Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
The aggregate market
value of the registrant’s voting and non-voting common stock held by non-affiliates of the registrant (without admitting
that any person whose shares are not included in such calculation is an affiliate) computed by reference to the price at which
the common stock was last sold as of the last business day of the registrant’s most recently completed second quarter was
$5,284,540.
As of April 13, 2017
there were 229,471,392 shares of the registrant’s Common Stock issued and outstanding.
The purpose of this
Amendment No. 2 (the “Amendment”) to the Annual Report on Form 10-K of Interleukin Genetics, Inc. (the “Registrant”)
for the year ended December 31, 2016 as filed on April 17, 2017, as amended by Amendment No. 1 thereto as filed on April 18,
2017 (collectively, the “Original Form 10-K”) is to include the disclosure required in Part III, Items 10, 11, 12,
13 and 14. Except for Items 10, 11, 12, 13 and 14 of Part III and Item 15(a)(3) of Part IV, no other information included
in the Original Form 10-K is amended or changed by this Amendment.
Pursuant to Item 10(f)
of Regulation S-K promulgated under the Securities Act of 1933, as amended, as indicated herein, we have elected to comply with
the scaled disclosure requirements applicable to “smaller reporting companies.”
PART III
Item 10.
Directors, Executive
Officers and Corporate Governance
MANAGEMENT AND CORPORATE GOVERNANCE
The Board of Directors and Management
We are managed under
the direction of our Board of Directors. On December 23, 2014, we entered into a Securities Purchase Agreement (the “2014
Purchase Agreement”) with various accredited investors, pursuant to which we sold securities in a private placement transaction,
which we refer to herein as the 2014 Private Placement. Pursuant to the terms of the 2014 Purchase Agreement, as amended on April
6, 2015, the number of persons which constitutes the entire Board is set at eight (8), and is composed of the following:
|
(i)
|
two (2) Class I directors with terms ending at the 2019 annual meeting of stockholders, consisting of one independent director (currently William C. Mills III) and one director designated by Pyxis Innovations Inc. (“Pyxis”) (currently Joseph M. Landstra);
|
|
(ii)
|
three (3) Class II directors with terms ending at the 2017 annual meeting of stockholders, consisting of Interleukin’s Chief Executive Officer (currently Mark B. Carbeau), Kenneth S. Kornman, Ph.D., Interleukin’s founder and Chief Scientific Officer (for so long as Dr. Kornman remains employed by Interleukin), and one director designated by Bay City Capital Fund V, L.P. (“Bay City”) (currently Dayton Misfeldt); and
|
|
(iii)
|
three (3) Class III directors with terms ending at the 2018 annual meeting of stockholders, consisting of one director designated by Pyxis which is currently vacant, one independent director (currently James Weaver), and one director designated by Bay City (currently Lionel Carnot).
|
The 2014 Purchase Agreement
also provides that a board member designated by Pyxis shall serve on the Audit Committee and a board member designated by Bay City
shall serve on each of the Audit Committee, the Compensation Committee and the Nominating Committee. Currently, Joseph Landstra
serves as the Pyxis designee on the Audit Committee, Lionel Carnot serves as the Bay City designee on the Audit and Nominating
Committees and Dayton Misfeldt serves as the Bay City designee on the Compensation Committee.
Set forth below are
the names of our directors and our executive officers, their ages, their position in the company, their principal occupations or
employment for at least the past five years, the length of their tenure as directors and, for our directors, the names of other
public companies in which they hold or have held directorships during the past five years.
Name
|
|
Age
|
|
Position
with the Company
|
|
|
|
|
|
Mark B. Carbeau
|
|
56
|
|
Chief Executive Officer and Director
|
Kenneth S. Kornman, DDS, Ph.D.
|
|
69
|
|
President and Chief Scientific Officer and Director
|
Stephen DiPalma
|
|
58
|
|
Interim Chief Financial Officer
|
James M. Weaver
|
|
53
|
|
Director and Chairman of the Board
|
Lionel Carnot (1)(2)
|
|
49
|
|
Director
|
Joseph M. Landstra (1)
|
|
39
|
|
Director
|
William C Mills III (1)(3)
|
|
61
|
|
Director
|
Dayton Misfeldt (3)
|
|
43
|
|
Director
|
|
(1)
|
Member of our Audit Committee
|
|
(2)
|
Member of our Nominating Committee
|
|
(3)
|
Member of our Compensation Committee
|
MARK B. CARBEAU has
been our Chief Executive Officer and has served as a member of our Board of Directors since April 6, 2015. Prior to joining Interleukin,
from December 2013 to March 2015, Mr. Carbeau was CEO of Diagnostyx, a technology-based healthcare company focused on intelligent
drug infusion systems that he co-founded. Prior to Diagnostyx, from January 2010 to June 2013, Mr. Carbeau served as CEO of PolyRemedy
®
,
a technology enabled services business that combines health information technology with personalized therapeutics to improve wound
healing outcomes. From January 2008 to October 2009, Mr. Carbeau was the President and CEO of HyperMed, Inc., a commercial stage
medical device and diagnostics company using novel hyperspectral imaging technology. Prior to HyperMed, Mr. Carbeau served as President
USA of Kinetic Concepts, Inc. Prior to that, Mr. Carbeau served as Vice President, Corporate Development at OraPharma, Inc., during
its commercial launch of a periodontal therapeutic, a successful IPO, and the eventual sale of the company to Johnson & Johnson.
Mr. Carbeau also founded CM Partners, a strategic life science consulting firm, and was a member of The Boston Consulting Group.
Mr. Carbeau began his career serving in various sales, marketing and manufacturing roles with Eli Lilly and Company. He holds a
B.S. in Industrial Engineering from Penn State University and an M.B.A. from the Wharton School of the University of Pennsylvania.
Our Board of Directors has concluded that Mr. Carbeau’s role as Chief Executive Officer as well as his extensive experience
across a range of senior management positions with life science companies make him uniquely suited to serve on the Board. Mr. Carbeau
has not served on any other public company boards in the past five years.
KENNETH S. KORNMAN,
DDS, Ph.D. is Interleukin’s co-founder and serves as our President and Chief Scientific Officer. Dr. Kornman also served
as our Chief Executive Officer from August 2012 through April 2015. He has also been a member of our Board of Directors since August
2012 and previously served as a director from August 2006 through April 2010. Prior to founding Interleukin in 1986, Dr. Kornman
was a Department Chairman and Professor at The University of Texas Health Center at San Antonio. He has also been a consultant
and scientific advisor for several major oral care and pharmaceutical companies. Dr. Kornman currently retains academic appointments
at Harvard University and the University of Michigan. He holds multiple patents in the molecular diagnostics area, has published
three books and more than 125 scientific papers and has lectured and consulted worldwide on the transfer of technology to clinical
practice. Dr. Kornman also holds an MS (Periodontics) and Ph.D. (Microbiology-Immunology) from the University of Michigan. Our
Board of Directors has concluded that Dr. Kornman should serve as a director because of his prior executive management experience,
his scientific expertise and his knowledge of the dental and biotechnology industries. Dr. Kornman has not served on any other
public company boards in the past five years.
STEPHEN DIPALMA has
been our Interim Chief Financial Officer since September 2014. Mr. DiPalma is Managing Director at Danforth Advisors, LLC, where
he has served since April 2014. He brings more than 25 years of experience in life sciences and healthcare, including founding
two start-ups, working with venture-backed companies, subsidiaries of Fortune 100 firms and publicly traded companies, and his
work with Danforth Advisors clients. Previously, he served as the CFO of two public companies, and as CFO, COO, CEO or Director
of eight privately held companies, in addition to his consulting clients. Mr. DiPalma participated in the successful reorganization
of Cambridge Biotech from Chapter 11 bankruptcy protection into Aquila BioPharmaceuticals, led the effort to take RXi Pharmaceuticals
public, and has extensive experience in international fund raising and corporate structuring. He was formerly Chairman of the Board
of Cognoptix Inc., and is on the Board of Directors of Phytera, Inc. Mr. DiPalma received his M.B.A. from Babson College and his
B.S. from the University of Massachusetts-Lowell.
STEPHAN TOUTAIN joined the Company in August
2016. Mr. Toutain brings more than 25 years of commercial development, market access, and sales and marketing leadership
with particular expertise in ultra-orphan drug and orphan oncology markets worldwide. Prior to joining Interleukin, Mr. Toutain
spent three years as a successful consultant to the biopharmaceutical industry addressing marketing strategy and access challenges.
Previously he headed Global Commercial Development for Sarepta Therapeutics, and served as General Manager for Alexion in Europe.
Prior to these roles, Mr. Toutain held various commercial, marketing and product management positions with Alexion Pharmaceuticals,
Celgene Corporation, and Johnson & Johnson. Mr. Toutain received a Master of Business Administration from University of North
Carolina, and a Master of Engineering in Biotechnology from University of Nancy II in France.
JAMES M. WEAVER initially
joined the Board of Directors in July 2007 as a designee of Pyxis. He served as Chairman of our Board from September 2007 until
March 11, 2014, when he announced that he was resigning as a director due to his resignation from Alticor Corporate Enterprises
(an affiliate of Pyxis) to pursue other interests. On March 31, 2014, Mr. Weaver was re-elected as an independent director and
was also re-appointed as Chairman of the Board. He is the CEO of the Worden Group, a Holland based manufacturing company as well
as managing partner of Weaver Asset Management, an investment company that manages investments in manufacturing and real estate.
He is the former Vice President of Alticor Corporate Enterprises, a member of the Alticor Inc. family of companies, which is engaged
in the principal business of offering products, business opportunities, and manufacturing and logistics services in more than 80
countries and territories worldwide. In this role, Mr. Weaver was responsible for managing the current portfolio of Alticor’s
companies and directs its acquisition and growth. Prior to joining Alticor in June 2007, Mr. Weaver worked for X-Rite Inc. where
he held various leadership positions, including Senior Vice President and General Manager, Vice President of marketing and software
development, Vice President of marketing and product development, as well as lead executive on several acquisitions. Mr. Weaver
also founded and held the position of President and Chief Executive Officer of Bold Furniture Inc, and has held various leadership
positions at Steelcase Inc. and Bissell Inc. Mr. Weaver received a Bachelor’s degree in general studies from the University
of Michigan in Ann Arbor and serves on several non-profit and private company boards. Our Board of Directors has concluded that
Mr. Weaver should serve as a director because of his prior senior management experience and judgment and his extensive sales and
marketing experience in the consumer product industry. Mr. Weaver has not served on any other public company boards in the past
five years.
LIONEL CARNOT joined
the Board of Directors in May 2013. Mr. Carnot is Managing Director at Bay City Capital LLC, a leading, global life sciences investment
firm, and has been extensively involved in the firm's activities since he joined The Pritzker Organization in 2000. Prior to The
Pritzker Organization, Mr. Carnot was a Principal at Oracle Partners, a healthcare hedge fund. He also held several positions in
the pharmaceutical industry, including Product Manager for Prozac at Eli Lilly as well as several sales and marketing positions
at Rhone-Poulenc Rohrer (now Sanofi). Mr. Carnot was also a strategy and management consultant to the biopharmaceutical industry
while at Booz Allen & Hamilton and Accenture Strategic Services. Mr. Carnot is a member of the Board of Directors of Merus
B.V., Madrigal Pharmaceuticals and Tallikut Pharmaceuticals, and is a former member of the board of Reliant Pharmaceuticals, Pathway
Diagnostics, BioSeek and Nexus Dx. Mr. Carnot holds an MBA with Distinction from INSEAD and an MS with honors in Molecular Biology
from the University of Geneva. Our Board of Directors has concluded that Mr. Carnot should serve as a director because of his prior
management, consulting and board experience in the biotechnology and diagnostic industries, coupled with scientific, technical,
sales and marketing, finance, and business development expertise. Mr. Carnot has not served on any other public company boards
in the past five years.
JOSEPH M. LANDSTRA
joined the Board of Directors on March 31, 2014. Mr. Landstra has been with Alticor Inc., a member of the Alticor family of companies,
since May 2009, and is currently Director of Finance and Assistant Treasurer. Prior to his role with Alticor, Mr. Landstra was
Controller for Dickinson Press Inc. from April 2008 to May 2009 and with X-Rite Inc. from 2003 to April 2008, completing his time
with X-Rite as European Controller. Mr. Landstra also worked for Deloitte & Touche LLP supporting a broad range of audit clients.
Mr. Landstra is Certified Public Accountant in the state of Michigan. Mr. Landstra also serves on the Board of Directors for Metagenics,
Inc. which is in the Alticor family of companies. Mr. Landstra earned a Bachelor of Science degree in Accountancy from Calvin College
in Grand Rapids, Michigan. The Board of Directors has concluded that Mr. Landstra should serve as a director because of his prior
senior executive management experience, his background in the nutrigenomic medical foods and nutraceuticals business through his
current position at Alticor, and his broad-based financial and business expertise. Mr. Landstra has not served on any other public
company boards in the past five years.
WILLIAM C. MILLS III
joined the Board of Directors in April 2010. In February 2017, he retired from his roles as Chairman of the Board of Directors
and CEO of Stereotaxis, Inc. (NASDAQ: STXS), a medical device company that markets robotic cardiology instrument navigation systems
designed to enhance the treatment of arrhythmias and coronary disease. He has over 36 years of venture capital experience, having
held positions from 2004 until 2009 as a managing member of EGS Healthcare Capital Partners; from 1999-2004 as a Partner in the
Boston office of Advent International; from 1988-1999 as a General Partner of The Venture Capital Fund of New England; and from
1981-1988 as a Managing General Partner of Ampersand Ventures/PaineWebber Ventures. Currently, he is Chairman of the Board of Managers
of Ascension Ventures IV, LLC. Mr. Mills received his A.B. in Chemistry, cum laude, from Princeton University, his S.M. in Chemistry
from the Massachusetts Institute of Technology and his M.S. in Management from MIT’s Sloan School of Management. Except as
noted above, Mr. Mills has not served on any other public company boards in the past five years.
DAYTON MISFELDT joined
the Board of Directors in May 2013. Mr. Misfeldt is a Managing Director at Bay City Capital LLC, a leading, global life sciences
investment firm, and focuses on biopharmaceutical investment opportunities. Prior to joining Bay City Capital in May 2000, Mr.
Misfeldt was a Vice President at Roth Capital Partners where he worked as a sell-side analyst covering the biopharmaceutical industry.
Mr. Misfeldt has also worked as a Project Manager at LifeScience Economics. Mr. Misfeldt received a B.A. in Economics from the
University of California, San Diego. Mr. Misfeldt currently serves on the Board of Directors of Sunesis Pharmaceuticals, Inc, a
publicly traded biopharmaceutical company and one private company board. Our Board of Directors has concluded that Mr. Misfeldt
should serve as a director because he has financial expertise and strong understanding of the biotechnology industry, which the
Board believes makes him an important resource for the Board as it assesses both financial and strategic decisions. Except as noted
above, Mr. Misfeldt has not served on any other public company boards in the past five years.
Procedures by which
Stockholders may Nominate Directors
There have been no changes to the procedures
by which stockholders may recommend nominees to our Board of Directors.
Audit Committee and Financial Experts
Our Audit Committee
currently consists of
Lionel Carnot, Joseph M. Landstra and William C. Mills III (Chair)
. Our
Audit Committee met four times during the fiscal year ended December 31, 2016.
Our Audit Committee
is responsible for retaining and overseeing our independent accountants, approving the services performed by them and reviewing
our annual financial statements, accounting policies and our system of internal controls. All members of the Audit Committee satisfy
the current independence standards promulgated by the Securities and Exchange Commission and the NASDAQ Stock Market LLC (“NASDAQ”),
as such standards apply specifically to members of audit committees. The Board of Directors has determined that Mr. Mills is an
“audit committee financial expert” as the Securities and Exchange Commission has defined that term in Item 407
of Regulation S-K. A copy of the Audit Committee’s written charter is publicly available on the “Investors-Corporate
Governance-Committees” section of our website at
www.ilgenetics.com
.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Our records reflect
that all reports which were required to be filed pursuant to Section 16(a) of the Exchange Act during or with respect to the
year ended December 31, 2016 were filed on a timely basis
.
CODE OF CONDUCT AND ETHICS
We
have adopted a corporate code of conduct and ethics that applies to all of our employees, including our chief executive officer
and chief financial officer. The text of the corporate code of conduct and ethics is publicly available on our website at
www.ilgenetics.com
.
Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to our directors,
principal executive and financial officers will be posted on the “Investors-Corporate Governance” section of our website
at
www.ilgenetics.com
or included in a Current Report on Form 8-K within four business days following the
date of the amendment or waiver
.
Item 11.
Executive Compensation
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table
sets forth the total compensation awarded or paid to, accrued or earned during the fiscal years ended December 31, 2015 and
2016 by our Chief Executive Officer, our former Chief Executive Officer (our current President and Chief Scientific Officer), our
Chief Commercial Officer, and our Interim Chief Financial Officer (there were no other executive officers employed by us as of
December 31, 2016). We refer to these individuals as our “Named Executive Officers.”
Name and
Principal
Position
|
|
Fiscal
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)(1)(2)
|
|
|
Option
Awards
($)(1)(2)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
|
All
Other
Compensation
($)(3)
|
|
|
Total
($)
|
|
Mark B.
Carbeau
|
|
2016
|
|
$
|
365,000
|
|
|
$
|
47,906
|
|
|
$
|
—
|
|
|
$
|
812,850
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,500
|
|
|
$
|
1,227,256
|
|
Chief Executive Officer
|
|
2015
|
|
$
|
259,712
|
|
|
$
|
47,906
|
|
|
$
|
—
|
|
|
$
|
1,972,960
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,280,578
|
|
Kenneth S. Kornman
|
|
2016
|
|
$
|
360,000
|
|
|
$
|
45,450
|
|
|
$
|
—
|
|
|
$
|
17,728
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
423,178
|
|
Former Chief Executive Officer, Current President
and Chief Scientific Officer
|
|
2015
|
|
$
|
360,000
|
|
|
$
|
45,450
|
|
|
$
|
—
|
|
|
$
|
503,680
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,296
|
|
|
$
|
912,426
|
|
Stephan Toutain
|
|
2016
|
|
$
|
109,039
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
607,838
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,500
|
|
|
$
|
718,377
|
|
Chief Commercial Officer
|
|
2015
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Stephen DiPalma (4)
|
|
2016
|
|
$
|
282,631
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
282,631
|
|
Interim Chief Financial Officer
|
|
2015
|
|
$
|
322,603
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
322,603
|
|
(1)
|
The assumptions used to determine the fair value of the stock awards and option grants for 2016 and 2015 are as follows:
|
|
|
2016
|
|
|
2015
|
|
Risk-Free interest rate:
|
|
|
1.24
|
%
|
|
|
1.54
|
%
|
Expected life:
|
|
|
5.73 years
|
|
|
|
5.73 years
|
|
Expected volatility:
|
|
|
146.29
|
%
|
|
|
138.80
|
%
|
Dividend yield:
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
Using these assumptions, the weighted average grant date fair value per share of options granted in 2016 and 2015 was $0.15 and $0.16, respectively.
|
(2)
|
Amounts represent the grant date fair value of stock awards and option grants. The 2016 option award for Mr. Carbeau consists of the grant date fair value of options for 5,000,000 shares granted in October 2016 related to the July 2016 financing. The 2016 option award for Dr. Kornman consists of the grant date fair value of options for 400,000 shares granted in January 2016 as part of 2015 compensation. The 2016 option award for Mr. Toutain consists of the grant date fair value of options for 3,738,933 shares granted in October 2016 related to his hire. The 2015 option award for Mr. Carbeau consists of the grant date fair value of options for 14,245,227 shares granted in April 2015 related to his hire. The 2015 option award for Dr. Kornman consists of the grant date fair value of options for 2,030,000 shares granted in January 2015 as part of 2014 compensation. The 2015 option award for Mr. Snyder consists of the grant date fair value of options for 660,000 shares granted in January 2015 as part of 2014 compensation.
|
(3)
|
Mr. Carbeau and Mr. Toutain received a $1,500 401K company contribution in 2016. Dr. Kornman received reimbursement of $3,296 for life insurance in 2015.
|
(4)
|
Mr. DiPalma joined us as our Interim Chief Financial Officer in September 2014. Mr. DiPalma is Managing Director at Danforth Advisors, LLC, and we entered into a consulting agreement with Danforth Advisors, LLC at that time, pursuant to which Danforth provides us with finance, accounting and administrative functions, including interim Chief Financial Officer services. We pay Danforth an agreed upon hourly rate for such services and reimburse Danforth for expenses. Mr. DiPalma is compensated by Danforth and not by Interleukin. The amounts set forth above represent the amounts we paid to Danforth under the terms of the consulting agreement for Mr. DiPalma’s services.
|
Narrative Disclosure to Summary Compensation Table
The compensation paid
to our named executive officers in 2015 and 2016 summarized in our Summary Compensation Table above is generally determined in
accordance with employment agreements that we have entered into with certain of our Named Executive Officers as well as our consulting
agreement with Danforth Advisors, LLC. The material terms of the employment agreements are discussed under the caption “-
Employment Agreements” below.
Outstanding Equity Awards at Fiscal Year-End
The following table
shows stock option awards outstanding (vested and unvested) and unvested stock awards outstanding as of December 31, 2016,
including both awards subject to performance conditions and non-performance-based awards, for each of the executive officers in
the Summary Compensation Table.
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
|
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
|
Options
Exercise
Price
($)
|
|
|
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
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or Other
Rights
That
Have Not
Vested
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of
Unearned
Shares,
Units
or Other
Rights
That
Have Not
Vested
($)
|
|
Mark B. Carbeau
|
|
|
655,737
|
|
|
|
1,967,211
|
|
|
|
—
|
|
|
$
|
0.1525
|
|
|
4/6/2025
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
5,576,549
|
|
|
|
6,045,730
|
|
|
|
—
|
|
|
$
|
0.1525
|
|
|
4/6/2025
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
5,000,000
|
|
|
|
—
|
|
|
$
|
0.17544
|
|
|
10/20/2026
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth S. Kornman
|
|
|
25,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
1.40
|
|
|
4/2/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
75,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
0.48
|
|
|
11/12/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
30,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
0.745
|
|
|
4/6/2020
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
0.46
|
|
|
5/6/2021
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
300,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
0.34
|
|
|
12/21/2022
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
1,204,556
|
|
|
|
277,979
|
|
|
|
—
|
|
|
$
|
0.3799
|
|
|
10/22/2023
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
623,569
|
|
|
|
143,896
|
|
|
|
—
|
|
|
$
|
0.3799
|
|
|
10/22/2023
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
972,716
|
|
|
|
1,057,284
|
|
|
|
—
|
|
|
$
|
0.26
|
|
|
1/22/2025
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
99,996
|
|
|
|
300,004
|
|
|
|
—
|
|
|
$
|
0.07
|
|
|
12/14/2025
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
400,000
|
|
|
|
—
|
|
|
$
|
0.05
|
|
|
1/27/2026
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephan Toutain
|
|
|
—
|
|
|
|
3,738,933
|
|
|
|
—
|
|
|
$
|
0.17544
|
|
|
10/20/2026
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
351,569
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
0.3799
|
|
|
2/11/2016
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen DiPalma (1)
|
|
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
0.25
|
|
|
9/8/2024
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
(1)
|
Represents a warrant for 100,000 shares granted in September
2014 to Danforth Advisors, LLC. Mr. DiPalma disclaims beneficial ownership of the warrant and the shares of common stock issuable
thereunder.
|
Employment Agreements
Mark B. Carbeau
On April 6, 2015, we
entered into an employment agreement with Mark B. Carbeau to serve as our Chief Executive Officer. Under this agreement, Mr. Carbeau
will receive an initial annual base salary of $365,000 per year and is eligible to receive an annual bonus at a target amount of
35% of his base salary, with a stretch bonus opportunity of 150% of the target bonus. Under the terms of the Agreement, Mr. Carbeau
has been granted options to purchase up to 14,245,227 shares of Interleukin’s common stock (the “Options”) at
an exercise price of $0.1525 per share (the closing price of the common stock on April 6, 2015). The Options will vest as to 25%
of the shares on April 6, 2016, and as to an additional 2.083% of the shares on the last day of each successive month thereafter,
provided that he remains employed by Interleukin on the vesting date.
Per his employment
agreement, Mark Carbeau was entitled to receive a grant of options to purchase shares of the Company’s common stock equal
to 5% of the number of shares of the Company’s stock issued in the 2016 Private Placement, assuming the conversion of all
convertible securities issued in the 2016 Private Placement, which equals 5,626,257 shares, at a per share exercise price equal
to the fair market value of the Company’s common stock on the date of the grant. Pursuant to the terms of the 2013 Plan,
the Company cannot issue options or other grants for more than 5,000,000 shares to any one person in a calendar year. Consequently,
on October 20, 2016, the Company granted Mr. Carbeau options to purchase 5,000,000 shares of the Company’s common stock at
an exercise price of $0.17544 per share and expects to grant the remaining options to which Mr. Carbeau is entitled in 2017. These
options will vest as to 25% of the shares on July 29, 2017 and as to an additional 2.083% of the shares on the last day of each
successive month thereafter, provided that Mr. Carbeau remains employed by the Company on the vesting date.
The agreement provides
that if Mr. Carbeau’s employment with Interleukin is terminated by us without Cause (as defined in the agreement) or by Mr.
Carbeau for Good Reason (as defined in the agreement), subject to his execution of a release of claims agreement acceptable to
us, he will be entitled to (i) severance payments equal to 12 months of base salary and (ii) continuation of medical benefits for
up to 12 months. In addition, if within one year following a Change of Control (as defined in the agreement), Mr. Carbeau’s
employment with Interleukin is terminated by us without Cause or by Mr. Carbeau for Good Reason, subject to his execution of a
release of claims agreement acceptable to us, he will be entitled to (i) severance payments equal to 12 months of base salary,
(ii) continuation of medical benefits for up to 12 months and (iii) acceleration of the vesting of all outstanding unvested equity
awards.
As a condition of employment,
Mr. Carbeau has entered into a non-competition/non-solicitation agreement pursuant to which he has agreed not to compete with Interleukin
or to solicit customers or employees of Interleukin for a period of 12 months after the termination of his employment.
In January 2017, Mark
Carbeau was granted an option to purchase 1,278,653 shares of common stock related to the 2016 performance review process. This
option has an exercise price of $0.1237 per share. The option vests as to ¼ of the shares on January 25, 2018, and as to
1/36 of the remaining unvested shares at the beginning of each calendar month thereafter beginning on February 1, 2018.
Kenneth S. Kornman, DDS, Ph.D.
On November 12,
2008, we entered into an employment agreement with Dr. Kornman, our President and Chief Scientific Officer, for a three-year
term, commencing on March 31, 2009, the date his previous employment agreement expired. Effective March 31, 2012, this agreement
was extended through November 30, 2012. Under this agreement, Dr. Kornman received an initial annual salary of $360,000 and
is eligible to receive annual bonuses solely at the discretion of the Board of Directors. Dr. Kornman’s annual salary may
be increased in the sole discretion of the Board of Directors. Under the agreement, on November 12, 2008 Dr. Kornman received
a stock option to purchase 75,000 shares of common stock, at an exercise price of $0.48 per share, which was the closing price
as reported on the NYSE Amex on the grant date. The option was immediately exercisable with respect to 30,000 shares and vests
with respect to an additional 15,000 shares on each of March 31, 2010, 2011, and 2012. Under the agreement, Dr. Kornman
is entitled to participate in employee benefit plans that we provide or may establish for the benefit of our executive management
generally. In addition, while Dr. Kornman remains employed by us, we will reimburse him $3,296 annually for payment of life
insurance premiums.
The agreement is terminable
immediately by us with cause or upon thirty days prior written notice without cause. The agreement is terminable by Dr. Kornman
upon thirty days prior written notice. If we terminate Dr. Kornman without cause or Dr. Kornman terminates his employment
with good reason, then, in addition to payment of any accrued, but unpaid compensation prior to the termination, we must continue
to pay his base salary and to provide health insurance benefits until the earlier of (1) expiration of the agreement or (2) twelve
months. If we terminate Dr. Kornman in connection with a Cessation of our Business (as defined in the agreement), then, in
addition to payment of any accrued, but unpaid compensation prior to the termination, we must continue to pay his base salary and
to provide health insurance benefits until the earlier of (1) expiration of the agreement or (2) three months. The agreement also
includes non-compete and non-solicitation provisions for a period of twelve months following the termination of Dr. Kornman’s
employment.
On March 31, 2010,
Dr. Kornman was issued 12,500 shares of restricted stock under a restricted stock agreement dated April 30, 2008. In April 2010,
as part of the year-end compensation process, the Compensation Committee granted Dr. Kornman an option to purchase 30,000 shares
of our common stock. This option is exercisable at $0.745 per share and vests as to 20% of the shares on each of the first five
anniversaries of the date of grant.
In May 2011, the Compensation
Committee granted Dr. Kornman an option to purchase 100,000 shares of our common stock. This option is exercisable at $0.46 per
share and vests as to 25% of the shares on each of the first four anniversaries of the date of grant.
On April 25, 2012,
we executed an amendment, effective as of March 31, 2012, to Dr. Kornman’s employment agreement to extend the term through
November 30, 2012. In connection with the resignation of our former Chief Executive Officer on August 23, 2012, the Board of Directors
appointed Dr. Kornman as Chief Executive Officer in addition to his role as President and Chief Scientific Officer. The Board of
Directors also appointed Dr. Kornman as a director to fill the vacancy created by the CEO’s resignation. On November 29,
2012, we entered into a second amendment to Dr. Kornman’s employment agreement to extend the term through November 30, 2015.
Effective upon Mr. Carbeau’s appointment as Chief Executive Officer on April 6, 2015, Dr. Kornman resigned as Chief Executive
Officer and continues to serve as Interleukin’s President and Chief Scientific Officer and as a member of the Board of Directors.
In December 2012, the
Compensation Committee granted Dr. Kornman an option to purchase 300,000 shares of our common stock. This option is exercisable
at $0.34 per share and vests as to 25%, 33% and 42% of the shares on each of the first three anniversaries of the date of grant.
In October 2013, Dr.
Kornman was granted an option to purchase 2,250,000 shares of our common stock. This option has an exercise price of $0.3799, the
fair value of our common stock on the grant date of the option, and will vest as to ¼ of the shares on the first anniversary
of the grant date, and as to 1/36 of the remaining shares at the end of each month thereafter beginning on October 31, 2014. In
January 2015, Dr. Kornman was granted an option to purchase 2,030,000 shares of our common stock. This option has an exercise price
of $0.26, the fair value of our common stock on the grant date of the option, and will vest as to 1/48 of the shares at the beginning
of each month beginning on February 1, 2015.
On December 14, 2015,
we entered into a new Employment Agreement with Dr. Kornman to continue to serve as our President and Chief Scientific Officer.
The new agreement was effective as of December 1, 2015 and replaced the employment agreement, dated November 12, 2008, as amended
on March 31, 2012 and November 29, 2012, which terminated by its terms on November 30, 2015. Pursuant to the new agreement, Dr.
Kornman will receive an annual base salary of $360,000 per year and is eligible to receive an annual bonus at a target amount of
up to 35% of his base salary. Under the terms of the Agreement, Dr. Kornman was granted options to purchase up to 400,000 shares
of our common stock at an exercise price of $0.07 per share (the closing price of the common stock on December 14, 2015). The options
will vest over 4 years with 1/48
th
of the shares to vest on the first day of each successive month beginning January
1, 2016, provided that he remains employed by us on the vesting date. In addition, if at any time within 90 days prior to or 12
months following a Change in Control (as defined in the new agreement), Dr. Kornman is terminated without Cause (as defined in
the new agreement), the options will vest in full as of the date of such termination. The new agreement also provides that if Dr.
Kornman’s employment with Interleukin is terminated by us without Cause, subject to his execution of a release of claims
agreement acceptable to us, he will be entitled to severance payments equal to 6 months of base salary.
In January 2016, Dr.
Kornman was granted an option to purchase 400,000 shares of our common stock. This option has an exercise price of $0.05, the fair
value of our common stock on the grant date of the option, and will vest as to ¼ of the shares on the first anniversary
of the grant date, and as to 1/36 of the remaining shares at the end of each month thereafter beginning on February 1, 2017.
In January 2017, Kenneth
Kornman was granted an option to purchase 3,625,746 shares of common stock related to the 2016 performance review process. This
option has an exercise price of $0.1237 per share. The option vests as to ¼ of the shares on January 25, 2018, and as to
1/36 of the remaining unvested shares at the beginning of each calendar month thereafter beginning on February 1, 2018
Stephan Toutain
On May 19, 2016, we
entered into an employment agreement with Stephan Toutain for the position of Chief Commercial Officer beginning on August 15,
2016 (the “Start Date”). The agreement provides for a minimum annual base salary of $315,000 and he is eligible for
a bonus of 30% of his base salary pursuant to our bonus plan. Pursuant to the agreement, Mr. Toutain was granted options to purchase
3,738,933 shares of common stock, which was equal to 1% of our fully diluted shares as of his Start Date, at an exercise price
equal to fair market value of our common stock on the grant date of the option. The option will vest as to 25% of the shares on
the first anniversary of the Start Date, and as to an additional 2.083% of the shares monthly thereafter. Mr. Toutain’s agreement
is terminable at will by us or Mr. Toutain. If we terminate Mr. Toutain without cause, we will pay Mr. Toutain, in addition to
any accrued, but unpaid compensation prior to termination, an amount equal to six months of his base salary in effect at the time
of the termination.
In January 2017, Stephan
Toutain was granted an option to purchase 365,093 shares of common stock related to the 2016 performance review process. This option
has an exercise price of $0.1237 per share. The option vests as to ¼ of the shares on January 25, 2018, and as to 1/36 of
the remaining unvested shares at the beginning of each calendar month thereafter beginning on February 1, 2018.
Bonus Plan
The Compensation Committee
has approved an Employee Bonus Plan (the “Employee Bonus Plan”), pursuant to which bonuses may be awarded upon the
achievement of certain corporate goals, however, the Compensation Committee has absolute discretion as to whether bonuses will
be awarded and the size of any bonus, notwithstanding whether any such corporate goals are met or not.
DIRECTOR COMPENSATION
On April 29, 2010, our Board of
Directors adopted the following policy for compensation of non-employee directors:
|
·
|
for service as a director, an annual retainer of $20,000;
|
|
·
|
for service as the chair of a committee, an annual retainer of $7,500;
|
|
·
|
for service as a non-chair member of a committee, an annual retainer of $5,000;
|
|
·
|
for each Board or committee meeting attended in person, by teleconference or by video, $1,500; and
|
|
·
|
upon initial election or appointment to the Board, a grant of an option to purchase 15,000 shares of our common stock at an
exercise price equal to the closing price of the common stock on the date of grant, with such option to vest in four equal annual
installments on each of the first four anniversaries of the grant date.
|
Directors who are designated by Pyxis and
BCC pursuant to the terms of the 2014 Purchase Agreement, as amended, are not eligible to receive the foregoing compensation. All
of our directors are reimbursed for reasonable out-of-pocket expenses incurred in attending Board and committee meetings.
The following table shows the total compensation
paid or accrued during the fiscal year ended December 31, 2016 to William C. Mills III and James Weaver. No other director
was paid or accrued compensation during the fiscal year ended December 31, 2016.
Name (a)
|
|
Fiscal
Year
|
|
Fees Earned
or
Paid in Cash
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
William C. Mills III (1)
|
|
2016
|
|
$
|
59,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
59,500
|
|
James Weaver (1)
|
|
2016
|
|
$
|
74,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
74,000
|
|
|
(1)
|
The following table shows the total number of outstanding and vested stock options, and shares
of outstanding and restricted common stock as of December 31, 2016, the last day of our fiscal year, that have been issued as director
compensation.
|
Name
|
|
# of Stock
Options
Outstanding
|
|
|
# of Stock
Options
Vested
|
|
|
Shares of
Common Stock
Restricted
|
|
William C. Mills III
|
|
|
200,000
|
|
|
|
100,000
|
|
|
|
—
|
|
James Weaver
|
|
|
250,000
|
|
|
|
114,540
|
|
|
|
—
|
|
Item 12.
Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table
sets forth certain information with respect to the beneficial ownership of our common stock as of March 31, 2017 for (a) the
executive officers named in the Summary Compensation Table of this proxy statement, (b) each of our directors and director
nominees, (c) all of our current directors and executive officers as a group, and (d) each stockholder known to us to
beneficially own more than five percent of our common stock. Beneficial ownership is determined in accordance with the rules of
the SEC and includes voting or investment power with respect to the securities. We deem shares that may be acquired by an individual
or group within 60 days following March 31, 2017 pursuant to the exercise of options or warrants to be outstanding for the
purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose
of computing the percentage ownership of any other person shown in the table. Except as otherwise indicated, we believe that the
stockholders named in the table have sole voting and investment power with respect to all shares shown to be beneficially owned
by them based on information provided to us by these stockholders. Percentage ownership is based on a total of 229,435,726 shares
of our common stock issued and outstanding on March 31, 2017.
Name and Address of Beneficial Owner(1)
|
|
Amount and Nature
of Beneficial
Ownership
|
|
|
Percent
|
|
Five Percent Stockholders
|
|
|
|
|
|
|
|
|
Pyxis Innovations Inc. (2)
|
|
|
47,625,840
|
|
|
|
20.3
|
%
|
7575 Fulton Street, East
|
|
|
|
|
|
|
|
|
Ada, MI 49355
|
|
|
|
|
|
|
|
|
Bay City Capital LLC (3)
|
|
|
149,347,361
|
|
|
|
49.5
|
%
|
750 Battery Street Suite 400
|
|
|
|
|
|
|
|
|
San Francisco, CA 94111
|
|
|
|
|
|
|
|
|
Growth Equity Opportunities Fund III LLC (4)
|
|
|
106,980,342
|
|
|
|
38.1
|
%
|
1954 Greenspring Drive Suite 600
|
|
|
|
|
|
|
|
|
Timonium, MD 21093
|
|
|
|
|
|
|
|
|
Directors and Executive Officers
|
|
|
|
|
|
|
|
|
Mark B. Carbeau (5)
|
|
|
7,620,594
|
|
|
|
3.2
|
%
|
Kenneth S. Kornman, DDS, Ph.D. (6)
|
|
|
5,411,152
|
|
|
|
2.3
|
%
|
Stephan Toutain
|
|
|
—
|
|
|
|
—
|
|
Stephen DiPalma (7)
|
|
|
699,710
|
|
|
|
*
|
|
Lionel Carnot (8)
|
|
|
149,347,361
|
|
|
|
49.5
|
%
|
Joseph M. Landstra (9)
|
|
|
—
|
|
|
|
—
|
|
William C. Mills, III (10)
|
|
|
141,667
|
|
|
|
*
|
|
Dayton Misfeldt (8)
|
|
|
149,347,361
|
|
|
|
49.5
|
%
|
James M. Weaver (11)
|
|
|
378,289
|
|
|
|
*
|
|
All current executive officers and directors as a Group (9 persons) (12)
|
|
|
163,598,773
|
|
|
|
55.6
|
%
|
|
*
|
Represents less than 1% of the issued and outstanding shares.
|
|
(1)
|
Unless otherwise indicated, the address for each person is our address at 135 Beaver Street, Waltham,
MA 02452.
|
|
(2)
|
Based on a Schedule 13D/A filed on January 5, 2017 with the SEC by Pyxis Innovations Inc. (“Pyxis”)
and affiliated entities. Consists of 42,595,659 shares of common stock and 5,030,181 shares of common stock issuable upon the exercise
of warrants. Pyxis is a wholly-owned subsidiary of Alticor Inc. Alticor Inc. is a wholly-owned subsidiary of Solstice Holdings
Inc. Solstice Holdings Inc. is a wholly-owned subsidiary of Alticor Global Holdings Inc. Pyxis reports sole voting and dispositive
power over the shares, however, Alticor Inc., Solstice Holdings Inc., and Alticor Global Holdings Inc. have the power to direct
the voting and disposition of these securities held by Pyxis by virtue of their direct or indirect control of Pyxis.
|
|
(3)
|
Based on a Schedule 13D/A filed on August 5, 2016 with the SEC by Bay City Capital LLC (“BCC”)
and affiliated entities. BCC is the manager of Bay City Capital Management V LLC (“Management V”), which is the general
partner of Bay City Capital Fund V, L.P (“Fund V”), and Bay City Capital Fund V Co-Investment Fund, L.P. (“Co-Investment
V”). BCC is also an advisor to Fund V and Co-Investment V. The shares consist of (i) 75,800,716 shares of common stock and
70,753,850 shares of common stock issuable upon the exercise of warrants held by Fund V, and (ii) 1,444,485 shares of common stock
and 1,348,310 shares of common stock issuable upon the exercise of warrants held by Co-Investment V. Does not include shares of
common stock issuable upon conversion of the subordinated convertible promissory notes and warrants issued on April 17, 2017.
|
|
(4)
|
Based on a Schedule 13D/A filed on August 5, 2016 with the SEC by Growth Equity Opportunities Fund III, LLC (“GEOF”) and affiliates. The shares consist of 55,418,811 shares of common stock and 51,561,531 shares of common stock issuable upon the exercise of warrants held by GEOF.
|
|
(5)
|
Consists of (i) 7,419,388 shares of common stock issuable upon the exercise of options that are currently exercisable or become exercisable within 60 days of March 31, 2017, (ii) 100,603 shares of common stock held by Mr. Carbeau, and (iii) 100,603 shares of common stock issuable upon the exercise of warrants.
|
|
(6)
|
Consists of (i) 482,489 shares of common stock held by Dr. Kornman, (ii) 898,723 shares of common stock held by a limited partnership of which Dr. Kornman is a general partner and (iii) 4,004,790 shares of common stock issuable upon the exercise of options that are currently exercisable or become exercisable within 60 days of March 31, 2017. Dr. Kornman disclaims beneficial ownership of the shares held by the limited partnership, except to the extent of his pecuniary interest therein.
|
|
(7)
|
Consists of (i) 349,855 shares of common stock held by Mr. DiPalma and (ii) 349,855 shares of common stock issuable upon the exercise of warrants.
|
|
(8)
|
Appointed to the Board of Directors as a designee of BCC pursuant to the terms of the 2014 Purchase Agreement. Includes the shares of our common stock and shares of common stock issuable upon the exercise of warrants outstanding detailed in Note (3) above held by the entities affiliated with BCC. The voting and dispositive decisions with respect to the shares held by Fund V and Co-Investment V are made by the members of the investment committee of its general partner, Management V. Messrs. Carnot and Misfeldt serve on this investment committee. Each disclaims beneficial ownership of such shares, except to the extent of his actual pecuniary interest therein.
|
|
(9)
|
Appointed to the Board of Directors as a designee of Pyxis pursuant to the terms of the 2014 Purchase Agreement. We have been advised that this director does not, directly or indirectly, have voting or dispositive power over the shares of stock held by Pyxis.
|
|
(10)
|
Consists of 141,667 shares of common stock issuable upon the exercise of options that are currently exercisable or become exercisable within 60 days of March 31, 2017.
|
|
(11)
|
Consists of (i) 177,083 shares of common stock issuable upon the exercise of options that are currently exercisable or become exercisable within 60 days of March 31, 2017, (ii) 100,603 shares of common stock held by Mr. Weaver and (iii) 100,603 shares of common stock issuable upon the exercise of warrants.
|
|
(12)
|
See Notes 5 through 11 above.
|
EQUITY COMPENSATION PLAN INFORMATION
The following table provides certain aggregate
information with respect to all of our equity compensation plans in effect as of December 31, 2016.
Plan category
|
|
Number of securities to be
issued upon exercise
of outstanding options,
warrants and rights
(a)
|
|
|
Weighted average
exercise price of
outstanding options,
warrants and rights
(b)
|
|
|
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected
in column (a))
(c)
|
|
Equity compensation plans approved by security holders (1)
|
|
|
19,741,040
|
|
|
$
|
0.2131
|
|
|
|
20,799,266
|
|
Equity compensation plans not approved by security holders (2)
|
|
|
11,622,279
|
|
|
$
|
0.1525
|
|
|
|
—
|
|
Total
|
|
|
31,365,335
|
|
|
$
|
0.1828
|
|
|
|
20,799,266
|
|
|
(1)
|
These plans consist of our 2000 Employee Stock Compensation Plan (the “2000 Plan”),
our 2004 Employee, Director and Consultant Stock Plan (the “2004 Plan”), our 2013 Employee, Director and Consultant
Equity Incentive Plan (the “2013 Plan”) and our 2012 Employee Stock Purchase Plan (the “2012 ESPP”). The
number of shares set forth in column (a) consists of shares subject to outstanding options under the 2000 Plan, the 2004 Plan and
the 2013 Plan as of December 31, 2016. The number of shares set forth in column (c) consists of 30,649,503 shares remaining available
for issuance under the 2013 Plan and 300,073 shares remaining available for issuance under the 2012 ESPP as of December 31, 2016.
|
|
(2)
|
C
onsists of an inducement option grant
provided to Mr. Carbeau, our Chief Executive Officer, pursuant to the terms of his employment agreement
.
|
Item 13.
Certain Relationships
and Related Transactions, and Director Independence
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the written
charter of our Audit Committee, the Audit Committee is responsible for reviewing and approving, prior to our entry into any such
transaction, all transactions in which we are a participant and in which any of the following persons has or will have a direct
or indirect material interest: our executive officers; our directors; the beneficial owners of more than 5% of our securities;
the immediate family members of any of the foregoing persons; and any other persons whom the Board determines may be considered
related persons, any such person being referred to as a “related person.”
The following is a description of arrangements
that we have entered into with related persons since January 1, 2015. We believe that the transactions described below were made
on terms no less favorable to us than could have been obtained from unaffiliated third parties.
On October 26,
2009, we entered into a Merchant Network and Channel Partner Agreement with Amway Corp. d/b/a Amway Global, a subsidiary of Alticor,
Inc., which is the parent company of Pyxis Innovations Inc., a stockholder of Interleukin. Pursuant to this Agreement, Amway
Global sells our Inherent Health brand of genetic tests through its e-commerce Web site via a hyperlink to our e-commerce site. Amway
Global receives a commission equal to a percentage of net sales received by us from Amway Global customers. The agreement has an
initial term of 12 months and is automatically renewable for successive 12-month terms. The agreement may be terminated by
either party upon 120 days written notice. As of December 31, 2016, we have paid Amway Global approximately $3.2 million in commissions
under this agreement, including $302,000 in 2015 and $225,000 in 2016.
Beginning in September
2012 and again in 2013, Access Business Group LLC (“ABG”), an affiliate of Alticor, placed purchase orders totaling
approximately $3.3 million consisting of weight management kits. The kits are included as part of a promotional bundle of products
that Amway is now selling to their Individual Business Owners (IBOs). Of the $3.3 million in orders $1.8 million was received in
2013 for the 2014 program and $1.5 million for the 2013 program. Cash for the kits purchased for the 2013 program was received
in the first quarter of 2013 and cash for the kits purchased for the 2014 program was received by December 31, 2013. As a component
of the promotional program, and not reflective of actual product expiry, the kits were required to be redeemed by a certain date.
The initial program required redemption by December 31, 2013, but the date of required redemption was extended such that the revenues
will remain deferred until those kits are redeemed or the breakage analysis determines the probability of eventual redemption is
remote. In February 2014, we removed the redemption date requirement, for which ABG paid us $519,000 as a retrospective increase
in the product purchase price. In October 2014, we received $250,000 as a retrospective increase in the product purchase price
for unsold kits as consideration for extending the required redemption date of the 2014 promotional program to December 31, 2017.
Cash received for these kits will be treated as deferred revenues until specific kits are returned for processing or on the final
allowed redemption date of December 31, 2017.
On September 21, 2012,
we entered into a License Agreement with Access Business Group International LLC (“ABGI”), an affiliate of Alticor.
Pursuant to the License Agreement, we have granted ABGI and its affiliates a non-exclusive license to use the technology related
to our Weight Management genetic test and to sell the Weight Management test in Europe, Russia and South Africa (the “Territories”).
ABGI, or a laboratory designated by ABGI or an affiliate of ABGI, will be responsible for processing the tests, and we will receive
a royalty for each test sold, which royalty will increase if certain pending patent applications are issued. The License Agreement
has an initial term of five years from the date of first commercial sale of the Weight Management test under the agreement. Thereafter,
the term will automatically renew for additional one-year periods unless at least 60 days prior notice is delivered by either party.
Through December 31, 2016, we have been paid approximately $705,000 under this agreement, including $174,000 in 2015 and $192,000
in 2016.
We have also entered
into an agreement with Pyxis containing certain terms for allocating opportunities as permitted under Section 122(17) of the Delaware
General Corporation Law. This agreement regulates and defines the conduct of certain of our affairs as they may involve this stockholder
and its affiliates, and the powers, rights, duties and liabilities of us and our officers and directors in connection with corporate
opportunities. Except under certain circumstances, this stockholder and its affiliates have the right to engage in the same or
similar activities or lines of business or have an interest in the same classes or categories of corporate opportunities as we
do. If Pyxis, its affiliates, or one of our directors appointed by Pyxis acquire knowledge of a potential transaction or matter
that may be a corporate opportunity for both such stockholder and its affiliates and us, to the fullest extent permitted by law,
such stockholder and its affiliates will not have a duty to inform us about the corporate opportunity or be liable to us or to
our stockholders for breach of any fiduciary duty as a stockholder of ours for not informing us of the corporate opportunity, keeping
it for its own account, or referring it to another person. Additionally, except under limited circumstances, if an officer or employee
of Pyxis who is also one of our directors is offered a corporate opportunity, such opportunity shall not belong to us. In addition,
we agreed that such director will have satisfied his duties to us and not be liable to us or to you in connection with such opportunity.
The terms of these agreements will terminate on the date that no person who is a director, officer or employee of ours is also
a director, officer, or employee of Pyxis.
Effective as of February
1, 2016, we entered into a Services Agreement with Metagenics, Inc. to provide our ILUSTRA
™
Genetic Risk Test
to Metagenics’ employees as part of an enhanced employee benefits program. Metagenics is an affiliate of Alticor and Pyxis.
Pursuant to this agreement, we will provide genetic testing and patient education to Metagenics employees, as well as dental professional
support to their dental providers, and Metagenics will pay a fixed fee for each test processed by us. Through March 31, 2017, we
have received no revenue under this agreement.
On July 12, 2016, we
announced we had signed an agreement with Amway, a leading direct selling company, to provide our ILUSTRA Genetic Risk Test and
the ILUSTRA
Inflammation Management Program to Amway’s employees as part of an enhanced employee benefits
plan. Under terms of the agreement, we make the ILUSTRA Genetic Risk Test available to Amway’s approximately 5,000 employees
in the United States. Through March 31, 2017, we have received $30,000 in revenue under this agreement.
On July 29, 2016, we
entered into a Securities Purchase Agreement (the “2016 Purchase Agreement”) with various accredited investors (the
“2016 Investors”), pursuant to which we sold to the 2016 Investors in a private placement transaction (the “2016
Private Placement”) an aggregate of 56,262,571 shares of common stock at a price of $0.0994 per share for gross proceeds
of approximately $5.6 million. The 2016 Investors also received warrants to purchase up to an aggregate of 56,262,571 shares of
common stock at an exercise price of $0.0994 per share (the “2016 Warrants”). The 2016 Warrants vested immediately,
are all currently exercisable and have a term of seven years. The following beneficial owners of more than 5% of our securities
participated in the 2016 Private Placement:
Purchaser
|
|
Shares
|
|
|
Warrant
Shares
|
|
|
Purchase Price
|
|
Bay City Capital Fund V, L.P.
|
|
|
29,616,700
|
|
|
|
29,616,700
|
|
|
$
|
2,943,899.98
|
|
Bay City Capital Fund V Co-Investment Fund
|
|
|
564,386
|
|
|
|
564,386
|
|
|
$
|
56,099.97
|
|
Growth Equity Opportunities Fund III, LLC
|
|
|
20,120,724
|
|
|
|
20,120,724
|
|
|
$
|
1,999,999.97
|
|
On April 17, 2017,
we sold $500,000 of Convertible Notes (the “2017 Notes”) to each of Bay City Capital and Horizon Technology Finance
Corporation (the “Note Holders”), for a total of $1,000,000 in aggregate principal. The 2017 Notes are convertible
at the option of the Note Holder into shares of our common stock, in an amount determined by dividing (i) the then outstanding
principal amount and accrued interest under the 2017 Note by (ii) a conversion price equal to $0.125256, and are also convertible
into our common stock at differing conversion prices if certain conditions are met. The 2017 Notes are secured by a security interest
in all of our assets and are subordinated to our existing venture loan with Horizon Technology Finance Corporation. In connection
with the issuance of the 2017 Notes, we also issued warrants to purchase common stock to the Note Holders. The warrants have an
exercise price per share of $0.10438 and are exercisable for that number of shares of our common stock equal to the original principal
amount of the corresponding 2017 Note divided by such exercise price, or an aggregate of approximately 9,580,379 shares. The 2017
Note Warrants are exercisable on a net issuance basis and have a 5-year term.
See also “Principal
Stockholders.”
DIRECTOR INDEPENDENCE
Our Board of Directors
has determined that the following members qualify as independent directors under the definition promulgated by NASDAQ: Lionel Carnot,
Joseph M. Landstra, William C. Mills III, Dayton Misfeldt and James M. Weaver.
Item 14
. Principal Accountant
Fees and Services
INDEPENDENT PUBLIC ACCOUNTANT
Principal Accountant Fees and Services
The following table
presents fees for professional audit services rendered by Grant Thornton, LLP, our independent public accountant, for the
audit of our annual financial statements for the years ended December 31, 2015 and December 31, 2016 and fees billed
for other services rendered by Grant Thornton LLP during those periods.
|
|
2015
|
|
|
2016
|
|
Audit fees(1)
|
|
$
|
210,345
|
|
|
$
|
248,672
|
|
Audit related fees
|
|
|
—
|
|
|
|
—
|
|
Tax fees
|
|
|
—
|
|
|
|
—
|
|
All other fees
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
210,345
|
|
|
$
|
248,672
|
|
|
(1)
|
Audit fees consist of fees for professional services rendered for the
audit of our annual financial statements and review of the interim financial statements included in the quarterly reports and fees
for services related to the Company’s registration statements, consents and assistance with and review of documents filed
with the SEC.
|
Policy on Audit Committee Pre-Approval of Audit and Permissible
Non-audit Services of Independent Auditors
Consistent
with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and
overseeing the work of the independent auditor. In recognition of this responsibility, the Audit Committee has established a policy
to pre-approve all audit and permissible non-audit services provided by the independent auditor
.
Prior to the engagement
of the independent auditor for the next year’s audit, management will submit to the Audit Committee for approval a summary
of the services expected to be rendered during that year for each of four categories of services.
1.
Audit
se
rvices include audit work performed in the preparation of financial statements, as well as work that
generally only the independent auditor can reasonably be expected to provide, including comfort letters, statutory audits, and
attest services and consultation regarding financial accounting and/or reporting standards.
2.
Audit-Related
services are for assurance and related services that are traditionally performed by the independent
auditor, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required
to meet certain regulatory requirements.
3.
Tax
services include all services performed by the independent auditor’s tax personnel except those
services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning,
and tax advice
.
4.
Other Fees
are those associated with services not captured in the other categories. The Company generally does
not request such services from the independent auditor
.
Prior
to the engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted and the Audit
Committee requires the independent auditor and management to report actual fees versus the budget periodically throughout the year
by category of service. During the year, circumstances may arise when it may become necessary to engage the independent auditor
for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific
pre-approval before engaging the independent auditor
.
The
Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated
must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting
.