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Proposal 3: Approval, on and Advisory, Non-Binding Basis, the Compensation of our Named Executive Officers, as Disclosed in this Proxy Statement. |
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Although we presently intend to effect the Reverse Stock Split to regain compliance with The Nasdaq Capital Market’s minimum bid price requirement, under Section 242(c) of the Delaware General Corporation Law, our board of directors has reserved the right, notwithstanding our stockholders’ approval of the proposed amendment to the Amended and Restated Certificate of Incorporation at the Special Meeting, to abandon the proposed amendment at any time (without further action by our stockholders) before the certificate of amendment is filed with the Secretary of State of the State of Delaware. Further, our board of directors may consider a variety of factors in determining the appropriate range within the Split Ratio Range for any such amendment, including overall trends in the stock market, recent changes, and anticipated trends in the per-share market price of our common stock, business developments and our actual and projected financial performance. Again, our board of directors may decide to abandon the proposed amendment of the Amended and Restated Certificate of Incorporation in its entirety, particularly if the closing bid price of our common stock on The Nasdaq Capital Market is then in compliance with Nasdaq’s $1.00 minimum bid price requirement.If our common stock were delisted from The Nasdaq Capital Market, trading of our common stock would thereafter be conducted on the OTC Markets or the “pink sheets.” As a result, an investor may find it more difficult to dispose of, or to obtain accurate quotations as to the price of, our common stock. To relist shares of our common stock on The Nasdaq Capital Market, we would be required to meet the initial listing requirements for The Nasdaq Capital Market, which are more stringent than the maintenance requirements.
If our common stock were delisted from The Nasdaq Capital Market and the price of our common stock were below $5.00 at such time, shares of our common stock would likely come within the definition of “penny stock” as defined in the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and likely would be covered by Rule 15g-9 of the Exchange Act. That rule imposes additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5 million or individuals with net worth in excess of $1 million (not including the value of his or her primary residence) or annual income exceeding $0.2 million or $0.3 million jointly with their spouse). For transactions covered by Rule 15g-9, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. These additional sales practice restrictions would make trading in our common stock more difficult and the market less efficient.
Our board of directors is seeking stockholder approval of the Amendment Proposal in order to have the authority to effectuate the Reverse Stock Split as a potential means of increasing the share price of our common stock at or above $1.00 per share in order to avoid further action by Nasdaq, however, there can be no assurance that the Reverse Stock Split would result in the bid price per share of our common stock exceeding $1.00 or exceeding $1.00 for the required period of time, initially or in the future, or that it would enable us to maintain the listing of our common stock on The Nasdaq Capital Market.
Other Considerations
We also believe that the low per-share market price of our common stock impairs its marketability to, and acceptance by, institutional investors and other members of the investing public and creates a negative impression of the Company. Theoretically, decreasing the number of shares of our common stock outstanding should not, by itself, affect the marketability of the shares, the type of investor who would be interested in acquiring them, or our reputation in the financial community. In practice, however, many investors, brokerage firms, and market makers consider low-priced stocks as unduly speculative in nature and, as a matter of policy, avoid investment and trading in such stocks. Moreover, the analysts at many brokerage firms do not monitor the trading activity or otherwise provide coverage of lower-priced stocks. The presence of these factors may be adversely affecting, and may continue to adversely affect, not only the price of our common stock but also its trading liquidity. In addition, these factors may affect our ability to raise additional capital through the sale of our common stock.
Risks Associated with the Reverse Stock Split
In evaluating whether to seek stockholder approval of the Amendment Proposal, our board of directors considered negative factors associated with reverse stock splits. These factors included, but were not limited to. the negative perception of reverse stock splits that investors, analysts, and other stock market participants may hold; the fact that the stock prices of some companies that have effected reverse stock splits have subsequently declined,
sometimes significantly, following their reverse stock splits; the possible adverse effect on liquidity that a reduced number of outstanding shares could cause; and the costs associated with implementing a reverse stock split.
There can be no assurance that the Reverse Stock Split would achieve any of the above desired results. There also can be no assurance that the price per share of our common stock immediately after the Reverse Stock Split would increase proportionately with the Reverse Stock Split, or that any increase would be sustained for any period of time.
We cannot predict whether the Reverse Stock Split, if completed, will increase the market price for our common stock. The history of similar stock split combinations for companies in like circumstances is varied. There is no assurance that:
•the market price per share would either exceed or remain in excess of the $1.00 minimum bid price per share as required to maintain the listing of our common stock on The Nasdaq Capital Market;
•we would otherwise meet the requirements for continued listing of our common stock on The Nasdaq Capital Market;
•the market price per share of our common stock after the Reverse Stock Split would rise in proportion to the reduction in the number of shares outstanding before the Reverse Stock Split;
•the Reverse Stock Split would result in a per-share price that would attract brokers and investors who do not trade in lower-priced stocks;
•the Reverse Stock Split would result in a per-share price that would increase our ability to attract and retain employees and other service providers; or
•the Reverse Stock Split would promote greater liquidity for our stockholders with respect to their shares.
The market price of our common stock is based on our performance and other factors, some of which are unrelated to the number of shares outstanding. If the Reverse Stock Split is effected and the market price of our common stock declines, the percentage decline as an absolute number and as a percentage of our overall market capitalization may be greater than would occur in the absence of a reverse stock split.
Effect on Number of Authorized, But Unissued Shares
The Reverse Stock Split would reduce the number of outstanding shares of our common stock without reducing the number of shares of available but unissued common stock. Therefore, the number of shares of our common stock that are authorized and unissued will increase relative to the number of issued and outstanding shares of our common stock following the Reverse Stock Split. Our board of directors may authorize the issuance of authorized and unissued shares of our common stock without further stockholder action for a variety of purposes (including our intended capital raising activities discussed below), except as such stockholder approval may be required in particular cases by our Amended and Restated Certificate of Incorporation, applicable law, or the rules of Nasdaq or any stock exchange on which our securities may then be listed. The issuance of additional shares would be dilutive to our existing stockholders and, an issuance, potential issuance, or the perception that issuances may occur may cause a decline in the trading price of our common stock.
Nasdaq Stockholders’ Equity Deficiency and Capital Requirements
On November 22, 2023, we received a letter from the Staff notifying us that we were not in compliance with the minimum stockholders’ equity requirement for continued listing on The Nasdaq Capital Market (the “Notice”) based on the information provided in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023. Nasdaq Listing Rules require that companies listed on The Nasdaq Capital Market with a market value of listed securities of less than $35 million and annual net income of less than $0.5 million maintain stockholders’ equity of at least $2.5 million (the “Stockholders’ Equity Requirement”). In accordance with Section 14ANasdaq rules, we submitted a plan to regain compliance with the Stockholders’ Equity Requirement (the “Compliance Plan”). The Notice has no immediate effect on our continued listing on The Nasdaq Capital Market, subject to our compliance with other continued listing requirements. On January 22, 2024, the Staff granted us an extension until May 20, 2024 to regain compliance with the Stockholders’ Equity Requirement. Per the Staff’s January 22, 2024 letter, we must complete an equity offering to raise gross proceeds of at least $6.0 million and furnish to the Exchange Act,Staff and Nasdaq evidence of
compliance with the Stockholders’ Equity Requirement by filing a publicly available report prior to May 24, 2024. On February 6, 2024 we completed an equity offering to raise gross proceeds of $5.5 million, but the proceeds were insufficient for us to regain and maintain compliance with the Stockholders’ Equity Requirement such that we will likely need to raise substantial additional funds in the near term in order to regain compliance. If we fail to evidence compliance with the Stockholders’ Equity Requirement in our Quarterly Report for the quarter ending June 30, 2024, we may be delisted. There can be no assurance that we will be able to regain compliance.
Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into the second half of 2024. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. The Series T Warrants issued pursuant to that certain Securities Purchase Agreement, dated as of December 13, 2022, by and among the Company, GRI Operations and Altium Growth Fund, LP, are not presently subject to forced exercise by us as the equity conditions for their forced exercise, which include, among other things, a requirement that shares of our common stock have a value weighted average price of at least $64.47 per share for the periods specified in the Series T Warrants, are not met. In an effort to regain compliance with the Stockholders’ Equity Requirement and continue current operations, we intend to raise capital through additional issuances of equity securities and/or short-term or long-term debt arrangements, but there can be no assurances any such financing will be available when needed, even if our research and development efforts are successful. However, if we are askingunable to secure adequate additional funding when needed, we will need to reevaluate our stockholdersoperating plans and may be forced to vote on an advisory, non-binding basis (commonly referred to as “say-on-pay”), to approve the compensation paidmake reductions in spending, extend payment terms with suppliers, liquidate assets where possible, delay, scale back, or eliminate some or all of our development programs, or relinquish rights to our named executive officers as disclosedtechnology on less favorable terms than we would otherwise choose, or cease operations entirely. If we are unable to obtain additional funding to regain or maintain compliance with the Stockholders’ Equity Requirement, we may be delisted from The Nasdaq Capital Market.
These actions could materially impact our business, results of operations, and future prospects and the value of shares of our common stock.
Other Anti-takeover Considerations; Not Intended to Be a “Going Private Transaction”
The issuance of authorized but unissued shares of common stock could also be used to deter a potential takeover of us that may otherwise be beneficial to stockholders by diluting the shares held by a potential suitor or issuing shares to a stockholder that will vote in accordance with our board of directors’ desires. A takeover may be beneficial to independent stockholders because, among other reasons, a potential suitor may offer such stockholders a premium for their shares of stock compared to the “Executive Compensation” section of this Proxy Statement. This votethen-existing market price. The Amendment Proposal is not intended to addressbe an anti-takeover device, and we do not have any specific itemplans or proposals to adopt provisions or enter into agreements that may have material anti-takeover consequences. The Reverse Stock Split is not intended as, and would not have the effect of, compensation, but rathera "going private transaction" covered by Rule 13e-3 under the overall compensationExchange Act. Following the Reverse Stock Split, we would continue to be subject to the periodic reporting requirements of the Exchange Act.
Principal Effects of the Reverse Stock Split on the Market for Our Common Stock
On May 8, 2024, the closing price for our common stock on The Nasdaq Capital Market was $0.3901 per share. By decreasing the number of shares of our named executive officerscommon stock outstanding without altering the aggregate economic interest represented by the shares, we believe the market price would be increased. The greater the market price rises above $1.00 per share, the less risk there would be that we would fail to meet the requirements for maintaining the listing of our common stock on The Nasdaq Capital Market. However, there can be no assurance that the market price of the common stock would rise to or maintain any particular level or that we would at all times be able to meet the requirements for maintaining the listing of our common stock on The Nasdaq Capital Market.
Principal Effects of the Reverse Stock Split on Our Common Stock; No Fractional Shares
If our stockholders approve the Amendment Proposal, and if our board of directors decides to effectuate the philosophy, policies,Reverse Stock Split, the principal effect of the amendment would be to reduce the number of issued and practices describedoutstanding shares of our common stock, depending on the Split Ratio Range set forth in this Proxy Statement.such amendment, from 3,774,488 shares as of the Record Date to between 251,633 shares and 1,887,244 shares. If the Reverse Stock Split is effectuated, the total number of shares of our common stock each stockholder holds would be reclassified automatically into the number of shares of our common stock equal to the number of shares of our common stock
each stockholder held immediately prior to the Reverse Stock Split divided by the ratio approved by our board of directors within the Split Ratio Range and set forth in the applicable amendment.
As noted above, effecting the Reverse Stock Split will not change the total authorized number of shares of our common stock. However, the reduction in the issued and outstanding shares would provide more authorized shares available for future issuance. As noted above, we currently intend to raise additional capital through the issuance of equity securities in the near term. Except as may be contemplated in this offering, we have no specific commitment, arrangement, understanding, or agreement regarding the issuance of common stock subsequent to this proposed increase in the number of authorized shares at this time, and we have not allocated any specific portion of the proposed increase in the authorized number of shares to any particular purpose. Our board of directors does not intend to issue any common stock or securities convertible into common stock except on terms that our board of directors deems to be in the best interests of us and our stockholders.
Our directors and executive officers also have no substantial interests, directly or indirectly, in the matters set forth in the Reverse Stock Split, except to the extent of their ownership in shares of our common stock and securities exercisable for our common stock, which shares and securities would be subject to the same proportionate adjustment in accordance with the terms of the Reverse Stock Split as all other outstanding shares of our common stock and securities exercisable for our common stock.
The Reverse Stock Split would affect all of our stockholders uniformly and would not affect any stockholder’s percentage ownership interests, except to the extent that the Reverse Stock Split results in such stockholder owning a fractional share. No fractional shares will be issued in connection with the Reverse Stock Split. Stockholders who otherwise would be entitled to receive fractional shares because they hold a number of pre-split shares not evenly divisible by the number of pre-split shares for which each post-split share is to be exchanged, will be entitled to a cash payment in lieu thereof at a price equal to the fraction to which the stockholder would otherwise be entitled multiplied by the closing price of the common stock, as reported by Nasdaq, on the last trading day prior to the effective date of the Reverse Stock Split. The proceeds would be subject to certain taxes as discussed below. In addition, stockholders would not be entitled to receive interest for the period of time between the filing of the certificate of amendment to the Amended and Restated Certificate of Incorporation and the date a stockholder receives payment for the cashed-out shares. The payment amount would be paid to the stockholder in the form of a check in accordance with the procedures outlined below.
After the Reverse Stock Split, a stockholder would have no further interest in the Company with respect to such stockholder’s cashed-out fractional shares. A person otherwise entitled to a fractional interest would not have any voting, dividend, or other rights except to receive payment as described above. After the effective time of the Reverse Stock Split, our common stock will have a new Committee on Uniform Securities Identification Procedures (“CUSIP”) number, which is a number used to identify our equity securities, and stock certificates with the older CUSIP numbers will need to be exchanged for stock certificates with the new CUSIP numbers by following the procedures described below.
Principal Effects of the Reverse Stock Split on Convertible Securities
If our stockholders approve the Reverse Stock Split and our board of directors elects to effect the Reverse Stock Split, we would adjust and proportionately decrease the number of shares of our common stock reserved for issuance upon exercise of, and adjust and proportionately increase the exercise price of, all options and warrants and other rights to acquire our common stock.
Principal Effects of the Reverse Stock Split on Legal Ability to Pay Dividends
We have not declared or paid any dividends on our common stock, nor do we have any plans to declare in the foreseeable future any distributions of cash or other property to holders of common stock, and we are not in arrears on any dividends. Therefore, we do not believe that the Reverse Stock Split would have any effect with respect to future distributions, if any, to holders of our common stock.
Accounting Matters
The Reverse Stock Split would not affect the par value of our common stock, which would remain unchanged at $0.0001 per share. As a result, on the effective date of the Reverse Stock Split, the stated capital on our balance sheet attributable to our common stock would be reduced by the ratio approved by our board of directors within the Split Ratio Range. In other words, stated capital would be reduced by the ratio approved by our board of directors within the Split Ratio Range, and the additional paid-in capital account would be credited with the amount by which the stated capital is reduced. The per-share net income or loss and net book value of our common stock would be increased because there would be fewer shares of our common stock outstanding.
Beneficial Holders of Our Common Stock (Stockholders Who Hold in “Street Name”)
Upon the Reverse Stock Split, we intend to treat shares held by stockholders in “street name,” through a broker, in the same manner as registered stockholders whose shares are registered in their names. Brokers would be instructed to effect the Reverse Stock Split for their beneficial holders holding our common stock in “street name.” However, brokers may have different procedures than registered stockholders for processing the Reverse Stock Split and making payment for fractional shares. Stockholders holding shares of our common stock with a broker and having any questions in this regard should contact their broker.
Registered “Book-Entry” Holders of Our Common Stock
If a stockholder holds registered shares in book-entry form with the transfer agent, no action needs to be taken to receive post-Reverse Stock Split shares or cash payment in lieu of any fractional share interest, if applicable. If such a stockholder is entitled to post-Reverse Stock Split shares, a transaction statement would automatically be sent to such stockholder’s address of record indicating the number of shares of our common stock held following the Reverse Stock Split. If the Reverse Stock Split is implemented, our transfer agent will advise stockholders who hold their shares in certificated form of the procedures to be followed to exchange certificates.
If a stockholder is entitled to a payment in lieu of any fractional share interest, a check would be mailed to such stockholder’s registered address as soon as practicable after the effective time of the Reverse Stock Split. By endorsing and cashing the check, stockholders would warrant that they owned the shares of our common stock for which they received a cash payment. The cash payment is subject to applicable federal and state income tax and state abandoned property laws. No stockholders would be entitled to receive interest for the period of time between the effective time of the Reverse Stock Split and the date payment is received.
No Dissenters’ Rights
Under the Delaware General Corporation Law, stockholders are not entitled to dissenters’ rights with respect to the Reverse Stock Split.
Material Federal Income Tax Consequences of the Reverse Stock Split
The following discussion summarizes the material U.S. federal income tax consequences of the proposed Reverse Stock Split to us and to U.S. Holders (as defined below). This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service (the “IRS”) in each case in effect as of the date of this proxy statement. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a U.S. Holder. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below, and there can be no assurance that the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the proposed Reverse Stock Split.
For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our common stock that, for U.S. federal income tax purposes, is or is treated as (i) an individual who is a citizen or resident of the United States; (ii) a corporation (or any other entity or arrangement treated as a corporation) created or organized under the laws of the United States, any state thereof, or the District of Columbia; (iii) an estate, the income of which is subject to U.S. federal income tax regardless of its source; or (iv) a trust if (1) its administration is subject to the primary supervision of a court within the United States and all of its substantial decisions are subject to the control of one or
more “United States persons” (within the meaning of Section 7701(a)(30) of the Code ), or (2) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
This non-binding, advisory proposaldiscussion is limited to U.S. Holders who hold our common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to the particular circumstances of a U.S. Holder, including the impact of the Medicare contribution tax on net investment income. In addition, it does not address consequences relevant to U.S. Holders that are subject to special rules, including, without limitation, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, grantor trusts, tax-exempt organizations, dealers, or traders in securities, commodities, or currencies, stockholders who hold our common stock as part of a position in a straddle or as part of a hedging, conversion, or integrated transaction for U.S. federal income tax purposes, persons whose functional currency is not bindingthe U.S. dollar, persons who acquired their comment stock pursuant to the exercise of employee stock options or otherwise as compensation, or U.S. Holders who actually or constructively own 10% or more of our voting stock.
If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) is the beneficial owner of our common stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the Boardstatus of Directorsthe partner and the activities of the partnership. Accordingly, partnerships (and other entities treated as partnerships for U.S. federal income tax purposes) holding our common stock and the partners in such entities should consult their own tax advisors regarding the U.S. federal income tax consequences of the proposed Reverse Stock Split to them.
In addition, the following discussion does not address the U.S. federal estate and gift tax, alternative minimum tax, or us. Nevertheless,state, local, and non-U.S. tax law consequences of the views expressedproposed Reverse Stock Split. Furthermore, the following discussion does not address any tax consequences of transactions effectuated before, after, or at the same time as the proposed Reverse Stock Split, whether or not they are in connection with the proposed Reverse Stock Split. This discussion should not be considered as tax or investment advice, and the tax consequences of the proposed Reverse Stock Split may not be the same for all stockholders.
Each stockholder should consult his, her or its own tax advisors concerning the particular U.S. federal tax consequences of the proposed Reverse Stock Split, as well as the consequences arising under the laws of any other taxing jurisdiction, including any state, local or foreign tax consequences.
Tax Consequences to the Company. The proposed Reverse Stock Split is intended to be treated as a “recapitalization” pursuant to Section 368(a)(1)(E) of the Code. As a result, we should not recognize taxable income, gain, or loss in connection with the proposed Reverse Stock Split.
Tax Consequences to U.S. Holders. A U.S. Holder generally should not recognize gain or loss upon the proposed Reverse Stock Split for U.S. federal income tax purposes, except with respect to cash received in lieu of a fractional share of our common stock, as discussed below. A U.S. Holder’s aggregate adjusted tax basis in the shares of our common stock received pursuant to the proposed Reverse Stock Split should equal the aggregate adjusted tax basis of the shares of our common stock exchanged therefor (reduced by the stockholders, whether through this voteamount of such basis that is allocated to any fractional share of our common stock). The U.S. Holder’s holding period in the shares of our common stock received pursuant to the proposed Reverse Stock Split should include the holding period in the shares of our common stock exchanged therefor. U.S. Treasury Regulations provide detailed rules for allocating the tax basis and holding period of shares of common stock surrendered in a recapitalization to shares received in the recapitalization. U.S. Holders of shares of our common stock acquired on different dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares.
A U.S. Holder that, pursuant to the proposed Reverse Stock Split, receives cash in lieu of a fractional share of our common stock should recognize capital gain or loss in an amount equal to the difference, if any, between the amount of cash received and the portion of the U.S. Holder’s aggregate adjusted tax basis in the shares of our common stock surrendered that is allocated to such fractional share. Such capital gain or loss will be short-term if the pre-Reverse Stock Split shares were held for one year or less at the effective time of the Reverse Stock Split and long-term if held for more than one year.
A U.S. Holder of our common stock may be subject to information reporting and backup withholding on cash paid in lieu of a fractional share in connection with the proposed Reverse Stock Split. A U.S. Holder of our common
stock will be subject to backup withholding if such U.S. Holder is not otherwise exempt and such U.S. Holder does not provide its taxpayer identification number in the manner required or otherwise are importantfails to managementcomply with applicable backup withholding tax rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or allowed as a credit against a U.S. Holder’s federal income tax liability, if any, provided the required information is timely furnished to the IRS. U.S. Holders of our common stock should consult their own tax advisors regarding their qualification for an exemption from backup withholding and the Boardprocedures for obtaining such an exemption.
The U.S. federal income tax discussion set forth above does not discuss all aspects of DirectorsU.S. federal income taxation that may be relevant to a particular stockholder in light of such stockholder’s circumstances and accordingly,income tax situation. Accordingly, we urge you to consult with your own tax advisor with respect to all of the Boardpotential U.S. federal, state, local, and foreign tax consequences to you of Directors and the compensation committee intend to consider the results of this vote in making determinations in the future regarding named executive officer compensation arrangements.
proposed Reverse Stock Split.
Vote Required
Pursuant to the recent amendments to Delaware General Corporation Law that reduced the stockholder vote threshold required to approve this proposal, for the Amendment Proposal to be approved, the number of votes cast “FOR” the proposal must exceed the number of votes cast “AGAINST” the proposal; provided that our common stock is listed on Nasdaq immediately before the Reverse Stock Split becomes effective and Recommendation of Our Board of Directors
The approval of thismeets the Listing Condition, in which case, abstentions and any broker non-votes with respect to the Amendment Proposal No. 3 requireswill not be considered “votes cast” and will have no effect on the Amendment Proposal. If the Listing Condition is not met, the Amendment Proposal must receive the affirmative vote of the holders of shares having a majority of our issued and outstanding shares of common stock as of the votes castRecord Date and abstentions and any broker non-votes with respect to the Amendment Proposal would have the same effect as a vote against the Amendment Proposal. Brokerage firms will have discretionary authority to vote their customers’ unvoted shares held by the holdersfirms in street name on the Amendment Proposal.
Recommendation of allour Board of Directors
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE “FOR” APPROVAL OF THE AMENDMENT PROPOSAL.
PROPOSAL NO. 2
APPROVAL OF THE ADJOURNMENT OF THE SPECIAL MEETING TO A LATER DATE OR DATES, IF NECESSARY, TO PERMIT FURTHER SOLICITATION AND VOTE OF PROXIES IN THE EVENT THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF THE AMENDMENT PROPOSAL
Background of and Rationale for the Adjournment Proposal
If, at the Special Meeting, the number of shares of our common stock present or represented and voting onin favor of the Amendment Proposal is insufficient to approve such proposal, (meaningthe Chief Executive Officer or the Chairman of our board of directors, in his reasonable discretion, may move to adjourn the Special Meeting in order to enable our board of directors to continue to solicit additional proxies in favor of the Amendment Proposal.
Our board of directors believes that if the number of shares voted FORof our common stock cast at the Special Meeting is insufficient to approve the Amendment Proposal, it is in the best interests of our stockholders to enable our board of directors to continue to seek to obtain a sufficient number of additional votes to approve the Amendment Proposal.
In the Adjournment Proposal, we are asking stockholders to authorize the holder of any proxy solicited by our board of directors to vote in favor of adjourning or postponing the Special Meeting or any adjournment or postponement thereof. If our stockholders approve this Adjournment Proposal, we could adjourn or postpone the Special Meeting, and any adjourned session of the Special Meeting, to use the additional time to solicit additional proxies in favor of the Amendment Proposal.
Vote Required
For this Adjournment Proposal to be approved, the number of votes cast “FOR” the proposal must exceed the number of shares voted AGAINSTvotes cast “AGAINST” the proposal).
Vallon Pharmaceuticals - 2022 Proxy Statement | 8
Our Board of Directors recommends that stockholders vote FOR on Proposal No. 3 to approve, on an advisory, non-binding basis, the compensation of our named executive officers, as disclosed in this Proxy Statement,proposal. Abstentions and adopt the following resolution:
“RESOLVED, that the compensation paidany broker non-votes with respect to the Company’s named executive officers, as disclosed pursuant to the “Executive Compensation” section, set forth in the Company’s definitive Proxy Statement for the Annual Meeting, is hereby APPROVED.”
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Proposal 4: Advisory, Non-Binding Vote on the Frequency of an Advisory Vote on Executive Compensation. |
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Section 14A of the Exchange Act requires that we provide our stockholders with the opportunity to vote, on an advisory, non-binding basis, for their preference as to how frequently to include future advisory votes on the compensation of the Company’s named executive officers. [This is the Company’s first time seeking an advisory vote on frequency of say-on-pay because the Annual Meeting is our first annual meeting of stockholders.] By voting on this proposal, stockholders may indicate whether they would prefer an advisory vote on named executive officer compensation once every one, two, or three years or abstain from voting on this proposal. For the reasons described below, the Board of Directors recommends that its stockholders select a frequency of [every year, or an annual vote].
After careful consideration of this proposal, the Board of Directors has determined that an advisory vote on executive compensation that occurs [every year] is the most appropriate alternative for the Company,Adjournment Proposal will not be considered “votes cast” and therefore the Company’s Board of Directors recommends that you vote for an annual interval for the advisory vote on executive compensation.
In formulating its recommendation, the Board of Directors considered [that an annual advisory vote on executive compensation will allow the Company’s stockholders to provide the Company with their direct input on the Company’s compensation philosophy, policies, and practices as disclosed in the proxy statement every year. Additionally, an annual advisory vote on executive compensation is consistent with the Company’s policy of seeking input from, and engaging in discussions with, its stockholders on corporate governance matters and the Company’s executive compensation philosophy, policies, and practices]. The Company understands that its stockholders may have different views as to what is the best approach for the Company, and the Company looks forward to hearing from its stockholders on this proposal.
You may cast your vote on your preferred voting frequency by choosing the option of once every year, once every two years, once every three years, or abstain from voting when you vote in response to the resolution set forth below.
“RESOLVED, that the option of “ONCE EVERY YEAR,” “ONCE EVERY TWO YEARS” and “ONCE EVERY THREE YEARS” that receives the highest number of votes cast for this resolution will be determined to be the preferred frequency with which Vallon Pharmaceuticals, Inc.. is to hold a stockholder vote to approve the compensation of the named executive officers, as disclosed pursuant to the SEC’s compensation disclosure rules (which disclosure shall include the Compensation Discussion and Analysis, the Summary Compensation Table, and the other related tables and disclosure).”
Vote Required and Recommendation of Our Board of Directors
[The option of “ONCE EVERY YEAR,” “ONCE EVERY TWO YEARS” or “ONCE EVERY THREE YEARS” that receives the highest number of votes cast by stockholders will be the frequency for the advisory vote on executive compensation that has been selected by the Company’s stockholders. Broker non-votes and abstentions will have no effect on the outcome of this proposal.]. However, because thisAdjournment Proposal. Brokerage firms will have discretionary authority to vote is advisory and not bindingtheir customers’ unvoted shares held by the firms in street name on the Board of Directors or us in any way, the Board of Directors may decide that it is in the best interests of the Company’s stockholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option approved by our stockholders.Adjournment Proposal.
Our Board of Directors recommends that stockholders vote for the selection of [“ONCE EVERY YEAR”] on Proposal No. 4 as the frequency with which stockholders are asked to provide an advisory vote on the compensation of the Company’s named executive officers, and adopt the resolution set forth above.
Our Board of Directors does not intend to bring any other matters before the Annual Meeting, nor does it know of any matters which other persons intend to bring before the Annual Meeting. If, however, other matters not mentioned in this Proxy Statement properly come before the Annual Meeting, the persons named in the accompanying form of proxy will vote on such matters in accordance with the recommendationRecommendation of our Board of Directors.Directors
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE “FOR” APPROVAL OF THE ADJOURNMENT PROPOSAL.
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EXECUTIVE OFFICERS AND DIRECTORS |
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The following table sets forth the names and ages of all of our executive officers and directors as of April 20, 2022.
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Name | | Age | | Position |
Executive Officers | | | | |
David Baker | | 58 | | President, Chief Executive Officer and Director
(Principal Executive Officer)
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Leanne Kelly | | 45 | | Chief Financial Officer
(Principal Financial and Accounting Officer)
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| | | | |
Non-Employee Directors | | | | |
Joseph Payne(1)(2)(3)
| | 50 | | Director |
Richard Ammer | | 51 | | Director |
Marella Thorell(1)(2)
| | 54 | | Director |
Meenu Karson(1)
| | 49 | | Director |
| | | | |
Key Consultant | | | | |
Timothy Whitaker, M.D. | | 63 | | Chief Medical Officer |
(1)Member of the audit committee.
(2)Member of the compensation committee.
(3)Member of the nominating and corporate governance committee.
Biographical information regarding our executive officers as of April 20, 2022 is set forth below. Our executive officers are appointed by our Board of Directors.
David Baker has served as our President and Chief Executive Officer since January 15, 2019, and as a member of the board of directors from that time until August 23, 2019, and upon the consummation of the initial public offering (IPO) of our common stock on February 12, 2021, he was again appointed as a director. Prior to being appointed our President and Chief Executive Officer, he served as a consultant to our company since January 15, 2018. He previously served as the Interim Chief Executive Officer and Chief Commercial Officer of Alcobra Ltd. (now known as Arcturus), where he oversaw the development of ADAIR. Prior to joining Alcobra Ltd., he worked at Shire Pharmaceuticals for 10 years, including as Vice President of Commercial Strategy and New Business in the Neuroscience Business Unit. In that role, Mr. Baker led the commercial assessment of neuroscience licensing opportunities, managed commercial efforts on pipeline CNS products, and led the long-term strategic planning process. Previously, he served as Global General Manager for Shire’s Vyvanse® where he led the launch of Vyvanse and led global expansion efforts including successful establishment of a partnership in Japan and launches in Canada and Brazil. Prior to that, Mr. Baker served as Vice President of Marketing for all of Shire’s ADHD products. From 1990 through 2004, Mr. Baker worked at Merck & Co., where he held positions of increasing responsibility in marketing, sales, market research, and business development. In addition to his knowledge and experience with CNS medications, Mr. Baker’s expertise includes therapeutics for osteoporosis, migraine, and hyperlipidemia. He has been directly involved with the marketing of five medications with annual sales in excess of $1 billion each. Mr. Baker graduated Magna Cum Laude with a bachelor’s degree in Economics and Computer Science from Duke University. He earned a Master of Business Administration in Marketing from Duke’s Fuqua School of Business. Mr. Baker also serves on the board of directors of Benchworks, Inc., a private healthcare advertising agency.
We believe Mr. Baker’s extensive experience in the biopharmaceuticals industry and his in-depth understanding of our business, strategy and management team qualifies him to serve on our board of directors.
Leanne Kelly has served as our Chief Financial Officer since May 2021. She brings over 20 years of experience leading private and publicly traded companies across life science, technology and e-Commerce sectors with a foundation in public accounting. Prior to joining Vallon, she most recently served as the Controller and Executive Director, Global Financial Reporting at OptiNose, Inc., a $74 million revenue specialty pharmaceutical company. Over the course of her career, she has held Senior Vice President of Finance, Controller and Chief Financial Officer positions in private and public companies such as Flower Orthopedics, Iroko Pharmaceuticals, LLC, and Genaera Corporation. Ms. Kelly began her career as an auditor with KPMG LLP. While serving in those roles, Ms. Kelly's work included multi-million dollar financings, M&A diligence and support. She also has experience in financial oversight, internal and external financial
Vallon Pharmaceuticals - 2022 Proxy Statement | 10
reporting, forecasting, and financial analysis, as well as investor and public relations. Ms. Kelly received her Bachelor of Science degree in Business Economics with a concentration in Accounting from Lehigh University, and is a licensed CPA (inactive status) in the state of Pennsylvania.
Key Consultant and Employee
Timothy Whitaker, M.D. is a part-time consultant that has served as our Chief Medical Officer since April 2018. He brings over 20 years of experience in the pharmaceutical industry and nearly a decade in academic medicine. His pharmaceutical industry experience involves extensive leadership and management of many global clinical development programs, achieving numerous global regulatory approvals. The majority of this work has been in neuroscience and includes leading the development and approval of multiple ADHD medications. Most recently, Dr. Whitaker served as the Chief Medical Officer at Alder Biopharmaceuticals leading a positive Phase III study in the development of a CGRP antagonist for migraine. Prior to that, Dr. Whitaker worked at Shire for more than 10 years, most recently as VP and Neuroscience Therapeutic Area Head, Global Clinical Development. Prior to Shire, Dr. Whitaker served as a Senior Director — Neuroscience at Wyeth Research with a focus on sleep disorders and life cycle management for Effexor®. Prior to joining industry, Dr. Whitaker held a variety of clinical and teaching positions at the University of Vermont (UVM) College of Medicine and the Medical Center Hospital of Vermont, including Associate Professor of Psychiatry, Director of the Inpatient Services, Executive Committee of the Vermont Regional Sleep Disorders Center, and Director of the Psychopharmacology Clinic. He earned his bachelor’s degree from Duke University, and his medical degree from Wake Forest University School of Medicine. He completed a residency training program in psychiatry and a fellowship in clinical psychopharmacology at UVM/Medical Center Hospital of Vermont in Burlington.
Penny Toren served as our Senior Vice President, Regulatory Affairs, from April 2018 to April 2022. She has over 25 years of Regulatory and Clinical Development experience in the pharmaceutical industry from Glaxo SmithKline, AstraZeneca, Cephalon, and Teva. At Vallon, Ms. Toren headed the Regulatory Affairs & Program Management function, providing regulatory strategies to optimize the most efficient and effective outcomes for Vallon’s drug products as well as ensuring full compliance with FDA and DEA regulations for products in development through post approval. From 2003 until April 2018, Ms. Toren developed the Global Regulatory Policy & Intelligence function for Teva’s Specialty, Generic, & Biosimilar portfolio. In this role, Ms. Toren participated in several FDA, PhRMA, and BIO cross company working groups to address regulatory policy for abuse deterrent products. Prior to that, Ms. Toren led the successful registration of Fentora®, negotiated approval of the first RiskMap for opioids, and was a driver of the initial development of the Fentora® and Actiq® REMS programs. Ms. Toren earned her bachelor’s degree in Chemistry and Biology from Florida Atlantic University, an MS in Biostatistics and Epidemiology from New York Medical College.
As of April 19, 2022, Ms. Toren is no longer employed by the Company.
Biographical information as of April 20, 2022 and the attributes, skills and experience of each director that led our nominating and corporate governance committee and our Board of Directors to determine that such individual should serve as a director are discussed below.
Joseph Payne joined our board of directors in June 2018 in connection with the Amended and Restated Asset Purchase Agreement with Arcturus Therapeutics, Ltd. (Arcturus) and Amiservice Development Ltd., dates as of June 22, 2018, as the designated director nominee of Arcturus pursuant to the terms of the 2018 Voting Agreement, which voting agreement terminated upon the filing of the registration statement in connection with the IPO of our common stock. He also serves on the board of directors of Arcturus since November 2017. Mr. Payne previously served as President and Chief Executive Officer of Arcturus and on its board of directors from March 2013 to February 2018. Prior to joining Arcturus, Mr. Payne served as Senior Manager of Nitto Denko Corporation, a life sciences research company, from June 2009 until February 2013. Mr. Payne’s background includes over 20 years of drug discovery experience at Arcturus, Nitto Denko Corporation, Kalypsys Inc., Merck Research Labs, Bristol-Myers Squibb Co. and DuPont Pharmaceuticals Co. Mr. Payne received a bachelor’s degree in Chemistry, magna cum laude from Brigham Young University, a Master of Science in Synthetic Organic Chemistry from the University of Calgary and an Executive Training Certificate from MIT Sloan School of Management.
We believe Mr. Payne’s extensive experience in the biopharmaceuticals industry and as a chief executive officer of a biopharmaceutical company qualifies him to serve on our board of directors.
Richard Ammer, M.D., Ph.D. joined our board of directors in July 2019 in connection with the July 2019 private placement. Since 2003, Dr. Ammer served as general manager and since 2012 as managing owner of MEDICE Arzneimittel Pütter GmbH & Co. KG (Medice), a family-owned mid-sized pharmaceutical enterprise, where he is responsible for search and development, medical and regulatory affairs, manufacturing, market access and international marketing and distribution. Medice is affiliated with one of our principal stockholders and Dr. Ammer represents such stockholder on the Board of Directors. Since 2008, Dr. Ammer has served as a board member and Vice
Vallon Pharmaceuticals - 2022 Proxy Statement | 11
President of the German Pharmaceutical Association with a focus on research and development. Dr. Ammer graduated with a degree in medicine from Technical University, Munich, and internship at Harvard Medical School, Boston. Dr. Ammer pursued his clinical and scientific education in internal medicine at Massachusetts General Hospital in Boston from 1996 until 2000, the German Heart Center from 2000 until 2001, and the University Hospital in Muenster 2001, where he has been responsible for patients undergoing cardiac and renal care. He also established a nation-wide network of excellence and competence on cardiac arrhythmias, sponsored by the federal ministry of science (BMBF), for which he served as its general manager from 2002 to 2004. His research on atrial fibrillation, for which he obtained his PhD in 2000 from Technical University, Munich, was awarded by the European Society in Cardiology with the Young Investigator Award in Basic Science in 2001. Dr. Ammer also studied business administration and economics at University St. Gallen from 1992 until 1996, and at Harvard Extension School from 1996 until 1998 and obtained a PhD in 2005 from University St. Gallen. Since 2001, Dr. Ammer has also served as lecturer at University St. Gallen, Switzerland.
We believe Dr. Ammer’s extensive experience in the biopharmaceuticals industry and as a chief executive officer of a biopharmaceutical company qualifies him to serve on our board of directors.
Marella Thorell has served as a director and as the chairperson of our audit committee since February 2021. Ms. Thorell has more than 30 years of accomplishments in finance and operations having successfully led multiple M&A, licensing, and fundraising transactions. She has served as the Chief Accounting Officer of Centessa Pharmaceuticals plc (Nasdaq: CNTA) since April 2021 and previously served as Head of Finance somce February 2021. Prior to that, Ms. Thorell was the Chief Financial Officer of Palladio Biosciences from October 2019 to January 2021, leading their finance operations and capital strategy and execution. Before joining Palladio, she served in various capacities at Realm Therapeutics, PLC, (Nasdaq: RLM) from October 2008 until August 2019, including Chief Financial Officer, Chief Operating Officer and Executive Director. In this role, she led accounting and financial reporting operations and helped transition Realm’s focus to drug development following a strategic overhaul. She was also responsible for divesting domestic and international operating businesses and in-licensing and out-licensing assets. Earlier in her career Ms. Thorell worked for Campbell Soup Company (NYSE: CPB) in finance and operational roles of increasing responsibility and at Ernst & Young, LLP where she earned a C.P.A. Ms. Thorell also serves on the Board of Essa Pharm (Nasdaq: EPIX) and on the Board of Living Beyond Breast Cancer (lbbc.org). Ms. Thorell earned a B.S. in Business from Lehigh University, magna cum laude.
We believe Ms. Thorell’s extensive experience and education in finance and accounting in the biopharmaceuticals industry qualifies her to serve on our board of directors.
Meenu Karson has served as a director and as the chairperson of our nominating and corporate governance committee since February 2022. Ms. Karson brings over two decades of experience in various leadership roles in the life sciences and biotechnology industries. Most recently, she served as President and Chief Executive Officer of Proteostasis Therapeutics, Inc. a clinical stage biopharmaceutical company focused on the discovery and development of novel therapeutics to treat cystic fibrosis (CF) from May 2014 until December 2020. She let Proteostasis Therapeutics, Inc. through a successful IPO and raised over $300 million to advance the CF pipeline from discovery to successful completion of Phase 2 studies with three novel CFTR modulators delivered as a proprietary combination enabling the first ever personalized medicine registrational study for CF. She also led the strategic merger of Proreostasis Therapeutics, Inc. with Yumanity Therapeutics, Inc. in December 2020. From 2007 to 2014, Ms. Karson was President and Chief Executive Officer at Allozyne, Inc. Prior to her time at Allozyne, Inc., she served as the Chief Business Officer at BioXell SpA, a spin-off from Roche Pharmaceuticals where she led corporate development and financing activities. Ms. has also held roles of increasing responsibility at Novartis, Fresenius Kabi AG, Warner-Lambert Company, LLC, and Bristol-Myers Squibb Company. Currently, she serves on the board of Vasomune Therapeutics, Inc., a clinical stage biopharmaceutical company focused on the treatment of acute respiratory distress syndrome and is on the Board of Directors for the Biotechnology Innovation Organization (BIO) on its Emerging Companies Section Board. She obtained her M.B.A. from York University and her B.Sc. from the University of Toronto.
Family Relationships
There is no family relationship between any director, executive officer or person nominated to become a director or executive officer.
Board Composition and Diversity
On August 6, 2021, the SEC approved amendments to the Listing Rules of the Nasdaq Stock Market related to board diversity. This New Listing Rule 5605(f) requires smaller reporting companies to have, or explain why it does not have, at least two members of its board of directors who are diverse, as defined under said rule, including at least one director who self-identifies as Female. The second diverse director may include an individual who self-identifies as one or more of the following: Female, LGBTQ+, or an Underrepresented Minority (as defined under Nasdaq Rule 5605(f)(1)).
Currently, two of our Board members self-identified as female, and one of our Board members self-identified as an Underrepresented Minority (Asian). Our nominating and corporate governance committee believes the Board has met the diversity objectives of Nasdaq
Vallon Pharmaceuticals - 2022 Proxy Statement | 12
Listing Rule 5605(f), and the following table includes information on the diversity of our Board based upon information voluntarily provided by each director.
| | | | | | | | | | | | | | | | | | | | | | | |
| Board Diversity Matrix (As of April 20, 2022) |
| Total Number of Directors: 5 | |
| Female | | Male | | Non-Binary | | Did Not Disclose Gender |
| Part I: Gender Identity | | | | | | | |
| Directors | 2 | | 3 | | — | | — |
| Part II: Demographic Background | | | | | | | |
| African American or Black | — | | — | | — | | — |
| Alaskan Native or Native American | — | | — | | — | | — |
| Asian | 1 | | — | | — | | — |
| Hispanic or Latinx | — | | — | | — | | — |
| Native Hawaiian or Pacific Islander | — | | — | | — | | — |
| White | 1 | | 3 | | — | | — |
| Two or More Races of Ethnicities | — | | — | | — | | — |
| LGBTQ+ | — | | — | | — | | — |
| Did Not Disclose Demographic Background | — | | — | | — | | — |
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Stock Ownership of Directors, Officers and Principal Stockholders |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTThe following table sets forth certain information known to us regarding beneficial ownership of our capital stock as of April 14, 2022, as adjusted to reflect the sale of common stock offered by us in this offering,22, 2024 for:
•each person or group of affiliated persons known by us to be the beneficial owner of more than five percent of our capital stock;
•each of our named executive officers;
•each of our directors and our director nominees;directors; and
•all of our executive officers and directors and director nominees as a group.
We have determined beneficial ownership in accordance with the rules and regulations of the SEC,Securities and Exchange Commission (the “SEC”), and the information is not necessarily indicative of beneficial ownership for any other purpose. Under those rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power and includes securities that the individual or entity has the right to acquire, such as through the exercise of stock options, within 60 days of April 20, 2022.22, 2024. Except as noted by footnote, and subject to community property laws where applicable, we believe, based on the information provided to us, that the persons and entities named in the table below have sole voting and investment power with respect to all common stock shown as beneficially owned by them.
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The percentage of beneficial ownership in the table below is based on 6,812,8363,774,488 shares of our common stock deemed to be outstanding as of April 20, 2022.22, 2024.
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| | Common Stock Beneficially Owned |
| | Number of Shares and Nature of Beneficial Ownership | | Percentage of Total Common Stock |
| Name and Address of Beneficial Owner | | |
| Greater than 5% Stockholders | | | | | |
SALMON Pharma GmbH(1) | | 1,523,797 | | 22.4 | % | |
Arcturus Therapeutics, Inc. (fka successor to Arcturus Therapeutics Ltd.)(2) | | 843,750 | | 12.4 | % | |
Tomer Feingold(4)(13) | | 509,781 | | 7.5 | % | |
Dov Malnik(3)(4)(13) | | 509,781 | | 7.5 | % | |
Directors and Named Executive Officers(5) | | | | | |
David Baker(6) | | 141,968 | | 2.0 | % | |
Leanne Kelly(7) | | 23,750 | | * | |
Richard Ammer(8) | | 1,542,126 | | 22.6 | % | |
Joseph Payne(9) | | 883,661 | | | 12.9 | % | |
Marella Thorell(10) | | 10,000 | | * | |
Meenu Karson(11) | | 1,875 | | | — | % | |
All directors and named executive officers as a group (6 persons) | | 2,620,776 | | 37.3 | % | |
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Name and Address of Beneficial Owner(1) | | Number of Shares of Beneficial Ownership | | Percentage of Total Common Stock |
W. Marc Hertz, Ph.D.(2) | | 55,072 | | 1.46% |
Leanne Kelly(3) | | 233 | | * |
David Baker(4) | | 2,477 | | * |
Roelof Rongen(5) | | 1,642 | | * |
Camilla V. Simpson, M.Sc.(5) | | 1,642 | | * |
David Szekeres(5) | | 1,642 | | * |
All directors and executive officers as a group (8 persons)(6) | | 111,904 | | 2.96% |
_____________
*Represents beneficial ownership of less than one percent of our outstanding common stock.
(1)SALMON Pharma GmbH’sExcept as otherwise noted below, the address of the beneficial owner is Sankt-Jakobs-Strasse 90, CH-9002 Basel, Switzerland.c/o GRI Bio, Inc. 2223 Avenida de la Playa, Suite 208, La Jolla, CA 92037.
(2)Arcturus Therapeutics Ltd.’s address is 10628 Science Center Drive, Suite 250, San Diego, California 92121.Consists of 55,072 shares of common stock.
(3)Mr. Malnik has granted Ariel Malnik a power of attorney to vote and dispose of the shares held individually by Mr. Malnik.
(4)On March 3, 2020, the SEC filed an action against Tomer Feingold and Dov Malnik in the U.S. District Court for the Southern District of New York (SEC v. Feingold, et al., Civ. Action No. 20-cv-01881) alleging violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, Section 14(e) of the Securities Exchange Act of 1934, as amended (Exchange Act), and Rule 14e-3 thereunder and requesting other equitable relief. As of November 23, 2021, the action has been settled with regard to Mr. Malnik. Vallon Pharmaceuticals, Inc. is not a named party or identified in this action.
(5)The address for each of our executive officers, directors and director nominees is c/o Vallon Pharmaceuticals, 100 N. 18th Street, Suite 300, Philadelphia, PA 19103.
(6)Consists of (i) 8,84329 shares of common stock and (ii) 133,125204 shares of common stock issuable pursuant to stock options exercisable within 60 days of April 20, 2022.22, 2024.
(7)(4)Consists of (i) 6,25042 shares of common stock and (ii) 17,5002,435 shares of common stock issuable pursuant to stock options exercisable within 60 days of April 20, 2022.22, 2024.
(8)(5)Consists of (i) 1,523,797 shares of common stock held by SALMON Pharma GmbH (“Salmon Pharma”), of which Dr. Ammer is an affiliate and may be deemed to have shared voting and dispositive power over the shares beneficially owned by Salmon Pharma but disclaims such beneficial ownership except to the extent of his pecuniary interest therein, if any, and (ii) 18,3291,642 shares of common stock issuable pursuant to stock options exercisable within 60 days of April 20, 2022.22, 2024.
(9)(6)Consists of 843,750(i) the shares of common stock described in footnotes (4) through (5) above, (ii) 24,598 shares of common stock held by Arcturus, of which Mr. Payne is an affiliateVipin Kumar Chaturvedi, Ph.D. and may be deemed to have shared voting and dispositive power over the shares beneficially owned by Arcturus but disclaims such beneficial ownership except to the extent of his pecuniary interest therein, if any, (ii) 17,500(iii) 24,598 shares of common stock and (iii) 22,411 shares of common stock issuable pursuant to stock options exercisable within 60 days of April 20, 2022.
(10)Includes 10,000 shares of common stock issuable pursuant to stock options exercisable within 60 days of April 20, 2022.
(11)Includes 1,875 shares of common stock issuable pursuant to stock options exercisable within 60 days of April 20, 2022.
(12)On December 30, 2020, we entered into the voting agreement with Dov Malnik and Tomer Feingold, pursuant to which, following the date of effectiveness of our initial registration statement, at every meeting of our stockholders, and at every adjournment or postponement thereof, Messrs. Malnik and Feingold (in their capacity as stockholders) shall have the right to vote all common stock held by them collectively constituting no more than 9.99% of the total number of shares of common stock issued and outstanding as of the record date for voting on the matters presented at such meeting or taking action by written consent. The common stock held or otherwise beneficially owned by Messrs. Malnik and Feingold in excess of the Share Voting Cap (as defined in the voting agreement) shall be voted at every meeting of the stockholders of the Company, and at every adjournment or postponement thereof, and on every action or approval by written consent of the stockholders, in a manner that is proportionate to the manner in which all other holders of the issued and outstanding shares of common stock vote in respect of each matter presented at any such meeting and in respect of each action taken by written consent. See the section entitled “Certain Relationships and Related Party Transactions—2020 Voting Agreement”.Albert Agro, Ph.D.
Delinquent Section 16(a) Reports
Under U.S. securities laws, directors, certain officers and persons holding more than 10% of our common stock must report their initial ownership of our common stock and any changes in their ownership to the SEC. The SEC has designated specific due dates for these reports and we must identify in this Proxy Statement those persons who did not file these reports when due. Based solely on our review of copies of the reports filed with the SEC and the written representations of our directors and executive officers, we believe that all reporting requirements during 2021 were complied with by each person who at any time during 2021 was a director or an executive officer or held more than 10% of our common stock.
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CORPORATE GOVERNANCE AND BOARD MATTERS |
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Under the listing requirements of The Nasdaq Capital Market, independent directors must comprise a majority of a listed company’s board of directors within 12 months from the date of listing. In addition, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees must be independent within twelve months from the date of listing. Audit committee members must also satisfy additional independence criteria, including those set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the Exchange Act), and compensation committee members must also satisfy the independence criteria set forth in Rule 10C-1 under the Exchange Act. A director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3 under the Exchange Act, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors or any other board committee: (1) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries, other than compensation for board service; or (2) be an affiliated person of the listed company or any of its subsidiaries. In order to be considered independent for purposes of Rule 10C-1, the board of directors must consider, for each member of a compensation committee of a listed company, all factors specifically relevant to determining whether a director has a relationship to such company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: the source of compensation of the director, including any consulting advisory or other compensatory fee paid by such company to the director, and whether the director is affiliated with the company or any of its subsidiaries or affiliates.Our Board of Directors has determined that all members of the Board of Directors and our director nominees, except Richard Ammer and David Baker, are independent directors, including for purposes of the rules of The Nasdaq Capital Market and the SEC. In making such independence determination, our Board of Directors considered the relationships that each non-employee director has with us and all other facts and circumstances that our Board of Directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director. The composition and functioning of our Board of Directors and each of our committees comply with all applicable requirements of The Nasdaq Capital Market and the rules and regulations of the SEC.
One of the key functions of our Board of Directors is informed oversight of our risk management process. In particular our Board of Directors is responsible for monitoring and assessing strategic risk exposure. Our executive officers are responsible for the day-to-day management of the material risks we face. Our Board of Directors administers its oversight function directly as a whole. Our Board of Directors also administers its oversight through various standing committees, which address risks inherent in their respective areas of oversight. For example, our audit committee is responsible for overseeing the management of risks associated with financial reporting, accounting and auditing matters; our compensation committee oversees the management of risks associated with our compensation policies and programs; and our nominating and corporate governance committee oversees the management of risks associated with director independence, conflicts of interest, composition and organization of our Board of Directors and director succession planning.
We continue to evaluate and enhance our disclosures and reporting practices relating to environmental, social, and governance (“ESG”) matters, and we encourage you to share your opinions with us on ESG matters. ESG issues are discussed regularly by management and the Board of Directors. The nominating and corporate governance committee reviews the Company’s environmental, safety, sustainability and corporate social responsibility policies, objectives and practices on a periodic basis.
Our Board of Directors held 8 meetings during 2021. Each director attended at least 75% of the total number of meetings of the Board of Directors and committee meetings of which such director was a member during 2021.
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Our Board of Directors established an audit committee, a compensation committee and a nominating and corporate governance committee and may establish other committees to facilitate the management of our business. Members serve on these committees until their resignation or until otherwise determined by our Board of Directors. Our Board of Directors and its committees set meeting schedules throughout the year and can also hold special meetings and act by written consent from time to time, as appropriate.Our Board of Directors expects to delegate various responsibilities and authority to committees as generally described below. The committees regularly report on their activities and actions to the full Board of Directors. Each member of each committee of our Board of Directors qualifies as an independent director in accordance with the listing standards of The Nasdaq Capital Market. Each committee of our Board of Directors has a written charter that was approved by our board of directors.
Copies of each charter are posted on our website at www.vallon-pharma.com under the Investors section. Information contained on our website is not incorporated by reference into this Proxy Statement. We have included our website address in this Proxy Statement solely as an inactive textual reference.
Audit Committee
The members of our audit committee are Meenu Karson, Joseph Payne and Marella Thorell, who is the chair of the audit committee.
Our audit committee assists our Board of Directors with its oversight of the integrity of our financial statements; our compliance with legal and regulatory requirements; the qualifications, independence and performance of the independent registered public accounting firm; the design and implementation of our financial risk assessment and risk management. Among other things, our audit committee is responsible for reviewing and discussing with our management the adequacy and effectiveness of our disclosure controls and procedures. Our audit committee also discusses with our management and independent registered public accounting firm the annual audit plan and scope of audit activities, scope and timing of the annual audit of our financial statements, and the results of the audit, quarterly reviews of our financial statements and, as appropriate, initiates inquiries into certain aspects of our financial affairs.
Our audit committee is responsible for establishing and overseeing procedures for the receipt, retention and treatment of any complaints regarding accounting, internal accounting controls or auditing matters, as well as for the confidential and anonymous submissions by our employees of concerns regarding questionable accounting or auditing matters. In addition, our audit committee has direct responsibility for the appointment, compensation, retention and oversight of the work of our independent registered public accounting firm. Our audit committee has sole authority to approve the hiring and discharging of our independent registered public accounting firm, all audit engagement terms and fees and all permissible non-audit engagements with the independent auditor. Our audit committee reviews and oversees all related person transactions in accordance with our policies and procedures.
Each member of our audit committee is independent under the rules and regulations of the SEC and the listing standards of The Nasdaq Capital Market applicable to audit committee members. Our Board of Directors has determined that Marella Thorell qualifies as an audit committee financial expert within the meaning of SEC regulations and meets the financial sophistication requirements of The Nasdaq Capital Market listing standards. In making this determination, our Board has considered Ms. Thorell’s prior experience, business acumen and independence. Both our independent registered public accounting firm and management periodically meets privately with our audit committee.
We believe that the composition and functioning of our audit committee complies with all applicable requirements of Section 404 of the Sarbanes-Oxley Act of 2002, and all applicable SEC and The Nasdaq Capital Market rules and regulations. We intend to comply with future requirements to the extent they become applicable to us.
Compensation Committee
The members of our compensation committee are Marella Thorell and Joseph Payne, who is the chair of the compensation committee.
Each member of our compensation committee is independent under the rules and regulations of the SEC and the listing standards of The Nasdaq Capital Market applicable to compensation committee members. Our compensation committee assists our Board of Directors with its oversight of the forms and amount of compensation for our executive officers (including officers reporting under Section 16 of the Exchange Act), the administration of our equity and non-equity incentive plans for employees and other service providers and certain other matters related to our compensation programs. Our compensation committee, among other responsibilities, evaluates the performance of our chief executive officer and, in consultation with him, evaluates the performance of our other executive officers (including officers reporting under Section 16 of the Exchange Act).
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Nominating and Corporate Governance CommitteeADDITIONAL INFORMATION
The membersHouseholding of our nominating and corporate governance committee are Joseph Payne and Meenu Karson, who is the chair of the nominating and corporate governance committee.
Each member of our nominating and governance committee is independent under the rules and regulations of the SEC and the listing standards of The Nasdaq Capital Market, applicable to nominating and governance committee members. Our nominating and corporate governance committee assists our Board of Directors with its oversight of and identification of individuals qualified to become members of our Board of Directors, consistent with criteria approved by our Board of Directors, and selects, or recommends that our Board of Directors selects, director nominees; develops and recommends to our Board of Directors a set of corporate governance guidelines; oversees the evaluation of our Board of Directors; and reviews the Company’s environmental, safety, sustainability and corporate social responsibility policies, objectives and practices on a periodic basis.
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Nomination of Director Candidates |
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We receive suggestions for potential director nominees from many sources, including members of our Board of Directors, advisors and stockholders. Any suggested director candidate, together with appropriate biographical information, should be submitted to the Chair of our nominating and corporate governance committee in the manner discussed below. Any candidates submitted by a stockholder or stockholder group are reviewed and considered in the same manner as all other candidates.
Qualifications for consideration as a director nominee may vary according to the particular areas of expertise being sought as a complement to the existing composition of our Board of Directors. However, minimum qualifications include high level leadership experience in business activities, breadth of knowledge about issues affecting our Company, experience on other boards of directors preferably public company boards, and time available for meetings and consultation on Company matters. Our nominating and corporate governance committee does not have a formal policy with regard to the consideration of diversity in identifying director candidates, but seeks a diverse group of candidates who possess the background, skills and expertise to make a significant contribution to our Board of Directors, to our Company and our stockholders. Candidates whose evaluations are favorable are recommended by our nominating and corporate governance committee to the full Board of Directors for consideration. The full Board of Directors selects and recommends candidates for nomination as directors for stockholders to consider and vote upon at our annual meeting of stockholders.
A stockholder wishing to nominate a person for election to our Board of Directors at any annual meeting at which the Board of Directors has determined that one or more directors will be elected must submit a written notice of his or her nomination of a candidate to the Chair of our nominating and corporate governance committee (c/o the Corporate Secretary at Vallon Pharmaceuticals, Inc., 100 N 18th Street, Suite 300, Philadelphia, Pennsylvania 19103), providing:
•all information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in an election contest (even if an election contest is not involved) pursuant to the Exchange Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected);
•a description of all direct and indirect compensation and other material agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such stockholder or beneficial owner or stockholder associated person, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 of Regulation S-K if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant;
•a completed and signed questionnaire regarding the background and qualifications of such person to serve as a director, a copy of which may be obtained upon request to our Corporate Secretary;
•all information with respect to such person that would be required to be set forth in a stockholder’s notice pursuant to our Bylaws if such person were a stockholder or beneficial owner, on whose behalf the nomination was made, submitting a notice providing for the nomination of a person or persons for election as a director or directors in accordance with our Bylaws; and
•such additional information that we may reasonably request to determine the eligibility or qualifications of such person to serve as a director or an independent director of our Company, or that could be material to a reasonable stockholder’s understanding of the qualifications and/or independence, or lack thereof, of such nominee as a director.
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Pursuant to our Bylaws, the submission must be received at our principal executive offices not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that there was no annual meeting in the prior year or the date of the annual meeting is more than 30 days before or more than 70 days after such anniversary date, notice by the stockholder must be so delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Company.
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Stockholder Communication with Directors |
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Persons wishing to write to our Board of Directors, or to a specified director or committee of our Board of Directors, should send correspondence to our Corporate Secretary at Vallon Pharmaceuticals, Inc., 100 N. 18th Street, Suite 300, Philadelphia, PA 19103. Electronic submissions of stockholder correspondence will not be accepted.
Our Corporate Secretary will forward to the directors all communications that, in his judgment, are appropriate for consideration by the directors. Examples of communications that would not be appropriate for consideration by the directors include commercial solicitations and matters not relevant to the stockholders, to the functioning of the Board of Directors or to the affairs of our Company. Any correspondence received that is addressed generically to the Board of Directors will be forwarded to the Chairman of the Board of Directors.
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Compensation Committee Interlocks and Insider Participation |
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No member of our compensation committee has ever been an executive officer or employee of ours. None of our officers currently serves, or has served during the last completed fiscal year, on any other entity's board of directors, compensation committee or other committee serving an equivalent function that has one or more officers serving as a member of our Board of Directors or compensation committee.
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Code of Business Conduct and Ethics |
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We have adopted a written Code of Business Conduct and Ethics (the Code of Conduct) applicable to all of our employees, executive officers and directors. The Code of Conduct covers fundamental ethical and compliance-related principles and practices such as accurate accounting records and financial reporting, avoiding conflicts of interest, the protection and use of our property and information and compliance with legal and regulatory requirements. Our Code of Conduct is available on the "Investors —Corporate Governance" section of our website at www.vallon-pharma.com.
Our nominating and corporate governance committee is responsible for overseeing our Code of Conduct and must approve any waivers of the Code of Conduct for employees, executive officers or directors. We intend to disclose any future amendments to, or waivers from, our Code of Conduct within four business days of the waiver or amendment through a posting on our website.
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Hedging and Pledging Prohibition |
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Under our Insider Trading Policy, our directors, officers and employees (and such individuals’ family members, other members of their household and any person or entity whose transactions in our securities are subject to such individuals’ control or influence) are strictly prohibited from engaging the following transactions at any time: (i) trading in call or put options involving our securities and other derivative securities; (ii) engaging in short sales of our securities; (iii) holding our securities in a margin account or pledge our securities to secure margin or other loans; and (iv) all forms of hedging or monetization transactions, such as zero-cost collars and forward sale contracts. The full text of our Insider Trading Policy is available on the “Investors – Corporate Governance” section of our website at www.vallon-pharma.com.
The audit committee assists our Board of Directors in overseeing and monitoring the Company’s accounting, financial reporting and internal audit processes and the external audit of the Company’s financial statements. The audit committee operates pursuant to a written charter that is available on the "Investors -Corporate Governance" section of our website at www.vallon-pharma.com.
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Our management is responsible for preparing our financial statements and ensuring they are complete and accurate and prepared in accordance with generally accepted accounting principles. EisnerAmper, our independent registered public accounting firm for 2021, was responsible for performing an independent audit of our financial statements and expressing an opinion on the conformity of those financial statements with generally accepted accounting principles. The audit committee is responsible for assisting our Board of Directors in overseeing the conduct of these activities by management and the independent auditor. In fulfilling its oversight responsibilities with respect to our audited financial statements for the year ended December 31, 2021, the audit committee took the following actions:
•reviewed and discussed with management the Company’s audited financial statements for the year ended December 31, 2021;
•discussed with EisnerAmper the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the PCAOB) and the SEC;
•discussed with EisnerAmper their independence, and received from EisnerAmper the written disclosures and the letter required by applicable requirements of the PCAOB regarding EisnerAmper’s communications with the audit committee concerning independence; and
•discussed with EisnerAmper, with and without management present, the scope and results of EisnerAmper’s audit of the Company's financial statements for the year ended December 31, 2021, including a discussion of the quality, not just acceptability, of the accounting principles applied, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.
Based on these reviews and discussions, the audit committee recommended to our Board of Directors that such audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2021 for filing with the SEC. The audit committee also has appointed, subject to stockholder ratification, EisnerAmper as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022.
Respectfully Submitted by the
Members of the Audit Committee
Marella Thorell (Chairperson)
Joseph Payne
Meenu Karson
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RELATED PARTY TRANSACTIONS |
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Related Party Transaction Policy |
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Our written related party transactions policy states that our employees, officers and directors, and any members of the immediate family of and any entity affiliated with any of the foregoing persons are not permitted to enter into a material related party transaction with us without the review and approval of our audit committee. The policy provides that our general counsel, or, if we do not then have a general counsel, our principal executive, financial, or accounting officer (each a Designated Officer), must be notified of any request for us to enter into a transaction with such parties in which the amount involved exceeds $120,000 as well as of the facts and circumstances of the proposed transaction. Should an employee of the Company become aware of a related party transaction, regardless of whether such employee is a party to such transaction, such employee will report the related party transaction to the Designated Officer. The Designated Officer shall report such related party transaction to the audit committee for review. In approving or rejecting any such proposal, our audit committee considers the relevant facts and circumstances available and deemed relevant to the committee, including, but not limited to, (i) whether the transaction was undertaken in the ordinary course of business; (ii) whether the related party transaction was initiated by us, a subsidiary, or the related party; (iii) whether the transaction with the related party is proposed to be, or was, entered into on terms no less favorable to the company than terms that could have been reached with an unrelated third party; (iv) the purpose of, and the potential benefits to us of, the related party transaction; (v) the approximate dollar value of the amount involved in the related party transaction, particularly as it relates to the related party; (vi) the related party’s interest in the related party transaction; (vii) whether the related party transaction would impair the independence of an otherwise independent director; and (viii) any other information regarding the related party transaction or the related party that would be material to investors in light of the circumstances of the particular transaction.
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Certain Relationships and Related Party Transactions |
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The following is a summary of each transaction or series of similar transactions since January 1, 2021, to which we have been a party that:
•The amount involved exceeded or exceeds $120,000 or is greater than 1% of our total assets as of December 31, 2021; and
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•any of our directors or executive officers, any holder of 5% of our capital stock or any member of their immediate family had or will have a direct or indirect material interest.
Medice
Medice, through its affiliated entity, Salmon Pharma, owns approximately 22.4% of our issued and outstanding shares of common stock, and accordingly controls approximately 22.4% of our voting power. On January 6, 2020, we entered into a license agreement with Medice, which grants Medice an exclusive license, with the right to grant sublicenses, to develop, use, manufacture, market and sell ADAIR throughout Europe. Medice currently markets several ADHD products in Europe and is the ADHD market leader in Europe based on branded prescription market share. Medice is responsible for obtaining regulatory approval of ADAIR in the licensed territory. Under the license agreement, Medice paid Vallon a minimal upfront payment and will pay milestone payments of up to $6.3 million in the aggregate upon first obtaining regulatory approval to market and sell ADAIR in any country, territory or region in the licensed territory and upon achieving certain annual net sales thresholds.
Equity Financings
2021 Convertible Note Financing
In January 2021, we entered into a Convertible Promissory Note Purchase Agreement with certain existing stockholders, including Salmon Pharma and David Baker, our Chief Executive Officer, pursuant to which we issued convertible promissory notes (2021 Convertible Notes) for cash proceeds of $350,000. The 2021 Convertible Notes bear an interest rate of 7.0% per annum, non-compounding, and had a maturity date of September 30, 2021. The 2021 Convertible Notes were convertible into shares of our capital stock offered to investors in any subsequent equity financing, or Qualified Financing, after the date of their issuance in which we issued any of our equity securities and were convertible at a 20.0% discount to the price per share offered in such Qualified Financing.
On February 12, 2021, we consummated the IPO of our common stock, which was considered a Qualified Financing. Accordingly, the 2021 Convertible Notes converted into an aggregate of 54,906 shares of our common stock immediately prior to the closing of the IPO at a conversion price of $6.40 per share.
The following table sets forth the principal amounts under the 2021 Convertible Notes, or the Convertible Notes, acquired by 5% holders in the financing transaction described above, and the number of shares of common stock such Convertible Notes converted into in connection with the IPO.
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| Participants | | Principal Amount under the Convertible Notes | | Shares of Common Stock upon Conversion of Convertible Notes |
Greater than 5% Stockholders(1) | | | | |
SALMON Pharma GmbH(2) | | $ | 300,000 | | | 213,936 |
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(1)Additional details regarding these stockholders and their equity holdings are provided in this report under the caption “Principal Stockholders.”
(2)Dr. Ammer is affiliated with Salmon Pharma.
Employment Agreements
We have entered into employment agreements with certain of our executive officers. See the “Executive Compensation” section of this Proxy Statement.
Equity Grants
We have granted stock options to certain of our executive officers and members of our board of directors. See the “Executive Compensation” section of this Proxy Statement.
Indemnification and Limitation on Liability
Section 145 of the Delaware General Corporation Law (DGCL) authorizes a corporation to indemnify its directors and officers against liabilities arising out of actions, suits and proceedings to which they are made or threatened to be made a party by reason of the fact that they have served or are currently serving as a director or officer to a corporation. The indemnity may cover expenses (including attorneys’ fees) judgments, fines and amounts paid in settlement actually and reasonably incurred by the director or officer in connection with any such action, suit or proceeding. Section 145 permits corporations to pay expenses (including attorneys’ fees) incurred by directors and
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officers in advance of the final disposition of such action, suit or proceeding. In addition, Section 145 provides that a corporation has the power to purchase and maintain insurance on behalf of its directors and officers against any liability asserted against them and incurred by them in their capacity as a director or officer, or arising out of their status as such, whether or not the corporation would have the power to indemnify the director or officer against such liability under Section 145.
We have adopted provisions in our amended and restated certificate of incorporation and our amended and restated bylaws that limit or eliminate the personal liability of our directors to the fullest extent permitted by the DGCL, as it now exists or may in the future be amended. Consequently, a director will not be personally liable to us or our stockholders for monetary damages or breach of fiduciary duty as a director, except for liability for:
•any breach of the director’s duty of loyalty to us or our stockholders;
•any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
•any unlawful payments related to dividends or unlawful stock purchases, redemptions or other distributions; or
•any transaction from which the director derived an improper personal benefit.
These limitations of liability do not alter director liability under the federal securities laws and do not affect the availability of equitable remedies such as an injunction or rescission.
In addition, our bylaws provide that:
•we will indemnify our directors, officers and, in the discretion of our board of directors, certain employees to the fullest extent permitted by the DGCL, as it now exists or may in the future be amended; and
•we will advance reasonable expenses, including attorneys’ fees, to our directors and, in the discretion of our board of directors, to our officers and certain employees, in connection with legal proceedings relating to their service for or on behalf of us, subject to limited exceptions.
We have entered into indemnification agreements with each of our directors, and intend to enter into such agreements with our executive officers. These agreements provide that we will indemnify each of our directors, our executive officers and, at times, their affiliates to the fullest extent permitted by Delaware law. We will advance expenses, including attorneys’ fees (but excluding judgments, fines and settlement amounts), to each indemnified director, executive officer or affiliate in connection with any proceeding in which indemnification is available and we will indemnify our directors and officers for any action or proceeding arising out of that person’s services as a director or officer brought on behalf of us or in furtherance of our rights. Additionally, certain of our directors or officers may have certain rights to indemnification, advancement of expenses or insurance provided by their affiliates or other third parties, which indemnification relates to and might apply to the same proceedings arising out of such director’s or officer’s services as a director referenced herein. Nonetheless, we have agreed in the indemnification agreements that our obligations to those same directors or officers are primary and any obligation of such affiliates or other third parties to advance expenses or to provide indemnification for the expenses or liabilities incurred by those directors are secondary.
Our named executive officers for the year ended December 31, 2021 are:
•David Baker, our Chief Executive Officer;
•Leanne Kelly, our Chief Financial Officer; and
•Penny Toren, our former Senior Vice President, Regulatory Affairs & Project Management.
On April 19, 2022, Penny Toren’s position as Senior Vice President, Regulatory Affairs & Project Management was eliminated as part of our effort to streamline our operations and preserve our capital and cash resources.
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Summary Compensation Table
As an emerging growth company, we are required to disclose the compensation earned by or paid to our named executive officers for the last two completed fiscal years.
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| Name and Principal Position | | Year | | Salary ($) | | Option Awards ($)(1) | | Non-Equity Incentive Compensation(2) | | All Other Compensation ($)(3) | | Total ($) |
| David Baker | | 2021 | | 391,553 | | | 259,136 | | | 150,000 | | | 12,000 | | | 812,689 | |
| President and Chief Executive Officer | | 2020 | | 330,000 | | | 122,999 | | | 206,250 | | | 9,900 | | | 669,149 | |
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| Leanne M. Kelly | | 2021 | | 177,604 | | | 259,136 | | | 55,772 | | | 6,347 | | | 498,859 | |
| Chief Financial Officer | | | | | | | | | | | | |
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| Penny S. Toren | | 2021 | | 256,871 | | | 64,784 | | | 30,174 | | | 7,544 | | | 359,373 | |
| Former Senior Vice President, Regulatory Affairs & Program Management | | 2020 | | 235,000 | | | 57,399 | | | 58,750 | | | 7,050 | | | 358,199 | |
(1)Reflects the aggregate grant date fair value of stock options granted during the fiscal year calculated in accordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the executive in connection with the option awards.The assumptions made in valuing the option awards reported in this column are described in our audited financial statements (Note B. Summary of Significant Accounting Policies - [3] Stock-based compensation and Note F, Equity incentive plan) included in our Annual Report.
(2)The amounts in this column represent performance bonuses earned by the named executive officers in the year shown based upon the achievement of pre-established performance objectives. See "— Non-Equity Incentive Plan Compensation" below.
(3)The amounts reflect matching contributions to the named executive officers’ accounts under our SIMPLE IRA plan.
Elements of Compensation
2021 Base Salaries
Effective as of April 1, 2021, Mr. Baker’s annual salary was increased to $400,000. Effective as of March 1, 2021, Ms. Toren’s annual salary was increased to $251,450. Ms. Kelly’s base salary, which was negotiated in connection with her appointment as Chief Financial Officer on May 10, 2021, was set at $275,000.
Non-Equity Incentive Plan Compensation
Each of our named executive officers is eligible to receive an annual performance bonus based on the achievement of corporate and personal objectives as determined by our board of directors or compensation committee. Each executive officer is assigned a target bonus expressed as a percentage of base salary. For 2021, the target bonus opportunities for Mr. Baker, Ms. Kelly (prorated to her May 10, 2021 start date) and Ms. Toren, expressed as a percentage of base salary, were 50%, 35% and 20%, respectively. Actual performance bonus payments depend on the extent to which we achieve pre-established corporate objectives for the year, along with an overall assessment of each officer’s personal performance, as determined by our board of directors or compensation committee. For 2021, the corporate objectives, consisted primarily of: (i) IPO completion; (ii) execution of the SEAL study; (iii) determination of ADMIR ; (iv) execution of key non-clinical studies; and (v) manufacture of ADAIR. In the first quarter of 2022, our compensation committee assessed our level of achievement of these objectives. Based on this assessment, our compensation committee determined that our performance relative to the corporate objectives warranted a payout of 75% of the target bonus opportunity, subject to adjustments for personal performance. Actual bonus amounts paid with respect to 2021 are reflected in the "Non-Equity Incentive Compensation" column of the Summary Compensation Table above.
In addition, pursuant to her employment agreement, Ms. Toren was entitled to receive a one-time performance bonus of $130,000 related to the development and commercialization of ADAIR, which will vest in installments on the following dates: (i) $25,000 on the date the FDA completes its 30-day review period of our Investigational New Drug application for ADAIR , which occurred in July 2018 (ii) $25,000 on the date that we successfully complete the human abuse liability study for ADAIR , (iii) $30,000 on the date that we submit a new drug application (NDA) filing for ADAIR , and (iv) $50,000 on the later of the date when the FDA approves the NDA and the date we engage in exclusive collaboration for commercialization of the product.
Option Awards Granted During 2021
On May 14, 2021, each of Mr. Baker and Ms. Toren was granted a non-qualified stock option to purchase 100,000 and 25,000 shares of our common stock, respectively, with an exercise price of $3.66 per share, which was equal to the closing price of our common stock on
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the date of grant. Subject to the executive's continued employment on each applicable vesting date, 25% of the shares underlying these options vest on May 14, 2022, with the remainder vesting in equal quarterly installments thereafter through May 14, 2025.
Additionally, on May 14, 2021, in conjunction with the commencement of her employment with the Company, Ms. Kelly was granted non-qualified options to purchase 100,000 shares of our common stock, with an exercise price of $3.66 per share, which was equal to the closing price of our common stock on the date of grant. Subject to Ms. Kelly's continued employment on each applicable vesting date, 70,000 shares underlying these options will vest as follows: (i) 17,500 shares on May 14, 2022, and (ii) the remainder vesting in equal quarterly installments thereafter through May 14, 2025. An additional 30,000 shares underlying these options will vest, if at all, following the achievement of certain performance conditions related to regulatory submissions to the FDA for ADAIR, subject to Ms. Kelly’s continued employment.
Qualified Retirement Plan
We offer our employees, including our named executive officers, retirement and certain other benefits, including participation in the tax-qualified SIMPLE IRA retirement plan sponsored by the Company in the same manner as all of our other employees. Pursuant to the SIMPLE IRA program, employees are eligible to contribute to an individual SIMPLE IRA account on a tax-deferred basis. If an employee participates in the SIMPLE IRA plan, we make a matching contribution to the employee’s SIMPLE IRA account in an amount up to 3% of the employee’s base salary (subject to applicable IRS compensation limits). In 2021, Mr. Baker, Ms. Kelly and Ms. Toren contributed to the SIMPLE IRA and received a related matching contribution. Participants are fully vested in both their own contribution and the matching contributions at all times.
We do not maintain any deferred compensation, pension, or profit-sharing plans.
Employment Agreements
We have entered into an employment agreement with each of our named executive officers. The employment agreements provide that the executive will receive a base salary and be eligible to receive an annual cash bonus contingent upon the attainment of certain company milestones and/or individual objectives. Pursuant to the employment agreements, each executive's base salary and target bonus will be reviewed periodically by our compensation committee or board of directors. The employment agreements also provide for certain termination benefits, which are described below in the section entitled "Potential Payments Upon a Termination or Change in Control."
Our named executive officers are also entitled to participate in all of our retirement and group welfare plans available to our senior level executives as a group or our employees generally, subject to the terms and conditions applicable to such plans. Further, each such executive's employment agreement contains restrictive covenants relating to non-disclosure of confidential information, mutual non-disparagement, assignment of inventions, non-competition and non-solicitation provisions.
Potential Payments Upon a Termination or Change in Control
David Baker
Pursuant to his employment agreement with us, if Mr. Baker’s employment were terminated by us without cause or terminated by Mr. Baker for good reason, in either case not in connection with a change in control, then Mr. Baker is entitled to the following severance benefits:
• continued base salary for a period of 12 months, plus a pro-rated bonus for the year of termination, based on actual performance results for the entire year, and provided he was employed for at least six months during that year; and
•subsidized premiums for COBRA continuation coverage for a period of 12 months (or such earlier date that he obtains alternative coverage).
Pursuant to his employment agreement with us, if Mr. Baker’s employment were terminated by us without cause or terminated by Mr. Baker for good reason,in either case withing the one-year period following a change in control, then Mr. Baker would be entitled to the following severance benefits:
•continued base salary for a period of 18 months, plus a lump sum payment equal to 150% of his target bonus, without proration, for the fiscal year of termination;
•subsidized premiums for COBRA continuation coverage for a period of 18 months (or such earlier date that he obtains alternative coverage); and
•accelerated vesting of all outstanding stock-based awards held by the executive as of the date of termination, with any performance awards deemed satisfied at the “target” performance level, and any stock options remaining outstanding for their full term.
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Leanne Kelly
Pursuant to her employment agreement with us, if Ms. Kelly’s employment were terminated by us without cause or terminated by Ms. Kelly for good reason, in either case not in connection with a change in control, then Ms. Kelly would be entitled to the following severance benefits:
•continued base salary for a period of nine months, plus a pro-rated bonus for the year of termination, based on actual performance results for the entire year, and provided she was employed for at least six months during that year; and
•subsidized premiums for COBRA continuation coverage for a period of nine months (or such earlier date that she obtains alternative coverage).
Pursuant to her employment agreement with us, if Ms.Kelly’s employment were terminated by us without cause or terminated by Ms. Kelly for good reason, in ether case within the one-year period following a change in control transaction, then Ms. Kelly would be entitled to the following severance benefits:
•continued base salary for a period of 12 months, plus a lump sum payment equal to 100% of her target bonus, without proration, for the fiscal year of termination;
•subsidized premiums for COBRA continuation coverage for a period of 12 months (or such earlier date that she obtains alternative coverage); and
•accelerated vesting of all outstanding stock-based awards held by the executive as of the date of termination, with any performance awards deemed satisfied at the “target” performance level, and any stock options remaining outstanding for their full term.
Penny Toren
Pursuant to her employment agreement with us, if Ms. Toren’s employment were terminated by us without cause or terminated by Ms. Toren for good reason, then Ms. Toren would be entitled to continued base salary for six months. Ms. Toren’s employment was terminated without cause on April 19, 2022, and she therefore was entitled to receive this severance payment on the terms, and subject to the conditions, of her employment.
Outstanding Equity Awards at Fiscal Year-End
Stock Option Awards
The following table sets forth the outstanding stock option awards as of December 31, 2021, held by our named executive officers, on an award-by-award basis, setting forth the total number of shares underlying each stock option award that are (i) exercisable, but not yet exercised, (ii) unexercisable and not yet exercised, and (iii) total aggregate amount underlying each award.
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| Name | | Number of securities underlying unexercised, but vested stock options (1) | | Number of securities underlying unexercised, but unvested stock options (time based) (1) | | Number of securities underlying unexercised, but unvested stock options (performance based) (1)(2) | | Total securities underlying the stock options | | | Option exercise price | | Option expiration date |
| David Baker | | 46,875 | | | — | | | — | | | 46,875 | | (3) | | $ | 1.84 | | | 10/1/2028 |
| Chief Executive Officer | | 61,250 | | | — | | | — | | | 61,250 | | (3) | | $ | 2.20 | | | 2/5/2029 |
| | — | | | | | 37,500 | | | 37,500 | | | | $ | 4.72 | | | 5/22/2030 |
| | — | | | 100,000 | | | — | | | 100,000 | | (4) | | $ | 3.66 | | | 5/14/2031 |
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| Leanne Kelly | | — | | | 70,000 | | | 30,000 | | | 100,000 | | (5) | | $ | 3.66 | | | 5/14/2031 |
| Chief Financial Officer | | | | | | | | | | | | | |
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| Penny Toren | | 7,813 | | | — | | | 39,062 | | | 46,875 | | (6) | | $ | 1.84 | | | 10/1/2028 |
| Former SVP, Regulatory Affairs and Project Management | | 3,334 | | | 1,666 | | | — | | | 5,000 | | (7) | | $ | 3.82 | | | 10/11/2029 |
| | — | | | | | 17,500 | | | 17,500 | | | | $ | 4.72 | | | 5/22/2030 |
| | — | | | 25,000 | | | — | | | 25,000 | | (4) | | $ | 3.66 | | | 5/14/2031 |
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(1)All stock option awards were granted under our 2018 Equity Incentive Plan.
(2)The stock option award will vest upon satisfaction of certain performance milestones.
(3)The stock option award is fully vested.
(4)The stock options award will vest 25% on the first anniversary of the vesting start date (May 14, 2021) and 6.25% (1/16th of such shares) for each subsequent full quarter that the executive remains employed with us.
(5)70% of the stock option award will vest 25% on the first anniversary of the vesting start date (May 14, 2021) and 6.25% (1/16th of such shares) for each subsequent full quarter that the executive remains employed with us. The remaining 30% of the stock option award will vest upon the satisfaction of certain performance milestones.
(6)The stock option award vests as to one-sixth of the underlying shares of common stock upon the date of grant, then upon satisfaction of certain performance milestones.
(7)The stock option award vests as to one-third of the underlying shares of common stock on each of October 11, 2020, October 11, 2021 and October 11, 2022.
Stock Awards
We have not granted any stock awards to any of our named executive officers.
Director Compensation and Compensation Table
Our director compensation program is designed to enhance our ability to attract and retain highly qualified directors and to align their interests with the long-term interests of our stockholders. The program generally includes a cash component, which is designed to compensate non-employee directors for their service on our Board of Directors and an equity component, which is designed to align the interests of non-employee directors and stockholders. Directors who are employees of the Company receive no additional compensation for their service on our board of directors
The compensation committee annually reviews compensation paid to our non-employee directors and makes recommendations for adjustments, as appropriate, to the full Board of Directors. As part of this annual review, the compensation committee considers the significant time commitment and skill level required by each non-employee director in serving on our Board of Directors and its various committees. The compensation committee seeks to maintain a market competitive director compensation program and benchmarks our director compensation program against those maintained by our peer group.
For 2021, each of our non-employee directors was eligible to receive an annual retainer of $25,000, and the chair of the audit committee was eligible to receive an additional retainer of $10,000. The annual retainer was payable in cash, or at the election of a director, in the form of an equivalent amount of stock options. In addition, each non-employee director serving in 2021 received an initial stock option grant to purchase 15,000 shares, which generally vests in quarterly or monthly installments over two years.
In January 2022, and effective as of July 1, 2022, the Board of Directors, upon recommendation of the compensation committee, increased the annual retainer for each non-employee director to $30,000, increased the annual retainer for the chair of the audit committee to $15,000, and provided an annual retainer for the chair of the compensation committee of $10,000 and for the chair of the nominating and corporate governance committee of $5,000. Going forward, non-employee directors who are first appointed or elected to the Board will receive an initial stock option grant to purchase 15,000 shares, which generally will vest in quarterly installments over two years.A non-employee director who (i) is serving on the Board as of the date of any annual meeting of our stockholders after July 2, 2022 and has been serving as a non-employee director for at least six months as of the date of such meeting, and (ii) will continue to serve as a non-employee director immediately following such meeting, shall be automatically granted an option grant to purchase 7,500 shares on the date of such annual meeting, which generally will vest in quarterly installments over one year. Non-employee directors generally may elect to receive the $30,000 annual retainer in an award of a stock option in lieu of cash.
The following table provides information on compensation paid to our non-employee directors in 2021:
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| Name | | Fees Earned
or Paid in
Cash (US$) | | Option Awards ($)(1)(8) | | Total |
| Richard Ammer | | $ | — | | | $ | 62,607 | | (2)(3) | $ | 62,607 | |
| Ofir Levi | | — | | | 111,964 | | (4)(5) | 111,964 | |
| Joseph Payne | | — | | | 72,609 | | (2)(6) | 72,609 | |
| Marella Thorell | | 30,973 | | | 80,235 | | (7) | 111,208 | |
_________________(1)Reflects the aggregate grant date fair value of stock options granted during the fiscal year calculated in accordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the executive in connection with the option awards.The assumptions made in valuing the option
Vallon Pharmaceuticals - 2022 Proxy Statement | 25
awards reported in this column are described in our audited financial statements (Note B. Summary of Significant Accounting Policies - [3] Stock-based compensation and Note F, Equity incentive plan) included in our Annual Report.
(2)Options to purchase 15,000 shares of common stock were granted on May 14, 2021 and vest monthly over a 24-month period.
(3)Options to purchase 10,204 shares of common stock were granted on May 14, 2021 of which 25% vested immediately and an additional 25% vested on each of June 30, 2021, September 30, 2021 and December 31, 2021.
(4)Options to purchase 30,000 shares of common stock were granted on May 14, 2021 which vest monthly over a 24-month period. An additional 15,000 options to purchase common stock were granted on May 14, 2021 of which 25% vested immediately and an additional 25% vested on each of June 30, 2021, September 30, 2021 and December 31, 2021.
(5)Dr. Levi resigned from the Company’s Board of Directors on March 28, 2022.
(6)Options to purchase 14,286 were granted on May 14, 2021 of which 25% vested immediately and an additional 25% vested on each of June 30, 2021, September 30, 2021 and December 31, 2021.
(7)Ms. Thorell joined our board of directors effective February 12, 2021 and was granted 15,000 options which vest monthly over a period of 24 months.
(8)The following table shows the aggregate number of outstanding shares of common stock underlying outstanding options held by our non-employee directors as of December 31, 2021:
| | | | | | | | |
Name | | Outstanding Option Awards |
Richard Ammer | | 25,204 |
Ofir Levi | | 45,000 |
Joseph Payne | | 29,286 |
Marella Thorell | | 15,000 |
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EQUITY COMPENSATION PLAN INFORMATION |
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The following table sets forth information regarding our equity compensation plans as of December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| | 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 (excluding securities reflected in column (a)) |
| Plan category | | (a) | | (b) | | (c) |
| Equity compensation plans approved by security holders | | 690,365 | | (1) | $3.57 | | — | | (2) |
| Equity compensation plans not approved by security holders | | 18,125 | | (3) | $4.72 | | — | | |
| Total | | 708,490 | | | $3.60 | | — | | |
_____________
(1)Represents shares of common stock issuable upon exercise of 620,365 outstanding stock options under our 2018 Equity Incentive Plan (2018 Plan) and includes 70,000 outstanding stock options whereby we may pay in cash (in lieu of issuing underlying shares) an amount equal to (i) the market price of the underlying common stock on the date of exercise minus (ii) the exercise price if the authorized option pool is depleted when exercised. Our 2018 Plan has been approved by our stockholders.
(2)The number of shares of our common stock authorized under the 2018 Plan automatically increases on January 1st of each year until the expiration of the 2018 Plan, in an amount equal to four percent of the total number of shares of our common stock outstanding on December 31st of the preceding calendar year, subject to the discretion of our Board of Directors or compensation committee to determine a lesser number of shares shall be added for such year.
(3)Represents shares of common stock issuable upon the exercise of 18,125 outstanding options issued outside of our 2018 Plan.
Vallon Pharmaceuticals - 2022 Proxy Statement | 26
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
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Fees Paid to Independent Registered Accounting Firm |
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Our independent registered public accounting firm is EisnerAmper LLP, Iselin, New Jersey, Auditor Firm ID: 274.
The following table represents aggregate fees incurred for EisnerAmper services during the years ended December 31, 2021 and 2020 by us.
| | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 |
Audit Fees (1) | $ | 180,760 | | | $ | 171,984 | |
Audit Related Fees (2) | — | | | — | |
Tax Fees (3) | — | | | — | |
All Other Fees (4) | — | | | — | |
| Total | $ | 180,760 | | | $ | 171,984 | |
(1)Audit Fees represent the aggregate fees billed for professional services rendered by our independent registered public accounting firm for the audit of our annual financial statements, review of financial statements included in our quarterly reports or services that are normally provided in connection with statutory and regulatory filings or engagements for those fiscal years as well as the issuance of consents in connection with registration statement filings with the SEC and comfort letters in connection with securities offerings.
(2)Audit Related Fees represent the aggregate fees billed for assurance and related professional services rendered by our independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported under "Audit Fees" .
(3)Tax Fees represent the aggregate fees billed for professional services rendered by our independent registered public accounting firm for tax compliance, tax advice and tax planning services.
(4)All Other Fees represent the aggregate fees billed for all other products and services rendered by our independent registered public accounting firm other than the services reported in the other categories
The audit committee will approve in advance the engagement and fees of the independent registered public accounting firm for all audit services and non-audit services, based upon independence, qualifications and, if applicable, performance. The audit committee may form and delegate to subcommittees of one or more members of the audit committee the authority to grant pre-approvals for audit and permitted non-audit services, up to specific amounts. All audit services provided by EisnerAmper for the periods presented were ratified by our board of directors.
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Pre-Approval Policies and Procedures |
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Our audit committee has established a policy that requires it, or the chair of our audit committee pursuant to delegated authority, to pre-approve all services provided by our independent registered public accounting firm and the fees for such services. Our audit committee considers, among other things, the possible effect of the performance of such services on the firm's independence. The prior approval of our audit committee, or the chair of our audit committee pursuant to delegated authority, was obtained for all services provided by EisnerAmper in 2021 and 2020 and the fees for such services.
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DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS |
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MaterialsWe have adopted a procedure, approved by the SEC, called “householding”.“householding.” Under this procedure, stockholders of record who have the same address and last name will receive only one copy of our Notice of Internet Availability of Proxy Materials or,proxy materials, if requested, our proxy statement and Annual Report unless we are notified that one or more of these stockholders wishes to continue receiving individual copies. This procedure will reduce our printing costs and postage fees.
If you are eligible for householding, but you and other stockholders of record with whom you share an address currently receive multiple copies of our Notice of Internet Availability of Proxy Materials, or, if requested, our proxy statement and Annual Report,materials, or if you hold our stock in more than one account, and in either case you wish to receive only a single copy of each of these documents for your household, please contact our Corporate Secretary by mail at c/o Vallon Pharmaceuticals,GRI Bio, Inc., 100 N. 18th Street,2223 Avenida de la Playa, Suite 300, Philadelphia, PA 19103208, La Jolla, CA 92037, Attention. Corporate Secretary or by phone at (267) 607-8255.(619) 400-1170. If you participate in householding and wish to receive a separate copy of our Notice of Internet Availability of Proxy Materials or, if requested, this Proxy Statement and our Annual Report,proxy statement or if you do not wish to continue to participate in householding and prefer to receive separate copies of these documents in the future, please contact our Corporate Secretary as indicated above.
Vallon Pharmaceuticals - 2022 Proxy Statement | 27
our proxy materials to you.
If you are the beneficial owner of shares held in street name through a broker, bank, or other intermediary, please contact your broker, bank, or intermediary directly if you have questions, require additional copies of our Notice of Internet Availability of Proxy Materials, this Proxy Statement or our Annual Reportproxy materials, or wish to receive a single copy of such materials in the future for all beneficial owners of shares of our common stock sharing an address.
Stockholder Proposals and Nominations
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AVAILABILITY OF ANNUAL REPORT ON FORM 10-K |
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Because we have elected to use the “Notice and Access” method of providing proxy materials to you via the Internet, and have mailed to you a Notice of Internet Availability of Proxy Materials directing you to where you can find these proxy materials on the Internet, this Proxy Statement and our Annual Report for the year ended December 31, 2021 have not been mailed to you.
A copy of our 2021 Annual Report to Stockholders (consisting of our Annual Report on Form 10-K for the year ended December 31, 2021 but excluding the exhibits to such Annual Report) will be mailed, without charge, to stockholders entitled to notice of and to vote at the Annual Meeting, to the extent requested by such stockholders. Requests for a copy of our 2021 Annual Report to Stockholders should be mailed to Vallon Pharmaceuticals, Inc., 100 N. 18th Street, Suite 300, Philadelphia, PA 19103, Attention: Corporate Secretary. We will provide copies of the exhibits to the Form 10-K upon request by eligible stockholders, provided that we may impose a reasonable fee for providing such exhibits, which is limited to our reasonable expenses. Requests for copies of such exhibits should be mailed to Vallon Pharmaceuticals, Inc., 100 N. 18th Street, Suite 300, Philadelphia, PA 19103, Attention: Corporate Secretary.
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STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS |
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If you wish to submit a proposal toTo be considered for inclusion in next year'sthe proxy materialsstatement relating to our 2024 Annual Meeting of Stockholders, the written notice for nominations of persons for election to our board of directors or nominate a director, yourthe proposal of business other than nominations must be in proper form accordingdelivered to SEC Regulation 14A, Rule 14a-8 and received bythe Corporate Secretary at the address of our Corporate Secretaryprincipal executive offices no later than December 26, 2022. the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the previous year’s annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days, or delayed by more than 70 days, from the anniversary date of the preceding year’s annual meeting, or if no annual meeting was held in the preceding year, notice must be received no earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of (A) the 90th day prior to such annual meeting or (B) the 10th day following the day on which the public announcement of the date of such meeting is first made. In addition to satisfying the foregoing advance notice requirements, to comply with the universal proxy rules under the Exchange Act, stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must follow the requirements set forth in our bylaws, Rule 14a-19 as promulgated under the Exchange Act, or as otherwise permitted by law.
Proposals that are not received after that datein a timely manner or in accordance with applicable law will not be included invoted on at the proxy materials we send out in connection with our 20232024 Annual Meeting of Stockholders. If a proposal is received before that date,on time, the proxies that management solicits for the meeting may still exercise discretionary voting authority on the proposal under circumstances consistent with the proxy rules of the SEC. All stockholder proposals should be marked for the attention of Corporate Secretary, GRI Bio, Inc., 2223 Avenida de La Playa Suite 208, La Jolla, CA 92037.
Other Matters
We know of no other matters that will be presented for consideration at our Special Meeting. If any other matters properly come before our Special Meeting upon which a vote properly may be taken, shares represented by all proxies received by us on the proxy card will be voted with respect thereto as permitted and in accordance with the judgment of the proxy holders.
Stockholder Communication with Directors
Generally, stockholders who have questions or concerns should contact our Investor & Media Relations team as indicated on the “Investors” section of on our website. However, persons wishing to write to our board of directors, or to a specified director or committee of our board of directors, should send correspondence to our Corporate
Secretary at GRI Bio, Inc., 2223 Avenida de la Playa, Suite 208, La Jolla, CA 92037. Electronic submissions of stockholder correspondence will not be accepted.
Communications will be distributed to our board of directors, or to any individual director or directors as appropriate, depending on the facts and circumstances outlined in the communications. Items that are unrelated to the duties and responsibilities of our board of directors may be excluded, such as:
•junk mail and mass mailings;
•resumes and other forms of job inquiries;
•surveys; and
•solicitations or advertisements.
In addition, any material that is unduly hostile, threatening, or illegal in nature may be excluded, in which case it will be made available to any outside director upon request.
APPENDIX A
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
The corporation organized and existing under the General Corporation Law of the State of Delaware, hereby certified that:
FIRST. The name of the corporation is GRI Bio, Inc. (the “Corporation”).
SECOND. The Amended and Restated Certificate of Incorporation of the Corporation, as amended to date, is hereby further amended by striking Section 4.1 of Article IV in its entirety and by substituting in lieu of the following:
“Section 4.1 Authorized Stock. The total number of shares which the Corporation shall have authority to issue is 260,000,000 shares, of which (a) 250,000,000 shall be designated as Common Stock, $0.0001 par value per share (the “Common Stock”) and (b) 10,000,000 shall be designated Preferred Stock, $0.0001 par value per share (the “Preferred Stock”).
Effective at [●] on [●], 2024 (the “Reverse Stock Split Effective Time”), a one-for-[●] reverse stock split of the Corporation’s Common Stock shall become effective, pursuant to which each [●] shares of Common Stock outstanding and held of record by each stockholder of the Corporation (including treasury shares) immediately prior to the Reverse Stock Split Effective Time shall be reclassified and combined into one (1) validly issued, fully paid and nonassessable share of Common Stock automatically and without any action by the holder thereof upon the Reverse Stock Split Effective Time and shall represent one share of Common Stock from and after the Reverse Stock Split Effective Time (such reclassification and combination of shares, the “Reverse Stock Split”). No fractional shares of Common Stock shall be issued as a result of the Reverse Stock Split and, in lieu thereof, upon surrender after the Reverse Stock Split Effective Time of a certificate which formerly represented shares of Common Stock that were issued and outstanding immediately prior to the Reverse Stock Split Effective Time, any person who would otherwise be entitled to a fractional share of Common Stock as a result of the Reverse Stock Split, following the Reverse Stock Split Effective Time, shall be entitled to receive a cash payment equal to the fraction of a share of Common Stock to which such holder would otherwise be entitled multiplied by the fair value per share of the Common Stock immediately prior to the Reverse Stock Split Effective Time as determined by the Board of Directors of the Corporation.
Each stock certificate that, immediately prior to the Reverse Stock Split Effective Time, represented shares of Common Stock that were issued and outstanding immediately prior to the Reverse Stock Split Effective Time shall, from and after the Reverse Stock Split Effective Time, automatically and without the necessity of presenting the same for exchange, represent that number of whole shares of Common Stock after the Reverse Stock Split Effective Time into which the shares formerly represented by such certificate have been reclassified (as well as the right to receive cash in lieu of fractional shares of Common Stock after the Reverse Stock Split Effective Time); provided, however, that each person of record holding a certificate that represented shares of Common Stock that were issued and outstanding immediately prior to the Reverse Stock Split Effective Time shall receive, upon surrender of such certificate, a new certificate evidencing and representing the number of whole shares of Common Stock after the Reverse Stock Split Effective Time into which the shares of Common Stock formerly represented by such certificate shall have been reclassified.”
THIRD. The amendment of the Amended and Restated Certificate of Incorporation herein certified has been duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
GRI BIO, INC.
By:
Name: W. Marc Hertz, Ph.D.
Title: President and Chief Executive Officer
APPENDIX B
PROXY CARD
In accordance with Rule 14a-19 promulgated under the Exchange Act, a stockholder intending to engage in a director election contest with respect to the 2023 Annual Meeting of stockholders must give the company notice of its intent to solicit proxies by providing the names of its nominees and certain other information at least 60 calendar days before the anniversary date of the 2022 Annual Meeting. This deadline is April 10, 2023
In addition, our Bylaws establish an advance notice procedure for nominations for election to our Board of Directors and other matters that stockholders wish to present for action at an annual meeting other than those to be included in our proxy statement. To be timely, stockholder notice of a nomination or a proposal must be delivered to or mailed and received by the Corporate Secretary at our principal offices not later than the close of business on March 11, 2023 and no earlier than the close of business on February 9, 2023; provided, however, that in the event that the date of the 2023 Annual Meeting of Stockholders is held more than 30 days before or more than 70 days after the anniversary date of the 2022 Annual Meeting of Stockholders, notice by the stockholder to be timely must be delivered not earlier than the close of business on the 120th day prior to the 2023 Annual Meeting of Stockholders and not later than the close of business on the later of the 90th day prior to the 2023 Annual Meeting of Stockholders or the 10th day following the day on which public announcement of the date of such meeting is first made by us. All nominations and stockholder proposals should be sent to the attention of our Corporate Secretary, c/o Vallon Pharmaceuticals, Inc., 100 N. 18th Street, Suite 300, Philadelphia, PA 19103. The notice of nomination or proposal also must comply with the content requirements for such notices set forth in our Bylaws.
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Vallon Pharmaceuticals - 2022 Proxy Statement | 28Appendix B-2
