UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN
PROXY
STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant To Section 14(a) of the
Securities
Exchange Act of 1934
Filed
by the Registrant [X]
Filed
by a Party other than the Registrant [ ]
Check
the appropriate box:
[ ]
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Preliminary
Proxy Statement
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[ ]
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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[X]
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Definitive
Proxy Statement
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[ ]
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Definitive
Additional Materials
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[ ]
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Soliciting
Material Pursuant to § 240.14a-12
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Ritter
Pharmaceuticals, Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the Appropriate Box):
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[X]
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No
fee required.
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[ ]
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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[ ]
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Fee
paid previously with preliminary materials.
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[ ]
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Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date
of its filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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May
15, 2018
Dear
Stockholder:
You
are cordially invited to attend the 2018 Annual Meeting of Stockholders of Ritter Pharmaceuticals, Inc. (“Ritter”
or the “Company”) on Tuesday, June 26, 2018, at 9:00 A.M. Pacific Time (PT) at the offices of Reed Smith LLP,
1901 Avenue of the Stars, Suite 700, Los Angeles, CA 90067-6078.
The
attached proxy statement describes the business to be conducted at the 2018 Annual Meeting of Stockholders (the “Annual
Meeting”).
We
hope you can join us at the Annual Meeting. As a stockholder, your participation in the affairs of Ritter is important, regardless
of the number of shares you hold. Therefore, whether or not you are able to personally attend, please vote your shares as soon
as possible by following the instructions provided in the Notice of Internet Availability, or if you hold your shares through
a bank, broker or other financial intermediary, by following the instructions provided by the financial intermediary. If you decide
to attend the Annual Meeting, you will be able to vote in person even if you have previously voted.
Our
Notice of 2018 Annual Meeting of Stockholders, proxy statement for the Annual Meeting, and 2017 Annual Report on Form 10-K are
available at
www.proxyvote.com
. We hope you find them informative reading.
On
behalf of the board of directors, we would like to express our appreciation for your continued interest in the affairs of Ritter
Pharmaceuticals, Inc.
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Sincerely
yours,
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Michael
D. Step
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Chief
Executive Officer
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Ira
E. Ritter
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Executive
Chairman of the Board of Directors
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1880
Century Park East, #1000, Los Angeles, CA 90067
TEL:
(310) 203-1000
http://
www.ritterpharmaceuticals.com
RITTER
PHARMACEUTICALS, INC.
NOTICE
OF 2018 ANNUAL MEETING OF STOCKHOLDERS (THE “ANNUAL MEETING”)
TIME
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9:00
A.M. Pacific Time (PT) on Tuesday, June 26, 2018
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PLACE
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Reed
Smith LLP
1901 Avenue of the Stars, Suite 700
Los Angeles, CA 90067-6078
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ITEMS
OF BUSINESS
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1.
To elect as directors the seven nominees identified in the proxy statement.
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2.
To ratify the appointment of Mayer Hoffman McCann P.C. as our independent registered public accounting firm for the fiscal
year ending December 31, 2018.
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RECORD
DATE
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You
are entitled to vote at the Annual Meeting and any adjournment thereof if you were a stockholder at the close of business
on May 7, 2018.
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ANNUAL
REPORT
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Our
2017 Annual Report on Form 10-K is a part of our proxy materials being made available to you.
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We
are utilizing a U.S. Securities and Exchange Commission Rule that allows companies to furnish their proxy materials over the Internet
rather than in paper form. We believe that this delivery process will reduce our environmental impact and over time lower the
costs of printing and distributing our proxy materials. We believe that we can achieve these benefits with no impact on our stockholders’
timely access to this important information. If you have received a Notice of Internet Availability and you would prefer to receive
proxy materials (including a proxy card) in printed form by mail or electronically by email, please follow the instructions contained
in the Notice of Internet Availability.
Whether
or not you plan to attend the Annual Meeting, please vote your shares as soon as possible by telephone, via the Internet or by
completing, dating, signing and returning a proxy card (as instructed in the Notice of Internet Availability) to ensure your shares
are voted, or, if you hold your shares in street name, by following the instructions provided by your bank, broker or other financial
intermediary. Submitting your proxy now will not prevent you from voting your shares at the Annual Meeting if you desire to do
so, as your proxy is revocable at your option.
By
Order of the Board of Directors
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Andrew
J. Ritter
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Corporate
Secretary
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May
15, 2018
PROXY
STATEMENT
QUESTIONS
AND ANSWERS ABOUT THESE PROXY MATERIALS AND THE 2018 ANNUAL MEETING OF STOCKHOLDERS
Q:
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When
and where is the 2018 Annual Meeting of Stockholders?
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A:
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The
2018 Annual Meeting of Stockholders (the “Annual Meeting”) will be held on Tuesday, June 26, 2018, at 9:00
A.M. Pacific Time (PT) at the offices of Reed Smith LLP, 1901 Avenue of the Stars, Suite 700, Los Angeles, CA 90067-6078.
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Directions
to the Annual Meeting may be found at
https://www.reedsmith.com/Los-Angeles-United-States-of-America/?section=directions.
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Q:
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Why
is the Company providing these proxy materials?
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A:
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The
board of directors of Ritter Pharmaceuticals, Inc. (“Ritter,” the “Company,” “we,” “our,”
or “us,” as the context requires) is soliciting proxies on behalf of the Company to be voted at the Annual Meeting.
When we ask for your proxy, we must provide you with a proxy statement and other proxy materials that contain certain information
specified by law and other information.
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Q:
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What
proxy materials are being made available to stockholders?
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A:
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The
proxy materials consist of: (1) the Notice of 2018 Annual Meeting of Stockholders; (2) this proxy statement; and (3) Ritter’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (the “2017 Annual Report’).
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If
you request printed versions of the proxy materials by mail, these proxy materials will also include the proxy card or voting
instruction form for the Annual Meeting.
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Q:
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Why
did I receive a Notice in the mail regarding the Internet availability of proxy materials instead of a full set paper copy
of the proxy materials?
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A:
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We
are utilizing a U.S. Securities and Exchange Commission (“SEC”) rule that allows companies to furnish their proxy
materials over the Internet rather than in paper form. This rule allows a company to send some or all of its stockholders
a Notice regarding Internet availability of proxy materials (“Notice”). Instructions on how to access the proxy
materials over the Internet may be found in the Notice. If you have received a Notice and you would prefer to receive the
proxy materials in printed form by mail or electronically by email, please follow the instructions contained in the Notice.
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The
SEC rules that allow us to furnish our proxy materials over the Internet rather than in paper form do not require us to do
so for all stockholders. We may choose to send certain stockholders the Notice, while sending other stockholders a full set
paper copy of our proxy materials.
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Q:
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When
were the proxy materials first sent or made available to stockholders?
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A:
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The
Notice was first mailed to stockholders on or about May 15, 2018. Once the Notice is received, stockholders have the option
of (1) accessing the proxy materials, including instructions on how to vote, online or by phone; or (2) requesting that the
proxy materials be sent to the stockholder in printed form by mail or electronically by email. Opting to receive your proxy
materials online will save the Company the cost of producing and mailing documents to your home or business, and will also
give you an electronic link to the proxy voting site.
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Q:
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How
can I access the proxy materials over the Internet?
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A:
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The
Notice contains instructions on how to view the proxy materials on the Internet, vote your shares on the Internet and obtain
printed or electronic copies of the proxy materials. An electronic copy of the proxy materials is available at
www.proxyvote.com
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Q:
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What
proposals will be voted on at the Annual Meeting?
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A:
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There
are two matters on which a vote is scheduled at the Annual Meeting:
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The
election as directors of the seven nominees identified in this proxy statement (Proposal 1); and
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The
ratification of the appointment of Mayer Hoffman McCann P.C. as Ritter’s independent registered public accounting firm
for the fiscal year ending December 31, 2018 (Proposal 2).
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We
will also consider and vote upon any other business properly brought before the Annual Meeting.
Q:
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What
are the board of directors’ voting recommendations?
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A:
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The
board of directors recommends that you vote your shares:
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FOR
the election of each of the seven nominees named herein to the board of directors (Proposal 1); and
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FOR
the ratification of the appointment of Mayer Hoffman McCann P.C. as Ritter’s independent registered public accounting
firm for the fiscal year ending December 31, 2018 (Proposal 2).
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Q:
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What
shares may I vote?
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A:
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You
may vote all shares of common stock, par value $0.001 per share, of the Company that you owned as of the close
of business on May 7, 2018 (the “Record Date”). These shares include:
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1.
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those
held directly in your name as the
stockholder of record;
and
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2.
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those
held for you as the
beneficial owner
through a bank, broker or other financial intermediary at the close of business
on the Record Date.
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Each
share of common stock is entitled to one vote. On the Record Date, there were approximately 5,019,638 shares of
our common stock issued and outstanding.
Q:
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What
is the difference between holding shares as a stockholder of record and as a beneficial owner?
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A:
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Most
stockholders hold their shares through a bank, broker or other financial intermediary rather than directly in their own name.
As summarized below, there are some distinctions between shares held of record and shares held beneficially.
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Stockholder
of Record
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If
your shares are registered directly in your name with Ritter’s transfer agent, Corporate Stock Transfer, Inc. (the “Transfer
Agent”), you are considered, with respect to those shares, the stockholder of record. As the stockholder of record,
you have the right to grant your proxy directly to Ritter or to vote your shares in person at the Annual Meeting.
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Beneficial
Owner
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If
you hold shares in a stock brokerage account or through a bank, broker or other financial intermediary, you are considered
the
beneficial owner
of shares held
in street name
. Your bank, broker or other financial intermediary is considered,
with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your bank,
broker or other financial intermediary on how to vote your shares, but because you are not the stockholder of record, you
may not vote these shares in person at the Annual Meeting unless you obtain a signed proxy from the record holder giving you
the right to vote the shares. As a beneficial owner, you are, however, welcome to attend the Annual Meeting.
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Q:
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May
I attend the Annual Meeting in person?
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A:
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You
are invited to attend the Annual Meeting in person and we encourage all stockholders of Ritter to attend the Annual Meeting
in person.
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All
stockholders attending the Annual Meeting will be asked to present a form of photo identification, such as a driver’s
license, in order to be admitted to the Annual Meeting. No cameras, computers, recording equipment, other similar electronic
devices, signs, placards, briefcases, backpacks, large bags or packages will be permitted in the Annual Meeting. The use of
mobile phones, tablets, laptops and similar electronic devices during the Annual Meeting is prohibited, and such devices must
be turned off and put away before entering the meeting room. By attending the Annual Meeting, stockholders agree to abide
by the agenda and procedures for the Annual Meeting, copies of which will be distributed to attendees at the meeting.
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Q:
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How
can I vote my shares in person at the Annual Meeting?
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A:
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You
may vote shares you hold directly in your name as the stockholder of record in person by written ballot at the Annual Meeting.
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If
you are the
beneficial owner
of shares held
in street name
, you may vote your shares in person at the Annual
Meeting only if you have obtained a signed proxy from your bank, broker or other financial intermediary (
i.e.
, the
stockholder of record) giving you the right to vote the shares.
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Even
if you plan to attend the Annual Meeting, we recommend that you also submit your proxy as described in the Notice so that
your vote will be counted if you later decide not to attend the Annual Meeting. Submitting your proxy now will not prevent
you from voting your shares in person by written ballot at the Annual Meeting if you desire to do so, as your proxy is revocable
at your option.
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Q:
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How
can I vote my shares without attending the Annual Meeting?
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A:
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If
you hold your shares directly, you may vote by granting a proxy by one of the following methods:
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On
the Internet
—You may vote online at
www.proxyvote.com
by following the instructions provided in the Notice.
Voting on the Internet has the same effect as voting by mail. If you vote on the Internet, you do not need to return a proxy
card. Internet voting will be available until 11:59 P.M. Eastern Time (ET) on June 25, 2018.
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By
Telephone
—You may vote by telephone by dialing (800) 690-6903. Voting by telephone has the same effect as voting
by mail. If you vote by telephone, you do not need to return a proxy card. Telephone voting will be available until 11:59
p.m. Eastern Time (ET) on June 25, 2018.
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By
Mail
—The Notice includes instructions on how to request the proxy materials (including a proxy card) in printed
form by mail or electronically by email. Once you receive a paper proxy card, you may vote your shares by signing and dating
each proxy card that you receive and returning it in the prepaid envelope by June 22, 2018. Sign your name exactly
as it appears on the proxy card. If you are signing in a representative capacity (for example, as an attorney-in-fact, executor,
administrator, guardian, trustee or the officer or agent of a corporation or partnership), please indicate your name and your
title or capacity. If the stock is held in custody for a minor (for example, under the Uniform Transfers to Minors Act), the
custodian should sign, not the minor. If the stock is held in joint ownership, one owner may sign on behalf of all owners.
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If
you are the beneficial owner of shares held in street name, you may instruct your bank, broker or other financial intermediary
to vote your shares by following the instructions provided by your bank, broker or other financial intermediary. Most intermediaries
offer voting by mail, by telephone and on the Internet.
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Q:
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May
I change or revoke my vote?
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A:
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Yes,
you may change or revoke your proxy instructions at any time prior to the vote at the Annual Meeting.
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If
you hold your shares directly, you must (a) file with the Transfer Agent a written notice of revocation or (b) timely deliver
a valid, later-dated proxy by telephone, on the Internet, or by mail, or vote your shares in person at the Annual Meeting.
Your attendance at the Annual Meeting will not by itself revoke your previously granted proxy unless you give written notice
of revocation to the Transfer Agent before the Annual Meeting or you vote by written ballot at the Annual Meeting. Any proxy
submitted by a stockholder of record may be revoked at any time prior to its exercise at the Annual Meeting.
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For
shares you own beneficially, you may change your vote by submitting new voting instructions to your bank, broker or other
financial intermediary. If you voted on the Internet or by telephone, you may change your vote by following the instructions
for voting by either method until 11:59 p.m. Eastern Time (ET) on June 25, 2018.
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Q:
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How
are votes counted?
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A:
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In
the election of directors, you may vote “FOR ALL NOMINEES,” “WITHHOLD AUTHORITY FOR ALL NOMINEES,”
or “FOR ALL EXCEPT” one or more of the nominees. Votes that are withheld will not be included in the vote tally
for the election of directors (Proposal 1) and will not affect the results of that vote.
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On
the proposal to ratify the appointment of our independent registered public accounting firm, you may vote “FOR”,
“AGAINST” or “ABSTAIN.” For abstentions, see “What happens if I abstain from voting?”
below.
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If
you specify a voting choice, the shares will be voted in accordance with that choice. If you vote your shares, but do not
indicate your voting preferences, the persons named as proxies by our board of directors, Michael D. Step and Andrew J. Ritter
(the “Named Proxies”), will vote your shares in accordance with the recommendations of the board of directors.
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If
you are a beneficial owner and you have not provided voting instructions to your bank, broker or other financial intermediary,
such firm may exercise discretion to vote your shares only with respect to the ratification of our independent registered
public accounting firm (Proposal 2). Your broker does not have discretionary authority to vote your shares in the election
of directors (Proposal 1), resulting in a “broker-non-vote” with respect to this matter. See “What is a
broker non-vote?” below for more information.
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Q:
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What
is the quorum requirement for the Annual Meeting?
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A:
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The
quorum requirement for holding the Annual Meeting and transacting business is a majority of the outstanding shares of common
stock. The shares may be present in person or represented by proxy at the Annual Meeting. Abstentions and “broker
non-votes” (described below) will be counted as present and entitled to vote for purposes of determining a quorum.
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Q:
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What
is the voting requirement to approve each of the proposals?
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A:
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In
the election of directors (Proposal 1), the seven nominees for director who receive the highest number of votes “FOR”
their election will be elected as directors. This is called a plurality vote.
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Approval
of the ratification of our independent registered public accounting firm (Proposal 2) will require the affirmative vote of
a majority of votes cast on such proposal by the shares present in person or represented by proxy at the Annual Meeting and
entitled to vote thereon.
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In
each case, a quorum must be present at the Annual Meeting for a valid vote.
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Q:
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What
happens if I abstain from voting?
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A:
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If
you submit a proxy and explicitly abstain from voting on any proposal, the shares represented by the proxy will be considered
present at the Annual Meeting for the purpose of determining a quorum. Abstentions will not be counted as votes cast and therefore
they will have no effect on the outcome of either proposal.
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Q:
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What
is a “broker non-vote”?
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A:
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A
“broker non-vote” occurs when a broker submits a proxy that does not indicate a vote for one or more of the proposals
because the broker has not received instructions from the beneficial owner on how to vote on such proposals and does not have
discretionary authority to vote in the absence of instructions. Brokers have discretionary authority to vote on matters that
are deemed “routine,” such as the ratification of our independent registered public accounting firm (Proposal
2). Brokers do not have discretionary authority to vote on matters that are deemed “non-routine,” such as the
election of directors (Proposal 1). Broker non-votes will be counted for the purposes of determining whether a quorum exists
at the Annual Meeting, but because they are not votes that are cast, they will have no effect on the outcome of Proposal 1.
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Q:
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Will
I have dissenters’ rights?
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A:
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No
dissenters’ rights are available under the General Corporation Law of the State of Delaware, our certificate of incorporation,
or our bylaws to any stockholder with respect to any of the matters proposed to be voted on at the Annual Meeting.
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Q:
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What
does it mean if I receive more than one Notice, proxy or voting instruction card?
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A:
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It
means your shares are registered differently or are held in more than one account. To ensure that all of your shares are voted,
please vote as instructed in each Notice or sign and return each proxy card (if you have requested and received paper copies
of this proxy statement and a proxy card). If you vote by telephone or on the Internet, you will need to vote once for each
Notice, proxy card or voting instruction card you receive.
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Q:
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Where
can I find the voting results of the Annual Meeting?
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A:
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We
will announce preliminary voting results at the Annual Meeting and publish final results in a Current Report on Form 8-K following
the Annual Meeting.
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Additional
Q&A information regarding the Annual Meeting and stockholder proposals may be found on page 35.
OWNERSHIP
OF THE COMPANY
Security
Ownership Of Certain Beneficial Owners And Management
The
following table sets forth certain information regarding the beneficial ownership of our common stock as of May 7, 2018 by:
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our
named executive officers;
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each
of our directors;
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all
of our current directors and executive officers as a group; and
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each
stockholder known by us to own beneficially more than five percent of our common stock.
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Beneficial
ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities.
Shares of common stock that may be acquired by an individual or group within 60 days of May 7, 2018, pursuant to the exercise
of options or warrants are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or
group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in
the table. The percentage of beneficial ownership of our common stock is calculated based on an aggregate of 5,019,638 shares
outstanding as of May 7, 2018.
The
shares of common stock reflected in the table and footnotes below have been adjusted to account for the 1-for-10 reverse stock
split that was effected on March 23, 2018 (the “Reverse Stock Split”).
Except
as indicated in the footnotes to this table, we believe that the stockholders named in this table have sole voting and
investment power with respect to all shares of common stock shown to be beneficially owned by them, based on information provided
to us by such stockholders. Unless otherwise indicated, the address for each director and executive officer listed is: c/o Ritter
Pharmaceuticals, Inc., 1880 Century Park East, #1000, Los Angeles, California 90067.
Beneficial Owner
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Number of Shares
Beneficially Owned
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Percentage of
Common Stock
Beneficially Owned
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Five Percent Stockholders
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Javelin Entities
(1)
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777,653
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15.4
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%
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Aleyska Investment Group L.P.
(2)
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499,937
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10.0
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%
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Aspire Capital Fund LLC
(3)
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490,000
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9.8
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%
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Baker Bros. Funds (4)
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280,000
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5.6
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%
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Executive Officers, Directors and Director Nominees
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Michael D. Step
(5)
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107,298
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2.1
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%
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Andrew J. Ritter
(6)
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179,213
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3.5
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%
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Ira E. Ritter
(7)
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179,213
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3.5
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%
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Noah J. Doyle
(1)(8)
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781,176
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15.4
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%
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Matthew W. Foehr
(9)
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5,983
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*
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Paul V. Maier
(10)
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2,420
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*
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Gerald T. Proehl
(11)
|
|
|
7,420
|
|
|
|
*
|
|
Dr. William M. Merino
(12)
|
|
|
1,889
|
|
|
|
*
|
|
All current executive officers and directors as a group
(8 persons)
(13)
|
|
|
1,145,388
|
|
|
|
21.6
|
%
|
*
Represents beneficial ownership of less than 1% of the shares of common stock.
(1)
According to a Schedule 13D/A filed with the SEC on November 28, 2017 by Javelin Venture Partners, L.P. (“Javelin”),
Javelin Venture Partners I SPV I, LLC (“Javelin SPV”), Javelin Venture Partners GP, L.P. (“Javelin GP, LP”),
Javelin Venture Partners GP, LLC (“Javelin GP, LLC”), Noah J. Doyle and Jed Katz (collectively, the “Javelin
Entities”), in which the reporting persons reported shared voting and dispositive power with respect to 777,653 shares as
of October 3, 2017. According to the Schedule 13D/A, this number consists of (i) 704,780 shares of common stock held directly
by Javelin and 8,322 shares of common stock that Javelin has the right to acquire upon exercise of warrants to purchase common
stock that are currently exercisable and (ii) 32,275 shares of common stock held directly by Javelin SPV and 32,275 shares of
common stock that Javelin SPV has the right to acquire upon exercise of warrants to purchase common stock that are
currently exercisable. Javelin GP, LP serves as the general partner for Javelin and Javelin SPV. Javelin GP, LLC serves as the
general partner of Javelin GP, LP, and Noah Doyle and Jed Katz serve as the managers of Javelin GP, LLC. As a result of the application
of the beneficial ownership limitation described in this footnote, this number does not include 500,000 shares of common stock
issuable upon exercise of warrants to purchase common stock owned by Javelin. Under the terms of these warrants, Javelin is not
permitted to exercise such warrants to purchase common stock to the extent that such exercise would result in Javelin (and its
affiliates) beneficially owning more than 4.99% of the number of shares of our common stock outstanding immediately after giving
effect to the issuance of shares of common stock issuable upon exercise of such warrants to purchase common stock. This limitation
is referred to in this footnote as the “beneficial ownership limitation”. Javelin has the right to increase the beneficial
ownership limitation in its discretion on 61 days’ prior written notice to us, provided that in no event is Javelin permitted
to exercise such warrants to purchase common stock to the extent that such exercise would result in Javelin (and its affiliates)
beneficially owning in the aggregate more than 19.99% of the number of shares of our common stock outstanding or the combined
voting power of our securities outstanding immediately after giving effect to the issuance of shares of common stock issuable
upon exercise of such warrants. The address of the Javelin Entities is One Rincon Center, 101 Spear Street, Suite 255, San Francisco,
California 94105. As a Manager of Javelin GP, LLC, Noah Doyle may be deemed the beneficial owner of these shares. Mr. Doyle expressly
disclaims beneficial ownership over these shares except to the extent of his pecuniary interest therein.
(2)
According to a Schedule 13G/A filed with the SEC on February 14, 2018 by Aleyska Investment Group, L.P., Alyeska Fund GP, LLC
and Anand Parekh, in which the reporting persons reported shared voting and dispositive power with respect to 499,937 shares as
of December 31, 2017. As a result of the application of the beneficial ownership limitation described in this footnote, this number
does not include 425,000 shares of common stock issuable upon the exercise of warrants to purchase common stock owned by Aleyska
Investment Group L.P. (“Aleyska”). Under the terms of the warrants to purchase common stock, Aleyska is not permitted
to exercise such warrants to the extent that such exercise would result in Aleyska (and its affiliates) beneficially owning more
than 4.99% of the number of shares of our common stock outstanding immediately after giving effect to the issuance of shares of
common stock issuable upon exercise of such warrants. This limitation is referred to in this footnote as the “beneficial
ownership limitation”. Aleyska has the right to increase the beneficial ownership limitation in its discretion on 61 days’
prior written notice to us, provided that in no event is Aleyska permitted to exercise such warrants to purchase common stock
to the extent that such exercise would result in Aleyska (and its affiliates) beneficially owning in the aggregate more than 19.99%
of the number of shares of our common stock outstanding or the combined voting power of our securities outstanding immediately
after giving effect to the issuance of shares of common stock issuable upon exercise of such warrants to purchase common stock.
The address of Aleyska is 77 West Wacker Drive, 7th Floor, Chicago, Illinois 60601.
(3)
As a result of the application of the beneficial ownership limitation described in this footnote, this number does not include
(i) 750,000 shares of common stock issuable upon the exercise of warrants to purchase common stock owned by Aspire Capital Fund,
LLC (“Aspire”) or (ii) 260,000 shares of common stock issuable upon the conversion of 1,040 shares of the Series A
Convertible Preferred Stock, par value $0.001 per share, of the Company (“Series A Preferred Stock”) owned
by Aspire. Under the terms of the warrants to purchase common stock and the Series A Preferred Stock issued to Aspire,
Aspire is not permitted to exercise such warrants or convert the Series A Preferred Stock into common stock to the
extent that such exercise or conversion would result in Aspire (and its affiliates) beneficially owning more than 4.99% of the
number of shares of our common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable
upon exercise of such warrants or conversion of the Series A Preferred Stock. This limitation on the exercise of such
warrants and conversion of the Series A Preferred Stock into common stock is referred to in this footnote as the “beneficial
ownership limitation”. Aspire has the right to increase the beneficial ownership limitation in its discretion on 61 days’
prior written notice to us, provided that in no event is Aspire permitted to exercise such warrants to purchase common stock or
convert its shares of Series A Preferred Stock into common stock to the extent that such exercise or conversion would
result in Aspire (and its affiliates) beneficially owning in the aggregate more than 19.99% of the number of shares of our common
stock outstanding or the combined voting power of our securities outstanding immediately after giving effect to the issuance of
shares of common stock issuable upon exercise of such warrants or conversion of such shares of Series A Preferred
Stock. The address for Aspire is 155 N. Wacker Drive, Suite 1600, Chicago, IL 60606.
(4)
According to a Schedule 13G filed with the SEC on February 13, 2018 by Baker Bros. Advisors LP, Baker Bros. Advisors (GP) LLC,
Felix J. Baker, and Julian C. Baker, in which the reporting persons reported sole voting and dispositive power with respect to
280,000 shares as of December 31, 2017. According to the Schedule 13G, this number consists of (i) 26,490 shares of our common
stock owned by 667, L.P. and (ii) 253,509 shares of our common stock owned by Baker Brothers Life Sciences, L.P. (collectively,
the “Baker Bros. Funds”). As a result of the application of the beneficial ownership limitation described in this
footnote, this number does not include the following: (a) 123,829 shares of common stock issuable upon exercise of warrants to
purchase common stock owned by 667, L.P. and 1,126,171 shares of common stock issuable upon exercise of warrants to purchase common
stock owned by Baker Brothers Life Sciences, L.P. and (b) 100,000 shares of common stock issuable upon conversion of 400 shares
of the Series A Preferred Stock owned by 667, L.P. and 910,000 shares of common stock issuable upon conversion of
3,640 shares of the Series A Preferred Stock owned by Baker Brothers Life Sciences, L.P. The information in this footnote
is provided to us by Baker Bros. Advisors LP. Baker Bros. Advisors LP serves as the investment advisor to the Baker Bros. Funds.
Baker Bros. Advisors (GP) LLC is the sole general partner of Baker Bros. Advisors LP. Julian C. Baker and Felix J. Baker are principals
of Baker Bros. Advisors (GP) LLC. Baker Bros. Advisors LP has complete and unlimited discretion and authority with respect to
the investment and voting power of the securities held by the Baker Bros. Funds. Julian C. Baker, Felix J. Baker, Baker Bros.
Advisors LP and Baker Bros. Advisors (GP) LLC expressly disclaim beneficial ownership of all shares held by the Baker Bros. Funds,
except to the extent of their indirect pecuniary interest therein. Under the terms of the warrants to purchase common stock and
the Series A Preferred Stock issued to the Baker Bros. Funds, the funds are not permitted to exercise such warrants
or convert its shares of Series A Preferred Stock into common stock to the extent that such exercise or conversion
would result in the Baker Bros. Funds (and their affiliates) beneficially owning more than 4.99% of the number of shares of our
common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon exercise of such
warrants or conversion of such Series A Preferred Stock. This limitation on the exercise of the warrants and conversion
of the Series A Preferred Stock to purchase common stock issued to the Baker Bros. Funds is referred to in this footnote
as the “beneficial ownership limitation.” The Baker Bros. Funds have the right to increase the Beneficial Ownership
Limitation in their discretion on 61 days’ prior written notice to us, provided that in no event are the Baker Bros. Funds
permitted to exercise such warrants to purchase common stock or convert such Series A Preferred Stock to the extent
that such exercise or conversion would result in the Baker Bros. Funds (and their affiliates) beneficially owning in the aggregate
more than 19.99% of the number of shares of our common stock outstanding or the combined voting power of our securities outstanding
immediately after giving effect to the issuance of shares of common stock issuable upon exercise of such warrants or conversion
of such shares of Series A Preferred Stock. The address for the Baker Bros. Funds is 860 Washington Street, 3rd Floor,
New York, NY 10014.
(5)
Includes 102,298 shares underlying stock option awards held by Mr. Step that are currently exercisable or exercisable within 60
days of May 7, 2018. The number of shares issuable upon exercise of options includes 1,499 shares subject to options that are
currently exercisable, but are not subject to vesting within 60 days of May 7, 2018 and accordingly, if exercised, are subject
to a repurchase right until vested.
(6)
Includes 625 shares owned directly, 59,360 shares underlying stock option awards that are currently exercisable or exercisable
within 60 days of May 7, 2018 and 119,227 shares beneficially owned by Stonehenge Partners LLC (“Stonehenge”), including
18,750 shares that are issuable upon the exercise of warrants to purchase common stock that are currently exercisable. Under the
terms of the warrants to purchase common stock, Stonehenge is not permitted to exercise such warrants to the extent that such
exercise would result in Stonehenge (and its affiliates) beneficially owning more than 4.99% of the number of shares of our common
stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon exercise of such warrants.
This limitation is referred to in this footnote as the “beneficial ownership limitation.” Stonehenge has the right
to increase the beneficial ownership limitation in its discretion on 61 days’ prior written notice to us, provided that
in no event is Stonehenge permitted to exercise such warrants to purchase common stock to the extent that such exercise would
result in Stonehenge (and its affiliates) beneficially owning in the aggregate more than 19.99% of the number of shares of our
common stock outstanding or the combined voting power of our securities outstanding immediately after giving effect to the issuance
of shares of common stock issuable upon exercise of such warrants. As a managing partner of Stonehenge, Andrew Ritter may be deemed
the beneficial owner of these shares. Andrew Ritter expressly disclaims beneficial ownership of the shares held by Stonehenge.
(7)
Includes 59,360 shares underlying stock option awards that are currently exercisable or exercisable within 60 days of May 7, 2018,
625 shares held in a retirement plan trust of which the reporting person and his spouse are trustees, and 119,227 shares beneficially
owned by Stonehenge, including 18,750 shares that are issuable upon the exercise of warrants to purchase common stock that are
currently exercisable. Under the terms of the warrants to purchase common stock, Stonehenge is not permitted to exercise such
warrants to the extent that such exercise would result in Stonehenge (and its affiliates) beneficially owning more than 4.99%
of the number of shares of our common stock outstanding immediately after giving effect to the issuance of shares of common stock
issuable upon exercise of such warrants. This limitation is referred to in this footnote as the “beneficial ownership limitation.”
Stonehenge has the right to increase the beneficial ownership limitation in its discretion on 61 days’ prior written notice
to us, provided that in no event is Stonehenge permitted to exercise such warrants to purchase common stock to the extent that
such exercise would result in Stonehenge (and its affiliates) beneficially owning in the aggregate more than 19.99% of the number
of shares of our common stock outstanding or the combined voting power of our securities outstanding immediately after giving
effect to the issuance of shares of common stock issuable upon exercise of such warrants to purchase common stock. As a managing
partner of Stonehenge, Ira Ritter may be deemed the beneficial owner of these shares. Ira Ritter expressly disclaims beneficial
ownership of the shares held by Stonehenge.
(8)
Includes 2,272 shares owned directly by Mr. Doyle, 1,250 shares underlying a stock option award held by Mr. Doyle that is currently
exercisable or exercisable within 60 days of May 7, 2018 and the shares beneficially owned by the Javelin Entities reflected in
footnote (1) above. Mr. Doyle expressly disclaims beneficial ownership of the share held by the Javelin Entities.
(9)
Includes 2,483 shares underlying a stock option award held by Mr. Foehr that is currently exercisable or exercisable within 60
days of May 7, 2018.
(10)
Represents shares underlying a stock option award held by Mr. Maier that is currently exercisable or exercisable within 60 days
of May 7, 2018.
(11)
Includes 2,420 shares underlying a stock option award held by Mr. Proehl that is currently exercisable or exercisable within 60
days of May 7, 2018. As noted elsewhere in this proxy statement, Mr. Proehl will not stand for re-election at the Annual Meeting.
(12)
Includes 1,750 shares underlying a stock option award held by Dr. Merino that is currently exercisable or exercisable within 60
days of May 7, 2018.
(13)
Includes 290,693 shares underlying stock options and warrants that are currently exercisable or exercisable within 60 days of
May 7, 2018. This number does not include 500,000 shares of common stock issuable upon exercise of warrants to purchase common
stock owned by Javelin, due to the beneficial ownership limitation described in footnote 1.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules issued thereunder, requires
our directors and executive officers and beneficial owners of more than 10% of the outstanding shares of our equity securities
to file reports of ownership and changes in beneficial ownership of our equity securities with the SEC. Copies of these reports
are furnished to Ritter. The Company is required to identify any of those individuals who failed to file such reports on a timely
basis. Based solely on our review of the copies of such reports furnished to us, and representations from the persons subject
to Section 16(a) with respect to the Company, we believe that during 2017 all of our executive officers, directors and 10% stockholders
complied with the Section 16(a) requirements.
RELATIONSHIP
WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Mayer
Hoffman McCann P.C. (“MHM”) serves as the Company’s independent registered public accounting firm and has served
in that capacity since 2014.
MHM leases substantially all its personnel,
who work under the control of MHM shareholders, from wholly-owned subsidiaries of CBIZ, Inc., in an alternative practice structure.
The decision to engage MHM as the Company’s independent registered public accounting firm for the fiscal year ending
December 31, 2018 was approved by the Audit Committee of the board of directors.
The
Audit Committee considered the independence of MHM and whether the audit services MHM provided to the Company are compatible with
maintaining that independence. The Audit Committee has adopted procedures by which the Audit Committee must approve in advance
all services provided by and fees paid to the Company’s independent registered public accounting firm. The advance approval
requirement was not waived in any instance during the past fiscal year.
Fees
and Services of Mayer Hoffman McCann P.C.
The
following table sets forth the aggregate fees billed to the Company by MHM for the fiscal years ended December 31, 2017 and 2016:
|
|
2017
|
|
|
2016
|
|
Audit Fees(1)
|
|
$
|
106,419
|
|
|
$
|
167,049
|
|
Audit-Related Fees
|
|
|
─
|
|
|
|
─
|
|
Tax Fees
|
|
|
─
|
|
|
|
─
|
|
All Other Fees(2)
|
|
|
77,900
|
|
|
|
─
|
|
Total
|
|
$
|
184,319
|
|
|
$
|
167,049
|
|
(1)
|
Audit
fees consisted of fees for audit work performed in the audit of financial statements, as well as fees for quarterly reviews
and registration statements.
|
|
|
(2)
|
All
Other Fees consists of fees paid in connection with our October 2017 public offering.
|
The
Audit Committee has adopted a formal policy on auditor independence requiring the advance approval by the Audit Committee of all
audit and non-audit services provided by our independent registered public accounting firm. In determining whether to approve
any services by our independent registered public accounting firm, the Audit Committee reviews the services and the estimated
fees, and considers whether approval of the proposed services will have a detrimental impact on the auditor’s independence.
On an annual basis, our management reports to the Audit Committee all audit services performed during the previous 12 months and
all fees billed by our independent registered public accounting firm for such services.
In
fiscal 2017 and 2016, all audit services and the corresponding fees were approved by our board of directors.
BOARD
OF DIRECTORS AND CORPORATE GOVERNANCE
The
Board of Directors in General
Our
board of directors currently consists of eight members. As noted elsewhere in this proxy statement, Mr. Proehl will not stand
for re-election at the Annual Meeting. Effective as of the time of the Annual Meeting, our board of directors will consist of
seven members. Biographical information with respect to our director nominees is provided below.
Our
directors hold office for one year or until their successors have been duly elected and qualified or until the earlier of their
death, resignation or removal. Our amended and restated bylaws provide that the authorized number of directors comprising our
board of directors will be fixed, from time to time, by a majority of the total number of directors.
There
are no family relationships among any of our directors or executive officers, other than Ira and Andrew Ritter, who are father
and son, respectively.
Name
|
|
Position
with the Company
|
|
Age
as
of the
Annual
Meeting
|
|
Director
Since
|
Michael
D. Step
|
|
Chief
Executive Officer and Director
|
|
58
|
|
2012
|
Andrew
J. Ritter
|
|
President
and Director
|
|
35
|
|
2008
|
Ira
E. Ritter
|
|
Executive
Chairman, Chief Strategic Officer and Director
|
|
69
|
|
2008
|
Noah
J. Doyle
|
|
Director
|
|
50
|
|
2008
|
Matthew
W. Foehr
|
|
Director
|
|
45
|
|
2015
|
Paul
V. Maier
|
|
Director
|
|
70
|
|
2015
|
Dr.
William M. Merino
|
|
Director
|
|
75
|
|
2017
|
Gerald
T. Proehl
|
|
Director
|
|
59
|
|
2015
|
Michael
D. Step
became our Chief Executive Officer on October 1, 2014. He has served as a director of the Company since 2012.
Mr. Step has over 20 years of business development and corporate development experience in the pharmaceutical industry. Prior
to joining the Company as its Chief Executive Officer, Mr. Step served as Senior Vice President of Corporate Development at Santarus,
Inc. (“Santarus”), and a member of its executive committee, from 2005 to January 2014, when Santarus was sold to Salix
Pharmaceuticals, Ltd. At Santarus, Mr. Step was responsible for corporate development activities. Prior to joining Santarus, he
served as Vice President, Corporate Development for Amylin Pharmaceuticals, Inc. (“Amylin”) from 2000 to 2005. In
this capacity, he was responsible for leading corporate development activities, including product licensing, strategic planning,
and mergers and acquisitions evaluations. Before joining Amylin, Mr. Step served as Senior Director, Business Development at Dura
Pharmaceuticals, Inc. (“Dura Pharmaceuticals”) from 1997 to 2000. In this position, his duties included licensing
of marketed pharmaceutical products. Prior to joining Dura Pharmaceuticals, he served in corporate development and strategic planning
at Hoffmann-La Roche, from 1996 to 1997, and held various sales and management roles at Roche Labs, from 1994 to 1996, and Syntex
Labs, from 1992 to 1994. Mr. Step holds a B.A. in political science from Vanderbilt University and a M.B.A. from the University
of Southern California.
Qualifications
:
We believe that Mr. Step is well qualified to serve on our board of directors and as Chief Executive Officer of the Company due
to his over 20 years’ experience in the pharmaceutical industry, serving in senior leadership roles within public pharmaceutical
companies including in the gastrointestinal disease segment. Mr. Step has served in various executive management positions in
sales and sales management, and has had experience with many aspects of pharmaceutical commercialization, strategic planning,
business development and licensing providing both strategic and operational vision and guidance. His extensive experience gives
him valuable insight into our industry as well as seasoned business judgment.
Andrew
J. Ritter
served as Co-Founder, President and Chief Executive Officer of the Company’s predecessor in interest from
its inception in 2004 until relinquishing the role of Chief Executive Officer to Mr. Step in October 2014. Mr. Ritter was a member
of the board of directors of the Company’s predecessor since its inception in 2004 and has been a member of our board of
directors since 2008 when the Company was formed. Mr. Ritter has been actively studying the field of lactose intolerance for over
15 years and currently holds over a dozen patents and over twenty pending international patent applications. In addition, he has
co-published articles, has given presentations at major healthcare and medical conferences, and has been a guest lecturer of entrepreneurship
at various graduate and undergraduate schools throughout Los Angeles including: University of Southern California Marshall School
of Business, University of California at Los Angeles Anderson School of Business and Pepperdine University Graziadio School of
Business and Management. Mr. Ritter served as a Los Angeles City Commissioner on the Commission for Children, Youth and Their
Families from 2000 to 2002. He holds a B.A. in Political Science and a minor in Business from the University of Southern California.
Mr. Ritter received a Master of Business Administration from the Wharton School of Business.
Qualifications
:
We believe that Mr. Ritter is well qualified to serve on our board of directors due to his over 15 years of research experience
working in lactose intolerance and digestive diseases. Having founded the Company and invented Lactagen™, Mr. Ritter has
an in depth knowledge of the Company, and provides senior leadership on the clinical and product development matters facing the
Company. Mr. Ritter also brings to the board of directors an extensive scientific and operational background gained previously
at Ritter Natural Sciences and over the years at Ritter.
Ira
E. Ritter
served as Co-Founder, Chief Strategic Officer and Executive Chairman of the Company’s predecessor in interest
from its inception in 2004 through the formation of the Company in 2008 and has served in those positions with the Company since
2008. Mr. Ritter has extensive experience creating and building diverse business enterprises and has provided corporate management,
strategic planning and financial consulting for a wide range of market segments. Since 2010, Mr. Ritter has also acted as a managing
partner of Stonehenge Partners. Mr. Ritter served as President and Vice Chairman of Quality King, Inc., a national wholesale distributor
of healthcare products, from 1992 to 2000. From 1998 to 2001, he served as President and Chairman of Rockwood Investments Inc.,
a business he developed which produced private label health and beauty products for major national retailers, including GNC and
K-Mart. He also served as Chairman of ON-TV, a division of Oak Industries, Inc.,
from 1982 to 1985, where he managed the television division initiating exclusive broadcasts of Los Angeles, Chicago, and New York
professional baseball, basketball, and hockey games. During this tenure, he produced the first televised home shopping program
and directed development of the largest “pay-per-view” channel system for its time. Mr. Ritter served on the board
of directors for Martin Lawrence Art Galleries from 1980 to 1985 helping take it public on The New York Stock Exchange. During
his 20 years as a publisher, he produced monthly national consumer magazines focused on health & fitness, women’s issues
and the environment. Mr. Ritter also has a long history of public service that includes appointments by three Governors to several
State of California Commissions including eight years as Commissioner on the California Prison Industry Authority. He has guest
lectured at University of Southern California Marshall School of Business and Pepperdine University Graziadio School of Business
where he also serves as an advisory board member to Pepperdine’s Graduate School of Education and Psychology, Social Entrepreneurship
and Change Program. Presently he serves on the board of directors for Vitavis Laboratories. In 1981, Mr. Ritter was honored with
the City of Hope’s Man of the Year award.
Qualifications
:
We believe that Mr. Ritter is well suited to serve on our board of directors due to his over 40 years’ experience overseeing
daily operations of diverse business enterprises, and his managing public as well as private companies. Mr. Ritter provides our
board of directors with extensive background in operational and strategic planning, as well as general executive and leadership
expertise. Mr. Ritter has served on the boards of several companies during his career.
Noah
J. Doyle
has served as a director of the Company since September 2008. He has been an entrepreneur and investor for over
20 years. Mr. Doyle is the managing director of Javelin GP, LLC, the general partner of Javelin GP, LP, which is the general partner
of Javelin and the manager of Javelin SPV. Prior to forming the first Javelin entities in 2008, Mr. Doyle supported over a dozen
start-ups as an angel investor, including Keyhole, Inc. (“Keyhole”) (acquired by Google Inc. in 2004), Cantametrix,
Inc. (acquired by Gracenote, Inc. in 2002), Amae Software (acquired by Verint Systems, Inc. in 2006), Nuvon, Inc., Aquea Scientific
Corporation, Emdigo Inc., Magnacash Inc. (acquired by Yaga, Inc. in 2001), and i-mint India. Mr. Doyle most recently directed
the enterprise product line for Google’s geospatial products, Google Earth and Google Maps, from 2004 to 2007. From 2002
to 2004 he managed the Sales and Corporate Development functions at Keyhole, which created the first Web hosted digital earth
model. Prior to Keyhole, Mr. Doyle helped establish the Internet loyalty rewards marketplace as a co-founder of MyPoints.com (“MyPoints”),
the largest Internet loyalty program with over 6 million active members, where he led product management and business development
functions from the company’s inception in 1996 through its initial public offering and subsequent acquisition by United
Airlines in 2002. Prior to joining MyPoints, Mr. Doyle was based in Tokyo
where he managed overseas sales and marketing for the OEM channel of Matsushita’s (Panasonic) communications equipment subsidiary
in Japan, from 1990 to 1994. Mr. Doyle served on the board of directors of MOL Global, Inc. from July 2014 to February 2016. He
was also chairman of the management board of the University of California, Berkeley’s campus bookstore, a $17 million retail
operation, and also held product management and operations management roles at IBM/Rational (Pure Atria) and Oracle, from 1989
to 1990. Mr. Doyle holds M.B.A. and B.A. Economics degrees, as well as certificates in Management of Technology and Global Management
from University of California, Berkeley.
Qualifications
:
We believe that Mr. Doyle is well suited to serve on our board of directors due to his over 20 years of experience as an entrepreneur
and investor. Mr. Doyle has experience as a venture capitalist building and serving on the boards of many public and private emerging
companies in leadership roles providing guidance on finance, development and operational growth.
Matthew
W. Foehr
has served as a director of the Company since February 2015. He currently serves as President and Chief Operating
Officer at Ligand Pharmaceuticals Incorporated (“Ligand”), a commercial stage biopharmaceutical company. Prior to
joining Ligand in 2011, Mr. Foehr was Vice President and Head of Consumer Dermatology R&D, as well as Acting Chief Scientific
Officer of Dermatology, in the Stiefel division of GlaxoSmithKline (“GSK”). Following GSK’s acquisition of Stiefel
Laboratories, Inc. (“Stiefel”) in 2009, Mr. Foehr led the R&D integration of Stiefel into GSK. At Stiefel Laboratories,
Inc., Mr. Foehr served as Senior Vice President of Global R&D Operations, Senior Vice President of Product Development&
Support, and Vice President of Global Supply Chain Technical Services. Prior to joining Stiefel, Mr. Foehr held various executive
roles at Connetics Corporation including Senior Vice President of Technical Operations and Vice President of Manufacturing. Currently,
he is a member of the board of directors of Viking Therapeutics Inc. Mr. Foehr is the author of multiple scientific publications
and is a named inventor on numerous U.S. patents. He received his Bachelor of Science degree in Biology from Santa Clara University.
Qualifications
:
We believe that Mr. Foehr is well suited to serve on our board of directors due to his more than 20 years of experience in the
pharmaceutical industry and his experience managing global operations and research and development programs.
Paul
V. Maier
has served as a director of the Company since April 2015. From November 2009 through June 2014, Mr. Maier served
as the Chief Financial Officer of Sequenom Inc., a publicly held company serving the discovery, clinical research, and diagnostics
market. From February 2007 until November 2009, he served as an independent financial consultant. Previously, Mr. Maier was Senior
Vice President and Chief Financial Officer of Ligand from 1992 through 2007. From 1990 to 1992, Mr. Maier served as Vice President,
Finance of DFS West, a division of DFS Group LP, a private multinational retailer. From 1984 to 1990, Mr. Maier was employed by
ICN Pharmaceuticals, a pharmaceutical and biotechnology research products company, where he held various executive positions in
finance and general management in ICN as well as SPI Pharmaceuticals, a publicly held subsidiary. Mr. Maier currently serves on
the board of directors of International Stem Cell Corporation, Apricus Biosciences, MabVax Therapeutics, and Biological Dynamics.
Mr. Maier received an MBA from Harvard Business School and a BS from Pennsylvania State University.
Qualifications
:
We believe that Mr. Maier is well suited to serve on our board of directors due to his over 25 years of experience as a senior
executive in biotechnology and pharmaceutical companies and his extensive experience in finance.
Dr.
William M. Merino
has served as a director of the Company since January 2017. Dr. Merino served as the Senior Vice President of Worldwide Regulatory Affairs for
Warner Lambert Pharmaceuticals from 1987 to 2000, where he was a member of the Office of the Chairman and responsible for the
registration and approval of pharmaceuticals products with regulatory agencies around the world. He was also responsible for quality
assurance, quality control and drug safety for the company, and led efforts to gain expedited registration of Lipitor in the United
States and abroad in 20 other countries. He also has previous experience leading international regulatory affairs at Alcon Pharmaceuticals,
G.D. Searle & Co., and Riker Laboratories. Dr. Merino has served as a senior clinical and regulatory advisory to the Company.
Dr. Merino received his PhD in Pharmacology from Purdue University.
Qualifications
:
We believe that Dr. Merino’s deep global experience in drug and device registration and his extensive work with senior members
of the FDA as well as several international regulatory authorities will bring important insight and acumen to our board of directors,
as the Company continues its interactions with the FDA in an effort to bring RP-G28 to market.
Board
of Directors Leadership Structure
The
roles of Chairman of the board of directors and Chief Executive Officer are held separately. Our Chief Strategic Officer also
serves as the Executive Chairman of our board of directors. Our board of directors has determined its leadership structure is
appropriate and effective for us at this time, given our stage of development.
Director
Independence
Under
Nasdaq’s continued listing requirements, a majority of a listed company’s board of directors must be comprised
of independent directors, subject to certain exceptions and phase-in rules. In addition, Nasdaq’s continued listing
requirements require that, subject to certain exceptions and phase-in rules, each member of a listed company’s audit, compensation
and governance and nominating committees must be independent. Audit committee members must also satisfy the independence criteria
set forth in Rule 10A-3 under the Exchange Act. Under Nasdaq’s continued listing requirements, 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.
Based
upon information requested from and provided by each director concerning their background, employment and affiliations, including
family relationships, our board of directors determined that each of Messrs. Doyle, Foehr, Maier and Proehl and Dr. Merino
are independent under the applicable rules and regulations of Nasdaq. In making such determinations, the board of directors
considered the relationships that each such non-employee director has with our company and all other facts and circumstances the
board of directors deemed relevant in determining their independence.
Board
Diversity
Our
Nominating and Corporate Governance Committee is responsible for reviewing with the board of directors, on an annual basis, the
appropriate characteristics, skills and experience required for the board of directors as a whole and its individual members.
In evaluating the suitability of individual candidates (both new candidates and current members), the Nominating and Corporate
Governance Committee, in recommending candidates for election, and the board of directors, in approving (and, in the case of vacancies,
appointing) such candidates, takes into account many factors, including the following:
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diversity
of personal and professional background, perspective, experience, age, gender, ethnicity and country of citizenship;
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personal
and professional integrity and ethical values;
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experience
in one or more fields of business, professional, governmental, scientific or educational endeavors, and a general appreciation
of major issues facing public companies similar in scope and size to us;
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experience
relevant to our industry or with relevant social policy concerns;
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relevant
academic expertise or other proficiency in an area of our operations;
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objective
and mature business judgment and expertise; and
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any
other relevant qualifications, attributes or skills.
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Board
of Director’s Role in Risk Oversight
Risk
is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of
risks, including risks relating to product candidate development, technological uncertainty, dependence on third parties, uncertainty
regarding patents and proprietary rights, comprehensive government regulations, having no commercial manufacturing experience,
marketing or sales capability or experience and dependence on key personnel, as more fully discussed under “Risk Factors”
in our 2017 Annual Report. Management is responsible for the day-to-day management of risks we face, while our board of directors,
as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, our
board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management
are adequate and functioning as designed.
Our
board of directors is actively involved in oversight of risks that could affect us. This oversight is conducted primarily through
committees of the board of directors, but the full board of directors has retained responsibility for general oversight of risks.
Our board of directors satisfies this responsibility through full reports by each committee chair regarding the committee’s
considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular
risks within our company as our board of directors believes that full and open communication between management and the board
of directors is essential for effective risk management and oversight.
Committees
of the Board of Directors
Our
board of directors has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee.
Each committee operates under a charter. Copies of each committee’s charter are posted on the Investor Relations section
of our website, which is located at
www.ritterpharmaceuticals.com
. The composition and function of each of these committees
are described below.
Audit
Committee
. The current members of our Audit Committee are Matthew W. Foehr, Paul V. Maier (Chairman) and Gerald T. Proehl,
each of whom was determined by our board of directors to be independent under Rule 10A-3 of the Exchange Act and the continued
listing requirements of Nasdaq, and to satisfy the other continued listing requirements of Nasdaq for audit committee
membership. As noted elsewhere in this proxy statement, Mr. Proehl will not stand for re-election at the Annual Meeting. It is
expected that Dr. Merino will be appointed to the Audit Committee to take his place. The board of directors has determined that
Dr. Merino is independent under Rule 10A-3 of the Exchange Act and the continued listing requirements, and satisfies the other
continued listing requirements of Nasdaq for audit committee membership. Our board of directors has determined that Mr. Maier
qualifies as an “audit committee financial expert,” as such term is defined by the SEC, and that he has the requisite
level of financial sophistication required by the continued listing requirements of Nasdaq.
Under
the Audit Committee charter, our Audit Committee is authorized to take the following actions, among others:
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approve
and retain the independent auditors to conduct the annual audit of our financial statements;
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review
the proposed scope and results of the audit;
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review
and pre-approve audit and non-audit fees and services;
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review
accounting and financial controls with the independent auditors and our financial and accounting staff;
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review
and approve transactions between us and our directors, officers and affiliates;
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recognize
and prevent prohibited non-audit services;
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establish
procedures for complaints received by us regarding accounting matters;
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oversee
internal audit functions, if any; and
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prepare
the report of the Audit Committee that the rules of the SEC require to be included in our annual meeting proxy statement.
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Compensation
Committee
. The current members of our Compensation Committee are Matthew W. Foehr (Chairman), Paul V. Maier and Dr. William
M. Merino, each of whom was determined by our board of directors to be independent under the continued listing requirements of
Nasdaq.
Under
the Compensation Committee charter, our Compensation Committee is authorized to take the following actions, among others:
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review
and approve the compensation arrangements for our chief executive officer and approve, for subsequent review and ratification
by the full board of directors, the compensation arrangements for our other executive officers;
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review,
approve and recommend to the board of directors general compensation policies with the objective to attract and retain
superior talent, to reward individual performance and to achieve our financial goals; and
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administer
our stock incentive plans.
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To
determine executive compensation, the Compensation Committee, with input from the Chief Executive Officer and other members of
senior management (who do not participate in the deliberations regarding their own compensation), reviews, at least annually,
and makes recommendations to the board of directors appropriate compensation levels for each executive officer of the Company.
The Compensation Committee considers all factors it deems relevant in setting executive compensation.
Under
its charter, the Compensation Committee has the authority, in its sole discretion, to select, retain and obtain the advice of
a compensation consultant as necessary to assist with the execution of its duties and responsibilities as set forth in its charter,
but only after taking into account certain factors prescribed by Nasdaq bearing on the consultant’s independence.
There is no requirement, however, that a compensation consultant be independent.
During
the past fiscal year, the Compensation Committee engaged March & McLennan (“M&M”) as compensation consultants.
The Compensation Committee identified and selected M&M based on their reputation and experience consulting companies in the
life sciences industry. The Compensation Committee requested that M&M:
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develop
a peer group of companies for market assessment;
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conduct
a competitive compensation assessment for the senior management team;
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develop
severance and change-in-control policies;
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develop
a competitive board of directors compensation program;
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conduct
a competitive assessment for the broad-based employee population;
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develop
a broad-based equity grant strategy; and
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develop
a competitive employee stock purchase plan and help to determine an appropriate share reserve number for the Company’s
equity incentive plan.
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Nominating
and Corporate Governance Committee
. The current members of our Nominating and Corporate Governance Committee are Noah
Doyle, Dr. William M. Merino and Gerald Proehl (Chairman), each of whom was determined by our board of directors to be independent
under the continued listing requirements of Nasdaq.
As
noted elsewhere in this proxy statement, Mr. Proehl will not stand for re-election at the Annual Meeting.
Under
the Nominating and Corporate Governance Committee charter, our Nominating and Corporate Governance Committee is authorized to
take the following actions, among others:
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identify
and nominate members of the board of directors;
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develop
and recommend to the board of directors a set of corporate governance principles applicable to our company; and
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oversee
the evaluation of our board of directors.
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Director
Nominations
Director
nominees are considered by our Nominating and Corporate Governance Committee on a case-by-case basis. A candidate for election
to our board of directors must possess the ability to apply good business judgment and must be in a position to properly exercise
his or her duties of loyalty and care in his or her representation of the interests of stockholders. Candidates should also exhibit
proven leadership capabilities, high integrity and experience with a high level of responsibilities within their chosen fields,
and have the ability to quickly grasp complex principles of business, finance, and transactions regarding the Company’s
industry. In general, preferred candidates will currently hold, or have recently held, an established executive level position
and have extensive experience in business, finance, law, science, research, or government. The Nominating and Corporate Governance
Committee will consider these criteria for nominees identified by the Nominating and Corporate Governance Committee or the board
of directors, by stockholders, or through other sources. When current directors are considered for nomination for reelection,
the Nominating and Corporate Governance Committee will take into consideration their prior contributions and performance as well
as the composition of our board of directors as a whole, including whether the board of directors reflects the appropriate balance
of independence, sound judgment, business specialization, technical skills, diversity, and other desired qualities. The Nominating
and Corporate Governance Committee will make a preliminary assessment of each proposed nominee based upon the résumé
and biographical information, an indication of the individual’s willingness to serve, and other relevant information. This
information will be evaluated against the criteria set forth above and the specific needs of the Company at that time. Based upon
a preliminary assessment of the candidate(s), those who appear best suited to meet the needs of the Company may be invited to
participate in a series of interviews, which are used as a further means of evaluating potential candidates. On the basis of information
learned during this process, the Nominating and Corporate Governance Committee will determine which nominee(s) to submit for election.
The Nominating and Corporate Governance Committee will use the same process for evaluating all nominees, regardless of the original
source of the nomination.
It
is our Nominating and Corporate Governance Committee’s responsibility to consider stockholder proposals for nominees for
election as directors that are nominated in accordance with our certificate of incorporation and our bylaws, and other applicable
laws, including the rules and regulations of the SEC and any stock market on which our stock is listed for trading or quotation.
Generally, such recommendations made by a stockholder entitled to notice of, and to vote at, the meeting at which such proposed
nominee is to be considered are required to be written and received by the Secretary of the Company by no later than the close
of business on the 90
th
day, nor earlier than the close of business of the 120
th
day in advance of the first
anniversary of the preceding year’s annual meeting of stockholders. The notice must set forth all of the information required
by the Company’s bylaws.
Meetings
and Attendance During 2017
The
board of directors held 12 meetings in 2017. Each director who served as a director during 2017 participated in 75% or more of
the meetings of the board of directors and of the committees on which he served during the year ended December 31, 2017 (during
the period that such director served). At each regular meeting of the board of directors, the independent directors meet in private
without members of management.
We
encourage all of our directors to attend our annual meeting of stockholders. In 2017, all of our directors attended the annual
meeting of stockholders.
Code
of Business Conduct and Ethics
We
adopted a code of business conduct and ethics that applies to all of our employees, officers and directors, including those officers
responsible for financial reporting prior to the closing of our initial public offering. The code of business conduct and ethics
is available on our website at
www.ritterpharmaceuticals.com
. Any amendments to the code of business conduct and ethics,
or any waivers of its requirements that apply to our principal executive officer, principal financial officer or principal accounting
officer, will be disclosed on our website.
Communications
with the Board of Directors
The
board of directors has not established a formal process for security holders to send communications to the board of directors
and the board of directors has not deemed it necessary to establish such a process at this time. Historically, almost all
communications that the Company receives from security holders are administrative in nature and are not directed to the board
of directors. If the Company should receive a security holder communication directed to the board of directors, or to an individual
director, said communication will be relayed to the board of directors or the individual director, as the case may be.
Certain
Relationships and Related Party Transactions
Our
Audit Committee is responsible for reviewing, approving and overseeing any transaction between the Company and its directors,
director nominees, executive officers, greater than 5% beneficial owners, and each of their respective immediate family members,
where the amount involved exceeds the lesser of (i) $120,000 and (ii) one percent (1%) of the average of our total assets at year-end
for the prior two fiscal years. Since January 1, 2016, there have been no such transactions, except as described below.
October
2016 Public Offering
On
October 31, 2016, we closed a public offering of 212,766 shares of our common stock (adjusted to reflect the Reverse Stock Split)
at a price to the public of $2.35 per share. One of our existing stockholders holding in excess of 5% of our outstanding shares
prior to the October 2016 Public Offering, Aspire, purchased shares in the offering for $1,199,999.
October
2017 Public Offering
On
October 3, 2017, we closed a public offering of (i) 34,550,000 Class A Units consisting of 3,455,000 shares of our common stock
and warrants to purchase 3,455,000 shares of our common stock (adjusted to reflect the Reverse Stock Split), at a public offering
price of $0.40 per unit, and (ii) 9,180 Class B Units consisting of 9,180 shares of our Series A Convertible Preferred stock,
with a stated value of $1,000, and convertible into an aggregate of 2,295,000 shares of our common stock, and warrants to purchase
2,295,000 shares of our common stock (adjusted to reflect the Reverse Stock Split), at a public offering price of $1,000 per unit.
Two of our existing stockholders holding in excess of 5% of our outstanding shares prior to the October 2017 Public Offering,
Javelin and Aleyska, purchased Class A Units in the public offering for $2.0 million and $1.7 million, respectively.
EXECUTIVE
Officers
Our
Executive Officers as of the date of this proxy statement are as follows:
Name
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Age
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Position
with the Company
|
Michael
D. Step
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|
58
|
|
Chief
Executive Officer
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Andrew
J. Ritter
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35
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President
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Ira
E. Ritter
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|
69
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|
Executive
Chairman and Chief Strategic Officer
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Officers
serve at the discretion of the board of directors. There are no family relationships among any of our directors or executive officers,
other than Ira and Andrew Ritter, who are father and son, respectively. There is no arrangement or understanding between any executive
officer and any other person pursuant to which the executive officer was selected.
Please
see “Board of Directors - The Board of Directors in General
” for the biographies of our executive officers.
EXECUTIVE
AND DIRECTOR COMPENSATION
Summary
Compensation Table (2017 and 2016)
The
following table sets forth the compensation paid or earned for the fiscal years ended December 31, 2017 and 2016 to our named
executive officers for each of those years, who are comprised of (1) our principal executive officer for such year, and
(2) our next two highest compensated executive officers other than the principal executive officer (whose compensation exceeded
$100,000).
Name
and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
(2)
|
|
|
Option
Awards
(1)
($)
|
|
|
Nonequity
Incentive
Compensation
($)
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
Michael
D. Step
|
|
|
2017
|
|
|
$
|
411,875
|
|
|
$
|
—
|
|
|
$
|
88,425
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
500,300
|
|
Chief
Executive Officer
|
|
|
2016
|
|
|
$
|
376,269
|
|
|
$
|
—
|
|
|
$
|
126,280
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
502,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew
J. Ritter
|
|
|
2017
|
|
|
$
|
331,569
|
|
|
$
|
121,320
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
452,889
|
|
President
|
|
|
2016
|
|
|
$
|
324,010
|
|
|
$
|
117,180
|
|
|
$
|
490,394
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
931,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ira
E. Ritter
|
|
|
2017
|
|
|
$
|
330,367
|
|
|
$
|
101,115
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
431,482
|
|
Executive
Chairman and
|
|
|
2016
|
|
|
$
|
308,332
|
|
|
$
|
97,571
|
|
|
$
|
490,394
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
896,297
|
|
Chief
Strategic Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represent
the grant date fair value of the option awards granted during the years presented, determined in accordance with FASB ASC
Topic 718. We utilize the Black-Scholes option-pricing model to value awards. Key valuation assumptions include:
|
|
●
|
Expected
dividend yield
. The expected dividend is assumed to be zero as we have never paid dividends and have no current plans
to pay any dividends on our common stock.
|
|
|
|
|
●
|
Expected
stock-price volatility
. As our common stock only recently became publicly traded, the expected volatility is derived from
the average historical volatilities of publicly traded companies within our industry that we consider to be comparable to
our business over a period approximately equal to the expected term.
|
|
|
|
|
●
|
Risk-free
interest rate
. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero
coupon U.S. Treasury notes with maturities approximately equal to the expected term.
|
|
|
|
|
●
|
Expected
term
. The expected term represents the period that the stock-based awards are expected to be outstanding. Our historical
share option exercise experience does not provide a reasonable basis upon which to estimate an expected term because of a
lack of sufficient data. Therefore, we estimate the expected term by using the simplified method provided by the SEC. The
simplified method calculates the expected term as the average of the time-to-vesting and the contractual life of the options.
|
In
addition to the assumptions used in the Black-Scholes option-pricing model, we also estimate a forfeiture rate to calculate the
stock-based compensation for our equity awards. We will continue to use judgment in evaluating the expected volatility, expected
terms and forfeiture rates utilized for our stock-based compensation calculations on a prospective basis.
(2)
|
Represents
annual bonuses earned for 2017 and 2016 based upon the achievement of specific performance goals, pursuant to the terms of
their respective offer letters. For 2017, the annual bonuses earned were equal to 90% of the target bonus opportunities for
each of Andrew Ritter (target bonus equal to 40% of his base salary) and Ira Ritter (target bonus equal to 35% of his base
salary). For 2016, the annual bonuses earned were equal to 90% of the target bonus opportunities for each of Andrew Ritter
(target bonus equal to 40% of his base salary) and Ira Ritter (target bonus equal to 35% of his base salary).
|
Narrative
to Summary Compensation Table
All
share amounts referenced below have been adjusted to account for the Reverse Stock Split.
Letter
Agreement with Michael D. Step
On
December 2, 2014, we entered into a letter agreement (the “Step Letter Agreement”), with Mr. Step, our current Chief
Executive Officer, setting forth the terms of his employment. The Step Letter Agreement provides that Mr. Step will be entitled
to an annual base salary of $360,000. Pursuant to the Step Letter Agreement, Mr. Step was also entitled to receive three
stock options.
The
first two options entitle Mr. Step to purchase 64,653 and 7,337 shares of common stock of the Company, respectively,
for an exercise price of $50.86 per share. Each of these options was immediately exercisable in full as of the date of
the grant, with 44/48
ths
of the total number of shares covered by each option subject to a right of repurchase by the
Company upon termination of Mr. Step’s employment with us for any reason. This right of repurchase will lapse over a period
of 44 months, with 1/44
th
of the total number of shares subject to the right of repurchase lapsing on January 1, 2015
and on the first day of each month thereafter. In addition, the right of repurchase will lapse in its entirety upon a termination
of the employment of Mr. Step by us without Cause or by Mr. Step with Good Reason and upon a Termination upon a Change in Control.
The
third option became exercisable upon the closing of our initial public offering on June 29, 2015. Pursuant to the terms of the
agreement, the option is exercisable for a total of 16,379 shares of our common stock, which, together with the
shares subject to the first option, represent 7.5% of the shares of common stock deemed to be outstanding at June
29, 2015 on a fully-diluted basis, after giving effect to the number of shares subject to the third option. Seventy-five percent
of the shares subject to the third option are subject to a right of repurchase by us upon termination of Mr. Step’s employment
for any reason. This right of repurchase will lapse with respect to 1/36
th
of the total number of shares subject to
the right of repurchase on the first day of each month following the date on which the third option first becomes exercisable.
In addition, the right of repurchase will lapse in its entirety upon Mr. Step’s termination of employment under certain
circumstances.
For
purposes of the Step Letter Agreement, the terms “Cause,” “Good Reason,” and “Termination upon a
Change in Control” each have the meanings ascribed to such terms in the Executive Severance & Change in Control Agreement
described below.
Offer
Letters with Andrew Ritter and Ira Ritter
The
compensation terms outlined in the offer letters, which became effective June 29, 2015, superseded and replaced those provided
in the Executive Compensation Plan, which became effective September 25, 2013, other than certain provisions related to bonus
opportunities. The offer letters provide that Andrew Ritter is entitled to an annual base salary of $310,000 and Ira Ritter is
entitled to an annual base salary of $295,000. In accordance with his offer letter, Andrew Ritter also became entitled to receive
up to $180,000 payable over a three-year period for tuition reimbursement.
Pursuant
to their respective offer letters, Andrew Ritter and Ira Ritter each have the opportunity to earn an annual bonus based upon a
percentage of their base salary and the achievement of specific performance as determined by the Company. The initial target bonus
opportunities are 40% and 35% of the base salary for Andrew Ritter and Ira Ritter, respectively.
2015
Equity Incentive Plan
On
June 15, 2015, our board of directors approved the 2015 Equity Incentive Plan, and on June 17, 2015, the 2015 Equity Incentive
Plan was approved by our stockholders. The 2015 Equity Incentive Plan was subsequently amended by the stockholders of the Company
on June 3, 2016, June 2, 2017 and August 24, 2017.
The
purposes of the 2015 Equity Incentive Plan are to optimize the profitability and growth of the Company through long-term incentives
that are consistent with the Company’s objectives and that link the interests of award recipients (“Grantees”),
to those of the Company’s stockholders; to give award recipients an incentive for excellence in individual performance;
to promote teamwork among Grantees; and to give the Company flexibility in attracting and retaining key employees, directors and
consultants.
Selected
employees, officers and directors of the Company or any subsidiary, and consultants, advisors and independent service providers
to the Company and any subsidiary who qualify as a “consultant” under the applicable rules of the SEC for registration
of shares on a Form S-8 registration statement, are eligible to receive awards under the 2015 Equity Incentive Plan. The plan
administrator may also grant awards to individuals in connection with hiring, retention or otherwise before the date the individual
first performs services for the Company or any subsidiary; provided, however, that those awards will not become vested or exercisable
before the date the individual first performs services for the Company or any subsidiary.
The
number of shares of common stock that we may issue pursuant to awards under the 2015 Plan is (i) 2,750,000 plus
(ii) any shares which were available for grant under the 2008 Stock Plan or the 2009 Stock Plan (collectively, the “Prior
Plans”), on the effective date of the 2015 Equity Incentive Plan or are subject to awards under the Prior Plans which, after
the effective date of the 2015 Equity Incentive Plan, are forfeited or lapse unexercised or are settled in cash and are not issued
under the Prior Plans. No more than 2,750,000 shares of common stock may be issued pursuant to incentive stock options
intended to qualify under Section 422 of the Internal Revenue Code (the “Code”). No awards may be granted under any
Prior Plan; however, any awards granted under any Prior Plan that were outstanding as of the effective date of the 2015 Plan continue
to be subject to the terms and conditions of such Prior Plan. The maximum number of shares of common stock subject
to awards of any combination that may be granted under the 2015 Equity Incentive Plan during any calendar year to any one individual
is limited to 300,000 shares.
The
2015 Equity Incentive Plan provides for grants of stock options (including incentive stock options qualifying under Section 422
of the Code and nonstatutory stock options), restricted stock awards, stock appreciation rights, restricted stock units, performance
awards, other stock-based awards or any combination of the foregoing.
Outstanding
Equity Awards at 2017 Fiscal Year-End
The
following table presents the outstanding equity awards held by each of the named executive officers as of December 31, 2017. The
information included in the table and footnotes below has been adjusted to account for the Reverse Stock Split.
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
Michael
D. Step
|
|
|
2,616
|
|
|
|
—
|
|
|
$
|
10.14
|
|
|
8/16/2022
|
|
|
|
64,653
|
(1)
|
|
|
—
|
|
|
$
|
15.86
|
|
|
12/2/2024
|
|
|
|
7,337
|
(2)
|
|
|
—
|
|
|
$
|
15.86
|
|
|
12/2/2024
|
|
|
|
16,379
|
(3)
|
|
|
—
|
|
|
$
|
15.86
|
|
|
12/2/2024
|
|
|
|
2,904
|
(4)
|
|
|
5,295
|
(4)
|
|
$
|
11.54
|
|
|
7/5/2026
|
|
|
|
1,329
|
(5)
|
|
|
4,470
|
(5)
|
|
$
|
12.89
|
|
|
1/25/2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew
J. Ritter
|
|
|
2,487
|
(6)
|
|
|
309
|
(6)
|
|
$
|
11.27
|
|
|
9/25/2023
|
|
|
|
2,097
|
|
|
|
—
|
|
|
$
|
15.86
|
|
|
12/2/2024
|
|
|
|
35,135
|
(7)
|
|
|
8,108
|
(7)
|
|
|
|
(7)
|
|
12/2/2024
|
|
|
|
2,904
|
(8)
|
|
|
5,295
|
(8)
|
|
$
|
11.54
|
|
|
7/5/2026
|
|
|
|
2,334
|
(9)
|
|
|
11,670
|
(9)
|
|
$
|
12.60
|
|
|
10/25/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ira
E. Ritter
|
|
|
2,487
|
(10)
|
|
|
309
|
(10)
|
|
$
|
11.27
|
|
|
9/25/2023
|
|
|
|
2,097
|
|
|
|
—
|
|
|
$
|
15.86
|
|
|
12/2/2024
|
|
|
|
35,135
|
(11)
|
|
|
8,108
|
(11)
|
|
|
|
(11)
|
|
12/2/2024
|
|
|
|
2,904
|
(12)
|
|
|
5,295
|
(12)
|
|
$
|
11.54
|
|
|
7/5/2026
|
|
|
|
2,334
|
(13)
|
|
|
11,670
|
(13)
|
|
$
|
12.60
|
|
|
10/25/2026
|
(1)
|
This
option was granted to Mr. Step on December 2, 2014 and was immediately exercisable in full as of the date of grant. Of the
shares subject to this option, 59,265 shares are subject to a right of repurchase in favor of us at a price of $15.86
per share, which right expires ratably over 44 months commencing January 1, 2015 and in full upon a change of control or upon
Mr. Step’s employment termination by us without Cause, subject to his continued employment with us (as described in
the stock option award agreement).
|
|
|
(2)
|
This
option was granted to Mr. Step on December 2, 2014 and was immediately exercisable in full as of the date of grant. Of the
shares subject to this option, 6,726 shares are subject to a right of repurchase in favor of us at a price of $15.86
per share, which rights expires ratably over 44 months commencing January 1, 2015 and in full upon a change of control or
upon Mr. Step’s employment termination by us without Cause, subject to his continued employment with us (as described
in the stock option award agreement).
|
|
|
(3)
|
This
option was granted to Mr. Step on December 2, 2014. The total number of shares issued under this option equaled the number
of shares of common stock, together with the 64,653 shares subject to the option granted to Mr. Step on December
2, 2014, representing in the aggregate 7.5% of the shares of common stock deemed to be outstanding on a fully-diluted
basis as of the date that we raised in the aggregate a minimum of $15,000,000 in one or more private and/or public
offerings (a “Qualified Financing”), after giving effect to (i) the issuance of the shares issued in the Qualified
Financing, (ii) the issuance of this option and (iii) any adjustments. 75% of the shares subject to the third option are subject
to a right of repurchase upon termination of Mr. Step’s employment for any reason, which right expires ratably over
36 months commencing with July 1, 2015 and in full upon a change of control or upon Mr. Step’s employment termination
by us without Cause, subject to his continued employment with us (as described in the stock option award agreement).
|
|
|
(4)
|
This
option was granted to Mr. Step on July 5, 2016 for an aggregate of 8,200 shares. The option vests in 48 equal monthly installments,
the first of which vested on July 20, 2016 with the balance vesting on the 20
th
day of each calendar month thereafter
until vested in full.
|
|
|
(5)
|
This
option was granted to Mr. Step on January 25, 2017 for an aggregate of 5,800 shares. The option vests in forty-eight (48)
equal monthly installments beginning on February 25, 2017 with the balance vesting on the 25th day of each calendar month
thereafter until vested in full.
|
|
|
(6)
|
This
option was granted to Andrew Ritter on September 25, 2013 for an aggregate of up to 4,895 shares, subject to the achievement
of certain milestones. The option included 236 shares that vested and became exercisable as of the date of grant (with a balance
of 113 shares vesting ratably on a monthly basis from September 30, 2013 over 36 months) attributable to the FDA Meeting Bonus
milestone. An additional 367 shares vested and became exercisable as of June 29, 2015 (with a balance of 681 shares vesting
ratably on a monthly basis from July 31, 2015 over 36 months) attributable to the Clinical Trial Funding Commitment Bonus
Opportunity milestone. An additional 489 shares vested and became exercisable as of June 29, 2015 (with a balance of 909 shares
vesting ratably on a monthly basis beginning July 31, 2015 over 36 months) attributable to the Fundraising Bonus Opportunities
milestone. The option for the remaining balance of the 2,097 shares expired unvested as of September 30, 2015.
|
|
|
(7)
|
This
option was granted to Andrew Ritter on December 2, 2014 and vests as follows: 25% of the shares vest on September 1, 2015
and the remaining 75% of the shares will vest in 36 equal monthly installments beginning on the last day of the first full
month thereafter, subject to his continued employment with us. The exercise price for this option is as follows: (i) $15.86
for the first 15,234 shares; (ii) $19.30 for the next 14,004 shares; and (iii) $132.30 for the remaining 14,004 shares.
|
|
|
(8)
|
This
option was granted to Andrew Ritter on July 5, 2016 for an aggregate of 8,200 shares. The option vests in 48 equal monthly
installments, the first of which vested on July 20, 2016 with the balance vesting on the 20
th
day of each calendar
month thereafter until vested in full.
|
|
|
(9)
|
This
option was granted to Andrew Ritter on October 25, 2016 for an aggregate of 14,004 shares. The option vests ratably in 48
equal monthly installments following the public disclosure of top-line data results from the Company’s Phase 2b clinical
trial.
|
|
|
(10)
|
This
option was granted to Ira Ritter on September 25, 2013 and is subject to the same vesting schedule as the option granted to
Andrew Ritter on this date as reflected in footnote (5) above.
|
(11)
|
This
option was granted to Ira Ritter on December 2, 2014 and is subject to the same vesting schedule as the option granted to
Andrew Ritter on this date as reflected in footnote (8) above.
|
|
|
(12)
|
This
option was granted to Ira Ritter on July 5, 2016 for an aggregate of 8,200 shares. The option vests in 48 equal monthly installments,
the first of which vested on July 20, 2016 with the balance vesting on the 20th day of each calendar month thereafter until
vested in full.
|
|
|
(13)
|
This
option was granted to Ira Ritter on October 25, 2016 for an aggregate of 14,004 shares. The option vests ratably in 48 equal
monthly installments following the public disclosure of top-line data results from the Company’s Phase 2b clinical trial.
|
Payments
Due Upon Termination of Employment or a Change in Control
Executive
Severance & Change in Control Agreements
We
have entered into Executive Severance & Change in Control Agreements (the “Severance Agreements”), with each of
our named executive officers. The Severance Agreements provide that if we terminate the executive’s employment without Cause,
or the executive terminates his employment for Good Reason, the executive will be entitled to: (i) the Accrued Obligations; (ii)
an amount equal to 12 months of base salary, as in effect immediately prior to the termination date; (iii) medical, dental benefits
provided by the Company to the executive and his spouse and dependents at least equal to the levels of benefits provided to other
similarly situated active employees of the Company and its subsidiaries until the earlier of (a) the twelve (12) month anniversary
of the date of termination or (b) the date that the executive becomes covered under a subsequent employer’s medical and
dental plans; and (iv) acceleration of vesting of all equity and equity-based awards.
Pursuant
to the terms of the Severance Agreements, in the event that within one (1) month prior to or the twelve (12) months following
a Change in Control, the Company terminates the executive’s employment without Cause, or the executive terminates his employment
for Good Reason, then, in lieu of the payments and benefits otherwise due to the executive in the preceding paragraph, the executive
will be entitled to: (i) the Accrued Obligations; (ii) an amount equal to the sum of twelve (12) months of base salary, as in
effect on the date of termination or the date of the Change in Control, whichever is greater; (iii) medical, dental benefits provided
by the Company to the executive and his spouse and dependents at least equal to the level of benefits provided to other similarly
situated active employees of the Company and its subsidiaries until the earlier of (a) the twelve (12) month anniversary of the
date of termination or (b) the date that the executive becomes covered under a subsequent employer’s medical and dental
plans; and (iv) acceleration of vesting of all equity and equity-based awards.
In
the event the executive’s employment is terminated by him without Good Reason, by the Company for Cause or due to the executive’s
death or disability, the executive and/or his estate or beneficiaries will be solely entitled to the Accrued Obligations.
The
executive’s entitlement to the payments (other than the Accrued Obligations) and benefits described above is expressly contingent
upon him providing the Company with a signed release satisfactory to the Company.
For
purposes of the Severance Agreements:
“
Accrued
Obligations
” means (i) earned but unpaid base salary through the date of termination; (ii) payment of any annual, long-term,
or other incentive award which relates to a completed fiscal year or performance period, as applicable, and is payable (but not
yet paid) on or before the date of termination; (iii) a lump-sum payment in respect of accrued but unused vacation days at the
executive’s per-business-day base salary rate in effect as of the date of termination; and (iv) any unpaid expense or reimbursements
due pursuant to Company expense reimbursement policy.
“
Cause
”
means a finding by the Company that the executive has (i) been convicted of a felony or crime involving moral turpitude; (ii)
disclosed trade secrets or confidential information of the Company (or any parent or subsidiary) to persons not entitled to receive
such information; (iii) engaged in conduct in connection with the executive’s employment or service to the Company (or any
parent or subsidiary), that has, or could reasonably be expected to result in, material injury to the business or reputation of
the Company (or any parent or subsidiary), including, without limitation, act(s) of fraud, embezzlement, misappropriation and
breach of fiduciary duty; (iv) violated the operating and ethics policies of the Company (or any parent or subsidiary) in any
material way, including, but not limited to those relating to sexual harassment and the disclosure or misuse of confidential information;
(v) engaged in willful and continued negligence in the performance of the duties assigned to the executive by the Company, after
the executive has received notice of and failed to cure such negligence; or (vi) breached any material provision of any agreement
between the executive and the Company (or any parent or subsidiary), including, without limitation, any confidentiality agreement.
“
Change
in Control
” means the occurrence of any of the following events:
|
(i)
|
Any
“person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes a “beneficial owner”
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more
than 50% of the voting power of the then outstanding securities of the Company; provided that a Change of Control will not
be deemed to occur as a result of a change of ownership resulting from the death of a shareholder, and a Change of Control
will not be deemed to occur as a result of a transaction in which the Company becomes a subsidiary of another corporation
and in which the shareholders of the Company, immediately prior to the transaction, will beneficially own, immediately after
the transaction, shares entitling such shareholders to more than 50% of all votes to which all shareholders of the parent
corporation would be entitled in the election of directors (without consideration of the rights of any class of stock to elect
directors by a separate class vote);
|
|
|
|
|
(ii)
|
A
change in the effective control of the Company which occurs on the date that a majority of members of the board of directors
is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of
the members of the board of directors prior to the date of the appointment or election; or
|
|
|
|
|
(iii)
|
The
consummation of (A) a merger or consolidation of the Company with another corporation where the shareholders of the
Company, immediately prior to the merger or consolidation, will not beneficially own, immediately after the merger or consolidation,
shares entitling such shareholders to more than 50% of all votes to which all shareholders of the surviving corporation would
be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by
a separate class vote); (B) a sale or other disposition of all or substantially all of the assets of the Company; or (C) a
liquidation or dissolution of the Company.
|
“
Good
Reason
” means, without the executive’s express written consent, the occurrence of any one or more of the following:
(i) a substantial and material diminution in the executive’s duties or responsibilities; (ii) a material reduction in the
executive’s Base Salary; or (iii) the relocation of the executive’s principal place of employment to a location more
than 50 miles from the executive’ principal work location to a location that is more than 50 miles from the prior location.
Notwithstanding the foregoing, a relocation of Mr. Step’s principal place of employment to a location closer to Mr. Step’s
principal residence in San Diego, California shall not constitute “Good Reason.” A termination of employment by the
executive for Good Reason will be effectuated by giving the Company written notice, or Notice of Termination for Good Reason,
not later than 90 days following the occurrence of the circumstance that constitutes Good Reason, setting forth in reasonable
detail the specific conduct of the Company that constitutes Good Reason and the specific provision(s) of this Agreement on which
the executive relied. The Company will be entitled, during the 30-day period following receipt of a Notice of Termination for
Good Reason, to cure the circumstances that gave rise to Good Reason, provided that the Company shall be entitled to waive its
right to cure or reduce the cure period by delivery of written notice to that effect to the executive (such 30-day or shorter
period, the “Cure Period”). If, during the Cure Period, such circumstance is remedied, the executive will not be permitted
to terminate his employment for Good Reason as a result of such circumstance. If, at the end of the Cure Period, the circumstance
that constitutes Good Reason has not been remedied, the executive will terminate employment for Good Reason on the date of expiration
of the Cure Period.
2009
Stock Plan
The
2009 Stock Plan provides that in the event we merge with or into another corporation, or a Change in Control (as defined below)
occurs, each outstanding option and stock purchase right will be assumed or an equivalent option substituted by the successor
corporation or a parent or subsidiary of the successor corporation. In the event that the successor corporation in a merger or
Change in Control refuses to assume or substitute for the option or stock purchase right, then the optionee will fully vest in
and have the right to exercise the option or stock purchase right as to all of the optioned stock, including shares as to which
it would not otherwise be vested or exercisable; provided, however, that such exercise will only be permitted as and to the extent
it complies with Code Section 409A or does not cause the option or stock purchase right to cease to be exempt from that statute.
For
purposes of the 2009 Stock Plan, “
Change in Control
” means the occurrence of any of the following events:
|
(i)
|
Any
“person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial
owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities representing fifty percent
(50%) or more of the total voting power represented by our then outstanding voting securities; or
|
|
|
|
|
(ii)
|
The
consummation of the sale or disposition by us of all or substantially all of our assets; or
|
|
|
|
|
(iii)
|
The
consummation of a merger or our consolidation with any other corporation, other than a merger or consolidation which would
result in our voting securities outstanding immediately prior thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving entity or its parent) at least 50% of the total voting power
represented by the our voting securities or such surviving entity or its parent outstanding immediately after such merger
or consolidation. Notwithstanding the foregoing, only a Change in Control event that also qualifies as a “change in
the ownership” or a “change in the effective control” of the Company or a “change in the ownership
of a substantial portion” of our assets within the meaning of Treasury Regulation Section 1.409A-3(i)(5) shall be recognized
as a Change of Control for purposes of triggering exercise, distribution or settlement rights under any option or stock purchase
right granted under the Stock Plan that is subject to Code Section 409A.
|
2015
Equity Incentive Plan
The
2015 Equity Incentive Plan provides that notwithstanding any other provision of the 2015 Equity Incentive Plan, in the event of
a Change in Control (as defined below), unless otherwise determined by the plan administrator, each outstanding award under the
plan will be assumed or an equivalent award substituted by the successor corporation or a parent or subsidiary of the successor
corporation. In the event that, or to the extent that, the successor corporation in a Change in Control refuses to assume or substitute
for the award, or if the plan administrator determines that such assumption or substitution is not desirable or is only desirable
for a portion of any outstanding award, then the plan administrator may take any or all of the following actions: (i) determine
that an outstanding award will accelerate and become exercisable, or determine that the restrictions and conditions on an outstanding
award will lapse, in whole or in part, as applicable, upon the Change of Control or upon such other event as the plan administrator
determines; (ii) require that a Grantee surrender his or her outstanding award, or any portion of such outstanding award, in exchange
for a payment by the Company, in cash or stock, as determined by the plan administrator, in an amount equal to the fair market
value of the vested portion of the award (with respect to options or stock appreciation rights, or other similar appreciation
value awards, such value shall be determined by the amount by which the then fair market value of the shares subject to the Grantee’s
unexercised award exceeds the any applicable exercise price or other grant price or base value or the award); or (iii) after giving
the Grantee an opportunity to exercise the vested portion of his or her outstanding award, terminate any or all unexercised portion
of the award at such time as the plan administrator deems appropriate. Such surrender or termination will take place as of the
date of the Change of Control or such other date as the plan administrator may specify.
For
purposes of the 2015 Equity Incentive Plan, “Change in Control” means the occurrence of any of the following events:
|
(i)
|
A
change in our ownership which occurs on the date that any one person, or more than one person acting as a group, or Person,
acquires ownership of our stock that, together with the stock held by such Person, constitutes more than 50% of the total
voting power of our stock, except that any change in the ownership of our stock as a result of a private financing that is
approved by our board of directors will not be considered a Change in Control; or
|
|
|
|
|
(ii)
|
If
we have a class of securities registered pursuant to Section 12 of the Exchange Act, a change in our effective control which
occurs on the date that a majority of members of our board of directors is replaced during any twelve (12) month period by
directors whose appointment or election is not endorsed by a majority of the members of our board of directors prior to the
date of the appointment or election. For purposes of this paragraph (ii), if any Person is considered to be in effective control
of our company, the acquisition of additional control of our company by the same Person will not be considered a Change in
Control; or
|
|
(iii)
|
A
change in the ownership of a substantial portion of our assets which occurs on the date that any Person acquires (or has acquired
during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from
us that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of our
assets immediately prior to such acquisition or acquisitions. For purposes of this paragraph (iii), gross fair market value
means the value of our assets, or the value of the assets being disposed of, determined without regard to any liabilities
associated with such assets.
|
Persons
will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase
or acquisition of stock, or similar business transaction with us.
Compensation
of Directors
Non-Employee
Director Compensation Program
Prior to January 23,
2018
,
non-employee directors received the following compensation for their services:
|
●
|
Annual
Cash Retainer — $20,000
|
|
|
|
|
●
|
Chairman
of the Board Cash Retainer — $15,000
|
|
|
|
|
●
|
Audit
Committee Chair Retainer — $7,500
|
|
|
|
|
●
|
Compensation
Committee Chair Retainer — $5,000
|
|
|
|
|
●
|
Nominating
and Corporate Governance Committee Chair Retainer — $3,500
|
|
|
|
|
●
|
Initial
Equity Grant — 10,000 shares
|
|
|
|
|
●
|
Annual
Equity Grant — 7,000 shares
|
Beginning
January 23, 2018, our non-employee directors are entitled to receive the following compensation for their services:
|
●
|
Annual
Cash Retainer — $35,000
|
|
|
|
|
●
|
Chairman
of the Board Cash Retainer — $25,000
|
|
|
|
|
●
|
Audit
Committee Chair Retainer — $15,000
|
|
|
|
|
●
|
Compensation
Committee Chair Retainer — $10,000
|
|
|
|
|
●
|
Nominating
and Corporate Governance Committee Chair Retainer — $7,500
|
|
|
|
|
●
|
Initial
Equity Grant — 40,000 shares
|
|
|
|
|
●
|
Annual
Equity Grant — 30,000 shares
|
2017
Director Compensation
The
following table sets forth the compensation paid or earned for the fiscal year ended December 31, 2017 to our non-employee directors.
Compensation paid to Michael D. Step, Andrew Ritter, and Ira Ritter is presented as part of the “Summary Compensation Table
(2017 and 2016)” above. Our employee directors do not receive compensation for their service as directors.
Name
of Director
|
|
Fees
Earned and
Paid in Cash
($)
|
|
|
Option
Awards
(2)
($)
|
|
|
All
other compensation
($)
|
|
|
Total
($)
|
|
Noah
Doyle
(1)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Matthew
W. Foehr
|
|
$
|
25,000
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
25,000
|
|
Paul
V. Maier
|
|
$
|
27,500
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
27,500
|
|
Dr.
William M. Merino
|
|
$
|
20,000
|
|
|
|
13,068
|
|
|
|
|
|
|
|
33,068
|
|
Gerald
T. Proehl
(3)
|
|
$
|
23,500
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
23,500
|
|
(1)
|
Mr.
Doyle declined to receive any compensation for his service as director in 2017.
|
|
|
(2)
|
Represents
the aggregate grant date fair value of the options granted to Dr. Merino on January 25, 2017, determined in accordance with
FASB ASC 718.
|
We
utilize the Black-Scholes option-pricing model to value awards. Key valuation assumptions include:
|
●
|
Expected
dividend yield
. The expected dividend is assumed to be zero as we have never paid dividends and have no current plans
to pay any dividends on our common stock.
|
|
|
|
|
●
|
Expected
stock-price volatility
. As our common stock only recently became publicly traded, the expected volatility is derived from
the average historical volatilities of publicly traded companies within our industry that we consider to be comparable to
our business over a period approximately equal to the expected term.
|
|
|
|
|
●
|
Risk-free
interest rate
. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero
coupon U.S. Treasury notes with maturities approximately equal to the expected term.
|
|
|
|
|
●
|
Expected
term
. The expected term represents the period that the stock-based awards are expected to be outstanding. Our historical
share option exercise experience does not provide a reasonable basis upon which to estimate an expected term because of a
lack of sufficient data. Therefore, we estimate the expected term by using the simplified method provided by the SEC. The
simplified method calculates the expected term as the average of the time-to-vesting and the contractual life of the options.
|
In
addition to the assumptions used in the Black-Scholes option-pricing model, we also estimate a forfeiture rate to calculate the
stock-based compensation for our equity awards. We will continue to use judgment in evaluating the expected volatility, expected
terms and forfeiture rates utilized for our stock-based compensation calculations on a prospective basis.
As
of December 31, 2017, each of our non-employee directors (other than Mr. Doyle and Dr. Merino) held option awards to purchase
an aggregate of 1,700 shares of our common stock (adjusted to account for the Reverse Stock Split) and no stock
awards. Mr. Doyle held no stock awards or option awards as of December 31, 2017. Dr. Merino held option awards to purchase an
aggregate of 1,200 shares of our common stock (adjusted to account for the Reverse Stock Split) and no stock awards.
(3)
|
As
noted elsewhere in this proxy statement, Mr. Proehl will not stand for re-election at the Annual Meeting.
|
Equity
Compensation Plan Information
The
following table sets forth aggregate information for the fiscal year ended December 31, 2017 (adjusted to account for the Reverse
Stock Split), regarding the Company’s compensation plans, including individual compensation agreements, under which equity
securities of the Company are authorized for issuance:
Plan
Category
|
|
Number
of securities
to
be issued
upon exercise of
outstanding options,
warrants and rights
(#)
|
|
|
Weighted
average
exercise price of
outstanding options,
warrants and rights
($)
|
|
|
Number
of securities
remaining available for future
issuance under
equity compensation
plans (excluding
securities reflected in column (a))
(#)
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Equity
compensation plans approved by security holders
|
|
|
254,180
|
(1)
|
|
|
15.93
|
|
|
|
2,672,019
|
(2)
|
Equity
compensation plans not approved by security holders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
254,180
|
(1)
|
|
|
15.93
|
|
|
|
2,672,019
|
(2)
|
(1)
|
Represents
the number of underlying shares of common stock associated with outstanding options that were granted under the 2009 Stock
Plan and the 2015 Equity Incentive Plan.
|
|
|
(2)
|
Represents
the number of shares of common stock available for future issuance under the 2015 Equity Incentive Plan. As of June 29, 2015,
no further awards were permitted to be issued under the 2009 Stock Plan.
|
REPORT
OF THE AUDIT COMMITTEE
The
following is the report of the Audit Committee with respect to the Company’s audited financial statements for the fiscal
year ended December 31, 2017. The Audit Committee oversees the Company’s financial reporting process on behalf of the board
of directors.
The
Audit Committee is composed of three non-employee directors and operates under a written charter adopted and approved by the board
of directors. The board of directors, in its business judgment, has determined that each Audit Committee member is “independent”
as such term is defined under the applicable Nasdaq Marketplace Rules and under Section 10A(m)(3) of the Exchange Act. The Company
has identified Paul V. Maier as an “audit committee financial expert” as such term is defined in Item 407(d)(5) of
SEC Regulation S-K. The Audit Committee has sole authority to select and retain (subject to ratification by the Company’s
stockholders), oversee, and terminate the Company’s independent registered public accounting firm, to approve fees and other
terms of the engagement, and to approve any permitted non-audit engagements with the independent registered public accounting
firm.
The
Company’s management has the primary responsibility for the preparation, presentation, and integrity of the Company’s
financial statements and the accounting and reporting process, including the systems of internal controls, and procedures to assure
compliance with applicable accounting standards and applicable laws and regulations.
The
Company’s independent registered public accounting firm is responsible for auditing those financial statements and expressing
an opinion as to their conformity with accounting principles generally accepted in the United States of America.
The
Audit Committee’s responsibility is to independently monitor and review the financial reporting processes of the Company.
However, the Audit Committee members are not professionals engaged in the practice of accounting or auditing, and must rely, without
independent verification, on the information provided to them and on the representations made by management and the independent
registered public accounting firm. Accordingly, although the Audit Committee members consult with and discuss these matters and
their questions and concerns with management and the Company’s independent registered public accounting firm, the Audit
Committee’s oversight cannot provide an independent basis to assure that management has maintained appropriate accounting
and financial reporting principles or appropriate internal controls and procedures consistent with accounting standards and applicable
laws and regulations. Furthermore, the Audit Committee’s considerations and discussions cannot assure that the audit of
the Company’s financial statements has been carried out in accordance with generally accepted auditing standards; that the
financial statements are presented in accordance with generally accepted accounting principles; or, that the Company’s independent
registered public accounting firm is in fact “independent.”
In
this context, the Audit Committee holds meetings throughout the year to, among other things, facilitate and encourage communication
among the Audit Committee, management, and the Company’s independent registered public accounting firm.
In
fulfilling the Audit Committee’s oversight responsibilities, the Audit Committee members reviewed and discussed (a) the
audited financial statements for the fiscal year ended December 31, 2017, with the Company’s management and the independent
registered public accounting firm, who are responsible for expressing an opinion on the conformity of the Company’s audited
financial statements with accounting principles generally accepted in the United States, including a discussion of their judgments
as to the quality, not just the acceptability, of the Company’s accounting principles, (b) the reasonableness of significant
judgments, (c) the clarity of disclosures in the financial statements, and (d) such other matters as are required to be discussed
with the Audit Committee under auditing standards generally accepted in the United States.
The
Audit Committee also discussed with the Company’s independent registered public accounting firm matters related to the conduct
of the audit of the Company’s financial statements and matters required to be discussed by Auditing Standard No. 1301, “
Communications
with Audit Committees
” issued by the Public Company Accounting Oversight Board (the “PCAOB”). The Audit
Committee’s discussions included a discussion of the background and experience of the independent auditor’s audit
team assigned to Ritter and the quality control procedures established by the independent registered public accounting firm. The
Audit Committee has received the written disclosures and the letter from the Company’s independent registered public accounting
firm required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications
with the audit committee concerning independence, and the Audit Committee has discussed with the independent registered public
accounting firm its independence from the Company and its management. The Audit Committee met with the independent registered
public accounting firm with and without management present to discuss the results of their examinations, their evaluations of
the Company’s internal controls, and the overall quality of the Company’s financial reporting.
Based
on the review and the aforementioned meetings, discussions and reports, and subject to the limitations on our role and responsibilities
referred to above and in the Audit Committee Charter, the Audit Committee recommended to the Company’s board of directors
that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2017, for filing with the SEC, and selected Mayer Hoffman McCann P.C. as the Company’s independent
registered public accounting firm for fiscal year 2018.
|
AUDIT
COMMITTEE
|
|
|
|
Paul
V. Maier (Chairman)
|
|
Matthew
W. Foehr
|
|
Gerald
T. Proehl
|
The
information contained in the foregoing report shall not be deemed to be “soliciting material” or to be “filed”
with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933,
as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference in such filing.
PROPOSAL
1
ELECTION
OF DIRECTORS
At
the Annual Meeting, seven directors will be elected by the stockholders to serve until the next Annual Meeting of Stockholders
or until their successors are elected and qualified. Properly submitted proxies will be voted “FOR” the election as
directors of the seven persons named below, unless the proxy contains instructions to the contrary. Proxies cannot be voted for
a greater number of persons than the number of nominees named in this proxy statement. Management has no reason to believe that
any of the nominees is unable or unwilling to serve, if elected. However, in the event that any of the nominees should become
unable or unwilling to serve as a director, the proxy will be voted for the election of such person or persons as shall be designated
by the board of directors.
Nominees
for the Board of Directors
The
board of directors has nominated Michael D. Step, Andrew J. Ritter, Ira E. Ritter, Noah Doyle, Matthew W. Foehr, Paul V. Maier,
and Dr. William M. Merino for election as directors. Information regarding the business experience of each nominee and his or
her service on boards of directors of other public companies may be found under the section of this
proxy statement entitled “BOARD OF DIRECTORS AND CORPORATE GOVERNANCE—The Board of Directors in General.”
Except
for Michael D. Step, Andrew J. Ritter and Ira E. Ritter, who are employees of the Company, the board of directors has determined
that each director nominee qualifies as an “independent” director under Nasdaq’s continued listing requirements.
The board of directors based this determination primarily on a review of the responses of the directors to questions regarding
their employment, affiliations and family and other relationships.
Vote
Required
The
seven nominees for director who receive the highest number of votes “FOR” election by holders of our common
stock that are entitled to vote at the Annual Meeting on the election of a director will be elected as directors, provided
that a quorum is present. Unless otherwise instructed, the Named Proxies will vote properly executed proxies timely received “FOR”
each of the director nominees.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE
ELECTION OF EACH OF
Michael D. Step, Andrew J. Ritter, Ira E. Ritter,
Noah
Doyle, Matthew W. Foehr, Paul V. Maier AND Dr. William M. Merino as directors.
PROPOSAL
2
RATIFICATION
OF THE APPOINTMENT OF THE COMPANY’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Overview
Mayer
Hoffman McCann P.C. currently serves as the Company’s independent registered public accounting firm, and that firm conducted
the audit of the Company’s accounts for fiscal year 2016 and 2017. The Audit Committee has selected Mayer Hoffman McCann
P.C. as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018, and the
board of directors is asking stockholders to ratify that selection. Selection of the Company’s independent registered public
accounting firm is not required to be submitted to a vote of the stockholders of the Company for ratification. Although the Sarbanes-Oxley
Act of 2002, as well as the charter of the Audit Committee, require the Audit Committee to engage, retain, and supervise the Company’s
independent registered public accounting firm, the board of directors considers the selection of the independent registered public
accounting firm to be an important matter of stockholder concern and is submitting the selection of Mayer Hoffman McCann P.C.
for ratification by stockholders as a matter of good corporate practice.
If
a majority of votes cast on this matter are not cast in favor of the selection of Mayer Hoffman McCann P.C., the Audit Committee
and the board of directors will reconsider the selection of such firm as the Company’s independent registered public accounting
firm. Even if stockholders vote on an advisory basis in favor of the selection, the Audit Committee may, in its discretion, direct
the selection of different independent auditors at any time during the year if it determines that such a change would be in the
best interests of the Company and the stockholders.
The
Company expects that representatives of Mayer Hoffman McCann P.C. will be present at the Annual Meeting, will have an opportunity
to make a statement, and will be available to respond to appropriate questions.
Vote
Required
The
affirmative vote of a majority of the votes cast by holders of shares of our common stock represented at the Annual
Meeting is required to ratify the selection of Mayer Hoffman McCann P.C., as the Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2018. Unless otherwise instructed, the Named Proxies will vote properly
executed proxies timely received “FOR” the proposal.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE
RATIFICATION OF THE SELECTION OF
Mayer Hoffman McCann P.C
. AS
THE
COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL
YEAR
ENDING DECEMBER 31, 2018.
OTHER
MATTERS
The
board of directors knows of no other matters other than those stated in this proxy statement that are to be presented for action
at the Annual Meeting. If any other matters should properly come before the Annual Meeting, it is intended that proxies will be
voted on any such matter in accordance with the judgment of the persons voting such proxies. Discretionary authority to vote on
such matters is conferred by such proxies upon the persons voting them.
HOUSEHOLDING
OF PROXY MATERIALS
Some
brokers and other nominee record holders may be participating in the practice of “householding” proxy statements.
This means that only one copy of this proxy statement may have been sent to multiple stockholders in a stockholder’s household.
The Company will promptly deliver a separate copy of the proxy statement to any stockholder who contacts the Company’s Vice
President Finance by writing to Ritter Pharmaceuticals, Inc., 1880 Century Park East, #1000, Los Angeles, CA 90067, or by calling
(310) 203-1000. If a stockholder is receiving multiple copies of this proxy statement at the stockholder’s household and
would like to receive a single copy of the proxy Statement for a stockholder’s household in the future, the stockholder
should contact his or her broker, other nominee record holder, or the Company’s Vice President Finance to request mailing
of a single copy of this proxy statement.
THE
COMPANY’S WEBSITE
In
addition to the information about the Company contained in this proxy statement, extensive information about the Company can be
found on its website located at
www.ritterpharmaceuticals.com
including information about its management team, products
and services and its corporate governance practices. The content on the Company’s website is available for information purposes
only, and should not be relied upon for investment purposes, and is not deemed to be incorporated by reference into this proxy
statement.
THE
COMPANY’S PRINCIPAL EXECUTIVE OFFICE
The
Company’s principal executive office is located at 1880 Century Park East, #1000, Los Angeles, CA 90067.
ANNUAL
REPORT AND OTHER SEC FILINGS
Our
2017 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K are available on our corporate
website
www.ritterpharmaceuticals.com
under the “Investor” tab. These and other SEC filings, including this
proxy statement, are also available on the SEC’s website at
www.sec.gov
. The Company will provide, without charge,
to any person upon written request or telephone call a copy of any of our SEC filings. All such requests should be directed to
our Vice President Finance, Ritter Pharmaceuticals, Inc., 1880 Century Park East, #1000, Los Angeles, CA 90067, or by calling
(310) 203-1000.
ADDITIONAL
QUESTIONS AND INFORMATION REGARDING
THE
ANNUAL MEETING AND STOCKHOLDER PROPOSALS
Q:
|
What
happens if additional proposals are presented at the Annual Meeting?
|
|
|
A:
|
Other
than the three proposals described in this proxy statement, we do not expect any matters to be presented for a vote at the
Annual Meeting. If you grant a proxy, the Named Proxies will have the discretion to vote your shares on any additional matters
properly presented for a vote at the Annual Meeting. If for any unforeseen reason any of our nominees is not available as
a candidate for director, the Named Proxies will vote your proxy for such other candidate or candidates as may be nominated
by the board of directors.
|
|
|
Q:
|
Who
will bear the cost of soliciting votes for the Annual Meeting?
|
|
|
A:
|
Ritter
will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials. However, if you
choose to vote over the Internet, you will bear the expenses for your Internet access. In addition, we have retained Broadridge
Financial Solutions, Inc. (“Broadridge”), 5 Dakota Drive, Suite 300, Lake Success, NY 11042, to aid in the solicitation
of proxies by mail, telephone, facsimile, e-mail and personal solicitation and to contact brokerage houses and other nominees,
fiduciaries and custodians to request that such entities forward soliciting materials to beneficial owners of our common
stock. For these services, we will pay Broadridge a fee of approximately $10,300. In addition to the mailing of these
proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic communication by
our directors, officers, and employees, who will not receive any additional compensation for such solicitation activities.
We will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for forwarding proxy and solicitation materials to stockholders.
|
|
|
Q:
|
May
I propose nominees for election to the board of directors at next year’s annual meeting of stockholders?
|
|
|
A:
|
Yes,
our bylaws establish an advance notice procedure for stockholders to make nominations for the position of director at an annual
meeting. Director nominee proposals for the 2019 Annual Meeting of Stockholders will not be considered timely unless such
proposals are received by us no later than March 28, 2019 and no earlier than February 26, 2019 in accordance
with our bylaws. Any proposal to nominate a director to our board of directors must set forth the information required by
our bylaws.
|
|
|
Q:
|
May
I propose other business proposals for consideration at next year’s annual meeting of stockholders?
|
|
|
A:
|
Yes,
you may submit other business proposals for consideration at next year’s Annual Meeting of Stockholders. In order for
a stockholder proposal to be considered for inclusion in the proxy statement in reliance on Rule 14a-8 of the Exchange Act
and presented at the 2018 Annual Meeting of Stockholders, it must be in such form as is required by the rules and regulations
promulgated by the SEC and received by us not less than 120 calendar days before May 15, 2019 (or by January 15, 2019).
|
A
business proposal submitted by a stockholder pursuant to our bylaws and outside of the process of Rule 14a-8 for the 2019 Annual
Meeting of Stockholders will not be considered timely unless such proposal is received by us no later than March 28, 2019
and no earlier than February 26, 2019 in accordance with our bylaws. Any business proposal must set forth the information
required by our bylaws. The proxy to be solicited on behalf of our board of directors for the 2018 Annual Meeting of Stockholders
may confer discretionary authority to vote on any such proposal considered to have been received on a non-timely basis that nonetheless
properly comes before the 2019 Annual Meeting of Stockholders.
|
By
Order of the Board of Directors
|
|
|
|
|
|
Andrew
J. Ritter
|
|
Corporate
Secretary
|
|
May
15, 2018
|
Ritter Pharmaceuticals (NASDAQ:RTTR)
過去 株価チャート
から 6 2024 まで 7 2024
Ritter Pharmaceuticals (NASDAQ:RTTR)
過去 株価チャート
から 7 2023 まで 7 2024