ITEM 10. DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE
GOVERNANCE
Directors and Executive Officers
The
following sets forth certain information regarding each of our
directors and executive officers:
Name
|
Age
|
Position
|
James Sapirstein
|
58
|
President, Chief Executive Officer and Non-Independent
Director
|
Daniel Schneiderman
|
42
|
Chief Financial Officer
|
James E. Pennington
|
77
|
Chief Medical Officer
|
Edward J. Borkowski (1)(2)
|
60
|
Chairman of the Board of Directors
|
Charles J. Casamento (1)(2)
|
74
|
Director
|
Alastair Riddell (1)(2)
|
70
|
Director
|
Vern L. Schramm
|
77
|
Director
|
Gregory Oakes
|
52
|
Director
|
__________
(1)
|
Member of the Compensation Committee and Nominating and Corporate
Governance Committee.
|
(2)
|
Member of the Audit Committee
|
The
following is a summary of our executive officers’ and
directors’ business experience.
James
Sapirstein was appointed to the
Board on October 8, 2019 and as the Company’s President and
Chief Executive Officer effective that same day. Prior to joining
the Company, Mr. Sapirstein served as Chief Executive Officer and
as a director of ContraVir Pharmaceuticals, Inc. (now known as
Hepion Pharmaceuticals, Inc.) from March 2014 to October 2018.
Previously, Mr. Sapirstein was the Chief Executive Officer of
Alliqua Therapeutics from October 2012 to February 2014. He founded
and served as Chief Executive Officer of Tobira Therapeutics from
October 2006 to April 2011 and served as Executive Vice President,
Metabolic and Endocrinology for Serono Laboratories from June 2002
to May 2005. Mr. Sapirstein’s earlier career included a
number of senior level positions in the area of marketing and
commercialization, including as Global Marketing Lead for Viread
(tenofovir) while at Gilead Sciences and as Director of
International Marketing of the Infectious Disease Division at
Bristol Myers Squibb. Mr. Sapirstein is currently the Chair
Emeritus of BioNJ, the New Jersey affiliate of the Biotechnology
Innovation Organization, and also serves on the Emerging Companies
and Health Section Boards of the Biotechnology Innovation
Organization. Mr. Sapirstein received his bachelor’s degree
in pharmacy from Rutgers University and holds an MBA degree in
management from Fairleigh Dickinson University.
Mr.
Sapirstein’s nearly 36 years of pharmaceutical industry
experience which spans areas such as drug development and
commercialization, including participation in 23 product launches,
six of which were global launches led by him makes him a valuable
asset to the Board and in his oversight and execution of the
Company’s business plan.
Daniel
Schneiderman was appointed as
Chief Financial Officer of the Company on January 2, 2020. Prior to
joining the Company, from November 2018 through December 2019 Mr.
Schneiderman served as Chief Financial Officer of Biophytis SA,
(ENXTPA: ALBPS) and its U.S. subsidiary, Biophytis, Inc., a
European-based, clinical-stage biotechnology company focused on the
development of drug candidates for age-related diseases, with a
primary focus on neuromuscular diseases. From February 2012 through
August 2018, Mr. Schneiderman served as Vice President of Finance,
Controller and Secretary of MetaStat, Inc. (OTCQB: MTST), a
publicly traded biotechnology company with a focus on Rx/Dx
precision medicine solutions to treat patients with aggressive
(metastatic) cancer. From 2008 through February 2012, Mr.
Schneiderman was Vice President of Investment Banking at Burnham
Hill Partners LLC, a boutique investment bank providing capital
raising, advisory and merchant banking services. From 2004 through
2008, Mr. Schneiderman served in various roles and increasing
responsibilities, including as Vice President of Investment Banking
at Burnham Hill Partners, a division of Pali Capital, Inc.
Previously, Mr. Schneiderman worked at H.C. Wainwright & Co.,
Inc. in 2004 as an investment banking analyst. Mr.
Schneiderman holds a bachelor’s degree in economics from
Tulane University.
Dr. James
E. Pennington was
appointed as Chief Medical Officer of the Company in May
2018. Prior to joining the Company, Dr. Pennington served as
Senior Clinical Fellow from 2010 to 2018 and as Executive Vice
President and Chief Medical Officer from 2007 to 2010 at Anthera
Pharmaceuticals, Inc. (NASDAQ: ANTH). From 2004 to 2007, Dr.
Pennington served as Executive Vice President and Chief Medical
Officer at CoTherix, Inc., and has held various executive positions
at a number of pharmaceutical companies, including InterMune Inc.,
Shaman Pharmaceuticals and Bayer Corporation. He has served on
several editorial boards and has authored numerous original
research publications and reviews. Dr. Pennington is currently a
Clinical Professor of Medicine with the University of California
San Francisco, where he has taught since 1986. Prior to that, he
was a professor at Harvard Medical School. Dr. Pennington received
a Bachelor of Arts from the University of Oregon and a Doctor of
Medicine from the University of Oregon School of Medicine, and is
Board Certified in internal medicine and infectious
diseases.
Edward J. Borkowski was appointed to
the Board in May 2015, and currently serves as its Chair. Mr.
Borkowski is a healthcare executive who has served as Executive
Vice President of MiMedx Group, Inc.
(NASDAQ: MDGX) until November 2019, but continues to serve as a
consultant for MiMedx Group, Inc. through March 2020. Mr. Borkowski
also served as a director for Co-Diagnostics, Inc. (NASDAQ: CODX)
from May 2017 to June 2019, as the Chief Financial
Officer of Aceto
Corporation (NASDAQ: ACET) from February 2018 to April 2018, and
has held several executive positions with
for Concordia
International, an international specialty pharmaceutical company,
between May
2015 to February 2018. Mr. Borkowski has
also served as Chief Financial Officer of Amerigen Pharmaceuticals,
a generic pharmaceutical company with a focus on oral, controlled
release products and as the Chief
Financial Officer and Executive Vice President of Mylan N.V. In
addition, Mr. Borkowski previously held the position of Chief
Financial Officer with Convatec, a global medical device company
focused on wound care and ostomy, and Carefusion, a global medical
device company for which he helped lead its spin-out from Cardinal
Health into an independent public company. Mr. Borkowski has also
served in senior financial positions at Pharmacia and American Home
Products (Wyeth). He started his career with Arthur Andersen &
Co. after receiving his MBA in accounting from Rutgers University
subsequent to having earned his degree in Economics and Political
Science from Allegheny College. Mr. Borkowski is currently a
Trustee and a member of the Executive Committee of Allegheny
College.
Mr.
Borkowski’s extensive healthcare and financial expertise,
together with his public company experience provides the Board and
management with valuable insight in the growth of the
Company’s business plan.
Charles J. Casamento was appointed to
the Board in March 2017. Since 2007, Mr. Casamento has been
executive director and principal of The Sage Group, a health care
advisory group. Prior to that, Mr. Casamento was president and
Chief Executive Officer of Osteologix, a startup company which he
oversaw going public, from October 2004 until April 2007. Mr.
Casamento was the founder of Questcor Pharmaceuticals where he was
President, Chief Executive Officer and Chair from 1999 through
2004. During his time at Questcor, the company acquired Acthar, a
product with sales that would eventually exceed $1.0 billion. Mr.
Casamento also served as President, Chief Executive Officer and
Chair of RiboGene Inc. until 1999 when RiboGene was merged another
company to form Questcor. He was also the Co-Founder, President and
Chief Executive Officer of Indevus (formerly Interneuron
Pharmaceuticals) and has held senior management positions at
Genzyme Corporation, where he was Senior Vice President, American
Hospital Supply, where he was Vice President of Business
Development for the Critical Care division, Johnson & Johnson,
Hoffmann-LaRoche and Sandoz. He currently serves on the Boards of
Directors of Relmada Therapeutics (OTCQB: RLMD) and Eton
Pharmaceuticals, and was previously a Director and Vice Chair of
the Catholic Medical Missions Board, a large not for profit
international organization. Mr. Casamento holds a bachelor's degree
in Pharmacy from Fordham University and an MBA from Iona
College.
Mr.
Casamento’s expertise and knowledge of the financial
community combined with his experience in the healthcare sector
makes him a valued member of the Board
Dr.
Alastair Riddell was
appointed to the Board in September 2015. Since June 2016, Dr.
Riddell has served as Chair of Nemesis Biosciences Ltd and Chair of
Feedback plc (LON: FDBK). He has also served as Chair of the South
West Academic Health Science network in the UK since January 2016.
Since his appointment in December 2015, Dr. Riddell he has served
as Non-Executive Director of Cristal Therapeutics in The
Netherlands. From September 2012 to February 2016, he served as
Chair of Definigen Ltd., and from November 2013 to September 2015
as Chair of Silence Therapeutics Ltd., and from October 2009 to
November 2012 as Chair of Procure Therapeutics. Between
2007 to 2009, Dr. Riddell served as the Chief Executive Officer of
Stem Cell Sciences plc. and between 2005 to 2007, served at
Paradigm Therapeutics Ltd. as the Chief Executive Officer. Between
1998 to 2005, Dr. Riddell also served as the Chief Executive
Officer of Pharmagene plc. Dr. Riddell began his career as a
doctor in general practice in a variety of hospital specialties and
holds both a Bachelor of Science and a Bachelor of Medical Sciences
degrees. He was recently awarded a Doctorate of Science, Honoris
Causa by Aston University.
Dr.
Riddell’s medical background coupled with his expertise in
the life sciences industry, directing all phases of clinical
trials, before moving to sales, marketing and general management,
makes him a well-qualified member of the Board.
Dr. Vern L.
Schramm was appointed to
the Board in October 2017. Dr. Schramm has served as Professor of
the Albert Einstein College of Medicine since 1987 and Chair of the
Department of Biochemistry from 1987 to 2015, and2015 and was
awarded the Ruth Merns Endowed Chair in Biochemistry. His
fields of interest include enzymatic transition state analysis,
transition state inhibitor design, biological targets for inhibitor
design, and mechanisms of N-ribosyltransferases. Dr. Schramm was
elected to the National Academy of Sciences in 2007, and2007 and
served as the Associate Editor for the Journal of the American
Chemical Society between
2003 to 2012. A frequent lecturer and presenter in topics related
to chemical biology, Dr. Schramm has been a consultant and advisor
to Pico Pharmaceuticals, Metabolon Inc., Sirtris Pharmaceuticals,
and BioCryst Pharmaceuticals. Dr. Schramm obtained his BS in
Bacteriology with an emphasis in chemistry from South Dakota State
College and holds a Master’s Degree in Nutrition with an
emphasis in biochemistry from Harvard University, a Ph.D. in
Mechanism of Enzyme Action from the Australian National University
and completed his postdoctoral training at NASA Ames Research
Center, Biological Sciences, with an NSF-NRC
fellowship.
Dr.
Schramm’s substantial experience in biochemistry and
expertise in the chemistry related to non-systemic biologics makes
him a respected member of the Board and an asset to the Company
specifically in the development of its product
candidates.
Gregory Oakes was appointed to the
Board on April 13, 2020. Mr. Oakes brings over 25
years of pharmaceutical industry and leadership experience and
currently serves as Corporate Vice President, Global Integration
Lead for Otezla® (apremilast) at
Amgen, Inc. where he is responsible for the integration and
continued success for sustained growth of the brand with $2 billion
in assets. Prior to Amgen from 2017 - 2019, Mr. Oakes served as
Corporate Vice President and U.S. General Manager at Celgene Corp.,
a global biopharmaceutical company which develops and
commercializes medicines for cancer and inflammatory disorders. Mr.
Oakes also served as the Global Commercial Integration Lead at
Celgene where he helped steer the $74 billion acquisition by
Bristol-Myers Squibb and the $13.4 billion divestiture of
Otezla®.
From 2010 to 2017, Mr. Oakes held several positions at Novartis AG,
the most recent as Head of Sandoz Biopharmaceuticals, North
America. He began his career at Schering-Plough (Merck) where he
held executive roles in both the U.S. and Europe. Mr. Oakes holds a
bachelor's degree in Marketing and Business Administration from
Edinboro University and a M.B.A. from Clemson University. He
currently sits on the Board of BioNJ and previously served on
various Executive Committees at Celgene, Novartis, and Schering-
Plough (Merck).
Mr.
Oakes’ background of over 25 years of pharmaceutical industry
and leadership experience combined with broad experience in
pharmaceutical commercialization and acquisitions makes him a
qualified member of the Board.
Board of Directors
Director Independence
Our
Board
of Directors has reviewed the independence of our directors based
on the listing standards of the Nasdaq Stock Market. Based on this
review, the Board of Directors determined that Messrs. Borkowski
and Casamento, and Drs. Riddell and Schramm are each independent,
as defined in Rule 5605(a)(2) of the Listing Rules of the Nasdaq
Stock Market. In making this determination, our Board of Directors
considered the relationships that each of these non-employee
directors has with us and all other facts and circumstances our
Board of Directors deemed relevant in determining their
independence.
Board Committees
Our
Board of Directors has established the following standing
committees: Audit Committee, Compensation Committee, and Nominating
and Corporate Governance Committee. Our Board of Directors has
adopted written charters for each of these committees. Copies of
the charters are available on our website. Our Board of Directors
may establish other committees as it deems necessary or appropriate
from time to time.
Audit Committee
The
Audit Committee is responsible for, among other
matters:
●
appointing,
compensating, retaining, evaluating, terminating, and overseeing
our independent registered public accounting firm;
●
discussing
with our independent registered public accounting firm the
independence of its members from its management;
●
reviewing
with our independent registered public accounting firm the scope
and results of their audit;
●
approving
all audit and permissible non-audit services to be performed by our
independent registered public accounting firm;
●
overseeing the financial reporting process and
discussing with management and our independent registered public
accounting firm the interim and annual financial statements that we
file with the Securities and Exchange Commission
(“SEC”);
●
reviewing
and monitoring our accounting principles, accounting policies,
financial and accounting controls, and compliance with legal and
regulatory requirements;
●
coordinating
the oversight by our Board of Directors of our code of business
conduct and our disclosure controls and procedures;
●
establishing
procedures for the confidential and/or anonymous submission of
concerns regarding accounting, internal controls or auditing
matters; and
●
reviewing
and approving related-person transactions.
Our
Audit
Committee currently consists of Messrs. Borkowski and Casamento and
Dr. Riddell, with Mr. Borkowski serving as the Chairman. The rules
of the Nasdaq Stock Market require our Audit Committee to consist
entirely of at least three directors, all of whom must be deemed to
be independent directors under the Listing Rules of the Nasdaq
Stock Market. Our Board has affirmatively determined that Messrs.
Borkowski and Casamento, and Dr. Riddell, each meet the definition
of “independent director” for purposes of serving on an
Audit Committee under the Nasdaq Stock Market Listing Rules. Our
Board of Directors has determined that Messrs. Borkowski and
Casamento each qualify as an “audit committee financial
expert,” as such term is defined in Item 407(d)(5) of
Regulation S-K.
Compensation Committee
The
Compensation Committee is responsible for, among other
matters:
●
reviewing
key employee compensation goals, policies, plans and
programs;
●
reviewing
and approving the compensation of our directors and executive
officers;
●
reviewing
and approving employment agreements and other similar arrangements
between us and our executive officers; and
●
appointing
and overseeing any compensation consultants or
advisors.
Our
Compensation Committee consists of Messrs. Borkowski and Casamento
and Dr. Riddell, with Dr. Riddell serving as Chair. The rules of
the Nasdaq Stock Market require our Compensation Committee to
consist entirely of independent directors. Our Board has
affirmatively determined that Mr. Borkowski and Dr. Riddell meet
the definition of “independent director” for purposes
of serving on a Compensation Committee under the Listing Rules of
the Nasdaq Stock Market.
Nominating and Corporate Governance Committee
The
purpose of the Nominating and Corporate Governance Committee is to
assist the Board in identifying qualified individuals to become
members of the Board, determining the composition of the Board, and
monitoring the activities of the Board to assess overall
effectiveness. In addition, the Nominating and Corporate
Governance Committee will be responsible for developing and
recommending to our Board corporate governance guidelines
applicable to the Company and advising our Board on corporate
governance matters. Our Nominating and Corporate Governance
Committee consists of Messrs. Borkowski and Casamento and Dr.
Riddell, with Mr. Borkowski serving as the
Chairman.
Board Attendance at Board of Directors, Committee and Stockholder
Meetings
Our Board met eight times
and acted by unanimous written consent 13 times during the fiscal year ended December 31,
2019. Our Audit Committee met three times and our Compensation Committee met once
during the same period. Our Nominating and Corporate
Governance Committee did not meet, instead the full Board
met and acted on its behalf during the
fiscal year ended December 31, 2019. Each of our directors
serving during fiscal 2019 attended at least 75% of the meetings of
the Board of Directors and the committees of the Board upon which
such director served that were held during the term of his
service.
We
do not have a formal policy regarding attendance by members of the
Board of Directors at our annual meeting of stockholders, but
directors are encouraged to attend.
Board Leadership Structure
Currently,Mr.
James Sapirstein serves as our President and Chief Executive
Officer and Mr. Edward J. Borkowski serves as Chair of our
Board. Our Board of Directors has determined that it is in the
best interests of the Board and the Company to maintain separate
the roles for the Chief Executive Officer and Chair of the Board.
The Board believes this structure increases the Board’s
independence from management and, in turn, leads to better
monitoring and oversight of management. Although the Board believes
the Company is currently best served by separating the role of
Board Chairman and Chief Executive Officer, the Board of
Directors will review and consider the continued
appropriateness of this structure on an annual
basis.
Risk Oversight
Our
Board of Directors oversees a company-wide approach to
risk management, determines the appropriate risk level for us
generally, assesses the specific risks faced by us and reviews the
steps taken by management to manage those risks. Although our Board
of Directors has ultimate oversight responsibility for the risk
management process, its committees oversee risk in certain
specified areas.
Specifically,
our Compensation Committee is responsible for overseeing the
management of risks relating to our executive compensation plans
and arrangements, and the incentives created by the compensation
awards it administers. Our Audit Committee oversees management of
enterprise risks and financial risks, as well as potential
conflicts of interests. Our Board of Directors will be
responsible for overseeing the management of risks associated with
the independence of our Board.
Code of Business Conduct and Ethics
Our
Board of Directors adopted a code of business conduct and ethics
that applies to our directors, officers and employees. A copy of
this code is available on our website. We intend to disclose on our
website any amendments to the Code of Business Conduct and Ethics
and any waivers of the Code of Business Conduct and Ethics that
apply to our principal executive officer, principal financial
officer, principal accounting officer, controller, or persons
performing similar functions.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section
16(a) of the Exchange Act, requires our officers, directors, and
persons who beneficially own more than 10% of our common stock to
file reports of ownership and changes in ownership with the SEC.
Officers, directors, and greater-than-ten-percent stockholders are
also required by the SEC to furnish us with copies of all Section
16(a) forms that they file.
Based solely upon a review of these forms that
were furnished to us, we believe that all reports required to be
filed by these individuals and persons under Section 16(a) were
filed during the year ended December 31, 2019 and that such filings
were timely, except for the
following:
●
Mr. Borkowski, a director, filed two late Form 4s reporting an
aggregate of four transactions;
●
Mr. Casamento, a director, filed a late Form 4 reporting one
transaction;
●
Dr. Dupret, the former Chief Scientific Officer, filed a late Form
4 reporting two transactions;
●
Dr. Pennington, the Chief Medical Officer, filed a late Form 4
reporting one transaction;
●
Dr. Riddell, a director, filed a late Form 4 reporting one
transaction;
●
Mr. Ross Jr., an individual who owns in excess of 5% of our common
stock, filed a late Form 4 reporting five transactions;
and
●
Dr. Schramm, a director, filed a late Form 4 reporting one
transaction.
ITEM 11. EXECUTIVE
COMPENSATION
Summary Compensation Table
The
following table provides information regarding the compensation
paid during the years ended December 31, 2019 and 2018 to our
principal executive officer, principal financial officer and
certain of our other executive officers, who are collectively
referred to as “named executive officers” elsewhere in
this Annual Report.
Current Named Executive Officers (1)
|
Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
Sapirstein
|
2019
|
$102,404
|
$-
|
$232,900
|
(3)
|
$-
|
$335,304
|
President and Chief Executive Officer
|
2018
|
$-
|
$-
|
-
|
(4)
|
$-
|
-
|
|
|
|
|
|
|
|
James E.
Pennington
|
2019
|
$255,000
|
$75,000
|
$115,000
|
(3)
|
$-
|
$445,000
|
Chief Medical Officer
|
2018
|
$148,718
|
$-
|
$155,475
|
(5)
|
$-
|
$304,193
|
|
|
|
|
|
|
|
Former
Named Executive Officers (2)
|
|
|
|
|
|
|
|
Johan
M. (Thijs) Spoor
|
2019
|
$340,177
|
$-(6)
|
$157,500
|
(3)
|
$-
|
$497,677
|
Former President, Chief Executive Officer and
Director
|
2018
|
$425,000
|
$212,500
|
$608,000
|
(5)
|
$-
|
$1,245,500
|
|
|
|
|
|
|
|
Maged
Shenouda (3)
|
2019
|
$308,035
|
$-(7)
|
$105,000
|
(5)
|
$-
|
$413,035
|
Former Chief Financial Officer
|
2018
|
$296,666
|
$82,500
|
$207,300
|
(5)
|
$-
|
$586,466
|
|
|
|
|
|
|
|
Daniel
Dupret
|
2019
|
$151,393
|
$-
|
$-
|
|
$-
|
$151,393
|
Former Chief Scientific Officer
|
2018
|
$234,999
|
$-
|
$169,980
|
(5)
|
$-
|
$404,979
|
(1)
|
Daniel Schneiderman was appointed as Chief Financial Officer
subsequent to the year ended December 31, 2019, and therefore is
excluded from the table. Mr. Sapirstein was appointed as President
and Chief Executive Officer effective October 8, 2019 and received
no compensation prior to his employment. Dr. Pennington was
appointed as Chief Medical Officer effective May 30, 2018 and
received no compensation prior to his employment.
|
|
|
(2)
|
Mr. Spoor’s employment with the Company as President and
Chief Executive Officer terminated effective October 8, 2019 due to
his resignation. In addition, Mr. Spoor resigned as a member of the
Board on April 29, 2020.
Mr. Shenouda’s employment with the Company as Chief Financial
Officer terminated effective November 30, 2019 due to his
resignation. Dr. Dupret retired and resigned from his position as
President of AzurRx SAS, a wholly owned French subsidiary of the
Company effective July 1, 2019.
|
(3)
|
Represents the grant date fair value of restricted stock and stock
options issued during the year ended December 31, 2019, calculated
in accordance with ASC Topic 718. The assumptions used in the
calculation of these amounts are included in Note 13 of the notes
to the consolidated financial statements contained in the
Company’s 10-K, filed with the SEC on March 30,
2020.
|
(4)
|
Mr. Sapirstein received no compensation during this period or prior
to his appointments as the Company’s President and Chief
Executive Officer effective October 8, 2019.
|
(5)
|
Represents the grant date fair value of restricted stock and stock
options issued during the year ended December 31, 2018, calculated
in accordance with ASC Topic 718. The assumptions used in the
calculation of these amounts are included in Note 13 of the notes
to the consolidated financial statements contained in the
Company’s 10-K, filed with the SEC on April 1,
2019.
|
(6)
|
On June 28, 2019, the Company accrued an incentive bonus in the
amount of $255,000 payable to Mr. Spoor. Subsequent to Mr.
Spoor’s resignation, the Compensation Committee reviewed the
accrued bonus and determined that such amount was not owed, which
determination is being challenged by Mr. Spoor. As a result of
management’s determination, the Company reversed the accrual
in the quarter ended December 31, 2019. This bonus has been
excluded from the table.
In
addition, all unvested shares of
restricted stock and stock options subject to time and other
performance-based vesting conditions have been forfeited in
connection with Mr. Spoor's resignation as the Company’s
President and Chief Executive Officer. Mr.
Spoor also forfeited the right to receive 241,667 earned, but
unissued shares of restricted stock in connection with his
resignation from the Board on April 29,
2020.
|
(7)
|
On June 28, 2019, the Company accrued an incentive bonus in the
amount of $100,000 payable to Mr. Shenouda. Subsequent to Mr.
Shenouda’s resignation, the Compensation Committee reviewed
the accrued bonus and determined that such amount was not owed, and
the Company reversed the accrual in the quarter ended December 31,
2019. This bonus has been excluded from the table.
|
Overview of Our Fiscal 2019 and 2018 Executive
Compensation
Elements of Compensation
Our
executive compensation program consisted of the following
components of compensation in 2019 and 2018:
Base Salary. Each named executive officer receives a base
salary commensurate with their respective expertise, skills,
knowledge and experience offered to our management team. Base
salaries are periodically adjusted to reflect:
●
the
nature, responsibilities, and duties of the officer’s
position;
●
the
officer’s expertise, demonstrated leadership ability, and
prior performance;
●
the
officer’s salary history and total compensation, including
annual cash incentive awards and annual equity incentive awards;
and
●
the
competitiveness of the officer’s base salary.
Each
named executive officer’s base salary for fiscal 2019 and
2018 is listed under the heading “Salary” in the
Summary Compensation Table above.
Employment Agreements and Potential Payments upon Termination or
Change of Control
Current Named Executive Officers
James Sapirstein
Effective
October
8, 2019, the Company entered into an employment agreement with Mr.
Sapirstein to serve as its President and Chief Executive Officer
for a term of three years, subject to further renewal upon
agreement of the parties. The employment agreement with Mr.
Sapirstein provides for a base salary of $450,000 per year. In
addition to the base salary, Mr. Sapirstein is eligible to receive
(i) a cash bonus of up to 40% of his base salary on an annual
basis, based on certain milestones that are yet to be determined;
(ii) 1% of net fees received by the Company upon entering into
license agreements with any third-party with respect to any product
current in development or upon the sale of all or substantially all
assets of the Company; (iii) a grant of 200,000 restricted stock
units (“RSUs”)
which are scheduled to vest as follows (a) 100,000 shares upon the
first commercial sale of MS1819 in the U.S. and (b) 100,000 shares
upon the total market capitalization of the Company exceeding $1.0
billion for 20 consecutive trading days; (iv) a grant of 300,000
10-year stock options to purchase shares of common stock with an
exercise price equal to $0.56 per share, which are scheduled to
vest as follows (a) 50,000 shares upon the Company initiating its
next Phase II clinical trial in the U.S. for MS1819, (b) 50,000
shares upon the Company completing its next or subsequent Phase II
clinical trial in the U.S. for MS1819, (c) 100,000 shares upon the
Company initiating a Phase III clinical trial in the U.S. for
MS1819, and (d) 100,000 shares upon the Company initiating a Phase
I clinical trial in the U.S. for any product other than MS1819. Mr.
Sapirstein is entitled to receive 20 days of paid vacation,
participate in full employee health benefits and receive
reimbursement for all reasonable expenses incurred in connection
with his services to the Company.
In the
event that Mr. Sapirstein’s employment is terminated by the
Company for Cause, as defined in his employment agreement, or by
Mr. Sapirstein voluntarily, then he will not be entitled to receive
any payments beyond amounts already earned, and any unvested equity
awards will terminate. In the event that Mr. Sapirstein’s
employment is terminated as a result of an Involuntary Termination
Other than for Cause, as defined in his employment agreement, Mr.
Sapirstein will be entitled to receive the following compensation:
(i) severance in the form of continuation of his salary (at the
base salary rate in effect at the time of termination, but prior to
any reduction triggering Good Reason (as such term is defined in
Mr. Sapirstein’s employment agreement) for a period of twelve
months following the termination date; (ii) payment of Mr.
Sapistein’s premiums to cover COBRA for a period of twelve
months following the termination date; and (iii) a prorated annual
bonus.
Daniel Schneiderman
Effective January
2, 2020, the Company entered into an employment agreement with Mr.
Schneiderman to serve as the Company’s Chief Financial
Officer for a term of three years, subject to further renewal upon
agreement of the parties. The employment agreement with Mr.
Schneiderman provides for a base salary of $285,000 per year. In
addition to the base salary, Mr. Schneiderman is eligible to
receive (a) an annual milestone cash bonus based on certain
milestones that will be established by the Company’s Board or
the Compensation Committee, and (b) a grant of stock options to
purchase 335,006 shares of common stock with an exercise price of
$1.03 per share, which shall vest in three equal portions on each
anniversary date of the execution of Mr. Schneiderman’s
employment agreement, commencing on January 2, 2021, the first
anniversary date of the agreement. Mr. Schneiderman is
entitled to receive 20 days of paid vacation, participate in full
employee health benefits and receive reimbursement for all
reasonable expenses incurred in connection with his service to the
Company. The Company may terminate Mr. Schneiderman’s
employment agreement at any time, with or without Cause, as such
term is defined in his employment agreement.
In the
event that Mr. Schneiderman’s employment is terminated by the
Company for Cause, as defined in Mr. Schneiderman’s
employment agreement, or by Mr. Schneiderman voluntarily, then he
will not be entitled to receive any payments beyond amounts already
earned, and any unvested equity awards will terminate. If the
Company terminates his employment agreement without Cause, not in
connection with a Change of Control, as such term is defined in Mr.
Schneiderman’s employment agreement, he will be entitled to
(i) all salary owed through the date of termination; (ii) any
unpaid annual milestone bonus; (iii) severance in the form of
continuation of his salary for the greater of a period of six
months following the termination date or the remaining term of the
employment agreement; (iv) payment of premiums to cover COBRA for a
period of six months following the termination date; (v) a prorated
annual bonus equal to the target annual milestone bonus, if any,
for the year of termination multiplied by the formula set forth in
the agreement. If the Company terminates Mr. Schneiderman’s
employment agreement without Cause, in connection with a Change of
Control, he will be entitled to the above and immediate accelerated
vesting of any unvested options or other unvested
awards.
Dr. James E. Pennington
Effective May 28,
2018, the Company entered into an employment agreement with Dr.
Pennington to serve as its Chief Medical Officer. The employment
agreement with Dr. Pennington provides for a base annual salary of
$250,000. In addition to his salary, Dr. Pennington is eligible to
receive an annual milestone bonus, awarded at the sole discretion
of the Board based on his attainment of certain financial, clinical
development, and/or business milestones established annually by the
Board or Compensation Committee. The Company may terminate Dr.
Pennington’s employment agreement at any time, with or
without Cause, as such term is defined in Dr. Pennington’s
employment agreement. In the event of termination by the Company
other than for Cause, Dr. Pennington is entitled to three
months’ severance payable over such period. In the event of
termination by the Company other than for Cause in connection with
a Change of Control as such term is defined in Dr.
Pennington’s employment agreement, Dr. Pennington will
receive six months’ severance payable over such
period.
Former Named Executive Officers
Johan
(Thijs) Spoor
On
January 3, 2016, the Company entered into an employment agreement
with its former President and Chief Executive Officer, Johan Spoor.
The employment agreement provided for a term expiring January 2,
2019. Although Mr. Spoor’s employment agreement expired, he
remained employed as the Company’s President and Chief
Executive Officer under the terms of his prior employment agreement
through his resignation from all positions with the Company on
October 8, 2019. In addition, Mr. Spoor resigned as a member of the
Board on April 29, 2020.
The
employment agreement with Mr. Spoor provided for a base salary of
$425,000 per year. At the sole discretion of the Board or the
Compensation Committee of the Board, following each calendar year
of employment, Mr. Spoor was eligible to receive an additional cash
bonus based on his attainment of certain financial, clinical
development, and/or business milestones to be established annually
by the Board or the Compensation Committee. Mr. Spoor’s
employment agreement was terminable by either party at any time. In
the event of termination by us without Cause or by Mr. Spoor for
Good Reason not in connection with a Change of Control, as those
terms are defined in Mr. Spoor’s employment agreement, he was
entitled to twelve months’ severance payable over such
period. In the event of termination by us without Cause or by Mr.
Spoor for Good Reason in connection with a Change of Control, as
those terms are defined in Mr. Spoor’s employment agreement,
he was eligible to receive eighteen months’ worth of his base
salary in a lump sum as severance.
Mr.
Spoor was originally entitled to 10-year stock options to purchase
380,000 shares of common stock, pursuant to the 2014 Plan. During
the year ended December 31, 2017, stock options to purchase 100,000
shares of common stock with an exercise price of $4.48 per share
with a grant date fair value of $386,900 were granted and vested.
On September 29, 2017, Mr. Spoor was granted 100,000 shares of
restricted common stock subject to milestone-based vesting, in
satisfaction of the Company’s obligation to issue an
additional 280,000 options to Mr. Spoor, with an estimated grant
date fair value of $425,000. During the year ended December 31,
2018, all 100,000 shares of restricted common stock vested, but the
stock options were cancelled as a result of Mr. Spoor’s
resignation as the Company’s President and Chief Executive
Officer.
On June
29, 2019, the Company accrued an incentive bonus in the amount of
$255,000. Subsequent to Mr. Spoor’s resignation, the
Compensation Committee reviewed the accrued bonus and determined
that such amount was not owed and the Company, which determination
is being challenged by Mr. Spoor.
Mr.
Spoor received no additional or severance compensation and all
unvested stock options and shares of restricted common stock
granted to Mr. Spoor were cancelled as a result of Mr.
Spoor’s resignation. As of December 31, 2019, there were
241,667 earned, but unissued shares of restricted common stock due
to Mr. Spoor. However, Mr. Spoor forfeited the right to receive
these shares on April 29, 2020 in connection with his resignation
from the Board.
Maged Shenouda
On
September 26, 2017, the Company
entered into an employment agreement with Mr. Shenouda to serve as
its Executive Vice-President of Corporate Development and Chief
Financial Officer for a term of three years, during which time he
received a base salary of $275,000. In addition to the base salary,
Mr. Shenouda was eligible to receive an annual milestone cash bonus
based on the achievement of certain financial, clinical
development, and/or business milestones, which milestones were
established annually at the sole discretion of the Company’s
Board or the Compensation Committee. Mr. Shenouda’s
employment agreement provided for the issuance of stock options to
purchase 100,000 shares of common stock, pursuant to the 2014 Plan,
with an exercise price of $4.39 per share and a term of ten years.
These stock options vested according to the following
performance-based criteria, so long as Mr. Shenouda served as
either Executive Vice-President of Corporate Development or as
Chief Financial Officer of the Company: (i) 75% upon FDA acceptance
of a U.S. IND application for MS1819, and (ii) 25% upon the Company
completing a Phase IIa clinical trial for MS1819. These stock
options vested during the year ended December 31,
2018.
Mr.
Shenouda’s employment agreement provided that the Company may
terminate Mr. Shenouda’s employment agreement at any time,
with or without Cause, as such term is defined in the agreement. If
the Company terminated the agreement without Cause, or if the
agreement was terminated due to a Change of Control, as such term
is defined in the agreement, Mr. Shenouda was entitled to (i) all
salary owed through the date of termination; (ii) any unpaid annual
milestone bonus; (iii) severance in the form of continuation
of his salary for the greater of a period of 12 months following
the termination date or the remaining term of his employment
agreement; (iv) payment of premiums to cover COBRA for a period of
12 months following the termination date; (v) a prorated annual
bonus equal to the target annual milestone bonus, if any, for the
year of termination multiplied by the formula set forth in the
agreement; and (vi) immediate accelerated vesting of any unvested
options or other unvested awards.
On June
28, 2019, the Compensation Committee approved the accrual of an
incentive bonus in the amount of $100,000. Subsequent to Mr.
Shenouda’s resignation, the Compensation Committee reviewed
the accrued bonus and determined that such amount was not owed, and
the Company reversed the accrual in the quarter ended December 31,
2019.
Mr.
Shenouda resigned from his position as the Company’s Chief
Financial Officer effective November 30, 2019. Mr. Shenouda
received no additional or severance compensation and all unvested
stock options and shares of restricted common stock granted to Mr.
Shenouda were cancelled as a result of Mr. Shenouda’s
resignation. Mr. Shenouda has a period of twelve months following
his resignation to exercise all vested stock options.
Outstanding Equity Incentive Awards At Fiscal Year-End
The
following table sets forth information regarding unexercised
options, stock that has not vested and equity incentive awards held
by each of the Named Executive Officers outstanding as of
December 31, 2019:
|
|
|
|
|
|
Number
of securities underlying unexercised options (#)
exercisable
|
Equity incentive plan awards: Number of underlying unexercised
unearned options (#)
|
Option
exercise price ($)
|
|
Number of shares or units of stock that have not vested
(#)
|
Market value of shares or units of stock that have not vested
($)
|
Equity incentive plan awards: Number of Unearned shares, units or
other rights that have not vested (#)
|
Equity
incentive plan awards: Market or Payout value of unearned shares,
units or other rights that have not vested ($)
|
|
|
|
|
|
|
|
|
|
|
Current Named Executive
Officers (1)
|
|
|
|
|
|
|
|
|
|
|
James
Sapirstein
|
10/8/2019
|
-
|
300,000(2)
|
$0.56
|
10/7/2029
|
|
|
|
|
|
10/8/2019
|
|
|
|
|
-
|
-
|
200,000 (3)
|
112,000
|
|
|
|
|
|
|
|
|
|
James
E. Pennington
|
6/28/2018
|
75,000
|
-
|
$3.04
|
6/27/2023
|
|
|
|
|
|
6/13/2019
|
-
|
110,000
|
$1.70
|
6/12/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Named Executive
Officers
|
|
|
|
|
|
|
|
|
|
Maged
Shenouda
|
2/3/2017
|
30,000
|
-
|
$4.48
|
2/2/2027
|
|
|
|
|
|
9/26/2017
|
100,000
|
-
|
$4.39
|
9/24/2027
|
|
|
|
|
|
6/28/2018
|
100,000
|
-
|
$3.04
|
6/27/2023
|
|
|
|
|
Johan M. (Thijs)
Spoor (4)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1)
|
Daniel Schneiderman was appointed as Chief Financial Officer
subsequent to the year ended December 31, 2019, and therefore is
excluded from the table.
|
(2)
|
Represents stock options issued to Mr. Sapirstein on October 8,
2019 under the terms of his employment agreement, which options
will vest as follows: (i) 50,000 upon initiating its next U.S.
Phase II clinical trial MS1819, (ii) 50,000 upon completing the
next U.S. Phase II clinical trial, (iii) 100,000 upon the Company
initiating a Phase III clinical trial in the U.S. for MS1819, and
(iv) 100,000 upon initiating a U.S. Phase I clinical trial for any
product other than MS1819.
|
(3)
|
Represents the restricted stock unit (“RSU”) award issued to Mr. Sapirstein on October
8, 2019 under the terms of his employment agreement, which RSU will
vest as follows: (i) 100,000 upon the first commercial sale in the
U.S. of MS1819, and (ii) 100,000 upon our total market
capitalization exceeding $1.0 billion for 20 consecutive trading
days.
|
(4)
|
As of December 31, 2019, there were 241,667 earned, but unissued
shares of restricted common stock due to Mr. Spoor. However, Mr.
Spoor forfeited the right to receive these shares on April 29, 2020
in connection with his resignation from the Board.
|
Non-Executive Director Compensation
For
2019, each of the Company’s non-executive directors received
(i) an annual retainer of $35,000 for their service on the Board
which is payable in either cash or shares of common stock in
quarterly installments, at the Company’s discretion; and (ii)
an annual grant of 30,000 shares of common stock in quarterly
installments. During the year ended December 31, 2019, the Company
elected to pay the annual retainer to non-executive directors in
cash.
The following table provides information regarding
compensation paid to non-employee directors for the year ended
December 31, 2019. Messrs. Sapirstein, Shenouda and Spoor did not
receive compensation for their service on the Board as employee
directors for the year ended December 31, 2019. Information
regarding executive compensation paid to Messrs. Sapirstein,
Shenouda and Spoor during 2019 is reflected in the Summary
Compensation table under “Executive
Compensation” of this
Form 10-K/A.
Name(1)
|
Fees Earned or Paid in Cash
|
|
|
|
|
Edward
J. Borkowski
|
$35,000
|
$43,350
|
$31,500
|
$-
|
$109,850
|
Charles
J. Casamento
|
$35,000
|
$43,350
|
$31,500
|
$-
|
$109,850
|
Alastair
Riddell
|
$35,000
|
$43,350
|
$31,500
|
$-
|
$109,850
|
Vern
L. Schramm
|
$35,000
|
$43,350
|
$31,500
|
$-
|
$109,850
|
(1)
|
Mr. Oakes was appointed to the board effective April 13, 2020, and
therefore has been excluded from the table.
|
(2)
|
Represents the aggregate grant date fair value of an aggregate of
30,000 shares of common stock issued to each of our non-employee
directors in 2019 as partial payment of fees payable for each
director’s service on the Board in 2019, calculated in
accordance with ASC Topic 718.
|
(3)
|
Represents the aggregate grant date fair value of 30,000 stock
options issued to each of our non-employee directors on June 13,
2019, calculated in accordance with ASC Topic 718.
|
Compensation Committee Interlocks and Insider
Participation
None
of our executive officers currently serves, or has served during
the last three years, on the compensation committee of any other
entity that has one or more officers serving as a member of our
Board of Directors.
Although
Mr. Shenouda was a member of the Company’s Compensation
Committee prior to his appointment as Chief Financial Officer, he
resigned from the Compensation Committee when he was appointed
Chief Financial Officer of the Company in October of 2017 in order
to comply with Compensation Committee independence
requirements.
Securities Authorized for Issuance Under Equity Compensation
Plans
The
following table provides information as of December 31, 2019
regarding equity compensation plans approved by our security
holders and equity compensation plans that have not been approved
by our security holders:
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(1)
|
Equity
compensation plans approved by security holders (1)
|
1,677,500
|
$2.30
|
1,274,819
|
Equity
compensation plans not approved by security holders
|
-
|
-
|
-
|
Total
|
1,677,500
|
$2.30
|
1,274,819
|
(1)
|
Includes 632,667 shares of common stock are reserved under the 2014
Plan as of December 31, 2019, subject to the issuance of restricted
stock and RSUs. Subsequent to
December 31, 2019, Mr. Spoor forfeited a total of 241,667 reserved
shares in connection with his resignation from the Board on April
29, 2020.
|
Amended and Restated 2014 Omnibus Equity Incentive
Plan
The
Board and stockholders have adopted and approved the 2014 Plan,
which is a comprehensive incentive compensation plan under which we
can grant equity-based and other incentive awards to our officers,
employees, directors, consultants and advisers. The purpose of the
2014 Plan is to help us attract, motivate and retain such persons
with awards under the 2014 Plan and thereby enhance stockholder
value.
Administration.
The 2014 Plan is administered by the Compensation Committee of the
Board, which consists of three members of the Board, each of whom
is a “non-employee director” within the meaning of Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), an “outside
director” within the meaning of Section 162(m) of the
Internal Revenue Code (the “Code”). Among other things, the Compensation
Committee has complete discretion, subject to the express limits of
the 2014 Plan, to determine the directors, employees and
nonemployee consultants to be granted an award, the type of award
to be granted the terms and conditions of the award, the form of
payment to be made and/or the number of shares of common stock
subject to each award, the exercise price of each option and base
price of each stock appreciation right (“SAR”), the term of each award, the vesting
schedule for an award, whether to accelerate vesting, the value of
the common stock underlying the award, and the required
withholding, if any. The Compensation Committee may amend, modify
or terminate any outstanding award, provided that the
participant’s consent to such action is required if the
action would impair the participant’s rights or entitlements
with respect to that award. The Compensation Committee is also
authorized to construe the award agreements, and agreements and may
prescribe rules relating to the 2014 Plan. Notwithstanding the
foregoing, the Compensation Committee does not have any authority
to grant or modify an award under the 2014 Plan with terms or
conditions that would cause the grant, vesting or exercise thereof
to be considered nonqualified “deferred compensation”
subject to Code Section 409A.
Grant of Awards; Shares
Available for Awards. The 2014
Plan provides for the grant of stock options, SARs, performance
share awards, performance unit awards, distribution equivalent
right awards, restricted stock awards, restricted stock unit awards
and unrestricted stock awards to non-employee directors, officers,
employees and nonemployee consultants of the Company or its
affiliates. The aggregate number of shares of common stock that may
be issued under the 2014 Plan shall not exceed 10% of the issued
and outstanding shares of common stock on an as converted basis
(the “As Converted
Shares”), on a rolling
basis. For calculation purposes, the As Converted Shares shall
include all shares of common stock and all shares of common stock
issuable upon the conversion of outstanding preferred stock and
other convertible securities, but shall not include any shares of
common stock issuable upon the exercise of options, warrants and
other convertible securities issued pursuant to the 2014 Plan. The
number of authorized shares of common stock reserved for issuance
under the 2014 Plan shall automatically be increased concurrently
with our issuance of fully paid and non-assessable shares of As
Converted Shares. Shares shall be deemed to have been
issued under the 2014 Plan solely to the extent actually issued and
delivered pursuant to an award. If any award expires, is cancelled,
or terminates unexercised or is forfeited, the number of shares
subject thereto is again available for grant under the 2014
Plan.
The
number of shares of common stock for which awards may be granted
under the 2014 Plan to a participant who is an employee in any
calendar year is limited to 300,000 shares. Future new hires and
additional non-employee directors and/or consultants would be
eligible to participate in the 2014 Plan as well. The number of
stock options and/or shares of restricted stock to be granted to
executives and directors cannot be determined at this time as the
grant of stock options and/or shares of restricted stock is
dependent upon various factors such as hiring requirements and job
performance.
Stock
Options. The 2014 Plan provides
for either “incentive stock options”
(“ISOs”), which are intended to meet the
requirements for special federal income tax treatment under the
Code, or “nonqualified stock options”
(“NQSOs”). Stock options may be granted on such
terms and conditions as the Compensation Committee may
determine; provided,
however, that the per share
exercise price under a stock option may not be less than the fair
market value of a share of common stock on the date of grant and
the term of the stock option may not exceed 10 years (110% of such
value and five years in the case of an ISO granted to an employee
who owns (or is deemed to own) more than 10% of the total combined
voting power of all classes of the Company's capital stock or a
parent or subsidiary of the Company). ISOs may only be granted to
employees. In addition, the aggregate fair market value of common
stock covered by one or more ISOs (determined at the time of
grant), which are exercisable for the first time by an employee
during any calendar year may not exceed $100,000. Any excess is
treated as a NQSO.
Stock Appreciation
Rights. A SAR entitles the
participant, upon exercise, to receive an amount, in cash or stock
or a combination thereof, equal to the increase in the fair market
value of the underlying common stock between the date of grant and
the date of exercise. SARs may be granted in tandem with, or
independently of, stock options granted under the 2014 Plan. A SAR
granted in tandem with a stock option (i) is exercisable only at
such times, and to the extent, that the related stock option is
exercisable in accordance with the procedure for exercise of the
related stock option; (ii) terminates upon termination or exercise
of the related stock option (likewise, the common stock option
granted in tandem with a SAR terminates upon exercise of the SAR);
(iii) is transferable only with the related stock option; and (iv)
if the related stock option is an ISO, may be exercised only when
the value of the stock subject to the stock option exceeds the
exercise price of the stock option. A SAR that is not granted in
tandem with a stock option is exercisable at such times as the
Compensation Committee may specify.
Performance Shares and
Performance Unit Awards.
Performance share and performance unit awards entitle the
participant to receive cash or shares of common stock upon the
attainment of specified performance goals. In the case of
performance units, the right to acquire the units is denominated in
cash values.
Distribution Equivalent Right
Awards. A distribution
equivalent right award entitles the participant to receive
bookkeeping credits, cash payments and/or common stock
distributions equal in amount to the distributions that would have
been made to the participant had the participant held a specified
number of shares of common stock during the period the participant
held the distribution equivalent right. A distribution equivalent
right may be awarded as a component of another award under the 2014
Plan, where, if so awarded, such distribution equivalent right will
expire or be forfeited by the participant under the same conditions
as under such other award.
Restricted Stock Awards and
Restricted Stock Unit Awards. A
restricted stock award is a grant or sale of common stock to the
participant, subject to our right to repurchase all or part of the
shares at their purchase price (or to require forfeiture of such
shares if issued to the participant at no cost) in the event that
conditions specified by the Compensation Committee in the award are
not satisfied prior to the end of the time period during which the
shares subject to the award may be repurchased by or forfeited to
us. Restricted stock units entitle the participant to receive a
cash payment equal to the fair market value of a share of common
stock for each restricted stock unit subject to such restricted
stock unit award, if the participant satisfies the applicable
vesting requirement.
Unrestricted Stock
Awards. An unrestricted stock
award is a grant or sale of shares of our common stock to the
participant that is not subject to transfer, forfeiture or other
restrictions, in consideration for past services rendered to the
Company or an affiliate or for other valid
consideration.
Change-in-Control
Provisions. In connection with
the grant of an award, the Compensation Committee may provide that,
in the event of a change in control, such award will become fully
vested and immediately exercisable.
Amendment and
Termination. The Compensation
Committee may adopt, amend and rescind rules relating to the
administration of the 2014 Plan, and amend, suspend or terminate
the 2014 Plan, but no such amendment or termination will be made
that materially and adversely impairs the rights of any participant
with respect to any award received thereby under the 2014 Plan
without the participant’s consent, other than amendments that
are necessary to permit the granting of awards in compliance with
applicable laws.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED
STOCKHOLDERS MATTERS
As
of April 27, 2020, we had one class of voting stock outstanding:
common stock. The following table sets forth information regarding
shares of common stock beneficially owned as of April 27, 2020
by:
|
(i)
|
Each of our officers and directors;
|
|
(ii)
|
All officer and directors as a group; and
|
|
(iii)
|
Each person known by us to beneficially own five percent or more of
the outstanding shares of our common stock. Percent ownership is
calculated based on 27,457,651 shares of common stock outstanding
at April 27, 2020.
|
Beneficial Ownership of Common Stock
Name and Address of Beneficial Owner (1)
|
|
Percent Ownership of Class (3)
|
Current Named Executive Officers and
Directors
|
|
|
James Sapirstein,
President and Chief Executive Officer
|
-
|
*
|
Daniel
Schneiderman, Chief Financial Officer (4)
|
28,917
|
*
|
James
E. Pennington, Chief Medical Officer (5)
|
75,000
|
*
|
Edward
J. Borkowski, Chair of the Board of Directors (6)
|
671,567
|
2.4%
|
Charles
J. Casamento, Director (7)
|
151,998
|
*
|
Alastair
Riddell, Director (8)
|
194,294
|
*
|
Vern
L. Schramm, Director (9)
|
125,498
|
*
|
Gregory
Oakes, Director (10)
|
-
|
|
Former Named Executive Officers
|
|
|
Johan M. (Thijs) Spoor, Former Chief Executive
Officer, President and Director (11)
|
298,468
|
1.1%
|
Maged
Shenouda, Former Chief Financial Officer (12)
|
230,000
|
*
|
Daniel
Dupret, Former Chief Scientific Officer (13)
|
15,000
|
*
|
All Directors, Executive Officers and Former Named Executive
Officers as a group (11 persons)
|
1,790,742
|
6.5%
|
|
|
|
5% Stockholders
|
|
|
Edmund
Burke Ross, Jr. (14)
|
3,630,347
|
9.9%
|
*
Less than 1%.
(1)
|
Unless otherwise indicated, the address of such individual is c/o
AzurRx BioPharma, Inc., 760 Parkside Avenue, Downstate
Biotechnology Incubator, Suite 304, Brooklyn, NY
11226.
|
(2)
|
Beneficial ownership is determined in accordance with the rules of
the SEC and generally includes voting or investment power with
respect to securities. All entries exclude beneficial ownership of
shares issuable pursuant to warrants, options or other derivative
securities that have not vested or that are not otherwise
exercisable as of the date hereof or which will not become vested
or exercisable within 60 days of the Record Date.
|
(3)
|
Percentages are rounded to nearest percent. Percentages are based
on 27,457,651 shares of common stock outstanding. Warrants, options
or other derivative securities that are presently exercisable or
exercisable within 60 days are deemed to be beneficially owned by
the person holding the options for the purpose of computing the
percentage ownership of that person, but are not treated as
outstanding for the purpose of computing the percentage of any
other person.
|
(4)
|
Includes 1,000 shares of common stock and 27,917 shares of common
stock issuable upon exercise of vested options.
|
(5)
|
Includes 75,000 shares of common stock issuable upon exercise of
vested options.
|
(6)
|
Includes (i) 409,773 shares
of common stock; (ii) 103,093 shares of common stock issuable upon
the conversion of senior convertible promissory notes, (iii) 80,021
shares of common stock issuable upon the exercise of warrants;(iv)
65,000 shares of common stock issuable upon exercise of vested
options; and (v) held 13,680 shares of common stock held by Mr.
Borkowski’s spouse. Excludes (i) 45,000 restricted shares of
common stock; and (ii) 75,000 shares of common stock issuable upon
exercise of unvested options.
|
(7)
|
Includes (i) 107,998 shares of common stock; (ii) 35,000 shares of
common stock issuable upon exercise of vested options; and (iii)
9,000 shares of common stock held by La Jolla Lenox Trust, a family
trust of which the Trustee is someone other than Mr. Casamento. Mr.
Casamento and members of his immediate family are the sole
beneficiaries of the trust. Excludes 75,000 shares of common stock
issuable upon exercise of unvested
options.
|
(8)
|
Includes (i) 129,294 shares of common stock; and (ii) 65,000 shares
of common stock issuable upon the exercise of vested options.
Excludes (i) 30,000 unvested restricted shares of common stock; and
(ii) 75,000 shares of common stock issuable upon exercise of
unvested options.
|
(9)
|
Includes (i) 90,498 shares of common stock and (ii) 35,000 shares
of common stock issuable upon exercise of vested options. Excludes
75,000 shares of common stock issuable upon exercise of unvested
options.
|
(10)
|
Excludes 60,000 shares of common stock issuable upon exercise of
unvested options.
|
(11)
|
Includes (i) 138,617 shares of common stock;
(ii) 20,000 shares of common stock issuable upon exercise
of vested options; (iii) 100,000 shares of
common stock that may be purchased
pursuant to options granted by third parties at an exercise price
of $1.00 per share; and (iv) 39,851 shares of
common stock held in a trust for the
benefit of Mr. Spoor’s spouse and minor children. Mr. Spoor
disclaims beneficial ownership with respect to such shares
of common stock
held in
trust. Excludes (i) 60,000
shares of common stock issuable upon exercise of unvested options;
and (ii) 241,667 shares of restricted common stock forfeited by Mr.
Spoor on April 29, 2020.
|
(12)
|
Includes 230,000 shares of common stock issuable upon the exercise
of vested options, which expire twelve months following the date of
Mr. Shenouda’s termination.
|
(13)
|
Includes 15,000 shares of earned but unissued restricted common
stock.
|
(14)
|
Based
upon information contained in a Schedule 13D filed by Edmund Burke
Ross, Jr. on February 26, 2019 and records maintained by the
Company. Includes a total of (i) 1,750,8135 shares of common stock,
(ii) 773,196 shares of common stock issuable upon the conversion of
senior convertible promissory notes, and (iii) 1,106,338 shares of
common stock issuable upon the exercise of warrants. Of these
holdings, (i) 1,676,009 shares are held by ADEC Private Equity
Investment, LLC, which include 1,031,268 shares of common stock,
and 644,741 shares of common stock issuable upon exercise of
warrants; (ii) 1,954,338 shares are held by EBR Ventures, LLC,
which include 719,545 shares of common stock, 773,196 shares of
common stock issuable upon the conversion of senior convertible
promissory notes, and 461,597 shares of common stock issuable upon
exercise of warrants. The 773,196 shares of common stock issuable
upon the conversion of the of senior convertible promissory notes
and 386,597 shares of common stock issuable upon the exercise of
warrants issued to ERB Ventures, LLC are subject to 9.99% ownership
blockers and are excluded from the beneficial ownership
calculation. Mr. Ross, Jr. is the Manager of EBR Ventures, LLC, and
ADEC Private Equity Investment, LLC, and has voting and dispositive
power over the shares of common stock held by such entities. The
address of Mr. Ross, Jr. and such entities are c/o JDJ Family
Office Services, P.O. Box 962049, Boston, MA
02196.
|
ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Johan (Thijs) Spoor
During
the year ended December 31, 2015, the Company employed the services
of JIST Consulting (“JIST”), a company controlled by
Johan (Thijs) Spoor, the Company’s former Chief Executive
Officer and President, as a consultant for business strategy,
financial modeling, and fundraising. Included in accounts payable
at December 31, 2019 and 2018, is $348,400 and $478,400,
respectively, for JIST relating to Mr. Spoor’s services. Mr.
Spoor received no other compensation from the Company other than as
specified in his employment agreement. On October 8, 2019, Mr.
Spoor resigned as Chief Executive Officer and President of the
Company, and on April 29, 2020, Mr. Spoor resigned as a member of
the Board.
On June
28, 2019, the Company accrued an incentive bonus in the amount of
$255,000 payable to Mr. Spoor. Subsequent to Mr. Spoor’s
resignation, the Compensation Committee reviewed the accrued bonus
and determined that such amount was not owed, which determination
is being challenged by Mr. Spoor. As a result of management’s
determination, the Company reversed the accrual in the quarter
ended December 31, 2019.
As of
December 31, 2019, Mr. Spoor was
entitled to an aggregate of 241,667 shares of restricted common
stock with an aggregate grant date fair value of $855,668 that have
vested but not been issued. Mr. Spoor forfeited the right to
receive these shares on April 29, 2020 in connection with his
resignation from the Board.
Mr.
Spoor received no additional or severance compensation and all
unvested stock options and shares of restricted common stock
granted to Mr. Spoor were cancelled as a result of Mr.
Spoor’s resignation.
Maged Shenouda
From
October 1, 2016 until his appointment as the Company’s Chief
Financial Officer on September 25, 2017, the Company employed the
services of Maged Shenouda as a financial consultant. Included in
accounts payable at December 31, 2019 and 2018 is $10,000 and
$50,000, respectively, for Mr. Shenouda’s services. On
November 1, 2019, Mr. Shenouda submitted his resignation as Chief
Financial Officer of the Company, effective November 30,
2019.
On June
28, 2019, the Company accrued an incentive bonus in the amount of
$100,000 payable to Mr. Shenouda. Subsequent to Mr.
Shenouda’s resignation, the Compensation Committee reviewed
the accrued bonus and determined that such amount was not owed, and
the Company reversed the accrual in the quarter ended December 31,
2019.
Mr.
Shenouda resigned from his position as the Company’s Chief
Financial Officer effective November 30, 2019. Mr. Shenouda
received no additional or severance compensation and all unvested
stock options and shares of restricted Common Stock granted to Mr.
Shenouda were cancelled as a result of Mr. Shenouda’s
resignation. Mr. Shenouda has a period of twelve months following
his resignation to exercise all vested stock options.
Christine Rigby-Hutton
During
the year ended December 31, 2015, the Company's President,
Christine Rigby-Hutton, was employed through Rigby-Hutton
Management Services (“RHMS”). Ms. Rigby-Hutton resigned
from the Company effective April 20, 2015. Included in accounts
payable at both December 31, 2019 and 2018 is $38,453 for RHMS for
Ms. Rigby-Hutton’s services.
Policy and Procedures Governing Related Party
Transactions
The
Board of Directors is committed to upholding the highest legal and
ethical conduct in fulfilling its responsibilities and recognizes
that related party transactions can present a heightened risk of
potential or actual conflicts of interest.
The
SEC rules define a related party transaction to include any
transaction, arrangement or relationship which: (i) we are a
participant; (ii) the amount involved exceeds $120,000; and (iii)
executive officer, director or director nominee, or any person who
is known to be the beneficial owner of more than 5% of our common
stock, or any person who is an immediate family member of an
executive officer, director or director nominee or beneficial owner
of more than 5% of our common stock had or will have a direct or
indirect material interest.
Although
we do not maintain a formal written procedure for the review and
approval of transactions with such related persons, it is our
policy for the disinterested members of our Board of Directors to
review all related party transactions on a case-by-case
basis. To receive approval, a related-party transaction must
have a legitimate business purpose for us and be on terms that are
fair and reasonable to us and our stockholders and as favorable to
us and our stockholders as would be available from non-related
entities in comparable transactions.
All
related party transactions must be disclosed in our applicable
filings with the SEC as required under SEC rules.
ITEM 14. PRINCIPAL
ACCOUNTANT FEES AND SERVICES
Set
forth below are fees billed or expected to be billed to us by
our independent registered public accounting firm Mazars USA LLP
for the years ended December 31, 2019 and 2018 for the professional
services performed for us.
Audit Fees
The
following table presents fees for professional services billed by
Mazars USA LLP for the fiscal years ended December 31, 2019 and
2018.
|
For the years ended
December 31,
|
|
|
|
Audit fees (1)
|
$124,640
|
$129,031
|
Audit-related fees (2)
|
71,500
|
28,101
|
Tax fees (3)
|
31,087
|
23,772
|
All other fees (4)
|
-
|
-
|
Total
|
$227,227
|
$180,904
|
(1)
Professional
services rendered by the Mazars USA LLP for the audit of our annual
financial statements and review of financial statements included in
our Form 10-Q’s.
(2)
The
aggregate fees billed for assurance and related services by Mazars
USA LLP that are reasonably related to the performance of the audit
or review of our financial statements and are not reported under
Note 1 above, principally related to registration statement
filings.
(3)
The
aggregate fees billed for professional services rendered by Mazars
USA LLP for tax compliance, tax advice, and tax
planning.
(4)
The
aggregate fees billed for products and services provided by Mazars
USA LLP other than the services reported in Notes 1 through 3
above.
Audit Committee Pre-Approval Policies and Procedures
The
Audit Committee has the sole authority for the appointment,
compensation and oversight of the work of our independent
accountants, who prepare or issue an audit report for
us.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF
DIRECTORS
The Audit Committee has reviewed and discussed
with management and Mazars USA LLP, our independent registered
public accounting firm, the audited consolidated financial
statements in the AzurRx BioPharma, Inc. Annual Report on
Form 10-K for the year ended December 31, 2019. The Audit Committee
has also discussed with Mazars USA LLP those matters required to be
discussed by Public Company Accounting Oversight Board
(“PCAOB”) Auditing Standard
1301.
Mazars
USA LLP also provided the Audit Committee with the written
disclosures and the letter required by the applicable requirements
of the PCAOB regarding the independent auditor’s
communication with the Audit Committee concerning independence. The
Audit Committee has discussed with the registered public accounting
firm their independence from our Company.
Based
on its discussions with management and the independent registered
public accounting firm, and its review of the representations and
information provided by management and the independent registered
public accounting firm, including as set forth above, the Audit
Committee recommended to our Board of Directors that the audited
consolidated financial statements be included in our Annual Report
on Form 10-K for the year ended December 31, 2019.
Dated: April 29, 2020
|
Respectfully Submitted,
Edward J. Borkowski, Chairman
Alastair Riddell
Charles J. Casamento
|
The information contained above under the caption
“Report of the Audit Committee
of the Board of Directors” shall not be deemed to be soliciting
material or to be filed with the SEC, nor shall such information be
incorporated by reference into any future filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act
of 1934, as amended, except to the extent that we specifically
incorporate it by reference into such filing.