UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Schedule
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment
No. )
Filed
by the Registrant ☒
Filed
by a Party other than the Registrant ☐
Check
the appropriate box:
☐ |
Preliminary
Proxy Statement |
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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☒ |
Definitive
Proxy Statement |
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☐ |
Definitive
Additional Materials |
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Soliciting
Material under § 240.14a-12 |
HILLSTREAM
BIOPHARMA, INC.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment
of Filing Fee (Check all boxes that apply):
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No
fee required |
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☐ |
Fee
paid previously with preliminary materials. |
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Fee
computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a- 6(i)(1) and 0-11 |
HILLSTREAM
BIOPHARMA, INC.
1200
Route 22 East, Suite 2000
Bridgewater,
NJ 08807
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON AUGUST 8, 2022
Dear
Stockholders:
You
are cordially invited to attend the annual meeting of stockholders (the “Annual Meeting”) of Hillstream BioPharma, Inc. (the
“Company,” “we,” “us,” or “our”) to consider and act upon the following matters:
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1 |
To
elect four (4) members to our Board of Directors; |
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2 |
To
ratify the appointment of Mayer Hoffman McCann P.C. as our independent registered public accounting firm for the fiscal year ending
December 31, 2022; and |
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3 |
To
transact such other business as may properly come before the meeting or any adjournment or postponement thereof. |
The
Company’s Board of Directors has fixed the close of business on June 15, 2022 as the record date for a determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting or any adjournment or postponement thereof.
If
You Plan to Attend
Please
note that space limitations make it necessary to limit attendance of the Annual Meeting to our stockholders. Registration and seating
will begin at 8:30 a.m. EST. Shares of common stock can be voted at the Annual Meeting only if the holder thereof is present in person
or by valid proxy.
For
admission to the Annual Meeting, each stockholder may be asked to present valid picture identification, such as a driver’s license
or passport, and proof of stock ownership as of the record date, such as the enclosed proxy card or a brokerage statement reflecting
stock ownership. Cameras, recording devices and other electronic devices will not be permitted at the Annual Meeting, If you do not plan
on attending the Annual Meeting, please vote, date and sign the enclosed proxy and return it in the business envelope provided. Even
if you do plan to attend the Annual Meeting, we recommend that you vote your shares at your earliest convenience in order to ensure your
representation at the Annual Meeting. Your vote is very important.
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting to Be Held on August 8, 2022 at 9:00 a.m. EST at the Company’s
office located at 1200 Route 22 East, Suite 2000, Bridgewater, NJ 08807.
The
proxy statement and annual report to stockholders are available at
www.annualgeneralmeetings.com/hillstream.
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By
the Order of the Board of Directors |
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/s/
Randy Milby |
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Randy
Milby |
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Chairman
of the Board of Directors and Chief Executive Officer |
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Dated:
June 16, 2022 |
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Whether
or not you expect to attend the Annual Meeting in person, we urge you to vote your shares at your earliest convenience. This will ensure
the presence of a quorum at the Annual Meeting. Promptly voting your shares will save the Company the expenses and extra work of additional
solicitation. An addressed envelope for which no postage is required if mailed in the United States is enclosed if you wish to vote by
mail. Submitting your proxy now will not prevent you from voting your shares at the Annual Meeting if your desire to do so, as your proxy
is revocable at your option. Your vote is important, so please act today!
HILLSTREAM
BIOPHARMA, INC.
1200
Route 22 East, Suite 2000
Bridgewater,
NJ 08807
PROXY
STATEMENT FOR THE
2022
ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON AUGUST 8, 2022
The
Board of Directors (the “Board” or “Board of Directors”) of Hillstream BioPharma, Inc. (“Hillstream”
or the “Company”) is soliciting your proxy to vote at the Annual Meeting of Stockholders (the “Annual Meeting”)
to be held at the Company’s office located at 1200 Route 22 East, Suite 2000, Bridgewater, NJ 08807, on August 8, 2022, at 9:00
a.m. EST, including at any adjournments or postponements of the Annual Meeting. You are invited to attend the Annual Meeting to vote
on the proposals described in this proxy statement. However, you do not need to attend the Annual Meeting to vote your shares. Instead,
you may simply complete, sign and return the enclosed proxy card if you received paper copies of the proxy materials, or follow the instructions
below to submit your proxy over the Internet.
In
accordance with rules and regulations adopted by the U.S. Securities and Exchange Commission (the “SEC”), we have elected
to provide our beneficial owners and stockholders of record access to our proxy materials over the Internet. Beneficial owners are stockholders
whose shares of our common stock are held in the name of a broker, bank or other agent (i.e., in “street name”). Accordingly,
a Notice of Internet Availability of Proxy Materials (the “Notice”) will be mailed on or about June 16, 2022 to our
beneficial owners and stockholders of record who owned our common stock at the close of business on June 15, 2022. Beneficial owners
and stockholders of record will have the ability to access the proxy materials on a website referred to in the Notice or request that
a printed set of the proxy materials be sent to them by following the instructions in the Notice. Beneficial owners and stockholders
of record who have previously requested to receive paper copies of our proxy materials will receive paper copies of the proxy materials
instead of a Notice.
QUESTIONS
AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
Why
did I Receive a Notice of Internet Availability of Proxy Materials in the Mail instead of a Full Set of Proxy Materials?
We
are pleased to take advantage of the SEC rule that allows companies to furnish their proxy materials over the Internet. Accordingly,
we have sent to our stockholders of record a Notice of Internet Availability of Proxy Materials. Instructions on how to access the proxy
materials over the Internet free of charge or to request a paper copy may be found in the Notice. Our stockholders may request to receive
proxy materials in printed form by mail or electronically on an ongoing basis. A stockholder’s election to receive proxy materials
by mail or electronically will remain in effect until the stockholder changes its election.
What
Does it Mean if I Receive More than One Notice?
If
you receive more than one Notice, your shares may be registered in more than one name or in different accounts. Please follow the voting
instructions on each Notice to ensure that all of your shares are voted.
How
do I attend the Annual Meeting?
The
Annual Meeting will be held on August 8, 2022, at 9:00 a.m. EST at the Company’s office located at 1200 Route 22 East, Suite 2000,
Bridgewater, NJ 08807. Information on how to vote in person at the Annual Meeting is discussed below.
Who
May Attend the Annual Meeting?
Only
record holders and beneficial owners of our common stock, or their duly authorized proxies, may attend the Annual Meeting. If your shares
of common stock are held in street name, you will need to bring a copy of a brokerage statement or other documentation reflecting your
stock ownership as of the Record Date (as defined herein).
Who
is Entitled to Vote?
The
Board has fixed the close of business on June 15, 2022 as the record date (the “Record Date”) for the determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting or any adjournment or postponement thereof. On the Record Date, there were
11,604,970 shares of common stock outstanding. Each share of common stock represents one vote that may be voted on each proposal
that may come before the Annual Meeting.
What
is the Difference Between Holding Shares as a Record Holder and as a Beneficial Owner (Holding Shares in Street Name)?
If
your shares are registered in your name with our transfer agent, Pacific Stock Transfer, Inc., you are the “record
holder” of those shares. If you are a record holder, these proxy materials have been provided directly to you by the Company.
If
your shares are held in a stock brokerage account, a bank or other holder of record, you are considered the “beneficial owner”
of those shares held in “street name.” If your shares are held in street name, these proxy materials have been forwarded
to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting
at the Annual Meeting. As the beneficial owner, you have the right to instruct this organization on how to vote your shares.
What
am I Voting on?
There
are two matters scheduled for a vote:
1. |
To
elect four (4) members to our Board of Directors; and |
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To
ratify the appointment of Mayer Hoffman McCann P.C. as our independent registered public accounting firm for our fiscal year ending
December 31, 2022. |
What
if another matter is properly brought before the Annual Meeting?
The
Board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought
before the Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote on those matters in accordance
with their best judgment.
How
Do I Vote?
Stockholders
of Record
For
your convenience, record holders of our common stock have three methods of voting:
1. |
Vote
by Internet. The website address for Internet voting is on your proxy card. |
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2. |
Vote
by mail. Mark, date, sign and promptly mail the enclosed proxy card (a postage-paid envelope is provided for mailing in the United
States). |
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3. |
Vote
in person. Attend and vote at the Annual Meeting. |
Beneficial
Owners of Shares Held in Street Name
For
your convenience, beneficial owners of our common stock have three methods of voting:
1. |
Vote
by Internet. The website address for Internet voting is on your vote instruction form. |
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2. |
Vote
by mail. Mark, date, sign and promptly mail your vote instruction form (a postage-paid envelope is provided for mailing in the
United States). |
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3. |
Vote
in person. Obtain a valid legal proxy from the organization that holds your shares and attend and vote at the Annual Meeting. |
If
you vote by Internet, please DO NOT mail your proxy card.
All
shares entitled to vote and represented by a properly completed and executed proxy received before the Annual Meeting and not revoked
will be voted at the Annual Meeting as instructed in a proxy delivered before the Annual Meeting. If you do not indicate how your shares
should be voted on a matter, the shares represented by your properly completed and executed proxy will be voted as the Board recommends
on each of the enumerated proposals, with regard to any other matters that may be properly presented at the Annual Meeting and on all
matters incident to the conduct of the Annual Meeting. If you are a registered stockholder and attend the Annual Meeting, you may deliver
your completed proxy card in person. If you are a street name stockholder and wish to vote at the Annual Meeting, you will need to obtain
a proxy form from the institution that holds your shares. All votes will be tabulated by the inspector of elections appointed for the
Annual Meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes.
We
provide Internet proxy voting to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness
of your proxy vote instructions. However, please be aware that you must bear any costs associated with your Internet access, such as
usage charges from Internet access providers and telephone companies.
How
Many Votes do I Have?
On
each matter to be voted upon, you have one vote for each share of common stock you own as of the close of business on the Record Date.
Is
My Vote Confidential?
Yes,
your vote is confidential. Only the inspector of elections, individuals who help with processing and counting your votes and persons
who need access for legal reasons will have access to your vote. This information will not be disclosed, except as required by law.
What
Constitutes a Quorum?
To
carry on business at the Annual Meeting, we must have a quorum. A quorum is present when a majority of the shares entitled to vote as
of the Record Date, are represented in person or by proxy. Thus, 5,802,486 shares must be represented in person or by proxy to
have a quorum at the Annual Meeting. Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted
on your behalf by your broker, bank or other nominee) or if you vote in person at the Annual Meeting. Abstentions and broker non-votes
will be counted towards the quorum requirement. Shares owned by us are not considered outstanding or considered to be present at the
Annual Meeting. If there is not a quorum at the Annual Meeting, the chairperson of the Annual Meeting may adjourn the Annual Meeting.
How
Will my Shares be Voted if I Give No Specific Instruction?
We
must vote your shares as you have instructed. If there is a matter on which a stockholder of record has given no specific instruction
but has authorized us generally to vote the shares, they will be voted as follows:
1. |
“FOR”
the election of each of the four (4) members to our Board of Directors; and |
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“FOR”
the ratification of the appointment of Mayer Hoffman McCann P.C., as our independent registered public accounting firm for our fiscal
year ending December 31, 2022. |
This
authorization would exist, for example, if a stockholder of record merely signs, dates and returns the proxy card but does not indicate
how its shares are to be voted on one or more proposals. If other matters properly come before the Annual Meeting and you do not provide
specific voting instructions, your shares will be voted at the discretion of the proxy.
If
your shares are held in street name, see “What is a Broker Non-Vote?” below regarding the ability of banks, brokers
and other such holders of record to vote the uninstructed shares of their customers or other beneficial owners in their discretion.
How
are Votes Counted?
Votes
will be counted by the inspector of election appointed for the Annual Meeting, who will separately count, for the election of directors,
“FOR,” “WITHHOLD” and broker non-votes; and, with respect to the other proposals, votes “FOR” and
“AGAINST,” abstentions and broker non-votes.
What
is a Broker Non-Vote?
If
your shares are held in street name, you must instruct the organization who holds your shares how to vote your shares. If you sign your
proxy card but do not provide instructions on how your broker should vote on “routine” proposals, your broker may vote your
shares as recommended by the Board. If you do not provide voting instructions, your shares will not be voted on any “non-routine”
proposals. This vote is called a “broker non-vote.” Because broker non-votes are not considered under Delaware law to be
entitled to vote at the Annual Meeting, broker non-votes will not be included in the tabulation of the voting results of any of the proposals
and, therefore, will have no effect on these proposals.
Brokers
cannot use discretionary authority to vote shares on the election of directors if they have not received instructions from their clients.
Please submit your vote instruction form so your vote is counted.
What
is an Abstention?
An
abstention is a stockholder’s affirmative choice to decline to vote on a proposal. Under Delaware law, abstentions are counted
as shares present and entitled to vote at the Annual Meeting. However, our Bylaws provide that an action of our stockholders (other than
the election of directors) is only approved if a majority of the number of shares of stock present and entitled to vote thereat vote
in favor of such action.
How
Many Votes are Needed for Each Proposal to Pass?
Proposal |
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Vote
Required |
Election
of each of the four (4) members to our Board of Directors |
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Plurality
of the votes cast (the four (4) directors receiving the most “FOR” votes) |
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Ratification
of the appointment of Mayer Hoffman McCann P.C. as our independent registered public accounting firm for our fiscal year ending December
31, 2022 |
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A
majority of the votes entitled to vote thereon and present at the Annual Meeting |
What
Are the Voting Procedures?
In
voting by proxy with regard to the election of directors, you may vote in favor of all nominees, withhold your votes as to all nominees,
or withhold your votes as to specific nominees. With regard to other proposals, you may vote in favor of or against the proposal, or
you may abstain from voting on the proposal. You should specify your respective choices on the accompanying proxy card or your vote instruction
form.
Is
My Proxy Revocable?
You
may revoke your proxy and reclaim your right to vote at any time before your proxy is voted by giving written notice to the Secretary
of Hillstream, by delivering a properly completed, later-dated proxy card or vote instruction form or by voting in person at the Annual
Meeting. All written notices of revocation and other communications with respect to revocations of proxies should be addressed to: Hillstream
BioPharma, Inc., 1200 Route 22 East, Suite 2000, Bridgewater, NJ 08807. Your most current proxy card or Internet proxy is the one that
will be counted.
Who
is Paying for the Expenses Involved in Preparing and Mailing this Proxy Statement?
All
of the expenses involved in preparing, assembling and mailing these proxy materials and all costs of soliciting proxies will be paid
by us. In addition to the solicitation by mail, proxies may be solicited by our officers and other employees by telephone or in person.
Such persons will receive no compensation for their services other than their regular salaries. Arrangements will also be made with brokerage
houses and other custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners of the shares held of
record by such persons, and we may reimburse such persons for reasonable out of pocket expenses incurred by them in forwarding solicitation
materials.
Do
I Have Dissenters’ Rights of Appraisal?
Our
stockholders do not have appraisal rights under Delaware law or under our governing documents with respect to the matters to be voted
upon at the Annual Meeting.
How
can I Find out the Results of the Voting at the Annual Meeting?
Preliminary
voting results will be announced at the Annual Meeting. In addition, final voting results will be disclosed in a Current Report on Form
8-K that we expect to file with the SEC within four business days after the Annual Meeting. If final voting results are not available
to us in time to file a Form 8-K with the SEC within four business days after the Annual Meeting, we intend to file a Form 8-K to publish
preliminary results and, within four business days after the final results are known to us, file an additional Form 8-K to publish the
final results.
When
are Stockholder Proposals Due for the 2023 Annual Meeting?
Any
appropriate proposal submitted by a stockholder and intended to be presented at the 2023 annual meeting of stockholders (the “2023
Annual Meeting”) must be submitted in writing to our Secretary at Hillstream BioPharma, Inc.,1200 Route 22 East, Suite 2000, Bridgewater,
NJ 08807, and received no earlier than May 10, 2023 and no later than June 9, 2023 to be includable in our proxy statement
and related proxy for the 2023 Annual Meeting. However, if the date of the 2023 Annual Meeting is convened more than 30 days before,
or delayed by more than 60 days after, August 8, 2023, to be considered for inclusion in proxy materials for our 2023 Annual Meeting,
a stockholder proposal must be submitted in writing to our Secretary at Hillstream BioPharma, Inc., 1200 Route 22 East, Suite 2000, Bridgewater,
NJ 08807 and received no earlier than the close of business on the 90th day prior to such annual meeting and no later than the close
of business on the later of (i) the 60th day prior to such annual meeting or (ii) the 10th day following the day on which public announcement
of the date of such meeting is first made by the Company. A stockholder proposal will need to comply with the SEC regulations under Rule
14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), regarding the inclusion of stockholder proposals
in company-sponsored proxy materials. Although the Board will consider stockholder proposals, we reserve the right to omit from our proxy
statement, or to vote against, stockholder proposals that we are not required to include under the Exchange Act, including Rule 14a-8.
Do
the Company’s Officers and Directors have an Interest in Any of the Matters to Be Acted Upon at the Annual Meeting?
Members
of the Board have an interest in Proposal 1, the election to the Board of the four (4) director nominees set forth herein. Members of
the Board and executive officers of Hillstream do not have any interest in Proposal 2, the ratification of the appointment of the Company’s
independent registered public accounting firm.
CORPORATE
GOVERNANCE STANDARDS AND DIRECTOR INDEPENDENCE
We
are committed to good corporate governance practices. These practices provide an important framework within which our Board of Directors
and management pursue our strategic objectives for the benefit of our stockholders.
Board
Composition and Leadership Structure
The
Company does not have a formal policy regarding the separation of its Chair and Chief Executive Officer positions. Randy Milby serves
as Chairman of the Board and Chief Executive Officer of the Company. Due to the size of our Company, we believe that this structure is
appropriate. We believe that the fact that three of the four members of the Board are independent reinforces the independence of the
Board in its oversight of our business and affairs, and provides for objective evaluation and oversight of management’s performance,
as well as management accountability. Furthermore, the Board believes that Mr. Milby is best situated to serve as Chairman because he
is the director most familiar with the Company’s business and industry and is also the person most capable of effectively identifying
strategic priorities and leading the discussion and execution of corporate strategy. In addition, the Board believes that the combined
role of Chairman and Chief Executive Officer strengthens the communication between the Board and management. Further, as the individual
with primary responsibility for managing day-to-day operations, Mr. Milby is best positioned to chair Board meetings and ensure that
key business issues and risks are brought to the attention of our Board. We therefore believe that the creation of a lead independent
director position is not necessary at this time.
Board’s
Role in Risk Oversight
Our
Board of Directors believes that open communication between management and the Board of Directors is essential for effective risk management
and oversight. Our Board of Directors meets with our Chief Executive Officer and other members of the senior management team at periodic
Board of Director meetings, where, among other topics, they discuss strategy and risks in the context of reports from the management
team and evaluate the risks inherent in significant transactions. While our Board of Directors is ultimately responsible for risk oversight,
our Board committees assist the Board of Directors in fulfilling its oversight responsibilities in certain areas of risk. The Audit Committee
assists our Board of Directors in fulfilling its oversight responsibilities with respect to risk management in the areas of major financial
risk exposures, internal control over financial reporting, disclosure controls and procedures and legal and regulatory compliance. The
Compensation Committee assists our Board of Directors in assessing risks created by the incentives inherent in our compensation policies.
The Nominating and Corporate Governance Committee assists our Board of Directors in fulfilling its oversight responsibilities with respect
to the management of corporate, legal and regulatory risk.
Director
Independence
Our
common stock is listed on The Nasdaq Capital Market. Under the rules of the Nasdaq Stock Market, independent directors must constitute
a majority of a listed company’s Board of Directors. In addition, the rules of the Nasdaq Stock Market require that, subject to
specified exceptions, each member of a listed company’s Audit, Compensation, Compensation Committee and Nominating and Corporate
Governance Committee must be an “independent director.” Under the rules of the Nasdaq Stock Market, a director will only
qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not
have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Additionally, compensation committee members must not have a relationship with the listed company that is material to the director’s
ability to be independent from management in connection with the duties of a compensation committee member.
Audit
Committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended
(“Exchange Act”). In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed
company may not, other than in his or her capacity as a member of the audit committee, the board of directors or any other board committee:
(i) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries
or (ii) be an affiliated person of the listed company or any of its subsidiaries.
Our
Board of Directors has undertaken a review of the independence of each director and considered whether each director has a material relationship
with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result
of this review, our Board of Directors determined that Leonard Mazur, Lynne Bui and Sireesh Appajosyula three of our four incumbent directors,
are “independent directors” as defined under the applicable rules and regulations of the SEC and the listing requirements
and rules of the Nasdaq Stock Market. In making these determinations, our Board of Directors reviewed and discussed information provided
by the directors and us with regard to each directors’ business and personal activities and relationships as they may relate to
us and our management, including the beneficial ownership of our capital stock by each non-employee director and any affiliates.
Committee
of our Board of Directors
Our
Board of Directors has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee,
each of which has the composition and responsibilities described below. Members serve on these committees until their resignation or
until otherwise determined by our Board of Directors. Each of these committees has a written charter, copies of which are available without
charge on our website at www.hillstreambio.com. In addition from time to time, special committees may be established under the
direction of the Board of Directors when necessary to address specific issues.
Audit
Committee
Our
Audit Committee is responsible for, among other things:
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approving
and retaining the independent auditors to conduct the annual audit of our financial statements; |
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reviewing
the proposed scope and results of the audit; |
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reviewing
and pre-approving audit and non-audit fees and services; |
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reviewing
accounting and financial controls with the independent auditors and our financial and accounting staff; |
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reviewing
and approving transactions between us and our directors, officers and affiliates; |
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establishing
procedures for complaints received by us regarding accounting matters; |
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overseeing
internal audit functions, if any; and |
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preparing
the report of the audit committee that the rules of the SEC require to be included in our annual meeting proxy statement. |
Our
Audit Committee consists of Lynne Bui and Leonard Mazur, with Leonard Mazur serving as chair. As
permitted under the applicable rules and regulations of the SEC and Nasdaq, we intend to phase in compliance with the Audit Committee
composition requirements prior to the end of the one-year transition period. Our Board of Directors has determined that Lynne
Bui and Leonard Mazur each meet the definition of “independent director” under Nasdaq rules, and that they meet the independence
standards under Rule 10A-3 of the Exchange Act. Each member of our Audit Committee meets the financial literacy requirements of Nasdaq.
In addition, our Board of Directors has determined that Leonard Mazur qualifies as an “audit committee financial expert,”
as such term is defined in Item 407(d)(5) of Regulation S-K.
Compensation
Committee
Our
Compensation Committee is responsible for, among other things:
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reviewing
and recommending the compensation arrangements for management, including the compensation for our Chief Executive Officer; |
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establishing
and reviewing general compensation policies with the objective to attract and retain superior talent, to reward individual performance
and to achieve our financial goals; |
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administering
our stock incentive plans; and |
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preparing
the report of the compensation committee that the rules of the SEC require to be included in our annual meeting proxy statement. |
Our
Compensation Committee consists of Lynne Bui and Leonard Mazur, with Leonard
Mazur serving as chair. Our Board of Directors has determined that Lynne Bui and Leonard
Mazur are each independent directors under Nasdaq rules.
Nominating
and Corporate Governance Committee
Our
Nominating and Corporate Governance Committee is responsible for, among other things:
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nominating
members of the Board of Directors; |
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developing
a set of corporate governance principles applicable to our Company; and |
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overseeing
the evaluation of our Board of Directors. |
Our
Nominating and Corporate Governance Committee consists of Lynne Bui and Sireesh Appajosyula, with Sireesh Appajosyula serving as chair.
Our Board of Directors has determined that Lynne Bui and Sireesh Appajosyula are each independent directors under Nasdaq rules.
Scientific
Advisory Board
We
are supported by members of our Scientific Advisory Board who provide advice and guidance in their respective fields of expertise from
pre-clinical to clinical development. Our Scientific Advisory Board is currently composed of the following members who receive compensation
in a combination of cash and options to purchase shares of our common stock:
Donald
Kufe, MD – Chair of the Scientific Advisory Board; Dana-Farber Cancer Institute/Harvard University
Kwok-Kin
Wong, MD, PhD – New York University School of Medicine
Paul
Richardson, MD – Dana-Farber Cancer Institute/Harvard University
Surender
Kharbanda, PhD - Dana-Farber Cancer Institute
Joseph
Paul Eder, MD – Yale University/Yale Cancer Center
David
Weaver, PhD – FemtoDx
Richard
Stone, MD – Dana-Farber Cancer Institute
Jonathan
Rayner, PhD – University of South Alabama
Scott
Dixon, PhD – Stanford University
Harpal
Singh, PhD – Indian Institute of Technology Delhi
Code
of Business Conduct and Ethics
We
have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal
executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
A copy of the code is filed as an exhibit to our Annual Report on Form 10-K and is posted on our website, www.hillstreambio.com.
We intend to post on our website all disclosures that are required by law or Nasdaq rules concerning any amendments to, or waivers from,
any provision of the code.
Anti-hedging
As
part of our Insider Trading Policy, all of our officers, directors, employees and consultants and family members or others sharing a
household with any of the foregoing or that may have access to material non-public information regarding our Company are prohibited from
engaging in short sales of our securities, any hedging or monetization transactions involving our securities and in transactions involving
puts, calls or other derivative securities based on our securities. Our Insider Trading Policy further prohibits such persons from purchasing
our securities on margin, borrowing against any account in which our securities are held or pledging our securities as collateral for
a loan unless pre-cleared by our Insider Trading Compliance Officer. As of December 31, 2021, none of our directors or executive officers
had pledged any shares of our common stock.
Family
Relationships
There
are no family relationships among our directors and executive officers.
Arrangements
between Officers and Directors
Except
as set forth herein or in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, to
our knowledge, there is no arrangement or understanding between any of our officers or directors and any other person pursuant to which
such officer or director was selected to serve as an officer or director of the Company.
Involvement
in Certain Legal Proceedings
We
are not aware of any of our directors or officers being involved in any legal proceedings in the past ten years relating to any matters
in bankruptcy, insolvency, criminal proceedings (other than traffic and other minor offenses), or being subject to any of the items set
forth under Item 401(f) of Regulation S-K.
Board
and Committee Meetings and Attendance
The
Board of Directors and its committees will meet regularly throughout the year and also hold special meetings and act by written consent
from time to time. During the 2021 fiscal year, the Board of Directors did not hold any meetings. As a result of the formation of our
Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee upon the consummation of our initial public
offering on January 14, 2022, such committees did not hold any meetings during the 2021 fiscal year. The independent members of the Board
of Directors will also meet separately without management directors on a regular basis to discuss such matters as the independent directors
consider appropriate.
Board
Attendance at Annual Stockholders’ Meeting
We
invite and encourage each member of our Board of Directors to attend our annual meetings of stockholders. We do not have a formal policy
regarding attendance of our annual meetings of stockholders by the members of our Board of Directors.
Communication
with Directors
Stockholders
and interested parties who wish to communicate with our Board of Directors, non-management members of our Board of Directors as a group,
a committee of the Board of Directors or a specific member of our Board of Directors (including our Chair) may do so by letters addressed
to:
Hillstream
BioPharma, Inc.
c/o
Secretary
1200
Route 22 East, Suite 2000
Bridgewater,
NJ 08807
All
communications by letter addressed to the attention of our Secretary will be reviewed by the Secretary and provided to the members of
the Board of Directors unless such communications are unsolicited items, sales materials and other routine items and items unrelated
to the duties and responsibilities of the Board of Directors.
Director
Nomination Process
Identification
and Evaluation of Nominees for Directors
The
Nominating and Corporate Governance Committee considers candidates submitted by a variety of sources (including incumbent directors,
stockholders, management and third party search firms) when reviewing candidates to fill vacancies and/or expand the Board. If a vacancy
arises or the Board decides to expand its membership, the Nominating and Corporate Governance Committee will ask each director to submit
a list of potential candidates for consideration. The Nominating and Corporate Governance Committee will also consider potential nominees
submitted by stockholders in accordance with the procedures set forth in the Company’s Bylaws and other processes adopted from
time to time for submission of director nominees by stockholders or potential nominees submitted by management. If the Nominating and
Corporate Governance Committee deems it necessary, it may also retain an independent third party search firm to provide potential candidates.
The Nominating and Corporate Governance Committee has the sole authority to approve the search firm’s fees and other retention
terms.
The
Nominating and Corporate Governance Committee will also consider potential nominees submitted by stockholders as required under applicable
securities laws. The Nominating and Corporate Governance Committee then evaluates each potential candidate’s educational background,
employment history, outside commitments and other relevant factors to determine whether he/she is potentially qualified to serve on the
Board. The Nominating and Corporate Governance Committee seeks to identify and recruit the best available candidates and intends to evaluate
qualified stockholder nominees on the same basis as those submitted by Board members, management, third party search firms or other sources.
Under
the Company’s Bylaws, stockholders wishing to suggest a candidate for director must write to the Company’s Secretary. In
order to give the Nominating and Corporate Governance Committee sufficient time to evaluate a recommended candidate and/or include the
candidate in our proxy statement for the 2023 annual meeting, the recommendation must be received by our Secretary at our principal executive
offices in accordance with our procedures detailed in the section entitled “When are Stockholder Proposals Due for the 2023 Annual
Meeting?”
Such
submissions must state, among other things: (A) all information relating to such person that is required to be disclosed in solicitations
of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under
the Exchange Act (or any successor thereto) and Rule 14a-11 thereunder (or any successor thereto) (including such person’s written
consent to being named in the proxy statement as a nominee and to serving as a director if elected), (B) the name and address of the
stockholder who intends to make the nomination and of the person or persons to be nominated, (C) a representation that the stockholder
is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting
and nominate the person or persons specified in the notice; (D) a description of all arrangements or understandings between the stockholder
and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are
to be made by the stockholder; and (E) such other information regarding each nominee proposed by such stockholder as would be required
to be included in a proxy statement filed pursuant to the proxy rules of the SEC had the nominee been nominated, or intended to be nominated,
by the Board of Directors.
Director
Qualifications
Our
Board of Directors is responsible for identifying, considering and recommending candidates to the Board of Directors for Board membership.
A variety of methods are used to identify and evaluate director nominees, with the goal of maintaining and further developing a diverse,
experienced and highly qualified Board of Directors. Candidates may come to our attention through current members of our Board of Directors,
professional search firms, stockholders or other persons.
Our
Board of Directors encourages selection of directors who will contribute to the Company’s overall corporate goals. Individual directors
may from time to time review and recommend to the Board of Directors the desired qualifications, expertise and characteristics of directors,
including such factors as breadth of experience, knowledge about our business and industry, willingness and ability to devote adequate
time and effort to the Board of Directors, ability to contribute to the Board of Directors’ overall effectiveness, and the needs
of the Board of Directors and its committees. Exceptional candidates who do not meet all of these criteria may still be considered. In
evaluating potential candidates for the Board of Directors, the Board of Directors considers these factors in the light of the specific
needs of the Board of Directors at that time.
A
director is expected to spend the time and effort necessary to properly discharge such director’s responsibilities. Accordingly,
a director is expected to regularly attend meetings of the Board of Directors and committees on which such director sits, and to review
prior to meetings material distributed in advance for such meetings. Thus, the number of other public company boards and other boards
(or comparable governing bodies) on which a prospective nominee is a member, as well as his or her other professional responsibilities,
will be considered. There are no limits term that may be served by a director; however, in connection with evaluating recommendations
for nomination for reelection, the Board of Directors considers director tenure. We value diversity on a company-wide basis but have
not adopted a specific policy regarding Board diversity.
PROPOSAL
1
ELECTION
OF DIRECTORS
At
the Annual Meeting, the stockholders will elect four (4) directors to hold office until the 2023 Annual Meeting. Directors are elected
by a plurality of votes cast by stockholders. In the event the nominees are unable or unwilling to serve as directors at the time of
the Annual Meeting, the proxies will be voted for any substitute nominees designated by the present Board or the proxy holders to fill
such vacancy, or for the balance of the nominees named without nomination of a substitute, or the size of the Board will be reduced in
accordance with the Bylaws of the Company. The Board has no reason to believe that the persons named below will be unable or unwilling
to serve as nominees or as directors if elected.
Assuming
a quorum is present, the four (4) nominees receiving the highest number of affirmative votes of shares entitled to be voted for such
persons will be elected as directors of the Company to serve for a one-year term. Unless marked otherwise, proxies received will be voted
“FOR” the election of the nominees named below. In the event that additional persons are nominated for election as directors,
the proxy holder intends to vote all proxies received by him in such a manner as will ensure the election of the nominees listed below,
and, in such event, the specific nominees to be voted for will be determined by the proxy holder.
Information
with Respect to Director Nominees
Listed
below are the current directors who are nominated to hold office until their successors are elected and qualified, and their ages as
of June 15, 2022.
Name |
|
Age |
|
Position |
Randy
Milby |
|
69 |
|
Chief
Executive Officer and Chairman of the Board of Directors |
Leonard
Mazur |
|
77 |
|
Director |
Lynne
A. Bui, MD |
|
51 |
|
Director |
Sireesh
Appajosyula |
|
46 |
|
Director |
The
business background and certain other information about our directors is set forth below.
Randy
Milby
Randy
Milby has served as our Chief Executive Officer and Chairman of our Board of Directors since inception in 2017. Mr. Milby is an experienced
biopharmaceutical executive and served as the Chief Executive Officer and member of the board of directors at CorMedix Inc., a biopharmaceutical
company focused on developing and commercializing therapeutic products for the prevention and treatment of inflammatory and infectious
diseases, from May 2012 to December 2012 and from January 2013 until September 2016, respectively. Mr. Milby has served in various other
positions including, but not limited to, Global Business Director – BioMedical and Global Business Director – Applied BioSciences
of DuPont de Nemours, Inc.; Global Marketing Director of DuPont Crop Protection; Securities Analyst, Investment Research, Biotechnology
of Goldman Sachs; and Senior Director of DuPont Merck Pharmaceuticals. Mr. Milby received his BS in pharmacy from The University of Kansas
and his MBA in finance/marketing from Washington University in St. Louis – Olin Business School. We believe Mr. Milby is qualified
to serve as a member of our Board of Directors because of his extensive experience in the biotechnology industry.
Leonard
Mazur
Leonard
Mazur has served as a member of our Board of Directors since July 2021. In addition, since September 2014, Mr. Mazur has served as Executive
Chairman of the board of directors and Secretary of Citius Pharmaceuticals, Inc. (Nasdaq: CTXR) (“Citius”). Mr. Mazur also
serves as the Secretary of Citius’ majority-owned subsidiary, NoveCite, Inc. Mr. Mazur is the co-founder and Vice Chairman of Akrimax
Pharmaceuticals, LLC (“Akrimax”), a privately held pharmaceutical company specializing in producing cardiovascular and general
pharmaceutical products. Akrimax was founded in September 2008 and has successfully launched prescription drugs while acquiring drugs
from major pharmaceutical companies. From January 2005 to May 2012, Mr. Mazur co-founded and served as the Chief Operating Officer of
Triax Pharmaceuticals LLC (“Triax”), a specialty pharmaceutical company producing prescription dermatological drugs. Prior
to joining Triax, he was the founder and, from 1995 to 2005, Chief Executive Officer of Genesis Pharmaceutical, Inc. (“Genesis”),
a dermatological products company that marketed its products through dermatologists’ offices as well as co-promoting products for
major pharmaceutical companies. In 2003, Mr. Mazur successfully sold Genesis to Pierre Fabre, a leading pharmaceutical company. Mr. Mazur
has extensive sales, marketing and business development experience from his tenures at Medicis Pharmaceutical Corporation as Executive
Vice President, ICN Pharmaceuticals, Inc. as Vice President, Sales and Marketing, Knoll Pharma (a division of BASF), and Cooper Laboratories,
Inc. Mr. Mazur is a member of the Board of Trustees of Manor College, is a recipient of the Ellis Island Medal of Honor and was previously
the chairman of the board of directors of LMB, Citius’ wholly-owned subsidiary. Mr. Mazur received both his B.A. and M.B.A. from
Temple University and has served in the U.S. Marine Corps Reserves. We believe Mr. Mazur is qualified to serve as a member of our Board
of Directors because of his extensive experience in the biotechnology industry.
Lynne
A. Bui MD
Lynne
Bui has served as a member of our Board of Directors since July 2021. In addition, since June 2017, she has served as President, Chief
Executive Officer and a member of the board of directors of Khloris Biosciences, Inc., a biotechnology company dedicated to revolutionizing
medical treatment and prevention of cancer and other diseases. Dr. Bui is a board-certified hematologist oncologist, seasoned entrepreneur,
angel investor and drug developer, having unparalleled experience in basic, translational and clinical research spanning over 15 years
with direct patient care and leading clinical development programs from preclinical IND enabling studies to Phase 1 to 3 registration
studies for multiple approved drugs, including cabozantinib, carfilzomib and enzalutamide. In addition, she has held senior level positions
at Exelixis, Inc., Onyx Pharmaceuticals (acquired by Amgen Inc.) and Intellikine, Inc. (acquired by Millennium/Takeda in 2012) and has
served as Chief Medical Officer and clinical development lead for multiple biotechnology and pharmaceutical companies. She has experience
with small molecules, antibodies, dendritic cell vaccines, gene therapies, embryonic stem cells, and cell therapies. As a clinician,
Dr. Bui has previously been clinical attending at Stanford Hospital and UCLA Medical Center, and is the Founder and Chairman of Global
Cancer Research Institute (“GCRI”), a community-based hematology/oncology clinical practice and clinical trial site. She
is also the Founder and Chairman of GCRI Foundation, a non-profit organization dedicated to funding clinical research in cancer; and
a former Fellow of the Leukemia & Lymphoma Society, Lymphoma Research Foundation and Howard Hughes Medical Institute. Dr. Bui received
her B.A. in molecular and cell biology, with an emphasis in neurobiology from University of California, Berkeley and her M.D. from the
David Geffen UCLA School of Medicine. We believe Dr. Bui is qualified to serve as a member of our Board of Directors because of her extensive
clinical and industry experience.
Sireesh
Appajosyula
Sireesh
Appajosyula has served as a member of our Board of Directors since July 2021. Since April 2020, he has served as SVP, Corporate Development
and Operations of 9 Meters Biopharma, Inc. (Nasdaq: NMTR) (“9 Meters”), a company focused on rare and unmet needs in gastrointestinal
patient populations developing compounds with unique gastrointestinal biology, and since 2018 he has served as Managing Member of Highpoint
Pharmaceuticals, LLC, a pharmaceutical research and development company. In addition, since 2015, Mr. Appajosyula has served as Managing
Partner of Channel BioConsulting, LLC, a company that assists in enhancing search and evaluation efforts for complementary assets to
be added to existing portfolios of biopharmaceutical companies. Prior to joining 9 Meters, Mr. Appajosyula spent approximately 8 years
at Salix Pharmaceuticals, Inc. (“Salix”) (Nasdaq: SLXP) in various roles in medical affairs, product commercialization and
business development until its acquisition by Bausch Health (Nasdaq: BHC). Prior to Salix, he was involved in various roles at Amgen
Inc., Critical Therapeutics, Inc. and Sanofi (formerly Aventis). Mr. Appajosyula received his Bachelor of Science and Doctor of Pharmacy
from Rutgers University. We believe Mr. Appajosyula is qualified to serve as a member of our Board of Directors because of his extensive
experience in the biotechnology industry.
Board
Recommendation
THE
BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES TO THE BOARD SET FORTH IN THIS PROPOSAL 1.
EXECUTIVE
OFFICERS
The
following are biographical summaries of our executive officers and their ages as of June 15, 2022, except for Mr. Milby, whose biography
is included under the heading “Proposal 1: Election of Directors” set forth above:
Name |
|
Age |
|
Position(s) |
Randy
Milby |
|
69 |
|
Chief
Executive Officer and Chairman of the Board of Directors |
Thomas
Hess |
|
58 |
|
Chief
Financial Officer |
Thomas
Hess
Thomas
Hess has served as our Chief Financial Officer since June 2021. In addition, since June 2021, Mr. Hess has served as a consulting Chief
Financial Officer through Danforth Advisors and TH Advisors for various biotechnology companies. From August 2014 until June 2021, Mr.
Hess served as Chief Financial Officer and Senior Vice President of Finance of Genomind, Inc, a pharmacogenetics company focused on mental
health. From September 2011 until its sale in April 2014, Mr. Hess served as Chief Financial Officer and Executive Vice President of
Finance of The Keane Organization, a comprehensive provider of unclaimed property services. Mr. Hess also previously served in various
other capacities including, but not limited to, Chief Financial Officer and Senior Vice President of Yaupon Therapeutics, Inc.; Chief
Financial Officer and Vice President, Finance of Adolor Corporation; Corporate Controller of Vicuron Pharmaceuticals, Inc.; and Senior
Manager – Accounting and Audit of KPMG. Mr. Hess received his B.S. in accounting from The Pennsylvania State University and his
MBA from Katz Graduate School of Business, University of Pittsburgh. He is a Certified Public Accountant in the state of Pennsylvania
and serves on the Board of Directors of Life Sciences Pennsylvania as the audit committee chair.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table presents the compensation awarded to, earned by or paid to our principal executive officer, who we also refer to as our
“named executive officer”, for the year ended December 31, 2021 and 2020.
Name and Principal Position | |
Year | | |
Salary ($) | | |
Bonus ($) | | |
Option awards ($)(2) | | |
Total ($) | |
Randy Milby, President and | |
| 2021 | (1) | |
| - | | |
| - | | |
| 973,401 | | |
| 973,401 | |
Chief Executive Officer | |
| 2020 | (3) | |
| - | | |
| - | | |
| 193,627 | | |
| 193,627 | |
|
(1) |
For
fiscal year 2021, in lieu of base salary, Mr. Milby was compensated with stock options to purchase 18,939 shares of common stock
per month through May 2021. |
|
(2) |
Reflects
the aggregate grant date fair value of stock options granted during the fiscal year calculated in accordance with FASB ASC Topic
718. For a discussion of the assumptions made by us in determining the grant date fair value of our equity awards see Note 6 to our
audited consolidated financial statements for the year ended December 31, 2021 included elsewhere in this Annual Report on Form 10-K. |
|
|
|
|
(3) |
For
fiscal year 2020, in lieu of base salary, Mr. Milby was compensated with stock options to purchase 7,575 shares of common stock per
month. |
Employment
Agreements
Employment
Agreement with Randy Milby
On
January 1, 2019, we entered into an employment agreement with Randy Milby, to serve as our President and Chief Executive Officer. Pursuant
to the employment agreement, Mr. Milby received an annual base salary of $200,000; provided, however, instead of base salary, Mr. Milby
was to receive 75,757 shares of our common stock per year until funding met or exceeded $2,000,000 after which cash compensation would
be paid. Mr. Milby was also eligible to receive an annual target bonus of up to 100% of the base salary, subject to achievements to be
mutually agreed upon by our Board of Directors and Mr. Milby. Mr. Milby was also entitled
to receive an annual grant of stock or stock options as determined by our Board of Directors,
in its sole discretion, among other bonus payments based upon our capitalization. In January 2020, we amended the employment agreement
pursuant to which Mr. Milby was to receive stock options to purchase 7,575 shares of common stock per month (at an exercise price based
upon the most recent 409A valuation) effective January 1, 2020 until funding met or exceeded $3,000,000, after which time, cash compensation
of $200,000 per year would be paid. In addition, if Mr. Milby raised more than $3,000,000, he would receive a grant of options to purchase
up to 757,575 shares of our common stock at an exercise price of $4.88. Effective January 1, 2021, we further amended the employment
agreement such that in lieu of base salary, Mr. Milby would receive stock options to purchase 18,939 shares of our common stock per month
at an exercise price of $7.822 per share effective January 1, 2021 until funding meets or exceeds $5,000,000, after which time, cash
compensation of $300,000 per year would be paid. The amendment also provided for a base salary of $435,000 after we received funding
greater than $5,000,000, or we completed an initial public offering or similar transaction as set forth in the employment agreement.
In addition, if Mr. Milby raised more than $5,000,000, he would receive a grant of stock options to acquire 757,575 shares of our common
stock with an exercise price based upon the most recent 409A valuation. Subsequently, on January 20, 2021, we entered into a further
amendment to the employment agreement pursuant to which Mr. Milby would receive a base salary of $200,000.
On
June 1, 2021, we entered into an Amended and Restated Employment Agreement, as amended on September 24, 2021 (the “Amended and
Restated Employment Agreement”), with Randy Milby pursuant to which Mr. Milby will continue to serve as our President and Chief
Executive Officer. The term of the Amended and Restated Employment Agreement commenced upon the closing of our initial public offering
and continues for a period of five years and automatically renews for successive one year periods at the end of each term unless either
party provides written notice of their intent not to review at least 60 days prior to the expiration of the then effective term. Pursuant
to the Amended and Restated Employment Agreement, Mr. Milby will receive an annual base salary of $485,000, which may be increased from
time to time, and shall be eligible to receive an annual cash bonus equal to 55% of his then base salary based upon the achievement of
Company and individual performance targets established by our board. In addition, in the first year in which our market capitalization
(as defined in the Amended and Restated Employment Agreement) equals or exceeds (i) $250 million, Mr. Milby shall receive a cash payment
of $150,000; (ii) $500 million, Mr. Milby shall receive a cash payment of $350,000; and (iii) $1 billion, Mr. Milby shall receive a cash
payment of $750,000. Furthermore, on January 14, 2022, Mr. Milby was granted an option to purchase 757,575 shares of our common stock
at an exercise price of $4.00 per share which shall vest over a 48 month period commencing 12 months after the date of grant. This shall
be in addition to any additional equity-based compensation awards we may grant Mr. Milby from time to time.
Pursuant
to the Amended and Restated Employment Agreement, Mr. Milby’s employment may be terminated (i) by us for Cause (as defined in the
Amended and Restated Employment Agreement); (ii) upon Mr. Milby’s death; (iii) upon Mr. Milby’s Disability (as defined in
the Amended and Restated Employment Agreement); (iv) or by Mr. Milby for Good Reason (as defined in the Amended and Restated Employment
Agreement). In the event Mr. Milby’s employment is terminated, we shall pay Mr. Milby his then base salary through the last day
of his employment, the reimbursement of expenses incurred on or prior to the termination date and any earned but unpaid bonus (collectively,
the “Accrued Compensation”). In the event Mr. Milby’s employment is terminated as a result of his death or Disability,
we shall pay Mr. Milby (i) the Accrued Compensation, (ii) his then base salary through the date which is 90 days after his death or Disability
and (iii) such other or additional benefits as may be provided under our employee benefit plans, programs and arrangements (collectively,
the “Plans”). In addition, all shares of our capital stock that are subject to vesting and all stock options that are scheduled
to vest on or before the next succeeding anniversary of the effective date of the Amended and Restated Employment Agreement shall be
accelerated and deemed to have vested as of the termination date. All shares and options that have not vested as of the date of termination
shall be forfeited. Any stock options that have vested as of the termination date shall remain exercisable until the earlier of (i) 60
months after the termination date and (ii) the expiration date of the option (all payments to be paid upon Mr. Milby’s death or
Disability are hereinafter referred to as the “Death and Disability Severance”). Any payments that shall be made to Mr. Milby
as a result of his Disability shall be contingent upon Mr. Milby executing a general release within 21 days of separation from service.
In
the event Mr. Milby’s employment is terminated for Cause, Mr. Milby shall receive (i) the Accrued Compensation and (ii) such other
and additional benefits, if any, as may be required pursuant to the Plans, and all shares that have not vested as of the termination
date shall be forfeited while all stock options that are vested as of the termination date shall remain exercisable for 90 days after
such termination (all payments to be paid upon termination of Mr. Milby’s termination for Cause are hereinafter referred to as
the “Cause Severance”). If Mr. Milby’s employment is terminated other than for death, Disability or Cause, including
if Mr. Milby’s employment is terminated for Good Reason, then, subject to the execution of a separation agreement within 60 days
from the separation of service, we shall pay Mr. Milby, (i) the Accrued Compensation, (ii) his then base salary and provide him with
health benefits for a period of 12 months following the effective date of his separation from service and (iii) provide such other or
additional benefits, if any, as may be provided under the Plans. Furthermore, all shares and stock options that have not vested as of
the termination date shall be forfeited, and any stock options that have vested as of the termination date shall remain exercisable until
the earlier of (i) 60 months following such termination and (ii) the termination date of such option (all payments to be paid upon Mr.
Milby’s termination other than for death, Disability or Cause, including Good Reason, are hereinafter referred to as the “Other
Severance” and together with the Death and Disability Severance and the Cause Severance, “Severance”). In the event
Mr. Milby’s employment is terminated either (i) by us without Cause at any time within 12 months prior to the consummation of a
Change of Control (as defined in the Amended and Restated Employment Agreement), (ii) by Mr. Milby for Good Reason at any time within
12 months after the consummation of a Change of Control or (iii) by us without Cause at any time upon or within 12 months after the consummation
of a Change of Control, then Mr. Milby shall (A) be entitled to the acceleration and vesting in full of any then outstanding and unvested
equity award, with options continuing to be exercisable for 60 months following termination (or, if earlier, their expiration date) and
(B) all Severance; provided, however, that such Severance amount shall equal two times the sum of Mr. Milby’s then base salary
and target bonus and the Severance period shall be 24 months.
Outstanding
Equity Awards at December 31, 2021
The
following table sets forth information concerning outstanding equity awards held by our named executive officer as of December 31, 2021.
| |
| |
OPTION AWARDS | | |
|
Name | |
Grant Date | |
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 (#) | | |
Option Exercise Price ($) | | |
Option Expiration Date |
Randy Milby | |
6/20/2018 | |
| 17,045 | | |
| 1,894 | (1) | |
| - | | |
$ | 13.200 | | |
6/20/2023 |
| |
9/20/2018 | |
| 9,635 | | |
| 1,349 | (2) | |
| - | | |
$ | 13.200 | | |
9/20/2023 |
| |
7/31/2019 | |
| 26,633 | | |
| - | | |
| 11,245 | (3) | |
$ | 0.0792 | | |
7/31/2024 |
| |
8/30/2019 | |
| - | | |
| 189,393 | (4) | |
| - | | |
$ | 0.0792 | | |
8/30/2024 |
| |
9/17/2019 | |
| 1,272 | | |
| - | | |
| 621 | (5) | |
$ | 2.6400 | | |
9/17/2024 |
| |
9/19/2019 | |
| 1,272 | | |
| - | | |
| 621 | (6) | |
$ | 2.6400 | | |
9/19/2024 |
| |
11/5/2019 | |
| 621 | | |
| - | | |
| 325 | (7) | |
$ | 2.6400 | | |
11/05/2024 |
| |
12/13/2019 | |
| 5,721 | | |
| - | | |
| 1,854 | (8) | |
$ | 2.6400 | | |
12/13/2024 |
| |
12/31/2019 | |
| 23,970 | | |
| - | | |
| 13,908 | (9) | |
$ | 2.6400 | | |
12/31/2024 |
| |
1/31/2020 | |
| 7,575 | | |
| - | | |
| - | | |
$ | 0.3142 | | |
1/31/2030 |
| |
2/29/2020 | |
| 7,575 | | |
| - | | |
| - | | |
$ | 0.3142 | | |
2/28/2030 |
| |
3/31/2020 | |
| 7,575 | | |
| - | | |
| - | | |
$ | 0.3142 | | |
3/31/2030 |
| |
4/30/2020 | |
| 7,575 | | |
| - | | |
| - | | |
$ | 0.3142 | | |
4/30/2030 |
| |
5/31/2020 | |
| 7,575 | | |
| - | | |
| - | | |
$ | 0.3142 | | |
5/31/2030 |
| |
6/30/2020 | |
| 7,575 | | |
| - | | |
| - | | |
$ | 0.3142 | | |
6/30/2030 |
| |
7/31/2020 | |
| 7,575 | | |
| - | | |
| - | | |
$ | 0.3142 | | |
7/31/2030 |
| |
8/31/2020 | |
| 7,575 | | |
| - | | |
| - | | |
$ | 0.3142 | | |
8/31/2030 |
| |
9/30/2020 | |
| 7,575 | | |
| - | | |
| - | | |
$ | 0.3142 | | |
9/30/2030 |
| |
10/31/2020 | |
| 7,575 | | |
| - | | |
| - | | |
$ | 3.8174 | | |
10/31/2030 |
| |
11/12/2020 | |
| 7,575 | | |
| - | | |
| - | | |
$ | 3.8174 | | |
11/12/2030 |
| |
11/12/2020 | |
| 37,878 | | |
| - | | |
| - | | |
$ | 3.8174 | | |
11/12/2030 |
| |
11/30/2020 | |
| 7,575 | | |
| - | | |
| - | | |
$ | 3.8174 | | |
11/30/2030 |
| |
12/31/2020 | |
| 7,575 | | |
| - | | |
| - | | |
$ | 3.8174 | | |
12/31/2030 |
| |
01/31/2021 | |
| 18,939 | | |
| - | | |
| - | | |
$ | 7.8223 | | |
01/31/2031 |
| |
02/01/2021 | |
| 45,454 | | |
| - | | |
| - | | |
$ | 7.8223 | | |
02/01/2031 |
| |
02/28/2021 | |
| 18,939 | | |
| - | | |
| - | | |
$ | 7.8223 | | |
02/28/2031 |
| |
03/31/2021 | |
| 18,939 | | |
| - | | |
| - | | |
$ | 7.8223 | | |
03/31/2031 |
| |
04/02/2021 | |
| 37,878 | | |
| - | | |
| - | | |
$ | 7.8223 | | |
04/02/2031 |
| |
04/30/2021 | |
| 18,939 | | |
| - | | |
| - | | |
$ | 7.8223 | | |
04/30/2031 |
| |
05/31/2021 | |
| 18,939 | | |
| - | | |
| - | | |
$ | 7.8223 | | |
05/31/2031 |
|
(1) |
3,787
of the options vested on the date of grant (June 20, 2018), with the balance of the 15,152 options vesting over a period of 48 months
thereafter. |
|
|
|
|
(2) |
3,787
of the options vested on date of grant (September 20, 2018), with the remaining 7,197 of the options vesting in equal installments
over a period of 48 months. |
|
|
|
|
(3) |
25%
of the options vested on the one year anniversary of the vesting starting date (July 31, 2019), with the remaining 28,409 of the
options vesting in equal installments over a period of 48 months. |
|
|
|
|
(4) |
100%
of the options shall vest on the completion of our IPO or a public listing via reverse merger with a public company. Our IPO closed
on January 14, 2022, at which time 100% of the options vested. |
|
|
|
|
(5) |
25%
of the options vested on the one year anniversary of the vesting starting date (September 17, 2019), with the remaining 1,420 of
the options vesting in equal installments over a period of 48 months. |
|
|
|
|
(6) |
25%
of the options vested on the one year anniversary of the vesting starting date (September 19, 2019), with the remaining 1,420 of
the options vesting over a period of 48 equal monthly installments. |
|
|
|
|
(7) |
25%
of the options vested on the one year anniversary of the vesting starting date (November 5, 2019), with the remaining 710 of the
options vesting in equal installments over a period of 48 months. |
|
|
|
|
(8) |
3,787
of the options vested on the one year anniversary of the vesting starting date (December 13, 2019), with the remaining 3,788 of the
options vesting in equal installments over a period of 48 months. |
|
|
|
|
(9) |
25%
of the options vested on the one year anniversary of the vesting starting date (December 31, 2019), with the remaining 28,409 of
the options vesting in equal installments over a period of 48 months. |
Non-Employee
Director Compensation
We
did not compensate our non-employee directors for their service during the fiscal year ended December 31, 2021.
2017
Stock Incentive Plan
Our
Board of Directors and our stockholders approved the 2017 Stock Incentive Plan (“2017
Plan”) on March 30, 2017, under which we may grant equity incentive awards in order to attract, motivate and retain the talent
who are expected to make important contributions to the Company. The material terms of the 2017 Plan are summarized below.
Administration
of the 2017 Plan: The 2017 Plan is administered by our Board of Directors. Our Board
of Directors may delegate any or all of its powers under the 2017 Plan to one or more committees or subcommittees of the board
(a “Committee”). All references in the 2017 Plan to the “Board” shall mean our Board
of Directors or a Committee of our Board of Directors to the extent that the board’s
powers or authority under the 2017 Plan have been delegated to such Committee. The Board shall have authority to grant awards and to
adopt, amend and repeal such administrative rules, guidelines and practices relating to the 2017 Plan as it shall deem advisable. The
Board may correct any defect, supply any omission or reconcile any inconsistency in the 2017 Plan or any award in the manner and to the
extent it shall deem expedient to carry the 2017 Plan into effect and it shall be the sole and final judge of such expediency. All decisions
by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any
interest in the 2017 Plan or in any award thereunder. No director or person acting pursuant to the authority delegated by the Board shall
be liable for any action or determination relating to or under the 2017 Plan made in good faith.
Eligibility
Participants: The 2017 Plan authorizes the grant of stock options, restricted stock, restricted stock units and/or other stock
based awards to employees, officers, directors, individual consultants and advisors of the Company. The Board determines, in its sole
discretion, who will receive awards under the 2017 Plan. Notwithstanding anything in the 2017 Plan or any award documentation to the
contrary, for so long as the Company has elected Subchapter S status under Section 1362 of the Internal Revenue Code of 1986, as amended,
no award shall be granted or exercised, as the case may be, if the result of such grant or exercise would result in the termination of
such Subchapter S status, unless such grant or exercise, as the case may be, is consented to by all stockholders of the Company. Any
such purported grant or exercise of an award that does not comply with the foregoing shall be void and have no legal force or effect
and shall not be recognized on the books of the Company as effective.
Shares
Available Under the 2017 Plan: The maximum number of shares of common stock that may be issued to participants under the 2017
Plan is 94,696, subject to adjustment for certain corporate changes affecting the shares, such as stock splits. Shares subject to an
award under the 2017 Plan for which the award is canceled, forfeited or expires again become available for grants under the 2017 Plan.
Shares subject to an award that is settled in cash will not again be made available for grants under the 2017 Plan.
Stock
Options:
General:
The Board has the authority to grant options to purchase shares of the Company’s common stock and determine the number of shares
of the Company’s common stock to be covered by each option, the exercise price of each option and the conditions and limitations
applicable to the exercise of each option, including conditions relating to applicable federal or state securities laws, as it considers
necessary or advisable.
Exercise
of Options: An option may be exercised only in accordance with the terms and conditions of the option agreement as established by
the Board at the time of the grant. The option must be exercised by notice to the Company, accompanied by payment of the exercise price.
Payments may be made in cash or, at the option of the Board, by actual or constructive delivery of shares of common stock to the holder
of the option based upon the fair market value of the shares on the date of exercise.
Expiration
or Termination: Options, if not previously exercised, will expire on the expiration date established by the Board at the time of
grant; provided that such term cannot exceed ten years and that such term of an incentive stock option granted to a holder of more than
10% of our voting stock cannot exceed five years. Options will terminate before the expiration date to the extent the vested portion
of the option is not exercised within 3 months of the termination date if the holder’s service with us terminates before the expiration
date. The option may remain exercisable for specified periods after certain terminations of service, including terminations as a result
of death, disability or retirement, with the precise period during which the option may be exercised to be established by the Board and
reflected in the agreement evidencing the award.
Restricted
Shares and Restricted Stock Units: Eligible participants may be awarded grants of restricted stock units, which represent the
right to receive shares of the common stock to be delivered when the common stock vests. The holders of restricted stock units will have
none of the rights of a stockholder of the Company until such time or times as shares of the common stock have been issued to participant
in settlement of the award. The Board shall determine the participants to whom and the time or times at which grants of restricted stock
units shall be awarded, the number of units to be awarded to any participant, the conditions for vesting, the time or times within which
such awards may be subject to forfeiture and restrictions on transfer and other terms and conditions of the awards. Each restricted stock
unit shall at all times be equal in value to the fair market value of one share of the common stock of the Company.
Other
Stock Based Awards: The Board may grant or sell other awards that may be denominated or payable in, valued in whole or in part
by reference to, or otherwise based on or related to, common stock or factors that may influence the value of such shares. In addition,
the Board may grant unrestricted shares to eligible participants.
Other
Material Provisions: Awards will be evidenced by a written agreement, in such form as may be approved by the Board. In the event
of various changes to the capitalization of our Company, such as stock splits, stock dividends and similar re-capitalizations, an appropriate
adjustment will be made by the Board to the number of shares covered by outstanding awards or to the exercise price of such awards. The
Board is also permitted to include in the written agreement provisions that provide for certain changes in the award in the event of
a change of control of our Company, including acceleration of vesting. Except as otherwise determined by the Board at the date of grant,
awards will not be transferable, other than by will or the laws of descent and distribution. Prior to any award distribution, we are
permitted to deduct or withhold amounts sufficient to satisfy any employee withholding tax requirements. The Board also has the authority,
at any time, to discontinue the granting of awards. The Board also has the authority to alter or amend the 2017 Plan or any outstanding
award or may terminate the 2017 Plan as to further grants, provided that no amendment will, without the approval of our stockholders,
increase the number of shares available under the 2017 Plan or change the persons eligible for awards under the 2017 Plan. No amendment
that would adversely affect any outstanding award made under the 2017 Plan can be made without the consent of the holder of such award.
2019
Stock Incentive Plan
Our
Board of Directors and our stockholders approved the 2019 Stock Incentive Plan (“2019
Plan”) on July 24, 2019, under which we may grant equity incentive awards in order to attract, motivate and retain the talent who
are expected to make important contributions to the Company. The material terms of the 2019 Plan are summarized below.
Administration
of the 2019 Plan: The 2019 Plan is administered by our Board of Directors. Our Board
of Directors may delegate any or all of its powers under the 2019 Plan to one or more committees or subcommittees of the board
(a “Committee”). All references in the 2019 Plan to the “Board” shall mean our Board
of Directorsor a Committee of our Board of Directors to the extent that the board’s
powers or authority under the 2019 Plan have been delegated to such Committee. The Board shall have authority to grant awards and to
adopt, amend and repeal such administrative rules, guidelines and practices relating to the 2019 Plan as it shall deem advisable. The
Board may correct any defect, supply any omission or reconcile any inconsistency in the 2019 Plan or any award in the manner and to the
extent it shall deem expedient to carry the 2019 Plan into effect and it shall be the sole and final judge of such expediency. All decisions
by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any
interest in the 2019 Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable
for any action or determination relating to or under the 2019 Plan made in good faith.
Eligibility
Participants: The 2019 Plan authorizes the grant of stock options, restricted stock, restricted stock units and/or other stock
based awards to employees, officers, directors, individual consultants and advisors of the Company.
The
Board determines, in its sole discretion, who will receive awards under the 2019 Plan. Notwithstanding anything in the 2019 Plan or any
award documentation to the contrary, for so long as the Company has elected Subchapter S status under Section 1362 of the Internal Revenue
Code of 1986, as amended, no award shall be granted or exercised, as the case may be, if the result of such grant or exercise would result
in the termination of such Subchapter S status, unless such grant or exercise, as the case may be, is consented to by all stockholders
of the Company. Any such purported grant or exercise of an award that does not comply with the foregoing shall be void and have no legal
force or effect and shall not be recognized on the books of the Company as effective.
Shares
Available Under the 2019 Plan: The maximum number of shares of common stock that may be delivered to participants under the 2019
Plan is 3,901,512, subject to adjustment for certain corporate changes affecting the shares, such as stock splits. Shares subject to
an award under the 2019 Plan for which the award is canceled, forfeited or expires again become available for grants under the 2019 Plan.
Shares subject to an award that is settled in cash will not again be made available for grants under the 2019 Plan.
Stock
Options:
General:
The Board has the authority to grant options to purchase shares of the Company’s common stock and determine the number of shares
of the Company’s common stock to be covered by each option, the exercise price of each option and the conditions and limitations
applicable to the exercise of each option, including conditions relating to applicable federal or state securities laws, as it considers
necessary or advisable.
Exercise
of Options: An option may be exercised only in accordance with the terms and conditions of the option agreement as established by
the Board at the time of the grant. The option must be exercised by notice to us, accompanied by payment of the exercise price. Payments
may be made in cash or, at the option of the Board, by actual or constructive delivery of shares of common stock to the holder of the
option based upon the fair market value of the shares on the date of exercise.
Expiration
or Termination: Options, if not previously exercised, will expire on the expiration date established by the Board at the time of
grant; provided that such term cannot exceed ten years and that such term of an incentive stock option granted to a holder of more than
10% of our voting stock cannot exceed five years. Options will terminate before the expiration date to the extent the vested portion
of the option is not exercised within 3 months of the termination date if the holder’s service with us terminates before the expiration
date. The option may remain exercisable for specified periods after certain terminations of service, including terminations as a result
of death, disability or retirement, with the precise period during which the option may be exercised to be established by the Board and
reflected in the agreement evidencing the award.
Restricted
Shares and Restricted Stock Units: Eligible participants may be awarded grants of restricted stock units, which represent the
right to receive shares of the Company’s common stock to be delivered when the common stock vests. The holders of restricted stock
units will have none of the rights of a stockholder of the Company until such time or times as shares of the common stock have been issued
to participant in settlement of the award. The Board shall determine the participants to whom and the time or times at which grants of
restricted stock units shall be awarded, the number of units to be awarded to any participant, the conditions for vesting, the time or
times within which such awards may be subject to forfeiture and restrictions on transfer and other terms and conditions of the awards.
Each restricted stock unit shall at all times be equal in value to the fair market value of one share of the common stock of the Company.
Other
Stock Based Awards: The Board may grant or sell other awards that may be denominated or payable in, valued in whole or in part
by reference to, or otherwise based on or related to, common stock or factors that may influence the value of such shares. In addition,
the Board may grant unrestricted shares to eligible participants.
Other
Material Provisions: Awards will be evidenced by a written agreement, in such form as may be approved by the Board. In the event
of various changes to the capitalization of our Company, such as stock splits, stock dividends and similar re-capitalizations, an appropriate
adjustment will be made by the Board to the number of shares covered by outstanding awards or to the exercise price of such awards. The
Board is also permitted to include in the written agreement provisions that provide for certain changes in the award in the event of
a change of control of our Company, including acceleration of vesting. Except as otherwise determined by the Board at the date of grant,
awards will not be transferable, other than by will or the laws of descent and distribution. Prior to any award distribution, we are
permitted to deduct or withhold amounts sufficient to satisfy any employee withholding tax requirements. The Board also has the authority,
at any time, to discontinue the granting of awards. The Board also has the authority to alter or amend the 2019 Plan or any outstanding
award or may terminate the 2019 Plan as to further grants, provided that no amendment will, without the approval of our stockholders,
increase the number of shares available under the 2019 Plan or change the persons eligible for awards under the 2019 Plan. No amendment
that would adversely affect any outstanding award made under the 2019 Plan can be made without the consent of the holder of such award.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The
following includes a summary of transactions during our fiscal years ended December 31, 2021 and December 31, 2020 to which we have been
a party, including transactions in which the amount involved in the transaction exceeds the lesser of $120,000 or 1% of the average of
our total assets at year-end for the last two completed fiscal years, and in which any of our directors, executive officers or, to our
knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons
had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and
other arrangements, which are described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. We are not otherwise
a party to a related party transaction, and no transaction is currently proposed, in which the amount of the transaction exceeds the
lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years and in which a related
person had or will have a direct or indirect material interest.
Convertible
Promissory Notes
Commencing
in May 2017, we entered into Subordinated Convertible Promissory Note Agreements with our Chief Executive Officer with respect to the
issuance of convertible promissory notes in the aggregate principal amount of $2,804,318 and $2,031,236 as of December 31, 2021 and 2020,
respectively. The convertible promissory notes accrued interest at a rate of 5% per annum. Unless earlier converted into shares of Equity
Securities (as defined herein), the principal and accrued interest shall be due and payable by the Company on demand by the holder thereof
at any time after the earlier of (i) the Maturity Date (as defined in each note) and (ii) the closing of the Next Equity Financing (as
defined herein). “Equity Securities” means, subject to certain exceptions, the Company’s common stock, preferred stock
and common stock and preferred stock equivalents. “Next Equity Financing” means the next sale (or series of related sales)
by the Company of its Equity Securities from which the Company receives gross proceeds of not less than $5,000,000 for notes issued from
2017 through November 2020 and $7,500,000 for notes issued in December 2020 (including the aggregate amount of debt securities converted
into Equity Securities upon conversion or cancellation of promissory notes). The principal amount of the notes together with interest
accrued thereon will automatically be converted into the type of Equity Securities issued in the Next Equity Financing upon closing thereof.
The number of Equity Securities to be issued upon such conversion shall be equal to the quotient obtained by dividing the outstanding
principal amount together with interest accrued thereon by the lesser of (i) 80% of the price paid per Equity Security in the Next Equity
Financing or (ii) an equity valuation of $25 million for notes issued from 2017 through November 2020 and $50 million for notes issued
in December 2020.
On
September 27, 2020, we agreed to provide our Chief Executive Officer Exchange Notes in exchange for Original Notes which were in default
at such time by more than 90 days. The Original Notes had a principal of approximately $265,000 and accrued interest of $37,000 at December
31, 2019. As of September 27, 2020, the aggregate outstanding principal was approximately $265,000 and accrued interest (which included
the default interest rate of 20% as described above) was approximately $71,000. The Exchange Notes took the then principal and accrued
interest of the Original Notes and added an original issue discount of 37.5% to determine the new principal (which amounted to an aggregate
of $537,968) of the Exchange Notes outstanding.
Effective
October 1, 2020, all notes held by our Chief Executive Officer which matured, and were not repaid or converted, were rolled over on substantially
the same terms as the original notes with a new two year term. Effective December 1, 2020, all notes held by our Chief Executive Officer
which matured, and were not repaid or converted, were rolled over on substantially the same terms as the original notes with a new three
year term. The principal amount of the notes together with interest accrued thereon will automatically be converted into the type of
Equity Securities issued in the Next Equity Financing upon closing thereof.
Our
IPO qualified as a Next Equity Financing and, on January 14, 2022, the notes were converted into an aggregate of 921,288 shares of our
common stock.
On
December 22, 2020, we issued Leonard Mazur, a member of our Board of Directors, a subordinated
convertible promissory note in the principal amount of $300,000. The note accrues interest at 5% per annum and, unless earlier converted,
matures upon the earlier of December 31, 2023 and the closing of the Next Equity Financing. The principal amount of the note together
with any accrued interest thereon will automatically convert into the type of Equity Securities issued in the Next Equity Financing upon
the closing thereof. The number of Equity Securities to be issued upon such conversion shall be equal to the quotient obtained by dividing
the outstanding principal amount together with interest accrued thereon by the lesser of (i) 80% of the price paid per Equity Security
in the Next Equity Financing or (ii) an equity valuation of $50 million. Our IPO qualified as a Next Equity Financing and, on January
14, 2022, the note was converted into an aggregate of 98,733 shares of our common stock.
Payments
to the Chief Executive Officer
As
of December 31, 2021 and 2020, we owed our Chief Executive Officer $200,000 and $200,000, respectively. The expenses were comprised of
expenses paid by the Chief Executive Officer on behalf of our Company of $55,068 (which was converted into a convertible promissory note
in 2020) and $200,000 for accrued compensation at December 31, 2019. At December 31, 2021 and 2020, the balance comprised $200,000 and
$200,000, respectively, for accrued compensation.
Related
Person Transaction Policy
We
have adopted a related person transaction policy that sets forth our procedures for the identification, review, consideration and approval
or ratification of related person transactions. For purposes of our policy only, a related person transaction is a transaction, arrangement
or relationship, or any series of similar transactions, arrangements or relationships, in which we and any related person are, were or
will be participants in which the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end.
Transactions involving compensation for services provided to us as an employee or director are not covered by this policy. A related
person is any executive officer, director or beneficial owner of more than 5% of any class of our voting securities, including any of
their immediate family members and any entity owned or controlled by such persons.
Under
the policy, if a transaction has been identified as a related person transaction, including any transaction that was not a related person
transaction when originally consummated or any transaction that was not initially identified as a related person transaction prior to
consummation, our management must present information regarding the related person transaction to our audit committee, or, if audit committee
approval would be inappropriate, to another independent body of our Board of Directors,
for review, consideration and approval or ratification. The presentation must include a description of, among other things, the material
facts, the interests, direct and indirect, of the related persons, the benefits to us of the transaction and whether the transaction
is on terms that are comparable to the terms available to or from, as the case may be, an unrelated third party or to or from employees
generally. Under the policy, we will collect information that we deem reasonably necessary from each director, executive officer and,
to the extent feasible, significant stockholder to enable us to identify any existing or potential related-person transactions and to
effectuate the terms of the policy. In addition, under our code of business conduct and ethics, our employees and directors will have
an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict
of interest. In considering related person transactions, our audit committee, or other independent body of our Board
of Directors, will take into account the relevant available facts and circumstances including, but not limited to:
|
● |
the
risks, costs and benefits to us; |
|
● |
the
impact on a director’s independence in the event that the related person is a director, immediate family member of a director
or an entity with which a director is affiliated; |
|
● |
the
availability of other sources for comparable services or products; and |
|
● |
the
terms available to or from, as the case may be, unrelated third parties or to or from employees generally. |
The
policy requires that, in determining whether to approve, ratify or reject a related person transaction, our audit committee, or other
independent body of our Board of Directors, must consider, in light of known circumstances,
whether the transaction is in, or is not inconsistent with, our best interests and those of our stockholders, as our audit committee,
or other independent body of our Board of Directors, determines in the good faith exercise
of its discretion.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table sets forth certain information regarding the beneficial ownership of our common stock as of the Record Date by:
|
● |
each
of our named executive officers; |
|
● |
each
of our directors; |
|
● |
all
of our current directors and named executive officers as a group; and |
|
● |
each
stockholder known by us to own beneficially more than 5% 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.
Shares of common stock that may be acquired by an individual or group within 60 days of the Record Date, pursuant to the exercise of
options or warrants, vesting of common stock or conversion of preferred stock or convertible debt, are deemed 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. Percentage of ownership is based on 11,604,970 shares of common
stock issued and outstanding as of the Record Date.
Except
as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment power with
respect to all shares of common stock shown to be beneficially owned by them, based on information provided to us by such stockholders.
Unless otherwise indicated, the address for each director and executive officer listed is: c/o Hillstream BioPharma, Inc., 1200 Route
22 East, Suite 2000, Bridgewater, NJ 08807.
Name of Beneficial Owner | |
Shares of Common Stock Beneficially Owned | | |
Percentage | |
Directors and Named Executive Officers: | |
| | | |
| | |
Randy Milby | |
| 3,292,965 | (1) | |
| 27.53 | % |
Leonard Mazur | |
| 132,065 | (2) | |
| 1.16 | % |
Lynne Bui | |
| 26,924 | (3) | |
| * | |
Sireesh Appajosyula | |
| 1,378,279 | (4)(5) | |
| 12.08 | % |
All Named Executive Officers and Directors as a Group (4 persons) | |
| 4,830,233 | | |
| 40.10 | % |
5% or Greater Stockholders: | |
| | | |
| | |
Highpoint Pharmaceuticals LLC (5) | |
| 972,222 | | |
| 8.55 | % |
Kufe LLC (6) | |
| 842,317 | | |
| 7.41 | % |
Donald Kufe | |
| 843,263 | (6)(7) | |
| 7.42 | % |
Surender Kharbanda | |
| 722,602 | (8) | |
| 6.36 | % |
Varinder Kaur | |
| 653,059 | | |
| 5.75 | % |
Bearing Circle Capital LLC (9) | |
| 636,008 | | |
| 5.60 | % |
Sandeep Laumas | |
| 668,174 | (9)(10) | |
| 5.88 | % |
*
Represents less than 1%.
(1) |
Represents
(i) 2,694,013 shares of common stock and (ii) 598,952 shares of common stock issuable upon exercise of options. Excludes 780,382
shares of common stock issuable upon exercise of options which are subject to vesting. |
(2) |
Represents
(i) 123,733 shares of common stock and (ii) 8,332 shares of common stock issuable upon exercise of options. Excludes options to purchase
up to 41,668 shares of common stock issuable upon exercise of options which are subject to vesting. |
|
|
(3) |
Represents
26,924 shares of common stock issuable upon exercise of options. Excludes options to purchase up to 42,015 shares of common stock
issuable upon exercise of options which are subject to vesting. |
|
|
(4) |
Represents
(i) 46,210 shares of common stock issuable upon exercise of options, (ii) 284,090 shares of common stock, (iii) 972,222 shares of
common stock held by Highpoint Pharmaceuticals LLC and (iv) 75,757 shares of common stock held by Mercer Lake Group LLC. Excludes
options to purchase up to 41,668 shares of common stock issuable upon exercise of options which are subject to vesting. |
|
|
(5) |
Sireesh
Appajosyula is the Managing Member of each of Highpoint Pharmaceuticals LLC and Mercer Lake Group LLC and in such capacity has the
right to vote and dispose of the securities held by such entities. The address of Highpoint Pharmaceuticals LLC is 16192 Coastal
Highway Lewes, DE 19958. The address of Mercer Lake Group LLC is 1200 Route 22 East, Suite 2000, Bridgewater, NJ 08807. |
|
|
(6) |
Donald
Kufe is the Managing Director of Kufe LLC and in such capacity has the right to vote and dispose of the securities held by such entity.
The address of Kufe LLC is 179 Grove Street, Wellesley, MA 02482. |
|
|
(7) |
Represents
(i) 842,317 shares of common stock held by Kufe LLC and (ii) 1,778 shares of common stock issuable upon exercise of options held
by Donald Kufe. Excludes options to purchase up to 4,168 shares of common stock issuable upon exercise of options which are subject
to vesting. |
|
|
(8) |
Represents
(i) 721,240 shares of common stock and (ii) 1,362 shares of common stock issuable upon exercise of options. Excludes options to purchase
up to 2,084 shares of common stock issuable upon exercise of options which are subject to vesting. |
|
|
(9) |
Sandeep
Laumas is the Managing Member of Bearing Circle Capital LLC and in such capacity has the right to vote and dispose of the securities
held by such entity. |
|
|
(10) |
Represents
(i) 32,166 shares of common stock and (ii) 636,008 shares of common stock held by Bearing Circle Capital LLC. |
PROPOSAL
2
RATIFICATION
OF THE APPOINTMENT OF OUR INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR ENDING
DECEMBER
31, 2022
The
Board has appointed Mayer Hoffman McCann P.C. (“MHM”) to serve as our independent registered public accounting firm for the
year ending December 31, 2022. MHM has acted as our principal accountant since 2020 and served as our independent registered public accounting
firm for the fiscal year ended December 31, 2021.
A
representative of MHM is expected to be present via telephone conference at the Annual Meeting. He or she will have the opportunity to
make a statement if desired and is expected to be available to respond to appropriate questions.
Our
Audit Committee retains our independent registered public accounting firm and approves in advance all audit and non-audit services performed
by this firm and any other auditing firms. Although management has the primary responsibility for the financial statements and the reporting
process including the systems of internal control, the Audit Committee consults with management and our independent registered public
accounting firm regarding the preparation of financial statements and the adoption and disclosure of our critical accounting estimates
and generally oversees the relationship of the independent registered public accounting firm with the Company. The independent registered
public accounting firm is responsible for expressing an opinion on the conformity of those audited financial statements with generally
accepted accounting principles, relating to their judgments as to the quality, not just the acceptability, of the Company’s accounting
principles, and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards.
It
is the responsibility of our management to determine that our financial statements and disclosures are complete and accurate and in accordance
with generally accepted accounting principles. It is the responsibility of our independent registered public accounting firm to conduct
the audit of our financial statements and disclosures. In giving its recommendation to the Board that our audited financial statements
for the year ended December 31, 2021 be included in our Annual Report on Form 10-K for the year ended December 31, 2021, the Audit Committee
has relied on: (1) management’s representation that such financial statements have been prepared with integrity and objectivity
and in conformity with generally accepted accounting principles in the United States; and (2) the report of our independent registered
public accounting firm with respect to such financial statements.
Principal
Accountant Fees and Services
Substantially
all of MHM personnel, who work under the control of MHM shareholders, are employees of wholly-owned subsidiaries of CBIZ, Inc., which
provides personnel and various services to MHM in an alternative practice structure. The
aggregate fees billed to us by MHM, our independent registered public accounting firm, for the indicated services for each of the last
two fiscal years were as follows:
| |
2021 | | |
2020 | |
| |
| | |
| |
Audit fees | |
$ | 343,323 | | |
$ | 120,238 | |
Audit related fees | |
| - | | |
| - | |
Tax fees | |
| - | | |
| - | |
All other fees | |
| - | | |
| - | |
Total | |
$ | 343,323 | | |
$ | 120,238 | |
Audit
Fees: Audit fees consist of fees billed for the professional services rendered to us for the audit of our annual consolidated financial
statements for the years ended December 31, 2021 and 2020, reviews of the quarterly financial statements during the periods, the issuance
of consent and comfort letters in connection with registration statement filings, and all other services that are normally provided by
the accounting firm in connection with statutory and regulatory filings and engagements.
Audit-Related
Fees: Fees not included in audit fees that are billed by the auditor for assurance and related services that are reasonably related
to the performance of the audit of the financial statements.
Tax
Fees: Fees for professional services rendered for tax compliance, tax advice and tax planning.
All
Other Fees: All other fees billed by the auditor for products and services not included in the foregoing categories.
Approval
Policies and Procedures
In
February 2022, our Board of Directors approved all audit and permitted non-audit services provided by our independent registered public
accounting firm. In the fiscal years ended December 31, 2021 and 2020, all of the services performed by our independent registered public
accounting firm were pre-approved by our Board of Directors.
Vote
Required
The
selection of our independent registered public accounting firm is not required to be submitted to a vote of our stockholders for ratification.
However, we are submitting this matter to the stockholders as a matter of good corporate governance. Even if the appointment is ratified,
the Board may, in its discretion, appoint a different independent registered public accounting firm at any time during the year if it
determines that such a change would be in the best interests of us and our stockholders. If the appointment is not ratified, the Board
will reconsider whether or not to retain MHM.
The
affirmative vote of a majority of the shares (by voting power) present in person at the Annual Meeting or represented by proxy and entitled
to vote at the Annual Meeting is required to approve the ratification of the appointment of MHM as our independent registered public
accounting firm for the fiscal year ending December 31, 2022.
Board
Recommendation
THE
BOARD RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF MAYER HOFFMAN MCCANN P.C. AS THE COMPANY’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2022.
AUDIT
COMMITTEE REPORT
The
following Audit Committee Report shall not be deemed to be “soliciting material,” deemed “filed” with the Securities
and Exchange Commission or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Notwithstanding anything to the contrary set forth in any of the Company’s previous filings under the Securities Act
of 1933, as amended, or the Exchange Act that might incorporate by reference future filings, including this proxy statement, in whole
or in part, the following Audit Committee Report shall not be incorporated by reference into any such filings.
The
Audit Committee is comprised of two independent directors (as defined under Nasdaq Listing Rule 5605(a)(2)). The Audit Committee operates
under a written charter, which is available on the Company’s website at www.hillstreambio.com.
The
Audit Committee has reviewed and discussed with management and the Company’s auditors, the Company’s audited financial statements
as of and for the fiscal year ended December 31, 2021.
The
Audit Committee has discussed with Mayer Hoffman McCann P.C., the Company’s independent registered public accounting firm, the
matters as required to be discussed by the Public Company Accounting Oversight Board (the “PCAOB”) Auditing Standard No.
1301 (Communications with Audit Committees).
The
Audit Committee has received the written disclosures and the letter from Mayer Hoffman McCann P.C. required by applicable requirements
of the PCAOB regarding Mayer Hoffman McCann P.C.’s communications with the Audit Committee concerning independence, and has discussed
with Mayer Hoffman McCann P.C. their independence from management and the Company.
Based
on the review and discussions referred to above, the Audit Committee recommended to the Board that the financial statements referred
to above be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for filing with the
Securities and Exchange Commission.
Submitted
by the Audit Committee |
|
Leonard
Mazur |
|
Lynne
Bui |
|
OTHER
MATTERS
We
have no knowledge of any other matters that may come before the Annual Meeting and do not intend to present any other matters. However,
if any other matters shall properly come before the Annual Meeting or any adjournment or postponement thereof, the persons soliciting
proxies will have the discretion to vote as they see fit unless directed otherwise.
ADDITIONAL
INFORMATION
Householding
The
SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for Proxy Availability
Notice or other Annual Meeting materials with respect to two or more stockholders sharing the same address by delivering a single Notice
or other Annual Meeting materials addressed to those stockholders. This process, which is commonly referred to as householding, potentially
provides extra convenience for stockholders and cost savings for companies. Stockholders who participate in householding will continue
to be able to access and receive separate proxy cards.
This
year, a number of brokers with account holders who are our stockholders will be “householding” our proxy materials. A Notice
or proxy materials will be delivered in one single envelope to multiple stockholders sharing an address unless contrary instructions
have been received from one or more of the affected stockholders. Once you have received notice from your broker that they will be householding
communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at
any time, you no longer wish to participate in householding and would prefer to receive a separate Notice or proxy materials, please
notify your broker or call our Secretary at (908) 955-3140 , or submit a request in writing to our Secretary, Hillstream BioPharma, Inc.,
1200 Route 22 East, Suite 2000, Bridgewater, NJ 08807. Stockholders who currently receive multiple copies of the Notice or proxy materials
at their address and would like to request householding of their communications should contact their broker. In addition, we will promptly
deliver, upon written or oral request to the address or telephone number above, a separate copy of the Notice or proxy materials to a
stockholder at a shared address to which a single copy of the documents was delivered.
Annual
Reports on Form 10-K
Additional
copies of the Company’s Annual Report on Form 10-K for fiscal year ended December 31, 2021 may be obtained without charge by writing
to the Secretary, Hillstream BioPharma, Inc., 1200 Route 22 East, Suite 2000, Bridgewater, NJ 08807.
By
Order of the Board of Directors |
|
|
|
/s/
Randy Milby |
|
Randy
Milby |
|
Chairman
of the Board of Directors and Chief Executive Officer |
|
June
17, 2022
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