UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐ | Preliminary Proxy Statement |
☐ | Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
☒ | Definitive Proxy Statement |
☐ | Definitive Additional Materials |
☐ | Soliciting Material Pursuant to §240.14a-12 |
EMERALD BIOSCIENCE, INC. | ||
(Name of Registrant as Specified in Its Charter) |
(Name of Person(s) Filing Proxy Statement, if other thanOther Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☒ | No fee required. |
☐ | Fee computed on table below per Exchange Act Rules 14a-6(i) | |
1. | Title of each class of securities to which transaction applies: | |
2. | Aggregate number of securities to which transaction applies: | |
3. | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |
4. | Proposed maximum aggregate value of transaction: | |
5. | Total fee paid: | |
☐ | Fee paid previously with preliminary |
☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. | |
1. | Amount previously paid: | |
2. | Form, Schedule or Registration Statement No.: | |
3. | Filing Party: | |
4. | Date Filed: | |
5910 Pacific Center Drive,Blvd, Suite 1770
San Diego, California 92121
December 22, 2020
To our stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of EMERALD BIOSCIENCE, INC. on January 28, 2021. The meeting will begin promptly at 9:00 a.m. Pacific Time. The meeting will be held virtually.
To attend the Annual Meeting virtually please follow the instructions below.
1. | Please pre-register for the Annual Meeting before January 27, 2021 at 12:00 p.m. Eastern Time by: |
a. | Visiting cleartrustonline.com/embi and select “Register to Attend Meeting”; or | |
b. | Calling Emerald Bioscience’s transfer agent, ClearTrust, at 813-235-4490 and providing the 12-digit control number included in your proxy card. |
2. | You will receive step-by-step instructions from ClearTrust to access the Annual Meeting. |
The official Notice of Annual Meeting of Stockholders, proxy statement, proxy card and return envelope are included with this letter. The matters listed in the Notice of the Annual Meeting of Stockholders are described in detail in the proxy statement.
The vote of every stockholder is important. Whether or not you plan to attend the Annual Meeting, please cast your vote as promptly as possible, as instructed in the accompanying proxy statement.
Sincerely, | ||
EMERALD BIOSCIENCE, INC. | ||
/s/ Punit Dhillon | ||
Punit Dhillon, Chairman of the Board of Directors |
EMERALD BIOSCIENCE, INC.
5910 Pacific Center Blvd, Suite 320
San Diego, California 92121
NOTICE OF 2016 ANNUAL MEETING OF STOCKHOLDERS
To the stockholders of Emerald Bioscience, Inc.
PLEASE TAKE NOTICE IS HEREBY GIVEN that the 2016 Annual Meeting (the “Annual Meeting”) of Stockholders ("Annual Meeting") of NemusEmerald Bioscience, Inc., a Nevada corporation (the "Company"“Company”) will be held on Tuesday, July 12, 2016,virtually at 11:9:00 a.m., local time, at the offices of Latham & Watkins LLP located at 650 Town Center Drive, 20th Floor, Costa Mesa, CA 92626, Pacific Time, on January 28, 2021, for the following purposes:
(1) | To elect |
(2) | To ratify the | |
(3) | To authorize and approve an amendment to the Company’s Articles of Incorporation to increase the number of authorized shares of Common Stock from 500,000,000 to 5,000,000,000 shares and the number of authorized shares of Preferred Stock from 20,000,000 to 50,000,000 shares; and |
(4) | To |
Only stockholders of record at the close of business on December 18, 2020 are more fully described in the Proxy Statement accompanying this Notice.
You may vote at the meeting or by proxy. Further information regarding voting rights and any and all adjourned sessions thereof.
To ensure thatattend the Annual Meeting virtually please follow the instructions below.
1. | Please pre-register for the Annual Meeting before January 27, 2021 at 12:00 p.m. Eastern Time by: |
a. | Visiting cleartrustonline.com/embi and completing the form to register; or | |
b. | Calling Emerald Bioscience’s transfer agent, ClearTrust, at 813-235-4490 and providing the 12-digit control number included in your proxy card. |
2. | You will receive step-by-step instructions from ClearTrust to access the Annual Meeting. |
Your vote is important. Whether or not you plan to attend the Annual Meeting, please cast your vote is recordedas promptly please vote as soonpossible, as possible. If you are a stockholder of record, please complete, sign and mail the proxy cardinstructed in the enclosed postage-paid envelope. If your shares are held in "street name", thataccompanying proxy statement. We encourage you to vote via the internet or by telephone. It is held for your account by a broker or other nominee, you will receive instructions from the holder of record that you must follow for your shares to be voted.
BY ORDER OF THE BOARD OF DIRECTORS | ||
/s/ Punit Dhillon | ||
Punit Dhillon | ||
Chairman of the Board of Directors |
San Diego, CA
December 22, 2020
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
i |
Table of Contents |
EMERALD BIOSCIENCE, INC.
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held at 9:00 a.m. Pacific Time on January 28, 2021
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The Board of Directors unanimously recommends that you vote "FOR" each(the “Board”) of Emerald Bioscience, Inc. (the “Company,” “we,” “us” and “our”) is soliciting proxies for the Annual Meeting proposals, all of which are described in detail inStockholders and any postponements, adjournments or continuations thereof (the “Annual Meeting”). The Annual Meeting will be held virtually on January 28, 2021, at 9:00 a.m. Pacific Time. This proxy statement and the accompanying Proxy Statement.
Important Notice Regarding the Availability of Proxy Materials for the Annual Stockholder Meeting of Stockholders to be heldHeld on Tuesday, July 12, 2016 at 11:00 a.m. local time at the offices of Latham & Watkins LLP located at 650 Town Center Drive, 20th Floor, Costa Mesa, CA 92626.
This proxy statement, and Annual Report onour annual report (on Form 10-K for the10-K) regarding our fiscal year ended December 31, 2015, which is being provided as2019 and our Annual Report to Stockholders,quarterly report (on Form 10-Q) regarding our fiscal quarter ended September 30, 2020 are available electronically at http:https://www.proxyvote.com.
The information provided below is a summary of the information included in this proxy statement. You should read this entire proxy statement carefully. Information contained on, or that can be accessed through, our website is not intended to be incorporated by reference into this proxy statement and references to our website address in this proxy statement are inactive textual references only.
QUESTIONS AND ANSWERS REGARDING THE 2016 ANNUAL MEETING OF STOCKHOLDERS
Although we encourage you to read this proxy for the annual meeting of stockholders (the "Annual Meeting")statement in its entirety, we include this question and answer section to be held at the offices of Latham & Watkins LLP located at 650 Town Center Drive, 20th Floor, Costa Mesa, CA 92626, on Thursday, July 12, 2016 at 11:00 a.m. local timeprovide some background information and at any and all adjourned sessions ofbrief answers to several questions you may have about the Annual Meeting.
Q: What proposals will be entitled to votevoted on at the Annual Meeting. As of the Record Date, we had 19,913,163 outstanding shares of common stock, entitled to be voted at the Annual Meeting, and 4,492 outstanding shares of Series B Convertible Preferred Stock (“Series B Preferred Stock”), entitled to be voted at the Annual Meeting. Each holder of common stock is entitled to one vote per share of common stock held on the Record Date, and each holder of Series B Preferred Stock is entitled to 1,250 votes per share of Series B Preferred Stock held on the Record Date.
A: There are counted as present at the meeting if the stockholder is present at the meeting and votes in person or a proxy card has been properly submitted by the stockholder or on the stockholder's behalf. Both abstentions and broker non-votes are counted as present for the purpose of determining the presence of a quorum.
Proposal 1: | Election of Directors | |
Proposal 2: | Ratification of the appointment of Mayer Hoffman McCann P.C. as our independent registered public accounting firm for the fiscal year ending December 31, 2020 | |
Proposal 3: | Increase of Company’s authorized shares of common stock and preferred stock. | |
Proposal 4: | Approval and adoption Amended and Restated Articles of Incorporation and Bylaws. |
Q: What is the Board’s voting recommendation?
A: The recommendations of our Board are set forth together with the description of each proposal in this proxy statement. In summary, the Board recommends a vote “For” each proposal.
1 |
Table of Contents |
Q: Who can vote at the Annual Meeting?
A: Our Board has set December 18, 2020 as the record date (the “record date”) for the Annual Meeting. In addition, banks and brokers cannot vote on their clients' behalf on "non-routine" proposals without your specificAll stockholders who own voting instructions.
Stockholders do not have the right to cumulate votes. Shares held as of the selectionrecord date include shares that you hold directly in your name as the stockholder of Mayer Hoffman McCann P.C.record and those shares held for you, as a beneficial owner, through a bank, broker or other nominee.
Q: What is the difference between holding shares as a stockholder of record and as a beneficial owner?
A: Many of our independentstockholders hold their shares through a bank, broker or other nominee rather than directly in their own names. As summarized below, there are some distinctions between shares held of record and those owned beneficially.
Stockholders of Record
If your shares are registered public accounting firm forin your name with our transfer agent, Computershare, you are considered the year ending December 31, 2016, also requires a pluralitystockholder of record with respect to those shares and the votes cast atproxy materials have been sent directly to you. As the Annual Meeting such thatstockholder of record, you have the proposals will be approved if the votes cast favoring the proposals exceed the votes cast opposing the proposals.
Beneficial Owners
If your shares are held by a bank, in "street name"a brokerage account or by another nominee, you are considered the beneficial owner of the shares. In this instance, your bank, broker or other nominee is considered, with respect to those shares, the stockholder of record and they will have forwarded the proxy materials to you. As the beneficial owner, you have the right to direct your bank, broker or other nominee on how to vote and you wantare also invited to attend the Annual Meeting virtually. However, since you must bring an account statement or letterare not the stockholder of record, you may not vote these shares in person at the Annual Meeting unless you request a proxy from the brokerage firmbank, broker or other nominee giving you the right to vote the shares at the Annual Meeting. We sometimes refer to stockholders who hold their shares through a bank, holding your shares showing that you werebroker or other nominee as “beneficial owners.”
Q: What is the beneficial ownervoting requirement to approve each of the proposals?
A: The requirements to approve each of the proposals are set forth below.
Proposal 1: Election of Directors. For Proposal 1, the three nominees who receive the most “For” votes (among votes properly cast in person or by proxy) will be elected. Only votes “For” or “Withheld” will affect the outcome.
Proposal 2: Ratification of Independent Registered Public Accounting Firm. To be approved, Proposal 2 must receive “For” votes from the holders of a majority of the shares of common stock present or represented by proxy and entitled to vote at the Annual Meeting.
Proposal 3: Increase of Authorized Shares of Common Stock. To be approved, Proposal 3 must receive “For” votes from the holders of a majority of the shares of common stock present or represented by proxy and entitled to vote at the Annual Meeting.
Proposal 4: Approval of Amended and Restated Articles of Incorporation and Bylaws. To be approved, Proposal 4 must receive “For” votes from the holders of a majority of the shares of common stock present or represented by proxy and entitled to vote at the Annual Meeting.
Q: If I vote against the proposals, do I have appraisal or dissenter’s rights?
A: No, Nevada law does not provide for appraisal or dissenter’s rights in connection with the proposals to be voted on at the record date.Annual Meeting.
2 |
Table of Contents |
Q: Who counts the votes?
A: Votes cast by proxy or in person at the Annual Meeting will be tabulated and certificated by the inspector of elections who will also determine whether or not a quorum is present. A representative of ClearTrust, LLC will serve as the inspector of elections.
Q: What happens if I do not cast a vote?
A: If you wantare a stockholder of record and you do not cast your vote, no votes will be cast on your behalf on any of the proposals at the Annual Meeting. If you submit a signed proxy card with no further instructions, the shares represented by that proxy card will be voted as recommended by our Board in favor of the two proposals.
If you are a beneficial owner, your broker may vote on Proposal 1 and Proposal 2, which are considered to be “routine” matters.
Q: How can I vote my shares that arein person at the Annual Meeting?
A: The Annual Meeting will be a completely virtual meeting. There will be no physical meeting location. The Annual Meeting will only be conducted via live webcast. To attend the virtual meeting please follow the instructions below.
1. | Please pre-register for the Annual Meeting before January 27, 2021 at 12:00 p.m. Eastern Time by: |
a. | Visiting cleartrustonline.com/embi and completing the form to register; or | |
b. | Calling ClearTrust at 813-235-4490 and providing the 12-digit control number included in your proxy card. |
2. | You will receive step-by-step instructions from ClearTrust to access the meeting. |
ClearTrust has established a Help Line for the Annual Meeting. The Help Line will open at 8:00 a.m. Pacific Time on January 28, 2021 and will remain open for the duration of the meeting. The telephone number for the Help Line is 813-308-9980 – Access Code 675813.
Shares held in "street name" or are otherwise not registereddirectly in your name you will need to obtain a "legal proxy" fromas the holderstockholder of record and present itmay be voted electronically at the Annual Meeting.
Q: How can I vote my shares in advance, without attending the Annual Meeting?
A: Whether you hold shares directly as the stockholder of record (for exampleor you are a beneficial owner, you may direct how your common stock is registered in "street name" withshares are voted without attending the Annual Meeting. If you are a brokerage firm), you must follow the procedures required by the holder of record, which is usually a brokerage firm or bank, to revoke or change a proxy. You should contact the stockholder of record, directly for moreyou may vote as follows:
Vote by Internet. You can vote via the internet at www.cleartrustonline.com/embi ,and once you are at the website, follow the online instructions. You will need information from your proxy card to vote via the internet. Internet voting is available 24 hours a day. Proxies submitted by the internet must be received by 11:59 p.m. Eastern time on these procedures.
Vote by Telephone. You can vote by telephone by calling Emerald Bioscience’s transfer agent at (813) 235-4490. You will bearneed your proxy card to vote by telephone. Telephone voting is available 24 hours a day. Proxies submitted by telephone must be received by 11:59 p.m. Eastern time on the expenseday before the Annual Meeting.
Vote by Mail. You can vote by marking, dating and signing your name exactly as it appears on the proxy card you received, and returning it in the postage-paid envelope provided or by sending your proxy card to ClearTrust, LLC at 16540 Pointe Village Drive, Suite 205, Lutz, FL 33558. Please promptly mail your proxy card to ensure that it is received prior to the closing of solicitingthe polls at the Annual Meeting.
If your shares are held in the name of a bank, broker or other nominee, you should have received this proxy statement and voting instructions, which include the following, from your bank, broker or other nominee:
Vote by Internet. You can vote via the internet by following the instructions on the Voting Instruction Form provided to you. Once there, follow the online instructions. Internet voting is available 24 hours a day.
Vote by Telephone. You can vote by telephone by calling the number provided on your Voting Instruction Form. Telephone voting is available 24 hours a day.
Vote by Mail. You can vote by marking, dating and signing your name exactly as it appears on the Voting Instruction Form, and returning it in the postage-paid envelope provided. Please promptly mail your Voting Instruction Form to ensure that it is received prior to the closing of the polls at the Annual Meeting.
If you vote by any of the methods discussed above, you will be designating Punit Dhillon, our Chairman of the Board and/or Jim Heppell, our Director, as your proxies. Our officersThey may act together or individually on your behalf, and certainwill have the authority to appoint a substitute to act as proxy. Submitting a proxy will not affect your right to attend the Annual Meeting and vote in person.
3 |
Table of Contents |
Q: How can I change or revoke my vote?
A: Subject to any rules your bank, broker or other employees, without additional remuneration,nominee may solicit proxies personallyhave, you may change your proxy instructions at any time before your proxy is voted at the Annual Meeting.
Stockholders of record. If you are a stockholder of record, you may change your vote by (1) filing with our Secretary, prior to your shares being voted at the Annual Meeting, a written notice of revocation or a duly executed proxy card, in either case dated later than the prior proxy relating to the same shares, or (2) attending the virtual Annual Meeting and voting in person electronically (although attendance at the Annual Meeting will not, by itself, revoke a proxy). Any written notice of revocation or subsequent proxy card must be received by our Secretary prior to the taking of the vote at the Annual Meeting. Such written notice of revocation or subsequent proxy card should be hand delivered to our Secretary at the Annual Meeting or should be sent so as to be delivered, prior to the date of the Annual Meeting, to our principal executive office, 5910 Pacific Center Blvd, Suite 320, San Diego, CA 92121, Attention: Secretary.
Beneficial owners. If you are a beneficial owner of shares, you may change your vote (1) by submitting new voting instructions to your bank, broker or other nominee, or (2) if you have obtained, from the bank, broker or other nominee who holds your shares, a legal proxy giving you the right to vote the shares, by attending the virtual Annual Meeting and voting in person electronically. Your bank, broker or other nominee can provide you with instructions on how to change your vote.
In addition, a stockholder of record or a beneficial owner who has voted via the internet or by telephone e-mailmay also change his, her or other means.
Q: How do I obtain an Annual Report on Form 10-K?
A: The Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as well as this proxy statement, are available and can be accessed at https://www.sec.gov/Archives/edgar/data/1516551/000164033420000582/0001640334-20-000582-index.htm, or by emailing ir@emeraldbio.com. In addition, the Securities and Exchange Commission (the “SEC”) maintains a website at www.sec.gov that contains reports, proxy statements and other filed documents and information regarding public reporting companies such as the Company, and a copy of our annual report can be found on that website.
Q: Where can I find the voting results of the Annual Meeting?
A: We will announce the preliminary voting results at the Annual Meeting. We will also report the final results in a Current Report on Form 8-K to be filed with the Securities and Exchange Commission (the “Commission” or “SEC”) within four business days after the date of the Annual Meeting.
Q: Who is paying the costs of soliciting these proxies?
A: We will pay all of the costs of soliciting these proxies. Our directors, officers and other employees may solicit proxies in person or by telephone, fax or email. We will pay our directors, officers and other employees no additional compensation for these services. We will ask banks, brokers and other institutions, nominees and fiduciaries to forward these proxy materials to their principals and to obtain authority to execute proxies. We will then reimburse them for their expenses. Our costs for forwarding proxy materials will not be significant.
Q: What should I do if I receive more than one set of proxy materials?
A: If you receive more than one set of proxy materials, it is because your shares are registered in more than one name or brokerage account. Please follow the voting instructions on each proxy card or Voting Instruction Form you receive to ensure that all of your shares are voted.
Q: Who can attend the Annual Meeting?
A: Only stockholders of record as of the record date for the Annual Meeting, holders of valid proxies from stockholders of record as of the record date for the Annual Meeting and our invited guests will be admitted to the Annual Meeting. The Annual Meeting will be a completely virtual meeting. There will be no physical meeting location. The Annual Meeting will only be conducted via live webcast. To attend the virtual meeting, you must pre-register by January 27 at 12 PM EST by visiting cleartrustonline.com/embi and clicking “Register to Attend Meeting.” If a bank, broker or other nominee holds your shares and you plan to attend the Annual Meeting, you will need to preregister in the same manner. Once your request is received, ClearTrust will ask you for a copy of a valid proxy, which you must obtain from the record holder of your shares, in order to complete registration. If you have any questions, please contact ClearTrust at 813-235-4490.
4 |
Table of Contents |
PROPOSAL 1:
ELECTION OF DIRECTORS
Our bylaws currently specify that the number of directors shall be at least one and no more than 12 persons. Our Board of Directors currently consists of three persons and all of them have been nominated to stand for re-election. You are requested to vote for three nominees for director, who will be elected for a new one-year term and will serve until their successors are elected and qualified. The nominees are Punit Dhillon, James L. Heppell and Margaret Dalesandro.
If no contrary indication is made, proxies in the accompanying form are to be voted for each of Punit Dhillon, James L. Heppell and Margaret Dalesandro, or in the event that any of them is not a candidate or is unable to serve as a director at the time of election (which is not currently expected), for any nominee who is designated by our Board of Directors to fill the vacancy. Each of Punit Dhillon, James L. Heppell and Margaret Dalesandro is currently a member of our Board of Directors.
All of our directors bring to the Board of Directors significant leadership experience derived from their professional experience and service as executives or board members of other corporations. Certain individual qualifications and skills of our directors that contribute to the Board of Directors’ effectiveness as a whole are described in the following paragraphs.
NOMINEES FOR ELECTION TO
THE BOARD OF DIRECTORS
For a One-Year Term Expiring at the
2021 Annual Meeting of Stockholders
Name | Age | Present Position with Emerald Bioscience, Inc.. | ||
Punit Dhillon | 40 | Chief Executive Officer and Chairman of the Board | ||
James L. Heppell | 65 | Director | ||
Margaret Dalesandro | 75 | Director |
Punit Dhillon, Chairman of the Board and Director— Mr. Dhillon was appointed as a member of our Board in connection with the consummation of the investment in the Company by Emerald Health Sciences in 2018. On December 17, 2019, Mr. Dhillon was appointed as Chairman of our Board. Mr. Dhillon is currently a board member of Emerald Health Pharmaceuticals Inc., Emerald Health Therapeutics, Inc. (EMH), a TSX Venture Exchange listed company, and Arch Therapeutics Inc (OTCQB: ARTH). Mr. Dhillon is a Co-founder of Oncosec Medical Incorporated (NASDAQ: ONCS) and was formerly a Director through February 2020 and the CEO through March 2018. Prior to OncoSec, Mr. Dhillon was the Vice President of Finance and Operations at Inovio Pharmaceuticals, Inc. (NASDAQ: INO) from September 2003 until March 2011. Mr. Dhillon has also previously been a consultant and board member for several TSX Venture Exchange listed early stage life science companies, which matured through advances in their development pipelines and subsequent M&A transactions. Prior to joining Inovio, Mr. Dhillon worked for a corporate finance law firm as a law clerk and worked with MDS Capital Corp. (now Lumira Capital Corp.). Mr. Dhillon is an active member in his community and places great value on helping future leaders overcome challenges through mentorship and education and is a co-founder and board member of YELL Canada, a not-for-profit and charity organization based in Canada. Mr. Dhillon has a Bachelor of Arts with honors in Political Science and a minor in Business Administration from Simon Fraser University. Mr. Dhillon’s experience in the biotechnology and pharmaceutical industry, and his experience with publicly traded companies were the primary qualifications that the Board considered in appointing him as a director of the Company.
James L. Heppell, Director — Mr. Heppell was the founder, CEO and director of BC Advantage Life Sciences I Fund, which won the Canadian Venture Capital Deal of the Year Award in 2006 for having the highest realized return (23.4x its investment in Aspreva Pharmaceuticals) of any venture capital fund in Canada. Mr. Heppell has a Bachelor of Science degree in Microbiology and a law degree from the University of British Columbia. After being called to the Bar, he worked for six years with Fasken Martineau DuMoulin, during which time he was seconded to the BC Securities Commission for six months. Mr. Heppell then became President and Chief Executive Officer of Catalyst Corporate Finance Lawyers, a boutique corporate finance law firm that focused on assisting life science and technology companies. He is a past member of the Securities Policy Advisory Committee to the BCSC and is a Past-Chairman of the Securities Section of the Canadian Bar Association (B.C. Branch). Mr. Heppell is currently a director of a number of public and private life science companies, including Emerald Health Sciences. The Board considered Mr. Heppell’s significant experience with life science and technology companies in making the decision to appoint him as a director of the Company.
5 |
Table of Contents |
Margaret Dalesandro, Director — Dr. Margaret Dalesandro currently serves on the board of OncoSec Medical Incorporated, a company listed on NASDAQ and a late-stage biotechnology company focused on designing, developing and commercializing innovative therapies and proprietary medical approaches to stimulate and to guide an anti-tumor immune response for the treatment of cancer. In addition, Dr. Dalesandro is currently a pharmaceutical development consultant with Brecon Pharma Consulting LLC. Dr. Dalesandro has over twenty-five years of experience leading strategic product development in the pharmaceutical, biotechnology and diagnostics industries. She has previously served as a Business Director of Integrative Pharmacology at Corning, Incorporated, as a Vice President of Project, Portfolio and Alliance Management at ImClone Systems Inc., as an Executive Director of Project and Portfolio Management at GlaxoSmithKline, and as a Senior Consultant at Cambridge Pharma Consultancy over the course of her career. Dr. Dalesandro earned her Ph.D. in Biochemistry from Bryn Mawr College and completed a NIH Post-Doctoral Fellowship in Molecular Immunology at the Wake Forest University School of Medicine. The Board considered Dr. Dalesandro’s significant experience with life science and technology companies in making the decision to appoint her as a director of the Company
Family Relationships
There are no family relationships between or among the directors, the director nominees or executive officers.
Term of Office of Directors
Our directors are elected at each annual meeting of stockholders and serve until the next annual meeting of stockholders or until their successor has been duly elected and qualified, or until their earlier death, resignation or removal.
Directors and Officers Involvement in Certain Legal Proceedings
During the past ten years, our directors and executive officers have not been involved in any of the legal proceedings set forth in Item 401(f) of Regulation S-K promulgated by the SEC.
Board and Committee Meetings
During 2019, our Board met four times (including telephonic meetings) and took action by written consent 16 times. Each director attended at least 75% of the meetings held by the Board and by each committee on which he served while he was a director, either in person or by teleconference, during the year.
Director Attendance at Annual Meetings
Although we do not have a formal policy regarding attendance by members of our Board at each annual meeting of stockholders, we encourage all of our directors to attend.
Audit Committee and Financial Expert
On February 23, 2015, our Board established an audit committee that operates under a written charter that has been approved by our Board. The members of our audit committee are Ms. Dalesandro and Mr. Heppell. Mr. Heppell serves as chairman of the audit committee and our Board has determined that he is an “audit committee financial expert” as defined by applicable SEC rules. The Board has determined that Ms. Dalesandro and Mr. Heppell are independent directors as that term is defined in Rule 5605(a)(2) of the Nasdaq Listing Rules, and we have determined that both Ms. Dalesandro and Mr. Heppell as audit committee members meet the more stringent requirements under Rule 5605(c)(2) of the Nasdaq Listing Rules. Our audit committee met four times (including telephonic meetings) and took action by written consent one time in 2019.
Our audit committee is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) approving fees for the independent auditor and any outside advisors engaged by the audit committee. The Audit Committee Charter is filed as Exhibit 99.1 to our Report on Form 8-K filed on February 27, 2015.
6 |
Table of Contents |
Compensation Committee
On May 31, 2015, our Board established a compensation and compliance committee which operated under a written charter that was approved by the Board. In 2018, the Board dissolved the former compensation and compliance committee and established a new compensation committee which operates under a written charter approved by the Board. The members of our compensation committee are Ms. Dalesandro and Mr. Heppell. Mr. Heppell serves as chairman of the compensation committee. Our compensation committee did not meet during 2019 (including telephonic meetings) and took action by written consent one time.
Our compensation committee is responsible for the oversight of, and the annual and ongoing review of, the Chief Executive Officer, the compensation of the senior management team, and the bonus programs in place for employees, which includes: (1) reviewing the performance of the Chief Executive Officer and such other senior officers as the Board may request, and determining the bonus entitlement for such officer or officers on an annual basis and recommending the same to the Board for approval; (2) determining the proposed annual compensation of our executive officers for each fiscal year and recommending the same to the Board for approval; (3) reviewing and discussing the bonus plan proposed for our senior management team with the Chief Executive Officer; (4) reviewing and discussing the terms and conditions of proposed grants of stock options to directors, employees, consultants and advisors with the Chief Executive Officer; (5) reviewing and recommending to the Board the compensation of the Board and committee members; (6) reviewing and discussing with the Chief Executive Officer the standard forms of employment and consulting contracts used by us; (7) reviewing and discussing with the Chief Executive Officer the general benefit plans in place for employees; (8) engaging and setting the compensation for independent counsel and other advisors and consultants; and (9) reviewing and assessing the adequacy of its Charter and submitting any recommended changes to our Board for its consideration and approval.
Nomination and Corporate Governance Committee
In 2018, our Board established a nominating and corporate governance committee that operates under a written charter approved by the Board. The members of our nominating and corporate governance committee are Ms. Dalesandro and Mr. Heppell. Ms. Dalesandro serves as chairman of the nominating and corporate governance committee. Our nominating and corporate governance committee did not meet or take action by written consent in 2019.
Our nominating and corporate governance committee is responsible for assisting the Board in (1) identifying qualified individuals to become Board members, consistent with criteria approved by the Board, (2) determining the composition of the Board and its committees, (3) selecting the director nominees for the next annual meeting of shareholders, (4) monitoring a process to assess Board, committee and management effectiveness, (5) aiding and monitoring management succession planning and (6) developing, recommending to the Board, implementing and monitoring policies and processes related to our corporate governance guidelines.
Finance and Business Development Committee
In 2018, our Board established a finance and business development committee which operates under a written charter approved by the Board. The members of our finance and business development committee are Mr. Punit Dhillon and Mr. Heppell. Mr. Dhillon serves as chairman of the finance and business development committee. Our finance and business development committee did not meet and took action by written consent three times in 2019.
Our finance and business development committee is responsible for assisting the Board in (1) matters affecting our balance sheet, including capital structure strategies, debt and equity financings and working capital (2) analysis and assessment of financial and strategic aspects of major acquisitions and divestitures, collaborations and joint ventures, (3) formulating and recommending for approval to the Board our financial policies, including management of the financial affairs of the Company, (4) developing and maintaining relationships with investment banks, financial institutions and other investors and monitor developments in the capital markets and financing trends, and (5) evaluating and making recommendations to the Board concerning business development opportunities.
Nominations to the Board of Directors
We do not have any defined policy or procedural requirements for shareholders to submit recommendations or nominations for directors. Our Board believes that, given the stage of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. We do not currently have any specific or minimum criteria for the election of nominees to the Board. The Board, with the help of its nomination and corporate governance committee, will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment.
7 |
Table of Contents |
Stockholder Communications
We do not have a formal policy regarding stockholder communications with our Board. A shareholder who wishes to communicate with our Board may do so by directing a written request addressed to our Chief Executive Officer, at the address appearing on the first page of this filing.
Code of Ethics
On October 31, 2014, we adopted a formal code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, as well as our other officers, directors and employees. A copy of our code of ethics is available on our website at www.emeraldbio.life. We intend to disclose any future amendments to provisions of our code of ethics, or waivers of provisions required to be disclosed under the rules of the SEC, on a current report on Form 8-K or at the same location on our website identified in the preceding sentence. Any amendment or waiver disclosed on our website will remain available on our website for at least 12 months after the initial disclosure.
Vote Required; Recommendation of the Board of Directors
If a quorum is present and voting at the Annual Meeting, the three nominees receiving the highest number of votes will be elected to our Board of Directors. Votes withheld from any nominee, abstentions and broker non-votes will be counted only for purposes of determining a quorum. Broker non-votes will have no effect on this proposal as brokers or other nominees are not entitled to vote on such proposal in the absence of voting instructions from the beneficial owner.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF EACH OF PUNIT DHILLON, JAMES L. HEPPELL AND MARGARET DALESANDRO. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE ON YOUR PROXY CARD.
8 |
Table of Contents |
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
The Board of Directors has selected Mayer Hoffman McCann P.C. as the Company’s independent registered public accountants for the fiscal year ending December 31, 2020 and has further directed that management submit the selection of independent registered public accountants for ratification by the stockholders at the Annual Meeting. Mayer Hoffman McCann P.C. has audited the Company’s financial statements (together with its consolidated subsidiaries) since 2014.
Stockholder ratification of the selection of Mayer Hoffman McCann P.C. as the Company’s independent registered public accountants is not required by Nevada law, the Company’s amended and restated articles of incorporation, or the Company’s amended and restated bylaws. However, the Board is submitting the selection of Mayer Hoffman McCann P.C. to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Board will reconsider whether to retain that firm. Even if the selection is ratified, the Board in its discretion may direct the appointment of different independent registered public accountants at any time during the year if the Board determines that such a change would be in the best interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting will be required to ratify the selection of Mayer Hoffman McCann P.C. Abstentions will be counted toward the tabulation of votes cast on Proposal 2 and will have the same effect as negative votes. Broker non-votes will be counted towards a quorum, but will not be counted for any purpose in determining whether Proposal 2 has been approved.
Independent Registered Public Accountants’ Fees
The aggregate fees billed in each of the fiscal years ended December 31, 2019 and 2018, for professional services rendered by Mayer Hoffman McCann P.C. for the audit of our annual consolidated financial statements included in our Annual Report on Form 10-K and quarterly reviews of the unaudited interim condensed consolidated financial statements included in our Quarterly Reports on Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were $328,514 and $260,550, respectively. There have been no audit related fees, tax fees or any other fees charged by or paid to Mayer Hoffman McCann P.C.
Substantially all Mayer Hoffman McCann P.C.’s personnel, who work under the control of shareholders of Mayer Hoffman McCann P.C., are employees of wholly-owned subsidiaries of CBIZ, Inc., which provides personnel and various services to Mayer Hoffman McCann P.C. in an alternative practice structure.
Vote Required; Recommendation of the Board of Directors
The affirmative vote of a majority of the shares of common stock present or represented by proxy and entitled to vote at the meeting will be required to ratify the selection of Mayer Hoffman McCann P.C. Abstentions will be counted toward the tabulation of votes cast on this proposal and will have the same effect as negative votes. The approval of Proposal 2 is a routine proposal on which a broker or other nominee has discretionary authority to vote. Accordingly, no broker non-votes will likely result from this proposal.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE TO RATIFY THE SELECTION OF MAYER HOFFMAN MCCANN P.C. AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020. PROXIES SOLICITED BY OUR BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE ON THEIR PROXY CARDS.
9 |
Table of Contents |
AMENDMENT TO THE COMPANY’S ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK AND PREFERRED STOCK
General Information
As of the date hereof, pursuant to our Articles of Incorporation, we are authorized to issue up to five hundred million (500,000,000) shares of Common Stock and up to twenty million (20,000,000) shares of Preferred Stock. Pursuant to our Amended and Restated Articles of Incorporation, we propose to increase our authorized shares of Common Stock from five hundred million (500,000,000) to five billion (5,000,000,000) shares of Common Stock and our authorized shares of Preferred Stock from twenty million (20,000,000) to fifty million (50,000,000) shares of Preferred Stock (the “Authorized Stock Amendment”). A copy of the form of the Company’s Amended and Restated Articles of Incorporation is attached hereto as Annex A. The Amendment will not result in any changes to the issued and outstanding shares of Common Stock or Preferred Stock of the Company and will only affect the number of shares that may be issued by the Company in the future.
Reasons for the Amendment
The primary purpose of the Authorized Stock Amendment is to make available for future issuance by us additional shares of Common Stock and to have a sufficient number of authorized and unissued shares of Common Stock to maintain flexibility in our corporate strategy and planning. We believe that it is in the best interests of our Company and our Stockholders to have additional authorized but unissued shares available for issuance to meet business needs as they arise. The Board believes that the availability of additional shares will provide our Company with the flexibility to issue Common Stock and Preferred Stock for possible future financings, stock dividends or distributions, acquisitions, stock option plans, and other proper corporate purposes that may be identified in the future by the Board, without the possible expense and delay of holding a special Stockholders’ meeting. The issuance of additional shares of Common Stock and Preferred Stock may have a dilutive effect on earnings per share and, for Stockholders who do not purchase additional shares to maintain their pro rata interest in our Company, on such Stockholders’ percentage voting power.
The authorized shares of Common Stock and Preferred Stock in excess of those issued will be available for issuance at such times and for such corporate purposes as the Board may deem advisable, without further action by our Stockholders, except as may be required by applicable law or by the rules of any stock exchange or national securities association trading system on which the securities may be listed or traded. Upon issuance, such shares of Common Stock will have the same rights as the outstanding shares of Common Stock, and the Board may provide for specific rights to different series of Preferred Stock in a Certificate of Designation. Holders of Common Stock have no preemptive rights. The availability of additional shares of Common Stock and Preferred Stock is particularly important in the event that the Board determines to undertake any actions on an expedited basis and thus to avoid the time, expense and delay of seeking Stockholder approval in connection with any potential issuance of Common Stock or Preferred Stock, of which we have none contemplated at this time other than as discussed herein.
Other than as described herein, we have no arrangements, agreements, understandings, or plans at the current time for the issuance or use of the additional shares of Common Stock proposed to be authorized pursuant to the Authorized Common Stock Amendment. The Board does not intend to issue any Common Stock except on terms which the Board deems to be in the best interests of our Company and its then existing Stockholders.
Principal Effects on Outstanding Common Stock and Preferred Stock
The increase in the authorized Common Stock will affect the rights of existing holders of Common Stock to the extent that future issuances of Common Stock will reduce each existing Stockholder’s proportionate ownership and may dilute earnings per share of the Common Stock outstanding at the time of any such issuance. The increase in the authorized Preferred Stock may also affect the rights of existing holders of Common Stock to the extent that future issuances of Preferred Stock could be converted into shares of Common Stock, which will reduce each existing Stockholder’s proportionate ownership and may dilute earnings per share of the Common Stock outstanding at the time of any such issuance and conversion. The Authorized Stock Amendment will be effective upon the filing of the Amended and Restated Articles of Incorporation with the Secretary of State of Nevada.
10 |
Table of Contents |
Potential Anti-Takeover Aspects and Possible Disadvantages of Stockholder Approval of the Increase
The increase in the authorized number of shares of Common Stock could have possible anti-takeover effects. These authorized but unissued shares could, within the limits imposed by applicable law, be issued in one or more transactions that could make a change of control of the Company more difficult, and therefore more unlikely. The additional authorized shares could be used to discourage persons from attempting to gain control of the Company by diluting the voting power of shares then outstanding or increasing the voting power of persons that would support the Board in a potential takeover situation, including by preventing or delaying a proposed business combination that may be opposed by the Board although perceived to be desirable by some Stockholders. The Board does not have any current knowledge of any effort by any third party to accumulate our securities or obtain control of the Company by means of a merger, tender offer, solicitation in opposition to management or otherwise.
While the Authorized Stock Amendment may have anti-takeover ramifications, our Board believes that the financial flexibility offered by the Authorized Stock Amendment outweighs any potential disadvantages. To the extent that the Authorized Common Stock Amendment may have anti-takeover effects, the Authorized Stock Amendment may encourage persons seeking to acquire our Company to negotiate directly with the Board, enabling the Board to consider the proposed transaction in a manner that best serves our Stockholders’ interests.
Other than as set forth above, there are currently no plans, arrangements, commitments or understandings for the issuance of additional shares of Common Stock or Preferred Stock.
Amendment
The first paragraph of Article IV of the Company’s Amended and Restated Articles of Incorporation will read as follows:
“The Corporation shall have the authority to issue an aggregate of five billion fifty million (5,050,000,000) shares of capital stock, par value $0.001 per share, consisting of (a) five billion (5,000,000,000) shares of Common Stock, par value $0.001 per share (the “Common Stock”), and (c) fifty million (50,000,000) shares of preferred stock, par value $0.001 per share (the “Preferred Stock”).”
A copy of the Company’s Amended and Restated Articles of Incorporation is attached hereto as Annex A.
No Dissenter’s Rights
Under the Nevada Revised Statues ("NRS"), the dissenting Stockholders are not entitled to appraisal rights with respect to the Authorized Common Stock Amendment, and we will not independently provide the Stockholders with any such right
Vote Required; Recommendation of the Board of Directors
The affirmative vote of a majority of the shares of outstanding Common Stock entitled to vote is required to approve the Authorized Stock Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF PROPOSAL 3 TO AMEND THE COMPANY’S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK AND PREFERRED STOCK.
11 |
Table of Contents |
ADOPTION OF THE COMPANY’S AMENDED AND RESTATED ARTICLES OF INCORPORATION AND
AMENDED AND RESTATED BYLAWS
General Information
Our Board of Directors has determined that the existing Articles of Incorporation of the Company and the Bylaws of the Company are inadequate for our current and anticipated future needs. Therefore, the Board of Directors resolved that it would be in the best interests of the Company and its stockholders to amend and restate the Articles of Incorporation of the Company in the form of the Amended and Restated Articles of Incorporation attached hereto as Annex A (the “Articles”) and the Bylaws of the Company in the form of the Amended and Restated Bylaws attached hereto as Annex B (the “Bylaws”). The key amendments implemented by each of the Articles and the Bylaws are described in more detail below.
Articles
There are several key substantive differences between the existing Articles of Incorporation of the Company and the Articles, including, but not limited to, the following:
(i) Increase the Number of Authorized Shares of Common Stock and Preferred Stock
As discussed under Proposal 3, the Company is authorized to issue two classes of capital stock to be designated, respectively, “Common Stock” and “Preferred Stock”. The total number of shares of capital stock that the Company is authorized to issue is 5,050,000,000 shares, 5,000,000,000 shares of which shall be Common Stock, par value $.001 per share, and 50,000,000 shares of which shall be Preferred Stock, par value $.001 per share. Previously, the Company was authorized to issue 500,000,000 shares of Common Stock and 20,000,000 shares of Preferred Stock. Please see the discussion under Proposal 3 regarding the purpose of the increase in the total number of authorized but unissued shares of Common Stock and Preferred Stock. The Company has no arrangements, agreements, understandings, or plans at the current time for the issuance or use of the additional shares of Common Stock or Preferred Stock proposed to be authorized.
(ii) Authorize our Board of Directors to Establish One or More Series of Preferred Stock and the right of Holders to Appoint a Director
The Articles provide that Preferred Stock may be issued from time to time in one or more series and authorizes our Board of Directors to fix or alter the rights, preferences, privileges and restrictions granted to or imposed on each series of Preferred Stock, and the number of shares constituting any such series and the designation thereof, or any of them. In addition, for the duration of any period during which the holders of any series of Preferred Stock have the right to elect any of the directors: (i) the then otherwise total number of Directors shall be automatically increased by such specified number of directors, and the holders of such series of Preferred Stock shall be entitled to elect the directors so fixed or provided for pursuant to the terms of such series, (ii) each director so elected by such holders shall serve until such Director’s successor shall have been duly elected and qualified, or until such director’s right to hold such office terminates pursuant to such provisions, whichever occurs earlier, subject to his or her earlier death, disability, resignation, retirement, disqualification or removal, and (iii) removal of any such director shall require only the vote of the holders representing not less than two-thirds of the voting power of the outstanding shares of such series of Preferred Stock.
These provisions give the Board of Directors flexibility, without further stockholder action, to issue Preferred Stock on such terms and conditions as the Board of Directors deems to be in the best interests of the Company and its stockholders and provide the holders of Preferred Stock with a right to be represented by a special Director. These provisions also provide the Company with increased financial flexibility through the ability to meet future capital requirements by providing another type of security in addition to the Company’s Common Stock. It will allow Preferred Stock to be available for issuance from time to time and with such features as determined by the Board of Directors for any proper corporate purpose. It is anticipated that such purposes may include, without limitation, the issuance of Preferred Stock in exchange for cash as a means of obtaining capital for use by the Company or as part or all of the consideration required to be paid by the Company for acquisitions of other businesses or assets.
The issuance of shares of Preferred Stock having rights superior to those of the Common Stock may result in a decrease in the value or market price of the Common Stock. Holders of Preferred Stock may have the right to elect a specially designated Director, receive dividends, certain preferences in liquidation and conversion rights. The issuance of Preferred Stock could adversely affect the voting and other rights of the holders of Common Stock.
12 |
Table of Contents |
The Company may issue shares of Common Stock as a dividend in respect of shares of Preferred Stock or any particular series of Preferred Stock without the approval of the holders of the Common Stock. Any such issuance could be dilutive to the value or market price of the Common Stock.
There currently are no plans, arrangements, commitments or understandings for the issuance of shares of Preferred Stock that are authorized by the Articles. As of the date hereof, no shares of Preferred Stock are outstanding.
(iii) Authorize our Board of Directors to Amend, Repeal or Alter the Bylaws without Stockholders’ Consent
The Articles expressly authorize the Board to make, repeal, alter, amend and rescind, in whole or in part, the Bylaws without the assent or vote of the stockholders in any manner not inconsistent with the NRS or the Articles. Currently, the Board may amend the Bylaws or adopt additional Bylaws, but shall not alter or repeal any Bylaws adopted by the shareholders of the Company.
The Board of Directors believes that this amendment conforms to general standards in the corporate governance and would provide the Board with the flexibility to amend and streamline changes in the corporate governance structure.
(vi) Opt Out of Nevada Revised Statute Provisions Relating to “Control Share Acquisition” and Combinations with Interested Stockholders”
The Articles contain provisions stating that the Company will not be subject to Sections 78.411 to 78.444 of the NRS, which sets forth restrictions regarding combinations with interested stockholders, or Sections 78.378 to 78.3793 of the NRS, which sets forth restrictions regarding the voting rights of persons attempting to acquire control of a corporation.
Control Share Acquisition Statute
The “Control Share Acquisition Statute” provisions of Sections 78.411 to 78.444 of the NRS limit the rights of persons acquiring a controlling interest in a Nevada corporation, with 200 or more stockholders of record, at least 100 of whom have Nevada addresses appearing on the stock ledger of the corporation, and that does business in Nevada directly or through an affiliated corporation. Pursuant to these provisions, an acquiring person who acquires a controlling interest, which is not partas little as one-fifth of the proxy soliciting materials,outstanding voting shares, may not exercise voting rights on any control shares unless such voting rights are conferred by a majority vote of the disinterested stockholders of the issuing corporation at a special or annual meeting of the stockholders. In the event that the control shares are accorded full voting rights and the acquiring person acquires control shares with a majority or more of all the voting power, any stockholder, other than the acquiring person, who does not vote in favor of authorizing voting rights for the control shares is includedentitled to demand payment for the fair value of such person’s shares. Additionally, if the disinterested stockholders do not allow full voting rights to the acquired shares or the notice is not sent to the stockholders pursuant to the statue, then the acquiring person may cause the corporation to redeem the acquired stock.
The effect of the Control Share Acquisition Statute is, generally, to require a hostile bidder to put its offer to a stockholder vote or risk voting disenfranchisement. These provisions do not apply if the corporation opts-out of such provision in the articles of incorporation or bylaws of the corporation in effect on the tenth day following the acquisition of a controlling interest by an acquiring person.
Due to the stringent voting requirements of the Control Share Acquisition Statute, if the Company sells one-fifth or more of its outstanding voting power, the Company is required to receive stockholder approval from the disinterested stockholders and to provide payment of the fair market value of the disinterested stockholders. Additionally, if the offeror’s statement is not delivered in the manner prescribed or if such acquiring person is not granted full voting rights by the stockholders, the issuing corporation will be required to call for redemption of such shares of the aforementioned acquiring person. The Board of Directors has determined that requiring a special meeting, payment of the fair market value of the disinterested stockholders and possible redemption would place unnecessary burdens on the Company in connection with the completion of equity financing in which the Company would sell one-fifth or more of its outstanding voting shares. Therefore, the Board of Directors believes it is in the best interest of the Company to avoid the time and expense associated with calling a special meeting of stockholders or redemption of such acquiring person’s shares.
13 |
Table of Contents |
We do not currently meet the threshold required for application of the Control Share Acquisition Statute by virtue of having (i) less than 200 stockholders of record and (ii) less than 100 stockholders who have Nevada addresses appearing on the stock ledger of the Company. The approval of this Proxy Statementprovision will therefore have no effect on our current stockholders based upon our current plans, proposals, and arrangements to issue securities. Further, we have no present intention, plan, proposal, or arrangement to issue securities that would in the future subject us to the Control Share Acquisition Statute. The adoption of the amendment to make the Control Share Acquisition Statute not applicable to the Company will make it easier for us to sell one-fifth or more of the Company’s common stock without obtaining stockholder approval. Stockholders should note that as a result of the amendment, the Board of Directors will be able to enter into certain transactions as described above that may otherwise require stockholder approval in order for full voting rights to be conferred to an acquirer under Nevada corporate law.
Appendix ACombination with Interested Stockholders Statute.
The “business combination with interested stockholders” provisions of Sections 78.411 to 78.444 of the NRS, generally prohibit a Nevada corporation with at least 200 stockholders of record from engaging in various “combination” transactions with any interested stockholder for a period of two years after the date of the transaction in which the person became an interested stockholder, unless the transaction is approved by our board of directors prior to the date the interested stockholder obtained such status or the combination is approved by our board of directors and thereafter is approved at a meeting of the stockholders by the affirmative vote of stockholders representing at least 60% of the outstanding voting power held by disinterested stockholders, and extends beyond the expiration of the two-year period, unless:
• | the combination was approved by our board of directors prior to the person becoming an interested stockholder or the transaction by which the person first became an interested stockholder was approved by our board of directors before the person became an interested stockholder or the combination is later approved by a majority of the voting power held by disinterested stockholders, or |
• | if the consideration to be paid by the interested stockholder is at least equal to the highest of: (a) the highest price per share paid by the interested stockholder within the two years immediately preceding the date of the announcement of the combination or in the transaction in which it became an interested stockholder, whichever is higher, (b) the market value per share of common stock on the date of announcement of the combination and the date the interested stockholder acquired the shares, whichever is higher, or (c) for holders of preferred stock, the highest liquidation value of the preferred stock, if it is higher |
A “combination” is generally defined to include mergers or consolidations or any sale, lease exchange, mortgage, pledge, transfer, or other disposition, in one transaction or a series of transactions, with an “interested stockholder” having: (a) an aggregate market value equal to 5% or more of the aggregate market value of the assets of the corporation, (b) an aggregate market value equal to 5% or more of the aggregate market value of all outstanding shares of the corporation, (c) 10% or more of the earning power or net income of the corporation, and (d) certain other transactions with an interested stockholder or an affiliate or associate of an interested stockholder.
The statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire our Company was incorporatedeven though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price. Again, stockholders should note that as a result of this provision in the Articles, the Board of Directors may be able to enter into certain transactions as described above without stockholder approval under Nevada corporate law and without meeting the additional requirements of the statute.
(v) Provide for the Indemnification of Directors and Officers
The Articles generally provide that the Company, to the fullest extent permitted by the laws of the State of Nevada, on March 16, 2011, as Load Guard Transportation, Inc.,shall indemnify directors and changed its name to Load Guard Logistics, Inc. on November 6, 2012. On October 31, 2014,officers of the Company closedin their respective capacities as such and in any and all other capacities in which any of them serves at the request of the Company. In addition to any other rights of indemnification permitted by the laws of the State of Nevada, the expenses of directors and officers incurred in defending a reverse merger transactioncivil or criminal action, suit or proceeding, involving alleged acts or omissions of such director or officer in his or her capacity as a director or officer of the Company, must be paid, by the Company, as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by the Company.
14 |
Table of Contents |
The indemnification provisions in the Articles may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. In addition, stockholders’ investments may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
There is currently no pending material litigation or proceeding involving any of our directors or officers for which indemnification is sought.
The Board of Directors believes that the indemnification is necessary in order for the Company becameto be able to attract and retain qualified candidates to serve on the 100% parentBoard of Directors and as officers and therefore is in the best interests of the Company and its stockholders.
The Stockholders are urged to read the Articles in their entirety attached as Annex A hereto.
Possible Anti-Takeover Effects of the Proposals
The Articles will result in an increase in the number of authorized but unissued shares of our subsidiary Nemus ("Nemus Sub") and assumedcapital stock. Under certain circumstances this could have an anti-takeover effect, although this is not the operationsintent of Nemus Sub. On November 3, 2014,the Board of Directors. For example, it may be possible for the Board of Directors to delay or impede a takeover or transfer of control of the Company changed its nameby causing such authorized but unissued shares to Nemus Bioscience, Inc. by mergingbe issued to holders who might side with Nemus Bioscience, Inc.,the Board of Directors in opposing a subsidiarytakeover bid that the Board of Directors determines is not in the best interests of the Company.
The Articles provide that the Preferred Stock authorized by the Articles may be issued from time to time in this proxy statement, unlessone or more series and authorizes our Board of Directors to fix or alter the context indicatesrights, preferences, privileges and restrictions granted to or imposed on each additional series of Preferred Stock, and the number of shares constituting any such series and the designation thereof, or any of them. The issuance of Preferred Stock with either specified voting rights or rights providing for the approval of extraordinary corporate action could be used to create voting impediments or to frustrate persons seeking to effect a merger or to otherwise requires, "ourgain control of the Company by diluting their stock ownership. In addition, the ability of the Board of Directors to distribute shares of any class or series (within limits imposed by applicable law) as a dividend in respect of issued shares of Preferred Stock also could be used to dilute the stock ownership or voting rights of a person seeking to obtain control of the Company and effectively delay or prevent a change in control without further action by the stockholders.
While the aforementioned provisions of the Articles may be deemed to have possible anti-takeover effects, their approval and adoption was not prompted by any specific takeover threat currently perceived by management, and neither our management nor our Board of Directors views any provision of the Articles as an anti-takeover mechanism. Except for the potential effects of the aforementioned provisions, there are no anti-takeover provisions in the Articles, and the Board of Directors currently has no plan to adopt any proposal or to enter into any other arrangement that may have material anti-takeover consequences.
15 |
Table of Contents |
Effective Date
The adoption of the Articles will become effective upon the filing of the Articles with the Nevada Secretary of State.
Bylaws
There are several key substantive differences between the existing Articles of Incorporation of the Company and the Articles, including, but not limited to, the following:
(i) Increase the Minimum Number of Directors
The Bylaws provide that the Board shall consist of at least two individuals and not more than nine individuals. The existing company" "we," "us," bylaws provide that the Board shall consist of at least one individual and "our"not more than twelve individuals.
We believe that that the minimum number of directors would ensure a more robust and balanced Board of Directors and ultimately benefit the Stockholders.
(ii) Opt Out of Nevada Revised Statute Provisions Relating to “Control Share Acquisition” and Combinations with Interested Stockholders”
Similar to the Articles, the Bylaws contain provisions stating that the Company will not be subject to Sections 78.378 to 78.3793 of the NRS, which sets forth restrictions regarding the voting rights of persons attempting to acquire control of a corporation. Please refer to Nemus Bioscience, Inc., a Nevada corporation,the discussion under “Articles” above.
(iii) Provide for the Indemnification of Directors and its consolidated subsidiary, Nemus Sub.
Similar to the Jumpstart Our Business Startups Act of 2012, orArticles, the JOBS Act. We will remain an emerging growth company untilBylaws generally provide that the earlier of (i)Company, to the last dayfullest extent permitted by the laws of the fiscal year following the fifth anniversaryState of Nevada, shall indemnify directors and officers of the dateCompany in their respective capacities as such and in any and all other capacities in which any of them serves at the request of the first sale of our common stockCompany; provided that such indemnitee either is not liable pursuant to an effective registration statement under the Securities Act of 1933, as amended,NRS or acted in good faith and in a manner such Indemnitee reasonably believed to be in or not opposed to the Securities Act, which was on October 28, 2013; (ii) the last daybest interests of the fiscal yearCompany and, with respect to any proceeding that is criminal in which we have total annual gross revenues of $1 billionnature, had no reasonable cause to believe that her or more; (iii)his conduct was unlawful. Please refer to the date on which we have issued more than $1 billiondiscussion under “Articles” above.
The Stockholders are urged to read the Bylaws in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under applicable SEC rules. We expect that we will remain an emerging growth company for the foreseeable future, but cannot retain our emerging growth company status indefinitely and will no longer qualifytheir entirety attached as an emerging growth company on or before December 31, 2018. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from specified disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:
Vote Required; Recommendation of the reduced disclosure obligations available to us asBoard of Directors
The affirmative vote of a result of that classification. We have taken advantage of certain of reduced reporting burdens in this proxy statement. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.
.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF PROPOSAL 3
16 |
Table of Contents |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
STOCKHOLDER MATTERS
The following table sets forth certain information as of December 10, 2020, with respect to the beneficial ownership of our common stock, by:
To our knowledge, except as indicated in the footnotes to this table andor pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to allthe shares of common stock shown as beneficially owned by them. Unless otherwise indicated, the address of each beneficial owner listed below is 650 Town Center Drive, Suite 1770, Costa Mesa, California 92626.
Name and Address of Beneficial Owner |
| Amount and Nature of Beneficial Ownership (1) |
|
| Percentage of Class Beneficially Owned 1) | ||
|
|
|
|
|
| ||
Directors and Executive Officers |
|
|
|
|
| ||
|
|
|
|
|
| ||
Punit Dhillon 5910 Pacific Center Blvd, Suite 320 San Diego, CA 92121 |
|
| 3,112,500 | (2) |
| 1.2 | % |
|
|
|
|
|
|
| |
James L. Heppell 5910 Pacific Center Blvd, Suite 320 San Diego, CA 92121 |
|
| 1,025,000 | (3) |
| ** | |
|
|
|
|
|
|
| |
Dr. Margaret Dalesandro 5910 Pacific Center Blvd, Suite 320 San Diego, CA 92121 |
|
| 81,250 | (4) |
| ** | |
|
|
|
|
|
|
| |
Richard Janney 5910 Pacific Center Blvd, Suite 320 San Diego, CA 92121 |
| — |
|
| ---- | % | |
|
|
|
|
|
|
| |
All Officers and Directors as a Group |
| 4,218,750 |
|
| 1.6 | % | |
|
|
|
|
|
|
| |
5% Stockholders |
|
|
|
|
|
| |
|
|
|
|
|
|
| |
Emerald Health Sciences Inc. Office 8262, The Landing 200 – 375 Water Street Vancouver, BC, Canada V6B 0M9 |
|
| 124,005,759 | (5) |
| 45.1 | % |
|
|
|
|
|
|
| |
Armistice Capital, LLC 510 Madison Avenue, 7th Floor New York, NY 10022 |
|
| 136,320,841 | (6) |
| 35.6 | % |
|
|
|
|
|
|
|
|
Sabby Volatility Warrant Master Fund Ltd c/o Sabby Management LLC 10 Mountainview Road, Suite 205 Upper Saddle River, NJ 07458 |
|
| 33,369,879 | (7) |
| 12.0 | % |
(1) | Beneficial ownership is determined in accordance with Rule 13d-3 under the Exchange Act. A person is deemed to be the beneficial owner of | ||
(2) | Includes (i) |
(3) | Includes |
(4) | Includes 81,250 shares of |
(5) | Includes (i) 111,387,251 shares of |
(6) | Includes 121,133,334 shares issuable on exercise of | |
(7) | Includes 17,000,000 shares issuable upon exercise of warrants. Such warrants are subject to |
Summary Compensation Table
The following table sets forth information concerning the compensation earned for services rendered to the Company for the fiscal years ended December 31, 20152019 and 20142018 of our named executive officers as determined in accordance with SEC rules
SUMMARY COMPENSATION TABLE | |||||||||
Name and Principal Position | Year Ended | Salary $ | Bonus $ | Stock Awards $ (1) | Option Awards $ (1) | Non-Equity Incentive Plan Compensation $ | Nonqualified Deferred Compensation Earnings $ | All Other Compensation $ | Total $ |
Dr. Brian S. Murphy, CEO/CMO | 2015 | 330,000 | 0 | 281,250 | 0 | 0 | 0 | 0 | 611,250 |
2014 | 63,462 | 0 | 0 | 588,150 | 0 | 0 | 0 | 651,612 | |
Elizabeth M. Berecz, CFO | 2015 | 225,000 | 0 | 262,500 | 0 | 0 | 0 | 0 | 487,500 |
2014 | 51,923 | 0 | 0 | 432,500 | 0 | 0 | 0 | 484,423 | |
Cosmas N. Lykos, Chairman | 2015 | 0 | 0 | 243,750 | 0 | 0 | 0 | 120,000(3) | 363,750 |
2014 | 0 | 0 | 0 | 341,250 | 0 | 0 | 20,000 (3) | 361,250 | |
John B. Hollister, former CEO (2) | 2015 | 268,062 | 0 | 0 | 0 | 0 | 0 | 0 | 268,062 |
2014 | 76,154 | 0 | 0 | 656,400 | 0 | 0 | 0 | 732,554 |
SUMMARY COMPENSATION TABLE | ||||||||||||||||||||||||||||||||||
Name and Principal Position |
| Year |
| Salary ($) |
|
| Bonus ($) |
|
| Stock Awards ($) (1) |
|
| Option Awards ($) (1) |
|
| Non-Equity Incentive Plan Compensation ($) |
|
| Nonqualified Deferred Compensation Earnings ($) |
|
| All Other Compensation ($) |
|
| Total ($) |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Dr. Brian S. Murphy, |
| 2019 |
|
| 390,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 390,000 |
|
CEO/CMO |
| 2018 |
|
| 390,000 |
|
|
| - |
|
|
| 171,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 561,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elena Traistaru, |
| 2019 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
CFO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Dennis Kim, |
| 2019 |
|
| 119,812 |
|
|
| - |
|
|
| - |
|
|
| 164,985 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 284,797 |
|
CMO |
| 2018 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elizabeth M. Berecz, |
| 2019 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Former CFO (3) |
| 2018 |
|
| 246,795 |
|
|
| - |
|
|
| 133,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 19,277 |
|
|
| 399,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Avtar Dhillon, |
| 2019 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 117,890 |
|
|
| 117,890 |
|
Former Executive Chairman (4) |
| 2018 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 225,000 |
|
|
| - |
|
|
| - |
|
|
| 67,885 |
|
|
| 292,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cosmas N. Lykos, Former |
| 2019 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Chairman (2)(5) |
| 2018 |
|
| - |
|
|
| - |
|
|
| 171,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 220,000 |
|
|
| 391,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas Cesario, Former |
| 2019 |
|
| 250,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 250,000 |
|
CFO (6) |
| 2018 |
|
| 174,038 |
|
|
| - |
|
|
| 169,884 |
|
|
| 200,772 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 544,694 |
|
_________
(1) | Amounts reflect the full grant date fair value of restricted stock awards and stock options, computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual. |
(2) |
In June 2014, our subsidiary entered into an independent contractor agreement with K2C, Inc. (“K2C”), which is wholly owned by Mr. Lykos, pursuant to which | ||
(3) | Ms. Berecz separated from the Company, effective May 25, 2018, pursuant to a Separation Agreement and Release between the Company and Ms. Berecz. | |
(4) | Dr. Dhillon resigned as Chairman and member of the Board of Directors of the Company, effective December 17, 2019. For the year 2018, option awards granted to Dr. Dhillon represent compensation for services rendered as a member of our Board and other compensation includes $45,000 earned under the Independent Contractor Agreement (defined below) and $22,885 in fees earned for services rendered as a member of our Board. See “Director Compensation” below. For the year 2019, other compensation represents fees earned for services rendered as a member of our Board of Directors. | |
(5) | Mr. Lykos resigned from the Board, effective January 18, 2018, in connection with the consummation of the investment in the Company by Emerald Health Sciences. | |
(6) | Mr. Cesario separated from the Company, effective May 15, 2020, pursuant to a Separation and Release Agreement between the Company and Mr. Cesario. |
18 |
Table of Contents |
Employment and Severance Arrangements
Employment Agreements
In August 2019, we entered into a letter agreement with Dr. Dennis Kim, our Chief Medical Officer. The agreement provides for an annual base salary of $330,000 per year and an annual discretionary bonus target of up to 35% of annual salary. Pursuant to the agreement, Dr. Kim is entitled to receive the normal benefits available to other similarly situated executives and will be entitled to severance pay under circumstances. Dr. Kim’s employment with the Company is at-will. Except for termination of Dr. Kim’s employment for “Cause,” by death or by “Disability” (as such terms are defined in the agreement), Dr. Kim will be entitled to payment of an amount equal to six months of his then-current base salary for the first full year of continuous employment with the Company or twelve months after the first full year. Dr. Kim may take on advisory and consulting roles for up to 20% of his time so long as such roles do not haveconflict with the performance of his duties and responsibilities with the Company.
Pursuant to Dr. Kim’s agreement, Dr. Kim was granted a one-time sign-on award of options to purchase an aggregate of 736,541 shares of common stock of the Company pursuant to the Plan. Subject to continued employment with the Company, the stock options vest 25% 90 days after his employment commenced and the remaining 75% vests 1/33rd on each of the next 33 months thereafter. Dr. Kim resigned from his position as the Chief Medical Officer of the Company effective November 6, 2020 due to personal reasons.
The foregoing description of the employment agreements with anydoes not purport to be complete and is qualified in its entirety by reference to the full text of our executive officers.
Severance Arrangements
In February 2015, we adopted a change in control severance plan, in which our named executive officers participate, that provides for the payment of severance benefits if the executive’s service is terminated within twelve months following a change in control, either due to a termination without cause or upon a resignation for good reason (as each term is defined in the plan).
In either such event, and provided the executive timely executes and does not revoke a general release of claims against the Company, he or she will be entitled to receive: (i) a lump sum cash payment equal to at least six months'months’ of the executive'sexecutive’s monthly compensation, plus an additional month for each full year of service over six years, (ii) Company-paid premiums for continued health insurance for a period equal to length of the cash severance period or, if earlier, when executive becomes covered under a subsequent employer'semployer’s healthcare plan, and (iii) full vesting of all then-outstanding unvested stock options and restricted stock awards.
In January 2018, we entered into a restricted stock agreement (the “Restricted Stock Agreements”) with each of Dr. Murphy, Elizabeth Berecz and Cosmas N. Lykos granting 900,000, 700,000 and 900,000 shares of restricted Common Stock, respectively. Each Restricted Stock Agreement provides that if the executive’s employment or service is terminated by us without cause, or is terminated by the grantee for good reason, then the executive shall be entitled to receive a cash severance payment equal to six months of their base compensation, payable in substantially equal installments during the six-month period following the termination date.
19 |
Table of Contents |
In April 2020, the Company entered into a separation and release agreement with Douglas Cesario, our former Chief Financial Officer. Mr. Cesario’s separation was effective May 15, 2020. Pursuant to the agreement, Mr. Cesario agreed to certain ongoing cooperation obligations and to provide certain releases and waivers as contained in the agreement. As consideration under the agreement, the Company agreed to provide Mr. Cesario compensation and benefits as follows: (i) through May 15, 2020, an annualized base salary at the rate in effect for him as of the date of the agreement; (ii) a gross payment of $125,000 in consideration for the restrictive covenants contained in the agreement; and (iii) a continuation of health insurance benefits for a period of six months following May 15, 2020. In addition, the restricted325,929 unvested stock awardsoptions granted to Dr. MurphyMr. Cesario were cancelled on May 15, 2020.
The foregoing descriptions of the separation agreements do not purport to be complete and Ms. Bereczare qualified in October 2015their entirety by reference to the full text of such separation agreements attached hereto as exhibits and incorporated by reference herein.
Deferred Compensation
Effective March 23, 2020, the Company approved a plan to defer up to 50% of the members of senior management’s compensation indefinitely. Certain members of senior management have accepted the plan and the aggregate deferred compensation, together with a retention bonus of 10% of the amount being deferred will vest in full on a change in control (as defined in our 2014 Omnibus Incentive Plan).
Outstanding Equity Awards at Fiscal Year-end.
As of December 31, 2015, the2019, our named executive officers held the following outstanding Company equity awards.
|
|
| Option Awards |
| Stock Awards |
| |||||||||||||||||||
Name |
|
| Grant Date |
| Number of Securities Underlying Unexercised Options (#) Exercisable |
|
| Number of Securities Underlying Unexercised Options (#) Unexercisable |
|
| Option Exercise Price |
|
| Option Expiration Date |
| Number of Shares of Stock Not Vested (#) |
|
| Market Value of Shares Not Vested ($) (2) |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Dr. Brian S. Murphy, (1) |
|
| 10/31/2014 |
|
| 480,000 |
|
|
| - |
|
| $ | 0.42 |
|
| 10/31/2024 |
|
|
|
|
|
| ||
CEO/CMO (1) |
|
| 11/21/2014 |
|
| 175,000 |
|
|
| - |
|
| $ | 0.42 |
|
| 11/21/2024 |
|
|
|
|
|
| ||
(7) |
| 1/1/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 450,000 |
|
|
| 58,725 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Doug Cesario, Former CFO (3)(5) |
|
| 5/25/2018 |
|
| 787,662 |
|
|
| 407,411 |
|
| $ | 0.245 |
|
| 5/25/2028 |
|
|
|
|
|
|
|
|
(4) |
| 5/25/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 643,501 |
|
|
| 83,977 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Dennis Kim, Former CMO (8) |
|
| 8/21/2019 |
|
| 217,614 |
|
|
| 518,927 |
|
| $ | 0.300 |
|
| 8/21/2029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Avtar Dhillon, Former Executive Chairman (6) |
|
| 10/10/2018 |
|
| 1,000,000 |
|
|
| - |
|
| $ | 0.305 |
|
| 10/10/2028 |
|
|
|
|
|
|
|
|
___________
(1) | The options specified above vest as follows: 20% of total vests on each anniversary of the grant date over five years, subject to the grantee’s continued service. The options granted expire 10 years after the date of grant. |
20 |
Table of Contents |
(2) | The market value of shares that have not vested is calculated based on the per share closing price of our common stock on December 31, 2019. |
(3) | The options specified above vest as follows: 25% of total vests on the grant date and 1/33 each month thereafter on the anniversary of the grant date. |
(4) | The restricted stock vests in full on the two-year anniversary of the grant date, subject to the grantee’s continued service. |
(5) | Mr. Cesario separated from the Company, effective May 15, 2020, pursuant to a Separation and Release Agreement between the Company and Mr. Cesario. On the date of separation, 325,929 unvested stock options were cancelled. |
(6) | The options specified above vest in twelve equal monthly installments following the grant date. |
(7) | The restricted stock vests 1/2 each year on the anniversary of the grant date and is subject to acceleration upon termination. |
(8) | The options specified above vest as follows: 25% of the total vests 90 days after his employment commenced and the remaining 75% vests 1/33rd on each of the next 33 months thereafter. |
Non-Equity Incentive Plan Awards
In May 2018, in connection with the appointment of Mr. Hollister terminated services in August 2015Cesario, our former Chief Financial Officer, and aspursuant to the terms of December 31, 2015 did not hold any outstandingthe Executive Employment Agreement between the Company equity awards.
Option Awards | Stock Awards | ||||||
Name | Grant Date (1) | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Un-exercisable | Option Exercise Price | Option Expiration Date | Number of Shares of Stock Not Vested (#) (2) | Market Value of Shares Not Vested ($) (3) |
Dr. Brian S. Murphy, CEO/MO | 10/31/2014 | 96,000 | 384,000 | $0.42 | 10/31/2024 | ||
11/21/2014 | 35,000 | 140,000 | $0.42 | 11/21/2024 | |||
10/20/2015 | 375,000 | 262,500 | |||||
Elizabeth M. Berecz CFO | 10/31/2014 | 20,000 | 80,000 | $0.42 | 10/31/2024 | ||
11/21/2014 | 30,000 | 120,000 | $0.42 | 11/21/2024 | |||
10/20/2015 | 350,000 | 245,000 | |||||
Cosmas N. Lykos, Chairman | 11/21/2014 | 68,250 | 273,000 | $0.42 | 11/21/2024 | ||
10/20/2015 | 325,000 | 243,750 |
Exercises of our common stock on December 31, 2015.
There were no exercises of stock options by our named executive officers during the year ended December 31, 2015.
Director Compensation.
On October 10, 2018, the Company amended its policy for the compensation of its non-employee directors as follows:
• | Each non-employee director will receive a cash retainer of $40,000 on an annual basis, and the executive chair of the Board, if a non-employee director, will receive an additional $40,000 retainer annually. | |
• | Upon election to the Board, non-employee directors will receive a one-time award of 200,000 stock options which will vest in twelve equal monthly installments. In subsequent annual periods, each non-employee director will receive a grant of 100,000 common stock options which will vest in twelve equal monthly installments. |
21 |
Table of Contents |
Non-employee directors who serve as members of special committees of the Board will receive additional compensation as follows:
• | Audit Committee: $5,000 per year ($20,000 for the chair) | |
• | Compensation Committee: $2,500 per year ($10,000 for the chair) | |
• | Nominating and Corporate Governance Committee: $1,000 per year ($5,000 for the chair) | |
• | Finance and Business Development Special Committee: $40,000 per year for the chair (no compensation for other members) |
Our directors received the following compensation for their service as directors of the Company during the fiscal year ended December 31, 2015. Our directors generally received an annual cash retainer equal to $20,000. In addition, we grant stock options and restricted stock awards.
DIRECTOR COMPENSATION(1) | |||||||
Name | Fees Earned or Paid in Cash | Stock Awards $ (2) (4) | Option Awards $ (3) (4) | Non-Equity Incentive Plan Compensation $ | Non-Qualified Deferred Compensation Earnings $ | All Other Compensation $ | Total $ |
Douglas S. Ingram, director | 20,000 | 45,000 | 85,200 | 0 | 0 | 0 | 150,200 |
Gerald W. McLaughlin, director | 20,000 | 22,500 | 0 | 0 | 0 | 0 | 42,500 |
Thomas A. George | 20,000 | 45,000 | 243,200 | 0 | 0 | 0 | 308,200 |
DIRECTOR COMPENSATION (1) | ||||||||||||||||||||||||||||
Name |
| Fees Earned or Paid in Cash |
|
| Stock Awards $ (2) |
|
| Option Awards $ (2) |
|
| Non-Equity Incentive Plan Compensation $ |
|
| Non-Qualified Deferred Compensation Earnings $ |
|
| All Other Compensation $ |
|
| Total $ |
| |||||||
Punit Dhillon |
|
| 65,005 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 65,005 |
|
Jim Heppell |
|
| 60,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 60,000 |
|
Avtar Dhillon |
|
| 117,890 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 117,890 |
|
____________
(1) | Does not include compensation received for services provided as executive officers. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(2) | Each non-employee director is entitled to an annual grant of 100,000 common stock options that vest in twelve equal monthly installments. However, no option grants were approved by
Deferred Compensation Effective March 30, 2020, the
make such payments. Securities Authorized for Issuance under Equity Compensation The table below includes the following information as of December 31,
prospectus.
____________
Changes in Our management is not aware of any arrangements which may result in “changes in control” as that term is defined by the provisions of Item 403(c) of Regulation S-K.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE Transactions with Related Persons Except as specified below, there have been no other transactions with related persons K2C In June 2014, our subsidiary In January 19, 2018, we entered into a Restricted Stock Agreement with K2C granting 900,000 Restricted Stock to K2C. In February 28, 2018, we entered into a separation and release agreement with K2C, which provided for a lump sum payment of $180,000 and the immediate vesting of 900,000 shares of restricted common stock granted pursuant to the Restricted Stock Agreement, 325,000 shares of restricted common stock granted on October 20, 2015, 125,000 options granted on November 21, 2014, in exchange for a release of claims and certain other agreements. In addition, K2C also holds 1,110,000 shares of fully vested common stock pursuant to the common stock purchase warrant agreement dated June 20, 2013. Elizabeth Berecz In April 2018, we entered into a Separation Agreement and Release with Elizabeth Berecz, our former Chief Financial Officer. Pursuant to the agreement, we agreed to provide Ms. Berecz compensation and benefits as follows: (i) through May 25, 2018, Ms. Berecz’s separation date, an annualized base salary at the rate in effect as of the date of the separation agreement; (ii) a lump sum gross payment of $145,833, in consideration for the restrictive covenants contained in the separation agreement; and (iii) reimbursement for payments made by Ms. Berecz for COBRA coverage for a period of six (6) months following her separation date. In addition, the terms of the separation agreement provided for the immediate vesting of 700,000 shares of restricted common stock granted pursuant to Ms. Berecz’s Restricted Stock Agreement, 350,000 shares of restricted common stock granted on October 20, 2015, and 250,000 options granted in October 2014 and November 2014. Emerald Health Sciences On December 28, 2017, we entered into a Secured Promissory Note and Security Agreement for a convertible loan (the “Convertible Promissory Note”) with Emerald Health Sciences. The Convertible Promissory Note provided for aggregate gross proceeds to the Company of up to $900,000 and was secured by all of the Company’s assets. On January 19, 2018, $900,000 funded under the Convertible Promissory Note converted into 9,000,000 shares of our common stock and the Convertible Promissory Note was terminated. Simultaneously, we entered into a Securities Purchase Agreement (the “Emerald Health Sciences Financing”) in which we sold to Emerald Health Sciences 15,000,000 shares of common stock and a warrant to purchase 20,400,000 shares of common stock at an exercise price of $0.10 for aggregate gross proceeds of $1,500,000. The second closing under the Emerald Health Sciences Financing occurred on February 16, 2018, pursuant to which we issued and sold to Emerald Health Sciences 15,000,000 shares of our Common Stock, and a warrant to purchase 20,400,000 shares of Common Stock at an exercise price of $0.10 per share for a term of five years, for aggregate gross proceeds of $1,500,000. On February 1, 2018, we entered into an Independent Contractor Agreement (the “Independent Contractor Agreement”) with Emerald Health Sciences, pursuant to which Emerald Health Sciences agreed to provide such services as are mutually agreed between the Company and Emerald Health Sciences, including reimbursements for reasonable expenses incurred in the performance of the Independent Contractor Agreement. These services may include, but are not limited to, corporate advisory services and technical expertise in the areas of business development, marketing, investor relations, information technology and product development. The Independent Contractor Agreement has an initial term of ten years and specifies compensation which is agreed upon between the Company’s chief executive officer and
On February 6, 2018, the Company entered into a Consulting Agreement with Dr. Avtar Dhillon, the Chairman, Chief Executive Officer and President of Emerald Health Sciences. The services under the Consulting Agreement included, corporate finance and strategic business advisory. The Consulting Agreement had an initial term of one year and was renewable automatically unless terminated by either party. The agreement specified an annual fee of $60,000 payable semi-monthly in installments and included reimbursement for reasonable expenses incurred in the performance of the services. The contractor was also entitled to a discretionary annual bonus, payable 120 days after each fiscal year end, to be determined by the Board upon its annual review. Under this agreement, we incurred expenses in the amount of $45,000 during the fiscal year ended December 31, On October 5, 2018, the Company entered into the Credit Agreement with Emerald Health Sciences. The Credit Agreement provides for a credit facility to the Company of up to $20,000,000 and is unsecured. Advances under the Credit Agreement bear interest at an annual rate of 7% (payable quarterly in arrears) and mature on October 5, 2022. At Emerald Health Sciences’ election, advances and unpaid interest may be converted into Common Stock at a fixed conversion price of $0.30, subject to customary adjustments for stock splits, stock dividends, recapitalizations, etc. In connection with each advance under the Credit Agreement, the Company has agreed to issue Emerald Health Sciences warrants to purchase shares of common stock in an amount equal to 50% of the number of shares of common stock that each advance may be converted into. The warrants have an exercise price of $0.50 per share, a term of five years and will be immediately exercisable upon issuance. The exercise price is subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events or upon any distributions of assets, including cash, stock or other property to the Company’s shareholders. On November 1, 2018, the Company effected an initial draw under the Credit Agreement in the amount of $2,000,000 and issued Emerald Health Sciences a warrant to purchase 2,500,000 shares of common stock at an exercise price of $0.50 per share, in accordance with the terms of the Credit Agreement. On February 1, 2019, the Company effected the second draw under the Credit Agreement in the amount of $2,000,000 and issued Emerald Health Sciences a warrant to purchase 2,500,000 shares of common stock at an exercise price of $0.50 per share, in accordance with the terms of the Credit Agreement. On March 29, 2019, the Company effected the third draw under the Credit Agreement in the amount of $2,000,000 and issued Emerald Health Sciences a warrant to purchase 2,500,000 shares of common stock at an exercise price of $0.50 per share, in accordance with the terms of the Credit Agreement. On December 20, 2019, the Company entered into a Warrant Exchange Agreement, pursuant to which Emerald Health Sciences has exercised 40.80 million of such warrants and paid the aggregate exercise price of approximately $4.08 million for the related warrant shares in the form of a reduction of the corresponding amount of obligations outstanding under the Credit Agreement. Upon consummation of the transaction under the Warrant Exchange Agreement, the total outstanding principal amount excluding discounts under the Credit Agreement was $2,014,500. We have the ability to continue borrowing under this Credit Agreement, however there is no guarantee of continued funding. A portion of the proceeds raised in this offering may be used to pay, in whole or in part, the principal and accrued interest on our Credit Agreement. See “Use of Proceeds.” The net proceeds of each advance shall be used for general corporate purposes and are subject to approval by the Company’s Board, which is controlled by the directors and principal executive officer of Emerald Health Sciences. On December 19, 2019, the Company entered into an Independent Contractor Services Agreement with Dr. Avtar Dhillon, pursuant to which Dr. Dhillon will provide ongoing corporate finance and strategic business advisory services to the Company. In exchange for his services, Dr. Dhillon will receive a monthly fee of $10,000, with (i) $5,000 paid each month and (ii) $5,000 accruing from the effective date and payable upon Company’s completion of a material financing. The Board will review the monthly rate paid to Dr. Dhillon within 90 days of the end of each fiscal year. The Independent Contractor Services Agreement has an initial term of one year
On December Douglas Cesario In April 2020, the Company entered into a separation and release agreement with Douglas Cesario, our former Chief Financial Officer. Mr. Cesario’s separation was the agreement; (ii) a gross payment of $125,000 in consideration for the restrictive covenants contained in the agreement; and (iii) a continuation of health insurance benefits for a period of six months following May 15, 2020. In addition, 325,929 unvested stock options granted to Mr. Cesario were cancelled on May 15, 2020. Review, Approval and Ratification of Related Party Transactions Given our small size and limited financial resources, we have not adopted formal policies and procedures for the review, approval or ratification of transactions, such as those described above, with our executive officers, We intend to establish formal policies and procedures in the future, once we have sufficient resources and have appointed additional Conflicts Related to Other Business Activities The persons serving as our officers and directors have existing responsibilities and, in the future, may have additional responsibilities, to provide management and services to other entities in addition to us. As a result, conflicts of interest between us and the other activities of those persons may occur from time to time. We will attempt to resolve any such conflicts of interest in our favor. Our officers and directors are accountable to us and our shareholders as fiduciaries, which requires that such officers and directors exercise good faith and integrity in handling our affairs. A shareholder may be able to institute legal action on our behalf or on behalf of that shareholder and all other similarly situated shareholders to recover damages or for other relief in cases of the resolution of conflicts in any manner prejudicial to us. Director We Insider Trading Policy On October 31, 2014, our Board
Proposals of stockholders intended to be presented at our annual meeting of stockholders to be held in Recommendations from stockholders which are received after the deadline likely will not be considered timely for
The The Company does not intend to bring any other matters before the Annual Meeting and has no reason to believe any other matters will be presented. If any other matters properly come before the Annual Meeting, it is the intention of the persons named in the proxy card to vote the common stock they represent as the Board may recommend. Discretionary authority with respect to such other matters is granted by the execution of the proxy, whether through telephonic or internet voting or, alternatively, by using a paper copy of the proxy card that has been requested. It is important that your shares be represented at the Annual Meeting, regardless of the number of shares that you hold. You are, therefore, urged to vote by telephone or by using the internet as instructed on the proxy card or, if so requested, by executing and returning, at your earliest convenience, the requested proxy card in the envelope that will have been provided. THE BOARD OF DIRECTORS San Diego, California December 22, 2020
AMENDED AND RESTATED ARTICLES OF INCORPORATION OF EMERALD BIOSCIENCE, INC. ARTICLE I The name of the corporation is Emerald Bioscience, Inc. (the “Corporation”). ARTICLE II The Corporation may, from time to time, in the manner provided by law, change the registered agent and registered office within the State of Nevada. The Corporation may also maintain an office or offices for ARTICLE III The Corporation is formed for the purpose of engaging in any lawful activity for which corporations may be organized under the laws of the State of Nevada.
ARTICLE IV Section 1. Authorized Capital Stock. The Corporation shall have the authority to issue an aggregate of five billion fifty million (5,050,000,000) shares of capital stock, par value $0.001 per share, consisting of (a) five billion (5,000,000,000) shares of Common Stock, par value $0.001 per share (the “Common Stock”), and (c) fifty million (50,000,000) shares of preferred stock, par value $0.001 per share (the “Preferred Stock”). Common Stock and Preferred Stock may be issued from time to time by the Corporation for such consideration as shall be determined by the board of directors (the “Board”) of the Corporation. The capital stock of the Corporation, after the consideration therefor has been fully paid, shall not be assessable for any purpose, and no stock issued as fully paid shall ever be assessable or assessed, and these Amended and Restated Articles of Incorporation (as the same may be further amended from time to time, the “Articles of Incorporation”) shall not be amended in this particular. No stockholder of the Corporation shall be individually liable for the debts or liabilities of the Corporation. Except as otherwise provided in the Articles of Incorporation, including any certificate of designation relating to any series of Preferred Stock, the Articles of Incorporation may be amended, in accordance with the Nevada Revised Statutes (as amended from time to time, “NRS”), to increase or decrease the number of authorized shares of Common Stock or Preferred Stock (but no such decrease shall reduce the number of authorized shares of any class or series of the Corporation’s capital stock below the number of shares of such class or series then outstanding) with the approval of a majority of the voting power of the outstanding capital stock of the Corporation entitled to vote thereon, voting together as a single class, and without any separate vote by the holders of any class or series of the Corporation’s capital stock (as long as such action is not adverse to the Section 2. Preferred Stock. The Board of the
Section 3. Common Stock. No holder of Common Stock shall have the right to cumulate votes. The holders of Common Stock shall not have any conversion, redemption or preemptive rights. Except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to the Articles of Incorporation, including any certificate of designation relating to any series of Preferred Stock, that affects only the terms of one or more outstanding series of Preferred Stock if the holders of the affected series of Preferred Stock are entitled, either separately or together with the holders of one or more other such series, to vote on such amendment pursuant to the Articles of Incorporation, including any certificate of designation relating to any series of Preferred Stock, or pursuant to the NRS. (a) Voting Rights. (1) Common Stock. Subject to the voting rights of any outstanding series of Preferred Stock, each share of Common Stock shall entitle the record holder thereof to one (1) vote per share, on all matters on which stockholders shall have the right to vote. (b) Distributions. (1) Subject to the rights of the holders of any outstanding series of Preferred Stock, holders of Common Stock shall be entitled to such dividends, if any, as may be declared thereon by the Board from time to time in its sole discretion out of assets or funds of the Corporation legally available therefor; provided that (A) the holders of Common Stock shall have such distribution rights set forth in clause (2) below; (B) if any distribution is declared on the Common Stock that is payable in shares of Common Stock, or securities convertible into, or exercisable or exchangeable for Common Stock, such distribution shall be paid in the same number of shares (or fraction thereof) on a per-share basis of the Common Stock (or securities convertible into, or exercisable or exchangeable for the same number of shares (or fraction thereof) on a per-share basis of the Common Stock; and
(C) in the case of any other distribution (including, without limitation, any distribution pursuant to a stock dividend or a “spinoff,” “split-off” or “split-up” reorganization or similar transaction) payable in shares or other equity interests of any corporation or other entity which (2) Any distribution declared by the Board on a share of Common Stock shall be declared in equal amounts with respect to each share of Common Stock (as determined in good faith by the Board in its sole discretion), provided that in the case of distributions payable in shares of Common Stock, or securities convertible into, or exercisable or exchangeable for, Common Stock, and (d) Merger, Conversion or Exchange. In the event of any merger, conversion or exchange of the Corporation with or into another entity (whether or not the Corporation is the surviving entity), the holders of the Common Stock shall be entitled to (e) Rights Upon Dissolution, Liquidation or Winding-Up. In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, after distribution in full of the amounts to
ARTICLE V Section 1. Board; Number of Directors. The business and affairs of the Corporation shall be managed by or under the direction of the Board. Except as otherwise fixed or provided for pursuant to the provisions of the Articles of Incorporation, including any certificate of designation relating to any series of Preferred Stock, the Total Number of Directors Section 2. Vacancies. Subject to the rights granted to the holders of any one or more series of Preferred Stock then outstanding, any newly-created directorship that results from an Section 3. Removal. Any or all of the directors (other than the directors elected by the holders of any series of Preferred Stock of the Corporation, voting separately as a series or together with one or more other such series, as the case may be) may be removed from office by the vote of stockholders representing not less than two-thirds of the voting power of the outstanding capital stock of the Corporation entitled to vote thereon, voting as a single class. Section 4. Directors Elected by Holders of Preferred Stock. For the duration of any period during which the holders of any series of Preferred Stock have the right to elect any of the directors: (i) the then otherwise Total Number of Directors shall be automatically increased by such specified number of directors, and the holders of such series of Preferred Stock shall be entitled to elect the directors so fixed or provided for pursuant to the terms of such series, (ii) each director so elected by such holders shall serve until such director’s successor shall have been duly elected and qualified, or until such director’s right to hold such office terminates pursuant to such provisions, whichever occurs earlier, subject to his or her earlier death, disability, resignation, retirement, disqualification or removal, and (iii) removal of any such director shall require only the vote of the holders representing not less than two-thirds of the voting power of the outstanding shares of such series of Preferred Stock. Except as otherwise provided in the certificate of designation relating to such series of Preferred Stock, whenever the holders of any series of Preferred Stock having the right to elect additional directors are divested of such right pursuant to the provisions of the certificate of designation relating to such series, the terms of office of all directors so elected by the holders of such series pursuant to such right, or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of any such director, shall forthwith terminate, the Total Number of Directors shall be reduced accordingly, and pursuant to the NRS, such termination shall not constitute a removal of such director pursuant to the NRS or under the Articles of Incorporation or Bylaws.
ARTICLE VI Section 1. Annual Meetings of Stockholders. An annual meeting of stockholders for the Section 2. Special Meetings of Stockholders. Except as otherwise required by law and subject to the rights of the holders of any series of Preferred Stock, special meetings of the stockholders of the Corporation for any purpose(s) may be called at any time only by or at the direction of (a) the Board, (b) the chairman of the Board or (c) two or more directors of the Board. Section 3. Stockholder Action by Written Consent. Any action required or permitted to be
ARTICLE VII Section 1. Purposes. The provisions of this Article are set forth (a) to regulate and define (i) the conduct of certain affairs of the Corporation with respect to certain classes or categories of business opportunities as may involve any of the members of the Section 2. Renunciation of Certain Corporate Opportunities. To the fullest extent permitted by law, none of the Non-Employee Directors and their respective Affiliates (collectively, the “Identified Persons”) shall have any duty to refrain from directly or indirectly (a) engaging in the same or similar business activities or lines of business in which the Corporation or any of its Affiliates now engages or proposes to engage or (b) otherwise competing with the Corporation or any of its Affiliates, and, to the fullest extent permitted by law, no Identified Person shall be liable to the Corporation or its stockholders or to any Affiliate of the Corporation for breach of any fiduciary duty solely by reason of the fact that such Identified Person engages in any of such activities. To the fullest extent permitted by law, the Corporation hereby renounces any interest or expectancy in, and the right to be offered an opportunity to participate in, any business opportunity which may be a corporate opportunity for an Identified Person and the Corporation or any of its Affiliates, except as provided in Section 3 of this Article. Subject to Section 3 of this Article, in the event that any Identified Person acquires knowledge of a potential transaction or business opportunity which may be a corporate opportunity for such Identified Person and for the Corporation or any of its Affiliates, such Identified Person, to the fullest extent permitted by law, shall have no duty to communicate or offer such transaction or business opportunity to the Corporation or any of its Affiliates and, to the fullest extent permitted by law, shall not be liable to the Corporation or its stockholders or to any Affiliate of the Corporation for breach of any fiduciary duty as a stockholder, director or officer of the Corporation solely by reason of the fact that such Identified Person pursues or acquires such corporate opportunity for such Identified Person, or offers or directs such corporate opportunity to another Person. Section 3. Limitations. The Corporation does not renounce its interest in, and Section 2 of this Article shall not apply to, any corporate opportunity offered to any Non-Employee Director if such opportunity is expressly offered to such individual solely in his or her capacity as a director of the Corporation. In addition to and notwithstanding the foregoing provisions of this Article, a transaction or business opportunity shall not be deemed to be a “corporate opportunity” for the Corporation if it is a transaction or opportunity that (a) the Corporation is neither financially or legally able, nor contractually permitted, to undertake; (b) by its nature, is not in the line of the Corporation’s business or is of no practical advantage to the Corporation; or (c) is one in which the Corporation has no interest or reasonable expectancy.
ARTICLE VIII Section 1. Amendments to Articles of Incorporation. Except as limited by the provisions of Article IV, Section 1, the Corporation reserves the right to amend, alter, change or repeal any provision contained in the Articles of Incorporation, in the manner now or hereafter prescribed by the NRS. Section 2. Amendments to Bylaws. The Board of the Corporation is expressly authorized to make, repeal, alter, amend and rescind, in whole or in part, the Bylaws without the assent or vote of the stockholders in any manner not inconsistent with the NRS or these Articles of Incorporation. ARTICLE IX Section 1. Inapplicability of Combinations with Interested Stockholders Statutes. At such time, if any, as the Corporation becomes a “resident domestic corporation” (as that term is defined in NRS), the Corporation shall not be subject to, or governed by, any of the provisions in NRS 78.411 to 78.444, inclusive, as amended from time to time, or any successor statutes. Section 2. Inapplicability of Acquisition of Controlling Interest Statutes. In accordance with the provisions of NRS 78.378, the provisions of NRS 78.378 to 78.3793, inclusive, as amended from time to time, or any successor statutes, relating to acquisitions of controlling interests in the Corporation, shall not apply to the Corporation or to any acquisition of any shares of the Corporation’s capital stock.
ARTICLE X Section 1. Indemnification; Payment of Expenses. To the fullest extent permitted under the NRS and other applicable law, the Corporation shall indemnify directors and officers of the Corporation in their respective capacities as such and in any and all other capacities in which any of them serves at the request of the Corporation. In addition to any other rights of indemnification permitted by the laws of the State of Nevada or as may be provided for by the Corporation in the Bylaws or by agreement, the expenses of directors and officers incurred in defending a civil or criminal action, suit or proceeding, involving alleged acts or omissions of such director or officer in his or her capacity as a director or officer of the Corporation, must be paid, by the Corporation or through insurance purchased and maintained by the Corporation or through other financial arrangements made by the Corporation, as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by the Corporation. Section 2. Limitation on Liability. The liability of directors and officers of the Corporation shall be eliminated or limited to the fullest extent permitted by the NRS. If the NRS are amended to further eliminate or limit or authorize corporate action to further eliminate or limit the liability of directors or officers, the liability of directors and officers of the Corporation shall be eliminated or limited to the fullest extent permitted by the NRS, as so amended from time to time. Section 3. Amendment and Conflicts. Any repeal or modification of Section 1 or Section 2 of this Article approved by the stockholders of the Corporation shall be prospective only and shall not adversely affect any limitation on the liability of a director or officer of the Corporation existing as of the time of such repeal or modification. The provisions of this Article X relating to indemnification shall constitute a contract between the Corporation and each of its directors and officers which may be modified as to any director or officer only with that person’s consent or as specifically provided in these Articles of Incorporation and in the Bylaws. Notwithstanding any other provision of these Articles of Incorporation relating to their amendment generally, any repeal or amendment of this Article X which is adverse to any director or officer shall apply to such director or officer only on a prospective basis, and shall not limit the rights of such director or officer to indemnification with respect to any action or failure to act occurring prior to the time of such repeal or amendment. Notwithstanding any other provision of these Articles of Incorporation (including, without limitation, Article VIII), no repeal or amendment of these Articles of Incorporation shall affect any or all of this Article X so as to limit or reduce the indemnification in any manner unless adopted by (i) the unanimous vote of the directors of the Corporation then serving, and (ii) the stockholders in accordance with these Articles of Incorporation and applicable law; ARTICLE XI MISCELLANEOUS; CERTAIN DEFINED TERMS Section 1. Mandatory Forum. To the fullest extent permitted by law, and unless the Corporation consents in writing to the selection of an alternative forum, the Eighth Judicial District Court of Clark County, Nevada, shall be the sole and exclusive forum for (a) any derivative action or proceeding brought in the name or right of the Corporation or on its behalf, (b) any action asserting a claim for breach of any fiduciary duty owed by any director, officer, employee, consultant or agent of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action arising or asserting a claim arising pursuant to any provision of the NRS or any provision of the Articles of Incorporation or Bylaws, (d) any action to interpret, apply, enforce or determine the validity of the Articles of Incorporation or Bylaws or (e) any action asserting a claim governed by the internal affairs doctrine. Section 2. Severability. If any provision or provisions of these Articles of Incorporation shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever: (a) the validity, legality and enforceability of such provision(s) in any other circumstance and of the remaining provisions of these Articles of Incorporation (including, without limitation, each portion of any paragraph of the Articles of Incorporation containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of these Articles of Incorporation (including, without limitation, each such portion of any paragraph of the Articles of Incorporation containing any such provision held to be invalid, illegal or unenforceable) shall be construed (i) so as to permit the Corporation to protect its directors, officers, employees, consultants and agents from personal liability in respect of their service or (ii) for the benefit of the Corporation to the fullest extent permitted by law. Section 3. Certain Defined Terms. As used in these Articles of Incorporation, the following capitalized terms shall have the respective meanings set forth below: (a) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under the Securities Exchange Act of 1934. (b) “Person” shall mean any natural person, corporation, general or limited partnership, limited liability company, joint venture, trust, association or any other entity. (c) “Total Number of Directors” shall mean, at any time, the total number of authorized directors then comprising the entire Board of (d) “Voting Stock” shall mean, at any time, the Section 4. Deemed Notice and Consent. To the fullest extent permitted by law, each and every Person purchasing or otherwise acquiring any interest (of any nature whatsoever) in any shares of the * * * *
IN WITNESS WHEREOF, I have executed this Certificate of _________________, 2021.
|
AMENDED AND RESTATED BYLAWS
of
EMERALD BIOSCIENCE, INC.
(a Nevada corporation)
ARTICLE I
OFFICES
Section 1.1 Principal Office. The principal office and place of Contents
Section 1.2 Other Offices. Other offices and places of business either within or without the State of Nevada may be established from time to time by resolution of the Board or as Load Guard Logistics, Inc. ("LGL"), together with its wholly-owned subsidiary, Nemus, a California corporation ("Nemus")the business of the Corporation may require. The street address of the Corporation’s registered agent is the registered office of the Corporation in Nevada.
ARTICLE II
STOCKHOLDERS
Section 2.1 Annual Meeting. Nemus becameThe annual meeting of the wholly owned subsidiarystockholders of Nemus Bioscience, Inc. through the Merger (as defined below).
40 |
Table of Contents |
Section 2.2 Special Meetings.
(a) Special meetings of the stockholders may only be called in the manner provided in the Articles of Incorporation. Stockholders shall have no right to request or call a special meeting except as otherwise provided in the Articles of Incorporation. Except as otherwise restricted by the Articles of Incorporation or applicable law, the Board may postpone, reschedule or cancel any special meeting of stockholders.
(b) No business shall be acted upon at a special meeting of stockholders except as set forth in the notice of the meeting.
Section 2.3 Place of Meetings. Any meeting of the stockholders of the Corporation may be held at the Corporation’s registered office in the State of Nevada or at such other place in or out of the State of Nevada and Nemus Acquisition Sub mergedthe United States as may be designated in the notice of meeting. A waiver of notice signed by all stockholders entitled to vote thereat may designate any place for the holding of such meeting. The Board may, in its sole discretion, determine that any meeting of the stockholders shall be held using, or shall be held solely by means of, electronic communications or other available technology in accordance with Section 2.14.
Section 2.4 Notice of Meetings; Waiver of Notice.
(a) The chief executive officer, the president, any vice president, the secretary, any assistant secretary, or any other individual designated by the Board shall sign and deliver or cause to be delivered written notice of any stockholders’ meeting to the stockholders entitled to vote at such meeting (unless applicable law requires notice be given to all stockholders of record, in which case such notice shall be given in accordance with such law) not less than ten days, but not more than sixty days, before the date of such meeting. The notice shall state the place, date and time of the meeting, the means of electronic communication, if any, by which the stockholders entitled to vote or the proxies thereof shall be deemed to be present and vote and, in the case of a special meeting, the purpose or purposes for which the meeting is called. The notice shall be delivered in accordance with and into Nemus and Nemus survivedshall contain or be accompanied by such additional information as may be required by the Nevada Revised Statutes (as amended from time to time, the “NRS”).
41 |
Table of Contents |
(b) In the case of an annual meeting, subject to Section 2.13, any proper business may be presented for action, except that (i) if a wholly-owned subsidiaryproposed plan of LGL (the "Merger"). Immediately aftermerger, conversion or exchange is submitted to a vote, the Merger, LGL changed its name to "Nemus Bioscience, Inc." by merging with Name Change Merger Sub. At the closingnotice of the Mergermeeting must state that the purpose, or one of the purposes, of the meeting is to consider the plan of merger, conversion or exchange and must contain or be accompanied by a copy or summary of the plan; and (ii) if a proposed action creating dissenter’s rights is to be submitted to a vote, the notice of the meeting must state that the stockholders are or may be entitled to assert dissenter’s rights under NRS 92A.300 to 92A.500, inclusive, and be accompanied by a copy of those sections.
(c) A copy of the notice of any meeting of stockholders shall be personally delivered, mailed postage prepaid to each stockholder of record entitled to vote at such meeting (unless applicable law requires notice be given to all stockholders of record, in which case such notice shall be given in accordance with such law), at the address appearing on the records of the Corporation or as otherwise allowed under the NRS. Upon mailing, service of the notice is complete, and the time of the notice begins to run from the date upon which the notice is deposited in the mail or otherwise delivered. If the address of any stockholder does not appear upon the records of the Corporation or is incomplete, it will be sufficient to address any notice to such stockholder at the registered office of the Corporation. Notwithstanding the foregoing and in addition thereto, any notice to stockholders given by the Corporation pursuant to Chapters 78 or 92A of the NRS, the Articles of Incorporation or these Bylaws may be given pursuant to the Merger Agreement, Nemus issuedforms of electronic transmission listed herein, if such forms of transmission are consented to in writing by the stockholder receiving such electronically transmitted notice and such consent is filed by the secretary in the corporate records. Notice shall be deemed given (i) by facsimile when directed to a number consented to by the stockholder to receive notice, (ii) by e-mail when directed to an aggregate of 3,120,000 shares of its common stocke-mail address consented to by the stockholder to receive notice, (iii) by posting on an electronic network together with a separate notice to the former stockholders of LGL in exchange for allstockholder of the outstanding sharesspecific posting on the later of LGL’s capital stock, whichthe specific posting or the giving of the separate notice or (iv) by any other electronic transmission as consented to by and when combineddirected to the stockholder. The stockholder consent necessary to permit electronic transmission to such stockholder shall be deemed revoked and of no force and effect if (A) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with the 12,880,000 shares of Nemus common stock outstanding, amountedstockholder’s consent and (B) the inability to 16,000,000 total shares outstanding upon completiondeliver by electronic transmission becomes known to the secretary, any assistant secretary, transfer agent or other agent of the merger.
42 |
Table of Contents |
(d) The Merger is being accounted for aswritten certificate of an individual signing a reverse-merger and recapitalization. Nemus isnotice of meeting, setting forth the acquirer for financial reporting purposes and LGL issubstance of the acquired company. Consequently,notice or having a copy thereof attached thereto, the assets and liabilitiesdate the notice was mailed or personally delivered to the requisite stockholders and the operations that willaddresses to which the notice was mailed, shall be reflectedprima facie evidence of the manner and fact of giving such notice and, in the historical consolidated financial statements prior to the Merger will be thoseabsence of Nemus and will be recorded at the historical cost basis of Nemus, and the consolidated financial statements after completionfraud, an affidavit of the Merger will include the assets and liabilitiesindividual signing a notice of LGL and Nemus, the historical operations of Nemus and the operationsa meeting on behalf of the Nemus from andCorporation that the notice thereof has been given by a form of electronic transmission shall be prima facie evidence of the facts stated in the affidavit.
(e) Any stockholder may waive notice of any meeting by a signed writing or by transmission of an electronic record, either before or after the closing datemeeting. Such waiver of notice shall be deemed the equivalent of the Merger.
Section 2.5 Determination of consolidated financial statementsStockholders of Record.
(a) For the purpose of determining the stockholders entitled to (i) notice of and to vote at any meeting of stockholders or any adjournment thereof, (ii) receive payment of any distribution or the allotment of any rights, or (iii) exercise any rights in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") requires management to make estimates and assumptions that affectrespect of any change, conversion or exchange of stock, or for the reported amountspurpose of assets and liabilities and disclosure of contingent assets and liabilities atany other lawful action, the Board may fix, in advance, a record date, which shall not be more than sixty days nor less than ten days before the date of such meeting.
(b) If stockholder action by written consent is permitted under the consolidated financial statementsArticles of Incorporation and these Bylaws, the reported amountsBoard may adopt a resolution prescribing a date upon which the stockholders of revenue and expense duringrecord entitled to give written consent must be determined. The date set by the reporting period. Actual results could differ from those estimates.
(c) If no record date is fixed, the record date for determining stockholders: (i) entitled to continuenotice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and (ii) for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders shall apply to any postponement of any meeting of stockholders to a date not more than sixty days after the record date or to any adjournment of the meeting; provided that the Board may fix a new record date for the adjourned meeting and must fix a new record date if the meeting is adjourned to a date more than sixty days later than the meeting date set for the original meeting.
43 |
Table of Contents |
Section 2.6 Quorum; Adjourned Meetings.
(a) At any meeting of the stockholders, and unless the Articles of Incorporation require a different proportion, stockholders holding at least a majority of the voting power of the Corporation’s capital stock entitled to vote at such meeting, represented in person or by proxy (regardless of whether the proxy has authority to vote on all matters), are necessary to constitute a quorum for the transaction of business at such meeting. If, on any issue, voting by classes or series is required by the laws of the State of Nevada, the Articles of Incorporation or these Bylaws, at least a majority of the voting power, represented in person or by proxy (regardless of whether the proxy has authority to vote on all matters), within each such class or series is necessary to constitute a quorum of each such class or series.
(b) If a quorum is not represented, a majority of the voting power represented or the person presiding at the meeting may adjourn the meeting from time to time until a quorum shall be represented. At any such adjourned meeting at which a quorum shall be represented, any business may be transacted which might otherwise have been transacted at the adjourned meeting as originally called. When a going concern.stockholders’ meeting is adjourned to another time or place hereunder, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. However, if a new record date is fixed for the adjourned meeting, notice of the adjourned meeting must be given to each stockholder of record as of the new record date. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Section 2.7 Voting.
(a) Unless otherwise provided in the Articles of Incorporation, or private equity or debt financings, strategic collaborations, licensing arrangements, asset sales, government grants or other arrangements. However,in the Company cannot be sure that such additional funds will be available on reasonable terms, or at all. Ifresolution providing for the Company raises additional fundsissuance of preferred stock (or any series of preferred stock) adopted by issuing equity securities, substantial dilutionthe Board pursuant to existing stockholders would result. Ifauthority expressly vested in it by the Company is unable to secure adequate additional funding,provisions of the Company may be forced to make a reduction in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs.
44 |
Table of Contents |
(b) Except as otherwise provided in these Bylaws, all votes with respect to shares (including pledged shares, unless in the pledge the pledgor has expressly empowered the pledgee to vote the stock) standing in the name of December 31, 2015 was restricted from withdrawal andan individual at the close of business on the record date (or the date established by the Board in connection with stockholder action by written consent) shall be cast only by that individual or such individual’s duly authorized proxy. With respect to shares held by a bankrepresentative of the estate of a deceased stockholder, or a guardian, conservator, custodian or trustee, even though the shares do not stand in the form of a certificate of deposit. This certificate serves as collateral for payment of the Company's credit cards. Restricted cash as of December 31, 2014 was $0.
(c) With respect to shares standing of record in the name of another corporation, partnership, limited liability company or upon 60 days written noticeother legal entity on the record date, votes may be cast: (i) in the case of a corporation, by such individual as the bylaws of such other corporation prescribe, by such individual as may be appointed by resolution of the Board of such other corporation or by such individual (including, without limitation, the officer making the authorization) authorized in writing to do so by the Companychairman of the Board, the chief executive officer, the president or any vice president of such corporation; and (ii) in the case of a partnership, limited liability company or other legal entity, by an individual representing such stockholder upon presentation to UM.
(d) Notwithstanding anything to the contrary contained in these Bylaws and except for the rights to explore other routesCorporation’s shares held in a fiduciary capacity, the Corporation shall not vote, directly or indirectly, shares of delivery of UM5050its own stock owned or held by it, and such shares shall not yet agreed upon and/orbe counted in combination with other cannabinoids or other compatible compounds. There was a one-time up-front option payment of $10,000 for a six month option period that has subsequently been renewed under the same financial terms and conditions. The most recent renewal occurred on September 29, 2015.
(e) Any holder of shares entitled to vote on any matter may cast a portion of the votes in favor of such matter and refrain from casting the remaining votes or cast the same against the proposal. If such holder entitled to vote does vote any of such stockholder’s shares affirmatively and fails to specify the number of affirmative votes, it will be conclusively presumed that the holder is casting affirmative votes with respect to all shares held.
45 |
Table of Contents |
(f) With respect to shares standing of record in the lease periodname of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, spouses as community property, tenants by the entirety, voting trustees or otherwise and shares held by two or more persons (including proxy holders) having the average rent willsame fiduciary relationship in respect to the same shares, votes may be charged to expense each month during the lease period. The monthly amount charged to rent expense is $9,267.
For the year ending December 31, | ||||
2016 | $ | 249,903 | ||
2017 | 149,466 | |||
2018 | - | |||
2019 | - | |||
2020 | - | |||
Thereafter | - | |||
Total | $ | 399,369 |
(i) If only one person votes, the vote of our management team,such person binds all.
(ii) If more than one person casts votes, the act of the majority so voting binds all.
(iii) If more than one person casts votes, but the vote is evenly split on a particular matter, the votes shall be deemed cast proportionately, as split.
(g) If a quorum is present, unless the Articles of Incorporation, these Bylaws, the NRS or other applicable law provide for a different proportion, action by the stockholders entitled to vote on a matter, other than the election of directors, is approved by and is the act of the stockholders if the number of votes cast in favor of the action exceeds the number of votes cast in opposition to the action, unless voting by classes or series is required for any action of the stockholders by the laws of the State of Nevada, the Articles of Incorporation or these Bylaws, in which case the number of votes cast in favor of the action by the voting power of each such class or series must exceed the number of votes cast in opposition to the action by the voting power of each such class or series.
(h) If a quorum is present, directors shall be elected by a plurality of the votes cast.
Section 2.8 Proxies. At any meeting of stockholders, any holder of shares entitled to vote may designate, in a manner permitted by the laws of the State of Nevada, another person or persons to act as a proxy or proxies. If a stockholder designates two or more persons to act as proxies, then a majority of those persons present at a meeting has and may exercise all of the powers conferred by the stockholder or, if only one is present, then that one has and may exercise all of the powers conferred by the stockholder, unless the stockholder’s designation of proxy provides otherwise. Every proxy shall continue in full force and effect until its expiration or revocation in a manner permitted by the laws of the State of Nevada.
46 |
Table of Contents |
Section 2.9 Stockholder Action Without A Meeting. Any action required or permitted to be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting if, before or after the action, a written consent thereto is (a) signed by stockholders holding at least a majority of the voting power of the outstanding capital stock of the Corporation entitled to vote on such action (except that if a greater proportion of the voting power would be required for such an action at a meeting, then that proportion of written consents is required), and (b) delivered to the Corporation by delivery to its registered office in the State of Nevada, its principal place of business, or an officer or agent of the Corporation having custody of the books in which proceedings of meetings of stockholders are serving in an advisory role. Certain agreements expired oncerecorded. Any such delivery made to the individuals became full-time employees. Independent contractor fees forCorporation’s registered office shall be made by hand, overnight courier or by certified or registered mail, return receipt requested. In no instance where action is duly and properly authorized by written consent need a meeting of stockholders be called or, unless otherwise required by applicable law or any certificate of designation relating to any series of Preferred Stock, notice given.
Section 2.10 Organization.
(a) Meetings of stockholders shall be presided over by the year ended December 31, 2015 was $120,000 and for the year ended December 31, 2014 was $465,500. No independent contractor accounted for greater than 10% of our total expenditures for the year ended December 31, 2015. One contractor accounted for 13% of our total expenditures for the year ended December 31, 2014. This independent contractor’s agreement was terminated as of November 2014.
47 |
Table of Contents |
(b) The fair market valuechairman of the common stock issued was determined via an independent third-party valuation conducted asmeeting may appoint one or more inspectors of October 31, 2014.
(c) Only such persons who are nominated in accordance with the procedures set forth in Section 2.12 shall be eligible to be elected at any meeting of stockholders of the Company's warrants. These judgmentsCorporation to serve as directors and estimates includedonly such business shall be conducted at a meeting of stockholders as shall have been brought before the assumptions regarding its future operating performance,meeting in accordance with the timeprocedures set forth in Section 2.12. If any proposed nomination or business was not made or proposed in compliance with Section 2.12 (including proper notice under Section 2.13 and including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in compliance with such stockholder’s representation pursuant to completing an IPO or other liquidity event andclause (a)(iv)(D) of Section 2.13), then, unless otherwise provided in the determinationArticles of Incorporation, the chairman of the appropriate valuation methods. Ifmeeting shall have the Company had made different assumptions, its warrant valuation could have been significantly different.
Section 2.11 Consent to Meetings. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called, noticed or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice, to the extent such notice is required, if such objection is expressly made at the time any such matters are presented at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of stockholders need be specified in any written waiver of notice or consent, except as otherwise provided in these Bylaws.
48 |
Table of Contents |
Section 2.12 Director Nominations and Business Conducted at Meetings of Stockholders.
(a) Except as otherwise provided in the Articles of Incorporation, nominations of persons for election to the Board and the proposal of business to be considered by the stockholders may be immediately exercisable if permittedmade at an annual meeting of stockholders only (i) by or at the direction of the Board or the chairman of the Board, or (ii) by any stockholder of the Corporation who is entitled to vote on such matter at the meeting and who (A) has complied with the notice procedures set forth in Section 2.13 and (B) was a stockholder of record at the time such notice is delivered to the secretary of the Corporation.
(b) Except as otherwise provided in the specific grant approved byArticles of Incorporation, nominations of persons for election to the Board of Directors and, if exercised early may be subjectmade at a special meeting of stockholders at which directors are to repurchase provisions. The shares acquired generally vest over a period of five years from the date of grant. The Company granted options to purchase 1,180,000 shares through December 31, 2015, under the 2014 Plan.
Options Outstanding | ||||||||||||||||
Shares Available for Grant of Options & Shares | Number of Shares | Price per Share | Weighted Average Exercise Price | |||||||||||||
Balance at December 31, 2014 | 1,470,000 | 1,730,000 | $ | 0.42 | $ | 0.42 | ||||||||||
Options granted | (130,000 | ) | 130,000 | $ | 1.15- $3.00 | $ | 2.29 | |||||||||
Options exercised | - | - | ||||||||||||||
Options cancelled | 680,000 | (680,000 | ) | $ | 0.42 | $ | 0.42 | |||||||||
Subtotal | 2,020,000 | 1,180,000 | $ | 0.42-$3.00 | $ | 0.63 | ||||||||||
Shares used for restricted stock awards (see discussion below) | (1,200,000 | ) | ||||||||||||||
Balance at December 31, 2015 | 820,000 |
Section 2.13 Advance Notice of Director Nominations and Stockholder Proposals by Stockholders.
(a) For nominations or other business to be properly brought before an annual meeting by a stockholder and for nominations to be properly brought before a special meeting by a stockholder in each case pursuant to Section 2.12, the year ending December 31, 2015,stockholder of record must have given timely notice thereof in writing to the Company recorded $62,500secretary of the Corporation, and, in stock-based compensation expense relatedthe case of business other than nominations, such other business must be a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to these awards. (See discussion below).
For the Year Ended December 31, | ||||||||
2015 | 2014 | |||||||
Dividend yield | 0.00 | % | 0.00 | % | ||||
Volatility factor | 75.00 | % | 75.00 | % | ||||
Risk-free interest rate | 1.68-1.85 | % | 1.93 | % | ||||
Expected term (years) | 6.25-6.50 | 6.5 | ||||||
Weighted-average fair value of options granted during the periods | $ | 2.69 | $ | 1.27 |
For the Year Ended December 31, | |||
2015 | 2014 | ||
Dividend yield | 0.00% | NA | |
Volatility factor | 70.00% | NA | |
Risk-free interest rate | 1.75% | NA | |
Expected term (years) | 4.61 | NA | |
Weighted-average fair value of warrants granted during the periods | $0.46 | NA |
As of December 31, | ||||||||
2015 | 2014 | |||||||
Current deferred tax assets/(liabilities): | ||||||||
State taxes | $ | (199,861 | ) | $ | (77,495 | ) | ||
Capitalized research and development costs | 298,621 | 25,265 | ||||||
Accrual to cash adjustment | 638,754 | - | ||||||
Other | 34,588 | 10,313 | ||||||
Net operating loss | 1,867,086 | 1,067,039 | ||||||
Gross deferred tax assets | 2,639,188 | 1,025,122 | ||||||
Valuation allowance | (2,639,188 | ) | (1,025,122 | ) | ||||
Total deferred tax assets | $ | - | $ | - |
(i) as | ||
49 |
Table of Contents |
(ii) as to any other business that the stockholder proposes to bring before an annual meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws, the language of the proposed amendment), the reasons for conducting such business at the meeting and any substantial interest (within the meaning of Item 5 of Schedule 14A under the Exchange Act) in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made;
(iii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made or the business is proposed: (A) the name and address of such stockholder, as they appear on the Corporation’s books, and the name and address of such beneficial owner, (B) the class and number of shares of stock of the Corporation which portionsare owned of record by such stockholder and such beneficial owner as of the date of the notice, and a representation that the stockholder will notify the Corporation in writing within five business days after the record date for such meeting of the class and number of shares of stock of the Corporation owned of record by the stockholder and such beneficial owner as of the record date for the meeting, and (C) a representation that the stockholder intends to appear in person or by proxy at the meeting to propose such nomination or business;
(iv) as to the stockholder giving the notice or, if the notice is given on behalf of a beneficial owner on whose behalf the nomination is made or the business is proposed, as to such beneficial owner, and if such stockholder or beneficial owner is an entity, as to each director, executive, managing member or control person of such entity (any such person, a “control person”): (A) the class and number of shares of stock of the Corporation which are beneficially owned (as defined below) by such stockholder or beneficial owner and by any control person as of the date of the notice, and a representation that the stockholder will notify the Corporation in writing within five business days after the record date for such meeting of the class and number of shares of stock of the Corporation beneficially owned by such stockholder or beneficial owner and by any control person as of the record date for the meeting, (B) a description of any agreement, arrangement or understanding with respect to the nomination or other business between or among such stockholder or beneficial owner or control person and any other person, including without limitation any agreements that would be required to be disclosed pursuant to Item 5 or Item 6 of Exchange Act Schedule 13D (regardless of whether the requirement to file a Schedule 13D is applicable to the stockholder, beneficial owner or control person) and a representation that the stockholder will notify the Corporation in writing within five business days after the record date for such meeting of any such agreement, arrangement or understanding in effect as of the record date for the meeting, (C) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the stockholder’s notice by, or on behalf of, such stockholder or beneficial owner and by any control person or any other person acting in concert with any of the foregoing, the effect or intent of which is to mitigate loss, manage risk or benefit from changes in the share price of any class of the Corporation’s stock, or maintain, increase or decrease the voting power of the stockholder or beneficial owner with respect to shares of stock of the Corporation, and a representation that the stockholder will notify the Corporation in writing within five business days after the record date for such meeting of any such agreement, arrangement or understanding in effect as of the record date for the meeting, (D) a representation whether the stockholder or the beneficial owner, if any, and any control person will engage in a solicitation with respect to the nomination or business and, if so, the name of each participant (as defined in Item 4 of Schedule 14A under the Exchange Act) in such solicitation and whether such person intends or is part of a group which intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding stock required to approve or adopt the business to be proposed (in person or by proxy) by the stockholder; and
50 |
Table of Contents |
(v) a certification that the stockholder giving the notice and the beneficial owner(s), if any, on whose behalf the nomination is made or the business is proposed, has or have beencomplied with all applicable federal, state and other legal requirements in connection with such stockholder’s and/or each such beneficial owner’s acquisition of shares of capital stock or other securities of the Corporation and/or such stockholder’s and/or each such beneficial owner’s acts or omissions as a stockholder of the Corporation, including, without limitation, in connection with such nomination or proposal.
(b) The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation, including information relevant to a determination whether such proposed nominee can be considered an independent director.
(c) For purposes of Section 2.13(a), a “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed separatelyby the Corporation with the Securities and Exchange Commission.
(d) This Section 2.13 shall not apply to notice of a proposal to be made by a stockholder if the stockholder has notified the Corporation of her or his intention to present the proposal at an annual or special meeting only pursuant to and is not otherwise subject to liabilityin compliance with Rule 14a-8 under these sections
51 | |||
Table of Contents |
(e) If the stockholder does not provide the information required under clause (a)(iii)(B) and clauses (a)(iv)(A)-(C) of this Section 2.13 to the Corporation within the time frames specified, or if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. The chairman of the meeting shall have the power to determine whether notice of a nomination or of any business proposed to be brought before the meeting was properly made in accordance with the procedures set forth in this Section 2.13. Notwithstanding the foregoing provisions hereof, a stockholder shall also comply with all applicable requirements of the Exchange Act, and the rules and regulations thereunder with respect to the matters set forth herein.
Section 2.14 Meetings Through Electronic Communications. Stockholders may participate in a meeting of the stockholders by any means of electronic communications, videoconferencing, teleconferencing or other available technology permitted under the NRS (including, without limitation, a telephone conference or similar method of communication by which all individuals participating in the meeting may hear each other). If any such means are utilized, the Corporation shall, to the extent required under the NRS, implement reasonable measures to (a) verify the identity of each person participating through such means as a stockholder and (b) provide the stockholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to communicate, and to read or hear the proceedings of the meeting in a substantially concurrent manner with such proceedings. Participation in a meeting pursuant to this Section 2.14 constitutes presence in person at the meeting.
ARTICLE III
DIRECTORS
Section 3.1 General Powers; Performance of Duties. The business and affairs of the Corporation shall be managed by or under the direction of the Board, except as otherwise provided in the NRS or the Articles of Incorporation.
Section 3.2 Number, Tenure, and Qualifications. The Board shall consist of at least two individuals and not more than nine individuals, with the number of directors within the foregoing fixed minimum and maximum established and changed from time to time as provided by resolutions adopted by the Board. Each director shall hold office until her or his successor shall be elected or appointed and qualified or until her or his earlier death, retirement, disqualification, resignation or removal. No reduction of the number of directors shall have the effect of removing any director prior to the expiration of her or his term of office. No provision of this Section 3.2 shall restrict the right of the Board (or, to the extent permitted under the Articles of Incorporation, the stockholders) to fill vacancies or the right of the stockholders entitled to vote thereon to remove directors, each as provided in the Articles of Incorporation or these Bylaws.
Section 3.3 Chairman of the Board. The Board shall elect a chairman of the Board from the members of the Board, who shall preside at all meetings of the Board and stockholders at which she or he shall be present and shall have and may exercise such powers as may, from time to time, be assigned to her or him by the Board, these Bylaws or as provided by law.
Section 3.4 Vice Chairman of the Board. The Board may elect a vice chairman of the Board from the members of the Board who shall preside at all meetings of the Board and stockholders at which she or he shall be present, and the chairman is not present and shall have and may exercise such powers as may, from time to time, be assigned to her or him by the Board, these Bylaws or as provided by law.
Section 3.5 Elections. The directors shall be elected in accordance with the Articles of Incorporation and the NRS.
Section 3.6 Removal and Resignation of Directors. Any director may be removed from such position as provided in, and in accordance with, the Articles of Incorporation and the NRS. Any director may resign effective upon giving written notice, unless the notice specifies a later time for effectiveness of such resignation, to the chairman of the Board, the president or the secretary, or in the absence of all of them, any other officer of the Corporation.
Section 3.7 Vacancies; Newly Created Directorships. Vacancies on the Board, including vacancies resulting from newly created directorships, shall be filled as provided in, and in accordance with, the Articles of Incorporation and the NRS.
Section 3.8 Annual and Regular Meetings. Within five business days after the conclusion of the annual meeting of the stockholders or any special meeting of the stockholders at which directors are elected, the Board, including directors newly elected, shall hold its annual meeting without call or notice, other than this provision, to transact such business as may be necessary or appropriate. The Board may provide by resolution the place, date, and hour for holding regular meetings between annual meetings, and if the Board so provides with respect to a regular meeting, notice of such regular meeting shall not be required.
53 |
Section 3.9 Special Meetings. Subject to any rights of the holders of preferred stock, if any, and except as otherwise required by law or the Articles of Incorporation, special meetings of the Board may be called only by the chairman of the Board, or if there be no chairman of the Board, by the chief executive officer, or by the president or the secretary, and shall be called by the chairman of the Board, the chief executive officer, the president, or the secretary upon the request of a majority of the Board. If the chairman of the Board, or if there be no chairman of the Board, each of the chief executive officer, the president, and the secretary, fails for any reason to call such special meeting, a special meeting may be called by a notice signed by a majority of the Board.
Section 3.10 Place of Meetings. Any regular or special meeting of the Board may be held at such place as the Board, or in the absence of such designation, as the notice calling such meeting, may designate. A waiver of notice signed by the directors may designate any place for the holding of such meeting.
Section 3.11 Notice of Meetings. Except as otherwise provided in Section 3.8, there shall be delivered to each director at the address appearing for her or him on the records of the Corporation, at least twenty-four hours before the time of such meeting, a copy of a written notice of any meeting (i) by delivery of such notice personally, (ii) by mailing such notice postage prepaid, (iii) by overnight courier or (v) by electronic transmission or electronic writing, including, without limitation, e-mail. If mailed to an address inside the United States, the notice shall be deemed delivered five business days following the date the same is deposited in the United States mail, postage prepaid. If mailed to an address outside the United States, the notice shall be deemed delivered seven business days following the date the same is deposited in the United States mail, postage prepaid. If sent via overnight courier, the notice shall be deemed delivered the business day following the delivery of such notice to the courier. If sent by electronic transmission (including, without limitation, e-mail), the notice shall be deemed delivered when directed to the e-mail address of the director appearing on the records of the Corporation, and otherwise pursuant to the applicable provisions of the NRS. If the address of any director is incomplete or does not appear upon the records of the Corporation, it will be sufficient to address any notice to such director at the registered office of the Corporation. Any director may waive notice of any meeting, and the attendance of a director at a meeting shall constitute waiver of notice of the meeting unless such director objects, prior to the transaction of any business, that the meeting was not lawfully called, noticed or convened. Attendance for the express purpose of objecting to the transaction of business thereat because the meeting was not properly called or convened shall not constitute presence or a waiver of notice for purposes hereof.
54 |
Section 3.12 Quorum; Adjourned Meetings.
(a) A majority of the directors is necessary to constitute a quorum for the transaction of business at any meeting of the Board.
(b) At any meeting of the Board where a quorum is not present, a majority of those present may adjourn, from time to time, until a quorum is present, and no notice of such adjournment shall be required. At any adjourned meeting where a quorum is present, any business may be transacted which could have been transacted at the meeting originally called.
Section 3.13 Manner of Acting. The affirmative vote of a majority of the directors present at a meeting at which a quorum is present is an act of the Board.
Section 3.14 Meetings Through Electronic Communications. Members of the Board or of any committee designated by the Board may participate in a meeting of the Board or such committee by any means of electronic communications, videoconferencing, teleconferencing or other available technology permitted under the NRS (including, without limitation, a telephone conference or similar method of communication by which all individuals participating in the meeting can hear each other). If any such means are utilized, the Corporation shall, to the extent required under the NRS, implement reasonable measures to (a) verify the identity of each person participating through such means as a director or member of the committee, as the case may be, and (b) provide the directors or members of the committee a reasonable opportunity to participate in the meeting and to vote on matters submitted to the directors or members of the committee, including an opportunity to communicate, and to read or hear the proceedings of the meeting in a substantially concurrent manner with such proceedings. Participation in a meeting pursuant to this Section 3.14 constitutes presence in person at the meeting.
Section 3.15 Action Without Meeting. Any action required or permitted to be taken at a meeting of the Board or of a committee thereof may be taken without a meeting if, before or after the action, a written consent thereto is signed by all of the members of the Board or the committee, except that such consent need not be signed by any director who is not required to sign pursuant to the NRS. The written consent may be signed manually or electronically (or by any other means then permitted under the NRS), and may be so signed in counterparts, including, without limitation, email counterparts, and shall be filed with the minutes of the proceedings of the Board or committee.
55 | |
Table of Contents |
Section 3.16 Powers and Duties.
(a) Except as otherwise restricted by the NRS or the Articles of Incorporation, the Board has full control over the business and affairs of the Corporation. The Board may delegate any of its authority to manage, control or conduct the business of the Corporation to any standing or special committee, or to any officer or agent, and to appoint any persons to be agents of the Corporation with such powers, including the power to subdelegate, and upon such terms as it deems fit.
(b) The Board, in its discretion, or the chairman presiding at a meeting of stockholders, in her or his discretion, may submit any contract or act for approval or ratification at any annual meeting of the stockholders or any special meeting properly called and noticed for the purpose of considering any such contract or act, provided a quorum is present.
(c) The Board may, by resolution passed by a majority of the Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation, provided that the Board may also appoint additional natural persons who are not directors to serve on any committee. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Subject to applicable law and to the extent provided in the resolution of the Board, any such committee shall have and may exercise all the powers of the Board in the management of the business and affairs of the Corporation as the Board delegates. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board. The committees shall keep regular minutes of their proceedings and report the same to the Board when requested.
Section 3.17 Compensation. The Board, without regard to personal interest, may establish the compensation of directors for services in any capacity. If the Board establishes the compensation of directors pursuant to this Section 3.17, such compensation is presumed to be fair to the Corporation unless proven unfair by a preponderance of the evidence.
Section 3.18 Organization. Meetings of the Board shall be presided over by the chairman of the Board, or in the absence of the chairman of the Board by the vice chairman, or in her or his absence by a chairman chosen at the meeting. The secretary, or in the absence of the secretary, an assistant secretary, shall act as secretary of the meeting, but in the absence of the secretary and any assistant secretary, the chairman of the meeting may appoint any person to act as secretary of the meeting. The order of business at each such meeting shall be as determined by the chairman of the meeting.
ARTICLE IV
OFFICERS
Section 4.1 Election. The Board shall elect or appoint a president, a secretary, a treasurer or the equivalents of such officers. Such officers shall serve until their respective successors are elected and appointed and shall qualify or until their earlier resignation or removal. The Board may from time to time, by resolution, elect or appoint such other officers and agents as it may deem advisable, who shall hold office at the pleasure of the Board, and shall have such powers and duties and be paid such compensation as may be directed by the Board. Any individual may hold two or more offices.
Section 4.2 Removal; Resignation. Any officer or agent elected or appointed by the Board may be removed by the Board with or without cause. Any officer may resign at any time upon written notice to the Corporation. Any such removal or resignation shall be subject to the rights, if any, of the respective parties under any contract between the Corporation and such officer or agent.
Section 4.3 Vacancies. Any vacancy in any office because of death, resignation, removal or otherwise may be filled by the Board.
Section 4.4 Chief Executive Officer. The Board may elect a chief executive officer who, subject to the supervision and control of the Board, shall have the ultimate responsibility for the management and control of the business and affairs of the Corporation and perform such other duties and have such other powers which are delegated to her or him by the Board, these Bylaws or as provided by law.
Section 4.5 President. The president, subject to the supervision and control of the Board, shall in general actively supervise and control the business and affairs of the Corporation. The president shall keep the Board fully informed as the Board may request and shall consult the Board concerning the business of the Corporation. The president shall perform such other duties and have such other powers which are delegated and assigned to her or him by the Board, the chief executive officer, these Bylaws or as provided by law. The president shall be the chief executive officer of the Corporation unless the Board shall elect or appoint different individuals to hold such positions.
Section 4.6 Vice Presidents. The Board may elect one or more vice presidents. In the absence or disability of the president, or at the president’s request, the vice president or vice presidents, in order of their rank as fixed by the Board, and if not ranked, the vice presidents in the order designated by the Board, or in the absence of such designation, in the order designated by the president, shall perform all of the duties of the president, and when so acting, shall have all the powers of, and be subject to all the restrictions on the president. Each vice president shall perform such other duties and have such other powers which are delegated and assigned to her or him by the Board, the chief executive officer, the president, these Bylaws or as provided by law.
57 | |||
Table of Contents |
Section 4.7 Secretary. The secretary shall attend all meetings of the stockholders, the Board and any committees thereof, and shall keep, or cause to be kept, the minutes of proceedings thereof in books provided for that purpose. She or he shall keep, or cause to be kept, a register of the stockholders of the Corporation and shall be responsible for the giving of notice of meetings of the stockholders, the Board and any committees, and shall see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law. The secretary shall be custodian of the corporate seal, if any, the records of the Corporation, the stock certificate books, transfer books and stock ledgers, and such other books and papers as the Board or any appropriate committee may direct. The secretary shall perform all other duties commonly incident to her or his office and shall perform such other duties which are assigned to her or him by the Board, the chief executive officer, the president, these Bylaws or as provided by law.
Section 4.8 Assistant Secretaries. The Corporation may have one or more assistant secretaries. An assistant secretary shall, at the request of the secretary, or in the absence or disability of the secretary, perform all the duties of the secretary. He or she shall perform such other duties as are assigned to him or her by the Board, the chief executive officer, if any, the president, these Bylaws or as provided by law.
Section 4.9 Treasurer. The treasurer, subject to the requirementsorder of the Securities Exchange ActBoard, shall have the care and custody of, 1934, this report has been signed belowand be responsible for, all of the money, funds, securities, receipts and valuable papers, documents and instruments of the Corporation, and all books and records relating thereto. The treasurer shall keep, or cause to be kept, full and accurate books of accounts of the Corporation’s transactions, which shall be the property of the Corporation, and shall render financial reports and statements of condition of the Corporation when so requested by the followingBoard, the chairman of the Board, the chief executive officer, or the president. The treasurer shall perform all other duties commonly incident to her or his office and such other duties as may, from time to time, be assigned to her or him by the Board, the chief executive officer, the president, these Bylaws or as provided by law. If a chief financial officer of the Corporation has not been appointed, the treasurer may be deemed the chief financial officer of the Corporation.
Section 4.11 Execution of Negotiable Instruments, Deeds and Contracts. All (i) checks, drafts, notes, bonds, bills of exchange, and orders for the payment of money of the Corporation, (ii) deeds, mortgages, proxies, powers of attorney and other written contracts, documents, instruments and agreements to which the Corporation shall be a party and (iii) assignments or endorsements of stock certificates, registered bonds or other securities owned by the Corporation shall be signed in the name of the Corporation by such officers or other persons as the Board may from time to time designate. The Board may authorize the use of the electronic signatures of any such persons. Any officer of the Corporation shall be authorized to attend, act and vote, or designate another officer or an agent of the Corporation to attend, act and vote, at any meeting of the owners of any entity in which the Corporation may own an interest or to take action by written consent in lieu thereof. Such officer or agent, at any such meeting or by such written action, shall possess and may exercise on behalf of the registrantCorporation any and inall rights and powers incident to the capacities and on the dates indicated.
Table of Contents |
ARTICLE V
CAPITAL STOCK
Section 5.1 Issuance. Shares of the Corporation’s authorized capital stock shall, subject to any provisions or limitations of the laws of the State of Nevada, the Articles of Incorporation or any contracts or agreements to which the Corporation may be a party, be issued in such manner, at such times, upon such conditions and for such consideration as shall be prescribed by the Board.
Section 5.2 Stock Certificates and Uncertificated Shares.
(a) Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by (i) the chief executive officer, the president, or a vice president, and (ii) the secretary, an assistant secretary, the treasurer or the chief financial officer of the Corporation (or any other two officers or agents so authorized by the Board), certifying the number of shares of stock owned by him, her or it in the Corporation; provided that the Board may authorize the issuance of uncertificated shares of some or all of any or all classes or series of the Corporation’s stock. Any such issuance of uncertificated shares shall have no effect on existing certificates for shares until such certificates are surrendered to the Corporation, or on the respective rights and obligations of the stockholders. Whenever any such certificate is countersigned or otherwise authenticated by a transfer agent or a transfer clerk and by a registrar (other than the Corporation), then a facsimile of the signatures of any corporate officers or agents, the transfer agent, transfer clerk or the registrar of the Corporation may be printed or lithographed upon the certificate in lieu of the actual signatures. In the event that any officer or officers who have signed, or whose facsimile signatures have been used on any certificate or certificates for stock cease to be an officer or officers because of death, resignation or other reason, before the certificate or certificates for stock have been delivered by the Corporation, the certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed the certificate or certificates, or whose facsimile signature or signatures have been used thereon, had not ceased to be an officer or officers of the Corporation.
(b) Within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall send to the registered owner thereof a written statement certifying the number and class (and the designation of the series, if any) of the shares owned by such stockholder in the Corporation and any restrictions on the transfer or registration of such shares imposed by the Articles of Incorporation, these Bylaws, any agreement among stockholders or any agreement between the stockholders and the Corporation, and, at least annually thereafter, the Corporation shall provide to such stockholders of record holding uncertificated shares, a written statement confirming the information contained in such written statement previously sent. Except as otherwise expressly provided by the NRS, the rights and obligations of the stockholders of the Corporation shall be identical whether or not their shares of stock are represented by certificates.
59 |
Table of Contents |
(c) Each certificate representing shares shall state the following upon the face thereof: the name of the state of the Corporation’s organization; the name of the person to whom issued; the number and class of shares and the designation of the series, if any, which such certificate represents; the par value of each share, if any, represented by such certificate or a statement that the shares are without par value. Certificates of stock shall be in such form consistent with law as shall be prescribed by the Board. No certificate shall be issued until the shares represented thereby are fully paid. In addition to the foregoing, all certificates evidencing shares of the Corporation’s stock or other securities issued by the Corporation shall contain such legend or legends as may from time to time be required by the NRS, the Exchange Act or such other federal, state or local laws or regulations then in effect.
Section 5.3 Surrendered; Lost or Destroyed Certificates. All certificates surrendered to the Corporation, except those representing shares of treasury stock, shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been canceled, except that in case of a lost, stolen, destroyed or mutilated certificate, a new one may be issued therefor. However, any stockholder applying for the issuance of a stock certificate in lieu of one alleged to have been lost, stolen, destroyed or mutilated shall, prior to the issuance of a replacement, provide the Corporation with his, her or its affidavit of the facts surrounding the loss, theft, destruction or mutilation and, if required by the Board, an indemnity bond in an amount not less than twice the current market value of the stock, and upon such terms as the treasurer or the Board shall require which shall indemnify the Corporation against any loss, damage, cost or inconvenience arising as a consequence of the issuance of a replacement certificate.
Section 5.4 Replacement Certificate. When the Articles of Incorporation are amended in any way affecting the statements contained in the certificates for outstanding shares of capital stock of the Corporation or it becomes desirable for any reason, in the discretion of the Board, including, without limitation, the merger of the Corporation with another Corporation or the conversion or reorganization of the Corporation, to cancel any outstanding certificate for shares and issue a new certificate therefor conforming to the rights of the holder, the Board may order any holders of outstanding certificates for shares to surrender and exchange the same for new certificates within a reasonable time to be fixed by the Board. The order may provide that a holder of any certificate(s) ordered to be surrendered shall not be entitled to vote, receive distributions or exercise any other rights of stockholders of record until the holder has complied with the order, but the order operates to suspend such rights only after notice and until compliance.
Section 5.5 Transfer of Shares. No transfer of stock shall be valid as against the Corporation except on surrender and cancellation of any certificate(s) therefor accompanied by an assignment or transfer by the registered owner made either in person or under assignment. Whenever any transfer shall be expressly made for collateral security and not absolutely, the collateral nature of the transfer shall be reflected in the entry of transfer in the records of the Corporation.
60 |
Table of Contents |
Section 5.6 Transfer Agent; Registrars. The Board may appoint one or more transfer agents, transfer clerks and registrars of transfer and may require all certificates for shares of stock to bear the signature of such transfer agents, transfer clerks and/or registrars of transfer.
Section 5.7 Miscellaneous. The Board shall have the power and authority to make such rules and regulations not inconsistent herewith as it may deem expedient concerning the issue, transfer, and registration of certificates for shares of the Corporation’s stock.
Section 5.8 Inapplicability of Controlling Interest Statutes. Notwithstanding any other provision in the Articles of Incorporation or these Bylaws to the contrary, and in accordance with the provisions of NRS 78.378, the provisions of NRS 78.378 to 78.3793, inclusive, or any successor statutes, relating to acquisitions of controlling interests in the Corporation, shall not apply to the Corporation or to any acquisition of any shares of the Corporation’s capital stock.
ARTICLE VI
DISTRIBUTIONS
Distributions may be declared, subject to the provisions of the laws of the State of Nevada and the Articles of Incorporation, by the Board and may be paid in money, shares of corporate stock, property or any other medium not prohibited under applicable law. The Board may fix in advance a record date, in accordance with and as provided in Section 2.5, prior to the distribution for the purpose of determining stockholders entitled to receive any distribution.
61 |
Table of Contents |
ARTICLE VII
RECORDS AND REPORTS; CORPORATE SEAL; fiscal year
Section 7.1 Records. All original records of the Corporation shall be kept at the principal office of the Corporation by or under the direction of the secretary or at such other place or by such other person as may be prescribed by these Bylaws or the Board.
Section 7.2 Corporate Seal. The Board may, by resolution, authorize a seal, and the seal may be used by causing it, or a facsimile, to be impressed or affixed or reproduced or otherwise. Except when otherwise specifically provided in these Bylaws, the Board may authorize any officer of the Corporation the authority to affix the seal to any document requiring it.
Section 7.3 Fiscal Year-End. The fiscal year-end of the Corporation shall be such date as may be fixed from time to time by resolution of the Board.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification and Insurance.
(a) Indemnification of Directors and Officers.
(i) For purposes of this Article, (A) “Indemnitee” shall mean each director or officer who was or is a party to, or is threatened to be made a party to, or is otherwise involved in, any Proceeding (as hereinafter defined), by reason of the fact that she or he is or was a director, officer, employee, consultant or agent (including, without limitation, as a trustee, fiduciary, administrator or manager) of the Corporation or any predecessor entity thereof, or is or was serving in any capacity as a director, officer, employee, consultant or agent (including, without limitation, as a trustee, fiduciary, administrator, partner, member or manager) of, or in any other capacity for, another corporation or any partnership, joint venture, limited liability company, trust, or other enterprise; and (B) “Proceeding” shall mean any threatened, pending, or completed action, suit, petition or proceeding (including, without limitation, an action, suit or proceeding by or in the right of the Corporation), whether civil, criminal, administrative, or investigative.
(ii) Each Indemnitee shall be indemnified and held harmless by the Corporation to the fullest extent permitted by the laws of the State of Nevada, against all expense, liability and loss (including, without limitation, attorneys’ fees, judgments, fines, taxes, penalties, and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Indemnitee in connection with any Proceeding; provided that such Indemnitee either is not liable pursuant to the NRS or acted in good faith and in a manner such Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any Proceeding that is criminal in nature, had no reasonable cause to believe that her or his conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the Indemnitee is liable pursuant to the NRS or did not act in good faith and in a manner in which she or he reasonably believed to be in or not opposed to the best interests of the Corporation, or that, with respect to any criminal proceeding she or he had reasonable cause to believe that her or his conduct was unlawful. The Corporation shall not indemnify an Indemnitee for any claim, issue or matter as to which the Indemnitee has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Corporation or for any amounts paid in settlement to the Corporation, unless and only to the extent that the court in which the Proceeding was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the Indemnitee is fairly and reasonably entitled to indemnity for such amounts as the court deems proper. Except as so ordered by a court and for advancement of expenses pursuant to this Section, indemnification may not be made to or on behalf of an Indemnitee if a final adjudication establishes that her or his acts or omissions involved intentional misconduct, fraud or a knowing violation of law and was material to the cause of action. Notwithstanding anything to the contrary contained in these Bylaws, no director or officer may be indemnified for expenses incurred in defending any threatened, pending, or completed action, suit, petition or proceeding (including without limitation, an action, suit or proceeding by or in the right of the Corporation), whether civil, criminal, administrative or investigative, that such director or officer incurred in her or his capacity as a stockholder.
(iii) Indemnification pursuant to this Section shall continue as to an Indemnitee who has ceased to be a director or officer of the Corporation or who has ceased to serve as a director, officer, employee, agent, trustee, fiduciary, administrator, partner, member or manager of, or in any other capacity for, another corporation or any partnership, joint venture, limited liability company, trust, or other enterprise, and such indemnification shall inure to the benefit of such Indemnitee’s heirs, executors and administrators.
(iv) The expenses of Indemnitees must be paid by the Corporation or through insurance purchased and maintained by the Corporation or through other financial arrangements made by the Corporation, as such expenses are incurred and in advance of the final disposition of the Proceeding, upon receipt of an undertaking by or on behalf of such Indemnitee to repay the amount if it is ultimately determined by a court of competent jurisdiction that she or he is not entitled to be indemnified by the Corporation. To the extent that an Indemnitee is successful on the merits or otherwise in defense of any Proceeding, or in the defense of any claim, issue or matter therein, the Corporation shall indemnify her or him against expenses, including attorneys’ fees, actually and reasonably incurred in by her or him in connection with the defense.
Table of |
(b) Indemnification of Employees and Other Persons. The Corporation may, by action of its Board and to the extent provided in such action, indemnify employees and other persons as though they were Indemnitees.
(c) Non-Exclusivity of Rights. The rights to indemnification provided in this Article VIII shall not be exclusive of any other rights that any person may have or hereafter acquire under any statute, provision of the Articles of Incorporation or these Bylaws, agreement, vote of stockholders or directors, or otherwise.
(d) Insurance. The Corporation may purchase and maintain insurance or make other financial arrangements on behalf of any Indemnitee for any liability asserted against her or him and liability and expenses incurred by her or him in her or his capacity as a director, officer, employee, member, managing member or agent, or arising out of her or his status as such, whether or not the Corporation has the authority to indemnify her or him against such liability and expenses.
(e) Other Financial Arrangements. The other financial arrangements which may be made by the Corporation may include the following (i) the creation of a trust fund; (ii) the establishment of a program of self-insurance; (iii) the securing of its obligation of indemnification by granting a security interest or other lien on any assets of the Corporation; and (iv) the establishment of a letter of credit, guarantee or surety. No financial arrangement made pursuant to this subsection may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable for intentional misconduct, fraud, or a knowing violation of law, except with respect to advancement of expenses or indemnification ordered by a court.
(f) Other Matters Relating to Insurance or Financial Arrangements. Any insurance or other financial arrangement made on behalf of a person pursuant to this Section 8.1 may be provided by the Corporation or any other person approved by the Board, even if all or part of the other person’s stock or other securities is owned by the Corporation. In the absence of fraud, (i) the decision of the Board as to the propriety of the terms and conditions of any insurance or other financial arrangement made pursuant to this Section 8.1 and the choice of the person to provide the insurance or other financial arrangement is conclusive; and (ii) the insurance or other financial arrangement is not void or voidable and does not subject any director approving it to personal liability for his action; even if a director approving the insurance or other financial arrangement is a beneficiary of the insurance or other financial arrangement.
Section 8.2 Amendment. The provisions of this Article VIII relating to indemnification shall constitute a contract between the Corporation and each of its directors and officers which may be modified as to any director or officer only with that person’s consent or as specifically provided in this Section 8.2. Notwithstanding any other provision of these Bylaws relating to their amendment generally, any repeal or amendment of this Article VIII which is adverse to any director or officer shall apply to such director or officer only on a prospective basis, and shall not limit the rights of an Indemnitee to indemnification with respect to any action or failure to act occurring prior to the time of such repeal or amendment. Notwithstanding any other provision of these Bylaws (including, without limitation, Article X), no repeal or amendment of these Bylaws shall affect any or all of this Article VIII so as to limit or reduce the indemnification in any manner unless adopted by (i) the unanimous vote of the directors of the Corporation then serving, or (ii) the stockholders as set forth in Article X; provided that no such amendment shall have a retroactive effect inconsistent with the preceding sentence.
64 |
Table of Contents |
ARTICLE IX
CHANGES IN NEVADA LAW
References in these Bylaws to the laws of the State of Nevada or the NRS or to any provision thereof shall be to such law as it existed on the date these Bylaws were adopted or as such law thereafter may be changed; provided that (i) in the case of any change which expands the liability of directors or officers or limits the indemnification rights or the rights to advancement of expenses which the Corporation may provide in Article VIII, the rights to limited liability, to indemnification and to the advancement of expenses provided in the Articles of Incorporation and/or these Bylaws shall, to the extent permitted by law, continue as in effect prior to such change; and (ii) if such change permits the Corporation, without the requirement of any further action by stockholders or directors, to limit further the liability of directors or limit further the liability of officers or to provide broader indemnification rights or rights to the advancement of expenses than the Corporation was permitted to provide prior to such change, then liability thereupon shall be so limited and the rights to indemnification and the advancement of expenses shall be so broadened to the extent permitted by law.
ARTICLE X
AMENDMENT OR REPEAL
Except as otherwise provided in the Articles of Incorporation: (a) the Board is expressly authorized (in furtherance and not in limitation of the powers conferred by statute) to amend, repeal or rescind any provision of these Bylaws or to adopt new bylaws; or (b) the affirmative vote of the holders of at least a majority of the outstanding voting power of the Common Stock (as defined in the Articles of Incorporation) shall be required in order for the stockholders of the Corporation to amend, repeal or rescind, in whole or in part, any provision of these Bylaws (including, without limitation, this Article X) or to adopt any new provision of these Bylaws.
* * * *
Table of Contents |
Proxy Card
VOTE BY INTERNET - cleartrustonline.com/embi Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. EST on January 27, 2021. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to ClearTrust LLC, 16540 Pointe Village Dr., Suite 205, Lutz, FL 33558. ATTEND VIRTUAL MEETING - Go to cleartrustonline.com/embi | |||
1. | Preregister for the meeting before January 27 at 12 p.m. EST by visiting cleartrustonline.com/embi or calling 813-235-4490 during business hours. | ||
2. | On the day of the meeting, follow the instructions provided by ClearTrust to access the meeting. | ||
Emerald Bioscience, INC. 5910 Pacific Center Blvd, Ste. 320 San Diego, California 92121 | |||
«SHAREHOLDER_NAME_LINE_1» «SHAREHOLDER_NAME_LINE_2» «ADDRESS_LINE_1» «ADDRESS_LINE_2» «ADDRESS_LINE_3» «CITY», «STATE» «POSTAL_CODE» | |||
Shareholder Meeting Help Line The Help Line will open at 8:00 A.M. Pacific Time on January 28, 2021 and will remain open for the duration of the meeting.Call 813-308-9980 – Access Code 675813 | |||
CONTROL # → | «CONTROL_NUMBER | |||
SHARES: | «SHARES» |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS | |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY |
For All | Withhold All | For All Except | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | ||||||
☐ | ☐ | ☐ | |||||||
The Board of Directors recommends you vote FOR the following: | |||||||||
1. | Election of Directors. Nominees: | ||||||||
i. | Punit Dhillon | ||||||||
ii. | James L. Heppell | ||||||||
iii. | Margaret Dalesandro | ||||||||
The Board of Directors recommends you vote FOR the following: | FOR | AGAINST | ABSTAIN | ||||||
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, 2020. | ☐ | ☐ | ☐ | |||||
FOR | AGAINST | ABSTAIN | |||||||
3. | To authorize and approve an amendment to the Company’s Articles of Incorporation to increase the number of authorized shares of Common Stock from 500,000,000 to 5,000,000,000 shares and the number of authorized shares of Preferred Stock from 20,000,000 to 50,000,000 shares; and | ☐ | ☐ | ☐ | |||||
FOR | AGAINST | ABSTAIN | |||||||
4. | To authorize and approve the adoption of the Company’s Amended and Restated Articles of Incorporation, including the Authorized Common Stock Amendment, in the form attached hereto as Annex A, and the Company’s amended and restated Bylaws, in the form attached hereto as Annex B. | ☐ | ☐ | ☐ |
NOTE: To transact any other business that may properly come before the meeting and any adjournment of the meeting.
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer | «SHAREHOLDER_NAME_LINE_1» «SHAREHOLDER_NAME_LINE_2» «ADDRESS_LINE_1» «ADDRESS_LINE_2» «ADDRESS_LINE_3» «CITY», «STATE» «POSTAL_CODE» |
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature [Joint Owner] | Date | «SEQUENCE_CODE» |
Table of Contents |
YOUR VOTE IS IMPORTANT
Please complete, date, sign and mail your voting instruction card in
the envelope provided as soon as possible
OR
Vote online at cleartrustonline.com/embi
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice & Proxy Statement
are available at www.cleartrustonline.com/embi
EMERALD BIOSCIENCE, INC.
REVOCABLE PROXY
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS FOR THE 2021 ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Punit Dhillon and Jim Heppell, and each of them with full power of substitution to each, the proxies of the undersigned to vote all shares of common stock and preferred stock of Emerald Bioscience, Inc. that the undersigned would be entitled to vote if in virtual attendance at the 2021 Annual Meeting of Shareholders of the Company to be held at 9:00 a.m. Pacific Time on January 28, 2021 online at www.cleartrustonline.com/embi or at any adjournments or postponements thereof.
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors recommendations.
67 |