Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
The aggregate market
value of the voting and non-voting common equity of the registrant held by non-affiliates, computed by reference to the closing
sales price of such stock, as of June 30, 2018 was $7,482,045.00. (For purposes of determination of the aggregate market value,
only directors, executive officers and 10% or greater shareholders have been deemed affiliates.
The number of shares
outstanding of the registrant’s common stock, par value $0.
001 per share, as of April
24, 2019
was 5,005,211 shares.
This Amendment No. 1 on Form 10-K/A (this “Amendment”)
amends the Annual Report on Form 10-K of Alliqua BioMedical, Inc. (the “Company” or “Alliqua”)
for the year ended December 31, 2018, originally filed with the U.S. Securities and Exchange Commission (“SEC”) on
February 22, 2019 (the “Original Filing”).
This Amendment is being filed for the purpose of providing the
information required by Items 10 through 14 of Part III of the Annual Report on Form 10-K. This information was previously omitted
from the Original Filing in reliance on General Instruction G(3) to the Annual Report on Form 10-K, which permits the above-referenced
Items to be incorporated in the Annual Report on Form 10-K by reference from a definitive proxy statement,
if such definitive proxy statement is filed no later than 120 days after December 31, 2018. At this time, the Company
is filing this Amendment to include Part III information in its Annual Report on Form 10-K because the Company
does not intend to file a definitive proxy statement within 120 days of December 31, 2018.
In accordance with Rule 12b-15 under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), Items 10 through 14 of Part III of the Original Filing are hereby amended
and restated in their entirety. In addition, pursuant to Rule 12b-15 under the Exchange Act, the Company is amending and refiling
Item 15 of Part IV, to reflect certain updates thereto and the inclusion of the certifications required under Section 302 of the
Sarbanes-Oxley Act of 2002.
Except as described above, no other changes have been made to
the Original Filing. Except as otherwise indicated herein, this Amendment continues to speak as of the date of the Original Filing,
and the Company has not updated the disclosures contained therein to reflect any events that occurred subsequent to the date of
the Original Filing. Accordingly, this Amendment should be read in conjunction with our Original Filing and with our filings with
the SEC subsequent to the filing of our Original Filing.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth information
regarding our executive officers and the members of our board of directors. All directors hold office for one-year terms until
the election and qualification of their successors. Officers are elected by the board of directors and serve at the discretion
of the board.
Name
|
|
Age
|
|
Position
|
David Johnson
|
|
60
|
|
President, Chief Executive Officer and Director
|
Joseph Leone
|
|
64
|
|
Director
|
Gary Restani
|
|
71
|
|
Director
|
Jeffrey Sklar
|
|
55
|
|
Director
|
Mark Wagner
|
|
62
|
|
Director
|
The following sets forth biographical information
and the qualifications and skills for our executive officers and the members of our board of directors:
David Johnson
was appointed
to our board and as Executive Chairman of Aquamed Technologies, Inc., our wholly owned subsidiary, on November 29, 2012. He was
appointed our President and Chief Executive Officer on February 4, 2013. Mr. Johnson was formerly President of the ConvaTec Division
of Bristol-Myers Squibb, Inc. until 2008 when he orchestrated a sale of the division from its pharmaceutical parent to Avista Capital
Partners and Nordic Capital in a deal valued at $4.1 billion. Concurrently, he acquired and integrated the assets of Copenhagen-based
Unomedical to expand ConvaTec Inc.’s manufacturing and infrastructure into Europe. From 2008 through 2012, Mr. Johnson served
as the Chief Executive Officer of ConvaTec Inc. Prior to his tenure with ConvaTec Inc., Mr. Johnson held several senior positions
in the U.S., Europe and Canada with Zimmer Inc., Fisher Scientific, and Baxter Corporation. He served as a member of ConvaTec Inc.’s
board of directors and the board of the Advanced Medical Technology Association (AdvaMed), where he chaired the Global Wound Sector
Team for four years. Mr. Johnson received an Undergraduate Business Degree in Marketing from the Northern Alberta Institute of
Technology in Edmonton, Alberta, Canada, completed the INSEAD Advanced Management Program in Fontainbleau, France, and is a fellow
from the Wharton School of the University of Pennsylvania. Mr. Johnson’s extensive experience in the pharmaceutical and biotechnology
fields, as well as his executive leadership experience, make him an asset that will serve as a bridge between the board of directors
and our executive officers.
Joseph Leone
has served as
a member of our board of directors since January 3, 2011. Mr. Leone spent more than 24 years with CIT Group, one of the nation’s
largest small and mid-size business lenders, and held several senior-level positions at CIT, most recently Vice Chairman and Chief
Financial Officer from May 1995 through April 2010. From 1975 through 1983, Mr. Leone was employed by KPMG – Peat Marwick
as a Senior Manager for Financial Services Clients including Citibank and Manufacturers Hanover Bank. He has been a Certified Public
Accountant since 1977. Mr. Leone is a graduate of Baruch College (BBA in Accounting) and the Advanced Management Program at Harvard
Business School. Mr. Leone serves as the chairman of the Audit Committee of The Baruch College Fund. Mr. Leone’s extensive
background in accounting and finance makes him a valuable member of the board.
Gary Restani
has served as
a member of our board of directors since July 21, 2014. Until April 2014, he was President and Chief Executive Officer of Spiracur
Inc., a privately held medical device company focused on the development of innovative wound healing technologies. Mr. Restani
has more than 40 years of experience in the medical device industry. He served as President and Chief Operating Officer of Hansen
Medical, Inc. from October 2006 to February 28, 2009. From December 1999 to June 2006, he served as President of ConvaTec, Inc.
From March 1995 to November 1999, Mr. Restani served as the President of various international divisions of Zimmer, Inc., a medical
device and surgical tool company. From March 1990 to February 1995, Mr. Restani served as President of various international divisions
of Smith & Nephew Orthopedics, Inc., an orthopedics, endoscopy and wound management company. He served as Director of Synovis
Orthopedic and Woundcare, Inc. (alternate name, Pegasus Biologics, Inc.) from 2007 to 2011. Mr. Restani served as a Director of
Corpak Medsystems until 2014, and with DFine Inc. from 2007 to 2012. He served on the board of AdvaMed from 1997 to 2006 as well
as the Leadership Board of the Cleveland Clinic’s Center for Digestive Diseases from 2000 to 2006. He served as a Director
of Hansen Medical, Inc. from September 2006 to June 17, 2009. He attended Sir George Williams University and Loyola University
and holds a certificate from Dartmouth College for completing the Tuck School of Business’ General Management Executive Program.
Mr. Restani’s extensive experience in the medical technology sector, as well as his executive leadership experience, make
him a valuable resource on the board.
Jeffrey Sklar
has served
as a member of our board of directors since January 3, 2011. Mr. Sklar has served as the Managing Partner of Sklar, Heyman Hirshfield,
& Kantor LLP, a regional accounting firm, where he oversees the industry specialization team for non-bank financial institutions
and for forensic and investigative auditing services, since January 2010 and prior to that, from January 2006 to December 2009,
he served as an audit partner. Since 2000, Mr. Sklar has also served as the Managing Director of SHC Consulting Group, LLC. Mr.
Sklar served Public Savings Bank as a Director, as the Chair of the Compliance and Risk Committee, and as a member of the Audit
Committee from September 2010 to September 2011. In addition to being a Certified Public Accountant, Mr. Sklar is a Certified Financial
Crime Specialist, Certified Anti-Money Laundering Specialist, Certified Fraud Specialist and Certified in Financial Forensics by
the American Institute of CPAs. He also serves on the Advisory Board of the Association of Financial Crime Specialists. Mr. Sklar’s
qualifications to serve on the board include his extensive background in accounting and finance.
Mark Wagner
was appointed
to our board of directors on May 29, 2015. He previously served as a director and as the President and Chief Executive Officer
of Celleration from June 2009 through our acquisition of Celleration. Prior to joining Celleration, he cofounded Orasi Medical
Inc., a privately held medical device and technology company, and served as a member of its board of directors from 2007 through
2012. Mr. Wagner has also served as Chief Executive Officer at several emerging companies in the medical device and healthcare
industry, including ProVation Medical, Inc., a health information technology company, Survivalink Corporation, a medical device
manufacturer, and Altiva Corporation, a spinal implant device company. Earlier in his career, Mr. Wagner held executive and management
level positions at Nellcor Puritan Bennett and numerous other positions during his 15 year tenure with GE Healthcare. He is currently
on the board of directors of Minnetronix, Inc., Miromatrix and Zipnosis. Mr. Wagner holds a B.S. in Business Administration from
the University of Southern California. Mr. Wagner has decades of leadership experience in the medical device field and healthcare
industry, as well as his traditional corporate background with emerging growth companies, which makes him a valuable resource on
the board of directors.
The board of directors regards all of the
individuals above as competent professionals with many years of experience in the business community. The board of directors believes
that the overall experience and knowledge of the members of the board of directors will contribute to the overall success of our
business.
Family Relationships
There are no family relationships among
any of our director or executive officers.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange
Act of 1934, as amended, requires our directors and officers, and persons who own more than ten percent of our common stock, to
file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. Directors, officers and
persons who own more than ten percent of our common stock are required by SEC regulations to furnish us with copies of all Section
16(a) forms they file.
To our knowledge, based solely on a review
of the copies of such reports furnished to us, during the fiscal year ended December 31, 2018, each of our directors, officers
and greater than ten percent stockholders complied with all Section 16(a) filing requirements applicable to our directors, officers
and greater than ten percent stockholders.
Code of Ethics
We have adopted
a code of corporate governance and ethics that applies to all our directors and employees, including the principal executive officer,
principal financial officer, principal accounting officer and controller. The full text of our Amended and Restated Code of Corporate
Governance and Ethics is published on the Investors section of our website at www.alliqua.com. We intend to disclose any future
amendments to certain provisions of the Amended and Restated Code of Corporate Governance and Ethics, or waivers of such provisions
granted to executive officers and directors, on this website within four business days following the date of any such amendment
or waiver.
Involvement
in Certain Legal Proceedings
There have been
no material legal proceedings that would require disclosure under the federal securities laws that are material to an evaluation
of the ability or integrity of our directors or executive officers, or in which any director, officer, nominee or principal stockholder,
or any affiliate thereof, is a party adverse to us or has a material interest adverse to us.
Board Committees
Our board of directors
has established an audit committee, a nominating and corporate governance committee and a compensation committee, each of which
has the composition and responsibilities described below.
Audit Committee
. The audit committee
is currently comprised of Messrs. Leone, Restani and Sklar, each of whom our board has determined to be financially literate and
qualify as an independent director under Section 5605(a)(2) and Section 5605(c)(2) of the rules of the Nasdaq Stock Market. Mr.
Leone is the chairman of our audit committee. In addition, each of Messrs. Leone and Sklar qualify as an audit committee financial
expert, as defined in Item 407(d)(5)(ii) of Regulation S-K. The function of the audit committee is to assist the board of directors
in its oversight of (1) the integrity of our financial statements, (2) compliance with legal and regulatory requirements, (3) the
qualifications, independence and performance of our independent auditors and (4) the performance of our internal audit function
and internal control systems.
Nominating
and Corporate Governance Committee.
The nominating and corporate governance committee is currently comprised of Messrs. Leone,
Restani and Wagner, each of whom qualifies as an independent director under Section 5605(a)(2) of the rules of the Nasdaq Stock
Market. Mr. Wagner is the chairman of our nominating and corporate governance committee. The primary function of the nominating
and corporate governance committee is to identify individuals qualified to become board members, consistent with criteria approved
by the board, and select the director nominees for election at each annual meeting of stockholders. The nominating and corporate
governance committee will consider all proposed nominees for the board of directors, including those put forward by stockholders.
Stockholder nominations should be addressed to the nominating and corporate governance committee in care of the Secretary, at the
following address: Alliqua BioMedical, Inc., 2150 Cabot Blvd, West, Suite B, Yardley, Pennsylvania, 19047, in accordance with the
provisions of the Company’s bylaws. The nominating and corporate governance committee annually reviews with the board the
applicable skills and characteristics required of board nominees in the context of current board composition and Company circumstances.
In making its recommendations to the board, the nominating and corporate governance committee considers all factors it considers
appropriate, which may include experience, accomplishments, education, understanding of the business and the industry in which
the Company operates, specific skills, general business acumen and the highest personal and professional integrity.
Compensation
Committee.
The compensation committee is currently comprised of Messrs. Restani, Sklar and Wagner, each of whom qualifies as
an independent director under Section 5605(a)(2) of the rules of the Nasdaq Stock Market, an “outside director” for
purposes of Section 162(m) of the Code and a “non-employee director” for purposes of Section 16b-3 under the Exchange
Act and does not have a relationship to us which is material to his ability to be independent from management in connection with
the duties of a compensation committee member, as described in Section 5605(d)(2) of the rules of the Nasdaq Stock Market. Mr.
Sklar is the chairman of the compensation committee. The function of the compensation committee is to discharge the board of directors’
responsibilities relating to compensation of our executive officers. The primary objective of the compensation committee is to
approve and evaluate all of our compensation plans, policies and programs insofar as they affect our executive officers.
ITEM 11. EXECUTIVE COMPENSATION
Compensation Philosophy and Process
The responsibility for establishing, administering
and interpreting our policies governing the compensation and benefits for our executive officers lies with our compensation committee
and our board of directors. Our board of directors has not retained the services of any compensation consultants in connection
with the compensation of our executive officers.
The goals of our executive compensation
program are to attract, motivate and retain individuals with the skills and qualities necessary to support and develop our business
within the framework of our size and available resources. We have designed our executive compensation program to achieve the following
objectives:
|
·
|
attract and retain executives experienced in developing and delivering products such as our own;
|
|
·
|
motivate and reward executives whose experience and skills are critical to our success
;
|
|
|
|
|
·
|
reward performance; and
|
|
|
|
|
·
|
align the interests of our executive officers and stockholders by motivating executive officers to increase stockholder value
.
|
The compensation committee may delegate
its responsibilities and authority to a subcommittee. Our executive officers played no role in determining or recommending the
amount or form of executive and director compensation for 2018.
2018 and 2017 Summary Compensation Table
The table below sets forth the compensation
earned by our named executive officers for the fiscal years ended December 31, 2018 and 2017. Unless otherwise noted, all information
presented in this Item 11 reflects a one-for-ten reverse stock split of our common stock that occurred on October 5, 2017.
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
|
|
Name and
|
|
|
|
|
|
|
|
|
|
Awards
|
|
|
Awards
|
|
|
All Other
|
|
|
|
|
Principal Position
|
|
Year
|
|
Salary
|
|
|
Bonus
|
|
|
(1)
|
|
|
(1)
|
|
|
Compensation
|
|
|
Total
|
|
David Johnson
|
|
2018
|
|
$
|
350,000
|
|
|
$
|
-
|
|
|
$
|
279,400
|
|
|
$
|
-
|
|
|
$
|
11,400
|
(3)
|
|
$
|
640,800
|
|
President and Chief
|
|
2017
|
|
$
|
350,000
|
|
|
$
|
276,500
|
(2)
|
|
$
|
274,000
|
|
|
$
|
-
|
|
|
$
|
11,400
|
(3)
|
|
$
|
911,900
|
|
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradford Barton (6)
|
|
2018
|
|
$
|
87,040
|
|
|
$
|
-
|
|
|
$
|
53,301
|
|
|
$
|
-
|
|
|
$
|
263,730
|
(5)
|
|
$
|
404,071
|
|
Chief Operating Officer
|
|
2017
|
|
$
|
246,800
|
|
|
$
|
118,310
|
(2)
|
|
$
|
103,829
|
|
|
$
|
-
|
|
|
$
|
8,400
|
(4)
|
|
$
|
477,339
|
|
Pellegrino Pionati (6)
|
|
2018
|
|
$
|
87,040
|
|
|
$
|
-
|
|
|
$
|
54,970
|
|
|
$
|
-
|
|
|
$
|
263,730
|
(5)
|
|
$
|
405,740
|
|
Chief Strategy and
|
|
2017
|
|
$
|
246,800
|
|
|
$
|
118,310
|
(2)
|
|
$
|
103,829
|
|
|
$
|
-
|
|
|
$
|
8,400
|
(4)
|
|
$
|
477,339
|
|
Marketing Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Warusz (7)
|
|
2018
|
|
$
|
281,960
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
281,960
|
|
Chief Financial Officer,
|
|
2017
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Treasurer and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
amounts reported represent the aggregate grant date fair value of the awards, calculated in accordance with Financial Accounting
Standards Board Accounting Standards Codification Topic 718—Compensation—Stock Compensation (“ASC 718”),
with the exception that the amount shown assumes no forfeitures. Assumptions used in the calculation of these amounts are included
in “Note 2. Summary of Significant Accounting Policies—Stock-Based Compensation” and “Note 15. Stockholders’
Equity” to our audited financial statements for the fiscal year ended December 31, 2018 included in this Annual Report.
|
|
(2)
|
Discretionary
year-end performance bonus earned in 2017 paid in 2018.
|
|
(3)
|
Comprised of (i) auto expense allowance payments of $9,000 and (ii) life insurance premium payments of $2,400.
|
|
|
|
|
(4)
|
Comprised of auto expense allowance payments.
|
|
|
|
|
(5)
|
Comprised of (i) auto expense allowance payments of $2,927, (ii) vacation payout payment of $11,203 and (iii) severance payment of $249,600.
|
|
|
|
|
(6)
|
Effective May 7, 2018, Mr. Barton ceased employment as Chief Operating Officer and Mr. Pionati ceased employment as Chief Strategy and Marketing Officer.
|
|
|
|
|
(7)
|
Effective April 1, 2018, Mr. Warusz was appointed as Chief Financial Officer, Secretary and Treasurer. Effective March 18, 2019, Mr. Warusz resigned as Chief Financial Officer, Secretary and Treasurer.
|
Agreements with Executive Officers
David Johnson
In connection
with the appointment of David Johnson as Chief Executive Officer, on February 4, 2013, we entered into an Executive Employment
Agreement with Mr. Johnson. The employment agreement has an initial term of three years and will be automatically renewed for an
additional one-year term unless terminated by either party upon written notice provided not less than four months before the end
of the initial term. Under the employment agreement, Mr. Johnson is entitled to an annual salary of $350,000, which may be increased,
but not decreased, at the board’s discretion. Mr. Johnson is also eligible to receive an annual bonus of up to 100% of his
base salary, provided that he is employed with us on December 31 of the year to which the bonus relates. The amount of Mr. Johnson’s
annual bonus, if any, will be determined based upon the achievement of certain performance criteria. The performance criteria for
each year will be set by the compensation committee after consultation with Mr. Johnson. Mr. Johnson is also entitled to a monthly
automobile allowance of $750 per month, reimbursement of up to $200 per month for the cost of a term life insurance policy having
a face amount of $1 million, and benefit plans provided by us to all employees and executive employees.
Mr. Johnson is entitled to receive the
following equity awards pursuant to our 2011 Long-Term Incentive Plan or, if there are not sufficient shares available under the
2011 Long-Term Incentive Plan, pursuant to a stand-alone award agreement:
|
(i)
|
a
nonqualified stock option to purchase a number of shares of our common stock equal to three percent of the total outstanding common
stock (determined on a fully-diluted basis as of February 4, 2013), with the following terms: (A) an exercise price equal the
fair market value of a share of common stock on the date of grant; (B) immediate vesting; and (C) a term of 10 years; and
|
|
(ii)
|
an
award of nonqualified stock options on the last business day of each calendar quarter through February 4, 2016 relating to a number
of shares of common stock equal to 0.333% percent of our outstanding common stock as of the date of grant (determined on a fully-diluted
basis), with the following terms: (A) an exercise price equal to the fair market value of a share of common stock on the date
of grant, (B) the first eight (8) grants will be 100% vested on the first anniversary of their respective dates of grant and the
last four (4) grants will be 100% vested on the date of grant, (C) immediate vesting of any unvested restricted stock units upon
the effective date of a “Change in Control” (as defined in the 2011 Long-Term Incentive Plan) and (D) a term of ten
years.
|
Mr. Johnson is also eligible to receive
additional equity awards in such amount and on such terms as is determined by the board. Mr. Johnson received the first award set
forth above on February 4, 2013. He was awarded options to purchase 27,923 shares of common stock at an exercise price of $32.80
per share. Mr. Johnson received stock option grants for the first, second and third calendar quarters of 2013 under the second
award set forth above on November 14, 2013. He was awarded an aggregate of 11,713 shares of common stock at an exercise price of
$35.00 per share. The foregoing share numbers and prices have been adjusted for the 1 for 43.75 reverse stock split of our common
stock that occurred on November 18, 2013 and a 1 for 10 reverse stock split of our common stock that occurred on October 5, 2017.
On December 20, 2013, we entered into a
First Amendment to Executive Employment Agreement with Mr. Johnson, which amended the employment agreement to provide for a single
stock option award in lieu of all of the remaining quarterly grants thereunder. Pursuant to the amendment, Mr. Johnson received
a nonqualified stock option to purchase 73,058 shares of our common stock at an exercise price equal to $68.20 per share on December
20, 2013. The option has a term of ten years, with one-ninth of the optioned shares vesting on the first day of each calendar quarter
during the period commencing on January 1, 2014 and ending on February 4, 2016, provided that Mr. Johnson remains employed by us
on such date, and subject to the terms and conditions of that certain nonqualified stock option agreement by and between us and
Mr. Johnson, effective as of December 20, 2013.
On August 29, 2017, we and Mr. Johnson
entered into an amendment (the “Executive Officer Amendment”) to Mr. Johnson’s employment agreement in order
to, among other things, (a) modify the term of Mr. Johnson’s employment to remain in effect until August 29, 2020, subject
to automatic renewals for successive one year periods thereafter, unless earlier terminated by either party; and (b) provide that
any equity awards granted to Mr. Johnson during such amended employment term will be granted pursuant to the Alliqua, Inc. 2014
Long-Term Incentive Plan and any successor plan thereto.
The Executive Officer Amendment also amended
certain provisions of Mr. Johnson’s employment agreement related to payments on termination of Mr. Johnson’s employment.
Pursuant to the Executive Officer Amendment, if Mr. Johnson’s employment is terminated by us without cause or by Mr. Johnson
for good reason, subject to compliance with the confidentiality, non-solicitation and non-disparagement requirements of the employment
agreement and the execution of a release of claims, we will pay to Mr. Johnson: (a) within the time period required by applicable
law, and in no event later than 30 days following termination of employment, (i) any accrued but unpaid base salary accrued through
the date of termination, (ii) all unpaid performance bonus earned and accrued for a previously completed calendar year, (iii) any
unreimbursed expenses properly incurred prior to the termination date; plus (b) severance pay in an amount equal to two years’
base salary and two years annual bonus calculated at Mr. Johnson’s target bonus level, which payment will, less applicable
taxes and withholdings, be payable in 24 equal monthly installments from the date of termination (the “Severance Period”);
provided that, with respect to such severance payment, we shall pay (i) the number of installments that are exempt from U.S. Internal
Revenue Code Section 409A as short term deferrals under Treasury Regulation § 1.409A-1(b)(4) because they would have been
paid during the short term deferral period ending on the March 15th following the end of the calendar year that includes the date
of Mr. Johnson’s termination, plus (ii) the number of installments that near or equal, but do not exceed, the dollar limit
set forth in Treasury Regulation § 1.409A-1(b)(9)(iii) as of the date of termination, in a single lump sum on the 60th day
following the termination of Mr. Johnson’s employment, with the remainder of the installments being paid over the Severance
Period on the dates and in such amounts such installments would have been paid without regard to installments that were paid in
a lump sum payment. In addition, upon such termination, all outstanding stock options and other equity awards granted to Mr. Johnson
will vest, to the extent not previously vested, and the stock options will remain exercisable for three months from the date of
Mr. Johnson’s termination; and we will continue to provide healthcare coverage until the earlier of (x) the expiration of
the Severance Period, (y) the date that Mr. Johnson’s “COBRA” coverage terminates or expires, or (z) the date
that Mr. Johnson obtains new employment that offers substantially similar health benefits. Additionally, under the Executive Officer
Amendment, upon the occurrence of certain change in control transactions, we may elect to terminate Mr. Johnson’s employment
agreement and pay to Mr. Johnson the payments and benefits payable to Mr. Johnson upon termination by us without cause or by Mr.
Johnson for good reason, or any remaining unpaid portions thereof, as the case may be, in a single lump sum payment as further
set forth in the Executive Officer Amendment.
We have the right to terminate the employment
agreement at any time for cause. “Cause” is defined as Mr. Johnson’s commission of any of the following: an act
of theft, embezzlement or fraud; an act of intentional dishonesty or willful misrepresentation of a material nature; any willful
misconduct with regard to us; a material breach of any fiduciary duties owed to us; conviction of, or pleading nolo contendere
or guilty to, a felony or misdemeanor (other than a traffic infraction) that is reasonably likely to cause damage to us or our
reputation; a material violation of our written policies, standards or guidelines that is not cured within 30 days; refusal to
perform the material duties and responsibilities required by the employment agreement, subject to a 30 day cure period; and a material
breach of the employment agreement or any other agreement to which Mr. Johnson and we are parties that is not cured within 30 days.
The employment agreement may also be terminated by either party at any time without cause upon 30 days written notice, and by Mr.
Johnson with good reason upon 90 days written notice, which shall include a 30 day cure period. “Good Reason” is defined
as the occurrence, without Mr. Johnson’s prior written consent, of a material reduction in base salary, a material diminution
in title, duties, responsibility or authority, relocation of his primary office to an office located 35 miles from the office in
Langhorne, Pennsylvania, a material breach by us of any agreement with Mr. Johnson or failure by us to have any successor assume
the employment agreement.
Bradford Barton
Barton Separation Agreement
On May 7, 2018, the Company and Mr. Barton
entered into a general release and severance agreement (the “Barton Separation Agreement”), which became effective
on May 15, 2018. Pursuant to the Barton Separation Agreement, Mr. Barton released the Company from any and all claims. In
consideration of the Barton Separation Agreement and his general release of claims, Mr. Barton was entitled to (i) his 2017
performance bonus in the amount of $118,310.40 (less applicable taxes and other withholdings), (ii) severance pay in an
amount equal to his base salary for twelve (12) months, less applicable taxes and other withholdings, payable in a lump sum payment
on or before the thirtieth (30th) day following May 7, 2018, (iii) for a period of twelve (12) months or until Mr. Barton becomes
eligible for comparable employer sponsored health plan benefits, whichever is sooner, all health plan benefits to which Mr. Barton
was entitled prior to the separation date under any such benefit plans or arrangements maintained by the Company in which Mr. Barton
participated, which benefits shall be determined and paid in accordance with the Company’s plans or arrangements and shall
be provided pursuant to COBRA with the relative costs therefor being paid by the Company and Mr. Barton in the same proportion
as existed while Mr. Barton was an active employee of the Company and (iv) the stock options and restricted stock previously granted
to Mr. Barton: (1) became fully and immediately vested upon May 7, 2018, and (2) the stock options shall remain exercisable
for two (2) years following May 7, 2018, or, if sooner, until the end of the applicable stock option’s term.
Barton Employment Agreement
In connection with his appointment as Chief
Operating Officer, pursuant to an offer letter dated May 14, 2013, we agreed to pay Mr. Barton an annual salary of $240,000, an
annual bonus of up to 60% of his prorated annual base salary based on the achievement of mutually agreed upon objectives, a monthly
stipend of $700 to cover auto and telephone expenses, and medical, dental, 401(k), group life and long-term disability benefits.
On June 5, 2015, we entered into an employment
agreement with Mr. Barton (the “Barton Employment Agreement”), which amended and restated the terms set forth in that
certain offer letter dated May 14, 2013 in its entirety. The Barton Employment Agreement provided for a term of employment that
continues until terminated by either party. Under the Barton Employment Agreement, Mr. Barton was entitled to an annual base salary
of $240,000, less applicable payroll deductions and tax withholdings. He was also eligible to receive an annual bonus of up to
60% of his annual base salary for each calendar year during employment based upon the achievement of certain performance criteria,
provided that he was employed by us through the end of the applicable calendar year to which the bonus relates, subject to certain
exceptions. The performance criteria for each year was established reasonably and in good faith by the board. Mr. Barton was also
entitled to a monthly automobile allowance of $700 per month, reimbursement of certain out-of-pocket expenses reasonably incurred
in connection with the performance of his services and benefit plans provided by us to all employees.
The Barton Employment Agreement also contained
certain confidentiality, non-competition, non-solicitation and assignment of work product covenants for Mr. Barton.
Mr. Barton’s employment was terminable
by either party at any time upon written notice. If Mr. Barton’s employment was terminated by us for cause or by Mr. Barton
without good reason, we were to pay Mr. Barton an amount equal to the sum of (i) all unpaid base salary accrued through the date
of termination, (ii) all unpaid performance bonus earned and accrued for a previously completed calendar year, (iii) all accrued
and unpaid vacation or similar pay required by law and (iv) any unreimbursed expenses properly incurred prior to the termination
date.
If Mr. Barton’s employment was terminated
by us without cause or by Mr. Barton for good reason, subject to the timely execution and return by Mr. Barton of a release of
claims of an irrevocable release of claims within 60 days following the date of termination, then we were to pay Mr. Barton a lump
sum amount equal to the accrued obligations set forth in (i) through (iv) above, plus severance pay in an amount equal to his base
salary for 12 months, payable in equal installments in accordance with our normal payroll policies. If, prior to such termination,
Mr. Barton was employed by us through at least July 1st of the applicable calendar year, he would also have been eligible to receive
a pro-rata portion of any annual performance bonus earned during such calendar year, with the amount prorated based on the number
of days employed during such calendar year. In addition, all outstanding stock options and restricted stock awards granted to Mr.
Barton were to immediately vest in full and the stock options were to remain exercisable for two years following the termination
date or, if sooner, until the end of the applicable stock option’s term. We were also to provide continued health benefits
coverage until the earlier of the expiration of the 12 month severance period and the date that Mr. Barton became eligible for
comparable employer sponsored health benefits.
Pellegrino Pionati
Pionati Separation Agreement
On May 7, 2018,
the Company and Mr. Pionati entered into a general release and severance agreement (the “Pionati Separation Agreement”),
which became effective on May 15, 2018. Pursuant to the Pionati Separation Agreement, Mr. Pionati released the Company from
any and all claims. In consideration of the Pionati Separation Agreement and his general release of claims, Mr. Pionati was
entitled to (i) his 2017 performance bonus in the amount of $118,310.40 (less applicable taxes and other withholdings),
(ii) severance pay in an amount equal to his base salary for twelve (12) months, less applicable taxes and other withholdings,
payable in a lump sum payment on or before the thirtieth (30th) day following May 7, 2018, (iii) for a period of twelve (12) months
or until Mr. Pionati becomes eligible for comparable employer sponsored health plan benefits, whichever is sooner, all health plan
benefits to which Mr. Pionati was entitled prior to the separation date under any such benefit plans or arrangements maintained
by the Company in which Mr. Pionati participated, which benefits shall be determined and paid in accordance with the Company’s
plans or arrangements and shall be provided pursuant to COBRA with the relative costs therefor being paid by the Company and Mr.
Pionati in the same proportion as existed while Mr. Pionati was an active employee of the Company and (iv) the stock options and
restricted stock previously granted to Mr. Pionati: (1) became fully and immediately vested upon May 7, 2018, and (2) the
stock options shall remain exercisable for two (2) years following May 7, 2018, or, if sooner, until the end of the applicable
stock option’s term.
Pionati Employment Agreement
In connection with Mr. Pionati’s
appointment as Chief Strategy and Marketing Officer, on June 3, 2015, we entered into an employment agreement with Mr. Pionati
(the “Pionati Employment Agreement”) for a term of employment that commenced on June 15, 2015 and continued until terminated
by either party. Under the Pionati Employment Agreement, Mr. Pionati was entitled to an annual base salary of $240,000, less applicable
payroll deductions and tax withholdings. He was also eligible to receive an annual bonus of up to 60% of his annual base salary
for each calendar year during employment based upon the achievement of certain performance criteria, provided that he was employed
by us through the end of the applicable calendar year to which the bonus relates, subject to certain exceptions. The performance
criteria for each year will be established reasonably and in good faith by our board of directors. Mr. Pionati was also entitled
to a monthly automobile allowance of $700 per month, reimbursement of certain out-of-pocket expenses reasonably incurred in connection
with the performance of his services and benefit plans provided by us to all employees.
The Pionati Employment Agreement also contained
certain confidentiality, non-competition, non-solicitation and assignment of work product covenants for Mr. Pionati.
Mr. Pionati’s employment was terminable
by either party at any time upon written notice. If Mr. Pionati’s employment was terminated by us for cause or by Mr. Pionati
without good reason, we were to pay Mr. Pionati an amount equal to the sum of (i) all unpaid base salary accrued through the date
of termination, (ii) all unpaid performance bonus earned and accrued for a previously completed calendar year, (iii) all accrued
and unpaid vacation or similar pay required by law and (iv) any unreimbursed expenses properly incurred prior to the termination
date.
If Mr. Pionati’s employment was terminated
by us without cause or by Mr. Pionati for good reason, subject to the timely execution and return by Mr. Pionati of an irrevocable
release of claims within 60 days following the date of termination, then we were to pay Mr. Pionati a lump sum amount equal to
the accrued obligations set forth in (i) through (iv) above, plus severance pay in an amount equal to his base salary for 12 months,
payable in equal installments in accordance with our normal payroll policies. If, prior to such termination, Mr. Pionati was employed
by us through at least July 1st of the applicable calendar year, he was also eligible to receive a pro-rata portion of any annual
performance bonus earned during such calendar year, with the amount prorated based on the number of days employed during such calendar
year. In addition, all outstanding stock options and restricted stock awards granted to Mr. Pionati were to immediately vest in
full and the stock options will remain exercisable for two years following the termination date or, if sooner, until the end of
the applicable stock option’s term. We were also to provide continued health benefits coverage until the earlier of the expiration
of the 12 month severance period and the date that Mr. Pionati becomes eligible for comparable employer sponsored health benefits.
In connection with his appointment,
on June 15, 2015, Mr. Pionati received (i) stock options to purchase 10,000 shares of common stock at an exercise of $52.50 per
share, with one-third vesting on each of June 15, 2016, 2017 and 2018, and (ii) a restricted stock award of 12,000 shares of restricted
common stock with 25% vesting on each of June 15, 2015, 2016, 2017 and 2018, in each case, provided that Mr. Pionati was employed
by or providing services to us through the applicable vesting date, subject to the terms and conditions of the Alliqua BioMedical,
Inc. 2014 Long-Term Incentive Plan.
Warusz Employment Agreement
Mr. Warusz did not have an employment
agreement with us and his employment was terminable by either party at any time upon written notice. Mr. Warusz was entitled to
an hourly salary of $250 per hour.
Outstanding Equity Awards at Fiscal
Year End
The following
table sets forth information regarding equity awards that have been previously awarded to each of the named executive officers
and which remained outstanding as of December 31, 2018:
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares or
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
Units of
|
|
|
Units of
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
Stock That
|
|
|
Stock That
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Expiration
|
|
Have Not
|
|
|
Have Not
|
|
Name
|
|
|
Exercisable
|
|
|
|
Unexercisable
|
|
|
|
Price
|
|
|
Date
|
|
|
Vested
|
|
|
|
Vested
|
|
David Johnson
|
|
|
5,920
|
|
|
|
-
|
|
|
$
|
43.80
|
|
|
11/29/2022
|
|
|
|
|
|
|
|
|
David Johnson
|
|
|
5,920
|
|
|
|
-
|
|
|
$
|
65.60
|
|
|
11/29/2022
|
|
|
|
|
|
|
|
|
David Johnson
|
|
|
5,920
|
|
|
|
-
|
|
|
$
|
87.50
|
|
|
11/29/2022
|
|
|
|
|
|
|
|
|
David Johnson
|
|
|
27,923
|
|
|
|
-
|
|
|
$
|
32.80
|
|
|
2/4/2023
|
|
|
|
|
|
|
|
|
David Johnson
|
|
|
11,713
|
|
|
|
-
|
|
|
$
|
35.00
|
|
|
11/14/2023
|
|
|
|
|
|
|
|
|
David Johnson
|
|
|
73,058
|
|
|
|
-
|
|
|
$
|
68.20
|
|
|
12/20/2023
|
|
|
|
|
|
|
|
|
David Johnson
|
|
|
11,502
|
|
|
|
-
|
|
|
$
|
62.30
|
|
|
2/6/2025
|
|
|
|
|
|
|
|
|
Bradford Barton
|
|
|
5,487
|
|
|
|
-
|
|
|
$
|
43.80
|
|
|
5/10/2023
|
|
|
|
|
|
|
|
|
Bradford Barton
|
|
|
5,487
|
|
|
|
-
|
|
|
$
|
54.70
|
|
|
5/10/2023
|
|
|
|
|
|
|
|
|
Bradford Barton
|
|
|
5,487
|
|
|
|
-
|
|
|
$
|
65.60
|
|
|
5/10/2023
|
|
|
|
|
|
|
|
|
Bradford Barton
|
|
|
5,487
|
|
|
|
-
|
|
|
$
|
87.50
|
|
|
5/10/2023
|
|
|
|
|
|
|
|
|
Bradford Barton
|
|
|
5,487
|
|
|
|
-
|
|
|
$
|
109.40
|
|
|
5/10/2023
|
|
|
|
|
|
|
|
|
Bradford Barton
|
|
|
7,002
|
|
|
|
-
|
|
|
$
|
90.00
|
|
|
3/6/2024
|
|
|
|
|
|
|
|
|
Bradford Barton
|
|
|
11,502
|
|
|
|
-
|
|
|
$
|
62.30
|
|
|
2/6/2025
|
|
|
|
|
|
|
|
|
Pellegrino Pionati
|
|
|
10,002
|
|
|
|
-
|
|
|
$
|
52.50
|
|
|
6/15/2025
|
|
|
|
|
|
|
|
|
Change of Control Agreements
We do not currently have any plans providing
for the payment of retirement benefits to our officers or directors, other than as described under “Agreements with Executive
Officers” above.
We do not currently have any change-of-control
or severance agreements with any of our executive officers or directors, other than as described under “Agreements with Executive
Officers” above. In the event of the termination of employment of the named executive officers, any and all unexercised stock
options shall expire and no longer be exercisable after a specified time following the date of the termination, other than as described
under “Agreements with Executive Officers” above.
2011 Long-Term Incentive Plan
Our board of directors adopted the 2011
Long-Term Incentive Plan on November 7, 2011, which was approved by our stockholders at the 2011 annual meeting held on December
19, 2011. The purpose of the 2011 Long-Term Incentive Plan is to enable us to remain competitive and innovative in its ability
to attract, motivate, reward and retain the services of key employees, certain key contractors, and non-employee directors. The
2011 Long-Term Incentive Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation
rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights, and other awards which may be
granted singly, in combination, or in tandem, and which may be paid in cash or shares of common stock. Our 2011 Long-Term Incentive
Plan is expected to provide flexibility to its compensation methods in order to adapt the compensation of employees, contractors,
and non-employee directors to a changing business environment, after giving due consideration to competitive conditions and the
impact of federal tax laws. The 2011 Long-Term Incentive Plan is administered by our board of directors. A total of 182,857 shares
of common stock are reserved for award under the 2011 Plan, of which 47,129 remained available for future awards as of December
31, 2018.
2014 Long-Term Incentive Plan
Our board of directors approved the 2014
Long-Term Incentive Plan (the “2014 Plan”) on April 10, 2014, which was approved by our stockholders at the 2014 annual
meeting held on June 5, 2014 and adopted on that date. On February 26, 2015, our board of directors approved an amendment to the
2014 Plan to increase the total number of shares available for issuance pursuant to awards under the 2014 Plan, which was approved
by stockholders at our 2015 annual meeting held on May 6, 2015.
The purpose of the 2014 Plan is to enable
us to remain competitive and innovative in our ability to attract, motivate, reward and retain the services of key employees, certain
key contractors, and non-employee directors. The 2014 Plan provides for the granting of incentive stock options, nonqualified stock
options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights, and
other awards which may be granted singly, in combination, or in tandem, and which may be paid in cash or shares of common stock.
The 2014 Plan is expected to provide flexibility to its compensation methods in order to adapt the compensation of employees, contractors,
and non-employee directors to a changing business environment, after giving due consideration to competitive conditions and the
impact of federal tax laws. The 2014 Plan is administered by our board of directors. A total of 950,000 shares of common stock
are reserved for award under the 2014 Plan, of which 423,114 remained available for future awards as of December 31, 2018.
Director Compensation
The following
table provides compensation information concerning our directors, other than David Johnson, during the year ended December 31,
2018:
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned or
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
Paid in
|
|
|
Awards
|
|
|
|
|
|
|
Year
|
|
|
Cash
|
|
|
[1]
|
|
|
Total
|
|
Joseph Leone
|
|
2018
|
|
|
$
|
33,750
|
|
|
$
|
|
|
|
$
|
33,750
|
|
Gary Restani
|
|
2018
|
|
|
$
|
32,626
|
|
|
$
|
|
|
|
$
|
32,626
|
|
Jeffrey Sklar
|
|
2018
|
|
|
$
|
34,500
|
|
|
$
|
|
|
|
$
|
34,500
|
|
Mark Wagner
|
|
2018
|
|
|
$
|
27,750
|
|
|
$
|
|
|
|
$
|
27,750
|
|
|
(1)
|
The amounts reported represent the aggregate grant date fair value of the awards, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718—Compensation—Stock Compensation (“ASC 718”), with the exception that the amount shown assumes no forfeitures. Assumptions used in the calculation of these amounts are included in “Note 2. Summary of Significant Accounting Policies—Stock-Based Compensation” and “Note 15. Stockholders’ Equity” to our audited financial statements for the fiscal year ended December 31, 2018 included in this Annual Report.
|
For the year ended December 31, 2018,
cash compensation for non-employee directors, including the board chair, was $26,250. In addition, the audit committee chair was
paid $10,500, the compensation committee chair was paid $8,750, other audit committee members were paid $5,250, other compensation
committee members were paid $3,938 and nominating and corporate governance committee members, including the chair, were paid $2,625.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Unless otherwise noted, all information
in this Item 12 reflects a one-for-ten reverse stock split of our common stock that occurred on October 5, 2017.
Equity Compensation Plan Information
The following table provides certain information
as of December 31, 2018 with respect to our equity compensation plans under which our equity securities are authorized for issuance:
|
|
Number of
|
|
|
Weighted
|
|
|
Number of
|
|
|
|
securities to
|
|
|
average
|
|
|
securities
|
|
|
|
be
|
|
|
exercise price
|
|
|
remaining
|
|
|
|
issued upon
|
|
|
of
|
|
|
available for
|
|
|
|
exercise of
|
|
|
outstanding
|
|
|
future
|
|
|
|
outstanding
|
|
|
options,
|
|
|
issuance
|
|
Equity compensation plans approved by security holders
|
|
|
219,108
|
|
|
$
|
37.43
|
|
|
|
470,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by security holders
|
|
|
180,169
|
(1)
|
|
$
|
57.82
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
399,277
|
|
|
$
|
46.63
|
|
|
|
470,243
|
|
|
(1)
|
Compromised of the following awards:
|
|
·
|
An option granted to Mr. Johnson to purchase 17,760 shares of common stock, granted on November 27, 2012, vesting as follows: (i) options to purchase 5,920 shares of common stock at an exercise price of $43.80 per share, which vested and became exercisable on November 29, 2012; (ii) options to purchase 5,920 shares of common stock at an exercise price of $65.60 per share, which vested and became exercisable on November 29, 2013; (iii) and options to purchase 5,920 shares of common stock at an exercise price of $87.50 per share, which vested and became exercisable on November 29, 2014.
|
|
|
|
|
·
|
An option granted to an employee on May 10, 2013, with a term of ten years, to purchase 27,435 shares of common stock vesting as follows: (i) options to purchase 1,829 shares of common stock immediately on the date of grant; and (ii) options to purchase 1,829 shares of common stock on each of the first, second, third, and fourth year anniversaries of the date of grant. The exercise price for one-fifth of each tranche is $43.80, $54.70, $65.60, $87.50 and $109.40 per share.
|
|
|
|
|
·
|
An option granted to Brian, our former Chief Financial Officer, with a ten year term, to purchase 18,516 shares of common stock, granted on September 3, 2013. The options are scheduled to vest as follows: (i) 6,172 shares at an exercise price of $43.80 per share, which vested immediately; (ii) 6,172 shares at an exercise price of $65.60 per share, which vested upon the one year anniversary of employment; and (iii) 6,172 shares at an exercise price of $87.50 per share, which vested upon the two year anniversary of employment. The options have a term of ten years.
|
|
|
|
|
·
|
An option granted to Mr. Johnson, with a term of ten years, to purchase 11,713 shares of common stock, granted on November 14, 2013 with an exercise price of $35.00. The options vested as follows: (i) options to purchase 3,255 shares vested on March 28, 2014, (ii) options to purchase 4,112 shares vested on June 28, 2014; and (iii) options to purchase 4,346 shares vested on September 30, 2014.
|
|
|
|
|
·
|
An option granted to Mr. Johnson, with a term of ten years, to purchase 73,058 shares of common stock, granted on December 20, 2013 at an exercise price of $68.20. The options vest on the first day of each calendar quarter during the period commencing on January 1, 2014 and ending on February 4, 2016, provided that Mr. Johnson remains employed by the company on such date.
|
|
·
|
An option granted to an employee on January 6, 2014, with a term of ten years, to purchase 8,001 shares of common stock with an exercise price of $69.90 per share. The option is scheduled to vest and become exercisable in thirds on each of the next three anniversaries of the date of grant.
|
|
|
|
|
·
|
A warrant to purchase 4,500 shares of common stock, expiring on March 29, 2022, at an exercise price of $4.40 was issued to a consultant on April 3, 2017, vesting on the date of grant.
|
|
|
|
|
·
|
A warrant to purchase 7,224 shares of common stock, expiring on March 29, 2022, at an exercise price of $4.40 was issued to a consultant on April 3, 2017, vesting on the date of grant.
|
|
|
|
|
·
|
A warrant to purchase 2,961 shares of common stock, expiring on March 29, 2022, at an exercise price of $4.40 was issued to a consultant on April 3, 2017, vesting on the date of grant.
|
|
|
|
|
·
|
A warrant to purchase 8,171 shares of common stock, expiring on March 29, 2022, at an exercise price of $4.40 was issued to a consultant on April 3, 2017, vesting on the date of grant.
|
|
|
|
|
·
|
A warrant to purchase 593 shares of common stock, expiring on March 29, 2022, at an exercise price of $4.40 was issued to a consultant on April 3, 2017, vesting on the date of grant.
|
|
|
|
|
·
|
A warrant to purchase 237 shares of common stock, expiring on March 29, 2022, at an exercise price of $4.40 was issued to a consultant on April 3, 2017, vesting on the date of grant.
|
Security Ownership of Certain Beneficial
Owners and Management
The following table sets forth information
with respect to the beneficial ownership of our common stock as of by April 24, 2019:
|
·
|
each person known by us to beneficially own more than 5.0% of our common stock;
|
|
|
|
|
·
|
each of our directors;
|
|
|
|
|
·
|
each of the named executive officers; and
|
|
|
|
|
·
|
all of our directors and executive officers as a group.
|
The percentages of common stock beneficially
owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under
the rules of the SEC, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which
includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of
or to direct the disposition of the security. Except as indicated in the footnotes to this table, each beneficial owner named in
the table below has sole voting and sole investment power with respect to all shares beneficially owned and each person’s
address is c/o Alliqua BioMedical, Inc., 2150 Cabot Blvd, West, Suite B, Langhorne, PA 19047. As of April 24, 2019, we had 5,005,211
shares outstanding.
Name of Beneficial Owner
|
|
Number of
Shares
Beneficially
Owned(1)
|
|
|
Percentage
Beneficially
Owned(1)
|
|
5% Owners
|
|
|
|
|
|
|
|
|
Celgene Corporation
|
|
|
818,896
|
(2)
|
|
|
16.3
|
%
|
86 Morris Avenue
|
|
|
|
|
|
|
|
|
Summit, New Jersey 07901
|
|
|
|
|
|
|
|
|
Officers and Directors
|
|
|
|
|
|
|
|
|
David I. Johnson
|
|
|
314,547
|
(3)
|
|
|
6.1
|
%
|
Joseph Warusz (11)
|
|
|
-
|
|
|
|
-
|
|
Bradford C. Barton (10)
|
|
|
73,524
|
(4)
|
|
|
1.5
|
%
|
Pellegrino Pionati (10)
|
|
|
30,225
|
(5)
|
|
|
*
|
|
Joseph M. Leone
|
|
|
18,077
|
(6)
|
|
|
*
|
|
Jeffrey Sklar
|
|
|
18,670
|
(7)
|
|
|
*
|
|
Gary Restani
|
|
|
15,730
|
(8)
|
|
|
*
|
|
Mark Wagner
|
|
|
54,439
|
(9)
|
|
|
1.1
|
%
|
Directors and executive officers as a group (8 persons)
|
|
|
525,212
|
|
|
|
10.0
|
%
|
|
*
|
Represents ownership of less than 1%
|
|
(1)
|
Shares of common stock beneficially owned and the respective percentages of beneficial ownership of common stock assumes the exercise of all options, warrants and other securities convertible into common stock beneficially owned by such person or entity currently exercisable or exercisable within 60 days of April 24, 2019. Shares issuable pursuant to the exercise of stock options and warrants exercisable within 60 days are deemed outstanding and held by the holder of such options or warrants for computing the percentage of outstanding common stock beneficially owned by such person, but are not deemed outstanding for computing the percentage of outstanding common stock beneficially owned by any other person.
|
|
|
|
|
(2)
|
Based on information contained in Amendment No. 8 to Schedule 13D filed with the SEC on June 27, 2017. Comprised of (i) 804,610 shares of our common stock owned directly by Celgene Corporation, and (ii) 14,286 shares of our common stock issuable to Celgene Corporation upon the exercise of warrants that are currently exercisable. Celgene Corporation is a publicly traded corporation listed on NASDAQ.
|
|
|
|
|
(3)
|
Comprised of (i) 172,591 shares of our common stock owned directly by Mr. Johnson, and (ii) 141,956 shares of our common stock issuable to Mr. Johnson upon the exercise of stock options that are vested.
|
|
|
|
|
(4)
|
Comprised of (i) 27,585 shares of our common stock owned directly by Mr. Barton, and (ii) 45,939 shares of our common stock issuable to Mr. Barton upon the exercise of stock options that are vested.
|
|
|
|
|
(5)
|
Comprised of (i) 20,223 shares of our common stock owned directly by Mr. Pionati, and (ii) 10,002 shares of restricted stock that are vested.
|
|
|
|
|
(6)
|
Comprised of (i) 1,533 shares of our common stock owned directly by Mr. Leone, and (ii) 16,544 shares of our common stock issuable to Mr. Leone upon the exercise of stock options that are vested.
|
|
|
|
|
(7)
|
Comprised of (i) 2,286 shares of our common stock owned directly by Mr. Sklar, (ii) 69 shares of our common stock held in a custodial account for a child, of which Mr. Sklar disclaims beneficial ownership, and (iii) 16,315 shares of our common stock issuable to Mr. Sklar upon the exercise of stock options that are vested.
|
|
|
|
|
(8)
|
Comprised of shares of our common stock issuable to Mr. Restani upon the exercise of stock options that are vested.
|
|
(9)
|
Comprised of (i) 39,430 shares owned directly by Mark Wagner Revocable Trust, and (ii) 15,009 shares of our common stock issuable to Mr. Wagner upon the exercise of stock options that are vested.
|
|
|
|
|
(10)
|
Effective May 7, 2018, Mr. Barton ceased employment as Chief Operating Officer and Mr. Pionati ceased employment as Chief Strategy and Marketing Officer.
|
|
|
|
|
(11)
|
Effective April 1, 2018, Mr. Warusz was appointed as Chief Financial Officer, Secretary and Treasurer. Effective March 18, 2019, Mr. Warusz resigned as Chief Financial Officer, Secretary and Treasurer.
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain Relationships and Related
Party Transactions
In connection with his resignation as our
Chief Financial Officer, on March 15, 2018, we and Brian Posner entered into a general release and severance agreement (the “Separation
Agreement”), which became effective on March 23, 2018. Pursuant to the Separation Agreement, Mr. Posner released the Company
from any and all claims. In consideration of the Separation Agreement and his general release of claims, Mr. Posner is entitled
(i) to his 2017 performance bonus in the amount of $118,310.40 (less applicable taxes and other withholdings), and (ii)
in the event of the final consummation of the Asset Sale Transaction, provided such transaction occurs on or before September 30,
2018 (the “Sale Consummation”): (A) severance pay in an amount equal to his base salary for twelve (12) months, less
applicable taxes and other withholdings, payable in a lump sum payment on or before the thirtieth (30th) day following the date
of the Sale Consummation, and (B) the stock options and restricted stock previously granted to Mr. Posner: (1) shall remain outstanding
and eligible for vesting as if he were employed by the Company through the date of the Sale Consummation and shall become fully
and immediately vested upon the Sale Consummation, and (2) the stock options shall remain exercisable for two (2) years following
April 1, 2018, or, if sooner, until the end of the applicable stock option’s term.
On
April 3, 2017, we completed an underwritten public offering of 947,325 shares of common stock at a public offering price of $4.00
per share (the “Public Offering”), for aggregate gross proceeds of $3.8 million, before deducting underwriting discounts
and offering expenses. The investors in the Public Offering included Messrs. Johnson, Wagner, Leone, Pionati and Barton, each a
member of our board of directors or an executive officer at the time of the transaction, who purchased an aggregate of 46,250 shares
of common stock at $4.00 per share, for an aggregate purchase price of $185,000.
On
February 27, 2017, we closed a private placement of 554,000 shares of common stock at a purchase price of $5.00 per share, for
gross proceeds of $2,770,000. Celgene Corporation,
which beneficially owns more than 5% of our common stock, purchased 400,000
shares of common stock for a purchase price of $2,000,000, and Dr. Zeldis, the chairman of our board of directors at the time of
the transaction, purchased 40,000 shares of common stock for a purchase price of $200,000 in the private placement. Additional
shares of common stock were issuable to Celgene and Dr. Zeldis pursuant to the “most favored nation” provision in the
securities purchase agreement entered into in the private placement (the “Securities Purchase Agreement”), which issuance
was subject to stockholder approval as may be required by the applicable rules and regulations of the NASDAQ Capital Market. Following
the Public Offering, on April 11, 2017, we adjusted the per share purchase price under the Securities Purchase Agreement to equal
the $4.00 per share Public Offering price and issued 29,628 additional shares of common stock to Celgene.
Following approval at the Company’s
2017 annual meeting of shareholders, the Company issued 70,372 additional shares of common stock to Celgene and 10,000 additional
shares of common stock to Dr. Zeldis, in each case, pursuant to the “most favored nation” provision in the Securities
Purchase Agreement
On May 29, 2015, we and each of its subsidiaries
entered into the Credit Agreement with Perceptive Credit Opportunities Fund, LP (“Perceptive”), an affiliate of Perceptive
Advisors, LLC, which beneficially owns more than 5% of our common stock. The Credit Agreement provided a senior secured term loan
in a single borrowing to the Company in the principal amount of $15.5 million. The Credit Agreement (i) has a four-year term, (ii)
accrues interest at an annual rate equal to the greater of (a) one-month LIBOR or 1% plus (b) 9.75%, (iii) is interest only for
the first 24 months, followed by monthly amortization payments of $225,000, with the remaining unpaid balance due on the maturity
date and (iv) is secured by a first priority lien on substantially all of the Company’s assets. The Company is required to
pay an exit fee when the term loan is paid in full equal to the greater of 2% of the outstanding principal balance immediately
prior to the final payment or $200,000, which was amended in conjunction with the extinguishment of debt described below from the
greater of 1% of the outstanding principal balance immediately prior to the final payment or $100,000. The repayment of the term
loan and our obligations under the Credit Agreement are secured by a first priority lien on all of our existing and after acquired
tangible and intangible assets, including intellectual property. On May 7, 2018, we paid approximately $14.8 million, which included
$0.2 million charged by Perceptive as an early termination fee, in full satisfaction of all debt obligations due Perceptive.
In
connection with the entry into the Credit Agreement, a five-year warrant (the “Warrant”) to purchase 75,000 shares
of common stock, par value of $0.001 per share at an exercise price of $55.138 per share (the “Exercise Price”) was
issued to Perceptive. The Company granted Perceptive customary demand and piggy-back registration rights with respect to the shares
of common stock issuable upon exercise of the Warrant. The Warrant contains a weighted average anti-dilution feature whereby the
Exercise Price is subject to reduction if the Company issues shares of common stock (or securities convertible into common stock)
in the future at a price below the current Exercise Price. The Company amended and restated the Warrant on each of October 25,
2016, January 26, 2017, March 7, 2017 and April 6, 2017. In addition, on June 1, 2017, the Company further amended the Warrant.
The amended and restated Warrant, as amended, is exercisable for 210,000 shares of the Company’s common stock at an exercise
price of $4.70. The amended and restated Warrant, as amended, contains a weighted average anti-dilution feature whereby the exercise
price of the amended and restated warrant is subject to reduction if the Company issues shares of common stock (or securities convertible
into common stock) in the future at a price below the current exercise price of such warrant. Perceptive will not have the right
to exercise the warrant to the extent that after giving effect to such exercise, Perceptive would beneficially own in excess of
9.99% of the common stock outstanding immediately after giving effect to such exercise.
Mark Wagner, who is a member of our board
of directors, is a director of Minnetronix, Inc. (“Minnetronix”). On November 17, 2015, we entered into a manufacturing
supply agreement with Minnetronix, pursuant to which Minnetronix agreed to perform manufacturing and other services in exchange
for certain fees and expenses, with such amounts being variable and contingent on various factors. During the years ended December
31, 2018 and 2017, we incurred costs of approximately $260,000 and $430,000, respectively.
Director Independence
Our board of directors
has determined that each of Joseph Leone, Gary Restani, Mark Wagner, and Jeffrey Sklar satisfy the requirements for independence
set out in Section 5605(a)(2) of the Nasdaq Stock Market Rules and that each of these directors has no material relationship with
us (other than being a director and/or stockholder). In making its independence determinations, the board of directors sought to
identify and analyze all of the facts and circumstances relating to any relationship between a director, his immediate family or
affiliates and our company and its affiliates and did not rely on categorical standards other than those contained in the Nasdaq
rule referenced above.
Policies for Review, Approval or Ratification of Transactions
with Related Persons
The board of directors
has adopted a written policy with respect to the review, approval and ratification of related party transactions. The policy generally
defines a related party transaction as any transaction directly or indirectly involving any related party that would need to be
disclosed under Item 404(a) of Regulation S-K, which means any transaction or material amendment or modification to any
such transaction occurring since the beginning of the last fiscal year, or any currently proposed transaction, involving the Company
where the amount involved exceeds $120,000 and in which any related person had or will have a direct or indirect material interest.
A related party includes (i) a director, director nominee or executive officer, (ii) a security holder known to be a beneficial
owner of more than 5% of our common stock and (iii) an immediate family member of any of the foregoing.
The policy requires
our audit committee to review and approve all related party transactions. At each of its meeting, the audit committee will be provided
with details of each new, existing or proposed related party transaction, including terms of the transaction, the business purpose
of the transaction and the benefits to the Company and to the relevant related party. In reviewing and determining whether to approve
a related party transaction, the audit committee is to consider, among other factors (i) whether the terms of the proposed
related party transaction are fair to the Company and on the same basis as would apply if the transaction did not involve a related
party, (ii) whether there are business reasons for the Company to enter into the related party transaction and (iii) whether the
related party transaction would present an improper conflict of interests for any director or executive officer of the Company,
taking into account the size of the transaction, the overall financial position of the director, executive officer or related party,
the direct or indirect nature of such person’s interest in the transaction and the ongoing nature of any proposed relationship,
and any other factors that the audit committee deems relevant.
Upon completion of its
review of the transaction, the audit committee may determine to permit or to prohibit the related party transaction. Under the
terms of the policy, a related party transaction entered into without pre-approval of the audit committee will not violate the
policy or be invalid or unenforceable, so long as the transaction is brought to the audit committee as promptly as reasonably practicable
after it is entered into or after it becomes reasonably apparent that the transaction is covered by the policy.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table presents aggregate
fees for professional services rendered by Marcum LLP for the fiscal years ended December 31, 2018 and 2017.
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Audit fees
|
|
$
|
189,849
|
|
|
$
|
219,081
|
|
Audit-related fees
|
|
|
101,173
|
|
|
|
61,896
|
|
Taxes
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
291,022
|
|
|
$
|
281,077
|
|
Audit Fees
Audit fees for the years ended December
31, 2018 and 2017 consist of the aggregate fees billed by Marcum LLP for the audit of the consolidated financial statements and
internal control over financial reporting included in our Annual Report on Form 10-K and review of interim condensed financial
statements included in the quarterly reports on Form 10-Q for the years ended December 31, 2018 and 2017. Audit fees also include
services related to providing consents to fulfill the accounting firm’s responsibilities under generally accepted accounting
principles.
Audit-Related Fees
Audit-related fees for the year ended December
31, 2018 include services in connection with our acquisition and divesture audit activities.
Tax Fees
Tax fees for the year ended December 31,
2018 consisted of fees for tax consultation services. Marcum LLP did not provide any professional services for tax compliance,
tax advice or tax planning for the year ended December 31, 2018.
Pre-Approval of Independent Registered
Public Accounting Firm Fees and Services Policy
Our audit committee pre-approves all auditing
and permitted non-audit services to be performed for us by our independent auditor, except for de minimis non-audit services that
are approved by the audit committee prior to the completion of the audit. The audit committee may form and delegate authority to
subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted
non-audit services. The audit committee pre-approved all of the fees set forth in the table above.