|
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
|
Directors
As of May 9, 2019,
our Board of Directors (the “Board”) consists of five members, Bruce Horowitz, Jan Koe, John Lacey, III, M.D., Ed
Pershing, CPA, and Dominic Rodrigues, CFA. Set forth below is a biographical summary of the experience of each of our current
directors:
Bruce Horowitz
,
63, has served as a member of our Board since 2017, and serves as Provectus’ Chief Operating Officer since April 29, 2019;
he previously served as the Company’s Chief Operations Consultant since 2017. Mr. Horowitz has served as the Managing Director
of Capital Strategists, LLC, which provides corporate, strategic, and financial consulting services, since 2006. He also serves
as a trusted advisor to family trusts and private individuals, with a focus on financial asset management, real estate management
and special situation investments. He has also served as the Managing Member of Plata LLC since 2017. Earlier in his career Mr.
Horowitz was a charter member of the New York Futures Exchange, was a Senior Vice President managing principal equity investment
accounts, private equity investments and public offerings at Drake Capital Securities, and managed the trading department at the
Los Angeles office of Laidlaw Equities. He was also a partner at Stanley Capital, a private equity buyout firm. Mr. Horowitz
was the chairman and a member of two general obligation bond fund committees, raising more than $500 million in general revenue
bonds for the Beverly Hills Unified School District. Subsequently, he was named the first chairman of both the state of California-mandated
Citizens’ Oversight Committee and Facilities Advisory Committee, overseeing expenditure of all BHUSD general obligation
bond funds. Mr. Horowitz is a founding member of the Los Angeles Chapter of the Positive Coaching Alliance. He founded and is
currently the president of the Beverly Hills Basketball League, a youth basketball program that serves more than 35,000 families.
Mr. Horowitz has also served as a member of the board of directors of the American Youth Soccer Organization and Beverly Hills
Little League. He holds a Juris Doctor degree from Benjamin N. Cardozo School of Law in New York City and Bachelor of Arts degree
from Washington University in St. Louis.
Jan
Koe
, 68, has served as a member of our Board since 2012. Mr. Koe has a 31-year track record of success in consulting, asset
management, real estate and public company governance, and has represented major insurance firms, national retailers and Fortune
500 companies. He is President of GoStar, which is the manager of Real Solutions Opportunity Fund 2005-I and Real Solutions Fund
Management LLC and Real Solutions Investment LLC. He is also Principal of Method K Partners, Inc., a commercial real estate firm,
which he founded in 1988. He has served on the board of directors of ONE Bio, Corp. where he was Chair of the Compensation Committee
and a member of the Financial Audit Committee. He holds a degree in Business Administration and Psychology from Luther College.
John
Lacey, III, M.D.
, 71, has served as a member of our Board since 2018. Dr. Lacey is the former Chief Medical Officer and Senior
Vice President of University Health System d/b/a University of Tennessee Medical Center (“UTMC”), a 600+ bed academic
medical center based in Knoxville since 1999. Dr. Lacey served continuously in this capacity from 1999 until retirement from UTMC
in 2016. He also operated an internal medicine practice for 39 years. Dr. Lacey graduated from the University of Tennessee with
a Bachelor’s degree in Nuclear Engineering and the University of Tennessee Medical School (Memphis) with a Doctor of Medicine
degree. Dr. Lacey helped create Knoxville Area Project Access, a partnership with the Knoxville Academy of Medicine and providers
to give primary and specialty health services to the uninsured and medically underserved, and was the inaugural chair of the Governor’s
Health and Wellness Task Force, which focused on improving Tennessee’s national health ranking. Dr. Lacey has been recognized
by several entities for contributions to population health.
Ed
Pershing, CPA
, 66, has served as the Chair of our Board since 2018. He is Chief Executive Officer of Pershing Yoakley &
Associates (“PYA”), a top 20 healthcare consulting and top 100 accounting firm in the U.S. PYA, which he co-founded
more than 30 years ago, expanded from a three-employee office to more than 270 employees and five affiliate companies serving
more than 3,500 clients in 50 states. Mr. Pershing’s healthcare experience and expertise include turnaround/performance
improvement initiatives, long-range planning studies, development of numerous hospital and medical office projects, restructuring
of healthcare organizations, liaison between boards of directors and management teams to craft corporate visions and strategies,
mergers, acquisitions, divestitures, and leasing arrangements. He has served as an expert witness on healthcare industry matters
and in several Certificate of Need appeals. Mr. Pershing also has represented healthcare organizations before regulatory agencies
such as the Centers for Medicare & Medicaid Services, Internal Revenue Service, and Departments of Mental Health, Insurance,
and Medicaid. He graduated from the University of Tennessee with a Bachelor of Science in Accounting, and was one of 18 professionals
from the U.S. and Great Britain to participate in the first Ernst & Ernst Accelerated Healthcare Program, a one-year full-time
education and work-study program in healthcare industry matters. Mr. Pershing is a Certified Professional Accountant.
Dominic
Rodrigues, CFA
, 50, has served as a member of our Board since 2017 (and the Vice Chair of our Board since 2018; he previously
served as the Chair from 2017 to 2018). Mr. Rodrigues previously served as President of Rhisk Capital, which provided management
consulting, corporate development, and portfolio management services, since 2005. Project industries and technologies included
aerospace & defense (a technology-focused investment capital pool; an operational role in a related data communications solution
company), biotechnology, financial services (a capital markets-focused technology company), gaming, healthcare, life sciences,
nanotechnology (a venture capital fund investment), wealth management (a start-up private wealth office), and restaurants. Since
2013 Mr. Rodrigues has been an Adjunct Professor of Finance at the Lee Business School of the University of Nevada, Las Vegas,
where he teaches valuation and CFA exam preparation courses. His business development, corporate development, finance, and leadership
experiences at various companies include SAIC Venture Capital Corporation, the multi-billion-dollar subsidiary of research and
engineering company SAIC, where he was an observer or member of the board of directors of 11 different firms. Mr. Rodrigues currently
serves as a member of the audit & finance committee of Three-Square Food Bank. He holds business, economics, and engineering
degrees from The Wharton School, the London School of Economics, the Massachusetts Institute of Technology, and the University
of Toronto. Mr. Rodrigues also is a Chartered Financial Analyst.
Experience,
Qualifications, Attributes and Skills of Our Directors
Set
forth below are the specific experience, qualifications, attributes and skills of our directors that led to the conclusion that
each director should serve as a member of our Board.
Bruce
Horowitz
brings extensive and diverse board of directors, business development, corporate development, strategic planning,
capital formation, and leadership experience to our board of directors and company management from his prior and ongoing work,
non-profit volunteerism, and educational background.
Jan
Koe
brings extensive and diverse board of directors and board committee, chief executive, and leadership experience to our
board of directors and company management from his prior and ongoing work, and educational background.
John
Lacey, III, M.D.
brings extensive and diverse board of directors, medical, strategic planning, and leadership experience to
our Board and company management from his prior work, non-profit volunteerism, and educational background.
Ed
Pershing, CPA
brings extensive and diverse board of directors, business development, corporate development, strategic planning,
accounting, healthcare industry, and leadership experience to our Board and company management from his prior and ongoing work,
non-profit volunteerism, and educational background.
Dominic
Rodrigues, CFA
brings extensive and diverse board of directors and board committee, business development, corporate development,
finance, and leadership experience to our board of directors and company management from his prior and ongoing work and professional
volunteerism, and educational background.
Board
Leadership Structure
Mr. Pershing serves as non-executive Chairman of our Board and Mr. Rodrigues serves as non-executive Vice Chairman.
We
believe that it is appropriate to separate the positions of Chairman and Chief Executive Officer to ensure that the appropriate
level of independent oversight is applied to all management decisions and avoids any potential conflicts of interest. The Company
does not currently have a Chief Executive Officer, although our Chief Operating Officer, Mr. Horowitz, serves as our principal
executive officer. Our entire board of directors is responsible for our risk oversight function due to the fact that we have only
three employees.
Board
and Committees
Our Board met five times
and acted by unanimous written consent eight times in 2018. Each incumbent director attended all meetings of our Board and its
committees on which he served during 2018. We do not have a formal policy regarding attendance by Board members at our Annual
Stockholders Meeting, but members of our Board are encouraged to attend the 2019 Annual Meeting of Stockholders. Directors
Horowitz, Lacey, Pershing, and Rodrigues attended the 2018 Annual Meeting of Stockholders in person, and Director Koe attended
via telephone.
We
have three standing Board committees: the audit committee, the compensation committee, and the corporate governance and nominating
committee (the “nominating committee”).
Audit
Committee
The
audit committee consists of Dr. Lacey and Messrs. Horowitz, Koe, Pershing, and Rodrigues. Dr. Lacey and Messrs. Koe, Pershing
and Rodrigues are independent directors under the listing standards of the NYSE American LLC. Mr. Pershing is the chairman of
the audit committee. Our Board has determined that Messrs. Pershing and Rodrigues qualify as “audit committee financial
experts,” as defined under the rules of the SEC. The audit committee met four times in 2018.
The
audit committee’s responsibilities include:
|
|
1.
|
Hiring
one or more independent registered public accountants to audit our books, records and financial statements and to review our
systems of accounting (including our systems of internal control),
|
|
|
|
|
|
|
2
.
|
Discussing
with the independent registered public accounting firm the results of the annual audit and quarterly reviews,
|
|
|
3
.
|
Conducting
periodic independent reviews of the systems of accounting (including systems of internal control),
|
|
|
|
|
|
|
4.
|
Making
reports periodically to our Board with respect to its findings, and
|
|
|
|
|
|
|
5.
|
Undertaking
other activities described more fully in the section called “Audit Committee Report.”
|
Our audit committee charter
is posted on our website under the “Investors” subpage, at http://provectusbio.com/media/docs/AuditCommitteeCharter.pdf,
and is also available in print to any stockholder or other interested party who makes such a request to the Company’s Secretary.
The information on our website, however, is not a part of this Amendment.
Compensation
Committee
The
compensation committee consists of Dr. Lacey and Messrs. Horowitz, Koe, Pershing, and Rodrigues. Dr. Lacey and Messrs. Koe, Pershing,
and Rodrigues are independent directors under the listing standards of the NYSE American LLC. Mr. Koe is the chairman of the compensation
committee. The compensation committee met three times in 2018.
The
compensation committee’s responsibilities include:
|
|
1.
|
Reviewing
and approving annually the corporate goals and objectives relevant to each executive officer, and at least annually, evaluating
each executive officer’s performance in light of these goals and objectives, and setting each executive officer’s
compensation, including salary, bonus and incentive compensation, based on this evaluation,
|
|
|
|
|
|
|
2.
|
Reviewing
our compensation and benefits plans,
|
|
|
|
|
|
|
3.
|
Reviewing
and recommending to the entire Board the compensation for members of our Board, and
|
|
|
|
|
|
|
4.
|
Other
matters that our Board specifically delegates to the compensation committee from time to time.
|
Our compensation committee
charter is posted on our website under the “Investors” subpage, at http://provectusbio.com/media/docs/CompensationCommitteeCharter.pdf,
and is also available in print to any stockholder or other interested party who makes such a request to the Company’s Secretary.
The information on our website, however, is not a part of this Amendment.
Other
Information Concerning Management
As of May 9,
2019, our executive officers are Bruce Horowitz, Chief Operations Officer, Heather Raines, CPA, Chief Financial Officer and
Eric A. Wachter, Ph.D., Chief Technology Officer. Set forth below is a biographical summary of the experience of each of our
executive officers:
Bruce Horowitz
serves
as our Chief Operations Officer. Information about his business experience is set forth above under the heading, “Directors.”
Heather
Raines, CPA,
52, serves as our Chief Financial Officer (since March 25, 2019). Mrs. Raines previously served as the Company’s
Controller from August 2017 until her appointment as the Company’s CFO. Before joining the Company, Mrs. Raines served as
the Vice President of Finance for BDry Waterproofing, a service business, from November 2015 to November 2017. She previously
managed financial and accounting functions at AMETEK, Inc. (NYSE: AME), a manufacturing company, serving as AMT Business Unit
Controller for AMETEK’s wholly-owned subsidiary, Advanced Measurement Technology, Inc., from June 2015 to September 2015,
Scientific Instruments Business Unit Controller from September 2013 to May 2015, and Senior Finance Manager from August 2007 to
September 2013. Mrs. Raines was a tax analyst at Goody’s Family Clothing from 2006 to 2007, and an Accounting Manager at
Siemens Medical Solutions USA, Inc., a wholly-owned subsidiary of Siemens AG (NYSE: SI), from 2005 to 2006, and CTI Molecular
Imaging, Inc. (Nasdaq: CTMI) from 1999 to 2005. Mrs. Raines received a Master’s Degree in Accounting from Strayer University
and a Bachelor’s Degree in Accounting from the University of Tennessee. She is a Certified Public Accountant (“CPA”),
and a member of the American Institute of CPAs and the Tennessee Society of CPAs.
Eric A. Wachter, Ph.D.
,
55, has served as our Chief Technology Officer (since May 14, 2012); the Company and Dr. Wachter are currently negotiating
a new employment agreement. Dr. Wachter previously served as Executive Vice President – Pharmaceuticals and as a member
of our Board since we acquired PPI on April 23, 2002 until May 14, 2012 and again from February 29, 2016 to April 27, 2018. Prior
to joining us, from 1997 to 2002 he was a senior member of the management team of Photogen, including serving as Secretary and
a director of Photogen since 1997 and as Vice President and Secretary and a director of Photogen since 1999. Prior to joining
Photogen, Dr. Wachter served as a senior research staff member with Oak Ridge National Laboratory. He earned a Ph.D. in Chemistry
from the University of Wisconsin–Madison in 1988.
Section
16(a) Beneficial Ownership Reporting Compliance
The
federal securities laws require our directors and executive officers and persons who beneficially own more than 10% of a registered
class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of our securities.
Based solely on our review of the copies of these forms received by us or representations from reporting persons, we believe that
SEC beneficial ownership reporting requirements for 2018 were met.
Code
of Ethics
Our
Board has adopted a code of ethics that applies to our principal executive officer and principal financial officer, or persons
performing similar functions. The code of ethics contains written standards that are reasonably designed to deter wrongdoing and
to promote: (1) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between
personal and professional relationships; (2) full, fair, accurate, timely, and understandable disclosure in reports and documents
that we file with, or submit to, the SEC and in other public communications made by us; (3) compliance with applicable governmental
laws, rules and regulations; (4) the prompt internal reporting of violations of the code to an appropriate person or persons identified
in the code; and (5) accountability for adherence to the code. The code of ethics is available without charge upon request from
our Secretary, Provectus Biopharmaceuticals, Inc., 10025 Investment Drive, Suite 250, Knoxville, Tennessee 37932.
|
ITEM
11.
|
EXECUTIVE
COMPENSATION.
|
Compensation
of Directors and Executive Officers
Because we are a smaller
reporting company, we are not required to include a Compensation Discussion and Analysis section in this Amendment and
have elected to comply with the scaled-down executive compensation disclosure requirements applicable to smaller reporting companies.
Base
Salary and Employment Agreements
On
April 28, 2014, we entered into amended and restated executive employment agreements with Drs. Scott and Wachter to serve as our
President and Chief Technology Officer, respectively. Each agreement provided that such executive be employed for a five-year
term with automatic one-year renewals unless previously terminated pursuant to the terms of the agreement or either party gives
notice that the term will not be extended. Each executive officer’s base salary was $500,000 per year. The Company and Drs.
Scott and Wachter are parties to a Stipulated Settlement Agreement dated June 6, 2014 (the “Kleba Settlement Agreement”)
that was negotiated to resolve certain claims asserted against Drs. Scott and Wachter derivatively, pursuant to which each of
Drs. Scott and Wachter agreed to repay the Company compensation that was paid to such executive along with legal fees and other
expenses incurred by the Company. Each of Drs. Scott and Wachter had $200,000 withheld from their salary each year for such repayment
obligation. On November 26, 2018, the Board provided notice to each of Drs. Scott and Wachter that the Company would not renew
their respective employment agreements as of their April 28, 2019 expiration dates.
Independent
Contractor Agreements
During 2016, the Company
entered into an independent contractor agreement, as amended (the “Glass Agreement”), with Mr. Glass, pursuant to
which he served as Interim Chief Financial Officer of the Company. On January 24, 2019, the Board provided Mr. Glass with
a 60-day written notice of the Company’s intent to terminate the Glass Agreement. Mr. Glass continued to serve as Interim
Chief Financial Officer with the Company until the effective date of the termination of the Glass Agreement on March 25, 2019.
The Glass Agreement provided that Mr. Glass be paid $125 per hour. The Glass Agreement further provided that, following the termination
of the Glass Agreement by the Company as a result of the hiring of a permanent chief financial officer, Mr. Glass would also be
entitled to a severance payment of $20,000 subject to certain terms and conditions set forth in the Glass Agreement.
2019
Executive Employment/Contractor Agreements
On
May 8, 2019, our Board promoted Mr. Horowitz to the Company’s Chief Operating Officer. During 2017, the Company entered
into an independent contractor agreement, as amended (the “Horowitz Agreement”), with Mr. Horowitz, pursuant to which
he has served as Chief Operations Consultant of the Company since April 19, 2017. The Horowitz Agreement was amended on May
8, 2019 to provide that Mr. Horowitz continue to be paid $125 per hour and receive a health insurance allowance
of $1,200 per calendar month.
On
March 25, 2019, our Board promoted Mrs. Raines to the Company’s Chief Financial Officer. She had previously served as Provectus’
Controller since August 1, 2017. In connection with the promotion, Mrs. Raines is entitled to receive an initial incentive
compensation of 50,000 shares of the Company common stock. The term of the employment agreement is from March 25, 2019 to March
24, 2020 and thereafter, the term of her employment will be extended automatically one additional year unless terminated by either
the Company or Mrs. Raines upon 30 days prior written notice. In the event of a change in control, Mrs. Raines will be paid an
amount equal to 50% of her base salary in the preceding calendar year.
Bonus
Awards
No
cash bonuses were earned or awarded to our named executive officers in 2018.
Other
Benefits
We
maintain broad-based benefits that are provided to all employees, including health insurance, life and disability insurance, dental
insurance, and a vacation policy.
Long-Term
Incentives
At
the 2014 annual meeting of stockholders, our stockholders approved the Provectus Biopharmaceuticals, Inc. 2014 Equity Compensation
Plan (the “2014 Equity Compensation Plan”), which authorizes our Board to grant options that qualify as “incentive
stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986 (the “Code”), and options
that do not qualify as incentive stock options under the Code (“non-qualified stock options,” and collectively with
incentive stock options, “options”). We are authorized to grant options under the 2014 Equity Compensation Plan for
up to 20,000,000 shares of our common stock. If any options granted under the 2014 Equity Compensation Plan are forfeited or terminated
for any reason, the shares of common stock that were subject to the options will again be available for future distribution under
the 2014 Equity Compensation Plan. In June 2016, the compensation committee approved an amendment to our 2014 Equity Compensation
Plan to allow for restricted stock awards to non-employee directors. Our stockholders approved this amendment at our 2017 annual
stockholder meeting.
Under
the terms of our 2014 Equity Compensation Plan, prior to the occurrence of a change in control (as defined in the 2014 Equity
Compensation Plan), and unless otherwise determined by our Board, any stock options outstanding on the date such change in control
is determined to have occurred that are not yet exercisable and vested on such date will become fully exercisable and vested.
As of December 31, 2018, named executive officers had no outstanding unvested stock options. No options were awarded to our named
executive officers or to directors in 2018.
Summary
Compensation Table
The
table below shows the compensation for services in all capacities we paid during the years ended December 31, 2018 and 2017 to
our principal executive officer and our two other executive officers during 2018 (whom we refer to collectively as our “named
executive officers”):
|
Name
and Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
All
Other Compensation
(1)
|
|
|
Total
|
|
|
Timothy
C. Scott, Ph.D., Former President
(2)
|
|
|
2018
|
|
|
$
|
300,000
|
(3)
|
|
|
—
|
|
|
$
|
28,473
|
|
|
$
|
328,473
|
|
|
|
|
|
2017
|
|
|
$
|
300,000
|
(3)
|
|
|
—
|
|
|
$
|
29,490
|
|
|
$
|
329,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Glass, CPA, Former
Interim Chief Financial Officer
(4)
|
|
|
2018
|
|
|
$
|
234,213
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
234,213
|
|
|
|
|
|
2017
|
|
|
$
|
276,534
|
|
|
$
|
60,000
|
|
|
|
—
|
|
|
$
|
336,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric Wachter, Ph.D., Chief Technology
Officer
(5)
|
|
|
2018
|
|
|
$
|
300,000
|
(3)
|
|
|
—
|
|
|
$
|
28,360
|
|
|
$
|
328,360
|
|
|
|
|
|
2017
|
|
|
$
|
300,000
|
(3)
|
|
|
—
|
|
|
$
|
29,490
|
|
|
$
|
329,490
|
|
|
(1)
|
Amounts
in this column for 2018 are comprised of the following: unused vacation that was accrued totaling $19,231 for Dr. Wachter;
and health/vision, life, short term disability, and long-term disability insurance premiums.
|
|
(2)
|
Dr.
Scott ceased serving as our President (and principal executive officer), effective as of May 8, 2019.
|
|
(3)
|
This
amount reflects the annual base salary for Drs. Scott and Wachter for 2018 and 2017 after $200,000 per year for these years
was withheld from their respective salaries in connection with the Kleba Settlement Agreement. In 2018, Dr. Scott applied
an additional $150,000 of his salary to the Kleba Settlement Agreement.
|
|
(4)
|
Mr.
Glass ceased serving as our Interim Chief Financial Officer on March 25, 2019.
|
|
(5)
|
The
Company and Dr. Wachter are currently negotiating a new employment agreement.
|
Outstanding
Equity Awards at 2018 Fiscal Year-end
The
following table shows the number of equity awards outstanding as of December 31, 2018 for our named executive officers. All the
options were exercisable as of December 31, 2018.
|
|
|
Option
Awards
|
|
|
Name
(1)
|
|
Number
of Shares of
Common Stock
Underlying Unexercised
Options Exercisable (#)
|
|
|
Option
Exercise
Price ($)
|
|
|
Option
Expiration
Date
|
|
Timothy Scott, Ph.D.,
Former President
|
|
|
50,000
|
|
|
$
|
1.04
|
|
|
|
6/19/2019
|
|
|
|
|
|
50,000
|
|
|
$
|
1.16
|
|
|
|
6/18/2020
|
|
|
|
|
|
525,000
|
(1)
|
|
$
|
1.00
|
|
|
|
7/22/2020
|
|
|
|
|
|
50,000
|
|
|
$
|
1.04
|
|
|
|
7/6/2021
|
|
|
|
|
|
525,000
|
(1)
|
|
$
|
0.93
|
|
|
|
9/6/2021
|
|
|
|
|
|
50,000
|
|
|
$
|
0.84
|
|
|
|
6/28/2022
|
|
|
|
|
|
50,000
|
|
|
$
|
0.67
|
|
|
|
8/19/2023
|
|
|
|
|
|
400,000
|
|
|
$
|
0.75
|
|
|
|
12/9/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric Wachter, Ph.D.,
Chief
Technology Officer
(2)
|
|
|
50,000
|
|
|
$
|
1.04
|
|
|
|
6/19/2019
|
|
|
|
|
|
50,000
|
|
|
$
|
1.16
|
|
|
|
6/18/2020
|
|
|
|
|
|
50,000
|
|
|
$
|
1.04
|
|
|
|
7/6/2021
|
|
|
|
|
|
400,000
|
|
|
$
|
0.75
|
|
|
|
12/9/2025
|
|
John Glass,
Former Interim Chief Financial Officer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(1)
|
Pursuant
to the Kleba Settlement Agreement, Dr. Scott agreed to retain incentive stock options for 100,000 shares but forfeited 50%
of the nonqualified stock options granted to him in both 2010 and 2011. The amounts set forth in the table reflect the outstanding
options after rescission of 50% of the nonqualified stock options granted to Dr. Scott in 2010 and 2011.
|
|
(2)
|
The Company and Dr. Wachter are currently negotiating
a new employment agreement.
|
Director Compensation
Each non-employee director
receives an annual retainer equal to $40,000 in cash as compensation for service as a member of the Board. Non-employee directors
serving as members of our audit committee will receive $15,000 per year; the audit committee chairperson will receive $15,000
per year. Non-employee directors serving as members of our corporate governance and nominating committee will receive $10,000
per year; the corporate governance and nominating committee chairperson will receive $15,000 per year. Non-employee directors
serving as members of our compensation committee will receive $10,000 per year; the compensation committee chairperson will receive
$15,000 per year. Our employee directors are compensated for their service as executive officers and are not separately compensated
for their service as directors. Each of our directors is also reimbursed for expenses incurred in fulfilling his duties as a director,
including attending meetings.
Director Compensation Table for 2018
|
Name
|
|
Fees Earned or
Paid in
Cash
|
|
|
Option
Awards
(1)
|
|
|
All Other
Compensation
|
|
|
Total
|
|
|
Bruce Horowitz
|
|
$
|
75,000
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
$
|
75,000
|
|
|
Jan Koe
|
|
$
|
78,750
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
$
|
78,750
|
|
|
John Lacey, III, MD
|
|
$
|
53,991
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
$
|
53,991
|
|
|
Ed Pershing, CPA
|
|
$
|
50,616
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
$
|
50,616
|
|
|
Dominic Rodrigues, CFA
|
|
$
|
75,000
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
$
|
75,000
|
|
|
(1)
|
No
stock options or restricted stock awards were granted to directors in 2018. As of December 31, 2018, Mr. Koe had a total of
200,000 stock options outstanding.
|
|
(2)
|
Dr.
Lacey and Messrs. Horowitz, Koe, Pershing, and Rodrigues accrued their director fees in 2018.
|
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
|
Policies
and Procedures for Related Person Transactions
We
have adopted a written related person transactions policy, pursuant to which our executive officers, directors and principal stockholders,
including their immediate family members, are not permitted to enter into a related person transaction with us without the consent
of our audit committee. Any request for us to enter into a transaction with an executive officer, director, principal stockholder
or any of such persons’ immediate family members, other than transactions available to all employees generally or involving
less than $10,000 when aggregated with similar transactions, must be presented to our audit committee for review, consideration
and approval, unless the transaction involves an employment or other compensatory arrangement approved by the compensation committee.
All of our directors, executive officers and employees are required to report to our audit committee any such related person transaction.
In approving or rejecting the proposed agreement, our audit committee will take into account, among other factors it deems appropriate,
whether the proposed related person transaction is on terms no less favorable than terms generally available to an unaffiliated
third party under the same or similar circumstances, the extent of the person’s interest in the transaction and, if applicable,
the impact on a director’s independence. After consideration of these and other factors, the audit committee may approve
or reject the transaction. Consistent with the policy, if we should discover related person transactions that have not been approved,
the audit committee will be notified and will determine the appropriate action, including ratification, rescission or amendment
of the transaction.
Related
Party Transactions
2017
Financing
On
March 23, 2017, the Company entered into an exclusive Definitive Financing Commitment Term Sheet effective as of March 19, 2017
(the “Term Sheet”), which sets forth the terms on which a group of the Company’s stockholders (the “PRH
Group”) will provide financing to the Company. As described in the Term Sheet, the 2017 Financing from the PRH Group is
in the form of a loan (the “Loan”) that is evidenced by secured convertible promissory notes (individually a “PRH
Note” and collectively, the “PRH Notes”).
During
the year ended December 31, 2018, the Company entered into additional PRH Notes with related parties in the aggregate principal
amount of $1,870,000, as set forth in the table below.
As
of December 31, 2018, the Company had borrowed $6,870,000 of PRH Notes from related parties which were outstanding.
|
|
|
Face
|
|
|
Note
|
|
|
Holder
|
|
Amount
|
|
|
Date
|
|
|
Eric Wachter
|
|
$
|
500,000.00
|
|
|
|
2/21/2017
|
|
|
|
|
$
|
500,000.00
|
|
|
|
3/21/2017
|
|
|
|
|
$
|
1,500,000.00
|
|
|
|
3/28/2017
|
|
|
|
|
$
|
500,000.00
|
|
|
|
1/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Cal Enterprises LLC
|
|
$
|
500,000.00
|
|
|
|
4/17/2017
|
|
|
|
|
$
|
500,000.00
|
|
|
|
8/16/2017
|
|
|
|
|
$
|
500,000.00
|
|
|
|
9/5/2017
|
|
|
|
|
$
|
500,000.00
|
|
|
|
10/2/2017
|
|
|
|
|
$
|
500,000.00
|
|
|
|
10/31/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Tim Scott
|
|
$
|
250,000.00
|
|
|
|
2/21/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Ed Pershing
|
|
$
|
200,000.00
|
|
|
|
4/13/2018
|
|
|
|
|
$
|
200,000.00
|
|
|
|
7/26/2018
|
|
|
|
|
$
|
200,000.00
|
|
|
|
8/21/2018
|
|
|
|
|
$
|
100,000.00
|
|
|
|
10/24/2018
|
|
|
|
|
$
|
75,000.00
|
|
|
|
10/31/2018
|
|
|
|
|
$
|
75,000.00
|
|
|
|
11/15/2018
|
|
|
|
|
$
|
50,000.00
|
|
|
|
11/28/2018
|
|
|
|
|
$
|
50,000.00
|
|
|
|
12/7/2018
|
|
|
|
|
$
|
50,000.00
|
|
|
|
12/17/2018
|
|
|
|
|
$
|
120,000.00
|
|
|
|
12/21/2018
|
|
|
Total Related Parties
|
|
$
|
6,870,000.00
|
|
|
|
|
|
During
the three months ended March 31, 2019, the Company entered into additional PRH Notes with related parties in the aggregate principal
amount of $25,000. As of March 31, 2019, the Company had drawn down the entire $25,000 under these notes.
For further details on
the terms of the 2017 Financing, please refer to the Original Filing as filed with the SEC on March 7, 2019.
Raines
PRH Note
On
January 16, 2019, the Company issued a secured convertible promissory note in favor of Mr. Robert Raines and Mrs. Heather Raines,
our then Controller and our current Chief Financial Officer, in the original principal amount of $25,000 (the “Raines PRH
Note”). The terms of the Raines PRH Note are substantially identical to the terms of the
PRH Notes.
Consulting
Fees
During
the year ended December 31, 2018, the Company paid Bruce Horowitz (Capital Strategists), one of our directors and our current
Chief Operating Officer, under an independent contractor agreement, fees of $190,000 for services rendered.
Other
than as set forth above, we had no transactions since January 1, 2018 that would be required to be disclosed under Item 404(a)
of Regulation S-K, and no such transactions are currently proposed for 2019.
Director
Independence
Four
members of our Board, Dr. Lacey and Messrs. Koe, Pershing, and Rodrigues, are considered independent under the independence standards
of the NYSE American LLC.