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
(Amendment No. )
| | |
| Filed by the Registrant | x ☒ |
| Filed by a Party other than the Registrant | o ☐ |
Check the appropriate box:
| x | | | | |
| þ | Preliminary Proxy Statement |
| o☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| o☐ | Definitive Proxy Statement |
| o☐ | Definitive Additional Materials |
| o☐ | Soliciting Material Pursuant to sec. 240.14a-12Rule §240.14a-11(c) or §240.14a-2 |
MONSTER DIGITAL, INC.
9 Meters Biopharma, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check
the appropriate box)all boxes that apply):
| o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| (1) | Title of each class of securities to which transaction applies: |
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| (4) | Proposed maximum aggregate value of transaction: |
| o | Fee paid previously with preliminary materials. |
| o | 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.: |
þNo fee required
☐Fee paid previously with preliminary materials
☐Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11
Notice of July 14, 2023
Annual Meeting and
2023 Proxy Statement
9 METERS BIOPHARMA, INC.
4509 Creedmoor Road, Suite 600
MONSTER DIGITAL, INC.Raleigh, NC 27612
(919) 275-1933
NOTICE OF ANNUAL MEETING OF STOCKHOLDERSYou are cordially invited to attend
Notice of Annual Meeting of Stockholders
To Be Held on July 14, 2023
Dear Stockholder:
Notice is hereby given that the Annual Meeting of Stockholders (the “Annual Meeting”)
of Monster Digital, Inc., a Delaware corporation (the “Company”), towill be held on
June 15, 2017July 14, 2023, at
1:9:00
p.m. Pacific Daylighta.m. Eastern Time at
The Courtyard by Marriott, 191 Cochran Street, Simi Valley, CA 93065.4509 Creedmoor Road, Suite 600, Raleigh, North Carolina 27612.
The Annual Meeting
of the Company is
being heldcalled for the following purposes:
| 1. | To elect five (5) members to the Board of Directors to serve for one-year
1.To elect two Class II directors to serve three-year terms expiring at the 2026 Annual Meeting of Stockholders and until such director’s successor is elected and qualified, or until his earlier death, resignation or removal;
2.To approve Amendment No. 1 to the 9 Meters Biopharma, Inc. 2022 Stock Incentive Plan to increase the number of shares authorized for issuance under the plan by 4,000,000 shares;
3.To approve an amendment to the amended and restated certificate of incorporation to effect a reverse stock split of the Company’s common stock, the decision whether to implement such split, being subject to the discretion of the Board of Directors (the “Reverse Stock Split Proposal”);
4.To hold an advisory (nonbinding) vote on named executive officer compensation; and
5.To ratify the appointment of Mayer Hoffman McCann P.C. as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2023.
These items of business are more fully described in the Proxy Statement accompanying this Notice. The Board of Directors unanimously recommends that you vote “FOR” the election of the director nominees listed in the accompanying Proxy Statement, “FOR” Amendment No. 1 to the 9 Meters Biopharma, Inc. 2022 Stock Incentive Plan, “FOR” the Reverse Stock Split Proposal, “FOR” for the named executive officer compensation as described in this Proxy Statement, and “FOR” ratification of the appointment of Mayer Hoffman McCann P.C. as the Company’s independent registered public accounting firm.
9 METERS BIOPHARMA, INC. 4509 Creedmoor Road, Suite 600 Raleigh, NC 27612 (919) 275-1933
The record date for the Annual Meeting is May 25, 2023. Only stockholders of record at the 2017 annual meeting of stockholders; |
| 2. | To approve, on an advisory basis, the compensation of our named executive officers; |
| 3. | To approves an amendment of our 2012 Omnibus Incentive Plan to increase the number of shares of common stock reserved for issuance thereunder from 970,350 shares to 1,370,350 shares; |
| 4. | To approve an amendment to our certificate of incorporation to authorize the Board of Directors, if it so chooses, to affect a reverse stock split by a ratio of not less than one-for-two (1:2) and not greater than one-for-four (1:4). |
| 5. | To ratify the appointment of CohnReznick LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2017; and |
| 6. | To transact such other business as may properly come before the meeting or any adjournments thereof. |
Our Board has fixed the close of business on April 28, 2017that date may vote at the meeting or any adjournment thereof. Whether or not you expect to attend the Annual Meeting, it is important that your shares be represented and voted. Please vote over the telephone or over the Internet as instructed in these materials, or request a proxy card and vote by mail, as promptly as possible in order to ensure your representation at the meeting. Even if you have voted by proxy, you may still vote in person if you attend the meeting. Please note, however, that, if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder. Instructions on how to vote are found in the section entitled “How may I vote shares at the Annual Meeting” starting on page 4 of the Proxy Statement.
| | |
|
| If you have any questions, or require any assistance |
| with voting your shares, please contact: |
|
| D.F. King & Co., Inc. |
|
| 48 Wall Street, 22nd Floor |
| New York, New York 10005 |
|
| Telephone for Banks and Brokers: (212) 269-5550 |
| Stockholders may call toll-free: (866) 829-1035 |
| Email: 9meters@dfking.com |
| | |
| By Order of the Board of Directors |
|
| /s/ John Temperato |
| John Temperato |
| Chief Executive Officer |
|
| Raleigh, North Carolina |
9 METERS BIOPHARMA, INC.
4509 Creedmoor Road, Suite 600
Raleigh, NC 27612
919-275-1933
Proxy Statement for Annual Meeting of Stockholders
To Be Held on July 14, 2023
TABLE OF CONTENTS
9 METERS BIOPHARMA, INC.
4509 Creedmoor Road, Suite 600
Raleigh, NC 27612
919-275-1933
Proxy Statement for Annual Meeting of Stockholders
To Be Held on July 14, 2023
THE ANNUAL MEETING TO BE HELD ON JULY 14, 2023
This Proxy Statement is furnished to the holders of our common stock in connection with the solicitation of proxies on behalf of our Board of Directors for use at the Annual Meeting to be held on July 14, 2023, at 9:00 a.m. Eastern Time at 4509 Creedmoor Road, Suite 600, Raleigh, North Carolina 27612, or for use at any adjournment or postponement thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting of Stockholders. Only stockholders of record at the close of business on May 25, 2023 are entitled to notice of and to vote at the meeting.
We mailed our proxy materials on or about [l], 2023 to our stockholders of record and beneficial owners as of the close of business on the Record Date.
Each holder of our common stock is entitled to one vote for each share held as of the record date (the “Record Date”)with respect to all matters that may be considered at the Annual Meeting. Stockholder votes will be tabulated by persons appointed by our Board of Directors to act as inspectors of election for determiningthe Annual Meeting.
We have engaged D.F. King & Co., Inc. ("DF King"), a proxy solicitation firm, at an approximate costs of $12,750 to $20,000, to solicit proxies on behalf of the Company. DF King may solicit the return of proxies, either by mail, telephone, email or through personal contact. The cost of solicitation will be borne by us, including the fees of DF King as well as the reimbursement of their expenses. Our directors and employees may also solicit proxies in person, by telephone, fax, electronic transmission or other means of communication. We will not pay these directors and employees any additional compensation for these services. We will ask banks, brokerage firms, and other institutions, nominees, and fiduciaries to forward these proxy materials to their principal, and to obtain authority to execute proxies, and will reimburse them for their expenses.
We bear the expense of soliciting proxies. Our directors, officers, and employees may also solicit proxies personally or by telephone, facsimile, or other means of communication. We do not intend to pay additional compensation for doing so. In addition, we might reimburse banks, brokerage firms, and other custodians, nominees, and fiduciaries representing beneficial owners of our common stock for their expenses in forwarding soliciting materials to those beneficial owners.
All references in this Proxy Statement to “9 Meters”, “the Company”, “we”, “our”, and “us” mean 9 Meters Biopharma, Inc.
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
Will the Annual Meeting be conducted in person?
We currently intend to hold the Annual Meeting in person at 4509 Creedmoor Road, Suite 600, Raleigh, North Carolina 27612. However, if it becomes necessary to change the date, time, location, and/or format of the Annual Meeting, in lieu of mailing additional soliciting materials or amending this Proxy Statement, we will announce the decision in advance by issuing a press release, filing the announcement with the SEC and taking other reasonable steps to notify other parties involved in the proxy process of the change(s). Any such press release and filing with the SEC will also be available on our website at www.9meters.com/press-releases.
We recommend that you monitor our press releases or filings with the SEC in the event that circumstances require us to change the date, time, location or format of the Annual Meeting, particularly if you plan to attend the Annual Meeting in person. We encourage all stockholders whoto vote their shares prior to the Annual Meeting. Even if you plan to attend the Annual Meeting, we recommend that you vote your shares in advance using one of the methods described below under “How may I vote my shares at the Annual Meeting?” to ensure that your vote will be counted in the event that you later decide not to attend the Annual Meeting.
Who may vote at the Annual Meeting?
Our Board of Directors set May 25, 2023 as the Record Date for the Annual Meeting. If you owned shares of our common stock at the close of business on May 25, 2023, you may attend and vote at the Annual Meeting. Each stockholder is entitled to one vote for each share of common stock held on all matters to be voted on. Cumulative voting is not permitted in the election of directors or on any other matter.
As of the close of business on May 25, 2023, there were [l] shares of our common stock outstanding that will be entitled to vote at the Annual Meeting.The Company’s
A list of the stockholders entitled to vote at the Annual Report on Form 10-KMeeting may be examined at our principal executive office in Raleigh, North Carolina during ordinary business hours for the year ended December 31, 2016,ten-day period preceding the meeting for any purposes related to the meeting. The stockholder list will also be available to stockholders during the meeting.
What is the difference between holding shares as fileda stockholder of record and as a beneficial owner?
Many of our stockholders hold their shares through a broker, bank or other nominee rather than directly in their own name as the stockholder of record. As summarized below, there are some distinctions between shares held of record and those owned beneficially.
Stockholder of Record. If your shares are registered directly in your name with our transfer agent, Broadridge Corporate Issuer Solutions, Inc. (“Broadridge”), you are considered, with respect to those shares, the Securitiesstockholder of record, and Exchange Commission on March 31, 2017, is enclosed with this notice. The followingthese proxy statement and enclosed proxy cardmaterials are being sent directly to eachyou by Broadridge on our behalf. As the stockholder as of record, you have the Record Date.right to grant your voting proxy directly to us or to vote in person at the Annual Meeting. You will need to present a form of personal photo identification in order to be admitted to the Annual Meeting.
Beneficial Owner. If you hold your shares in an account with a broker, bank or other nominee, rather than of record directly in your own name, then the broker, bank or other nominee is considered the record holder of that stock. You are cordiallyconsidered the beneficial owner of that stock, and your stock is held in “street name.” This Proxy Statement has been forwarded to you by your broker, bank or other nominee. As the beneficial owner, you have the right to direct your broker, bank or other nominee regarding how to vote your shares, and you are also invited to attend the Annual Meeting, but ifMeeting.
Your broker, bank or other nominee has enclosed a voting instruction form for you do not expect to attend,use in directing your broker, bank or if you planother nominee as to attend, but desire the proxy holdershow to vote your shares, please date shares. In most cases, you will be able to do this by mail, via the Internet or by telephone. Alternatively, you may obtain a “legal proxy” from your broker, bank or other nominee
and
sign your proxy card and return it infollow the
enclosed postage paid envelope. The givinginstructions described below. Because a beneficial owner is not the stockholder of
this proxy card willrecord, you may not
affect your right to vote
these shares in person
in the event you find it convenient to attend. Please return the proxy card promptly to avoid the expense of additional proxy solicitation. If you are a stockholder who owns shares through a nominee and attendsat the Annual Meeting
unless you
must obtain a
legal proxy“legal proxy” from the broker,
trusteenominee, or
nomineetrustee that holds your shares, giving you the right to vote the shares at the Annual Meeting.
Important Notice Regarding We urge you to instruct your broker, bank or other nominee by following the Availabilityinstructions on the enclosed voting instruction form, to vote your shares in line with our Board of Proxy MaterialsDirectors’ recommendations on the voting instruction form.
What is the quorum requirement for the Annual MeetingMeeting?
A majority of our outstanding shares of common stock entitled to
Be Held onJune 15, 2017: This Proxy Statement andvote as of the Record Date must be present at the Annual
Report on Form 10-KMeeting in order for
us to hold the
year endedDecember 31, 2016 are availablemeeting and conduct business. This is called a quorum. Your shares will be counted as present at
https://MonsterDigital.com/pages/investor-relations | | |
FOR THE BOARD OF DIRECTORS |
/s/ David H. Clarke
David H. Clarke,
Chairman and Chief Executive Officer
Dated: May 3, 2017
Simi Valley, CA | | |
MONSTER DIGITAL, INC.
PROXY STATEMENT
For the Annual Meeting if you:
•Are present and entitled to vote in person at the Annual Meeting;
•Properly submitted a proxy card or voting instruction form; or
•Do not provide your broker with instructions on how to vote, but the broker submits your proxy nonetheless (a broker non-vote).
Abstentions, withheld votes and broker non-votes (if any) will be counted for purposes of determining whether a quorum is present at the Annual Meeting. Broker non-votes occur when a person holding shares in street name, such as through a brokerage firm, does not provide instructions as to how to vote those shares, but the broker submits that person’s proxy nonetheless. If you are present in person or by proxy at the Annual Meeting but withhold your vote or abstain from voting on any or all proposals, your shares are still counted as present and entitled to vote.
What proposals will be voted on at the Annual Meeting?
The five proposals to be
Heldvoted on
June 15, 2017, 1:00 p.m., Pacific Daylight TimeThe enclosed proxy is solicited by at the board ofAnnual Meeting are as follows:
1.To elect two Class II directors (the “Board”) of Monster Digital, Inc. (“we,” “us,” “our”,to serve three-year terms expiring at the “Company,” or “Monster Digital”), a Delaware corporation, in connection with the2026 Annual Meeting of Stockholders ofand until such director’s successor is elected and qualified, or until his earlier death, resignation or removal;
2.To approve Amendment No. 1 to the Company to be held on June 15, 2017 at 1:00 p.m. Pacific Daylight Time at The Courtyard by Marriott, 191 Cochran Street, Simi Valley, CA 93065 (the “Annual Meeting”). The approximate mailing date for this proxy statement and the enclosed proxy is May 15, 2017.The purpose of the Annual Meeting is to vote on the following items of business: (1) the election of five directors to our Board to serve one-year terms ending at the 2017 annual meeting of stockholders; (2) approval on an advisory basis of the compensation of our named executive officers; (3) approval of an amendment of our 2012 Omnibus9 Meters Biopharma, Inc. 2022 Stock Incentive Plan to increase the number of shares of common stock reservedauthorized for issuance thereunder from 970,350 shares to 1,370,350under the plan by 4,000,000 shares; (4) approval of
3.To approve an amendment to our amended and restated certificate of incorporation to authorizeeffect a reverse stock split of the Company’s common stock, the decision whether to implement such split, being subject to the discretion of the Board of Directors if it so chooses, to affect a reverse stock split by a ratio of not less than one-for-two (1:2)(the “Reverse Stock Split Proposal”);
4.To hold an advisory (nonbinding) vote on named executive officer compensation; and not greater than one-for-four (1:4); (5) ratification of
5.To ratify the appointment of CohnReznick LLPMayer Hoffman McCann P.C. as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017; and (6) transaction of such2023.
We will also consider any other business
as maythat properly
comecomes before the
meeting orAnnual Meeting. As of the Record Date, we are not aware of any
adjournments thereof.Annual Report
Our annual reportother matters to stockholdersbe submitted for the fiscal year ended December 31, 2016 will be concurrently provided to each stockholderconsideration at the time we send thisAnnual Meeting. If any other matters are properly brought before the Annual Meeting, the proxy statementnamed in the proxy card or voter instruction card will vote the shares it represents using its best judgment.
What is a broker non-vote, and will there be any broker non-votes at the Annual Meeting?
Broker non-votes occur when brokers do not have discretionary voting authority to vote certain shares held in “street name” on particular non-routine proposals and the
enclosed proxy card and isbeneficial owner of those shares has not
instructed the broker to
be considered a partvote on those proposals. Broker non-votes are not counted in the tabulations of the
proxy soliciting material.Voting Information
Record Date; Quorum; Voting Rights
Holders of our common stock of recordvotes present at the close of business on April 28, 2017 (“the Record Date”) will be
Annual Meeting and entitled to vote at the Annual Meeting oron any adjournment or postponement of the Annual Meeting. There were 8,005,011 shares of common stock issued and outstanding as of the Record Date. Each share of our common stock is entitled to one vote on each matternon-routine proposals to be voted on at the Annual Meeting, and therefore will have no effect on the presence, in personoutcome of Proposal 1, Proposal 2, or by proxy,Proposal 4.
Proposal 3, the Reverse Stock Split Proposal, and Proposal 5, the ratification of holdersthe appointment of a majorityregistered public accounting firm, are each considered a routine proposal, and brokers have discretion to vote on such matters even if no instructions are received from the “street name” holder. As such, we do not expect any broker non-votes for Proposal 3 or Proposal 5.
What vote is required to approve each proposal?
Votes will be counted by the inspector of elections appointed for the Annual Meeting, who will separately count votes “For” and “Against,” abstentions or withheld votes, and, if applicable, broker non-votes. The following table describes the voting requirements for each proposal, including the required vote to approve each proposal and the effect that abstentions or broker non-votes will have on the outcome of the proposal:
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| Proposal Number | Proposal Description | Required Vote for Approval | Effect of Abstentions | Effect of Broker Non-Votes |
| 1 | Election of directors | Nominee receiving the most “For” votes (plurality voting) | Withheld votes will have no effect | None |
| 2 | Approval of Amendment No. 1 to the 9 Meters Biopharma, Inc. 2022 Stock Incentive Plan; | “For” votes from the holders of a majority of the votes cast and entitled to vote thereon | Abstentions will have no effect | None |
| 3 | Approval of the Reverse Stock Split Proposal | “For” votes from the holders of a majority of the shares outstanding and entitled to vote at the meeting | Abstentions have the same effect as a vote against | No broker non-votes are expected |
| 4 | Advisory (nonbinding) vote on named executive officer compensation | “For” votes from the holders of a majority of the votes cast and entitled to vote thereon | Abstentions will have no effect | None |
| 5 | Ratification of the appointment of Mayer Hoffman McCann P.C. as our independent registered public accounting firm for the fiscal year ending December 31, 2023 | “For” votes from the holders of a majority of the votes cast and entitled to vote thereon | Abstentions will have no effect | No broker non-votes are expected |
Can I access these proxy materials on the Internet?
Yes. The Notice of Annual Meeting, Proxy Statement, and 2022 Annual Report to Stockholders (including the 2022 Annual Report on Form 10-K) are available for viewing, printing, and downloading at www.proxyvote.com. Our Annual Report on Form 10-K for the year ended December 31, 2022 is also available under the Investors - Stock & Finance section of our website at www.9meters.com and through the SEC website at http://www.sec.gov. All materials will remain posted on www.proxyvote.com at least until the conclusion of the Annual Meeting.
How may I vote my shares of ourat the Annual Meeting?
If your common stock is necessaryheld by a broker, bank, nominee, or trustee, they should send you instructions that you must follow in order to constitute a quorum forhave your shares voted.
If you hold shares in your own name, you may vote by proxy in any one of the following ways:
•Proxy Vote by Internet.You may use the Internet to transmit your voting instructions by going to the websitewww.proxyvote.com and following the voting instructions on that website;
•Proxy Vote by Phone.You may use any touch-tone telephone to transmit your voting instructions by calling the toll-free number 1-800-690-6903and following the recorded instructions;
•By Mail. By completing, dating, signing, and returning the proxy card that you receive in your proxy materials; or
•In Person at the Annual Meeting. If a quorum is not presentAll stockholders of record may vote in person at the Annual Meeting. You may also be represented by another person at the Annual Meeting we expectby executing a proper proxy designating that person. You are encouraged to vote via the Annual Meeting will be adjourned to solicit additional proxies. Stockholders may not cumulate their votes.Voting Your Proxy
Your vote is important. Your shares can be voted at the Annual Meeting only if you are present in personInternet, by telephone or represented by proxy. Even ifmail, regardless of whether you plan to attend the Annual Meeting we urge youin person
. The Internet and telephone voting procedures are designed to authenticate stockholders’ identities by use of a control number to allow stockholders to vote their shares and to confirm that stockholders’ instructions have been properly recorded. Voting via the Internet or telephone must be completed by 11:59 PM EDT on July 13, 2023. If you submit or return a proxy card without giving specific voting instructions, your shares will be voted as recommended by our Board of Directors, as permitted by law.
If you have any questions or need assistance voting, please contact DF King, our proxy solicitor assisting us in
advance. Please followconnection with the
appropriate instructions described below:StockholderSpecial Meeting. Stockholders may call toll free at (866) 829-1035 or email at 9meters@dfking.com. Brokers and banks may call (212) 269-5550.
What is a proxy?
A proxy is your legal designation of Record: Shares Registeredanother person to vote the stock you own. That other person is called a proxy. If you designate someone as your proxy in Your Name — a written document, that document is also called a proxy or a proxy card. Our Board of Directors has designated John Temperato and Mark Sirgo as the Company’s proxies for the Annual Meeting.
How can I change my vote after submitting it?
If you are a stockholder of record, you may vote in personcan revoke your proxy before your shares are voted at the Annual Meeting by:
•Filing a written notice of revocation bearing a later date than the proxy with our Corporate Secretary at 4509 Creedmoor Road, Suite 600, Raleigh, NC 27612 at or you maybefore the taking of the vote by mail by completing, signing, datingat the Annual Meeting;
•Duly executing a later-dated proxy relating to the same shares and returningdelivering it to our Corporate Secretary at 4509 Creedmoor Road, Suite 600, Raleigh, NC 27612 at or before the accompanying proxy card intaking of the prepaid envelope provided or you may vote electronically viaat the Internet. To vote by Internet, go tohttps://secure.corporatestock.com/vote.phpand follow the instructions to cast your vote. You will need to have your 12-digit control number located on your proxy card. Please do not return the enclosed paper ballot if you are voting by Internet. You may still attendAnnual Meeting;
•Attending the Annual Meeting and votevoting at the meeting (although attendance at the meeting will not in person ifand of itself constitute a revocation of a proxy); or
•If you have already voted by proxytelephone or given your proxy authorization. Stockholders of record may vote in person by attending the Annual Meeting and completing a ballot distributed at the meeting.Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Agent — Stockholders who hold their shares beneficially in “street name” through a nominee (such as a bank or broker) may be able to
vote by telephone,via the Internet, or mail. To votevoting again by Internet, gothe same means prior tohttp://www.proxyvote.com.You should follow the instructions you receive from your nominee to vote those shares. 11:59 PM EDT on July 13, 2023.
If you are a stockholder who ownsbeneficial owner of shares, through a nominee and you attend the Annual Meeting, you may submit new voting instructions by contacting your broker, bank, or other holder of record. You may also vote in person at the Annual Meeting onlyby following the instructions provided by your bank, broker or other holder of record to participate in the Annual Meeting
What does it mean if I receive more than one proxy card or voting instruction form?
It means that you obtain a legalhave multiple accounts at the transfer agent or with banks, brokers or other nominees. Please complete and return all proxy from the broker, trusteecards or nomineevoting instruction forms to ensure that holdsall of your shares givingare voted. For joint
accounts, each owner should sign the proxy card. When signing as an executor, administrator, attorney, trustee, guardian or other representative, please print your full name and title on the proxy card.
Who can help answer my questions about the Annual Meeting or how to submit or revoke my proxy?
If you are the rightstockholder of record, please contact:
9 Meters Biopharma, Inc.
Attn: Investor Relations
4509 Creedmoor Road, Suite 600,
Raleigh, NC 27612
Telephone: (919) 275-1933
investor-relations@9meters.com
If your shares are held in street name, please call the telephone number provided on your voting instruction form or contact your bank, broker or other nominee directly.
Who will pay the costs of soliciting these proxies, and how are they being solicited?
We have engaged DF King, a proxy solicitation firm, at an approximate costs of $12,750 to $20,000, to solicit proxies on behalf of the Company. DF King may solicit the return of proxies, either by mail, telephone, email or through personal contact. The cost of solicitation will be borne by us, including the fees of DF King as well as the reimbursement of their expenses. Our directors and employees may also solicit proxies in person, by telephone, fax, electronic transmission or other means of communication. We will not pay these directors and employees any additional compensation for these services. We will ask banks, brokerage firms, and other institutions, nominees, and fiduciaries to forward these proxy materials to their principal, and to obtain authority to execute proxies, and will reimburse them for their expenses.
If you choose to access the proxy materials and/or submit a proxy to vote on the sharesInternet or telephonically, you are responsible for access charges you may incur.
Where can I find the voting results of the Annual Meeting?
We plan to announce the preliminary voting results at the Annual Meeting.
We will publish the results in a Form 8-K filed with the SEC within four business days after the Annual Meeting.
Whom do I contact if I have questions about the Special Meeting?
| | |
|
| If you have any questions, or require any assistance |
| with voting your shares, please contact: |
|
| D.F. King & Co., Inc. |
|
| 48 Wall Street, 22nd Floor |
| New York, New York 10005 |
|
| Telephone for Banks and Brokers: (212) 269-5550 |
| Stockholders may call toll-free: (866) 829-1035 |
| Email: 9meters@dfking.com |
PROPOSAL 1
ELECTION OF DIRECTORS
Our Board of Directors is divided into three classes. Each class consists, as nearly as possible, of one-third of the total number of directors and each class has a three-year term. At the recommendation of our nominating and corporate governance committee, our Board proposes that the nominees below be elected as Class II directors for a three-year term expiring at the 2026 Annual Meeting of Stockholders and until such director’s successor is elected and qualified, or until his earlier death, resignation or removal.
Information about our directors, including the nominees, their ages as of May 25, 2023, occupations and length of service on the Board of Directors are not awareprovided in the tables below. Additional biographical descriptions are set forth in the text below the tables and include the primary individual experience, qualifications, attributes and skills of any mattereach director that led to be presentedthe conclusion that such director should serve as a member of our Board of Directors at this time.
Nominees for Election to the Board of Directors at the Annual Meeting
The nominees for election to the Board of Directors, and his respective Class and term of service, is set forth below.
| | | | | | | | | | | | | | | | | | | | |
| Name of Director/Nominee | | Age | | Class | | Director Since |
| Michael Rice | | 58 | | Class II | | 2021 |
| John Temperato | | 58 | | Class II | | 2020 |
Michael Rice
Mr. Rice joined our Board in February 2021. Mr. Rice is president and co-founder of LifeSci Advisors, LLC, a life sciences investor relations consultancy, and co-founder of LifeSci Capital, a research-driven investment bank, positions he has held since March 2010. Mr. Rice is also a founding member of LifeSci Communications, LLC, a corporate communications and public relations firm. From June 2019 to December 2020, Mr. Rice also served as Chief Operating Officer and a member of the board of LifeSci Acquisition Corp. until its merger with Vincerx Pharma, Inc. (f/k/a Vincera Pharma, Inc.). Prior to co-founding LifeSci Advisors and LifeSci Capital, Mr. Rice was the co-head of health care investment banking at Canaccord Adams from April 2007 to November 2008, where he was involved in debt and equity financing. Mr. Rice was also a Managing Director at ThinkEquity Partners from April 2005 to April 2007, where he was responsible for managing Healthcare Capital Markets. Prior to that, from August 2003 to March 2005, Mr. Rice served as a Managing Director at Bank of America, serving large hedge funds and private equity healthcare funds. Previously, he was a Managing Director at JPMorgan/Hambrecht & Quist. Mr. Rice has been a director of Navidea Biopharmaceuticals, Inc. (NYSEA: NAVB) since May 2016 and served as a director of RDD Pharma, Ltd. (“RDD”) from January 2016 until the Company’s merger with RDD in May 2020. Mr. Rice received his B.A. from the University of Maryland and Mr. Rice holds Series 7, 24, 63, and 79 licenses.
We believe Mr. Rice’s long-running healthcare investment and advisory experience qualifies him to serve on our Board.
John Temperato
Mr. Temperato joined our Board in April 2020 leading the creation of 9 Meters through a merger of three companies: Innovate Biopharmaceuticals, Inc., RDD, and Naia Rare Diseases, Inc. in May of 2020. Prior to the merger, Mr. Temperato served as the Chief Executive Officer of RDD from March 2019 until April 2020. Prior to joining RDD, Mr. Temperato held various leadership roles, including most notably U.S. President & Chief Operating Officer with Atlantic Healthcare, President & Chief Operating Officer/Chief Commercial Officer with Melinta Therapeutics, Inc., and Senior Vice President of Sales and Managed Markets with Salix Pharmaceuticals,
Inc., a specialty pharmaceutical company specializing in gastrointestinal products. Notably, at Salix Pharmaceuticals, Mr. Temperato played a critical role in the successful commercialization and growth of their broad GI portfolio and executed over ten launches during his tenure at the company driving growth of company revenues from $119 million in 2004 to $2 billion in 2015. Across his career, Mr. Temperato has been instrumental in defining and executing capital efficient go-to-market strategies, business development strategy and overseeing the commercialization and life-cycle management for small molecules, devices, and biologics. Additionally, he has developed strategies for reimbursement and external healthcare policy. He holds a Bachelor of Science degree from the University of Bridgeport in Bridgeport, Connecticut.
We believe that Mr. Temperato’s extensive executive experience in the pharmaceutical and healthcare industries qualifies him to serve on our Board.
Continuing Directors
| | | | | | | | | | | |
| Director | Age | Class | Term |
| Michael Constantino | 60 | Class I | 2025 Annual Meeting of Stockholders |
| Lorin K. Johnson, Ph.D. | 70 | Class I | 2025 Annual Meeting of Stockholders |
| Mark Sirgo, Pharm.D. | 69 | Class III | 2024 Annual Meeting of Stockholders |
| Samantha Ventimiglia | 50 | Class III | 2024 Annual Meeting of Stockholders |
Michael Constantino
Mr. Constantino joined our Board in June 2020. Mr. Constantino is a retired Ernst & Young LLP assurance partner who served in the Research Triangle Park Region of North Carolina for over 30 years. From 2009 to 2012, he served as the Office Managing Partner for the combined Raleigh/Greensboro office. He was responsible for leading a growing practice that included assurance, advisory and tax services focused on public and privately held entrepreneurial companies representing many industries. During his career with the firm, he worked with several companies including life sciences companies (biotechnology, medical device and pharmaceuticals), contract research organizations, technology, manufacturing and transportation companies, and large SEC registrants. Mr. Constantino assisted clients with over 20 initial public offerings, debt offerings, mergers and acquisition transactions, and private equity offerings. He worked closely with companies across the development continuum from start-up to mature public entities and assisted management teams and boards of directors with SEC compliance matters, Sarbanes-Oxley internal controls, global operations and strategic planning. Currently, he is the Chair of the Audit Committee of Humacyte (Nasdaq:HUMA), a biotechnology company that is pioneering the development and manufacture of off-the-shelf, universally implantable, bioengineered human tissues. Mr. Constantino holds a B.A. in both Accounting and Business Management from NC State University and is a North Carolina CPA.
We believe that Mr. Constantino’s extensive experience as a CPA and with SEC compliance matters and Sarbanes-Oxley internal controls qualifies him to serve on our Board.
Lorin K. Johnson, Ph.D.
Dr. Johnson joined our Board in January 2018. He is the founder and Chief Scientist of Glycyx PharmaVentures Ltd., a biopharma investment and development company. In 1989, he co-founded Salix Pharmaceuticals, Inc. (Nasdaq: SLXP), a specialty pharmaceutical company specializing in gastrointestinal products, and held senior leadership positions prior to its $15.8 billion acquisition by Valeant Pharmaceuticals International, Inc. (NYSEA: VRX) in April 2015. Prior to Salix, Dr. Johnson served as Director of Scientific Operations and Chief Scientist at Scios, Inc. (formerly California Biotechnology, Inc). Since June 2019, he has been a board member of Edesa Biotech, Inc. (Nasdaq: EDSA), a biopharmaceutical company in the fields of inflammation, infectious disease and gastroenterology. He is also a board member of Glycyx MOR, Inc. (Delaware) and Kinisi Therapeutics, Ltd. (Isle of Man), as well as Intact Inc. (California). All are GI specialty drug development companies. In addition to his career in industry, Dr. Johnson has served as an Assistant Professor of Pathology at Stanford University Medical Center and held academic positions at Stanford University School of Medicine and the University of California, San Francisco. He is the co-author of 75 journal articles and book chapters and is the co-inventor on 22 issued patents.
Dr. Johnson holds a Ph.D. from the University of Southern California and was a Postdoctoral Fellow at the University of California, San Francisco.
We believe that Dr. Johnson’s extensive experience in the pharmaceutical and life science industries, both as an executive and investor, qualifies him to serve on our Board.
Mark Sirgo, Pharm.D.
Dr. Sirgo joined our Board in April 2020 upon completion of the Company’s merger with RDD and was appointed as Chairman of the Board of Directors. Since January 2023, Dr. Sirgo has served as Chief Executive Officer and a member of the Board of Directors of Corium Pharma Solutions, Inc., a full-service contract development and manufacturing organization specializing in novel drug delivery technologies. Previously, from January 2019 to April 2022, Dr. Sirgo served as Chief Executive Officer and a member of the Board of Directors of ArunA Bio, Inc., a private development-stage company focused on central nervous system and neurodegenerative disorders. Prior to that, he was President and Chief Executive Officer of BioDelivery Sciences International, Inc. (Nasdaq: BDSI) (“BDSI”) from January 2005 to January 2018. He joined BDSI in August 2004 as Senior Vice President of Commercialization and Corporate Development upon its acquisition of Arius Pharmaceuticals, Inc., of which he was a co-founder and Chief Executive Officer. Dr. Sirgo served as a director of BDSI from August 2005 until the sale of the Company in March 2022. Dr. Sirgo has over 30 years of experience in the pharmaceutical industry, including senior and/or executive positions in research and development, business development, sales, marketing and business operations. Dr. Sirgo spent 16 years in a variety of positions of increasing responsibility in both clinical development and marketing at Glaxo, Glaxo Wellcome, and GlaxoSmithKline, including Vice President of International OTC Development and Vice President of New Product Marketing. From 1996 to 1999, Dr. Sirgo was Senior Vice President of Global Sales and Marketing at Pharmaceutical Product Development, Inc. (Nasdaq: PPDI), a leading contract service provider to the pharmaceutical industry. Dr. Sirgo served on the Board of Directors and as Chairman of the Compensation Committee of Salix Pharmaceuticals, Inc. (Nasdaq: SLXP), a specialty pharmaceutical company specializing in gastrointestinal products, from 2008 until its sale in 2015. Dr. Sirgo has served as the Chair of the Board of Directors of Genenta Science (Nasdaq: GNTA), a clinical-stage biotechnology company developing hematopoietic stem progenitor cell immuno-gene therapy for cancer, since April 2022, and he also served on the Board of Directors of Biomerica, Inc. (Nasdaq: BMRA), a gastrointestinal diagnostics and therapeutic company, from 2016 to 2022. Dr. Sirgo received his BS in Pharmacy from The Ohio State University and his Doctorate from Philadelphia College of Pharmacy and Science.
We believe that Dr. Sirgo’s extensive executive level experience in the pharmaceutical industry, including leading both public and private companies and served on multiple boards of directors, qualifies him to serve on our Board.
Samantha Ventimiglia
Ms. Ventimiglia joined our Board in October 2021. Since December 2011, Ms. Ventimiglia has served in various leadership roles at Vertex Pharmaceuticals, Inc., a global biotechnology company, and is currently Senior Vice President, U.S. Public Affairs, responsible for developing and overseeing the company’s policy, government affairs and patient advocacy strategy, including building relationships with state and federal government officials, industry organizations, patient groups and other thanstakeholders. From February 2008 until December 2010, Ms. Ventimiglia was government affairs director at Astellas Pharma US, a multinational pharmaceutical company, and from April 2004 until February 2008, she was a principal consultant at Jeffrey J. Kimbell & Associates, a federal government affairs firm representing clients in the healthcare community who are seeking legislative and regulatory solutions to problems related to product approval, coverage and reimbursement and marketing practices. Prior to that, describedMs. Ventimiglia was a policy director at the Pharmaceutical Research & Manufacturers of America (PhRMA) and the National Governors Association (NGA) where she played a pivotal role in this proxy statement. If, however, other matters properly are brought beforedeveloping the associations’ policy and legislative agenda on Medicare, Medicaid, private sector healthcare and Food & Drug Administration issues. She also held legislative positions in the offices of U.S. Senator Olympia J. Snowe and U.S. Congressman Elton Gallegly. Ms. Ventimiglia received a B.A. from Catholic University of America and a Master of Public Policy from Georgetown University.
We believe that Ms. Ventimiglia’s years of experience seeking legislative and regulatory solutions in the healthcare industry qualifies Ms. Ventimiglia to serve on our Board.
Required Vote
Provided there is a quorum for the Annual Meeting,
or any adjournment or postponementthe director nominees receiving the highest number of
the Annual Meeting, your proxy includes discretionary authority on the partaffirmative votes of
the individuals appointed to vote yourour common stock
present or
actrepresented and entitled to be voted for them will be elected as directors. Votes withheld will have no legal effect on
those matters according to their best judgment, including adjournment of the Annual Meeting.How the Board Recommends that You Vote
Our Board recommends the following votes:
(1) “FOR” the election of a director. Under applicable exchange rules, brokers are not permitted to vote shares held for a customer on “non-routine” matters without specific instructions from the five (5) nomineescustomer. As such, broker non-votes will have no effect on the outcome of this Proposal 1.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE “FOR” THE DIRECTOR NOMINEES LISTED ABOVE.
PROPOSAL 2
APPROVAL OF AMENDMENT NO. 1 TO THE 9 METERS BIOPHARMA, INC.
2022 STOCK INCENTIVE PLAN
Our 2022 Stock Incentive Plan (the “2022 Plan”), originally authorized for director named herein;(2) “FOR” approval, in an advisory vote,issuance 12,000,000 shares of our common stock under the plan. As a result of the compensation paid1-for-20 reverse stock split effected on October 17, 2022, the number of shares authorized for issuance under the 2022 Plan was reduced to 600,000. On March 21, 2023, our named executive officers;
(3) “FOR”Board of Directors approved, subject to stockholder approval, of an amendment of our 2012 Omnibus IncentiveAmendment No. 1 to the 2022 Plan to increase the number of shares of common stock reservedauthorized for issuance thereunder from 970,350under the 2022 Plan to a total of 4,600,000 shares, to 1,370,350 shares;
(4) “FOR” approvalrepresenting an increase of an amendment to our certificate of incorporation to authorize the Board of Directors, if it so chooses, to affect a reverse stock split by a ratio of not less than one-for-two (1:2) and not greater than one-for-four (1:4); and
(5) “FOR” ratification of the appointment of CohnReznick LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2017.
Counting of Votes
Your4,000,000 shares. The additional requested shares will be voted in accordance with your instructions on your duly executed and returned proxy card. If you submit the proxy card but do not indicate your voting instructions, your shares will be voted as follows:
(1) “FOR” the election of the five (5) nominees for director named herein;
(2) “FOR” approval, in an advisory vote, of the compensation paid to our named executive officers;
(3) “FOR” approval of an amendmentrepresent approximately [
l] of our 2012 Omnibus Incentive Plan to increase the number oftotal shares of common stock reserved for issuance thereunder from 970,350 shares to 1,370,350 shares;(4) “FOR” approval of an amendment to our certificate of incorporation to authorize the Board of Directors, if it so chooses, to affect a reverse stock split by a ratio of not less than one-for-two (1:2) and not greater than one-for-four (1:4); and
(5) “FOR” ratification of the appointment of CohnReznick LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2017.
All properly executed proxies delivered pursuant to this solicitation and not revoked will be voted at the Annual Meeting in accordance with the directions given. Representatives of our transfer agent will assist us in the tabulation of the votes.
Abstentions and Broker Non-Votes
An abstention is the voluntary act of not voting by a stockholder who is present at a meeting and entitled to vote.
A “broker non-vote” occurs on a matter when a broker does not vote on a particular proposal because it has not received voting instructions from the beneficial owner and does not have discretionary authority to vote the shares with respect to that proposal. Brokers that hold shares of common stock in a “street name” for customers that are the beneficial owners of those shares generally have discretionary authority to vote on
routine matters without specific instructions from their customers. However, brokers generally do not have discretionary voting power (i.e. they cannot vote) on non-routine matters without specific instructions from their customers. Proposals are determined to be routine or non-routine matters based on the rules of the various regional and national exchanges of which the brokerage firm is a member.
Abstentions and broker non-votes will count toward the presence of a quorum. Refer to each proposal for a discussion of the effect of abstentions and broker non-votes on the results of each proposal.
Revoking Your Proxy
Any proxy given may be revoked by the person giving it at any time prior to its use by notifying the Corporate Secretary of the Company in writing of such revocation, by duly executing and delivering another proxy bearing a later date, or by attending and voting in person at the Annual Meeting. The Company’s address for this purpose is 2655 First Street, Suite 250, Simi Valley, California 93065.
Postponement or Adjournment of the Annual Meeting
If the Annual Meeting were to be postponed or adjourned, your proxy would still be valid and will be voted at the postponed or adjourned meeting. You would still be able to revoke your proxy until it was voted.
Voting Results of the Annual Meeting
The preliminary voting results will be announced at the Annual Meeting. The final voting results will be tallied by the inspector of elections and published in a Current Report on Form 8-K, which we will file with the SEC within four business days after the Annual Meeting.
Solicitation of Proxies
The cost of this solicitation of proxies will be borne by the Company. The Company will solicit stockholders by mail. The Company may, in a limited number of circumstances, use the services of its officers and regularly engaged employees to solicit proxies, personally or by telephone, without additional compensation. The Company will reimburse banks, brokerage firms, other custodians, nominees and fiduciaries for reasonable expenses incurred in sending proxy materials to beneficial owners of the common stock of the Company.
Delivery of Proxy Materials to Households
“Householding” is a program, approved by the Securities and Exchange Commission (the “SEC”), which allows companies and intermediaries (e.g. brokers) to satisfy the delivery requirements for proxy statements and annual reports by delivering only one package of stockholder proxy material to any household at which two or more stockholders reside. If you and other residents at your mailing address own shares of our common stock in “street name,” your broker or bank may have notified you that your household will receive only one copy of our proxy materials. Once you have received notice from your broker that it will be “householding” materials to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement, or if you are receiving multiple copies of the proxy statement and wish to receive only one, please notify your broker if your shares are held in a brokerage account. If you hold shares of our common stock in your own name as a holder of record, “householding” will not apply to your shares.
Interest of Executive Officers and Directors
None of the Company’s executive officers or directors or any of their associates has any interest in any of the matters to be acted upon at the Annual Meeting, except, with respect to potential grants under the 2012 Plan, and with respect to each director, to the extent that a director is named as a nominee for election to the Board.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our Board currently consists of five (5) directors whose terms expireoutstanding as of May 25, 2023. We believe that the Annual Meeting. Accordingly, five (5) directors will be elected at our Annual Meeting. Our Bylaws give the Board the authority to establish, increase or decrease the numbereffective use of directors.
Upon recommendation of the Nominating Committee, the Board has nominated David H. Clarke, Jonathan Clark, Robert Machinist, Christopher Miner, and Steven Barre for election to our Board. If elected, each nominee will serve as a director until our annual meeting of stockholders in 2018 and until his or her successorlong-term equity incentives is elected and qualified.
Unless you otherwise instruct us, your properly executed proxy that is returned in a timely manner will be voted for election of each of these five nominees. Each of the nominees currently serves on our Board and each has advised the Company of his willingness to serve as a member of the Company’s Board, if elected. If, however, any of these nominees should be unable or should fail to act as a nominee because of an unexpected occurrence, your proxy will be voted for such other person as the holders of your proxy, acting in their discretion, may determine. You can find information about the nominees below under the section “Board of Directors and Executive Officers.”
Vote Required
You may vote in favor or withhold your vote as to any or all of the nominees. If a quorum exists at the Annual Meeting, the affirmative vote of a plurality of the shares present or in person or represented by proxy at the Annual Meeting and entitled to vote on the election of directors is required for the election of each nominee for director. There is no cumulative voting for the Board. If stockholders do not specify the manner in which their shares represented by a validly executed proxy solicited by the Board are to be voted on this proposal, such shares will be voted in favor of all of the nominees. Shares that are withheld will have no effect on the outcome of the election of directors. Broker non-votes will not be counted and also will have no effect on the result of the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF
THE DIRECTOR NOMINEES.
PROPOSAL NO. 2
ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
As required pursuant to Section 14A of the Securities Exchange Act of 1934, we are giving our stockholders the opportunity to approve, on an advisory basis, the compensation of our named executive officers. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation. We currently include this advisory vote on our executive compensation every three years.
Our named executive officer compensation program is designedessential to attract, motivate and retain our named executive officers, who are critical toemployees. Based upon our success. The Compensation Committee believes an effective compensation program is one that is designed to align the interests of executive officers with thoseassessment of our stockholders by tying long-term incentive compensation to financial performance and ultimately toanticipated grants under the creation of stockholder value. The Compensation Committee believes that it has taken a responsible approach to compensating our named executive officers.
Please read the “Executive Compensation” section of this proxy statement for additional details about our executive compensation program.
We are asking our stockholders to indicate their support for our named executive officer compensation as described in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Accordingly,2022 Plan, we will ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED,believe that the stockholders of Monster Digital, Inc. hereby approve, on an advisory basis, the compensation of the named executive officers, as disclosedproposed increase in Monster Digital, Inc.’s proxy statement for the 2017 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission.”
The say-on-pay vote is advisory and therefore not binding on the Company, our Compensation Committee or our Board. However, our Board and our Compensation Committee value the views of our stockholders expressed in their votes and will consider the outcome of this vote when determining future compensation arrangements for our named executive officers.
Vote Required
This vote is advisory and therefore is not binding on us, our Board or our Compensation Committee. The affirmative vote of a majority of all votes cast at the Annual Meeting is required for advisory approval of this proposal. If stockholders do not specify the manner in which their shares represented by a validly executed proxy solicited by the Board are to be voted on this proposal, such shares will be voted “for” this proposal. Abstentions will have the same effect as voting against the proposal. Brokers are not authorized to vote without instructions on this proposal and therefore, broker non-votes will not be deemed votes cast and will have no effect on the vote outcome.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SEC.
PROPOSAL 3
APPROVAL OF AN AMENDMENT OF THE COMPANY’S 2012 OMNIBUS INCENTIVE PLAN
General
We are asking our stockholders to approve an amendment of our 2012 Omnibus Incentive Plan (the “2012 Plan”). We use the 2012 Plan to attract and retain key talent, encourage stock ownership by our employees, non-employee directors and consultants, to better align with governance best practices, and to receive a federal income tax deduction for certain compensation paid under the 2012 Plan. The proposed amendment of the 2012 Plan will increase the number of shares will be sufficient to meet our equity compensation requirements for approximately two years from the date of our common stock reserved for issuance under the plan by 400,000 shares. Annual Meeting.
The purpose of
amending the
20122022 Plan is to
enableadvance the interests of our Company and our stockholders through awards that give eligible employees, directors and third party service providers a personal stake in our growth, development and financial success. Awards under the 2022 Plan are also intended to motivate eligible employees, directors and third party service providers to devote their best efforts to our business and help us
to continue to attract and retain
talentedthe services of eligible employees,
non-employee directors and
consultants. Our board of directors believes that the proposed increase of 400,000 shares of our common stock representsthird party service providers who are in a
reasonable amount of potential equity dilution and allows usposition to
continue awarding equity incentives, which are an important component of our overall compensation program. The board unanimously approved the amendment and restatement of the 2012 Plan, subject to approval of our stockholders at this annual meeting. As of April 20, 2017, the closing sales price of a share of our common stock as reported on the NASDAQ Capital Market was $0.76. As of April 20, 2017, the potential number of participants in the 2012 Plan was approximately 20. As of April 20, 2017, a total of 234,949 shares of our common stock remained available for issuance under the 2012 Plan.We believe strongly that the approval of the amendment of the 2012 Plan is essentialmake significant contributions to our success. Our employeesfuture success and align them with stockholder interests.
In this Proposal 2, we are
our most valuable assets. Stock options, stock appreciation rights andrequesting that stockholders approve Amendment No. 1 to the
other awards permitted under the 20122022 Plan
are vital to
our abilitysatisfy Nasdaq rules relating to
attract and retain outstanding and highly skilled employees, especially in the competitive labor markets in which we compete. These awards also are crucial to our ability to motivate employees to achieve our goals. The terms of the 2012 Plan are designed toequity compensation. In addition, approval would allow us to
continue to attract, retain and motivate people whose skills and performance are critical to our success. We will continue to monitor the environment in which we operate and make changes to our equity compensation program to help us meet our goals, including achieving long-term stockholder value.Subject to stockholder approval, we plan to register thequalify additional 400,000 shares reserved under the 2012 Plan on a Registration Statement on Form S-8.
A general description of the principal terms of the 2012 Plan is set forth below. This description is qualified in its entirety by the terms of the 2012 Plan.
2012 Omnibus Incentive Plan
We have adopted a 2012 Omnibus Incentive Plan (the “Plan”). An aggregate of 970,350 shares of our common stock is reservedoptions for issuance and available for awards under the Plan, including incentive stock options granted under the Plan. The Plan administrator may grant awards to any employee, director, consultant or other person providing services to us or our affiliates. As of March 17, 2017, options to acquire an aggregate of 10,100 shares and 16,834 shares of common stock at a per share exercise price of $31.92 and $4.50, respectively, have been granted under the Plan. In addition, an aggregate of 708,467 stock and restricted stock grants have been made under the Plan.
The Plan shall be initially administered by the Board. The Plan administrator has the authority to determine, within the limits of the express provisions of the Plan, the individuals to whom awards will be granted, the nature, amount and terms of such awards and the objectives and conditions for earning such awards. The Board may at any time amend or terminate the Plan, provided that no such action may be taken that adversely affects any rights or obligations with respect to any awards previously made under the Plan without the consent of the recipient. No awards may be made under the Plan after the tenth anniversary of its effective date.
Awards under the Plan may include incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted shares of common stock, restricted stock Units, performance share or Unit awards, other stock-based awards and cash-based incentive awards.
Stock Options. The Plan administrator may grant to a participant options to purchase our common stock that qualifytreatment as incentive stock options for purposes of Section 422 of the Internal Revenue Code, or the “Code”. If stockholder approval is not received, the present 2022 Plan would remain in effect without such amendment. In addition, if stockholder approval is not received, we may seek to hold additional stockholder meetings until stockholder approval is obtained.
As of May 25, 2023, approximately [l] employees, [l] consultants and [l] non-employee directors would be eligible to participate in the 2022 Plan. The closing price of our Company’s common stock on the Nasdaq Capital Market on May 25, 2023 was $[l].
Required Vote
Provided there is a quorum for the Annual Meeting, approval of Amendment No. 1 to the 2022 Plan requires the affirmative vote of a majority of the shares cast and entitled to be cast at the Annual Meeting. Abstentions and broker non-votes will have no effect on the outcome of this Proposal 2.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE “FOR” AMENDMENT NO. 1 TO THE 2022 PLAN.
Summary of the 2022 Plan, as Amended
Following is a summary of the principal features of the 2022 Plan, as amended, which assumes this Proposal 2 is approved by the Company’s stockholders.
| | | | | |
| Principal Features of the 2022 Plan, as amended | Description |
| |
| Share Reserve: | 4,600,000 shares of our Company’s common stock, plus the number of shares of common stock underlying any award granted under the 9 Meters Biopharma, Inc. 2012 Omnibus Incentive Plan, as amended (the “Omnibus Plan”), that expires, terminates, or is canceled or forfeited without such shares of common stock having been issued. The reserved shares are reduced (i) by one share for each share granted pursuant to awards awarded under the 2022 Plan, and (ii) to the extent cash is delivered in lieu of shares of common stock upon the exercise of a stock appreciation right, our Company will be deemed to have issued the number of shares of common stock which it was entitled to issue upon such exercise. |
| |
| Award Types: | Incentive and nonstatutory stock options Stock appreciation rights (“SARs”) Restricted stock awards Restricted stock unit awards (“RSUs”) Dividend equivalent rights |
| |
| Vesting: | Determined by our Board of Directors or a committee designated by our Board. |
| |
| Repricing: | Repricing of outstanding stock awards is not permitted without the approval of our Company’s stockholders, except for certain proportionate capitalization adjustments as set forth in the 2022 Plan. |
| |
| Termination Date: | May 4, 2032 |
Administration
The 2022 Plan is administered by our Board of Directors, or a committee designated by our Board. With respect to grants of awards to our officers or directors, the 2022 Plan is administered by our Board or a designated committee in a manner that permits such grants and related transactions to be exempt from Section 16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The plan administrator has the full authority to select recipients of the grants, determine the extent of the grants, establish additional terms, conditions, rules, or procedures to accommodate rules or laws of applicable non-U.S. jurisdictions, adjust awards, and to take any other action deemed appropriate; however, no action may be taken that is inconsistent with the terms of the 2022 Plan.
Available Shares
Subject to adjustment upon certain corporate transactions or events, the maximum aggregate number of shares of common stock which may be issued pursuant to all awards is the sum of (i) 4,600,000 shares of common stock, and (ii) the number of shares of common stock underlying any award granted under the Omnibus Plan that expires, terminates, or is canceled or forfeited under the terms of the Omnibus Plan without such shares of common stock having been issued. Any shares covered by an award that is forfeited, canceled, or expires are deemed to have not been issued for purposes of determining the maximum aggregate number of shares which may be issued under the 2022 Plan. Shares that actually have been issued under the 2022 Plan pursuant to an award are not returned to the 2022 Plan and do not become available for future issuance under the 2022 Plan, other than unvested shares that are forfeited or repurchased by our Company. In the event any option or other award granted under the 2022 Plan is exercised through the tendering of shares (either actually or through attestation), or in the event tax withholding
obligations are satisfied by tendering or withholding shares, any shares so tendered or withheld are not again available for awards under the 2022 Plan. To the extent that cash is delivered in lieu of shares of common stock upon the exercise of a SAR, then we are deemed, for purposes of applying the limitation on the number of shares, to have issued the number of shares of common stock which were otherwise issuable upon such exercise. Shares of common stock we reacquire on the open market or otherwise using cash proceeds from the exercise of options are not available for awards under the 2022 Plan.
The number of shares authorized for issuance pursuant to our equity incentive plans have been adjusted proportionately to reflect the 1-for-20 reverse stock split we effected in October 2022 (the “Reverse Stock Split”). The Reverse Stock Split did not change the number of authorized shares of capital stock or cause an adjustment to the par value of our capital stock. Pursuant to their terms, a proportionate adjustment was made to the per share exercise price and number of shares issuable under our outstanding stock options and warrants. Unless we specifically state otherwise, the information in this Proposal 2 and elsewhere in the proxy statement assumes the 1-for-20 Reverse Stock Split.
Dividends
No dividend or dividend equivalent has or will be paid on any unvested award, although the plan administrator may provide in an award agreement that dividends with respect to unvested portions of awards may accrue and be paid when and if the awards vest and shares are actually issued to the participant.
Eligibility and Types of Awards
The 2022 Plan permits us to grant stock awards, including stock options, SARs, restricted stock, RSUs, and dividend equivalent rights to our employees, directors, and consultants.
Stock Options
A stock option may be an incentive stock options”), options that do not qualify asoption within the meaning of, and qualifying under, Section 422 of the Code, or a nonstatutory stock option. However, only our employees (or employees of our parent or subsidiaries, if any) may be granted incentive stock options. Incentive and nonstatutory stock options (“non-qualifiedare granted pursuant to option agreements adopted by the plan administrator. The plan administrator determines the exercise price for a stock options”) or a combination thereof. Theoption, within the terms and conditions of the 2022 Plan provided that the exercise price of a stock option grants, including the quantity, price, vesting periods, and other conditions on exercise will be determined by the Plan administrator. The exercise price for stock options will be determined by the Plan administrator in its discretion, but non-qualified stock options and incentive stock options may notcannot be less than 100% of the fair market value of one share of our company’s common stock on the date whenof grant (or 110% of the stock option is granted. Additionally,fair market value in the case of certain incentive stock options, as described below). Options granted under the 2022 Plan become exercisable at the rate specified by the plan administrator.
The plan administrator determines the term of the stock options granted under the 2022 Plan up to a maximum of 10 years, except in the case of certain incentive stock options, as described below. Unless the terms of an optionholder’s stock option agreement provide otherwise, if an optionholder’s relationship with us, or any of our affiliates, ceases for any reason other than disability or death, the optionholder may exercise any options otherwise exercisable as of the date of termination, but only during the post-termination exercise period designated in the optionholder’s stock option award agreement. The optionholder’s stock option award agreement may provide that upon the termination of the optionholder’s relationship with us for cause, the optionholder’s right to exercise his or her options terminates concurrently with the termination of the relationship. If an optionholder’s service relationship with us, or any of our affiliates, ceases due to disability or death, or an optionholder dies within a certain period following cessation of service, the optionholder or his or her estate or person who acquired the right to exercise the award by bequest or inheritance may exercise any vested options for a period of 12 months. The option term may be extended in the event that exercise of the option within the applicable time periods is prohibited by applicable securities laws or such longer period as specified in the stock option award agreement but in no event beyond the expiration of its term.
Acceptable consideration for the purchase of common stock issued upon the exercise of a stock option is determined by the plan administrator and may include (i) cash or check, (ii) a broker-assisted cashless exercise, (iii) the tender of common stock previously owned by the optionholder, (iv) a net exercise of the option, (v) past or future services rendered, and (vi) any combination of the foregoing methods of payment.
Unless the plan administrator provides otherwise, awards generally are not transferable, except by will or the laws of descent and distribution.
Incentive stock options may be granted only to our employees (or to employees of our parent company and subsidiaries, if any). To the extent that the aggregate fair market value, determined at the time of grant, of shares of our common stock with respect to which incentive stock options are exercisable for the first time by an optionholder during any calendar year under any of our equity plans exceeds $100,000, such options do not qualify as incentive stock options. A stock option granted to a holderany employee who, at the time of the grant, owns or is deemed to own stock representing more than 10% of the total combined voting power of all classes of stock (or any of our stock on the date of grant, the exercise priceaffiliates) may not be less thanan incentive stock option unless (i) the option exercise price is at least 110% of the fair market value of one share of commonthe stock subject to the option on the date of grant, and (ii) the term of the incentive stock option is granted. Stock options must be exercised within a period fixed by the Plan administrator that maydoes not exceed tenfive years from the date of grant.
Stock Appreciation Rights
SARs may be granted under the 2022 Plan either concurrently with the grant except that inof an option or alone, without reference to any related stock option. The plan administrator determines both the casenumber of incentiveshares of common stock options grantedrelated to each SAR and the exercise price for a holder of more than 10%SAR, within the terms and conditions of the total combined voting power2022 Plan, provided that the exercise price of all classesa SAR cannot be less than 100% of ourthe fair market value of the common stock subject thereto on the date of grant,grant. In the exercise period may not exceed five years. Atcase of a SAR granted concurrently with a stock option, the Plan administrator’s discretion, payment fornumber of shares of common stock onto which the SAR relates are reduced in the same proportion that the holder of the stock option exercises the related option.
The plan administrator determines whether to deliver cash in lieu of shares of common stock upon the exercise of
a SAR. If common stock
options may be made in cash,is issued, the number of shares of
our common stock
heldthat are issued upon the exercise of a SAR is determined by dividing (i) the number of shares of common stock as to which the SAR is exercised multiplied by the
participant oramount of the appreciation in
any other form of consideration acceptable to the Plan administrator (including one or more forms of “cashless” or “net” exercise).Stock Appreciation Rights. The Plan administrator may grant to a participant an award of SARs, which entitles the participant to receive, upon its exercise, a payment equal to (i) the excess ofsuch shares, by (ii) the fair market value of a share of common stock on the exercise date overdate.
If the plan administrator elects to pay the holder of the SAR cash in lieu of shares of common stock, the holder of the SAR receives cash equal to the fair market value on the exercise date of any or all of the shares that would otherwise be issuable.
The exercise of a SAR related to a stock option is permissible only to the extent that the stock option is exercisable under the terms of the 2022 Plan on the date of surrender. Any incentive stock option surrendered is deemed to have been converted into a nonstatutory stock option immediately prior to such surrender.
Restricted Stock
Restricted stock awards are awards of shares of our common stock that are subject to established terms and conditions. The plan administrator sets the terms of the restricted stock awards, including the size of the restricted stock award, the price times (ii)(if any) to be paid by the recipient, and the vesting schedule and criteria (which may include continued service to us for a period of time or the achievement of performance criteria). If a participant’s service terminates before the restricted stock is fully vested, all of the unvested shares generally are forfeited to, or repurchased by, us.
Restricted Stock Units
An RSU is a right to receive stock, cash equal to the value of a share of stock, or other securities, or a combination of these three elements, at the end of a set period or the attainment of performance criteria. No stock is issued at the time of grant. The plan administrator sets the terms of the RSU award, including the size of the RSU award, the consideration (if any) to be paid by the recipient, vesting schedule, and criteria and form (stock or cash) in which the award will be settled. If a participant’s service terminates before the RSU is fully vested, the unvested portion of the RSU award generally is forfeited to us.
Dividend Equivalent Rights
Dividend equivalent rights entitle the recipient to compensation measured by dividends paid with respect to a specified number of shares of common stock.
Performance-Based Compensation
The 2022 Plan establishes procedures for our Company to grant performance-based awards, meaning awards structured so that they vest only upon the achievement of performance criteria established by the plan administrator for a specified performance period. Performance criteria may be measured on an absolute (e.g., plan or budget) or relative basis, and may be established on a corporate-wide basis or with respect to one or more business units, divisions, subsidiaries or business segments, or may be established on an individual basis. Relative performance may be measured against a group of peer companies, a financial market index or other acceptable objective and quantifiable indices. The plan administrator has the discretion to adjust the minimum level of achievement required for achievement of performance awards if the plan administrator determines that a change in our business, operations, corporate structure or capital structure, the manner in which we conduct our business, or other events or circumstances render the performance objectives unsuitable. The plan administrator also has the discretion to adjust the performance objectives for other material events not originally contemplated when the performance objectives were established, such as extraordinary gains and losses, the effect of changes in accounting standards or principles, acquisitions or divestitures, changes in tax rules or regulations, capital transactions, restructuring, nonrecurring gains or losses or other unusual items.
The business measures that may be used to establish the performance criteria may include one of, or combination of, the following:
•Net earnings or net income (before or after taxes);
•Earnings per share;
•Net sales growth;
•Net operating growth;
•Return measures (including, but not limited to, return on assets, capital, equity, or sales);
•Cash flow (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital);
•Cash flow per share;
•Earnings before or after taxes, interest, depreciation, and/or amortization;
•Gross or operating margins;
•Productivity ratios;
•Share price (including, but not limited to, growth measures and total stockholder return);
•Expense targets or ratios;
•Charge-off levels;
•Improvement in or attainment of revenue levels;
•Margins;
•Operating efficiency;
•Operating expenses;
•Economic value added;
•Improvement in or attainment of expense levels;
•Improvement in or attainment of working capital levels;
•Debt reduction;
•Capital targets;
•Consummation of acquisitions, dispositions, projects, or other specific events or transactions; or
•Other significant operational or business milestones.
Corporate Transactions
Effective upon the consummation of a corporate transaction, all outstanding awards under the 2022 Plan will terminate unless they are assumed in connection with the corporate transaction.
The plan administrator has the authority to determine, before or at the time of any corporate transaction, the impact that the corporate transaction will have on outstanding awards under the 2022 Plan. For example, the plan administrator may determine that (i) awards will vest and become exercisable, or that other restrictions on such awards will lapse, (ii) awards will be assumed by the surviving corporation in the corporate transaction or replaced with awards that have substantially equivalent terms, (iii) participants will receive a payment in satisfaction of outstanding awards, and (iv) in the case of options and SARs, participants will receive a payment in an amount equal to the amount, if any, by which the fair market value of the shares subject to award exceeds the exercise price. The plan administrator is not required to treat all awards in the same way.
Amendment and Termination
Our Board of Directors generally may amend, suspend, or terminate the 2022 Plan. However, it may not amend the 2022 Plan without stockholder approval for certain actions, such as an increase in the number of shares reserved under the 2022 Plan, modifications to the provisions of the 2022 Plan regarding the grant of incentive stock options, modifications to the provisions of the 2022 Plan regarding the exercise prices at which shares may be offered pursuant to options, extension of the expiration date of the 2022 Plan, and certain modifications to awards, such as reducing the exercise price per share, canceling and regranting new awards with lower prices per share than the original prices per share of the cancelled awards, or canceling any awards in exchange for cash or the grant of replacement awards with an exercise price that is less than the exercise price of the original awards.
Tax Withholding
The plan administrator may require a participant to satisfy any federal, state, local, or foreign tax withholding obligation relating to a stock award by (i) causing the participant to tender a cash payment, (ii) withholding shares of common stock from the shares of common stock issued or otherwise issuable to the participant in connection with the award, (iii) delivering to our Company already-owned shares of common stock, (iv) selling shares of common stock from the shares of common stock issued or otherwise issuable to the participant in connection with the award, (v) withholding cash from an award settled in cash or other amounts payable to the participant, and/or (vi) any other means that the plan administrator determines both to comply with applicable laws and be consistent with the purposes of the 2022 Plan.
Summary of Federal Income Tax Consequences of the 2022 Plan
The following summary is intended only as a general guide to certain U.S. federal income tax consequences under current law of participation in the 2022 Plan and does not attempt to describe all possible federal or other tax consequences of such participation or tax consequences based on any participant’s particular circumstances. The summary does not purport to be complete, and it does not address the tax consequences of the participant’s death, any tax laws of any municipality, state or foreign country in which a participant might reside, or any other laws other than U.S. federal income tax laws. Furthermore, the tax consequences are complex and subject to change, and a participant’s particular situation may be such that some variation of the described rules is applicable. Recipients of awards under the 2022 Plan should consult their own tax advisors to determine the tax consequences to them as a result of their particular circumstances.
Incentive Stock Options
A participant recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an incentive stock option qualifying under Section 422 of the Code.
If a participant holds stock acquired through exercise of an incentive stock option for more than two years from the date on which the option was granted and more than one year after the date the option was exercised for those shares, any gain or loss on a disposition of those shares (a “qualifying disposition”) is a long-term capital gain or loss. Upon such a qualifying disposition, we are not entitled to any income tax deduction.
If a participant disposes of underlying shares within two years after the date of grant of the option or within one year after the date of exercise of the option (a “disqualifying disposition”), the difference between the fair market value of the shares on the option exercise date and the exercise price (not to exceed the gain realized on the sale if the disposition is a transaction with respect to which a loss, if sustained, would be recognized) is taxed to the SARparticipant as ordinary income at the time of disposition. Any gain in excess of that amount is exercised. a capital gain. If a loss is recognized, there is no ordinary income, and such loss is a capital loss. To the extent the participant recognizes ordinary income by reason of a disqualifying disposition, generally our Company is entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax-reporting obligation) to a corresponding income tax deduction in the tax year in which the disqualifying disposition occurs.
The difference between the option exercise price and the fair market value of the shares on the exercise date of an incentive stock option is treated as an adjustment in computing the participant’s alternative minimum taxable income and may subject the participant to alternative minimum tax liability for the year of exercise. Special rules may apply after exercise for (i) sales of the shares in a SAR willdisqualifying disposition, (ii) basis adjustments for computing alternative minimum taxable income on a subsequent sale of the shares, and (iii) tax credits that may be determined byavailable to participants subject to the Plan administrator in its discretion; provided, however, that inalternative minimum tax.
Nonstatutory Stock Options
Options not designated or qualifying as incentive stock options are nonstatutory stock options having no
event shallspecial tax status. A participant generally recognizes no taxable income upon the grant of such an option so long as (i) the exercise price
beis no less than the fair market value of
our commonthe stock on the date of
grant.Restricted Sharesgrant, and Restricted Units. The Plan administrator may award(ii) the option (and not the underlying stock) at such time does not have a readily ascertainable fair market value (as defined in Treasury Regulations under the Code). Upon exercise of a nonstatutory stock option, the participant normally recognizes ordinary income in the amount of the difference between the option exercise price and the then-fair market value of the shares purchased, and withholding of income and employment taxes applies if the participant is or was an employee. Generally, the Company is entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax-reporting obligation) to an income tax deduction in the tax year in which such ordinary income is recognized by the participant.
Upon the disposition of stock acquired by the exercise of a nonstatutory stock option, any recognized gain or loss, based on the difference between the sale price and the fair market value on the exercise date, is taxed as capital gain or loss, which is short-term or long-term gain or loss, depending on the holding period of the stock.
Stock Appreciation Rights
A participant does not normally recognize taxable income upon the receipt of a SAR. Upon the exercise of a SAR, the participant recognizes ordinary income in an amount equal to the excess of the fair market value of the underlying shares of common stock on the exercise date over the exercise price. If the participant is an employee, such ordinary income generally is subject to specified restrictions (“withholding of income and employment taxes. The Company generally is entitled to a deduction equal to the amount of ordinary income recognized by the participant in connection with the exercise of the SAR (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax-reporting obligation).
Restricted Stock
A participant acquiring restricted shares”)stock generally recognizes ordinary income equal to the difference between the fair market value of the shares on the “determination date” (as defined below) and their purchase price, if any. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. The “determination date” is the date on which the participant acquires the shares unless they are subject to a
substantial risk of forfeiture and are not transferable, in which case the determination date is the earliest of (i) the date the shares become transferable, (ii) the date the shares are no longer subject to a substantial risk of forfeiture, or (iii) the date the shares are acquired if the participant makes a timely election under Code Section 83(b). RestrictedIf the shares are subject to a substantial risk of forfeiture ifand not transferable when issued, the participant may elect, pursuant to Section 83(b) of the Code, to have the date of acquisition be the determination date by filing an election with the IRS, and other provisions, no later than 30 days after the date the shares are acquired. Upon the taxable disposition of shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value on the determination date, is generally taxed as capital gain or loss; however, for any shares returned to our Company pursuant to a forfeiture provision, a participant’s loss may be computed based only on the purchase price (if any) of the shares and may not take into account any income recognized by reason of a Section 83(b) election. Such gain or loss is long-term or short-term depending on whether the stock was held for more than one year. Our Company generally is entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax reporting obligation) to a corresponding income tax deduction in the year in which the ordinary income from restricted stock is recognized by the participant.
Restricted Stock Units
A participant does not meet certain conditions such as continued employment over a specified forfeiture periodnormally recognize taxable income upon receipt of an RSU award. In general, the participant recognizes ordinary income in the year in which the units vest and are settled in an amount equal to any cash received and/or the attainmentfair market value of specified performance targets overany nonrestricted shares received. If the forfeiture period. Theparticipant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Our Company generally is entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax reporting obligation) to an income tax deduction equal to the amount of ordinary income recognized by the participant.
Dividend Equivalent Rights
A recipient of dividend equivalent rights generally recognizes ordinary income at the time the dividend equivalent right is paid. If required, income and employment tax must be withheld on the income recognized by the participant. Our Company generally is entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax reporting obligation) to an income tax deduction equal to the amount of ordinary income recognized by the participant.
Other Awards
Our Company generally is entitled to an income tax deduction in connection with an award under the 2022 Plan administrator alsoin an amount equal to the ordinary income realized by the participant at the time the participant recognizes such income (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax-reporting obligation). Participants typically are subject to income (and employment) tax and recognize such tax at the time that an award is granted, exercised, vests, or becomes nonforfeitable, unless the award provides for a further deferral.
Section 409A
Section 409A of the Code (“Section 409A”) imposes certain requirements on nonqualified deferred compensation arrangements. Most awards granted under the 2022 Plan are designed to qualify for an exception from the requirements of Section 409A. Certain awards under the 2022 Plan, however, may
award to a participant Units representing the right to receive shares of common stock in the futurebe subject to the
achievementrequirements of
one or more goals relatingSection 409A in form and in operation. Awards that are subject to Section 409A are generally be designed to meet the conditions under Section 409A for avoiding the adverse tax consequences resulting from a failure to comply with Section 409A. If an award under the 2022 Plan is subject to Section 409A and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the
completion of service by the participant and/or the achievement of performance or other objectives (“restricted Units”). The terms and conditions of restricted share and restricted Unit awards are determined by the Plan administrator.Performance Awards. The Plan administrator may grant performance awards to participants under such terms and conditions as the Plan administrator deems appropriate. A performance award entitles a participant to receive a payment from us, the amount ofextent vested, which is based upon the attainment of predetermined performance targets over a specified award period. Performance awards may be paid in cash, shares of common stockbefore the compensation is actually or a combination thereof, as determined by the Plan administrator.
Other Stock-Based Awards. The Plan administrator may grant equity-based or equity-related awards, referred to as “other stock-based awards,” other than options, SARs, restricted shares, restricted Units, or performance awards. The terms and conditions of each other stock-basedconstructively received.
Also, if an award
will be determined by the Plan administrator. Payment under any other stock-based awards will be made in common stock or cash, as determined by the Plan administrator.Cash-Based Awards. The Plan administrator may grant cash-based incentive compensation awards, which would include performance-based annual cash incentive compensation to be paid to covered employeesthat is subject to Section 409A fails to comply with the requirements of Section 409A, Section 409A imposes an additional 20% federal penalty tax on the participant’s compensation recognized as ordinary income, as well as interest on such deferred compensation.
Impact of Section 162(m) on Tax Deductibility of Awards Under the 2022 Plan
Section 162(m) of the
Code. The terms and conditionsCode limits the deductibility for federal income tax purposes of
each cash-based award will be determined by the Plan administrator.Dividend Equivalents. The Plan administrator may provide for the payment of dividends or dividend equivalents with respectcertain compensation paid to any shares of common stock subjectour covered employees in excess of $1 million. For purposes of Section 162(m), the term “covered employee” generally includes our Chief Executive Officer, our Chief Financial Officer, and our three other most highly compensated officers, and any individual who was a covered employee for any taxable year beginning after December 31, 2016. Compensation attributable to an awardawards under the Plan.
2022 Plan either on its own or when combined with all other types of compensation received by a covered employee from the Company, may cause this limitation to be exceeded in any particular year.
Outstanding Equity Awards at Fiscal Year-End
Compensation Plan Information
The
following table
below summarizes theprovides aggregate
stock and option awards held by our named executive officersinformation as of December 31,
2016. | | | | | | | | | | |
| | Option Awards | | Stock Awards |
| Name | | Number of
securities
underlying
unexercised
options
unexercisable | | Option
exercise price | | Option
expiration
date | | Number of
shares of
stock that have
not vested | | Market value
of shares of
stock that have
not vested |
| David Olert | | | 16,834 | | | | 4.50 | | | | 7/7/2026 | | | | 25,000 | (1) | | | 43,750 | |
| Marc Matejka(2) | | | 18,000 | | | | 4.50 | | | | 7/7/2026 | | | | 25,000 | | | | 43,750 | |
| (1) | Mr. Olert was granted an additional 15,000 shares in January 2017. |
| (2) | Mr. Matejka’s status as Vice President, Operations was terminated in March 2017 and all options and shares were forfeited. |
Vote Required
This Proposal 3 requires the affirmative vote of a majority of the outstanding2022, with respect to compensation plans under which shares of our common stock and Preferred Stock voting together as a single class on an as-converted tomay be issued.
| | | | | | | | | | | | | | | | | | | | | | | |
| Plan Category | Number of Securities to be Issued upon Exercise of Outstanding Options | Weighted-Average Exercise Price of Outstanding Options | Number of Securities Remaining Available for Future Issuances under Equity Compensation Plans (excluding securities reflected in column (a)) |
| (a) | (b) | (c) |
| Equity compensation plans approved by security holders (1) | 1,408,743 | | $ | 21.06 | | 565,120 |
| Equity compensation plans not approved by security holders (2) | 49,295 | | | $ | 12.60 | | - |
| Total | 1,459,457 | | $ | 20.77 | | 565,120 |
(1) Consists of (i) 179,630 shares of common stock basis. Stockholders may vote “for” or “against”issuable upon exercise of outstanding options under the proposal, or they may abstain from voting onInnovate 2015 Stock Incentive Plan, with a weighted-average exercise price of $29.88, (ii) 1,192,233 shares of common stock issuable upon exercise of outstanding options under the proposal. AbstentionsOmnibus Plan, with a weighted-average exercise price of $20.22, and broker non-votes will have(iii) 36,880 shares of common stock issuable upon exercise of outstanding options under the same effect as vote “against” this Proposal 3. The proxy holders will vote your2022 Plan, with a weighted-average exercise price of $5.27. As of December 31, 2022, there were 565,120 shares in accordance with your instructions. If you have not given specific instructionsremaining for future issuance under the 2022 Plan.
(2) Pursuant to the
contrary, your shares will be voted “FOR”merger agreement with RDD (the “RDD Merger Agreement”), upon consummation of the
approvalmerger with RDD on April 30, 2020 (the “RDD Merger”), the Company assumed outstanding option grant agreements that were awarded to RDD employees. There were 49,295 assumed RDD options outstanding as of
this Proposal 3.OUR BOARDDecember 31, 2021, with a weighted-average exercise price of $12.60 per share.
PROPOSAL 3
APPROVAL OF
DIRECTORS BELIEVES THAT THE AMENDMENT OF THE 2012 PLAN TO INCREASE THE NUMBER OF SHARES OF OUR COMMON STOCK AVAILABLE FOR GRANT UNDER THE PLAN FROM 970,350 SHARES TO 1,370,350 SHARES IS IN THE BEST INTERESTS OF BOTH OUR STOCKHOLDERS AND THE COMPANY AND RECOMMENDS A VOTE “FOR” THE AMENDMENT.PROPOSAL 4
REVERSE STOCK SPLIT
Introduction
Our
The Board has unanimously approvedof Directors deems it advisable and recommendedin the best interest of the Company that the Board be granted the discretionary authority to our stockholders an amendment to ouramend the Company’s amended and restated certificate of incorporation, as amended (“Certificate of Incorporation”(the “Charter”), to authorize the Board of Directors, if it so chooses, to affecteffect a reverse stock split of the Company’s issued and outstanding common stock as described below (the “Reverse Stock Split Amendment”). The form of Reverse Stock Split Amendment to be filed with the Delaware Secretary of State is set forth in Annex B.
Approval of the proposal would permit (but not require) our Board of Directors to effect a reverse stock split of our issued and outstanding common stock by a ratio of
not lessone-for-ten (1:10) (a “Reverse Stock Split”), provided that the Company effects a Reverse Stock Split no later than
one-for-two (1:2) and not greater than one-for-four (1:4), withone year following the
exact ratio to be set as a whole number withinapproval of this
range determinedproposal by
stockholders. If our Board
andimplements a
related reductionReverse Stock Split, every ten shares of outstanding common stock will be combined into one share of common stock. Holders of fractional shares will be entitled to receive, in
lieu of any fractional share, the
authorized number of shares
of our common stock based on the reverse stock split ratio set by the Board (except in the case of a one-for-two ratio in which case no adjustmentrounded up to the
numbernext whole number. Our Board of
authorized shares of Common Stock will be made) (collectively,Directors reserves the
“Reverse Stock Split”). If this Proposal 4 is approved, our Board may (but is not required to) effect theright to elect to abandon a Reverse Stock Split,
on or before December 31, 2018, which is the end of our fiscal year 2018, without further stockholder approval. Even if this Proposal 4 is approved, our Board may decide not to affect the Reverse Stock Split at all if it determines,
in its sole discretion, that
thea Reverse Stock Split is not
an effective coursein the best interests of
action to achieve corporate objectives.Thethe Company and its stockholders.
Reasons for a Reverse Stock Split will have no effect on the par valueSplit; Potential Consequences of our common stock. The Company will pay cash in lieu of any fractional shares resulting from the Reverse Stock Split. Thea Reverse Stock Split will have
The Company continues to evaluate potential financing, business development and strategic alternatives that might be available to us to maximize stockholder value and drive growth of the effect of reducing the number of outstanding shares of common stock by the chosen ratio and also will reduce the number of authorized shares of common stock by the chosen ratio, except in the case of a one-for-two reverse split ratio. The proposed form of amendment to our Certificate of Incorporation to implement the Reverse Stock Split is attached to this proxy statement asAnnex A (the “Certificate of Amendment”).
Reasons for the Reverse Stock Split
Our common stock is listed on the NASDAQ Capital Market which has a continued listing requirement of $1.00 per share. The common stock has recently at times been trading below $1.00 per share. Our Board is submitting this Reverse Stock Split to our stockholders for approval with the primary intent of giving us the flexibility to increase the marketshare price of our common stock, particularly given the Company’s current liquidity position. Potential strategic transactions may include equity or debt financings, mergers and acquisitions, licensing arrangements and partnerships, co-development agreements, a sale of our Company, a combination of these, or other strategic transactions. We currently have no binding commitments to enhanceengage in any specific strategic transactions and there can be no assurance that we will be able to complete additional financings, business development transactions or other strategic alternatives. As the Company seeks to execute our abilitybusiness plans and explore strategic alternatives, the Company believes a Reverse Stock Split will help preserve flexibility for potential strategic opportunities for growth with institutional investors.
The Company’s primary reasons for approving and recommending a Reverse Stock Split would be to
maintainincrease the
listing requirementsper share price and bid price of
the NASDAQ Capital Market and to make our common stock,
more attractive to a broader range of institutional and other investors.We value our listing on the NASDAQ Capital Market and will consider implementing the Reverse Stock Split in order to assist in maintaining such listing. In addition,as we also believe that the low market price of our common stock impairs its acceptability to important segments of the financialinstitutional investor community and the investing public. Many investors look upon low-priced stock as unduly speculative in nature and, as a matter of policy, avoid investment in such stocks. We believe thatMoreover, the low market price of our common stock hasmay have reduced the effective marketability of thoseour shares because of the reluctance of many leading brokerage firms to recommend low-priced stock to their clients. Further,The Company believes a variety of brokerage house policies and practices tend to discourage individual brokers within those firms from dealing in low-priced stocks. Some of those policies and practices pertain to the payment of brokers’ commissions and to time-consuming procedures that function to make the handling of low-priced stocks unattractive to brokers from an economic standpoint. Finally, the internal guidelines of many institutional investors prohibit the purchase of stock trading below certain minimum prices, typically $1.00 to $5.00.
In order to provide maximum flexibility, we are submitting this proposal with a range of exchange ratios of not less than one-for-two (1:2) and not greater than one-for-four (1:4). The need for the broad range is due to the volatility of the stock price which ranged from a high of $4.01 to a low of $0.76 during the twelve months prior to April 20, 2017.
We believe that enabling our Board to set the ratio within the stated range will provide us with the flexibility to implement the Reverse Stock Split, inif executed, will make its common stock more attractive to a manner designed to maximizebroader range of investors, as it believes that the anticipated benefits for our stockholders. In determining whether to implementcurrent market price of its common stock may prevent or deter certain institutional investors, professional investors and other members of the investing public from purchasing stock. The Company believes that a Reverse Stock Split will make its common stock a more attractive and selectingcost-effective investment for many investors, which in turn would enhance the exchange ratio, our Board will consider factors such as:
Maintaining the listing standards of NASDAQ Stock Market;
The statusliquidity of the holders of common stock listing on the NASDAQ Capital Market and the listing standards of other stock exchanges; andstock.
The historical trading price and trading volume of our common stock;
The number of shares of our common stock outstanding;
The then prevailing trading price and trading volume for our common stock;
The anticipated impact of the Reverse Stock Split on the trading price of and market for our common stock; and
Prevailing general market and economic conditions.
Reducing the number of outstanding shares of our common stock through a reverse stock split is intended,should, absent other factors, togenerally increase the per share market price of our common stock. However, other factors, such as our financial results, market conditions andAlthough the market perceptionintent of a Reverse Stock Split is to increase the price of our business may adversely affectcommon stock, there can be no assurance, however, that even if a Reverse Stock Split is effected, that the bid price of the Company’s common stock will increase the per share market price of our common stock. As a result, there
There can be no assurance that thea Reverse Stock Split, if completed, will result in the intended benefits described above, that the market price of our common stock will increase following thea Reverse Stock Split or that the market price of our common stock will not decrease in the future. Additionally, we cannot assure you that the market price per share of our common stock after
Procedure for Implementing a reverse stock split will increase in proportion to the reduction in the number of shares of our common stock outstanding before the Reverse Stock Split. Accordingly, the total market capitalization of our common stock after theSplit
If we implement a Reverse Stock Split, may be lower thanit will become effective upon the total market capitalization beforefiling or such later time as specified in the filing (the “Split Effective Time”) of a Reverse Stock Split.
Our Board will have sole discretion as toSplit Amendment with the exact timing and precise exchange ratioDelaware Secretary of State. The form of the Reverse Stock Split within the range of ratios specified in this Proposal 4 until December 31, 2018, whichAmendment is the end of our fiscal year 2018. Our Board may also determine that the Reverse Stock Split is no longer in the best interests of the Company and its stockholders and decide to abandon the Reverse Stock Split, at any time before, during or after the Annual Meeting and prior to its effectiveness, without further action by the stockholders.
Effect of the Reverse Split on Our Common Stock
Depending on the ratio for the Reverse Stock Split determined by our Board, a minimum of two and a maximum of four shares of existing common stock will be combined into one new share of common stock. In addition, the authorized number of shares of our common stock will be reduced based on the reverse stock split ratio set by the Board to the extent set forth in the table below. For example, if the Board determines to set the ratio to combine three shares of existing common stock into one new share of common stock, the authorized number of shares of common stock will be amended to be one-third of the existing number of authorized shares (i.e., equal to the adjustment to the outstanding shares in the reverse stock split). No change will be made to the number of authorized shares of common stock if the reverse stock split ratio is set by the Board at two shares combined into one share.
The table below shows,attached hereto as of April 20, 2017, the number of authorized shares of common stock and the approximate number of outstanding shares of common stock (excluding Treasury shares) that would result from the listed hypothetical reverse stock split ratios (without giving effect to the treatment of fractional shares) based on the 8,005,011 shares of common stock issued and outstanding as of such date:
| | | | |
| Reverse Stock Split Ratio | | Approximate Number of
Outstanding Shares of
Common Stock Following the
Reverse Stock Split | | Number of Authorized Shares of
Common Stock Following the
Reverse Stock Split |
| [1-for-2] | | 4,002,506 | | 100,000,000 |
| [1-for-3] | | 2,668,337 | | 100,000,000 |
| [1-for-4] | | 2,001,253 | | 100,000,000 |
The actual number of shares issued and outstanding after giving effect to the Reverse Stock Split, if implemented, will depend on the Reverse Stock Split ratio that is ultimately determined by our Board.
The Reverse Stock Split will affect all holders of our common stock uniformly and will not affect any stockholder’s percentage ownership interest in us, except that, as described below in “— Fractional Shares,” record holders of common stock otherwise entitled to a fractional share as a result of the Reverse Stock Split will receive cash in lieu of such fractional share. In addition, the Reverse Stock Split will not affect any stockholder’s proportionate voting power (subject to the treatment of fractional shares)Annex B.
The Reverse Stock Split may result in some stockholders owning “odd lots” of less than 100 shares of common stock. Odd lot shares may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots are generally somewhat higher than the costs of transactions in “round lots” of even multiples of 100 shares.
The Reverse Stock Split will result in the number of authorized shares of common stock being reduced based on the equivalent of the Reverse Stock Split ratio determined by the Board other than in the case of a one-for-two reverse split in which case no change will be made to the number of authorized shares of common stock. Authorized but unissued shares of our common stock and preferred stock are available for future issuance as may be determined by our Board without further action by our stockholders, unless stockholder approval is required by applicable law or securities exchange listing requirements in connection with a particular transaction. These additional shares may be issued in the future for a variety of corporate purposes including, but not limited to, raising additional capital, corporate acquisitions and equity incentive plans. Except for a stock split or stock dividend, future issuances of common shares will dilute the voting power and ownership of our existing stockholders and, depending on the amount of consideration received in connection with the issuance, could also reduce stockholders’ equity on a per share basis.
The Reverse Stock Split could, under certain circumstances, have an anti-takeover effect (for example, by enhancing our ability to approve future issuances that could dilute the stock ownership of a person seeking to effect a change in the composition of our Board of Directors or contemplating a tender offer or other transaction involving the Company with another company). This Proposal 4 is not being made in response to any effort of which the Board is aware to accumulate shares of our common stock or obtain control of the Company nor does the Company currently have any plans, proposals or arrangements to issue for any purpose, including future acquisitions or financings, any of the newly available authorized shares of common stock resulting from a change in the authorized shares.
Procedure for Implementing the Reverse Stock Split
The Reverse Stock Split, if approved by our stockholders, would become effective upon the filing (the “Effective Time”) of a certificate of amendment to our Certificate of Incorporation with the Secretary of State of the State of Delaware. The exact timing of the filing of the certificate of amendment that will affect thea Reverse Stock Split Amendment, if any, will be determined by our Board of Directors based on its evaluation as to when such action will be the most advantageous to usthe Company and our stockholders. In addition, our Board reserves the right, notwithstanding stockholder approval and without further action by the stockholders, to elect not to proceed with thea Reverse Stock Split if, at any time prior to filing the amendment to our Certificate of Incorporation,a Reverse Stock Split Amendment, our Board, in its sole discretion, determines that it is no longernot in our best interest and the best interests of our stockholders to proceed with thea Reverse Stock Split. If a certificate of amendment effecting the Reverse Stock Split Amendment has not been filed with the Delaware Secretary of State of the State of Delaware by the closedate that is one year following the approval of business on December 31, 2018,this Proposal 3 by our stockholders, our Board will abandon thea Reverse Stock Split.
After
Principal Effects of a Reverse Stock Split
If implemented, a Reverse Stock Split will be effected simultaneously for all outstanding shares of Company common stock. A Reverse Stock Split will affect all of the Company’s stockholders uniformly and will not affect any stockholder’s percentage ownership interests in the Company, except to the extent that a Reverse Stock Split results in any stockholders owning a fractional share. Holders of fractional shares will be entitled receive, in lieu of any fractional share, the number of shares rounded up to the next whole number. Common stock issued pursuant to a Reverse Stock Split will remain fully paid and nonassessable. A Reverse Stock Split will not affect the Company’s continuing to be subject to the periodic reporting requirements of the Exchange Act.
As of the Split Effective Time, ourthe Company will adjust and proportionately decrease the number of shares of common stock reserved for issuance upon exercise of, and adjust and proportionately increase the exercise price of, all options and warrants and other rights to acquire shares of common stock. In addition, as of the Split Effective Time, the Company will adjust and proportionately decrease the total number of shares of common stock that may be the subject of the future grants under stock option plans.
As an example, the following table illustrates the effects of a 1-for-10 Reverse Stock Split (without giving effect to the treatment of fractional shares) as of May 25, 2023:
| | | | | | | | | | | |
| Prior to Reverse Stock Split | | After 1-for-10 Reverse Stock Split |
| Common stock outstanding | [l] | | [l] |
| Common stock issuable pursuant to outstanding equity awards | [l] | | [l] |
| Common stock issuable pursuant to outstanding warrants | [l] | | [l] |
Authorized Shares of Common Stock
A Reverse Stock Split will not change the number of authorized shares or the par value of the Company’s common stock under the Charter. Because the number of issued and outstanding shares of common stock will have a new Committee on Uniform Securities Identification Procedures (“CUSIP”)decrease, the number whichof shares of common stock remaining available for issuance will increase. Currently, under our Charter, our authorized capital stock consists of 550,000,000 shares of common stock.
Subject to limitations imposed by Nasdaq Listing Rules, the additional shares available for issuance may be issued without stockholder approval at any time, in the sole discretion of our Board of Directors. The authorized and unissued shares may be issued for cash, for acquisitions or for any other purpose that is
a number used to identify our equity securities, and stock certificates withdeemed in the
older CUSIP number will need to be exchanged for stock certificates with the new CUSIP number by following the procedures described below.Beneficial Holders of Common Stock (i.e., stockholders who hold in street name)
Upon the implementationbest interests of the Reverse Stock Split, we intend to treat shares held by stockholders through a bank, broker, custodian or other nominee in the same manner as registered stockholders whose shares are registered in their names. Banks, brokers, custodians or other nominees will be instructed to affect the Reverse Stock Split for their beneficial holders holding our common stock in street name. However, these banks, brokers, custodians or other nominees may have different procedures than registered stockholders for processing the Reverse Stock Split. Stockholders who hold shares of our common stock with a bank, broker, custodian or other nominee and who have any questions in this regard are encouraged to contact their banks, brokers, custodians or other nominees.
Company.
Registered “Book-Entry” Holders of Common Stock (i.e., stockholders that are registered on the transfer agent’s books and records but do not hold stock certificates)
Certain of our registered holders of common stock may hold some or all of their shares electronically in book-entry form with the transfer agent. These stockholders do not have stock certificates evidencing their ownership of the common stock. They are, however, provided with a statement reflecting the number of shares registered in their accounts.
Stockholders who hold shares electronically in book-entry form with the transfer agent will not need to take action (the exchange will be automatic) to receive whole shares of post-Reverse Stock Split common stock, subject to adjustment for treatment of fractional shares.
Exchange
Holders of
Stock Certificates and EliminationCertificated Shares of
Fractional Share InterestsAs soon as practicable after filing the certificateCommon Stock
Stockholders holding shares of amendment to our Certificate of Incorporation effecting a Reverse Stock Split with the Secretary of State of Delaware, stockholders will receive instructions for the exchange of their common stock certificatesin certificated form will be sent a transmittal letter by our transfer agent after the Split Effective Time. The letter of transmittal will contain instructions on how a stockholder should surrender his, her or its certificate(s) representing shares of our common stock (the “Old Certificates”) to the transfer agent in exchange for new certificates representing the appropriate number of whole shares of post-Reverse Stock Split common stock (the “New Certificates”). No New Certificates will be issued to a stockholder until such stockholder has surrendered all Old Certificates, together with a properly completed and executed letter of transmittal, to the transfer agent. No stockholder will be required to pay a transfer or other fee to exchange his, her or its Old Certificates. Stockholders will then receive a New Certificate(s) representing the number of whole shares of common stock after thethat they are entitled to as a result of a Reverse Stock Split. However, if permitted,Split, subject to the treatment of fractional shares. Until surrendered, we will deem outstanding Old Certificates held by stockholders to represent the number of whole shares of post-Reverse Stock Split common stock to which these stockholders are entitled, subject to the treatment of fractional shares. Any Old Certificates submitted for exchange, whether because of a sale, transfer or other disposition of stock, will automatically be exchanged for New Certificates. If an Old Certificate has a restrictive legend on the back of the Old Certificate, the New Certificate will be issued with the same restrictive legends that are on the back of the Old Certificate.
The Company may elect to affectexpects that our transfer agent will act as exchange agent for purposes of implementing the exchange in the ordinary course of trading as certificates are returned for transfer. In either event, each current certificate representingstock certificates. No service charges will be payable by holders of shares of common stock in connection with the exchange of certificates. All of such expenses will until so exchanged be deemedborne by the Company.
Beneficial Holders of Common Stock (i.e., stockholders who hold in street name)
Upon the implementation of a Reverse Stock Split, we will treat shares held by stockholders through a bank, broker, custodian or other nominee in the same manner as registered stockholders whose shares are registered in their names. Banks, brokers, custodians or other nominees will be instructed to effect a Reverse Stock Split for all corporate
purposes after the filing date to evidence ownershiptheir beneficial holders holding our common stock in street name. However, these banks, brokers, custodians or other nominees may have different procedures than registered stockholders for processing a Reverse Stock Split. Stockholders who hold shares of our common stock with a bank, broker, custodian or other nominee and who have any questions in this regard are encouraged to contact their banks, brokers, custodians or other nominees.
STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATES(S) AND SHOULD NOT SUBMIT ANY STOCK CERTIFICATES(S) UNTIL REQUESTED TO DO SO.
Appraisal Rights
Under the proportionately reduced number. An exchange agent may be appointedDelaware General Corporation Law, our stockholders are not entitled to act forappraisal or dissenter’s rights with respect to a Reverse Stock Split, and we do not intend to voluntarily provide our stockholders with such rights.
Potential Anti-Takeover Effect
Even though a Reverse Stock Split would result in
effecting the exchangean increased proportion of
their certificates.Stockholders shouldNOTdestroy any stock certificates or submit their stock certificates now. You should submit them only after you receive instructions from us or our exchange agent.
No service charges, brokerage commissions or transfer taxes will be payable by any stockholder, except that if any new stock certificates areunissued authorized shares to be issued, which could, under certain circumstances, have an anti-takeover effect (for example, by permitting issuances that would dilute the stock ownership of a person seeking to effect a change in the composition of the Board of Directors or contemplating a nametender offer or other than that in whichtransaction for the surrendered certificate(s) are registered it will be a conditioncombination of such issuance that (1) the person requesting such issuance pays all applicable transfer taxes resulting from the transfer (or prior to transfer of such certificate, if any) or establishes to our satisfaction that such taxes have been paid or are not payable, (2) the transfer compliesCompany with all applicable federal and state securities laws, and (3) the surrendered certificate is properly endorsed and otherwise in proper form for transfer.
Fractional Shares
We do not currently intend to issue fractional shares in connection withanother company), the Reverse Stock Split. Therefore,Split Proposal is not being proposed in response to any effort of which we will not issue certificates representing fractional shares. In lieuare aware to accumulate shares of issuing fractionsour common stock or obtain control of shares, we intendus, nor is it part of a plan by management to pay cash as follows:
Ifrecommend a stockholder’s shares are held in street name, payment for theseries of similar amendments to our Board and stockholders.
Fractional Shares
Holders of fractional shares will be deposited directly into the stockholder’s account with the organization holding the stockholder’s shares.
If the stockholder’s shares are registered directly in the stockholder’s name, payment for the fractional shares will be made by check, sententitled to the stockholder directly from our transfer agent upon receipt of the properly completed and executed transmittal letter and original stock certificates.
The amount of cash to be paid for fractional shares will be equal to the product obtained by multiplying:
| ▪ | The average closing price of our common stock as reported by the NASDAQ Capital Market for the five trading days immediately preceding the date of the Reverse Stock Split, or if our common stock is not at such time traded on the NASDAQ Capital Market, then as reported on the primary trading market for our common stock; and |
| ▪ | The amount of the fractional share. |
Those stockholders who hold less than the number of shares set forth in the Reverse Stock Split ratio would be eliminated as a result of the payment of fractional sharesreceive, in lieu of any fractional share, the number of shares rounded up to the next whole number. The ownership of a fractional share interest in connection with thefollowing a Reverse Stock Split. The Board reservesSplit will not give the rightholder any voting, dividend or other rights, except to aggregate all fractionalreceive the number of shares for cash and arrange for their sale, with the aggregate proceeds from such sale being distributedrounded up to the holders of fractional shares on a pro rata basis.
next whole number.
Effect of
thea Reverse Stock Split on
EmployeeEquity Incentive Plans, Options,
Restricted Stock Awards and Units, Warrants, and Convertible or Exchangeable Securities
Based upon the Reverse Stock Split ratio, determined by our Board, proportionate adjustments are generally required to be made to the per share exercise price and the number of shares issuable upon the exercise or conversion of all outstanding options, warrants and convertible or exchangeable securities entitling the holders to purchase, exchange for, or convert into, shares of common stock. This would result in approximately the same aggregate price being required to be paid under such options, warrants and convertible or exchangeable securities upon exercise, and approximately the same value of shares of common stock being delivered upon such exercise, exchange or conversion, immediately following thea Reverse Stock Split as was the case immediately preceding thea Reverse Stock Split. The number of shares deliverable upon settlement or vesting of restricted stock awards will be similarly adjusted, subject to our treatment of fractional shares. The number of shares reserved for issuance pursuant to these securities will be proportionately based upon the Reverse Stock Split ratio, determined by the Board, subject to our treatment of fractional shares.
Accounting Matters
This proposed amendment to our Certificate of Incorporation
A Reverse Stock Split Amendment will not affect the par value of our common stock per share, which will remain $0.0001 par value per share. As a result, as of the Split Effective Time, the stated capital attributable to common stock will be proportionately reduced based on the applicable ratio used in the Reverse Stock Split and the additional paid-in capital account on our balance sheet, in the aggregate, will not be materially affectedchange due to thea Reverse Stock Split. Reported per share net income or loss will be higher because there will be fewer shares of common stock outstanding.
Certain Federal Income Tax Consequences
of a Reverse Stock Split
The following summary describes certain material U.S. federal income tax consequences of
thea Reverse Stock Split to holders of our common stock.
Unless otherwise specifically indicated herein, this summary addresses the tax consequences only to a “U.S. holder”, which means a beneficial owner of our common stock that is (i) a citizen or individual resident of the United States, (ii) an entity taxable as a corporation for U.S. tax purposes and organized in or under the laws of the United States, or any state thereof or the District of Columbia, or otherwise(iii) an estate whose income is subject to U.S. federal income taxation onregardless of its source, or (iv) a net income basis in respect of our common stock (a “U.S. holder”). A trust may also be a U.S. holder if (1) a U.S. court is able to exercise primary supervision over administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in place to be treated as a U.S. person. An estate whose income is subject to U.S. federal income taxation regardless of its source may also be a U.S. holder.
This summary does not address all of the tax consequences that may be relevant to any particular investor, including tax considerations that arise from rules of general application to all taxpayers or to certain classes of taxpayers or that are generally assumed to be known by investors. This summary also does not address the tax consequences to stockholders that (i) persons that may be subject to special treatment under U.S. federal income tax law, such as banks, insurance companies, thrift institutions, regulated investment companies, real estate investment trusts, tax-exempt organizations, U.S. expatriates, persons subject to the alternative minimum tax, traders in securities that elect
to mark to market, and dealers in securities or currencies, (ii) persons that hold our common stock as part of a position in a “straddle” or as part of a “hedging,” “conversion” or other integrated investment transaction for federal income tax purposes, or (iii) persons that do not hold our common stock as a “capital assets”asset” (generally, property held for investment). In addition, this summary does not consider the effects of any federal, state, local, foreign, or other tax laws other than the U.S. federal income tax laws.
If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our common stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership.
Partnerships that hold our common stock, and partners in such partnerships,Entities or arrangements treated as a partnership for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences
to them and their owners of
thea Reverse Stock Split.
This summary is based on the provisions of the Internal Revenue Code of 1986, as amended
(the “Code”), U.S. Treasury regulations, administrative rulings, and judicial authority, all as in effect as of the date of this
proxyinformation statement. Subsequent developments in U.S. federal income tax law, including changes in law or differing interpretations, which may be applied retroactively, could have a material effect on the U.S. federal income tax consequences of
thea Reverse Stock Split.
We have not sought and will not seek any ruling from the Internal Revenue Service (the “IRS”), or an opinion from counsel with respect to the U.S. federal income tax consequences discussed below. There can be no assurance that the tax consequences discussed below would be accepted by the IRS or a court. The tax treatment of a Reverse Stock Split to any U.S. holder may vary depending upon such holder’s particular facts and circumstances.
PLEASE CONSULT YOUR OWN TAX ADVISOR REGARDING THE U.S. FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF
THEA REVERSE STOCK SPLIT IN YOUR PARTICULAR CIRCUMSTANCES UNDER THE
INTERNAL REVENUE CODE AND THE LAWS OF ANY OTHER TAXING JURISDICTION.
The
A Reverse Stock Split should be treated as a recapitalization for U.S. federal income tax purposes. Therefore,Thus, a stockholder generally will not recognize gain or loss on thean exchange of common shares for common shares in a Reverse Stock Split, except tofor adjustments that may result from the extenttreatment of cash, if any, received in lieufractional shares of a fractional share interest in the post-Reverse Stock Split shares.common stock as described below. The aggregate tax basis of the post-split shares received in the Reverse Stock Split will be equal to the aggregate tax basis of the pre-splitpre-Reverse Stock Split shares exchanged therefore (excluding(increased by any income or gain recognized on receipt of a whole share in lieu of a fractional share). Except in the case of any portion of a share of common stock treated as a distribution or as to which a U.S. holder recognizes capital gain as a result of the holder’s basis allocated totreatment of fractional shares), andshares, discussed below, the U.S. holder’s holding period for the post-Reverse Stock Split shares of the post-split shares received willcommon stock should include the holding period of pre-Reverse Stock Split shares of common stock surrendered. U.S. holders of shares of common stock should consult their tax advisors regarding the pre-split shares exchanged.
A holderapplicable rules for allocating the tax basis and holding period of the pre-splitsurrendered pre-Reverse Stock Split shares who receives cash will generally recognize gain or loss equalof common stock to the difference betweenpost-Reverse Stock Split shares of common stock received in the portionReverse Stock Split. U.S. holders of shares of common stock acquired on different dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of the pre-split shares allocated to the fractional share interest and the cash received. Such gain or loss will be a capital gain or loss and will be short term if the pre-split shares were held for one year or less and long term if held more than one year.
such shares.
No gain or loss will be recognized by usthe Company as a result of a Reverse Stock Split.
The treatment of fractional shares of common stock being rounded up to the next whole share is uncertain. A U.S. holder that receives a whole share of common stock in the Reverse Stock
Split.No Appraisal Rights
StockholdersSplit in lieu of a fractional share of common stock might recognize income, which may be characterized either as capital gain or as a dividend to the extent of the portion of our accumulated earnings and profits (if we have no rights under Delaware law or under our charter documentsany) attributable to exercise dissenters’ rightsthe rounded share. Any such taxable income would be in an amount not to exceed the excess of appraisal with respectthe fair market value of such whole share over the fair market value of the fractional share to which the U.S. holder was otherwise entitled. U.S. holders should consult their tax advisors regarding the U.S. federal income tax and other tax consequences of fractional shares being rounded to the next whole share (including the holding period of a post-Reverse Stock Split share of common stock received in exchange for a fractional pre-Reverse Stock Split share of common stock).
Required Vote
Provided there is a quorum for the Annual Meeting, approval of the Reverse Stock
Split.Vote Required
This Proposal 4Split Amendment requires the affirmative vote of a majority of the shares outstanding and entitled to vote on Proposal 3 as of the Record Date. Because the affirmative vote of at least a majority of the shares of our common stock and Preferred Stock voting together as a single class on an as-convertedoutstanding is required to common stock basis. Stockholders may vote “for” or “against” the proposal, or they may abstain from voting on the proposal. Abstentions and broker non-votesapprove this Proposal 3, abstentions will have the same effect as a vote “against”against Proposal 3. Under applicable stock exchange rules, brokers are permitted to vote shares held for a customer on “routine” matters, such as this Proposal 4. The proxy holders will vote your shares in accordance with your instructions. If you have not given3, without specific instructions tofrom the contrary, your shares will be voted “FOR” the approval ofcustomer. Therefore, we do not expect any broker non-votes on this Proposal 4.
Board Recommendation
3. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE “FOR” THE REVERSE STOCK SPLIT PROPOSAL.
PROPOSAL 4
ADVISORY (NONBINDING) VOTE ON
NAMED EXECUTIVE OFFICER COMPENSATION
As discussed under the “Executive Compensation” section, our compensation strategy focuses on providing a total compensation package that is designed to attract and retain high-caliber executives by incentivizing them to achieve Company performance goals and closely aligning these goals with stockholder interests. Our philosophy reflects our emphasis on pay for performance and on long-term value creation for our stockholders.
As required by Section 14A of the Exchange Act, we are providing stockholders with an advisory (nonbinding) vote on the compensation of our named executive officers, as described in this Proxy Statement. This Proposal 4, known as a “Say-on-Pay” proposal, is designed to give our stockholders the opportunity to endorse or not endorse our Company’s executive compensation program through the following resolution:
“Resolved, that the stockholders approve, on an advisory (nonbinding) basis, the compensation of our named executive officers, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC (which disclosure includes the Executive Compensation section, the Summary Compensation Table for fiscal year 2022, and other related tables and disclosures)”.
When you cast your vote, we urge you to consider the description of our executive compensation program contained in the Executive Compensation section in this Proxy Statement and the accompanying tables and narrative disclosures.
Required Vote
Provided there is a quorum for the Annual Meeting, the affirmative vote of a majority of the shares cast and entitled to be cast at the Annual Meeting is required for approval of Proposal 4. Abstentions and broker non-votes will have no effect on the outcome of this Proposal 4.
Because your vote is advisory, it will not be binding upon our Board of Directors, overrule any decision by our Board, or create or imply any additional fiduciary duties on our Board or any member of our Board. However, our Board and our compensation committee will take into account the outcome of the vote when considering future executive compensation arrangements.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE “FOR” PROPOSAL 4 ON OUR NAMED EXECUTIVE OFFICER COMPENSATION AS DESCRIBED IN THIS PROXY STATEMENT.
PROPOSAL 4.
5
PROPOSAL NO. 5
RATIFICATION OF APPOINTMENTSELECTION OF
INDEPENDENT
AUDITORSThe Audit CommitteeREGISTERED PUBLIC ACCOUNTING FIRM
Our audit committee has recommended the reappointment of CohnReznick LLPselected Mayer Hoffman McCann P.C. (“Cohn”MHM”) as the Company’sour independent registered public accounting firm for the fiscal year ending December 31, 2017. The Company appointed Cohn2023, and has further directed that we submit our audit committee’s selection of MHM as itsour independent registered public accounting firm in June 2014.Thefor ratification by our stockholders are being requested to ratify the reappointment of Cohn at the Annual Meeting. IfMHM has served as the Company’s auditor since 2015. Representatives of
MHM are expected to be present at the Annual Meeting, either in person or by telephone. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Neither our Bylaws nor other governing documents or law require stockholder ratification of the selection is not ratified, it is contemplated thatof MHM as the appointmentCompany’s independent registered public accounting firm. However, we are submitting the selection of CohnMHM to our stockholders for 2017 may be permittedratification as a matter of good corporate practice. If our stockholders fail to stand in viewratify the selection, our audit committee will reconsider the retention of the difficulty and the expense involved in changing independent auditors on short notice, unless the Audit Committee finds other compelling reasons for making a change.MHM. Even if the selection is ratified, the Audit Committee and the Boardour audit committee in its discretion may direct the appointment of a different independent registered public accounting firmauditors at any time during the year if they determineit determines that such a change would be in the best interests of the Company and its stockholders.
Principal Accountant Fees and Services
The Company anticipates that a representativefollowing table summarizes the aggregate fees billed for professional services rendered to us by our independent registered public accounting firm, Mayer Hoffman McCann P.C. (“MHM”), in 2022 and 2021. A description of Cohn will attendthese various fees and services follows the Annual Meeting. The representative will havetable.
| | | | | | | | | | | | | | | | | | | | |
| | Fiscal Year Ended |
| | 2022 | | 2021 |
| | (in thousands) |
Audit Fees | | $ | 453 | | $ | 253 |
| Audit-related Fees | | | — | | | — |
| Tax Fees | | | — | | | — |
| All Other Fees | | | — | | | — |
| Total Fees | | $ | 453 | | $ | 253 |
All services giving rise to the fees described above were pre-approved by our audit committee. Substantially all of MHM personnel, who work under the control of MHM shareholders, are employees of wholly-owned subsidiaries of CBIZ, Inc., which provides personnel and various services to MHM in an opportunity to make a statement and to respond to appropriate stockholder questions.alternative practice structure.
Audit fees include feesFees billed to us by MHM for the audityears ended December 31, 2022 and 2021, were related to the annual audits of the Company’s annualour consolidated financial statements feesincluded in our Annual Reports on Form 10-K, for the reviewingreviews of the Company’s interim consolidatedour quarterly financial statements included in our Quarterly Reports on Form 10-Q, the issuance of consent and fees forcomfort letters in connection with registration statement filings, and all other services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings orand engagements. In 2016 and 2015 this included reviews related to our Public Offering. The aggregateAudit fees billed by CohnReznick LLPwere $453,000 and $253,000 for the years ended December 31, 2022 and 2021, respectively.
Audit-Related Fees
There were no audit-related fees billed to us by MHM for professional services rendered to us by MHM during the Companyyears ended December 31, 2022 and 2021.
Tax Fees
There were no tax fees billed to us by MHM for professional services rendered to us by MHM during the years ended December 31, 2022 and 2021.
All Other Fees
There were no other fees billed to us by MHM for professional services rendered to us by MHM during the years ended December 31, 2022 and 2021.
Pre-Approval Policies and Procedures
Our audit committee has adopted policy and procedures for the pre-approval of audit and non-audit services rendered by the Company’s independent registered public accounting firm. The policy generally pre-approves specified services in the defined categories of audit services, audit-related services and tax services up to specified amounts. Pre-approval may also be given as part of our audit committee’s approval of the scope of the engagement of the independent auditor or on an individual, explicit, case-by-case basis before the independent auditor is engaged to provide each service. The pre-approval of services may be delegated to one or more of our audit committee’s members, but the decision must be reported to the full audit committee at its next scheduled meeting.
Our audit committee has determined that the rendering of services other than audit services by MHM to date are compatible with maintaining the principal accountant’s independence.
Required Vote
Provided there is a quorum for the Annual Meeting, ratification of the appointment of MHM as the Company’s independent registered public accounting firm requires the affirmative vote of a majority of the shares cast and entitled to be cast at the Annual Meeting. Abstentions will have no effect on the outcome of this Proposal 5. Under applicable stock exchange rules, brokers are permitted to vote shares held for a customer on “routine” matters, such as this Proposal 5, without specific instructions from the customer. Therefore, we do not expect any broker non-votes on this Proposal 5.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE “FOR” PROPOSAL 5 ON THE SELECTION OF MAYER HOFFMAN McCANN P.C. AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD
The principal purpose of the audit committee is to assist the Board of Directors in its oversight of the Company’s accounting and financial reporting processes and audits of the Company’s consolidated financial statements. The Company’s audit committee is responsible for appointing, evaluating, retaining and, when necessary, terminating the Company’s independent registered public accounting firm and approving the audit and non-audit services to be provided by the independent registered public accounting firm.
Management is responsible for the Company’s internal controls and the financial reporting process. The independent registered public accounting firm is responsible for performing an independent audit of the Company’s annualconsolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB) to obtain reasonable assurance that the Company’s consolidated financial statements are free from material misstatement and expressing an opinion on the conformity of such financial statements with accounting principles generally accepted in the United States.
In this context, the audit committee has reviewed and discussed the audited consolidated financial statements for the fiscal years 2016year ended December 31, 2022, with management and 2015, reviewsMHM. The audit committee has discussed with MHM the matters required to be discussed by the applicable requirements of quarterly consolidatedthe PCAOB and the SEC. The audit committee has also received the written disclosures and the letter from MHM required by applicable requirements of the PCAOB regarding the independent accountants’ communications with the audit committee concerning independence, and has discussed with the independent registered public accounting firm the accounting firm’s independence.
Based on its discussions with management and the independent registered public accounting firm, the audit committee in place in March 2023 recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-Q10-K for the fiscal year ended December 31, 2022, which was filed on March 28, 2023, as amended on April 28, 2023.
Submitted by the Audit Committee
Michael Constantino, Chairman
Lorin Johnson, Ph.D.
Mark Sirgo, Pharm.D.
The information contained in the following report of the Company’s audit committee is not considered to be “soliciting material,” “filed” or incorporated by reference in any past or future filing by the Company under the Exchange Act or the Securities Act of 1933 unless and only to the extent that the Company specifically incorporates it by reference.
CORPORATE GOVERNANCE MATTERS
Board Leadership Structure
Our Board of Directors does not have a written policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board. Our Board believes that it is in the best interests of our Company to make that determination from time to time based on the position and the direction of our Company and the membership of our Board. Currently, these roles are held separately. Mr. Temperato serves as Chief Executive Officer and Dr. Sirgo serves as the Board Chair. While the Board believes that separation of these positions serves our Company well, and intends to maintain this separation where appropriate and practicable, the Board does not believe that it is appropriate to prohibit one person from serving as both Board Chairman and Chief Executive Officer.
Role of the Board in Risk Oversight
The audit committee of our Board of Directors is primarily responsible for overseeing our risk management on behalf of our Board. The audit committee receives reports from management on a regular basis regarding our assessment of risks. In addition, the audit committee reports regularly to our Board, which also considers our risk profile. The audit committee and our
Form S-1 filings were $389,000Board focus on the most significant risks we face and
$464,000, respectively.All other Fees
There were no other feesour general risk-management strategies, including cybersecurity risks. While our Board, through our audit committee, oversees our risk management, management is responsible for services by CohnReznick LLPday-to-day risk-management processes.
Each committee of our Board of Directors meets in executive session with key management personnel and representatives of outside advisors to oversee risks associated with their respective principal areas of focus. Our audit committee oversees management of financial risks. Our compensation committee oversees the management of risks related to our executive compensation plans and arrangements. Our nominating and corporate governance committee manages risks associated with the independence of our Board and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through committee reports about such risks.
Independence of Directors
Our common stock is listed on The Nasdaq Capital Market. Under Nasdaq rules, independent directors must comprise a majority of the Board of Directors, and each member of our audit committee, compensation committee and nominating and corporate governance committee must be independent. Under Nasdaq rules, a director will only qualify as an “independent director” if, in the fiscal years 2016opinion of that company’s board of directors, that person does not have a relationship that would interfere with such person’s exercise of independent judgment in carrying out the responsibilities of a director.
Our Board of Directors has undertaken a review of its composition, the composition of its committees and
2015.Determinationthe independence of Auditor Independence
There were noeach director. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, the Board has determined that none of Messrs. Constantino and Rice, Drs. Johnson and Sirgo and Ms. Ventimiglia had a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under applicable Nasdaq rules. In making these determinations, the Board considered the current and prior relationships that each non-employee director has with us and all other facts and circumstances the Board deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.
Board Meetings and Attendance
Our Board of Directors meets throughout the year on a set schedule and also holds special meetings and acts by written consent from time to time. During 2022, the Board held nine meetings and each director attended at least 75% of the aggregate total number of meetings held by the Board and each committee on which he or she served
during the period each director was appointed during 2022. Additionally, Dr. Sirgo and Messrs. Constantino, Rice and Temperato attended the Annual Meeting of Stockholders held on June 22, 2022. We do not have a stated policy regarding director attendance at annual stockholder meetings, but strongly encourage our directors to attend each such meeting.
Board Committees
As described above, our Board of Directors has established an audit committee, a compensation committee and a nominating and corporate governance committee. Our Board may establish other committees to facilitate the management of our business. The composition and functions of each of our audit, compensation and nominating and corporate governance committees are described below. Members serve on these committees until their resignation or until otherwise determined by our Board. Each of these committees is governed by a formal written charter approved by our Board, and a copy of each such charter is available on the Investors - Resources - Corporate Governance section of our website at www.9meters.com. However, the reference to our website does not constitute incorporation by reference of the information contained on or available through our website, and you should not consider it to be a part of this Proxy Statement.
The following table provides membership information of our non-employee directors on each committee of our Board of Directors as of May 25, 2023.
| | | | | | | | | | | | | | | | | |
| Audit Committee | | Compensation Committee | | Nominating and Corporate Governance Committee |
| Michael Constantino | µ | | | | þ |
| Lorin K. Johnson, Ph.D. | þ | | µ | | þ |
| Michael Rice | | | þ | | µ |
| Mark Sirgo, Pharm.D. | þ | | þ | | þ |
| Samantha Ventimiglia | | | | | þ |
µ = Committee Chair
þ = Member
Audit Committee
Our audit committee consists of Mr. Constantino (Chair) and Drs. Johnson and Sirgo. Each of Mr. Constantino and Drs. Johnson and Sirgo satisfy the independence requirements of Rules 5605(a)(2) and 5605(c)(2) of the Nasdaq Stock Market listing rules and Section 10A(m)(3) of the Exchange Act. The audit committee met five times during 2022. Our Board of Directors has determined that Mr. Constantino is an “audit committee financial expert,” as that term is defined by the SEC rules implementing Section 407 of the Sarbanes-Oxley Act, and possesses financial sophistication, as defined under applicable Nasdaq rules. Our Board has also determined that each member of our audit committee can read and understand fundamental financial statements in accordance with applicable SEC and Nasdaq rules. To arrive at these determinations, our Board has examined each audit committee member’s scope of experience and the nature of his experience in the corporate finance sector.
The responsibilities of our audit committee include:
•selecting and retaining, compensating, overseeing and, if necessary, terminating the Company’s independent registered public accounting firm with respect to its performance of audit services and any permissible non-audit services;
•selecting and retaining, compensating, overseeing and, if necessary, terminating any other registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company;
•pre-approving all audit and permitted non-audit and tax services provided by CohnReznick LLPany independent registered public accounting firm;
•reviewing and discussing with the independent registered public accounting firm critical accounting policies and practices, alternative treatments of financial information and other material written communications;
•evaluating the qualifications, performance and independence of the Company’s independent registered public accounting firm;
•reviewing and discussing with the independent registered public accounting firm and management our annual financial statements and, following completion of the audit, reviewing separately with the independent registered public accounting firm and management any problems or difficulties encountered during the audit;
•recommending that would need tothe audited financial statements be consideredincluded in determining auditor independence.Pre-Approval Policy
In accordance with our Audit Committee Charter,Forms 10-K and producing the Audit Committee pre-approves all auditing services and permitted non-audit services, if any,Report required to be performedincluded in our proxy statements;
•reviewing any other relevant reports or other financial information prepared by management and directing the independent registered public accounting firm to use its best efforts to perform a review of interim financial information prior to our disclosure of such financial information;
•discussing policies and procedures concerning press releases and reviewing the information to be included in earnings press releases, as well as financial information and earnings guidance provided to analysts;
•coordinating our Board of Directors’ oversight of our internal control over financial reporting and disclosure controls and procedures;
•discussing our policies with respect to risk assessment and risk management, including risk for fraud, and discussing the guidelines and policies that govern the process by which our exposure to risk is handled;
•establishing procedures for the receipt, retention and treatment of complaints received by us regarding (i) accounting, internal accounting controls or auditing matters and (ii) the confidential, anonymous submission by our independent auditor, subjectemployees of concerns regarding questionable accounting or auditing matters;
•reviewing and approving, or making recommendations to our Board of Directors regarding, our policies and procedures for reviewing and approving or ratifying related person transactions, and reviewing, approving and overseeing any related person transactions;
•monitoring compliance with our Code of Ethics and Business Conduct (the “Code of Ethics”), investigating any alleged breach or violation of the Code of Ethics, enforcing the provisions of the Code of Ethics, and reviewing the Code of Ethics periodically and recommending any changes to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B)Board;
•periodically reviewing our Investment Policy and recommending any changes to the Board;
•performing an annual review and evaluation of the Securities Exchange Actperformance of 1934, as amended,the audit committee and an annual review of its charter; and
•performing any other activities consistent with the Company’s governing documents or that the audit committee or Board of Directors deems necessary or appropriate.
Compensation Committee
Our compensation committee consists of Dr. Johnson (Chair), Mr. Rice and Dr. Sirgo. Each of Dr. Johnson, Mr. Rice and Dr. Sirgo, satisfy the independence requirements of Rules 5605(a)(2) and 5605(d)(2) of the Nasdaq Stock Market listing rules. The compensation committee met two times during 2022.
The responsibilities of our compensation committee include:
•reviewing and approving, or recommending that our Board of Directors approve, the compensation of our Chief Executive Officer and all other executive officers, and evaluating the compensation in light of the most recent stockholder advisory vote on executive compensation;
•periodically reviewing and making recommendations to our Board of Directors with respect to director compensation;
•reviewing and approving, or recommending that our Board of Directors approve, incentive compensation plans and equity-based plans;
•reviewing and approving, or making recommendations to our Board of Directors regarding, any employment agreements and any severance arrangements or plans, including any benefits to be provided in connection with a change in control, for our Chief Executive Officer and other executive officers;
•reviewing and recommending to the Board of Directors the frequency with which are approvedthe Company will conduct Say-on-Pay votes and reviewing and approving the Say-on-Pay and Say-on-Frequency proposals for inclusion in the Company’s proxy statements;
•overseeing the management of risks relating to our executive compensation plans and arrangements;
•performing an annual review and evaluation of the performance of the compensation committee and an annual review of its charter; and
•performing any other activities consistent with the Company’s governing documents or that the compensation committee or Board of Directors deems necessary or appropriate.
Our compensation committee reviews and approves, or recommends for approval by the Audit Committee priorBoard of Directors, the compensation of our Chief Executive Officer and our other executive officers. Our compensation committee meets without the presence of executive officers when approving or deliberating on the compensation of our Chief Executive Officer but may, in its discretion, invite our Chief Executive Officer to be present during the completionapproval of, or deliberations with respect to, compensation for our other executive officers. Our compensation committee also periodically reviews and makes recommendations to our Board of Directors regarding the audit. The scopecompensation of the pre-approval includes pre-approval of all fees and terms of engagement, including those performed for purposes of providing comfort letters and statutory audits. The Audit Committeeour directors. Our compensation committee may form and delegate authority to subcommittees consisting of one or more members whensubcommittees as it deems appropriate includingfrom time to time.
Our compensation committee has the authority, in its sole discretion, to retain or obtain the advice of such compensation consultants, legal counsel or other advisors as it deems necessary or appropriate. During 2022, Willis Towers Watson US LLC (“WTW”) assisted the compensation committee by providing consulting services with regard to the compensation of our executive officers, non-executive staff and directors. Other than its engagement by the compensation committee, WTW provides no other services to the Company. The compensation committee has assessed the independence of WTW and concluded that its engagement of WTW does not raise any conflict of interest with us or any of our directors or executive officers.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Mr. Rice (Chair), Mr. Constantino, Drs. Johnson and Sirgo and Ms. Ventimiglia. Each of Messrs. Rice and Constantino, Drs. Johnson and Sirgo and Ms. Ventimiglia satisfy the independence requirements of Rule 5605(a)(2) of the Nasdaq Stock Market listing rules. The nominating and corporate governance did not meet in person during 2022, but took action by written consent once during 2022.
The responsibilities of our nominating and corporate governance committee include:
•identifying and screening individuals qualified to become members of our Board of Directors;
•recommending the number of members that shall serve on our Board of Directors;
•evaluating and reviewing the qualifications and independence of existing and prospective directors;
•selecting and approving the director nominees to be submitted to a stockholder vote at our Annual Meeting of stockholders;
•developing and recommending corporate governance guidelines to our Board of Directors;
•periodically reviewing our Board of Directors’ leadership structure;
•overseeing the review by our Board of Directors, from time to time, of succession planning for senior executives;
•overseeing the evaluation of our Board of Directors and its committees; and
•performing an annual review and evaluation of the performance of our nominating and corporate governance committee and an annual review of its charter.
Our nominating and corporate governance committee identifies persons as candidates to serve on the Board of Directors and selects, or recommends that our Board select, the nominees for directorships to be filled by our Board or by our stockholders at an annual or special meeting. In evaluating the suitability of individual candidates, our nominating and corporate governance committee may take into account many factors, including, among others, personal and professional integrity, ethics and values, experience in corporate management, strong finance experience, practical and mature business judgment, experience relevant to our industry, experience as a board member or executive officer of another publicly held company, relevant academic expertise or other proficiency in an area of our operations, diversity of expertise and experience in substantive matters pertaining to our business relative to other board members and diversity of background and perspective, including, but not limited to, with respect to age, gender, ethnicity, place of residence and specialized experience. The committee charter requires the nominating and corporate governance committee to strive to include candidates with a diversity of ethnicity and gender in each pool of candidates from which Board nominees are chosen and seek diverse candidates by including in the candidate pool (among others) individuals with diverse backgrounds in terms of knowledge, experience, skills, and other characteristics. Our nominating and corporate governance committee evaluates each person in the context of our Board as a whole, with the objective of assembling a group that can best effect and perpetuate the success of our Company and represent stockholder interests through the exercise of sound judgment, using its diversity of experience in these various areas.
Our nominating and corporate governance committee will consider stockholder recommendations of candidates on the same basis as it considers all other candidates. Stockholder recommendations should be submitted to us under the procedures discussed in “Stockholder Communications with the Board of Directors,” and should include the full name of the proposed nominee, a description of the proposed nominee’s business experience for at least the previous five years, complete biographical information and a description of the proposed nominee’s qualifications as a
director. Any such submission must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director if elected.
Environmental, Social and Governance
The management team and the Board of Directors of the Company are keenly aware of the importance of environmental, social and governance issues, and the Company’s need to conduct business with high standards. Our mission as an organization is to be patient-centric and develop innovative treatments to liberate patients from rare and underserved diseases through our deep understanding of GI biology.
We collectively believe that pursuing an environmental, social and governance (“ESG”) agenda serves the interests of all of our stakeholders, which includes our stockholders. Our employees, partners, and investors expect us to honor our values and take action to promote a more equitable and sustainable world for future generations.
As we further build our organization behind our pipeline of innovative products to treat rare and unmet needs in digestive diseases, we intend to strive to understand the perspectives of the diverse clients and communities we will serve, and as such, we are intensifying our efforts to drive diversity and inclusion and a culture of belonging throughout our organization. We will strive to comply with all applicable environmental laws, regulations and policies concerning environmental protection in all our business activities and in the selection of partners we choose to work with. We are committed to strengthening our local community by contributing through volunteerism and will continue, as we have been doing, to provide donations to parties we believe will support our goal in improving patient health and well-being. We are also committed to good corporate governance. All of our employees, officers and directors must conduct themselves according to the language and spirit of our Code of Ethics, and our Board of Directors is dedicated to providing effective corporate oversight including through oversight committees such as the nominating and governance committee and the audit committee.
Diversity, Equity and Inclusion
At 9 Meters, we are committed to diversity, equity and inclusion across all aspects of our organization, including hiring, promotion and development practices. We seek to build a diverse and inclusive workplace and have no tolerance for prejudice or racism. As of May 25, 2023, [l] of our employees self-reported as ethnically diverse individuals and [l] of our employees self-reported as female.
We are committed to ensuring our employees receive equal pay for equal work. We establish components and ranges of compensation based on market and benchmark data. Within this context, we strive to pay all employees equitably within a reasonable range, taking into consideration factors such as role, relevant experience, internal equity, job location, and individual, business unit and Company performance. In addition, we are committed to providing benefits designed to allow our diverse workforce to have reward opportunities that meet their varied needs so that they are inspired to perform their best on behalf of patients and stockholders each day. We regularly review our compensation practices and analyze the equity of compensation decisions, for individual employees and our workforce as a whole. If we identify employees with pay gaps, we receive and take action to attain fidelity between our stated philosophy and actions.
Board Diversity
We are committed to fostering an environment of diversity and inclusion, including among the members of our Board of Directors. Therefore, while the Board has not adopted a formal diversity policy, in considering director nominees, the nominating and governance committee considers candidates who represent a mix of backgrounds and a diversity of gender, race, ethnicity, age, background, professional experience and perspectives that enhance the quality of the deliberations and decisions of our Board, in the context of both the perceived needs of the structure of our Board and the Company’s business and structure at that point in time.
| | | | | | | | | | | | | | |
| Board Diversity Matrix |
| Total Number of Directors | 6 | | | |
| Female | Male | Non-Binary | Did Not Disclose Gender |
| Part I: Gender Identity | | | | |
| Directors | 1 | 5 | — | — |
| Part II: Demographic Background | | | | |
| African American or Black | — | — | — | — |
| Alaskan Native or Native American | — | — | — | — |
| Asian | — | — | — | — |
| Hispanic or Latinx | — | — | — | — |
| Native Hawaiian or Pacific Islander | — | — | — | — |
| White | 1 | 5 | — | — |
| Two or More Races or Ethnicities | — | — | — | — |
| LGBTQ+ | — | — | — | — |
| Did Not Disclose Demographic Background | — | — | — | — |
Stockholder Communications with the Board of Directors
Stockholders who wish to communicate with our Board of Directors may do so by sending written communications to our Corporate Secretary addressed as follows: 9 Meters Biopharma, Inc., Attn: Corporate Secretary, 4509 Creedmoor Road, Suite 600, Raleigh, NC 27612. The communications will be reviewed by the Corporate Secretary. Our Corporate Secretary will forward such communication to the Board or to any individual director to whom the communication is addressed unless the communication is frivolous, hostile, threatening or similarly inappropriate, in which case our Corporate Secretary shall discard the communication.
Code of Ethics and Business Conduct
We have adopted a Code of Ethics and Business Conduct that applies to our directors, officers (including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions) and other employees. Our Code of Ethics is available on our website under Investors — Resources, which may be accessed by navigating to www.9meters.com/resources. We intend to post on our website and (if required) file on Form 8-K all disclosures that are required by applicable law, the rules of the SEC or the Nasdaq listing standard, concerning any amendment to, or waiver from, our Code of Ethics. However, the reference to our website does not constitute incorporation by reference of the information contained on or available through our website, and you should not consider it to be a part of this Proxy Statement.
Anti-Hedging and Anti-Pledging Policies
The Company’s Insider Trading Policy prohibits our directors, officers and employees from engaging in any hedging activity in our securities or pledging any of our securities as collateral for loans or margin accounts.
EXECUTIVE OFFICERS OF THE COMPANY
For information regarding Mr. Temperato, our Chief Executive Officer, please see his biography above under “Directors.”
Bethany Sensenig
Ms. Sensenig joined our Company as Chief Financial Officer in January 2022. Prior to joining the Company from March 2019 to January 2022, Ms. Sensenig was Chief Financial Officer and Head of U.S. Operations of Minovia Therapeutics, Ltd., a clinical-stage biotech company, where she played a leadership role building the company’s business and financing strategy. From April 2006 to March 2019, Ms. Sensenig held various roles at Biogen, Inc. a multinational biotechnology company, where she most recently held the position of Vice President of Finance and Commercial Operations. Earlier in her career, Ms. Sensenig held financial management and analyst roles at Merck & Co. Inc. and Nexus Technologies, Inc. Ms. Sensenig holds a Bachelor of Science in Accounting and Business Management from Montreat College, a Master of Business Administration from Western Carolina University and is a Certified Management Accountant.
EXECUTIVE COMPENSATION
This Executive Compensation section describes the material elements of our compensation program for our “named executive officers” during 2022. Our named executive officers consisted of three individuals, our principal executive officer and the two individuals that served as our principal financial officer during 2022 (the “NEOs”); there were no other executive officers of the Company during 2022. Our named executive officers for 2022 were:
•John Temperato, who has served as our President and Chief Executive Officer (our “CEO”) since April 2020;
•Bethany Sensenig, who has served as our Chief Financial Officer (our “CFO”) since January 2022; and
•Edward J. Sitar, who served as our Chief Financial Officer (our “Former CFO”) from June 2019 through January 2022.
Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and
Principal
Position | Year | | Salary
($) | | Bonus ($) | | Stock Awards(1) ($) | | Option Awards(2) ($) | | Non-equity Incentive Plan Compensation(3) ($) | | All Other Compensation
($) | | Total
($) |
| John Temperato | 2022 | | $ | 553,213 | | | $ | — | | | $ | — | | | $ | 1,108,892 | | | $ | — | | | $ | — | | | $ | 1,662,105 | |
| President and Chief Executive Officer | 2021 | | $ | 537,100 | | | $ | — | | | $ | — | | | $ | 1,435,854 | | | $ | 214,840 | | | $ | — | | | $ | 2,187,794 | |
| | | | | | | | | | | | | | | |
Bethany Sensenig(4) | 2022 | | $ | 457,294 | | | $ | — | | | $ | — | | | $ | 753,998 | | | $ | — | | | $ | 50,002 | | | $ | 1,261,294 | |
| Chief Financial Officer | 2021 | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | |
Edward J. Sitar(5) | 2022 | | $ | 40,963 | | | $ | — | | | $ | — | | | $ | 558,907 | | | $ | — | | | $ | 397,956 | | | $ | 997,826 | |
| Chief Financial Officer | 2021 | | $ | 371,500 | | | $ | — | | | $ | — | | | $ | 523,489 | | | $ | 118,880 | | | $ | — | | | $ | 1,013,869 | |
(1)The amount in the “Stock Awards” column reflects the grant pre-approvalsdate fair value of auditrestricted stock units granted during the calendar year computed in accordance with the provisions of Accounting Standards Codification (“ASC”) 718, Compensation-Stock Compensation. The grant date fair value, which is based on the value of the underlying common stock on the date of grant, does not reflect the actual economic value that will be
realized by the NEO upon the vesting of the restricted stock units or the sale of the common stock underlying the award.
(2)The amounts in the “Option Awards” column reflect the aggregate Black-Scholes grant date fair value of stock options granted during the calendar year computed in accordance with the provisions of ASC 718, Compensation-Stock Compensation. The assumptions that were used to calculate the value of these awards are discussed in Notes 1 and permitted non-audit services,9 to the consolidated financial statements included in our Annual Report on Form 10-K. These amounts do not reflect the actual economic value that will be realized by the NEO upon the vesting of the stock options, the exercise of the stock options or the sale of the common stock underlying such stock options.
(3)During February 2022 and March 2023, the compensation committee determined the non-equity incentive plan compensation to certain executives and senior employees for the prior year’s performance. See section entitled “Employment Agreements with Our Named Executive Officers” below for further details of non-equity incentive plan compensation that may be awarded under those agreements.
(4)Ms. Sensenig was appointed as Chief Financial Officer, effective January 15, 2022. All other compensation consists of a one-time relocation reimbursement of $50,002.
(5)Mr. Sitar served as Chief Financial Officer until his separation from the Company, effective January 14, 2022. All other compensation consists of separation payments pursuant to a separation and consulting agreement with Mr. Sitar, effective January 14, 2022, the terms of which are described below under “Employment Agreements with Our Named Executive Officers.”
Narrative Disclosure to Summary Compensation Table
The primary elements of compensation for our NEOs consisted of base salary, equity-based compensation awards and other compensation such as discretionary bonuses and annual non-equity incentive bonuses. Our NEOs are also able to participate in employee benefit plans and programs that we offer to our other full-time employees on the same basis. Each of our NEOs is (or was) compensated by us pursuant to an executive employment agreement, the terms of which are described below under “Employment Agreements with Our Named Executive Officers.”
Base Salary
The base salary payable to our NEOs was intended to provide a fixed component of compensation that reflected the executive’s skill set, experience, role and responsibilities.
Bonus
Pursuant to their respective employment agreements, each NEO is (or was) eligible for an annual non-equity incentive award, based on goals established by the Board. In 2022 and 2021, the Board set goals related to various operational and financial objectives. In March 2023, the compensation committee determined that the financial position of the Company did not permit the compensation committee to recommend any payment of bonuses at that time and the committee decided that 0% of target bonus amounts for cash and equity grants would be paid out for the year ended December 31, 2022.
Equity Awards
The Company has three stock option plans in existence: the 2012 Omnibus Incentive Plan, as amended (the “Omnibus Plan”), the Innovate 2015 Stock Incentive Plan (the “Private Innovate Plan”) and the 2022 Plan. We will no longer award options under the Private Innovate Plan or the Omnibus Plan. In addition, pursuant to the RDD Merger Agreement, we assumed previously issued option grant agreements awarded to RDD employees upon consummation of the RDD Merger on April 30, 2020. For information about stock option awards granted to our NEOs, see the “Outstanding Equity Awards at Year-end” table below. We believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture and help to align the interests of our executives and stockholders. In addition, we believe that equity grants with a time-based vesting feature promote executive retention by incentivizing executives to continue employment during the vesting period.
Health, Welfare and Additional Benefits
Each of our NEOs is (or was) eligible to participate in our employee benefit plans and programs, including medical, dental and vision benefits, to the same extent as our other full-time employees, subject to the terms and eligibility requirements of those plans.
2022 Outstanding Equity Awards at Fiscal Year-End
The following table presents the outstanding equity awards held by our NEOs as of December 31, 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Option Awards | | |
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | | | |
| John Temperato | 12,338 | (1) | — | | $ | 14.80 | | | 4/30/2025 | | | | | | |
| CEO | 37,501 | (2) | 12,499 | | | $ | 14.04 | | | 4/30/2030 | | | | | | |
| 7,344 | (3) | 8,174 | | $ | 12.43 | | | 7/6/2030 | | | | | | |
| 19,323 | (4) | 12,660 | | $ | 21.40 | | | 11/27/2030 | | | | | | |
| 15,574 | (4) | 16,928 | | $ | 21.40 | | | 11/27/2030 | | | | | | |
| 30,013 | (5) | 35,470 | | $ | 36.20 | | | 2/4/2031 | | | | | | |
| — | (6) | 123,954 | | $ | 13.00 | | | 2/21/2032 | | | | | | |
| | | | | | | | |
| Bethany Sensenig | — | (7) | 65,001 | | $ | 16.89 | | | 1/18/2032 | | | | | | |
| CFO | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Edward J. Sitar (10) | 17,501 | (8) | — | | $ | 23.30 | | | 7/1/2029 | | | | | | |
| Former CFO | 8,808 | (9) | — | | $ | 12.00 | | | 4/24/2030 | | | | | | |
| 6,251 | (2) | — | | $ | 14.04 | | | 4/30/2030 | | | | | | |
| 27,502 | (3) | — | | $ | 12.43 | | | 7/6/2030 | | | | | | |
| 11,252 | (3) | — | | $ | 12.43 | | | 7/6/2030 | | | | | | |
| 23,874 | (5) | — | | $ | 36.20 | | | 2/4/2031 | | | | | | |
(1) This option was granted by RDD Pharma, Ltd. and was assumed by the Company pursuant to the RDD Merger Agreement upon consummation of the RDD Merger on April 30, 2020.
(2) This option was granted under the Omnibus Plan, and 25% of these options vested on April 30, 2020, with the remainder vesting monthly over the next 48 months.
(3) This option was granted under the Omnibus Plan, and 25% of these options vested on July 6, 2021, with the remainder vesting monthly over the next 36 months.
(4) This option was granted under the Omnibus Plan and began vesting upon satisfaction of certain performance criteria previously set by the Board. The Compensation Committee determined that the performance criteria was met and vesting began on January 1, 2021, with 25% vesting on January 1, 2022 and the remainder vesting over the next 36 months.
(5) This option was granted under the Omnibus Plan, and 25% of these options vested on February 4, 2022, with the remainder vesting monthly over the next 36 months.
(6) This option was granted under the Omnibus Plan, and 25% of these options vested on February 21, 2023, with the remainder vesting monthly over the next 36 months.
(7) This option was granted under the Omnibus Plan, and 25% of these options vested on January 18, 2023, with the remainder vesting monthly over the next 36 months.
(8) This option was granted under the Omnibus Plan, and 7.5% vested on December 31, 2019. The remainder of the options vesting was accelerated upon completion of the RDD Merger on April 30, 2020.
(9) This option was granted under the Omnibus Plan, and was fully vested on the date of grant, April 24, 2020.
(10) Mr. Sitar was serving as an independent consultant for the three months following the January 14, 2022 separation date. The material terms of Mr. Sitar’s previously granted equity awards subject to time-based vesting remained unchanged and continued to vest during the consulting period. Following the end of the consulting period, the remaining unvested equity awards previously granted to Mr. Sitar subject to time-based vesting were accelerated and became fully vested with the exercise period being extended to ten years from the issuance date.
Employment Agreements with Our Named Executive Officers
John Temperato
We entered into an executive employment agreement with Mr. Temperato, effective April 30, 2020, as amended on July 12, 2021. Pursuant to the executive employment agreement with Mr. Temperato, he receives an initial base salary of $450,000 per year, subject to review and adjustment by the Board from time to time. Effective January 1, 2021, Mr. Temperato’s salary was increased to $537,100. Upon execution of the employment agreement, the Board approved an option grant to Mr. Temperato to purchase 50,000 shares of common stock, which vested 25% upon grant, with the remainder vesting in 48 equal month installments, provided that decisionsMr. Temperato remains an employee of the Company as of each such vesting date. Mr. Temperato is eligible to receive an annual non-equity incentive cash award with a target amount of 40% of his base salary, as determined by the Board in its sole discretion (and pro-rated for 2020). Mr. Temperato is also eligible to participate in the Company’s other employee benefit plans in effect from time to time on the same bases as are generally made available to other senior executive employees of the Company.
If the employment of Mr. Temperato is terminated by the Company without “Cause” or by Mr. Temperato for “Good Reason” (each as defined in the employment agreement, as amended), Mr. Temperato will be eligible to receive 12 months of his then-current salary, the prorated amount of his target year-end annual non-equity incentive award, and accelerated vesting of his unvested options and restricted stock unit awards that were scheduled to vest in the 12 months following termination. However, if such termination of employment occurs within 12 months of a “Change in Control” (as defined in the employment agreement, as amended), then Mr. Temperato will be eligible to receive 18 months of his then-current salary, the amount of his target year-end annual non-equity incentive award, and accelerated vesting of all of his unvested options and restricted stock unit awards. All separation benefits are subject to Mr. Temperato entering into and not revoking a separation agreement.
Effective November 27, 2020, the Board cancelled certain stock option awards to Mr. Temperato that were intended to be granted to Mr. Temperato on July 6, 2020 (collectively, the “Original Stock Options”) under the 2012 Plan. The purpose of the cancellation was to correct an inadvertent error that occurred when the Company included a number of shares in the Original Stock Options that exceeded the previous annual individual award limit under the Omnibus Plan of 75,000 shares of common stock. The individual award limit was increased by the Board in November 2020 to 200,000 shares of Company common stock. Following the increase of the individual award limit, and in lieu of the Original Stock Options that were granted in excess of the prior individual award limit, the Board granted Mr. Temperato the following new stock awards: 31,983 shares of common stock, subject to time-based vesting, and 32,500 shares of common stock, subject to performance-based vesting, each at an exercise price of $21.40. Additionally, the Board granted Mr. Temperato 10,184 shares of restricted stock, vesting on November 25, 2021, contingent upon his continued relationship with the Company, in order to compensate him for the lost value of the Original Stock Options due to the increased exercise price of the new options. The portion of the Original Stock Options relating to 15,518 shares of common stock that were not in excess of the prior individual award limit remain in effect. Prior option grants made to Mr. Temperato in April 2020 and June 2020 also remain in effect.
As part of a retention program approved by the Board, on March 23, 2023, the Company entered into Retention Bonus Agreements (each, a “Retention Agreement”) with certain employees, which include cash bonuses and grants of RSUs, to be paid out or vested upon certain time-based milestones. The Retention Agreement for John Temperato
provides for a cash payment of $85,000 and a RSU grant for 68,815 shares. Half of the cash bonus will be earned and half of the RSU grant will vest on April 15, 2023, with the remaining half being paid out and vesting on December 31, 2023, provided that Mr. Temperato must be employed with the Company on such dates. If Mr. Temperato’s employment terminates for any reason other than by the Company for “Cause” or due to “Disability” (each as defined in the Retention Agreement), he will not earn any portion of the retention bonus. If Mr. Temperato is employed with the Company through the effective date of a “Change in Control” (as defined in the Retention Agreement) occurring prior to December 31, 2023, the remaining portion of the cash bonus will be paid out and the RSU grant will immediately vest upon such Change in Control.
Bethany Sensenig
We entered into an executive employment agreement with Ms. Sensenig effective January 15, 2022. Pursuant to the executive employment agreement with Ms. Sensenig, Ms. Sensenig receives an annual base salary of $425,000, subject to periodic increase as the Company may determine. Ms. Sensenig is eligible to receive a discretionary annual bonus, with a target amount of 40% of her base salary. Ms. Sensenig’s employment agreement provided that Ms. Sensenig would receive an initial grant of options to purchase up to 65,000 shares of the Company’s common stock, which will vest 25% one year from the vesting commencement date, with the remainder vesting in 36 equal monthly installments, provided that Ms. Sensenig remains an employee of the Company as of each such vesting date. Further the options will vest in full if Ms. Sensenig’s employment is terminated by the Company other than for “Cause” (as defined in the employment agreement) within six months of a change of control of the Company. If the employment of Ms. Sensenig is terminated by the Company without “Cause,” Ms. Sensenig will be eligible to receive six months of her then-current salary. All separation benefits are subject to Ms. Sensenig entering into and not revoking a separation agreement in a form acceptable to the Company. Ms. Sensenig is also generally eligible to participate in employee benefit programs established by us from time to time that are applicable to our executives.
As part of a retention program approved by the Board, on March 23, 2023, the Company entered into a Retention Agreement with Ms. Sensenig, which provides for a cash payment of $108,000 and a RSU grant of 50,177 shares. Half of the cash bonus will be earned and half of the RSU grant will vest on April 15, 2023, with the remaining half paid out and vesting on December 31, 2023, provided that Ms. Sensenig must be employed with the Company on such dates. If Ms. Sensenig’s employment terminates for any reason other than by the Company for “Cause” or due to “Disability” (each as defined in the Retention Agreement), she will not earn any portion of the retention bonus. If Ms. Sensenig is employed with the Company through the effective date of a “Change In Control” (as defined in the Retention Agreement) occurring prior to December 31, 2023, the remaining portion of the cash payment will be paid out and the RSU grant will immediately vest upon such Change in Control.
Edward J. Sitar
We entered into an executive employment agreement with Mr. Sitar effective July 1, 2019. Pursuant to the executive employment agreement with Mr. Sitar, Mr. Sitar received an annual base salary of $285,000, subject to periodic increase as the Company may determine. Effective January 1, 2021, Mr. Sitar’s salary was increased to $371,500. Mr. Sitar’s employment agreement provided that Mr. Sitar would receive an initial grant of options to purchase up to 350,000 shares of the Company’s common stock, which award vest with respect to 7.5% of the shares on the six-month anniversary of July 1, 2019, 7.5% of the shares on the one-year anniversary of July 1, 2019, and the remainder of the shares in 36 equal monthly installments on the last day of each successive month thereafter. In addition to Mr. Sitar’s initial equity award, Mr. Sitar was eligible to participate in (i) any equity compensation plan or similar program established by the Company and (ii) any bonus or similar incentive plans established by the Company that may be applicable to executives of the Company at Mr. Sitar’s level, with participation in such bonus or similar incentive plans based on a target of 30% - 50% of Mr. Sitar’s base salary. Mr. Sitar was also generally eligible to participate in employee benefit programs established by us from time to time that were applicable to our executives.
In January 2022, the Company entered into a separation and consulting agreement with Mr. Sitar, effective January 14, 2022 (the “Separation Date”). Pursuant to the separation and consulting agreement, Mr. Sitar served as an independent consultant for three months following the Separation Date (the “Consulting Period”). In connection with his separation, and following his non-revocation of a general release of claims, as provided in his employment
agreement, Mr. Sitar received: (i) separation pay in an amount equal to 12 months of his regular base salary, minus applicable withholdings, paid in accordance with the Company’s normal payroll practices; (ii) payment of his 2021 annual bonus, as determined by the Company’s Board of Directors; and (iii) payment of his 2022 annual bonus prorated for his period of service prior to the Separation Date and during the Consulting Period. The material terms of Mr. Sitar’s previously granted equity awards subject to time-based vesting remained unchanged and continued to vest during the Consulting Period. Following the end of the Consulting Period, the remaining unvested equity awards previously granted to Mr. Sitar subject to time-based vesting were accelerated and became fully vested with an extension of the exercise period to ten years from the issuance date.
Pay Versus Performance
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation actually paid and certain financial performance of our Company for each of the last two completed fiscal years. In determining the “compensation actually paid” to our NEOs, we are required to make various adjustments to amounts that have been previously reported in the Summary Compensation Table in previous years, because the SEC’s valuation methods for this section differ from those required in the Summary Compensation Table. The table below summarizes compensation values previously reported in our Summary Compensation Table, as well as the adjusted values required in this section for the 2022 and 2021 fiscal years. Our principal executive officer, or “PEO” is John Temperato and our “Non-PEO NEOs” for 2022 are Ms. Sensenig and Mr. Sitar, and for 2021 is Mr. Sitar. Note that for 2022, compensation for our Non-PEO NEOs is reported as an average.
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Year | Summary Compensation Table Total for PEO (1) | Compensation Actually Paid to PEO (2) | Average Summary Compensation Table Total for Non-PEO NEOs (3) | Average Compensation Actually Paid to Non- PEO NEOs (4) | Value of Initial Fixed $100 Investment Based On Total Shareholder Return (“TSR”) (5) | Net Income (Loss) (millions) (6) |
| 2022 | $ | 1,662,105 | | $ | (1,206,352) | | * | $ | 1,129,560 | | $ | (563,055) | | * | $ | (0.94) | | $ | (43.8) | |
| 2021 | $ | 2,187,794 | | $ | (112,200) | | * | $ | 1,013,869 | | $ | 435,138 | | | $ | 0.17 | | $ | (36.8) | |
* The negative values for Compensation Actually Paid in 2022 and 2021 reflect the decline in value of the underlying shares of options granted by us to our NEOs.
(1)Represents the amounts of total compensation reported for our PEO for each corresponding year in the “Total” column of the Summary Compensation Table above.
(2)Represents the amount of “compensation actually paid” to our PEO, as computed in accordance with Item 402(v) of Regulation S-K, as outlined below under “Compensation Actually Paid Adjustments.” The dollar amounts do not necessarily reflect the actual amount of compensation earned by or paid to our PEO during the applicable year for tax or other purposes.
(3)Represents the average of the amounts reported for our Non-PEO NEOs in each applicable year in the “Total” column of the Summary Compensation Table above.
(4)Represents the average amount of “compensation actually paid” to the Non-PEO NEOs, as computed in accordance with Item 402(v) of Regulation S-K, as outlined below under “Compensation Actually Paid Adjustments.” The dollar amounts do not reflect the actual average amount of compensation earned by or paid to the Non-PEO NEOs during the applicable year.
(5)TSR is cumulative for the measurement periods beginning on January 1, 2021 and ending on December 31, 2022 and 2021, respectively, calculated by dividing the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s share price at the beginning of the measurement period. No dividends were paid in 2022 or 2021.
(6)The dollar amounts reported represent the amount of net loss reflected in our consolidated audited financial statements for the applicable year.
Compensation Actually Paid Adjustments
In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to our PEO’s total compensation for each year to determine the “compensation actually paid”:
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| Year | Reported Summary Compensation Table Total for PEO ($) | Reported Value of Option Awards (a)($) | Equity Award Adjustments (b)($) | Compensation Actually Paid to PEO ($) |
John Temperato
PEO | 2022 | $1,662,105 | $1,108,892 | $(1,759,565) | $(1,206,352) |
| 2021 | $2,187,794 | $1,435,854 | $(864,140) | $(112,200) |
(a)The grant date fair value of equity awards represents the total of the amounts reported in the “Option Awards” columns in the Summary Compensation Table for the applicable year.
(b)In order to calculate the average “compensation actually paid” to our PEO, we are required under the SEC rules to subtract from the “Reported Summary Compensation Table - Total for PEO” value the “Reported Value of Option Awards” value, which represents the grant date fair value of equity awards, and add back the value in the “Equity Award Adjustments” column, which represents the following: (i) the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year; (ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any awards granted in prior years that are outstanding and unvested as of the end of the applicable year; (iii) for awards that are granted and vest in the same applicable year, the fair value as of the vesting date; (iv) for awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (v) for awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, a deduction for the amount equal to the fair value at the end of the prior fiscal year; and (vi) the dollar value of any dividends or other earnings paid on stock or option awards in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of such subcommitteeaward or included in any other component of total compensation for the applicable year. The amounts deducted or added in calculating the equity award adjustments are as follows:
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| Year | Year End Fair Value of Outstanding and Unvested Equity Awards Granted in the Year (i) ($) | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years (ii) ($) | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year (iii) ($) | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year (iv) ($) | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year (v) ($) | Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation (vi) ($) | Total Equity Award Adjustments ($) |
John Temperato PEO | 2022 | $43,552 | $(1,065,208) | $— | $(737,909) | $— | $— | $(1,759,565) |
| 2021 | $4,234 | $(542,649) | $— | $(325,725) | $— | $— | $(864,140) |
In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to grant pre-approvals shall beaverage total compensation for the Non-PEO NEOs for each year to determine the compensation actually paid, using the same methodology described above for the PEO adjustments. 2022 represents the average compensation totals for our former CFO and current CFO. 2021 represents the total compensation for our former CFO.
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| Year | Average Reported Summary Compensation Table Total for Non-PEO NEOs ($) | Average Reported Value of Equity Awards ($) | Average Equity Award Adjustments (a) ($) | Average Compensation Actually Paid to Non-PEO NEOs ($) |
| 2022 | $ | 1,129,560 | | $ | 656,453 | | $ | (1,036,162) | | $ | (563,055) | |
| 2021 | $ | 1,013,869 | | $ | 523,489 | | $ | (55,242) | | $ | 435,138 | |
| | | | | | | | |
| (a) | The amounts deducted or added in calculating the total average equity award adjustments are as follows: |
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| Year | Year End Fair Value of Outstanding and Unvested Equity Awards Granted in the Year ($) | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years ($) | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year ($) | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year ($) | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year ($) | Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation ($) | Total Equity Award Adjustments ($) |
| 2022 | $ | 18,908 | | $ | (735,013) | | $ | — | | $ | (320,057) | | $ | — | | $ | — | | $ | (1,036,162) | |
| 2021 | $ | — | | $ | — | | $ | — | | $ | (55,242) | | $ | — | | $ | — | | $ | (55,242) | |
Analysis of the Information Presented in the Pay Versus Performance Table
We generally seek to incentivize long-term performance, and therefore do not specifically align our performance measures with “compensation actually paid” (as computed in accordance with Item 402(v) of Regulation S-K) for a particular year. In accordance with Item 402(v) of Regulation S-K, we are providing the following descriptions of the relationships between information presented in the Pay Versus Performance table.
Compensation Actually Paid and Net Income (Loss)
Because we are a pre-revenue company, we have not historically looked to net income (loss) as a performance measure for our executive compensation program. In 2021 and 2022, our net loss increased as we spent more money on progressively later stages of development of our drug candidates, however, the compensation actually paid for both our PEO and non-PEO NEOs decreased between 2021 and 2022.
Compensation Actually Paid and Cumulative TSR
As shown in the following graph, the compensation actually paid to our PEO and the average amount of compensation actually paid to our Non-PEO NEOs during the periods presented are not directly correlated with TSR. We do utilize several performance measures to align executive compensation with our performance, but those are not generally financial performance measures, such as TSR. For example, as described in more detail above in the section “Narrative to Summary Compensation Table – Cash Bonuses,” part of the compensation our NEOs are eligible to receive consists of annual performance-based cash bonuses which are designed to provide appropriate incentives to achieve defined annual corporate goals and to reward our executives for individual achievement towards these goals, such as financial and strategic goals, which are expected to result in increased stockholder value. Additionally, we award stock options, which are an integral part of our executive compensation program, based on defined annual corporate goals, which are not directly tied to TSR, because they provide value only if the market price of our common stock increases, and if the executive officer remains employed over the vesting period. These stock option awards strongly align our executive officers’ interests with those of our stockholders by providing a continuing financial incentive to maximize long-term value for our stockholders and by encouraging our executive officers to remain a long-term employee of the Company.
The Compensation Committee reviews compensation information of peer companies and trends in executive compensation to ensure the compensation of our executives is reasonable and competitive. Our executive compensation program uses metrics for both cash and equity incentives, which are selected with the objective of creating long-term value for our stockholders through the achievement of strategic business objectives, while effectively managing the risks and challenges inherent to a small-cap biotechnology company. The Compensation Committee periodically engages independent experts to provide compensation analysis and best practices in our industry. During 2022, the Compensation Committee engaged WTW as its independent compensation consultant. The Board did not identify any conflicts of interest with WTW acting as an independent consultant to the
full AuditCompensation Committee. The Compensation Committee
at its next scheduled meeting.Our Audit Committee regularly reviewsdoes not believe that our compensation policies and determines whether specific non-audit projects or expenditures with our independent registered public accounting firm potentially affect its independence.
practices give rise to risks that are reasonably likely to have a material adverse effect on the Company.
REPORT OF THE AUDIT COMMITTEE
TheAll information contained in this Report ofprovided above under the Audit Committee shall“Pay Versus Performance” heading will not be deemed to be incorporated by reference in any filing of our Company under the Securities Act of 1933, or the Securities Exchange Act of 1934,as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing (except to the extent that we specifically incorporate thisfiling.
DIRECTOR COMPENSATION
The following table provides compensation information
by reference), and shall not otherwise be deemed “soliciting material” or “filed” with the SEC or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Securities Exchange Act of 1934 (except to the extent that we specifically request that this information be treated as soliciting material or specifically incorporate this information by reference).The Audit Committee consists of threeregarding our non-employee directors who are independent under the standards adopted by our Board and applicable NASDAQ Stock Market Rules and SEC regulations. The Audit Committee represents and assists the Board in fulfilling its responsibility for oversight and evaluation of the quality and integrity of the Company’s consolidated financial statements, the Company’s compliance with legal and regulatory requirements, the qualifications and independence of the Company’s registered public accounting firm, CohnReznick LLP, and the performance of the Company’s internal controls and of its public accounting firm.
The Audit Committee has reviewed and discussed with the Company’s management and internal finance staff and Cohn, with and without management present, the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2016. 2022.
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| Name | | Fees Earned or Paid in Cash (1) ($) | | Option Awards (2) ($) | | Total
($) |
| Mark Sirgo, Pharm.D. | | $ | 93,750 | | | | $ | 25,949 | | | | $ | 119,699 | | |
| Michael Constantino | | $ | 56,250 | | | | $ | 25,949 | | | | $ | 82,199 | | |
| Lorin K. Johnson, Ph.D. | | $ | 58,750 | | | | $ | 25,949 | | | | $ | 84,699 | | |
| Michael Rice | | $ | 52,500 | | | | $ | 25,949 | | | | $ | 78,449 | | |
| Samantha Ventimiglia | | $ | 41,250 | | | | $ | 25,949 | | | | $ | 67,199 | | |
(1)Fees earned or paid in cash reflect the non-employee director compensation earned or paid in cash during the year ended December 31, 2022.
(2)The Audit Committee has alsoamounts in the “Option Awards” column reflect the aggregate Black-Scholes grant date fair value of stock options granted during the calendar year computed in accordance with the provisions of ASC 718, Compensation-Stock Compensation. The assumptions that were used to calculate the value of these awards are discussed with Cohnin Notes 1 and 9 to the resultsconsolidated financial statements included in our Annual Report on Form 10-K. These amounts do not reflect the actual economic value that will be realized by the directors upon the vesting of the independent auditors’ examinations andstock options, the judgments concerning the quality, as well as the acceptability,exercise of the Company’s accounting principles and such other matters thatstock options or the Company is required to discuss with the independent auditors under applicable rules, regulations or generally accepted auditing standards (including the Auditing Standard No. 16 as issued by the Public Company Accounting Oversight Board).In addition, the Audit Committee has received the written disclosures and the letter from Cohn required by applicable requirementssale of the Public Company Accounting Oversight Board regarding their communications withcommon stock underlying such stock options.
The table below shows the Audit Committee concerning independence,aggregate number of option awards (vested and has discussed with Cohn their independence fromunvested) held as of December 31, 2022 by each of our non-employee directors who was serving as of that date.
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| Name | Aggregate Options Outstanding as of
December 31, 2022 |
| Mark Sirgo, Pharm.D. | 31,464 | |
| Michael Constantino | 19,126 | |
| Lorin K. Johnson, Ph.D. | 37,951 | |
| Michael Rice | 14,626 | |
| Samantha Ventimiglia | 14,626 | |
Non-Employee Director Compensation Policy
As of May 1, 2020, our non-employee directors receive the Company and management, including whether their provision of non-audit servicesfollowing annual retainers, to usbe paid quarterly:
| | | | | |
| Position | Retainer |
| Board member | $ | 37,500 | |
| Chairman of the Board | 35,000 | |
| Audit Committee Chair | 15,000 | |
| Audit Committee member | 7,500 | |
| Compensation Committee Chair | 10,000 | |
| Compensation Committee member | 7,500 | |
| Nominating and Corporate Governance Chair | 7,500 | |
| Nominating and Corporate Governance member | 3,750 | |
Under the policy, each non-employee director who is
compatible with maintaining their independence, the scope of the audit and the fees paid to Cohn during the year.Based on our review and the discussions referred to above, the Audit Committee recommendedinitially elected or appointed to the Board of Directors on any date other than the date of the Annual Meeting will be granted options to purchase 7,500 shares of our common stock. The initial equity awards will vest monthly over a period of three years, subject to continued service on our Board. In addition, each non-employee director who serves on the Board as of the date of any Annual Meeting will be granted an option on the date of such Annual Meeting, with the number of options and vesting period to be determined by the Compensation Committee. For 2023, in lieu of the Annual Meeting grant, the Board granted each non-employee director RSUs representing 7,885 shares of common stock. Half of the RSU grant vested on April 15, 2023, with the remaining half vesting on December 31, 2023. The vesting of the December 31, 2023 RSUs will accelerate upon a change in control prior to December 31, 2023.
Directors may be reimbursed for travel, food, lodging and other expenses directly related to their service as directors. Directors are also entitled to the protection provided by their indemnification agreements and the indemnification provisions in our certificate of incorporation and bylaws.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and the related notes present information on the beneficial ownership of shares of our common stock as of May 25, 2023 (except where otherwise indicated) by:
•each person, or group of affiliated persons, who are known by us to beneficially own more than 5% of the outstanding shares of our capital stock;
•each of our directors;
•each of our named executive officers; and
•all of our current directors and executive officers as a group.
Beneficial ownership is determined in accordance with SEC rules and includes voting or investment power with respect to the securities. Shares of common stock that may be acquired by an individual or group within 60 days of May 25, 2023, pursuant to the exercise of options or warrants, are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table.
Except as indicated in the footnotes to this table, we believe that the audited consolidated financial statementsstockholders named in this table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them, based on information provided to us by such stockholders. Unless otherwise indicated, the address for each stockholder listed is c/o 9 Meters Biopharma, Inc., 4509 Creedmoor Road, Suite 600, Raleigh, NC 27612.
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| Name and Address of Beneficial Owner | | Shares Beneficially Owned | | Percent of Outstanding(1) |
| Principal Stockholders: | | | | |
Sabby Volatility Warrant Master Fund, Ltd.(2) | | [l] | | | [l] | % |
| | | | | | |
| | | | | | |
| Directors and Named Executive Officers: | | | | |
John Temperato (3) | | [l] | | | [l] | % |
| | | | | | |
Bethany Sensenig (4) | | [l] | | | [l] | |
Mark Sirgo, Pharm.D. (5) | | [l] | | | [l] | |
Lorin K. Johnson, Ph.D. (6) | | [l] | | | [l] | |
Michael Constantino (7) | | [l] | | | [l] | |
Michael Rice (8) | | [l] | | | [l] | |
Samantha Ventimiglia (9) | | [l] | | | [l] | |
Edward J. Sitar (10) | | [l] | | | [l] | |
All current directors and executive officers as a group (7 persons) (11) | | [l] | | | [l] | % |
* Represents beneficial ownership of less than 1% of the shares of common stock outstanding
| | | | | | | | | | | |
| (1) | The percentage of beneficial ownership is based on [l] shares of common stock outstanding as of May 25, 2023. | |
| | |
| (2) | Following the Company’s March 13, 2023 registered direct offering, Sabby Volatility Warrant Master Fund, Ltd. (“Sabby”) held 1,300,000 shares of common stock, pre-funded warrants to purchase 1,825,000 shares of common stock, and common warrants to purchase 6,250,000 shares of common stock. All of the warrants held by Sabby are subject to beneficial ownership limitations of either 4.99% or 9.99%, which prohibit Sabby from exercising any portion of any warrant to the extent that, following such exercise, Sabby’s ownership of common stock would exceed the relevant beneficial ownership limitation. The beneficial ownership limitations, taken as a whole, cap Sabby’s ownership at 9.99% of the Company’s outstanding shares, other than to the extent Sabby were to acquire additional shares on the open market. Consequently, Sabby is not able to exercise all of its warrants due to the aforementioned beneficial ownership limitations, which is reflected in the table above. The address of Sabby is c/o Ogier Fiduciary Services (Cayman) Limited, 89 Nexus Way, Camana Bay, Grand Cayman KYI-9007, Cayman Islands. | |
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| (3) | Consists of (i) [l] shares of common stock held by Mr. Temperato, (ii) options to purchase [l] shares of common stock held by Mr. Temperato that are exercisable within 60 days of May 25, 2023, and (iii) warrants to purchase up to [l] shares of common stock. | |
| | | |
| (4) | Consists of (i) [l] shares of common stock held by Ms. Sensenig and (ii) options to purchase [l] shares of common stock that are exercisable within 60 days of May 25, 2023. | |
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| | |
| (5) | Consists of (i) [l] shares of common stock held by Dr. Sirgo, (ii) [l] shares of common stock held by Dr. Sirgo’s spouse; (iii) options to purchase [l] shares of common stock exercisable within 60 days of May 25, 2023, and (iv) warrants to purchase up to [l] shares of common stock. | |
| | |
| (6) | Consists of (i) [l] shares of common stock held by Dr. Johnson, (ii) options to purchase [l] shares of common stock that are exercisable within 60 days of May 25, 2023, and (iii) warrants to purchase up to[l] shares of common stock. | |
| | |
| (7) | Consists of (i) [l] shares of common stock held by Mr. Constantino and (ii) options to purchase [l] shares of common stock that are exercisable within 60 days of May 25, 2023. | |
| | |
| (8) | Consists of (i) [l] shares of common stock held by Mr. Rice and (ii) options to purchase [l] shares of common stock that are exercisable within 60 days of May 25, 2023. | |
| | |
| (9) | Consists of (i) [l] shares of common stock held by Ms. Ventimiglia and (ii) options to purchase [l] shares of common stock that are exercisable within 60 days of May 25, 2023. | |
| | | |
| (10) | Consists of (i) [l] shares of common stock held by Mr. Sitar, (ii) options to purchase [l] shares of common stock that are held by Mr. Sitar that are exercisable within 60 days of May 25, 2023, and (iii) warrants to purchase up to [l] shares of common stock. | |
| | |
| (11) | Consists of (i) [l] shares of common stock, (ii) options to purchase [l] held by the Company’s current directors and executive officers that are exercisable within 60 days of May 25, 2023, (iii) [l] restricted stock units that vest within 60 days of May 25, 2023, and (iv) warrants to purchase up to [l] shares of common stock. | |
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Related Person Transaction Policy and Procedures
The Board has adopted a written related person transaction policy setting forth the policies and procedures for the review and approval or ratification of related person transactions. This policy covers, with certain exceptions set forth in Item-404 of Regulation S-K, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant, in which the amount involved exceeds $120,000 in any fiscal year and a related person had, has or will have a direct or indirect material interest, including without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. In reviewing and approving any such transactions, our audit committee is tasked to consider all relevant facts and circumstances, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in an arm’s length transaction and the extent of the related person’s interest in the transaction. Notwithstanding anything therein to the contrary, the policy is to be interpreted only in such a manner as to comply with Item 404 of Regulation S-K.
Certain Related Person Transactions
Described below is each transaction occurring since January 1, 2021, and any currently proposed transaction to which we were or are to be a participant, respectively, and in which:
•The amounts involved exceeded or will exceed the lesser of (a) $120,000 or (b) 1% of the average of our total assets at year-end for the last two completed fiscal years; and
•Any person (i) who since January 1, 2021 served as a director or executive officer of the Company or any member of such person’s immediate family that had or will have a direct or indirect material interest, other than compensation, termination and change of control arrangements that are described under the section titled “Executive Compensation” or (ii) who, at the time when a transaction in which such person had a direct or indirect material interest occurred or existed, was a beneficial owner of more than 5% of our outstanding common stock or any member of such person’s immediate family.
Each of these transactions was approved pursuant to our related transaction policy.
Equity Financing:
Pursuant to the underwriting agreement in connection with the April 2021 Offering, the Company issued an aggregate of 1,725,000 shares of common stock at a price of $20.00 per share. Of the shares issued in the April 2021 Offering, the Company’s Chief Executive Officer, then-current Chief Financial Officer and Chairman of the Board of Directors purchased an aggregate of 22,500 shares at the public offering price and on the same terms as the other purchasers in the April 2021 Offering. The underwriters received the same underwriting discount on the shares purchased by the Company’s Chief Executive Officer, then-current Chief Financial Officer and Chairman of the Board of Directors as the other shares sold in the offering. The aggregate purchase price of the common stock shares issued to the Company’s Chief Executive Officer, then-current Chief Financial Officer and Chairman of the Board was $450,000.
Agreement with LifeSci Advisors
Mr. Rice, a member of our Board since March 2021, is a Founding Partner of LifeSci Advisors, LLC and LifeSci Communications, LLC. Prior to his becoming a director, on April 1, 2020 we entered into a master services agreement with both LifeSci Advisors, LLC and LifeSci Communications, LLC, to provide investor relations and public relations services, respectively. During the year ended December 31, 2022, we incurred expenses of approximately $0.3 million with LifeSci Advisors, LLC and $0.2 million with LifeSci Communications, LLC.
During the year ended December 31, 2021, we incurred expenses of approximately $0.3 million with LifeSci Advisors, LLC and $0.3 million with LifeSci Communications, LLC.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present proper proposals for inclusion in the proxy statement for consideration at our next Annual Meeting of stockholders. To be eligible for inclusion in the 2024 proxy statement, your proposal must be received by us no later than January 31, 2024 and must otherwise comply with Rule 14a-8. While our Board of Directors will consider stockholder proposals, we reserve the right to omit from the proxy statement stockholder proposals that we are not required to include under the Exchange Act, including Rule 14a-8.
Management’s proxy holders for the 2024 Annual Meeting of stockholders will have discretion to vote proxies given to them on any stockholder proposal of which we do not have notice prior to April 15, 2024.
Under our Bylaws, in order to nominate a director or bring any other business before the stockholders at the 2024 Annual Meeting of Stockholders that will not be included in our proxy statement, you must notify us in writing, and such notice must be received by us no earlier than 90 days and no later than 120 days before the date of the 2024 Annual Meeting. Assuming the 2024 Annual Meeting were held on July 14, 2024, such notice would have to be received by us no earlier than March 16, 2024 and no later than April 15, 2024. If the date of the 2024 Annual Meeting is more than 30 days before or more than 60 days after July 14, 2024, then the notice must be delivered not earlier than 120days before such date for the 2024 Annual Meeting and not later than the later of (i) 90days before such date for the 2024 Annual Meeting or (ii) 10 days after the day on which we provided public disclosure of the date of the 2024 Annual Meeting. In addition to satisfying the foregoing requirements under our Bylaws, to comply with the “universal proxy rules,” stockholders who intend to solicit proxies in support of director nominees at the 2024 Annual Meeting and who are not nominating directors through proxy access as described below must include the additional information required by Rule 14a-19(b) under the 1934 Act.
For proposals not made in accordance with Rule 14a-8, you must comply with specific procedures set forth in our Bylaws and the nomination or proposal must contain the specific information required by our Bylaws. You may write to our Corporate Secretary at 9 Meters Biopharma, Inc., Attn: Corporate Secretary, 4509 Creedmoor Road, Suite 600, Raleigh, NC 27612, to deliver the notices discussed above and to request a copy of the relevant Bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates pursuant to the Bylaws.
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy materials with respect to two or more stockholders sharing the same address by delivering a single set of proxy materials addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
A number of brokers with account holders who are 9 Metersstockholders will be householding the Company’s proxy materials. A single set of proxy materials will be delivered to multiple stockholders sharing an address, unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate set of proxy materials, please notify us or your broker. We will deliver promptly upon written or oral request a separate copy of the proxy materials. Direct your written request to our Corporate Secretary at 9 Meters Biopharma. Inc. Attn: Corporate Secretary, 4509 Creedmoor Road, Suite 600, Raleigh, NC 27612, or at (919) 275-1933. Stockholders who currently receive multiple copies of the proxy materials at their addresses and would like to request householding of their communications should contact their brokers.
ANNUAL REPORT ON FORM 10-K
Our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 for filing with the SEC.AUDIT COMMITTEE
Robert Machinist, Chairman
Christopher Miner
Steven Barre
Vote Required
You may vote in favor or against this proposal or you may abstain from voting. Assuming a quorum is present at the Annual Meeting, the affirmative vote of a majority of all votes cast at the Annual Meeting is required to ratify the appointment of Cohn2022 as our independent registered public accounting firm for 2017. If stockholders do not specify the manner in which their shares represented by a validly executed proxy solicited by the Board are to be voted on this proposal, such shares will be voted in favor of the ratification of the appointment of Cohn as our independent registered public accounting firm. Abstentions will have the same effect as votes cast against this proposal. Broker non-votes are not expected because brokers and other nominees that do not receive instructions are entitled to vote on this matter. However, should a broker non-vote occur, it will not be counted as a vote cast and will have no effect on the result of the vote (i.e. it will be neither a vote “for” nor “against” the proposal).
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF COHNREZNICK LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2017.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Our executive officers and directors, their respective positions and their respective ages as of April 20, 2017 are as follows:
| | | | |
Name | | Age | | Position(s) |
David H. Clarke | | 75 | | Chairman and Chief Executive Officer and Director |
Jonathan Clark | | 57 | | Interim President and Director |
David Olert | | 63 | | Senior Vice President, Finance and Chief Financial Officer |
Stephen R. Brownsell | | 46 | | Executive Vice President |
Robert B. Machinist | | 62 | | Director |
Christopher M. Miner | | 65 | | Director |
Steven Barre | | 57 | | Director |
David H. Clarke — Chairman and Chief Executive Officer. Mr. Clarke has served as Chief Executive Officer and President since December 2015 and has served as a director since September 2015. Mr. Clarke also serves on the board of Omega Protein, Inc., an animal and human nutritional company listed on the NYSE. Mr. Clarke was chairman of Hong Kong-based United Pacific Industries, Limited, a conglomerate listed on the Hong Kong Stock Exchange. He also served as a director of United Pacific Industries, Limited from 2004 to 2014. Previously he was Chairman and Chief Executive Officer of Jacuzzi Brands from June 1995 through October 2006.
Mr. Clarke also spends a portion of his time managing the business and affairs of GSB Holdings, Inc., a family-owned entity engaged in real estate development and investments only in investments and which is not involved in any industries in which our company currently competes. Although he may potentially face a conflict regarding the allocation of time between our business and the other business interests of GSB Holdings, Inc. Mr. Clarke has agreed to devote as much time to the management of our business and affairs as is necessary for the proper conduct of our business and affairs. We expect Mr. Clarke will devote at least 90% of his time to our operations.
Jonathan Clark — Interim President and Director. Mr. Clark joined our board of directors in July 2016 and became our Interim President in October 2016. From 2009 to 2016, Mr. Clark was the Chief Executive Officer and President of Priority Posting and Publishing, Inc., a real estate services provider to trustees, law firms and banking related organizations. From 1988 to 2009 he held a number of executive positions, including President and Chief Executive Officer of Sundance Spas, Inc. Mr. Clark holds doctorate degrees in Psychology from the American Behavioral Studies Institute and a Bachelor of Business Degree from California State University — Fullerton.
David Olert — Vice President, Finance and Chief Financial Officer. Mr. Olert has served as the Chief Financial Officer and Vice President, Finance since September 2015. Prior to his appointment, he served as Chief Financial Officer for InterMetro Communications a publicly traded long-distance provider, since July 2007. Mr. Olert is a certified public accountant and holds a Masters of Business Administration from William Howard Taft University and a Bachelors in Computer Science Concentration from Barry University.
Stephen R. Brownsell — Executive Vice President. Mr. Brownsell was recently promoted to Executive Vice President and previously served as a Vice President since joining the Company in October 2016. Mr. Brownsell is a management executive with over twenty years of international marketing experience. Previously, from August 2009, he was Vice President, Marketing, Business Development and Business Strategy at Priority Posting and Publishing, Inc. Prior to that, he held multiple marketing executive positions that included a position as a marketing executive at Hilton International Hotels. Mr. Brownsell is a graduate of Oxford University in the UK and has a Master’s Degree from Wake Forest University.
Robert B. Machinist — Director. Mr. Machinist joined our board of directors in July 2016. Mr. Machinist is the Chairman of CIFC Corp. and has been a member of that board since December 2004. He is currently Chairman of the Board of Advisors of MESA, a merchant bank specializing in media and entertainment industry transactions. Mr. Machinist also runs a private family investment company. In addition, he is a member of the boards of directors of United Pacific Industries, a publicly listed Hong Kong company, and Maimonides Medical Center. He was the Chairman of Atrinsic, a publicly-listed interactive media
company, through 2008. From 1998 to December 2001, Mr. Machinist was managing director and head of investment banking for the Bank of New York and its Capital Markets division. From January 1986 to November 1998, he was president and one of the principal founders of Patricof & Co. Capital Corp. (and its successor companies), a multinational investment banking business, until its acquisition by the Bank of New York. Mr. Machinist received a B.A. from Vassar College.
Christopher M. Miner — Director. Mr. Miner joined our board of directors in July 2016. Since January 2014, Mr. Miner has been a member of the board of director of Ascentra Holdings, Inc. (formerly Interush Holdings), a multi-level marketer, acting as its President from October 2015 through December 2016. Subsequently, Mr. Miner retained the Ascentra director position through March and is currently on the board of the Ascentra Philippine subsidiary. Mr. Miner most recently served as a director to Craig Wireless, Ltd. a publicly traded telecommunications company. He joined Craig Wireless as a consultant in 2010, was elected to the board in 2011 and served through February 2012, continuing as consultant until end of 2012. Mr. Miner was previously director of Cali-West, a manufacturing, construction and service company in the car care industry until 2010 when he sold the business. For nearly eight years Mr. Miner was active on the board of Herbalife International, a public reporting Health and Wellness Company. Mr. Miner was part of the special committee that managed the sale of Herbalife in 2002 and also chaired or participated in audit, compensation, and finance committees. Early technology engagements included serving as CFO of a NASDAQ reporting company, Technology Marketing Inc., and integration of several acquisitions substantially increasing company performance and valuation. In 1989 he founded Workstation Technologies, an international development company and marketer of compression and videoconferencing products to major telecommunication and computer manufacturers. Mr. Miner earned a Masters in Business Administration from the California State University in 1976 and Bachelors from the University of New York in 1973.
Steven C. Barre — Director. Mr. Barre joined our board of directors in November 2016. Mr. Barre is currently the Founder and President of Verona Group Inc., a real estate investment company. From 2008 to 2012, he was a member of the Board of Directors at Tigrent Inc., an educational program provider, and he served as its Chief Executive Officer from 2010 to 2012. Prior to this, Mr. Barre was Senior Vice President, General Counsel and Secretary of NYSE listed Jacuzzi Brands, Inc. Mr. Barre earned a B.S. from Cornell University and a JD from Columbia Law School.
Each of our officers serves at the discretion of our board of directors. Each of our directors holds office until his or her successor is duly elected and qualified or until his or her earlier resignation or removal.
CORPORATE GOVERNANCE AND BOARD MATTERS
Director Independence
Our Board has determined that each of the non-management directors, Robert Machinist, Christopher Miner and Steven Barre, who collectively constitute a majority of our Board, is an “independent” director as defined by the listing standards of the NASDAQ Stock Market currently in effect and approved by the SEC and all applicable rules and regulations of the SEC. All members of the Audit, Compensation and Nominating Committees satisfy the “independence” standards applicable to members of each such committee. Our Board made this affirmative determination regarding these directors’ independence based on discussion with the directors and on its review of the directors’ responses to a standard questionnaire regarding employment and compensation history; affiliations, family and other relationships; and transactions with the Company. The Board considered relationships and transactions between each director or any member of his immediate family and the Company and its subsidiaries and affiliates. The purpose of the Board’s review with respect to each director was to determine whether any such relationships or transactions were inconsistent with a determination that the director is independent under the NASDAQ Stock Market Rules.
Board Committees
Our board of directors has established an audit committee, compensation committee and nominating and corporate governance committee. Our board of directors may establish other committees to facilitate the management of our business. The composition and functions of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors.
Audit Committee
Our audit committee consists of Steven Barre, Robert Machinist and Christopher Miner, with Mr. Machinist acting as the chair. The audit committee consists solely of directors which satisfy the independence requirements under Nasdaq listing standards and Rule 10A-3(b)(1) of the Exchange Act. The chair of our audit committee is a person who our board of directors has determined is an “audit committee financial expert” within the meaning of SEC regulations. Each member of our audit committee is a person who our board of directors has determined has the requisite financial expertise required under the applicable requirements of Nasdaq. In arriving at this determination, the board examines each audit committee member’s scope of experience and the nature of their employment in the corporate finance sector. The primary functions of this committee includes:
reviewing and approving the engagement of our independent registered public accounting firm to perform audit services and any permissible non-audit services;
evaluating the performance of our independent registered public accounting firm and deciding whether to retain their services;
monitoring the rotation of partners on the engagement team of our independent registered public accounting firm;
reviewing our annual and quarterly financial statements and reports and discussing the statements and reports with our independent registered public accounting firm and management, including a review of disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations;”
considering and approving or disapproving all related party transactions;
reviewing, with our independent registered public accounting firm and management, significant issues that may arise regarding accounting principles and financial statement presentation, as well as matters concerning the scope, adequacy and effectiveness of our financial controls;
conducting an annual assessment of the performance of the audit committee and its members, and the adequacy of its charter; and
establishing procedures for the receipt, retention and treatment of complaints received by us regarding financial controls, accounting or auditing matters.
Compensation Committee
Our compensation committee consists of Robert Machinist, Steven Barre and Christopher Miner, with Mr. Miner acting as the chair. The compensation committee consists solely of directors whom our board of directors has determined to be independent under Nasdaq listing standards, a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act and an “outside director” as that term is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code. The functions of this committee includes:
determining the compensation and other terms of employment of our chief executive officer and our other executive officers and reviewing and approving corporate performance goals and objectives relevant to such compensation;
reviewing and recommending to the full board of directors the compensation of our directors;
evaluating and administering the equity incentive plans, compensation plans and similar programs advisable for us, as well as reviewing and recommending to our board of directors the adoption, modification or termination of our plans and programs;
establishing policies with respect to equity compensation arrangements;
if required, reviewing with management our disclosures under the caption “Compensation Discussion and Analysis” and recommending to the full board its inclusion in our periodic reports to be filed with the SEC; and
reviewing and evaluating, at least annually,SEC is accessible free of charge under the performance of the compensation committee and the adequacy of its charter.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Steven Barre, Robert Machinist and Christopher Miner, with Mr. Barre acting as the chair. Our nominating and corporate governance committee consists solely of directors whom our board of directors has determined to be independent under Nasdaq listing standards. The functions of this committee includes:
reviewing periodically and evaluating director performance on our board of directors and its applicable committees, and recommending to our board of directors and management areas for improvement;
interviewing, evaluating, nominating and recommending individuals for membership on our board of directors;
reviewing and recommending to our board of directors any amendments to our corporate governance policies; and
reviewing and assessing, at least annually, the performance of the nominating and corporate governance committee and the adequacy of its charter.
Code of Business Conduct and Ethics
Our board of directors has adopted a code of business conduct and ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. Our code of business conduct and ethics will be available on our website atwww.monsterdigital.com. We intend to disclose any amendments to the code, or any waivers of its requirements, on our website to the extent required by the applicable rules and exchange requirements. The inclusionInvestors - Stock & Finance section of our website address in this report does not include or incorporate by reference into this report the informationat www.9meters.com. The Annual Report on or accessible through our website.
Attendance of Directors at Board Meetings and Annual Meeting of Stockholders
During the year ended December 31, 2016, our Board met five times. EachForm 10-K contains audited consolidated balance sheets of the current directors who was on the Board during 2016 attended 100% of the aggregate number of meetings held by the Board and those committees of the Board on which he served during 2016.
The Company does not have a policy requiring its directors to attend the Annual Meeting of Stockholders.
Board Leadership Structure
The Company does not have a policy regarding whether the Chairman and Chief Executive Officer roles should be combined or separated. Rather, our Board retains flexibility to choose its Chairman in any way that it deems best for the Company at any given time. The Company currently has a combined Chairman and CEO position. David H. Clarke serves as our Chairman of the Board and Chief Executive Officer. The Board believes that Mr. Clarke’s in-depth knowledge of the businesses and operations of the Company best equips him to lead Board meetings and focus the Board discussions on the most critical issues, as well as fostering greater communication between the Company’s management and the Board.
The Board believes that other aspects of the current leadership structure ensure effective independent Board leadership and oversight of management. For example, the independent directors meet in executive sessions without the CEO or other members of management present. Executive sessions are led by our lead independent director Mr. Robert Machinist. An executive session is typically held in conjunction with each regularly scheduled Audit Committee meeting and other sessions may be called by the Audit Committee Chairman in his own discretion or at the request of the Board. Except as set forth above, the independent directors did not meet in executive session in 2016.
The Board’s Role in Risk Oversight
Our Company faces a variety of risks, including investment risk, liquidity risk, and operational risk. Our Board believes an effective risk management system will (1) timely identify the material risks that the Company faces, (2) communicate necessary information with respect to material risks to senior executives and, as appropriate, to the Board or committee thereof, (3) implement appropriate and responsive risk management strategies consistent with the Company’s risk profile, and (4) integrate risk management into Company decision-making. It is management’s responsibility to manage the day-to-day risks that we face and bring to the Board’s attention the most material risks to the Company.
The Board has oversight responsibility of the processes established by management to report and monitor systems for material risks applicable to the Company, with the oversight of certain risk areas delegated to board committees. For example, our Compensation Committee is responsible for assessing risks associated with our compensation programs and arrangements. Our Audit Committee is responsible for overseeing management of certain financial, accounting and regulatory risks. The Board encourages management to promote a corporate culture that incorporates risk management into the Company’s corporate strategy and day-to-day business operations. The Board also works, with the input of the Company’s executive officers, to assess and analyze the most likely areas of future risk for the Company.
The Director Nomination Process
The Nominating Committee considers nominees from all sources, including stockholders. Stockholder nominees are evaluated by the same criteria used to evaluate potential nominees from other sources. Our Board will consist of a majority of directors who qualify as “independent” directors within the meaning of the listing standards of the NASDAQ Stock Market, as the same may be amended from time to time. Minimally, nominees should have a reputation for integrity, honesty and adherence to high ethical standards. They should have demonstrated business experience and the ability to exercise sound judgment in matters related to the current and long-term objectives of the Company, and should be willing and able to contribute positively to the decision-making process of the Company. In addition, a nominee should not have, nor appear to have, a conflict of interest that would impair the nominee’s ability to represent the interests of the Company or to fulfill the responsibilities of a director.
Although the Board does not maintain a formal policy regarding diversity, the value of diversity on our Board is considered and the particular or unique needs of the Company shall be taken into account at the time a nominee is being considered. The Nominating Committee seeks a broad range of perspectives and considers both the personal characteristics (gender, ethnicity, age) and experience (education, industry, professional, public service) of directors and prospective nominees to the Board. Our Nominating Committee and Board
believe that a diverse representation on the Board fosters a healthy, comprehensive, and balanced deliberative and decision-making process that is essential to the continued effective functioning of the Board and continued success of the Company.
Additionally, the Nominating Committee considers the respective qualifications needed for directors serving on various committees of the Board, and serving as chairs of such committees, should be taken into consideration. In recruiting and evaluating nominees, the Nominating Committee considers the appropriate mix of skills and experience and background needed for members of the Board and for members of each of the Board’s committees, so that our Board and its committees have the necessary resources to perform their respective functions effectively. The Nominating Committee also believes that a prospective nominee should be willing to limit the number of other corporate boards on which he or she serves so that the proposed director is able to devote adequate time to his or her duties to the Company, including preparing for and attending Board and committee meetings. In addition, the re-nomination of existing directors is not viewed as automatic, but based on continuing qualification under the criteria set forth above. In addition, the Nominating Committee will consider the existing director’s performance on the Board and on any committee on which such director serves, which will include attendance at Board and committee meetings.
Director Nominees by Stockholders
The Nominating Committee will consider nominees recommended in good faith by our stockholders as long as these nominees for the appointment to the Board meet the requirements set forth above. Possible candidates who have been suggested by stockholders are evaluated by the Board in the same manner as are other possible candidates. Stockholders wishing to suggest a qualified director candidate for review and consideration by the Nominating Committee must provide a written statement to our corporate secretary that includes the following information: a statement that the proposing stockholder is recommending a candidate for consideration by the Nominating Committee; the candidate’s credentials and contact information; and the candidate’s written consent to be considered a candidate. Such information can be sent to Monster Digital, Inc., 2655 Park Center Drive, Unit C, Simi Valley, California 93065, Attention: Corporate Secretary.
The Nominating Committee may request further information about the stockholder recommended candidate in order to comply with any applicable laws, rules or regulations or to the extent that such information is required to be provided by such stockholder pursuant to any applicable laws, rules or regulations. If a stockholder submits a director recommendation in compliance with the procedure described above, the Nominating Committee will conduct an initial evaluation of the proposed nominee and, if it determines the proposed nominee may be a qualified candidate, the Nominating Committee and one or more members of our management team will interview the proposed nominee to determine whether he or she might be suitable to be a director. If the Nominating Committee determines the proposed nominee would be a valuable addition to our Board, based on the criteria for board membership described above and our Board’ specific needs at the time, it will recommend to our Board such person’s nomination. In connection with its evaluation, the Nominating Committee may request additional information from the proposed nominee and/or the proposing stockholder.
Family Relationships
There are no family relationships among any of the officers and directors.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation we paid to our executive officers for the fiscal years ended December 31, 2016 and 2015:
| | | | | | | | | | | | |
| Name and Principal Position | | Year | | Salary
($) | | Bonus
($) | | Stock Awards
($) | | All Other
Compensation
($) | | Total
($) |
David H. Clarke
Executive Chairman of the Board(1)
| | | 2015 | | | | — | | | | — | | | | 905,707 | (2) | | | 50,000 | (3) | | | 955,707 | |
| | | 2016 | | | | — | | | | — | | | | — | | | | — | | | | — | |
David Olert
Chief Financial Officer | | | 2015 | | | | 44,115 | | | | — | | | | — | | | | 2,347 | (5) | | | 46,462 | |
| | | 2016 | | | | 198,596 | | | | 46,250 | | | | — | | | | 13,574 | (5) | | | 258,420 | |
Marc Matejka(4)
Vice President — Operations | | | 2015 | | | | 69,231 | | | | — | | | | — | | | | 4,316 | (5) | | | 73,547 | |
| | | 2016 | | | | 170,211 | | | | — | | | | — | | | | 9,529 | (5) | | | 179,740 | |
Stephen R. Brownsell(6)
Executive Vice President
| | | 2015 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | 2016 | | | | 40,808 | | | | — | | | | — | | | | 2,400 | (7) | | | 43,208 | |
Jonathan Clark(8)
Interim President and Director | | | 2015 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | 2016 | | | | 55,000 | | | | — | | | | — | | | | 3,000 | (7) | | | 58,000 | |
Jawahar Tandon
Chief Executive Officer(9) | | | 2015 | | | | 250,000 | | | | — | | | | — | | | | 60,112 | (10) | | | 310,112 | |
| | | 2016 | | | | 9,615 | | | | — | | | | — | | | | 16,021 | (10) | | | 25,636 | |
Thomas Dulek
Chief Financial Officer(11) | | | 2015 | | | | — | | | | — | | | | — | | | | 99,999 | (12) | | | 99,999 | |
| | | 2016 | | | | — | | | | — | | | | — | | | | — | | | | — | |
Vivek Tandon
President and Chief Operating Officer(13) | | | 2015 | | | | 225,000 | | | | — | | | | — | | | | 19,277 | (14) | | | 244,277 | |
| | | 2016 | | | | 190,844 | | | | — | | | | — | | | | 14,495 | (14) | | | 205,339 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Mr. Clarke resigned as our Executive Chairman of the Board in December 2015 and currently serves as our Chairman and Chief Executive Officer. |
| (2) | An aggregate of 164,974 shares were issued to Mr. Clarke in 2015. As described further in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates — Fair Value Measurements”, factors included in the valuation of common stock include the present value of future cash flows, capital structure, valuation of comparable companies, exiting licensing agreements and the growth prospects for our product line. These factors were incorporated into an income approach and a market approach in order to derive an overall valuation of our common stock of $5.49 with respect to such issuances. |
| (3) | Represents unpaid expenses incurred further to the consulting contract and will be converted into shares of common stock and warrants further to the Conversion. |
| (4) | Mr. Matejka’s status as Vice President, Operations was terminated in March 2017. |
| (5) | Represents medical premiums. |
| (6) | Mr. Brownsell joined the Company in October, 2016. |
| (7) | Represents automobile expense allowance. |
| (8) | Mr. Clark became the Interim President of the Company in October, 2016. |
| (9) | Mr. Tandon resigned as Chief Executive Officer in December 2015 and became our Chairman of the Board. Mr. Tandon’s employment agreement with our company was terminated effective with his resignation as Chief Executive Officer. Mr. Tandon resigned as Executive Chairman of the Board in June 2016. He is currently a consultant. |
| (10) | Consists of payments by us for medical and dental premiums of $27,748, automobile expenses of $17,764 and country club membership of $14,600 in 2015 and medical and dental insurance premiums of $16,021 in 2016. Mr. Tandon’s automobile expense and country club reimbursement was discontinued for 2016. |
| (11) | Mr. Dulek’s status as Chief Financial Officer was terminated in June 2015. |
| (12) | Although named Chief Financial Officer of our company, Mr. Dulek rendered services as a consultant; all amounts are classified as consulting payments. |
| (13) | Vivek Tandon served as President and Chief Operating Officer from October 2014 through December 2015 when he resigned from such positions and became our Executive Vice President — Operations. His current annual salary is $180,000. |
| (14) | Includes automobile expenses of $19,277 in 2015 and medical and dental insurance premiums of $14,495 in 2016. Mr. Tandon’s automobile expense reimbursement was discontinued for calendar 2016. |
Employment Agreements and Termination of Employment and Change of Control Arrangements
We have an Executive Employment Agreement with David Olert, our Chief Financial Officer. Further to this Agreement, Mr. Olert is paid a base salary of $195,000. On July 7, 2016, Mr. Olert was granted 25,000 shares of restricted stock under our Plan as well as 16,835 stock options under the Plan at a per share price of $4.50. Mr. Olert received an additional 15,000 shares of restricted stock in January 2017.
In addition, Mr. Olert’s Executive Employment Agreement contains the following provisions:
* The agreement is for a one year term but renews automatically on the anniversary date of each year unless terminated by either party with 30 days’ notice.
* The Agreement provides that Mr. Olert shall be eligible to earn a bonus. It is currently anticipated that the Compensation Committee will set the bonus plan within 60 days of the beginning of each fiscal year. Within 45 days following the end of the calendar year, the Board shall determine whether and in what amount Mr. Olert has earned bonus for the prior calendar year. Notwithstanding the foregoing, determination of Mr. Olert’s entitlement to Bonus and amounts shall be determined exclusively by the Board in its sole discretion. General factors the board may consider in his bonus determination include our company’s financial performance, the level of responsibility, and contribution and performance of Mr. Olert. Evaluation of these and other factors is subjective and no fixed, relative weights are assigned to the factors given.
* The Agreement provides that one-third ( 1/3) of the restricted stock and stock options granted thereunder shall vest on each anniversary of the date thereof. Any unvested shares of restricted stock and stock options in the amount proportional to the time held will vest upon any termination of Mr. Olert’s employment other than termination of the Agreement by our company for “cause” or due to the voluntary resignation by the executive in the absence of “good reason”. Mr. Olert may be able to receive additional stock options and/or restricted stock from time to time at the sole discretion of the Compensation Committee and the Board.
* As long as Mr. Olert remains a full-time employee of our company, he shall be entitled to apply to participate in such executive benefit plans and programs as we may from time to time offer or provide to executives of our company at similar levels, including, but not limited to, any life insurance, health and accident, medical and dental, disability and retirement plans and programs.
* In the event of the termination of the Agreement by us without “cause” or due to the voluntary resignation by Mr. Olert for “good reason”, he shall be entitled to a severance payment equal to 1/3 of his then Base Salary, payable in accordance with our customary payroll practices.
CEO Compensation
Mr. Clarke serves as Chief Executive Officer without cash compensation, other than reimbursement of his reasonable work-related expenses. He does not have an employment agreement with the Company. We issued Mr. Clarke 84,170 shares of our common stock in May 2015 further to a consulting contract. Further to David Clarke’s agreement to become Executive Chairman of the Board, in October 2015 we issued Mr. Clarke an additional 67,337 shares of our common stock. In December 2015 Mr. Clarke became our Chief Executive Officer and President and we issued him an additional 13,467 shares of our common stock. Finally, in January 2017, we issued him an additional 175,000 shares of our common stock in recognition of his continued service to the Company.
Non-Employee Director Compensation
Our board of directors has established a compensation program for our non-employee, independent directors. Each such director receives an initial share or stock option grants of up to 15,000 shares; subsequent equity grants will be subject to the review and approval of the full board of directors. It is currently intended that cash fees may also be paid to our non-employee independent directors at such time as our financial status improves in such amounts as will be determined by those disinterested board members.
In May 2016, we entered into a ten-week consulting agreement with Jonathan Orban, a former director. Further to the agreement, we agreed to pay Mr. Orban $250 per hour but no more than $10,000 per week. We also agreed to pay all of Mr. Orban’s expenses incurred in connection with the performance of his consulting duties in an amount not to exceed $20,000. The Agreement was mutually terminated in October 2016 and we paid Mr. Orban an aggregate of $80,000 in connection therewith. Mr. Orban no longer serves the Company in any capacity.
In June 2016, we entered into a one year consulting agreement with Jawahar Tandon, our former Chief Executive Officer and a former director. Further to the agreement, issued Mr. Tandon 125,000 restricted shares of our common stock. Mr. Tandon agreed with the underwriters pf our initial public offering not to directly or indirectly sell, offer, contract or grant any option to sell, pledge, transfer (excluding intra-family transfers, transfers to a trust for estate planning purposes or to his beneficiaries upon his death), or otherwise dispose of or enter into any transaction which may result in the disposition of any such shares without the prior written consent of Axiom Capital Management, Inc., as representative of the underwriters, for a period of twelve months after the date of this report. We also agreed to pay all of Mr. Tandon’s pre-approved reasonable expenses incurred in connection with the performance of his consulting duties.
Advisory Board
We have created an advisory board to provide us with advice and assistance on various matters regarding unmet industry needs and opportunities, customer feedback on existing products, proposed product offerings and assessment of other strategic corporate matters. None of the members of all advisory board can be an officer or employee of our company and we seek to have members which are opinion leaders in their respective fields. Our sole current advisory board member is Noel Lee, the owner and Chief Executive Officer of Monster, Inc. We have entered into an advisory board agreement with Mr. Lee whereby we are reimbursed for certain of his out-of-pocket expenses incurred in connection with company-related business. The agreement contemplates a perpetual term commencing August 2015 to continue until (i) either party elects to terminate the agreement at any time after August 2017 or (ii) we elect to terminate the agreement immediately upon Mr. Lee’s breach or suspected breach of certain of the confidentiality provisions of the agreement. In addition, Mr. Lee was issued a warrant to purchase up to 191,289 shares of our common stock at a per share exercise price of $14.85. We will seek to add other industry leaders to our advisory board in the future as opportunities present themselves.
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of December 31, 2016 regarding compensation plans, including any individual compensation arrangements, under which2022 and 2021, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity securities(deficit) and cash flows for each of the Company are authorized for issuance.
| | | | | | |
| Plan Category | | Number of
Securities to be
issued upon exercise
of outstanding
options, warrants
and rights | | Weighted-average
exercise price of
outstanding options,
warrants and rights
| | Number of
securities remaining
available for future
issuance under equity
compensation plans |
| Equity compensation plans approved by security holders | | | 26,934 | | | $ | 13.95 | | | | 227,449 | |
| Equity compensation plans not approved by security holders | | | — | | | | — | | | | — | |
| Total | | | 26,934 | | | | NA | | | | 227,449 | |
As of April 20, 2017, there were 234,949 shares available for issuance pursuant to the Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage of ownership of that person, shares of common stock subject to options and warrants held by that person that are currently exercisable or become exercisable within 60 days of April 14, 2017 are deemed outstanding even if they have not actually been exercised. Those shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person.
The following table sets forth as of April 20, 2017 certain information with respect to beneficial ownership of our common stock based on 8,005,011 issued and outstanding shares of common stock, by:
Each person known to be the beneficial owner of more than 5% of the outstanding common stock of our company;
Each named executive officer;
Each director; and
All of the executive officers and directors as a group.
The number of shares of our common stock outstanding as of April 20, 2017 excludes 434,276 shares of our common stock issuable upon the exercise of outstanding options and warrants. Unless otherwise indicated, the persons and entities namedtwo years in the table have sole voting and sole investment power with respect to the shares set forth opposite the stockholder’s name, subject to community property laws, where applicable. Unless otherwise indicated, the address of each stockholder listed in the table is c/o Monster Digital, Inc., 2655 First Street, Suite 250, Simi Valley, California 93065.
| | | | | | |
| Name and Address of Beneficial Owner | | Title | | Amount and Nature of Beneficial Ownership(1) | | Percent of
Class |
Directors and Named Executive Officers
| | | | | | | | | | | | |
| David H. Clarke | | | Chief Executive Officer and Chairman of the Board | | | | 857,181 | (1) | | | 10.6 | % |
| Jonathan Clark | | | Interim President and Director | | | | 250,000 | | | | 3.0 | % |
| Stephen R. Brownsell | | | Executive Vice President | | | | 135.000 | | | | 1.7 | % |
| David Olert | | | Senior Vice President, Finance and CFO | | | | 56,834 | (2) | | | | * |
| Robert B. Machinist | | | Director | | | | 15,000 | | | | | * |
| Christopher Miner | | | Director | | | | 15,000 | | | | | * |
| Steven Barre | | | Director | | | | 15,000 | | | | | * |
| Officers and Directors as a Group (total of 8 persons) | | | | | | | 1,344,015 | (2)(3) | | | 15.7 | % |
5% Stockholders:
| | | | | | | | |
| Monster Inc.(4) | | | | | | | 590,697 | | | | 7.2 | % |
| Noel Lee(4)(5) | | | | | | | 590,697 | | | | 7.2 | % |
| * | Represents beneficial ownership of less than 1% of the outstanding common stock. |
| (1) | Includes 442,191 shares held by Mr. Clarke, 18,068 shares held by Leslie Clarke, Mr. Clarke’s wife, and 355,928 shares held by GBS Holdings, Inc., an entity which may be deemed controlled by Mr. Clarke but which is owned by Leslie Clarke and the children of Mr. Clarke. Also includes warrants to purchase 30,472 shares of common stock held by Mr. Clarke and 45,522 shares of common stock held by GBS Holdings, Inc. Mr. Clarke may be deemed the indirect beneficial owner of these securities since he has shared sale, voting and investment control over the securities with his wife. The address of GSB Holdings, Inc. and Mr. Clarke is 14179 Laurel Trail, Wellington, Florida 33414. |
| (2) | Includes stock options to purchase 16,834 shares of common stock. |
| (3) | Includes warrants to purchase 30,472 shares of common stock held by Mr. Clarke and 45,522 shares of common stock held by GBS Holdings, Inc. |
| (4) | Represents 382,575 shares held by Monster, Inc. and warrants to purchase 208,122 shares of common stock held by Noel Lee, the Chief Executive Officer and sole shareholder of Monster, Inc. |
| (5) | Mr. Lee may be deemed the indirect beneficial owner of these securities since he has sole sale, voting and investment control over the securities. The address of Monster, Inc. and Mr. Lee is 455 Valley Drive, Brisbane, CA 94005. |
SECTION 16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company’s securities are currently registered under Section 12 of the Securities Exchange Act of 1934, as amended. As a result, and pursuant to Rule 16a-2, the Company’s directors and officers and holders of 10% or more of its common stock are currently required to file statements of beneficial ownership with regards to their ownership of equity securities under Sections 13 or 16 of the Exchange Act. We have been informed that David H. Clarke, our Chief Executive Officer and Chairman of the Board, has inadvertently failed to file reports as required by Section 16 of the Securities Exchange Act of 1934, as amended, for our yearperiod ended December 31, 2016. These consisted of his failure to file Form 4s as required with respect to issuances of securities to him during fiscal 2016 after his appointment as President in September 2015, all as detailed in the sections herein entitled “Executive Compensation”, “Security Ownership of Certain Beneficial Owners and Management” and “Certain Relationships and Related Transactions”. We have been informed that Mr. Clarke has been made aware of these filing delinquencies and plans to make remedial filings as soon as practicable. Based on2022. You can request a review of written representations from our executive officers and directors and a review of Forms 3, 4 and 5 furnished to us, we believe that during the fiscal year ended December 31, 2016, directors, officers and more than 10% owners, other than Mr. Clarke, filed reports required by Section 16(a) of Exchange Act on a timely basis.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Party Loans
From time to time since inception, we have obtained certain related party loans from and advances Tandon Enterprises, Inc. a company controlled and owned by Jawahar Tandon, a director and our former Executive Chairman of the Board and Chief Executive Officer, and Devinder Tandon, a former director. The proceeds of the loans provided us with working capital. For the years ended December 31, 2015 and 2014, the net amount borrowed was $(151,000) and $460,000, respectively. However, as of June 22, 2016, we were indebted to Tandon Enterprises, Inc. in the amount of $346,100. The loans and advances were non-interest bearing and had no maturity date. Tandon Enterprises, Inc. converted all outstanding net amounts lent and advanced to our company into shares of common stock and warrants immediately prior to consummationcopy of our initial public offeringAnnual Report on Form 10-K free of charge by e-mail at the initial public offering price of the shares of common stock so offered.
David H. Clarke, our Chief Executive Officer and one of our principal stockholders, agreed that a $100,000 promissory note owedinvestor-relations@9meters.com, by mail addressed to him by our company made in September 2015, which note bears interest at 5% per annum, plus any interest accrued but unpaid thereon, as well as an aggregate of approximately $50,000 owed to Mr. Clarke under his prior consulting arrangement with our company, the total amounts owing to Clarke known as the Clarke Obligation, automatically converted immediately prior to the consummation of our initial public offering into a number of shares of common stock and warrants equal to the principal amount of the Clarke Obligation divided by the initial public offering price of the shares so offered (33,333 shares of common stock and 33,333 warrants).
Other Arrangements
Tandon Enterprises, Inc. agreed that $346,100 owed to it by our company automatically converted immediately prior to the consummation of our initial public offering into a number of shares of common stock and warrants equal to the principal amount of the obligation divided by the initial public offering price of the shares so offered (76,911 shares of common stock and 76,911 warrants).
Consulting Agreements
In May 2016, we entered into a 10-week consulting agreement with Jonathan Orban, a director, which becomes effective on the effective date of our initial public offering. The Agreement may be extended. Further to the agreement, we agreed to pay Mr. Orban $250 per hour but no more than $10,000 per week. We also agreed to pay all of Mr. Orban’s expenses incurred in connection with the performance of his consulting duties in an amount not to exceed $20,000. This Agreement was terminated in October 2016 and in connection therewith we paid Mr. Orban the aggregate sum of $80,000.
In June 2016, we entered into a one year consulting agreement with Jawahar Tandon, our former Chief Executive Officer. Further to the agreement, we issued Mr. Tandon 125,000 restricted shares of our common stock. We also agreed to pay all of Mr. Tandon’s pre-approved reasonable expenses incurred in connection with the performance of his consulting duties.
Cancellation of Shares
Pursuant to the Conversion, Jawahar Tandon and Devinder Tandon offered in the aggregate to each holder who agreed to convert Bridge Notes into shares of common stock and warrants or who purchased shares of our Series A Preferred Stock, which automatically converts into shares of common stock and warrants, one share from Mssrs. Tandon’s beneficial holdings for each share of common stock issued further to the aforementioned Conversion (but excluding shares issuable upon exercise of the warrants issued further to the Conversion) (the “Conversion Additional Shares”). For the sake of expediency, we will issue the Conversion Additional Shares directly to such holders and Mssrs. Tandon (and Tandon Enterprises, Inc. as described below) will cancel in the aggregate an equivalent number of shares beneficially held by them for each Conversion Additional Share referenced further to the previous sentence. The D Tandon Irrevocable Family Trust beneficially owned 479,065 shares of common stock prior to the Conversion; as a result of the Conversion, all shares held by the D Tandon Irrevocable Family Trust were cancelled. Further to a Share Cancellation Agreement dated June 1, 2016 by and among our company, the D Tandon Irrevocable Family Trust, the J Tandon Irrevocable Family Trust and Tandon Enterprises, Inc. (the “Share Cancellation
Agreement”), Tandon Enterprises, Inc. and the J Tandon Irrevocable Family Trust agreed to cancel any shortfall in the number of shares that the D Tandon Irrevocable Family Trust would have been required to cancel further to the Conversion. As a result of the aforementioned shortfall, Tandon Enterprises Inc. canceled all 67,337 shares held by it prior to the Conversion and all 72,863 shares to be issued to it as described above further to the Conversion. Further to the Share Cancellation Agreement, the J Tandon Irrevocable Family Trust agreed to cancel any shortfall in the number of shares that Tandon Enterprises agreed to cancel to cover any referenced shortfall by the D Tandon Irrevocable Family Trust. The J Tandon Irrevocable Family Trust owned 647,651 shares of common stock prior to the Conversion; as a result of the Conversion, all shares held by the J Tandon Irrevocable Family Trust were cancelled. Further to the Share Cancellation Agreement, we agreed to issue any additional shares that the D Tandon Irrevocable Family Trust, the J Tandon Irrevocable Family Trust and Tandon Enterprises, Inc. could not cancel to cover shares that were required to be cancelled further to the Conversion. As all shares held by the D Tandon Irrevocable Family Trust, the J Tandon Irrevocable Family Trust and Tandon Enterprises, Inc. were cancelled further to the Conversion, and based upon the public offering price of $4.50 per share, we issued 134,043 shares of common stock to investors in the Conversion.
Arrangements with WestPark Capital
Reorganization
In August 2012, SDJ, the predecessor of Monster Digital, became a wholly-owned subsidiary of Monster Digital (formerly known as WRASP 35, Inc. which changed its name to AOTS 35,9 Meters Biopharma, Inc., a company wholly owned by WP Financial, an affiliate of WestPark Capital) further to a share exchange agreement. In connection with this reorganization, 100% of the issued and outstanding securities of SDJ were exchanged for securities of Monster Digital. An aggregate of 1,169,068 shares of common stock was issued to the shareholders of SDJ. Prior to the closing of the reorganization, the then-controlling stockholder of Monster Digital, WP Financial, agreed to the cancellation of an aggregate of 1,234,868 shares and warrants to purchase an aggregate of 1,871,991 shares of common stock held by it such that there were 198,670 shares of common stock and warrants to purchase an aggregate of 39,392 shares of common stock owned by it immediately after the reorganization.
WP Financial did not receive any consideration for the cancellation of the shares and warrants. The cancellation of the shares and warrants was accounted for as a contribution to capital. The number of shares and warrants cancelled was determined based on negotiations between WP Financial and SDJ. The parties to the transaction acknowledged that a conflict of interest existed with respect to the negotiations for the terms of the reorganization due to, among other factors, the fact that WestPark was advising SDJ in the transaction. The shareholders of SDJ negotiated an estimated value of SDJ and its subsidiaries and an estimated value of Monster Digital (based on the mutually desired capitalization of the company resulting from the reorganization) which therefore determined the capitalization of Monster Digital following the reorganization.
In addition, we paid a $155,000 success fee to WestPark for services being provided in connection with the reorganization, including coordinating the reorganization process, interacting with the principals of Monster Digital pre-reorganization and negotiating the definitive agreement for the reorganization of SDJ with Monster Digital, conducting a financial analysis of SDJ, conducting due diligence on SDJ and managing the interrelationship of legal and accounting activities. We also paid a $95,000 fee to WestPark for providing the use of Monster Digital for the reorganization.
Richard Rappaport, the former President of each of AOTS 35, Inc. (renamed Monster Digital, Inc.) and its indirect controlling stockholder through his control of WP Financial prior to the reorganization, indirectly holds a 100% interest in WestPark, an underwriter for our initial public offering, due to the fact that he is the sole owner of the membership interests of the parent company of WestPark. Neither Mr. Rappaport nor WP Financial received any benefits in their individual capacities related to the transactions described above, except for WP Financial’s retention of shares in Monster Digital.
Private Placements
WestPark Capital acted as our placement agent in connection with a private placement from October 2015 to February 2016 of promissory notes consisting of $3.36 million loaned to our company a 22.5% loan organization fee payable on maturity, which is on the earlier of October 2016 or the closing date
of our initial public offering, and a flat fee interest rate of 15%. In connection therewith we paid WestPark Capital commission and expenses of $454,000.
WestPark Capital acted as our placement agent in connection with a private placement of up to $3.0 million of our Series A Preferred Stock which we commenced in March 2016. In connection therewith we paid Westpark Capital a 10% commission and a 3% non-accountable expense allowance, as well as certain legal and other expenses of Westpark Capital.
Westpark Capital is acting as a sales agent in connection with our current private placement of common stock and warrants. As of March 17, 2017, we paid Westpark Capital commission of approximately $31,000 further to this private placement.
Other Arrangements
In December 2013 and January 2014, David H. Clarke, our Chief Executive Officer, beneficially loaned Westpark Capital Financial Services LLC, the parent company of WestPark Capital, Inc., an aggregate of $350,000 evidenced by promissory notes bearing interest at 5% per annum and due five years from the date of issuance. In connection therewith Westpark Capital Financial Services LLC transferred to Mr. Clarke 7,659 shares of our common stock held by it and warrants to purchase up to 7,659 shares of our common stock held by it. The exercise price of the warrants is $14.85 and the warrants expire in 2017. All such loans and equity transfers were made by Westpark Capital Financial Services LLC prior to Mr. Clarke becoming our Chief Executive Officer. All such notes remain outstanding.
Prior to our initial public offering, Westpark Capital beneficially held over 5% of our common stock. WestPark Capital transferred 111,257 shares of the common stock held by it and warrants to purchase 35,537 shares of common stock to associated persons at WestPark Capital and to third parties further to prior contractual commitments; each of the transferees represented that he/she/it was an accredited investor.
Policies and Procedures for Transactions with Related Persons
We have adopted a policy that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our common stock and any members of the immediate family of any of the foregoing persons are not permitted to enter into a related person transaction with us without the prior consent of our audit committee. Any request for us to enter into a transaction with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of any class of our voting securities or any member of the immediate family of any of the foregoing persons, in which the amount involved exceeds $120,000 and such person would have a direct or indirect interest, must first be presented to our audit committee for review, consideration and approval. In approving or rejecting any such proposal, our audit committee is to consider the material facts of the transaction, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction. All of the transactions described above were entered into prior to the adoption of such policy, but after presentation, consideration and approval by our board of directors.
STOCKHOLDER PROPOSALS FOR 2018 ANNUAL MEETING
Proposals to be Included in Proxy Statement
Stockholders are hereby notified that if they wish a proposal to be included in our proxy statement and form of proxy relating to the 2018 annual meeting of stockholders, they must deliver a written copy of their proposal no later than April 1, 2018. If the date of next year’s annual meeting is changed by more than 30 days from the date of this year’s meeting, then the deadline is a reasonable time before we begin to print and mail proxy materials. Proposals must comply with the proxy rules relating to stockholder proposals, in particular Rule 14a-8 under the Securities Exchange Act of 1934, in order to be included in our proxy materials.
Proposals to be submitted for the Annual Meeting
A stockholder may wish to have a proposal presented at the 2017 annual meeting, but not to have such proposal included in the Company’s proxy statement and form of proxy relating to that meeting. If notice of any such proposal is not received by the Company at its principal executive offices on or before September 20, 2017 (45 calendar days prior to the anniversary of the mailing date of this proxy statement), then such proposal shall be deemed “untimely” for purposes of Securities and Exchange Commission Rule 14a-4(c).
If the date of our 2018 annual meeting has been changed by more than 30 days from the date of our 2017 annual meeting, stockholders’ written notices must be received by us a reasonable time before we begin to print and mail proxy materials for our 2018 annual meeting.
Mailing Instructions
Proposals should be delivered to Monster Digital, Inc., 2655 First Street,Attn: Investor Relations, 4509 Creedmoor Road, Suite 250, Simi Valley, California 93065, Attention: Secretary. To avoid controversy and establish timely receipt by the Company, it is suggested that stockholders send their proposals by certified mail, return receipt requested.
STOCKHOLDER COMMUNICATION WITH THE BOARD
Stockholders who wish to contact any of our directors either individually or as a group may do so by writing to c/o David Olert, Monster Digital, Inc., 2655 First Street, Suite 250, Simi Valley, California 93065,600, Raleigh, NC 27612, or by telephone at (805) 381-5469 specifying whether(919) 275-1933. Please include your contact information with the communication isrequest.
REQUESTS FOR DIRECTIONS TO THE ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting will be held on July 14, 2023, at 9:00 a.m. Eastern Time at 4509 Creedmoor Road, Suite 600, Raleigh, NC 27612. Requests for directions to the meeting location may be directed to the entire Board or to a particular director. Submitting stockholders should indicate they are a stockholder of our company. Company personnel will screen stockholder communications and depending on the subject matter, will forward the inquiry to the chairman of our Board, who may forward the inquiry to a particular director if the inquiry is directed towards a particular director; forward the inquiry to the appropriate personnel within our company (for instance, if it is primarily commercial in nature); attempt to handle the inquiry directly (for instance, if it is a request for information about our company or a stock-related matter); or not forward the inquiry if it relates to an improper or inappropriate topic or is otherwise irrelevant.9 Meters Biopharma. Inc., Attn: Corporate Secretary, 4509 Creedmoor Road, Suite 600, Raleigh, NC 27612.
OTHER BUSINESS
The Board doesMATTERS
We do not know of any other matteradditional matters to be acted uponsubmitted at the Annual Meeting. However, ifIf any other matter shallmatters properly come before the Annual Meeting, it is the proxy holdersintention of the persons named in the enclosed form of proxy accompanying this Proxy Statement will have authority to vote all proxiesthe shares they represent as our Board of Directors recommends.
THE BOARD OF DIRECTORS
Dated: [l], 2023
AMENDMENT NO. 1 TO THE 9 METERS BIOPHARMA, INC. 2022 STOCK INCENTIVE PLAN
WHEREAS, 9 Meters Biopharma, Inc. (the “Company”), maintains the 2022 Stock Incentive Plan (the “Plan”); and
WHEREAS, pursuant and subject to Section 16(a) of the Plan, the board of directors of the Company (the “Board”) is authorized to amend the Plan, subject to the approval of the Company’s stockholders; and;
WHEREAS, the Board deems it to be in the best interests of the Company to amend, and to submit for stockholder approval at the next annual meeting of stockholders of the Company, the amendment of the Plan as set forth below.
NOW, THEREFORE, in accordance with
their discretion.the provisions of Section 16(a) of the Plan and conditioned upon the receipt of stockholder approval as described therein, the Plan is hereby amended in the following respects:
1. Section 3(a) of the Plan is deleted in its entirety and the following substituted in lieu thereof:
“(a) Subject to adjustment as described in Section 13 below, the maximum aggregate number of Shares which may be issued pursuant to all Awards is the sum of (i) 4,600,000 Shares, (ii) the number of Shares remaining available for grant under the Prior Plan as of the Effective Date, and (iii) the number of Shares underlying any award granted under the Prior Plan that expires, terminates, or is canceled or forfeited under the terms of the Prior Plan without such Shares having been issued. The Shares may be authorized, but unissued, or reacquired Common Stock.”
2. Except as herein amended, the terms and provisions of the Plan shall remain in full force and effect as originally adopted and approved.
IN WITNESS WHEREOF, the undersigned officer of the Company attests that the foregoing Amendment of the 9 Meters Biopharma, Inc. 2022 Stock Incentive Plan was adopted by the Board on March 21, 2023, and approved by the Company’s shareholders on [●], 2023.
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BY ORDER OF THE BOARD | | 9 METERS BIOPHARMA, INC. |
/s/ David H. Clarke
David H. Clarke,
Chief Executive Officer on behalf of the Board of Directors
Dated: May 3, 2017
Simi Valley, CA | | |
| By: | |
| | Name: |
| | Title: |
ANNEX B
CERTIFICATE OF STOCKHOLDERSAMENDMENT TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED
OF9 METERS BIOPHARMA, INC.
(Pursuant to Section 242 of the
General Corporation Law of the State of Delaware)
MONSTER DIGITAL, INC.
June 15, 2017, 1:00 p.m.
9 Meters Biopharma, Inc.,
Pacific Daylight TimePlease date, signa corporation organized and mail your proxy card inexisting under and by virtue of the envelope providedGeneral Corporation Law of the State of Delaware (the “Corporation”), does hereby certify as soon as possible.
o Please detach along perforated line and mail infollows:
The Board of Directors of the
envelope provided.oTHIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:x
|
1.
TO ELECT FIVE DIRECTORS
|
Nominees |
01 David H. Clarke 02 Jonathan Clark 03 Robert Machinist 04 Christopher Miner 05 Steven Barre |
| | | | | | |
FOR
ALL
o | | WITHHOLD
ALL
o | | FOR ALL
EXCEPT
o | | 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. |
| | | | | | |
2.
TO APPROVE THE ADVISORY VOTE ON THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
| | FOR
o | | AGAINST
o | | ABSTAIN
o |
3.
TO APPROVE AN AMENDMENT OF THE COMPANY’S 2012 OMNIBUS INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE THEREUNDER FROM 970,350 SHARES TO 1,370,350 SHARES
| | FOR
o | | AGAINST
o | | ABSTAIN
o |
4.
TO APPROVE AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO AFFECT A REVERSE STOCK SPLIT BY A RATIO OF NOT LESS THAN ONE-FOR-TWO (1:2) AND NOT GREATER THAN ONE-FOR-FOUR (1:4)
| | FOR
o | | AGAINST
o | | ABSTAIN
o |
5.
TO RATIFY THE SELECTION OF COHNREZNIK LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2017.
| | FOR
o | | AGAINST
o | | ABSTAIN
o |
As to any other matters that may properly come before the meeting or any adjournment thereof, the proxy holders are authorized to voteCorporation duly adopted a resolution in accordance with their judgment.
Please indicate if you plan to attend this meeting: Mark here and indicate any change of address below.o
YESo NOo
Please sign exactly as your name(s) appear 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.
Signature Date Signature (Joint Owners) Date
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED FOR ELECTION OF THE DIRECTOR NOMINEES, FOR THE RESOLUTION APPROVING OUR EXECUTIVE COMPENSATION, AND FOR RATIFICATION OF THE APPOINTMENT OF COHNREZNIK, LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2017. THIS PROXY ALSO CONFERS DISCRETIONARY AUTHORITY ON THE PROXY HOLDERS TO VOTE AS TO ANY OTHER MATTERS THAT MAY BE PROPERLY BROUGHT BEFORE THE ANNUAL MEETING.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
MONSTER DIGITAL, INC.
ANNUAL MEETING OF STOCKHOLDERS
June 15, 2017
1:00 PM PACIFIC DAYLIGHT TIME
The undersigned stockholder(s) of MONSTER DIGITAL, INC., a Delaware corporation, hereby acknowledges receiptSection 242 of the Notice of Annual Meeting of Stockholders and Proxy Statement, each dated May 3, 2017, and hereby appoints David H. Clarke and David Olert, or either of them acting singly in the absenceGeneral Corporation Law of the other, with full powerState of substitution, as proxyDelaware, setting forth an amendment to the Amended and attorney-in-fact on behalf and in the name and placeRestated Certificate of Incorporation of the undersigned,Corporation, as amended (the “Amendment”) and hereby authorizes each of themdeclaring said Amendment to represent and to vote allbe advisable. The stockholders of the shares of capital stock that the undersigned would be entitled to vote if personally presentCorporation duly approved said proposed Amendment at the Annual Meeting of Stockholders of Monster Digital, Inc.the Corporation held on [●] in accordance with Section 242 of the General Corporation Law of the State of Delaware. The resolution setting forth the Amendment is as follows:
In order to effect the Amendment, the FIFTH ARTICLE of the Amended and Restated Certificate of Incorporation of the Corporation, as amended, is hereby amended to add the following paragraphs at the end of the FIFTH ARTICLE:
“The issued and outstanding Common Stock of the corporation, $0.0001 par value, shall, at 5:00 p.m., Eastern Standard Time, on [●], 202[●] (the “202●] Effective Time”), be deemed to be held“reverse stock split,” and in furtherance thereof, there shall, after the 202[●] Effective Time, be deemed to be issued and outstanding one (1) share of the Common Stock of the Corporation for and instead of each ten (10) shares of the Common Stock of the Corporation issued and outstanding immediately prior to the 202[●] Effective Time. Shares of Common Stock that were outstanding prior to the 202[●] Effective Time and that are not outstanding after the 202[●] Effective Time shall resume the status of authorized but unissued shares of Common Stock. To the extent that any stockholder shall be deemed after the 202[●] Effective Time as a result of this Amendment to own a fractional share of Common Stock, such fractional share shall be deemed to be one whole share.
The reverse stock split shall occur without any further action on June 15, 2017, at 1:00 p.m., Pacific Daylightthe part of the Corporation or the holders of shares of common stock and whether or not certificates representing such holders’ shares prior to the Reverse Split are surrendered for cancellation. Each stock certificate that, immediately prior to the 202[●] Effective Time, at The Courtyardrepresented shares of Common Stock shall, after the 202[●] Effective Time, represent that number of whole shares of Common Stock into which the shares of Common Stock represented by Marriott located at 191 Cochran Street, Simi Valley, CA 93065, and atsuch certificate shall have been reclassified (as well as the right to receive a whole share in lieu of any adjournments or postponements thereof, upon the mattersfractional shares of Common Stock as set forth above); provided, however, that each holder of record of a certificate that represented shares of Common Stock prior to the 202[●] Effective Time shall receive, upon surrender of such certificate, a new certificate representing the number of whole shares of Common Stock into which the shares of Common Stock represented by such certificate shall have been reclassified, as well as any whole share in lieu of fractional shares of Common Stock to which such holder may be entitled pursuant to the Noticeimmediately preceding paragraph.”
SECOND: Except as expressly amended herein, all provisions of Annual Meetingthe Amended and Restated Certificate of StockholdersIncorporation of the Corporation filed with the Office of the Secretary of State of the State of Delaware on December 5, 2018, and Proxy Statement, receiptamended on May 1, 2020, June 22, 2021 and October 14, 2022, shall remain in full force and effect.
THIRD:That said Amendment was duly adopted in accordance with the provisions of which isSection 242 of the General Corporation Law of the State of Delaware.
FOURTH: That the Corporation’s number of shares of authorized capital stock of all classes, and the par value thereof, shall not be changed or affected under or by reason of said Amendment.
FIFTH: That said amendment shall be effective at 5:00 p.m., Eastern Standard Time, on [●], 202[●].
IN WITNESS WHEREOF, the undersigned, being a duly authorized officer of the Corporation, does hereby acknowledged.CONTINUED AND TO BE SIGNED ON REVERSE SIDE
execute this Certificate of Amendment to the Amended and Restated Certificate of Incorporation, as amended, this [●] day of [●], 202[●]. | | | | | | | | | | | | | | | | | |
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| 9 METERS BIOPHARMA, INC. |
| |
| By: _________________________________________ |
| Name: |
| Title: |
