UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant
☒
Filed by a Party other than the Registrant
☐
Check the appropriate box:
☐
Preliminary Proxy
Statement
☐
Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
☒
Definitive Proxy
Statement
☐
Definitive
Additional Materials
☐
Soliciting
Material Pursuant to §240.14a-12.
INNOVUS PHARMACEUTICALS, 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):
☒
No fee required.
☐
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1)
Title of each class of securities to
which transaction applies:
______________________________________________________________________________________
2)
Aggregate number of securities to
which transaction applies:
______________________________________________________________________________________
3)
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):
______________________________________________________________________________________
4)
Proposed maximum aggregate value of
transaction:
______________________________________________________________________________________
5)
Total fee paid:
______________________________________________________________________________________
☐
Fee paid previously with preliminary
materials.
☐
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.
(1)
Amount
Previously Paid:
______________________________________________________________________________________
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Schedule or Registration Statement No.:
______________________________________________________________________________________
(3)
Filing
Party:
______________________________________________________________________________________
(4)
Date
Filed:
_____________________________________________________________________________________
INNOVUS PHARMACEUTICALS, INC.
9171 Towne Centre Drive, Suite 440
San Diego, CA 92122
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Dear Stockholders:
You are cordially invited to attend the Annual
Meeting of Stockholders of Innovus Pharmaceuticals, Inc., a Nevada
corporation (“
Innovus
” or “
Company
”), to be held on Monday, June 19, 2017 at
9:00 a.m., local time, at
9171 Towne Centre Drive, Coronado
North Conference Room, First Floor, San Diego, California
92122
. The purpose of our Annual
Meeting is to do the following:
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1.
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To elect four members of the Board of Directors to hold office
until the next annual meeting or until his or her successor has
been elected and qualified, or until their earlier resignation or
removal;
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2.
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To ratify the appointment of Hall & Company, Inc., an
independent registered public accounting firm, as our independent
auditors for the fiscal year ending December 31, 2017;
and
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3.
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To consider and act upon any other matters that may properly come
before the meeting or any adjournment thereof.
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These matters are more fully discussed in the attached proxy
statement.
Our Board of Directors has fixed the close of
business on April 27, 2017 as the record date
(“
Record Date
”) for the purpose of determining the
stockholders who are entitled to receive notice of and to vote at
the Annual Meeting or any adjournment thereof. A list of such
stockholders will be available for examination by any stockholder
at the Annual Meeting. For ten days prior to the Annual Meeting,
this list will also be available for inspection by stockholders,
for any purpose germane to the Annual Meeting, during normal
business hours at the Company’s executive offices at
9171 Towne Centre Drive, Suite 440, San Diego, California
92122
.
Our
Board of Directors unanimously recommends that you vote
“FOR” Proposal Nos. 1 and 2, which are described in
detail in the accompanying proxy
statement.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE STOCKHOLDER MEETING TO BE HELD ON JUNE 19,
2017:
THE ANNUAL REPORT AND PROXY STATEMENT
ARE AVAILABLE ONLINE AT
HTTP://CLIENT.IRWEBKIT.COM/INNOVUSPHARMA/FILINGS?QM_PAGE=38298
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By Order of the Board of Directors
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/s/ Bassam Damaj
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Bassam Damaj, Ph.D.
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President, Chief Executive Officer and Director
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San Diego, California
April 28, 2017
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YOUR VOTE IS IMPORTANT
Your vote is important. Whether or not you expect to attend the
Annual Meeting in person, we urge you to please
vote your shares at your
earliest convenience. This will ensure the presence of a quorum at
the Annual Meeting. We urge you to promptly vote your shares by
signing, dating and mailing the enclosed proxy. Doing so will save
the Company the expense and extra work of additional solicitation.
Submitting your proxy now will not prevent you from voting your
shares at the Annual Meeting if you desire to do so, as your proxy
is revocable at your option.
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INNOVUS PHARMACEUTICALS, INC.
9171 Towne Centre Drive, Suite 440
San Diego, CA 92122
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the
Board of Directors of Innovus Pharmaceuticals, Inc., a Nevada
corporation (the “
Company
”), for use at the 2017 Annual Meeting of
Stockholders (“
Annual
Meeting
”) to be held on
June 19, 2017 at 9:00 a.m., local time, and at any adjournment
or postponement thereof, at our corporate offices located at
9171 Towne Centre Drive, Coronado North Conference Room, First
Floor, San Diego, California 92122
.
Voting
The specific proposals to be considered and acted
upon at our Annual Meeting are summarized in the accompanying
notice (“
Notice
”) and are described in more detail in this
proxy statement. Stockholders of record at the close of
business on April 27, 2017 (the “
Record Date
”) are entitled to notice of and to vote at
the Annual Meeting. As of the close of business on the Record Date,
the Company had 150,535,774 shares of common stock, $0.001 par
value per share, issued and outstanding. Each holder of common
stock is entitled to one vote for each share held as of the Record
Date.
Quorum
In
order for any business to be conducted at the Annual Meeting, the
holders of more than 50% of the shares entitled to vote must be
represented at the Annual Meeting, either in person or by properly
executed proxy. If a quorum is not present at the scheduled time of
the Annual Meeting, the stockholders who are present may adjourn
the Annual Meeting until a quorum is present. The time and place of
the adjourned Annual Meeting will be announced at the time the
adjournment is taken, and no other notice will be given. An
adjournment will have no effect on the business that may be
conducted at the Annual Meeting.
Required Vote for Approval
Proposal No. 1: Election of
Directors.
For the four
nominees who receive the greatest number of votes cast at the
Annual Meeting by the shares present in person or by proxy and
entitled to vote will be elected.
Proposal No. 2: Ratification
of Appointment of Auditors.
To ratify the appointment of Hall & Company,
Inc. as our independent registered public accounting firm for the
fiscal year ending December 31, 2017, the number of votes cast
“FOR” must exceed the number of votes cast
“AGAINST” this Proposal.
Abstentions and Broker Non Votes
All
votes will be tabulated by the inspector of election appointed for
the Annual Meeting, who will separately tabulate affirmative and
negative votes, abstentions and broker non-votes. An abstention is
the voluntary act of not voting by a stockholder who is present at
a meeting and entitled to vote. A broker “non-vote”
occurs when a broker nominee holding shares for a beneficial owner
does not vote on a particular proposal because the nominee does not
have discretionary power for that particular item and has not
received instructions from the beneficial owner. If you hold your
shares in “street name” through a broker or other
nominee, your broker or nominee may not be permitted to exercise
voting discretion with respect to some of the matters to be acted
upon. If you do not give your broker or nominee specific
instructions regarding such matters, your proxy will be deemed a
“broker non-vote.”
Under
Nevada law and our Bylaws, each matter (other than the election of
directors) is determined by the vote of the holders of a majority
of the voting power present or represented by proxy. For these
matters, abstentions are treated as shares present or represented
by proxy, so abstentions have the same effect as negative votes.
Broker non-votes, however, are not deemed to be present to
represent by proxy and, therefore, do not have any effect on the
outcome of these matters.
Proxies
If your proxy is properly returned to the Company,
the shares represented thereby will be voted at the Annual Meeting
in accordance with the instructions specified thereon. If you
return your proxy without specifying how the shares represented
thereby are to be voted, the proxy will be voted
(i)
FOR
the election of four directors nominated by
our Board, (ii)
FOR
ratification of the appointment of Hall
& Company, Inc. as our independent registered public accounting
firm for fiscal year 2017, and (iii) at the discretion of the proxy
holders on any other matter that may properly come before the
Annual Meeting or any adjournment or postponement
thereof.
You may revoke or change your proxy at any time
before the Annual Meeting by filing with our Corporate Secretary at
our principal executive offices at
9171 Towne Centre Drive,
Suite 440, San Diego, California 92122
, a notice of revocation or another signed proxy
with a later date. You may also revoke your proxy by attending the
Annual Meeting and voting in person. Attendance at the
Annual Meeting alone will not revoke your proxy. If you
are a stockholder whose shares are not registered in your own name,
you will need additional documentation from your broker or record
holder to vote personally at the Annual
Meeting.
Solicitation
We will bear the entire cost of solicitation,
including the preparation, assembly, printing and mailing of the
Notice, as well as the preparation and posting of this proxy
statement and any additional solicitation materials furnished to
the stockholders. Copies of any solicitation materials will be
furnished to brokerage houses, fiduciaries and custodians holding
shares in their names that are beneficially owned by others so that
they may forward this solicitation material to such beneficial
owners. In addition, we may reimburse such persons for their costs
in forwarding the solicitation materials to such beneficial owners.
The original solicitation of proxies may be supplemented by a
solicitation by telephone, e-mail or other means by our directors,
officers or employees. No additional compensation will be paid to
these individuals for any such services. Except as described above,
we do not presently intend to solicit proxies other than by mail,
telephone and mail.
Important
Notice Regarding Availability of Proxy Materials
This proxy statement, the form of proxy card
and our Annual Report on Form 10-K for the year ended December 31,
2016, are available in the SEC Filings section of our website
at
http://client.irwebkit.com/innovuspharma/filings?qm_page=38298
.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL NO. 1
ELECTION OF DIRECTORS
General
Our
Bylaws provide that the Board of Directors shall consist of not
less than one, nor more than nine directors, and that upon any
change in the number of directors, any newly created directorships
or eliminated directorships shall be apportioned by the remaining
members of the Board of Directors or by stockholders. The
Company’s Board of Directors currently consists of four
directors, and these four directors are nominated for election at
the Annual Meeting. Each nominee has confirmed that they will be
able and willing to serve as a director if elected. If any of the
nominees becomes unable or unwilling to serve, your proxy will be
voted for the election of a substitute nominee recommended by the
current Board of Directors. Upon recommendation of the Board
of Directors, the Board of Directors has nominated for election as
directors at our Annual Meeting Drs. Bassam Damaj, Henry Esber,
Ziad Mirza, and Ms. Vivian Liu.
Required Vote and Recommendation
The
election of directors requires the affirmative vote of a plurality
of the voting shares present or represented by proxy and entitled
to vote at the Annual Meeting. The four nominees receiving the
highest number of affirmative votes will be elected. Unless
otherwise instructed or unless authority to vote is withheld,
shares represented by executed proxies will be voted
“FOR” the election of the nominees.
The Board of Directors recommends that the stockholders vote
“
FOR
” the election of Drs. Damaj, Esber and
Mirza, and Ms. Liu.
The following sections sets forth certain
information regarding the nominees for election as directors of the
Company.
Drs. Mirza and Damaj are first generation cousins.
Otherwise, there are no family relationships among any of our
directors or executive officers.
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Name
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Age
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Title
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Served as Director Since
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Bassam
Damaj, Ph.D.
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48
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President, Chief Executive Officer and Director
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January 2013
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Henry
Esber, Ph.D.
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78
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Chairman of the Board of Directors
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January 2013
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Vivian
Liu
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55
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Director
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December 2011
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Ziad
Mirza, M.B.A., M.D.
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55
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Director
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December 2011
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Bassam Damaj, Ph.D.
has served on our Board of Directors and as our
President and Chief Executive Officer, since January, 2013 and as
our Chief Accounting Officer from July 2015 until September 6,
2016. Before joining Innovus, Dr. Damaj served as President and
Chief Executive Officer of Apricus Biosciences, Inc. (Nasdaq:
APRI), a drug discovery and development company
(“
Apricus Bio
”), from December 2009 until November 2012.
Before joining Apricus Bio, Dr. Damaj was a co-founder of
Bio-Quant, Inc., a pre-clinical contract services company
(“
Bio-Quant
”) and served as the Chief Executive Officer
and Chief Scientific Officer and as a member of Bio-Quant’s
Board of Directors from its inception in June 2000 until its
acquisition by Apricus Bio in June 2011. In addition, Dr. Damaj was
the founder, Chairman, President and Chief Executive Officer of
R&D Healthcare, a wholesale drug distribution company, and the
co-founder of Celltek Biotechnologies, a drug discovery and
services company. He also served as a member of the Board of
Directors of CreAgri, Inc., a drug discovery company, and was a
member of the Scientific Advisory Board of MicroIslet, Inc., a drug
discovery company. Since July 2016, Dr. Damaj has been a member of
the Board of Directors of Hispanica International Delights of
America, Inc. (OTCQB:HISP), an ethnic food company. He is the
author of the Immunological Reagents and Solutions reference book,
the inventor of many patents and the author of numerous peer
reviewed scientific publications. Dr. Damaj won a U.S.
Congressional award for the Anthrax Multiplex Diagnostic Test in
2003. Dr. Damaj holds a Ph.D. degree in Immunology/Microbiology
from Laval University and completed a postdoctoral fellowship in
molecular oncology at McGill University.
Dr.
Damaj’s significant experience with our business and his
significant executive leadership experience, including his
experience leading several pharmaceutical companies, were
instrumental in his selection as a member of the Board of
Directors.
Henry Esber,
Ph.D
. has served as a member of
our Board of Directors since January 2011 and has served as
Chairman of the Board since January 2013. In 2000, Dr. Esber
co-founded Bio-Quant, and from 2000 to 2010, he served as its
Senior Vice President and Chief Business Development Officer. Dr.
Esber has more than 30 years of experience in the pharmaceutical
service industry. Dr. Esber served on the Board of Directors of
Apricus Bio from December 2009 to January 2013 and currently serves
on the Board of Directors of several private pharmaceutical
companies. Dr. Esber holds a Ph.D. in
Immunology/Microbiology from the West Virginia University School of
Medicine, as well as an M.S. in Public Health and Medical
Parasitology from University of North Carolina Chapel Hill. His
PreMed B.S is from Norfolk College of William and Mary, now Old
Dominion University.
Dr.
Esber’s significant scientific background and experience was
instrumental in his selection as a member of the Board of
Directors.
Vivian Liu
has served as a member of our Board of Directors
since December 2011 and served as our President, Chief Executive
Officer and Chief Financial Officer from December 2011 to January
22, 2013. Prior to that, she served as the President and Chief
Executive Officer of FasTrack Pharma, (“
FasTrack
Pharma
”), a
pharmaceutical company, from January 2011 to December 2011. Ms. Liu
is currently the Chief Operating Officer of Cesca Therapeutics,
Inc. (“
Cesca
”). She has been a member of the Board of
Directors of Cesca since November 2016. From February 2013 to March
2017, Ms. Liu served as Managing Director of OxOnc Services
Company, an oncology development company. In 1995, Ms. Liu
co-founded NexMed, Inc. a Delaware corporation
(“
NextMed
”), which in 2010 was renamed to Apricus
BioSciences, Inc. Ms. Liu was NexMed’s President and Chief
Executive Officer from 2007 to 2009. Prior to her appointment as
President, Ms. Liu served in several executive capacities,
including Executive Vice President, Chief Operating Officer, Chief
Financial Officer and Vice President of Corporate Affairs. She was
appointed as a director of NexMed in 2007 and served as Chairman of
its Board of Directors from 2009 to 2010. Ms. Liu has an M.P.A.
from the University of Southern California and has a B.A. from the
University of California, Berkeley.
Ms.
Liu’s significant executive leadership experience, including
her experience leading several pharmaceutical companies, as well as
her membership on public company boards was instrumental in her
selection as a member of the Board of Directors.
Ziad Mirza,
M.B.A.,
MD
has served as a member of our Board of Directors
since December 2011 and served as Chairman of our Board of
Directors from December 2011 to January 2013. He also served as
FasTrack Pharma’s Acting Chief Executive Officer from March
2010 to December 2010. Since February, 2016, Dr. Mirza has been the
Chief Medical Officer of HyperHeal Hyperbarics, Inc., an outpatient
hyperbaric oxygen therapy company.
He is the President and co-founder of Baltimore
Medical and Surgical Associates. He is a Certified Medical Director
of long term care through the American Medical Directors
Association. He is also a Certified Physician Executive from the
American College of Physician Executives. He consults for
pharmaceutical companies on clinical trial design. He has an M.D.
from the American University of Beirut and completed his residency
at Good Samaritan Hospital in Baltimore, Maryland. He received an
M.B.A. from the University of Massachusetts. Dr.
Mirza’s significant medical and scientific background was
instrumental in his selection as a member of the Board of
Directors.
The
nominees have consented to their nomination to the Board of
Directors, and will serve if elected. The Company has no reason to
believe that the nominees will be unavailable to serve as
directors.
There have been no events under any bankruptcy act, no criminal
proceedings and no judgments or injunctions material to the
evaluation of the ability and integrity of any director or nominee
during the past ten years.
When
the accompanying proxy is properly executed and returned, the
shares it represents will be voted in accordance with the
directions indicated thereon. We expect the nominees to be able to
serve if elected, but if the nominees notify us before this Annual
Meeting that he/she is unable to do so, then the proxies will be
voted for a substitute nominee or nominees.
CORPORATE GOVERNANCE, BOARD COMPOSITION AND BOARD
COMMITTEES
Term of Office
Pursuant
to our Bylaws, each member of our Board of Directors shall serve
from the time they are duly elected and qualified, until our next
Annual Meeting of Stockholders or their until death, resignation or
removal from office.
Board Member Independence
Although
our common stock is not yet listed on a national securities
exchange, we have elected to retain the NASDAQ Stock Market Rules
to determine director independence. Three of our four Board members
– Drs. Henry Esber and Ziad Mirza, and Ms. Vivian Liu –
are considered independent (as independence is defined by Rule
5605(a)(2) of the NASDAQ Stock Market Rules).
Board Structure
The
Board does not have a policy regarding the separation of the roles
of the Chief Executive Officer and Chairman of the Board, as the
Board believes it is in the best interest of the Company and its
stockholders to make that determination based on the position and
direction of the Company and the membership of the Board, from time
to time. Currently, Dr. Esber, an independent director, serves as
our Chairman of the Board. Dr. Damaj currently serves as our
principal executive officer and as a director.
Board Risk Oversight
Our
Board administers its oversight function through both regular and
special meetings and by frequent telephonic updates with our senior
management. A key element of these reviews is gathering and
assessing information relating to risks of our business. All
business is exposed to risks, including unanticipated or undesired
events or outcomes that could impact an enterprise’s
strategic objectives, organizational performance and stockholder
value. A fundamental part of risk management is not only
understanding such risks that are specific to our business, but
also understanding what steps management is taking to manage those
risks and what level of risk is appropriate for us. In setting our
business strategy, our Board assesses the various risks being
mitigated by management and determines what constitutes an
appropriate level of risk.
Board Meetings
During
the fiscal year ended December 31, 2016, our Board of Directors
held four meetings and approved certain actions by unanimous
written consent. We expect our directors to attend all board and
committee meetings and to spend the time needed and meet as
frequently as necessary to properly discharge their
responsibilities. Due to the limited size of our Board of
Directors, we currently do not use board committees. As a result,
the board as a whole carries out the functions of audit, nominating
and compensation committees.
Board Committees and Charters
Our
directors also act as our Audit Committee, and performs the same
functions as an audit committee, such as: recommending an
independent registered public accounting firm to audit the annual
financial statements, reviewing the independent registered public
accounting firm’s independence, the financial statements and
their audit report, and reviewing management's administration of
the system of internal accounting controls. The Company does not
currently have a written audit committee charter or similar
document.
Stockholder Communications with the Board of Directors
Our
Board of Directors provides stockholders with the ability to send
communications to the Board of Directors, and stockholders may do
so at their convenience. In particular, stockholders may send their
communications to:
Board of Directors
c/o Corporate Secretary
Innovus Pharmaceuticals, Inc.
9171 Towne Centre Drive, Suite 440
San Diego, California 92122
All
communications received by the Corporate Secretary are relayed to
the Board of Directors of the Company. Members of the Board of
Directors are not required to attend our Annual Meetings of
Stockholders.
PROPOSAL NO. 2
RATIFICATION OF THE APPOINTMENT
OF HALL & COMPANY, INC. AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31,
2017
The
Board of Directors has appointed Hall & Company, Inc. as our
independent registered public accounting firm for the current
fiscal year ending December 31, 2017 and hereby recommends that the
stockholders ratify such appointment.
The
Board of Directors may terminate the appointment of Hall &
Company, Inc. as the Company’s independent registered public
accounting firm without the approval of the stockholders whenever
the Board of Directors deems such termination necessary or
appropriate.
Representatives
of Hall & Company, Inc. will be present at the Annual Meeting,
or available by telephone, and will have an opportunity to make a
statement if they so desire and to respond to appropriate questions
from stockholders.
Principal Accountant Fees and Services
Effective
February 16, 2016, the audit partners at Hartley Moore Accountancy
Corporation joined Hall & Company, Inc., and Hartley Moore
Accountancy Corporation resigned as the independent registered
public accounting firm of the Company, effective February 15,
2016. The Company appointed Hall & Company, Inc. as
our independent registered public accounting firm for the year
ended December 31, 2015 and Hall & Company, Inc. has audited
our consolidated financial statements for the years ended December
31, 2016 and 2015.
The
following table presents aggregate fees for the fiscal years ended
December 31, 2016, and 2015, for professional services
rendered by Hall & Company, Inc. and Hartley Moore Accountancy
Corporation:
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Audit Fees
(1)
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$
46,380
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$
12,822
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$
5,250
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Audit-Related Fees
(2)
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9,185
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-
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-
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Tax
Fees
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-
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-
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-
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-
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-
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-
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Total
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$
55,565
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$
12,822
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$
5,250
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(1)
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“Audit
Fees” represent fees for professional services provided in
connection with the audit of our annual consolidated financial
statements, review of consolidated financial statements included in
our quarterly reports and related services normally provided in
connection with statutory and regulatory filings and engagements by
Hartley Moore Accountancy Corporation and Hall & Company,
Inc.
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(2)
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“Audit-Related
Fees”
represent fees for
professional services provided in connection with the review of our
registration statements on Forms S-8 and S-1
by Hall &
Company, Inc.
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The
Board of Directors has considered whether the provision of
non-audit services is compatible with maintaining the principal
accountant's independence.
There were no fees
billed by or paid to our independent registered public accounting
firm during the years ended December 31, 2016 and 2015 for tax
compliance, tax advice or tax planning services or for financial
information systems design and implementation
services.
Determination of Independence
The Board of Directors has received and reviewed
the written disclosures and the letter from the independent
registered public accounting firm required by the Public Company
Accounting Oversight Board (“
PCAOB
”) Rule 3526,
Communication with Audit
Committees Concerning Independence
, and has discussed with its auditors its
independence from the Company.
Audit Committee Policies and Procedures
Pursuant to the
provisions contained in our Bylaws and Articles of Incorporation,
our Board of Directors performs the same functions as an audit
committee. While we do not have formal written audit committee
policies and procedures in place, we do adhere to accounting
standards set forth by the Financial Accounting Standards Board
with respect to financial reporting and
discussed with the
independent registered public accounting firm the matters required
to be discussed by Statement on Auditing Standards No.
1301,
Communications
with Audit Committees
, as adopted by the
PCAOB
.
Our Board of Directors, acting as the audit committee, pre-approves
all services to be provided by Hall & Company,
Inc. All fees paid to Hall & Company, Inc. for
services performed in 2016 and 2015 were pre-approved by our Board
of Directors.
Required Vote and Recommendation
Ratification
of the selection of Hall & Company, Inc. as the Company’s
independent registered public accounting firm for the fiscal year
ending December 31, 2017 requires the affirmative vote of a
majority of the shares present or represented by proxy and entitled
to vote at the Annual Meeting. Under Nevada law and our Bylaws, an
abstention will have the same legal effect as a vote against the
ratification of Hall & Company, Inc., and each broker non-vote
will reduce the absolute number, but not the percentage, of
affirmative votes necessary for approval of the ratification.
Unless otherwise instructed on the proxy or unless authority to
vote is withheld, shares represented by executed proxies will be
voted “FOR” the ratification of Hall & Company,
Inc. as the Company’s independent registered public
accounting firm for the fiscal year ending December 31,
2017.
The Board of Directors recommends that stockholders vote
“FOR” the ratification of the selection of Hall &
Company, Inc. as the Company’s independent registered public
accounting firm for the fiscal year ending December 31,
2017.
The
following table sets forth information regarding the current
executive officers of the Company:
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Name
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Age
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Title
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Bassam
Damaj, Ph.D.
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48
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Chief
Executive Officer, President, Director
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Randy
Berholtz, M.B.A., JD
|
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55
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Executive
Vice President – Corporate Development, and General
Counsel
|
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|
|
Rauly
Gutierrez, CPA
|
|
32
|
|
Vice
President
–
Finance
|
The
Chief Executive Officer and other officers of the Company hold
their respective offices at the discretion of the
Board. The background and principal occupations of each
of our current executive officers are set forth below:
Bassam Damaj, Ph.D.
See Dr.
Damaj’s background and principal occupations under
“Election of Directors” above.
Randy Berholtz, MBA, JD
has served as
our Executive Vice President, Corporate Development and General
Counsel of the Company since January 9, 2017. He also became the
Secretary of the Company at that time. Mr. Berholtz had previously
been a part-time consultant for the Company from July 2013 to
mid-May 2016. Mr. Berholtz was recently the founding partner of the
Sorrento Valley Law Group, a healthcare and life sciences law firm.
Previously, from 2011 to 2013, he was the Executive Vice President,
General Counsel and Secretary of Apricus Biosciences, Inc., a
biotechnology company; from 2004 to 2010, he was the Vice
President, General Counsel and Secretary of the ACON Group of
private U.S. and Chinese life science companies; from 2003 to 2004,
he was the Chief Operating Officer and General Counsel to Inglewood
Ventures, a life sciences venture capital firm; and from 2000 to
2003, he held multiple titles and rose to become the Acting General
Counsel and Secretary of Nanogen, Inc., a genomics tools company.
From 1992 to 2000, Mr. Berholtz was in private practice with law
firms in New York and San Diego, and from 1990 to 1991, he was a
law clerk to Judge Jerry E. Smith on the U.S. Court of Appeals for
the Fifth Circuit. Mr. Berholtz is a member of the Board of
Directors of Hispanica International Delights of America, Inc., an
ethnic food company and Larada Health, Inc., a private company in
the medical supply business, and is a Senior Advisor to Mesa Verde
Ventures, a life sciences venture capital firm. Mr. Berholtz
received his B.A. from Cornell University, his M.Litt. from Oxford
University where he was a Rhodes Scholar, his J.D. from Yale
University and his M.B.A. from the University of San
Diego.
Rauly Gutierrez, CPA
has served as our Vice President,
Finance since September 23, 2016, and was appointed our principal
financial and accounting officer effective April 24, 2017. He
was recently an Audit Senior Manager at KMJ Corbin & Company
LLP, a regional public accounting firm. Mr. Gutierrez began his
career at KMJ Corbin & Company in 2006 and mainly serviced
clients in the pharmaceutical and life science industries which
included multiple publicly-traded companies with market caps
ranging from $50 million to $2 billion and revenues ranging from
pre-revenue to $125 million. He has a wide range of
experience dealing with SEC 1933 and 1934 Act filings, including
IPOs, reverse mergers, SEC comment letters, Sarbanes-Oxley Act
attestation services and periodic SEC reporting requirements.
His areas of expertise include complex debt and equity
transactions, such as derivatives, convertible instruments, and
stock-based compensation. He also has expertise in accounting for
gross-to-net revenue recognition for pharmaceutical product sales,
pharmacy drug billings and in business combination
transactions. Mr. Gutierrez has led several training sessions
for audit professionals in professional ethics and independence,
PCAOB auditing standards and technical accounting updates. Mr.
Gutierrez received his Bachelor of Science Degree in
Accounting from the Leventhal School of Accounting at the
University of Southern California, and is licensed as a CPA in the
State of California. He is also a member of the AICPA, CalCPA
and the Association for Corporate Growth.
Indemnification of Officers and Directors
As
permitted by Nevada law, we will indemnify our directors and
officers against expenses and liabilities they incur to defend,
settle, or satisfy any civil or criminal action brought against
them on account of their being or having been Company directors or
officers unless, in any such action, they are adjudged to have
acted with gross negligence or willful misconduct.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information
concerning the compensation paid to the Company’s Chief
Executive Officer, and the Company’s two most highly
compensated executive officers other than its Chief Executive
Officer, who were serving as executive officers as of December 31,
2016 and whose annual compensation exceeded $100,000 during such
year (collectively the “
Named Executive
Officers
”):
Summary Compensation Table
Name and Principal Position
|
|
|
|
|
|
|
|
|
Bassam Damaj Ph
D.,
|
2016
|
$
532,400
(2)
|
$
-
|
$
-
|
$
240,000
(3)
|
$
-
|
$
772,400
|
|
President and
Chief Executive
Officer, and
former Chief
Financial Officer
(4)
|
2015
|
$
484,000
(2)
|
$
-
|
$
-
|
$
630,000
(3)
|
$
-
|
$
1,114,000
|
|
|
|
|
|
|
|
|
|
Robert E.
Hoffman,
|
|
|
|
|
|
|
|
|
Executive Vice
President and former
Chief Financial
Officer
(5)
|
2016
|
$
96,731
|
$
-
|
$
-
|
$
675,000
(3)
|
$
-
|
$
771,731
|
|
(1)
|
Our
Board of Directors has not yet determined the amounts of bonuses
payable to our Named Executive Officers earned in 2016. We
anticipate that bonuses, if any, for 2016 will be determined by our
Board of Directors by mid-May 2017.
|
|
(2)
|
Pursuant
to the terms of
a line of credit
convertible debenture with Dr. Damaj (the
“
LOC
Convertible Debenture
”)
, Dr. Damaj agreed not to draw a
salary pursuant to his employment agreement for so long as payment
of such salary would jeopardize the Company’s ability to
continue as a going concern and not to draw any salary accrued
through December 31, 2015. Salary through June 30, 2016 was accrued
for and remains unpaid as of December 31, 2016. Effective July 1,
2016, Dr. Damaj started receiving his salary in cash.
|
|
(3)
|
Represents
the total grant date fair value, as determined under FASB ASC Topic
718,
Stock Compensation
, of
restricted stock unit awards granted during the respective fiscal
year.
|
|
(4)
|
Dr.
Damaj served as Chief Financial Officer from July 2015 until
September 6, 2016 when Mr. Robert E. Hoffman became Executive Vice
President and Chief Financial Officer.
|
|
(5)
|
Represents
Mr. Hoffman’s salary from the commencement of his employment
on September 6, 2016, through December 31, 2016. Mr. Hoffman
resigned from the Company effective April 21, 2017.
|
Employment Agreements
Bassam Damaj
.
On January 22, 2013, the Company
entered into an employment agreement (the “
Employment Agreement
”) with Dr.
Bassam Damaj to serve as its President and Chief Executive Officer,
which was amended on January 21,
2015.
The
Employment Agreement has an initial term of five years, which term
will be extended by an additional year on the fourth and each
subsequent anniversary. Dr. Damaj earned a base salary
of $375,000 for the first year, $440,000 in the second year and
increasing a minimum of 10% per year thereafter. Dr.
Damaj’s salary will be accrued and not paid for so long as
payment of such salary would jeopardize the Company’s ability
to continue as a going concern, in Dr. Damaj’s sole
determination. Dr. Damaj will have annual cash bonus targets equal
to 75% of his base salary, based on performance objectives
established by the Board of Directors, with the Board of Directors
determining the amount of the annual bonus.
Dr.
Damaj received 6.0 million shares of restricted common stock
(“
RSUs
”) of
common stock on January 22, 2013, of which 2.0 million shares
vested immediately, and the remaining 4.0 million shares vested in
eight equal quarterly installments beginning on April 1,
2013.
Upon
termination of the Employment Agreement for any reason, Dr. Damaj
will receive (i) a pro-rata bonus during that fiscal year based on
the number of days employed during that fiscal year, and (ii)
Company group medical, dental and vision insurance coverage for Dr.
Damaj and his dependents for 12 months paid by the
Company.
Pursuant to the
Employment Agreement, if Dr. Damaj’s employment is terminated
as a result of death, disability or without Cause (as defined in
the Employment Agreement) or Dr. Damaj resigns for Good Reason (as
defined in the Employment Agreement), Dr. Damaj or his estate, as
applicable, is entitled to the following payments and benefits,
provided that a mutual release of claims is executed: (1) a cash
payment in an amount equal to 1.5 times his then base salary and
annual target bonus amount, or two times his then base salary and
annual target bonus amount if such termination occurs within 24
months of a change of control; (2) Company group medical, dental
and vision insurance coverage for Dr. Damaj and his dependents for
24 months paid by the Company; and (3) the automatic acceleration
of the vesting and exercisability of outstanding unvested stock
awards.
For
purposes of the Employment Agreement, “Cause”
generally means (1) commission of fraud or other unlawful
conduct in the performance of duties for the Company,
(2) conviction of or, entry into a plea of
“guilty” or “no contest” to, a felony under
United States federal or state law, and such felony is either
work-related or materially impairs Dr. Damaj’s ability to
perform services to the Company, and (3) a willful, material
breach of the Employment Agreement that causes material harm to the
Company, provided, however, that the Board of Directors must
provide 30 days prior written notice of its intention to terminate
for Cause and give Dr. Damaj the opportunity to cure or remedy such
alleged Cause and present Dr. Damaj’s case to the Board of
Directors and afterwards, at least 75% of the Board of Directors
(except for Dr. Damaj in the event he the subject of the hearing)
affirmatively determines that termination is for
Cause.
For
purposes of the Employment Agreement, “Good
Reason” generally means that within one year prior to the
date of resigning, (1) a material diminution in Dr.
Damaj’s title, authority, duties or responsibilities (for Dr.
Damaj, this includes remaining a member of the Board of Directors),
(2) a reduction in Dr. Damaj’s base salary or target
bonus amount, (3) a change in the geographic location greater
than 25 miles from the current office at which Dr. Damaj must
perform his duties, (4) the Company elects not to renew
the Employment Agreement for another term or (5) the
Company materially breaches any provision of the Employment
Agreement, provided, however, that Dr. Damaj must provide 30 days
prior written notice of his intention to resign for Good Reason,
which notice must be given within 90 days of the initial occurrence
of such cause and gives the Company the opportunity to cure or
remedy such alleged Good Reason.
Randy Berholtz
. The Company and Mr. Berholtz entered into an
employment agreement, effective, January 9, 2017 wherein Mr.
Berholtz will receive an annual base salary of $280,000 as well as
an annual bonus based on personal performance and as approved by
the Board of Directors. The target bonus amount is 35% of his
annual base salary.
Mr.
Berholtz will also receive RSU’s covering 2.0 million shares
of the Company’s common stock; 666,666 of which will vest
after one year of employment. The remaining RSU’s will vest
in eight equal quarterly installments over two years of continued
service.
Upon
termination of the Employment Agreement for any reason, Mr.
Berholtz will receive (i) a pro-rata bonus during that fiscal year
based on the number of days employed during that fiscal year, and
(ii) Company group medical, dental and vision insurance coverage
for Mr. Berholtz and his dependents for six months paid by the
Company.
Pursuant to the
Employment Agreement, if Mr. Berholtz’s employment is
terminated as a result of death, disability or without Cause (as
defined in the Employment Agreement) or Mr. Berholtz resigns for
Good Reason (as defined in the Employment Agreement), Mr. Berholtz
or his estate, as applicable, is entitled to the following payments
and benefits, provided that a mutual release of claims is executed:
(1) a cash payment in an amount equal to six months of his then
base salary and annual target bonus amount, if such termination
occurs within six months of a change of control; (2) Company group
medical, dental and vision insurance coverage for Mr. Berholtz and
his dependents for six months paid by the Company; and (3) the
automatic acceleration of the vesting and exercisability of
outstanding unvested stock awards.
For
purposes of the Employment Agreement, “Cause”
generally means (1) commission of fraud or other unlawful
conduct in the performance of duties for the Company,
(2) conviction of or, entry into a plea of
“guilty” or “no contest” to, a felony under
United States federal or state law, and such felony is either
work-related or materially impairs Mr. Berholtz’s ability to
perform services to the Company, and (3) a willful, material
breach of the Employment Agreement that causes material harm to the
Company, provided, however, that the Board of Directors must
provide 30 days prior written notice of its intention to terminate
for Cause and give Mr. Berholtz the opportunity to cure or remedy
such alleged Cause and present Mr. Berholtz’s case to the
Board of Directors and afterwards, at least 75% of the Board of
Directors (except for Mr. Berholtz in the event he the subject of
the hearing) affirmatively determines that termination is for
Cause.
For
purposes of the Employment Agreement, “Good
Reason” generally means that within one year prior to the
date of resigning, (1) a material diminution in Mr.
Berholtz’s title, authority, duties or responsibilities (for
Mr. Berholtz, this includes remaining a member of the Board of
Directors), (2) a reduction in Mr. Berholtz’s base
salary or target bonus amount, (3) a change in the geographic
location greater than 25 miles from the current office at which Mr.
Berholtz must perform his duties, (4) the Company elects not
to renew the Employment Agreement for another term, or
(5) the Company materially breaches any provision of the Employment
Agreement, provided, however, that Mr. Berholtz must provide 30
days prior written notice of his intention to resign for Good
Reason, which notice must be given within 90 days of the initial
occurrence of such cause and gives the Company the opportunity to
cure or remedy such alleged Good Reason.
Rauly
Gutierrez
. The Company and Mr.
Gutierrez entered into an employment agreement, effective,
September 23, 2016 wherein Mr. Gutierrez will receive an annual
base salary of $200,000 as well as an annual bonus based on
personal performance and as approved by the Board of Directors. The
target bonus amount is 25% of his annual base
salary.
Mr.
Gutierrez received an RSU covering 1.25 million shares of the
Company’s common stock; 312,500 of which will vest after one
year of employment. The remaining RSU’s will vest in eight
equal quarterly installments over two years of continued
service.
Upon
termination of the Employment Agreement for any reason, Mr.
Gutierrez
will receive (i) a
pro-rata bonus during that fiscal year based on the number of days
employed during that fiscal year, and (ii) Company group medical,
dental and vision insurance coverage for Mr.
Gutierrez
and his dependents for six months
paid by the Company.
Pursuant to the
Employment Agreement, if Mr.
Gutierrez
’s employment is terminated
as a result of death, disability or without Cause (as defined in
the Employment Agreement) or Mr. Gutierrez resigns for Good Reason
(as defined in the Employment Agreement), Mr. Gutierrez or his
estate, as applicable, is entitled to the following payments and
benefits, provided that a mutual release of claims is executed: (1)
a cash payment in an amount equal to six months of his then base
salary and annual target bonus amount, if such termination occurs
within six months of a change of control; (2) Company group
medical, dental and vision insurance coverage for Mr.
Gutierrez and
his dependents for six months
paid by the Company; and (3) the automatic acceleration of the
vesting and exercisability of outstanding unvested stock
awards.
For
purposes of the Employment Agreement, “Cause”
generally means (1) commission of fraud or other unlawful
conduct in the performance of duties for the Company,
(2) conviction of or, entry into a plea of
“guilty” or “no contest” to, a felony under
United States federal or state law, and such felony is either
work-related or materially impairs Mr.
Gutierrez
’s ability to perform
services to the Company, and (3) a willful, material breach of
the Employment Agreement that causes material harm to the Company,
provided, however, that the Board of Directors must provide 30 days
prior written notice of its intention to terminate for Cause and
give Mr.
Gutierrez the
opportunity to cure or remedy such alleged Cause and present Mr
Gutierrez’s case to the Board of Directors and afterwards, at
least 75% of the Board of Directors (except for Mr.
Gutierrez in
the event he the subject of
the hearing) affirmatively determines that termination is for
Cause.
For
purposes of the Employment Agreement, “Good
Reason” generally means that within one year prior to the
date of resigning, (1) a material diminution in Mr.
Gutierrez
’s title,
authority, duties or responsibilities (for Mr.
Gutierrez
, this includes remaining a member
of the Board of Directors), (2) a reduction in Mr.
Gutierrez
’s base salary
or target bonus amount, (3) a change in the geographic
location greater than 25 miles from the current office at which Mr.
Gutierrez
must perform his
duties, (4) the Company elects not to renew the
Employment Agreement for another term, or (5) the Company
materially breaches any provision of the Employment Agreement,
provided, however, that Mr.
Gutierrez
must provide 30 days prior
written notice of his intention to resign for Good Reason, which
notice must be given within 90 days of the initial occurrence of
such cause and gives the Company the opportunity to cure or remedy
such alleged Good Reason.
Outstanding Equity Awards at Fiscal Year-End 2016
The
following table presents, for each of the Named Executive Officers,
information regarding outstanding stock options held as of
December 31, 2016.
|
|
|
|
|
|
|
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Option
Exercise
Price ($)
|
|
|
Robert E. Hoffman
(1)
|
Sep. 30, 2013
|
10,500
|
—
|
$
0.90
|
Sep. 29, 2023
|
|
|
Dec. 31, 2013
|
10,500
|
—
|
$
0.38
|
Dec. 30, 2023
|
|
|
Mar. 31, 2014
|
10,500
|
—
|
$
0.40
|
Mar. 30, 2024
|
|
|
Jun. 30, 2014
|
10,500
|
—
|
$
0.25
|
Jun. 29, 2024
|
|
|
Sep. 30, 2014
|
10,500
|
—
|
$
0.40
|
Sep. 29, 2024
|
|
|
Dec. 31, 2014
|
10,500
|
—
|
$
0.18
|
Dec. 30, 2024
|
|
|
Mar 31, 2015
|
10,500
|
—
|
$
0.14
|
Mar. 30, 2025
|
|
|
Jun. 30, 2015
|
10,500
|
—
|
$
0.12
|
Jun. 29, 2025
|
|
|
Sep. 30, 2015
|
10,500
|
—
|
$
0.07
|
Sep. 29, 2025
|
|
|
Dec. 31, 2015
|
10,500
|
—
|
$
0.07
|
Dec. 30, 2025
|
|
|
Mar. 31, 2016
|
10,500
|
—
|
$
0.05
|
Mar. 30, 2026
|
|
(1)
|
Represents
options fully vested at grant date to Mr. Hoffman while he was a
consultant to the Company, prior to being appointed Executive Vice
President and Chief Financial Officer in September 2016. Mr.
Hoffman resigned from the Company as of April 21,
2017.
|
The
following table presents, for each of the Named Executive Officers,
information regarding outstanding RSUs held as of December 31,
2016.
|
Name
|
Grant Date
|
|
|
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
|
|
|
Bassam
Damaj
(1)
|
Mar.
31, 2015
|
|
|
375,000
|
|
|
$
|
75,000
|
|
|
Robert
E. Hoffman
(2)
|
Sep. 6, 2016
|
|
|
2,500,000
|
|
|
$
|
500,000
|
|
|
(1)
|
Unvested
RSUs vest 125,000 per month through March 2017.
|
|
(2)
|
Unvested
RSUs were to vest 25% on September 6, 2017 with the balance vesting
ratably over eight quarters and fully vested on September 6, 2019.
Mr. Hoffman resigned from his position with the Company effective
April 21, 2017 and thus these RSUs were forfeited and returned to
the available pool for the Amended and Restated 2016 Equity
Incentive Plan.
|
Description of Equity Compensation Plans
2013 Equity Incentive
Plan.
The Company has issued
common stock, restricted stock units and stock option awards to
employees, non-executive directors and outside consultants under
the 2013 Incentive Plan (“
2013 Plan
”). The 2013 Plan allows for the
issuance of up to 10.0 million shares of the Company’s common
stock to be issued in the form of stock options, stock awards,
stock unit awards, stock appreciation rights, performance shares
and other share-based awards. The exercise price for all
equity awards issued under the 2013 Plan is based on the fair
market value of the common stock. Currently, because the
Company’s common stock is quoted on the OTCQB, the fair
market value of the common stock is equal to the last-sale price
reported by the OTCQB as of the date of determination, or if there
were no sales on such date, on the last date preceding such date on
which a sale was reported. Generally, each vested stock unit
entitles the recipient to receive one share of Company common
stock, which is eligible for settlement at the earliest of their
termination, a change in control of the Company or a specified
date. Restricted stock units can vest according to a schedule
or immediately upon award. Stock options generally vest over a
three-year period, first year cliff vesting with quarterly vesting
thereafter on the three-year awards, and have a ten-year
life. Stock options outstanding are subject to time-based
vesting as described above and thus are not performance-based. As
of December 31, 2016, no shares were available under the 2013
Plan.
2014 Equity Incentive
Plan.
The Company has issued
common stock, restricted stock units and stock option awards to
employees, non-executive directors and outside consultants under
the 2014 Incentive Plan (“
2014 Plan
”). The 2014 Plan allows for the
issuance of up to 20.0 million shares of the Company’s common
stock to be issued in the form of stock options, stock awards,
stock unit awards, stock appreciation rights, performance shares
and other share-based awards. The exercise price for all
equity awards issued under the 2014 Plan is based on the fair
market value of the common stock. Currently, because the
Company’s common stock is quoted on the OTCQB, the fair
market value of the common stock is equal to the last-sale price
reported by the OTCQB as of the date of determination, or if there
were no sales on such date, on the last date preceding such date on
which a sale was reported. Generally, each vested stock unit
entitles the recipient to receive one share of Company common
stock, which is eligible for settlement at the earliest of their
termination, a change in control of the Company or a specified
date. Restricted stock units can vest according to a schedule
or immediately upon award. Stock options generally vest over a
three-year period, first year cliff vesting with quarterly vesting
thereafter on the three-year awards and have a ten-year
life. Stock options outstanding are subject to time-based
vesting as described above and thus are not performance-based. As
of December 31, 2016, 146,314 shares were available under the 2014
Plan.
2016 Equity Incentive
Plan.
On March 21, 2016, our
Board of Directors approved the adoption of the 2016 Equity
Incentive Plan and on October 20, 2016 adopted the Amended and
Restated 2016 Equity Incentive Plan (“
2016 Plan
”). The 2016 Plan was then approved by
our stockholders in November 2016. A maximum of 20.0 million shares
of the Company’s common stock are initially authorized for
issuance and available for future grants under our 2016 Plan (the
“
Initial
Reserve
”). The number of
shares of common stock authorized for issuance and available for
future grants under the 2016 Plan will be increased each January 1
after the effective date of the 2016 Plan by a number of shares of
common stock equal to the lesser of: (a) 4% of the number of shares
of common stock issued and outstanding on a fully-diluted basis as
of the close of business on the immediately preceding December 31,
or (by) a number of shares of common stock set by our
Board.
As
of December 31, 2016, a total of 3.75 million RSUs have been
granted under the 2016 Plan and 412,500 shares have been issued to
consultants under the 2016 Plan. We have not yet granted stock
options and stock appreciation rights under the 2016 Plan. As of
December 31, 2016, 15,837,500 million shares remained issuable
under the 2016 Plan.
Equity Compensation Plan Information
The
following table provides information as of December 31, 2016
regarding our equity compensation plans.
|
Plan Category
|
|
Number of Securities to be Issued Upon Exercise of Outstanding
Options,
Warrants and Rights
|
|
|
Weighted-Average Exercise Price of Outstanding
Options,
Warrants and Rights
|
|
|
Number of Securities
Remaining Available for
Future Issuance Under Equity
Compensation Plans (excluding securities reflected
in column(a))
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity
Compensation Plans Approved by Security Holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amended
and Restated 2016 Equity Incentive Plan
|
|
|
3,750,000
|
|
|
$
|
-
|
(1)
|
|
|
15,837,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Compensation Plans Not Approved by Security Holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
Equity Incentive Plan
|
|
|
1,306,349
|
|
|
$
|
0.22
|
(1)
|
|
|
-
|
|
|
2014
Equity Incentive Plan
|
|
|
8,055,999
|
|
|
$
|
0.23
|
(1
)
|
|
|
146,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
13,112,348
|
|
|
$
|
0.22
|
(1)
|
|
|
15,983,814
|
|
|
(1)
|
Excludes
outstanding RSUs, which have no associated exercise
price.
|
DIRECTOR COMPENSATION
We currently have four directors. Our director
compensation plan provides that
each non-employee director
of the Company is to receive quarterly compensation of $3,000,
which is paid in RSUs. In addition, the Chairman of the Board of
Directors is entitled to receive an additional $3,000 in quarterly
compensation paid in RSUs.
The
following table sets forth summary information concerning the total
compensation paid to our non-employee directors in 2016 for
services to the Company.
|
Name
|
|
Fees Earned
or Paid in
Cash
|
|
|
Stock
Awards
|
|
|
Stock Unit
Awards
(1)
(2)
|
|
|
Total
|
|
|
Henry
Esber, Ph.D.
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
57,333
|
|
|
$
|
57,333
|
|
|
Vivian
Liu
|
|
|
-
|
|
|
|
-
|
|
|
|
45,333
|
|
|
|
45,333
|
|
|
Ziad
Mirza, MBA, M.D.
|
|
|
-
|
|
|
|
-
|
|
|
|
45,333
|
|
|
|
45,333
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
147,999
|
|
|
$
|
147,999
|
|
|
(1)
|
Represents
the total grant date fair value, as determined under FASB ASC Topic
718,
Stock Compensation
, of
RSU awards granted during the respective fiscal year.
|
|
(2)
|
Includes
an award of 833,333 RSUs granted to each of the directors on
January 29, 2016 under the 2014 Plan in connection with the
acquisition of Beyond Human
®
assets. One-half of the RSUs were
vested upon grant and the remaining RSUs vested upon the closing of
the Beyond Human
®
acquisition on
March 1, 2016.
|
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Transactions with Related Persons
Other
than the following transactions, there has not been, nor currently
are there proposed, any transactions or series of similar
transactions in which we were or are to be a participant and the
amount involved exceeds or will exceed the lesser of $120,000 or 1%
of the average of our total assets as
of December 31, 2016 and 2015, and in which any of our
directors, executive officers, holders of more than 5% of our
common stock or any member of the immediate family of any of the
foregoing persons, had or will have a direct or indirect material
interest.
Related Party Financings
We have
raised capital in various financing transactions in which related
parties have been involved, and we have issued our securities to
those related parties. The table below sets forth the principal
amount of the related party debt we issued in January 2012 to
related parties and the number of shares of our common stock we
issued to such related parties upon conversion of such debentures
in February 2014, or other related party indebtedness since
2014.
|
|
Outstanding
Principal
and
Interest at date of conversion or repayment
|
Common
Stock Issued
on
date of conversion
|
Original
Principal Amount
(in
U.S. dollars)
|
|
Related
Party Debt Converted during 2014:
|
|
|
|
|
Line of
Credit:
|
|
|
|
|
Bassam Damaj,
Ph.D., President and Chief Executive and Former Principal Financial
Officer
(1)
–
Repaid
|
$
476,165
|
1,190,411
|
$
452,728
|
|
|
|
January 2012
Debentures:
|
|
|
|
|
Vivian Liu, Board
Member
|
$
58,405
|
146,014
|
$
50,000
|
|
|
|
Ziad Mirza, M.D.,
Board Member
|
$
5,841
|
14,601
|
$
5,000
|
|
|
|
Henry Esber, Ph.D.,
Chairman of the Board
|
$
15,185
|
31,964
|
$
13,000
|
|
|
|
January 2013
Debenture:
|
|
|
|
|
Henry Esber, Ph.D.,
Chairman of the Board
|
$
76,122
|
190,304
|
70,000
|
|
|
|
Related
Party Debt Converted or Repaid during 2015:
|
|
|
|
|
Line of
Credit:
|
|
|
|
|
Bassam Damaj,
Ph.D., President and Chief Executive and Former Principal Financial
Officer
(1)
–
Repaid
|
$
15,000
|
N/A
|
$
424,192
|
|
|
|
Henry Esber, Ph.D.,
Chairman of the Board – Converted
|
$
75,000
|
468,750
|
$
75,000
|
|
|
|
|
|
|
Related
Party Debt Repaid during 2016:
|
|
|
|
|
Line of
Credit:
|
|
|
|
|
Bassam Damaj,
Ph.D., President and Chief Executive and Former Principal Financial
Officer (1) – Repaid
|
$
472,879
|
N/A
|
$
409,192
|
|
|
|
|
|
|
Note
Payable:
|
|
|
|
|
Bassam Damaj,
Ph.D., President and Chief Executive and Former Principal Financial
Officer
(1)
–
Repaid
|
$
29,986
|
N/A
|
$
25,000
|
|
(1)
|
Dr.
Damaj served as Chief Financial Officer from July 2015 until
September 6, 2016 when Mr. Robert E. Hoffman became Executive Vice
President and Chief Financial Officer.
|
Dr. Damaj, our President and Chief Executive
Officer, was the holder of
the LOC Convertible
Debenture.
During 2016 and
2015, we borrowed approximately $0 and $50,000, respectively, from
related parties. We recognized total interest expense on
related party financings, including amortization of the debt
discount, of $38,594 and $191,726 for the years ended December 31,
2016 and 2015, respectively. At December 31, 2016, there was no
related party line of credit, debentures or notes payable
outstanding.
OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The
following table presents information,
to the best of our knowledge,
about the
beneficial ownership of our common stock on April 28, 2017 by those
persons known to beneficially own more than 5% of our capital
stock, by each of our directors and named executive officers and
all of our directors and current executive officers as a group. The
percentage of beneficial ownership for the following table is based
on 150,535,774 shares of common stock outstanding as of April 28,
2017.
Beneficial
ownership is determined in accordance with the rules of the
Securities and Exchange Commission (“
SEC
”) and does not necessarily
indicate beneficial ownership for any other purpose. Under these
rules, beneficial ownership includes those shares of common stock
over which the stockholder has sole or shared voting or investment
power. It also includes shares of common stock that the stockholder
has a right to acquire within 60 days after April 28, 2017
pursuant to options, warrants, restricted stock units, conversion
privileges or other rights. The percentage of ownership of the
outstanding common stock, however, is based on the assumption,
expressly required by the rules of the SEC, that only the person or
entity whose ownership is being reported has converted options or
warrants into shares of our common stock.
|
|
SHARES
BENEFICIALLY
OWNED
(2)
|
PERCENTAGE
OF COMMON
STOCK
(3)
|
|
5%
Stockholders
|
|
|
|
Novalere Holdings
LLC
151 Treemont
Street, Penthouse
Boston, MA
02111
|
25,617,592
|
17.02
%
|
|
|
|
|
|
Directors
and Named Executive Officers:
|
|
|
|
Bassam Damaj, Ph.D.
(4)
|
23,703,347
|
15.35
%
|
|
Robert E. Hoffman
(5)
|
395,603
|
*
|
|
Randy Berholtz,
M.B.A., JD
(6)
|
175,000
|
*
|
|
Rauly Gutierrez,
CPA
(7)
|
-
|
*
|
|
Henry Esber, Ph.D.
(8)
|
1,853,109
|
1.22
%
|
|
Vivian Liu
(9)
|
2,439,780
|
1.60
%
|
|
Ziad Mirza, M.B.A.,
M.D.
(10)
|
2,013,044
|
1.32
%
|
|
Officers and
Directors as a Group (7 persons)
|
30,579,883
|
19.14
%
|
* Represents less than 1%
|
(1)
|
Unless
otherwise indicated in the footnotes to the following table, each
person named in the table has sole voting and investment power and
that person’s address is c/o Innovus Pharmaceuticals, Inc.,
9171 Towne Centre Drive, Suite 440, San Diego, California
92122.
|
|
(2)
|
Beneficial
Ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to
securities. Shares of common stock subject to options or warrants
currently exercisable or convertible, or exercisable or convertible
within 60 days of April 28, 2017 are deemed outstanding for
computing the percentage of the owner’s holding such option
or warrant but are not deemed outstanding for computing the
percentage of any other owner.
|
|
(3)
|
Percentage
based upon 150,535,774 shares of common stock issued and
outstanding as of
April
28, 2017.
|
|
(4)
|
Includes
3,875,000 shares of common stock issuable upon conversion of vested
RSUs within 60 days after April 28, 2017 and 129,393 shares of
common stock held by Dr. Damaj’s spouse.
|
|
(5)
|
Includes
115,500 shares of common stock issuable upon exercise of stock
options within 60 days after April 28, 2017. Mr. Hoffman resigned
from his position as Executive Vice President and Chief Financial
Officer effective April 21, 2017.
|
|
(6)
|
Includes
175,000 shares of common stock issuable upon conversion of vested
RSUs within 60 days after April 28, 2017.
|
|
(7)
|
Mr.
Gutierrez, our Vice President, Finance, was appointed as the
principal financial and accounting officer of the Company effective
April 24, 2017.
|
|
(8)
|
Includes
1,853,109 shares of common stock issuable upon conversion of vested
RSUs within 60 days after April 28, 2017.
|
|
(9)
|
Includes
1,595,097 shares of common stock issuable upon conversion of vested
RSUs within 60 days after April 28, 2017.
|
|
(10)
|
Includes
1,595,097 shares of common stock issuable upon conversion of vested
RSUs within 60 days after April 28, 2017.
|
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934, as amended (the
“
Exchange
Act
”), requires our executive officers and directors,
and persons who beneficially own more than ten percent of our
common stock, to file initial reports of ownership and reports of
changes in ownership with the SEC. Executive officers, directors
and greater-than-ten-percent beneficial owners are required by SEC
regulations to furnish us with copies of all Section 16(a) forms
they file. Based solely upon a review of the copies of such forms
furnished to us and written representations from our executive
officers and directors, we believe that as of December 31, 2016,
all required Section 16(a) forms have been filed and none were
delinquent except for those Form 4s for Drs. Henry Esber and Ziad
Mirza, and Ms. Vivian Liu that should have been filed on April 1,
2016 and July 1, 2016 but were filed on July 15, 2016 and those
Form 4s for the same three individuals that should have been filed
on October 1, 2016 but were filed on November 24, 2016.
ADDITIONAL INFORMATION
Deadline for Receipt of Stockholder Proposals
Pursuant to Rule 14a-8 under the Exchange
Act, stockholder proposals to be presented at our 2018 Annual
Meeting of Stockholders and included in our Proxy Statement and
form of proxy relating to that annual meeting must be received by
us at our principal executive offices at
9171 Towne Centre
Drive, Suite 440, San Diego, California 92122
, addressed to our Corporate Secretary, not later
than
90 days nor more than 120 days prior to the first
anniversary of the preceding year’s annual
meeting
. These proposals must comply
with applicable Nevada law, the rules and regulations promulgated
by the SEC and the procedures set forth in our
Bylaws.
We
reserve the right to reject, rule out of order, or take other
appropriate action with respect to any proposal that does not
comply with these and all other applicable
requirements.
Code of Ethics and Business Conduct
We have adopted a code of ethics that applies to
all of our executive officers, directors and employees. Code of
ethics codifies the business and ethical principles that govern all
aspects of our business. This document will be made available in
print, free of charge, to any stockholder requesting a copy in
writing from the Company, and is available
on our corporate
website at
www.innovuspharma.com
.
A form of the code of conduct and
ethics was filed as Exhibit 14.1 to our Annual Report on Form 10-K
for December 31, 2016.
Householding of Proxy Materials
The
SEC has adopted rules that permit companies and intermediaries
(e.g., brokers) to satisfy the delivery requirements for proxy
statements and annual reports with respect to two or more
stockholders sharing the same address by delivering a single proxy
statement and annual report addressed to those stockholders. This
process, which is commonly referred to as
“householding,” potentially means extra convenience for
stockholders and cost savings for companies.
A number of brokers with account holders who are
stockholders of the Company will be “householding” the
Company’s proxy materials. A single set of the
Company’s proxy materials will be delivered to multiple
stockholders sharing an address unless contrary instructions have
been received from the affected stockholders. Once you have
received notice from your broker that they will be
“householding” communications to your address,
“householding” will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in “householding” and would
prefer to receive a separate set of the Company’s proxy
materials, please notify your broker or direct a written request to
the Corporate Secretary at
9171 Towne Centre Drive, Suite
440, San Diego, California 92122
, or
by calling
858-964-5123
.
The Company undertakes to deliver promptly, upon any such oral or
written request, a separate copy of its proxy materials to a
stockholder at a shared address to which a single copy of these
documents was delivered. Stockholders who currently receive
multiple copies of the Company’s proxy materials at their
address and would like to request “householding” of
their communications should contact their broker, bank or other
nominee, or contact the Company at the above address or phone
number.
Other Matters
At
the date of this proxy statement, the Company knows of no other
matters, other than those described above, that will be presented
for consideration at the Annual Meeting. If any other business
should come before the Annual Meeting, it is intended that the
proxy holders will vote all proxies using their best judgment in
the interest of the Company and the stockholders.
The Board of Directors invites you to attend the
Annual Meeting in person. Whether or not you expect to attend the
Annual Meeting in person, please submit your vote by internet,
telephone or mail as promptly as possible
so that your shares will be represented at the
Annual Meeting.
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING IN
PERSON, PLEASE READ THE PROXY STATEMENT AND THEN VOTE BY MAIL
AS PROMPTLY AS POSSIBLE. VOTING PROMPTLY WILL SAVE US
ADDITIONAL EXPENSE IN SOLICITING PROXIES AND WILL ENSURE THAT YOUR
SHARES ARE REPRESENTED AT THE ANNUAL MEETING.
|
San Diego, California
April 28,
2017
|
|
By Order of the Board of Directors
|
|
|
|
/s/
Henry Esber, Ph. D.
|
|
|
|
Chairman
|
|
|
|
|
|
|
|
|
|
INNOVUS
PHARMACEUTICALS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
Annual
Meeting of Stockholders
June
19, 2017, 9:00AM
|
|
|
|
|
|
|
|
|
CONTROL ID:
|
|
|
|
|
|
|
|
|
|
|
REQUEST ID:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The undersigned appoints Henry Esber, Ph.D, Chairman of Innovus
Pharmaceuticals, Inc. with full power of substitution, the attorney
and proxy of the undersigned, to attend the Annual Meeting of
Stockholders of Innovus Pharmaceuticals, Inc. to be held June 19,
2017 beginning at 9:00 a.m., Local Time, at 9171 Towne Centre
Drive, Coronado North Conference Room, First Floor, San Diego,
California 92122 and at any adjournment thereof, and to vote the
stock the undersigned would be entitled to vote if personally
present, on all matters set forth in the proxy statement to
Stockholders dated April 28, 2017, a copy of which has been
received by the undersigned, as follows:
|
|
|
|
|
|
|
|
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VOTING INSTRUCTIONS
|
|
|
|
|
|
|
|
|
|
If you vote by phone, fax or internet, please DO NOT mail your
proxy card.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MAIL:
|
Please
mark, sign, date, and return this Proxy Card promptly using the
enclosed envelope.
|
|
|
|
|
|
|
|
FAX:
|
Complete the reverse portion of this Proxy Card
and Fax to
202-521-3464.
|
|
|
|
|
|
|
|
INTERNET:
|
https://www.iproxydirect.com/
INNV
|
|
|
|
|
|
|
|
PHONE:
|
1-866-752-VOTE(8683)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ANNUAL MEETING OF THE STOCKHOLDERS OF
INNOVUS PHARMACEUTICALS, INC.
|
PLEASE COMPLETE, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE:
☒
|
|
|
|
|
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
|
|
|
|
|
|
|
|
Proposal 1
|
|
|
FOR ALL
|
|
AGAINST
ALL
|
|
FOR ALL
EXCEPT
|
|
|
|
|
|
Election of Directors: The Board of Directors recommends a vote FOR
nominees.
|
|
☐
|
|
☐
|
|
|
|
|
|
|
|
Basam Damaj, Ph.D.
|
|
|
|
|
|
☐
|
|
|
|
|
|
Henry Esber, Ph.D.
|
|
|
|
|
|
☐
|
|
CONTROL ID:
|
|
|
|
Vivian Liu
|
|
|
|
|
|
☐
|
|
REQUEST ID:
|
|
|
|
Ziad Mirza, M.B.A., MD
|
|
|
|
|
|
☐
|
|
|
|
|
Proposal 2
|
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN
|
|
|
|
|
|
The ratification of Hall & Company, Inc. as the Company’s
Independent Registered Public Accounting Firm for the year ending
December 31, 2017
|
|
☐
|
|
☐
|
|
☐
|
|
|
|
|
|
|
|
|
|
MARK “X” HERE IF YOU PLAN
TO ATTEND THE MEETING:
☐
|
|
|
|
|
|
MARK HERE FOR ADDRESS CHANGE
☐
New Address (if
applicable):
_____________________________
_____________________________
_____________________________
IMPORTANT:
Please sign exactly
as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as
such. If signer is a partnership, please sign in partnership name
by authorized person.
Dated: ________________________, 2017
|
|
|
|
|
(Print Name of Stockholder and/or Joint Tenant)
|
|
|
|
(Signature of Stockholder)
|
|
|
|
(Second Signature if held jointly)
|