PHARMA-BIO SERV, INC.
10-Ks and 10-Qs
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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A
(Rule 14a-101)
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed
by the Registrant
☒
Filed by a Party
other than the Registrant:
☐
Check
the appropriate box:
☐
Preliminary Proxy
Statement
☐
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
☒
Definitive Proxy
Statement
☐
Definitive
Additional Materials
☐
Soliciting Material
Pursuant to ss.240.14a-12
Pharma-Bio Serv,
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):
☒
No fee
required.
☐
Fee computed on
table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1)
Title of each class
of securities to which transaction applies:
(2)
Aggregate number of
securities to which transaction applies:
(3)
Per unit price or
other underlying value of transaction computed pursuant to Exchange
Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4)
Proposed maximum
aggregate value of transaction:
(5)
Total fee
paid:
☐
Fee paid previously
with preliminary materials.
☐
Check box if any
part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
(1)
Amount Previously
Paid:
(2)
Form, Schedule or
Registration Statement No.:
(3)
Filing
Party:
(4)
Date
Filed:
PHARMA-BIO SERV, INC.
Pharma-Bio
Serv Building
#6 Road 696
Dorado, Puerto
Rico, 00646
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on June 29,
2018
To our
Stockholders:
The
Annual Meeting of Stockholders of Pharma-Bio Serv, Inc. (the
“Company”) will be held on Friday, June 29, 2018, at
9:30 a.m. local time at the Hilton Philadelphia at Penn's Landing
located at 201 South Christopher Columbus Boulevard, Philadelphia,
Pennsylvania 19106 for the following purposes:
1. The
election of two (2) directors as Class II directors to serve for a
term until the 2021 Annual Meeting of Stockholders or until
successors are duly elected and qualified;
2. The
ratification of the selection of Horwath Velez & Co. PSC as the
Company's independent certified public accountants for the fiscal
year ending October 31, 2018; and
3. The
transaction of such other and further business as may properly come
before the meeting or any, adjournments or postponements of the
meeting.
The
Board of Directors has fixed the close of business on May 21, 2018
as the record date for the determination of stockholders entitled
to notice of and to vote at the annual meeting.
The
enclosed proxy statement contains information pertaining to the
matters to be voted on at the annual meeting. A copy of the
Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 2017 is being mailed with this proxy
statement.
By
order of the Board of Directors,
By:
/s/ Pedro J.
Lasanta
Pedro
J. Lasanta
Chief
Financial Officer, Vice President -
Finance
and Administration and Secretary
Dorado,
Puerto Rico
May 25,
2018
IMPORTANT NOTICE
REGARDING THE
AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON JUNE 29, 2018
The Company's proxy statement and the 2017 Annual Report on Form
10-K are available at
http://www.pharmabioserv.com
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED
TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE
ACCOMPANYING PRE-ADDRESSED POSTAGE-PAID ENVELOPE OR USE THE
INTERNET VOTING SYSTEM AS DESCRIBED ON THE ENCLOSED PROXY CARD.
YOUR PROXY, GIVEN THROUGH THE RETURN OF THE ENCLOSED PROXY CARD OR
BY USE OF THE INTERNET VOTING SYSTEM, MAY BE REVOKED PRIOR TO ITS
EXERCISE BY FILING WITH OUR SECRETARY PRIOR TO THE MEETING A
WRITTEN NOTICE OF REVOCATION OR A DULY EXECUTED PROXY BEARING A
LATER DATE, OR BY ATTENDING THE MEETING AND VOTING IN
PERSON.
TABLE OF CONTENTS
|
PROXY STATEMENT
|
1
|
|
PROPOSAL 1: ELECTION OF DIRECTORS
|
2
|
|
PROPOSAL 2: SELECTION OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
|
9
|
|
REPORT OF THE AUDIT COMMITTEE
|
10
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|
MANAGEMENT
|
11
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EXECUTIVE COMPENSATION
|
12
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BENEFICIAL OWNERSHIP OF SECURITIES AND SECURITY OWNERSHIP
MANAGEMENT
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15
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
|
16
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|
16
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FINANCIAL STATEMENTS
|
16
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OTHER MATTERS
|
17
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PHARMA-BIO
SERV, INC.
Pharma-Bio Serv Building
#6 Road 696
Dorado, Puerto Rico,
00646
PROXY STATEMENT
Annual Meeting of Stockholders
To be held on June 29, 2018
General
We are
providing these proxy materials in connection with the solicitation
by the Board of Directors of Pharma-Bio Serv, Inc. of proxies to be
voted at our 2018 Annual Meeting of Stockholders and at any and all
postponements or adjournments thereof. Our Annual Meeting will be
held on Friday, June 29, 2018, at 9:30 a.m. local time at the
Hilton Philadelphia at Penn's Landing located at 201 South
Christopher Columbus Boulevard, Philadelphia, Pennsylvania 19106.
This proxy statement and the enclosed form of proxy are first being
sent to stockholders on or about May 25, 2018. In this proxy
statement Pharma-Bio Serv, Inc. and its subsidiaries are referred
to as the “Company,” “we,”
“our” or “us.”
Purposes of the Meeting
At the
Annual Meeting, our stockholders will consider and vote upon the
following matters:
(1) The
election of two directors as Class II directors to serve for a term
until the 2021 Annual Meeting of Stockholders or until successors
are duly elected and qualified (the “Election of Directors
Proposal”);
(2) The
ratification of the selection of Horwath Velez & Co. PSC as the
Company's independent certified public accountants for the fiscal
year ending October 31, 2018 (the “Auditor Ratification
Proposal”); and
(3) The
transaction of such other and further business as may properly come
before the meeting or any, adjournments or postponements of the
meeting.
Outstanding Securities and Voting Rights
Only
holders of record of the Company's common stock at the close of
business on May 21, 2018, the record date, will be entitled to
notice of, and to vote at, the Annual Meeting. On that date, we had
23,062,531 shares of common stock outstanding. Each share of common
stock is entitled to one vote at the Annual Meeting.
A
majority of the outstanding shares of our common stock constitutes
a quorum for the transaction of business at the Annual Meeting.
Abstentions and broker non-votes will be included in determining
the presence of a quorum at the Annual Meeting. A broker non-vote
occurs when a nominee holding shares for a beneficial owner does
not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not
received instructions from the beneficial owner. Under New York
Stock Exchange rules, a broker does not have the discretion to vote
on Proposal 1
–
Election
of Directors Proposal.
As a result, any broker that is
a member of the NYSE will not have the discretion to vote Proposal
1.
A broker non-vote
or an abstention will have no effect on Proposal 1.
Proxy Voting
Shares
for which proxy cards are properly executed and returned will be
voted at the Annual Meeting in accordance with the directions given
or, in the absence of directions, will be voted
“FOR”
Proposal 1
–
the Election
of Directors Proposal and “
FOR”
Proposal 2
–
the Auditor
Ratification Proposal.
If, however, other matters are
properly presented, the person named in the proxies in the
accompanying proxy card will vote in accordance with their
discretion with respect to such matters.
The
manner in which your shares may be voted depends on how your shares
are held. If you own shares of record, meaning that your shares are
represented by certificates or book entries in your name so that
you appear as a stockholder on the records of American Stock
Transfer & Trust Company, our transfer agent, a proxy card for
voting those shares will be included with this proxy statement. If
you own shares in street name, meaning that your shares are held by
a bank or brokerage firm or other nominee, you may instead receive
a voting instruction form from that institution with this proxy
statement to instruct it how to vote your shares.
1
The
Board of Directors urges you to promptly date, sign and mail your
proxy or to use the internet voting system set forth in the proxy,
in the form enclosed with this proxy statement, to make certain
that your shares are voted at the Annual Meeting. Proxies in the
enclosed or other acceptable form that are received in time for the
Annual Meeting will be voted. However, you may revoke your proxy at
any time prior to its use by a revocation in writing to the
Corporate Secretary at the Company's principal executive offices at
#6 Road 696 Dorado, Puerto Rico, 00646 or a later dated proxy that
is received in sufficient time by the Company prior to the Annual
Meeting; and, if you attend the Annual Meeting, you may vote your
shares in person.
Attendance and Voting at the Annual Meeting
If you
own common stock of record, you may attend the Annual Meeting and
vote in person, regardless of whether you have previously voted by
proxy card or by internet. If you own common stock in street name,
you may attend the Annual Meeting but in order to vote your shares
at the Annual Meeting, you must obtain a “legal proxy”
from the bank or brokerage firm that holds your shares. You should
contact your bank or brokerage account representative to learn how
to obtain a legal proxy. We encourage you to vote your shares in
advance of the Annual Meeting, even if you plan on attending the
Annual Meeting. If you have already voted prior to the Annual
Meeting, you may nevertheless change or revoke your vote at the
Annual Meeting in the manner described below. To obtain directions
to the Annual Meeting, please visit the hotel's website at
http://www3.hilton.com/en/hotels/pennsylvania/hilton-philadelphia-at-penns-landing-PHLPNHH/maps-directions/index.html#
.
Revocation
If you
own common stock of record, you may revoke a previously granted
proxy at any time before it is voted by delivering to Pedro J.
Lasanta, Chief Financial Officer, Vice President - Finance and
Administration and Secretary of the Company, a written notice of
revocation or a duly executed proxy bearing a later date or by
attending the Annual Meeting and voting in person. Any stockholder
owning common stock in street name may change or revoke previously
granted voting instructions by contacting the bank or brokerage
firm holding the shares or by obtaining a legal proxy from such
bank or brokerage firm and voting in person at the Annual
Meeting.
PROPOSAL 1: ELECTION OF DIRECTORS
Our
Board of Directors is currently comprised of five (5) directors
divided into three separate classes, as nearly equal in number as
possible, with one class being elected each year to serve a
staggered three-year term.
At the
2013 Annual Meeting of Stockholders, our stockholders approved an
amendment to our Certificate of Incorporation, which phased-in the
classification of our Board of Directors which began at the 2013
Annual Meeting of Stockholders. Pursuant to this amendment, the
director initially elected in Class I stood for election at the
2014 Annual Meeting of Stockholders for a term expiring at the 2017
Annual Meeting of Stockholders. The directors initially elected in
Class II stood for election at the 2015 Annual Meeting of
Stockholders for a term expiring at the 2018 Annual Meeting of
Stockholders and the directors initially elected in Class III stood
for election at the 2016 Annual Meeting of Stockholders for a term
expiring at the 2019 Annual Meeting of stockholders.
At this Annual Meeting of
Stockholders and each Annual Meeting of Stockholders thereafter,
the successors to the class of directors whose terms expire at that
meeting would be elected for a term of office to expire at the
third succeeding Annual Meeting of Stockholders after their
election, and until their successors have been duly elected and
qualified.
Our
Class I director is Irving Wiesen; our Class II directors are Kirk
Michel and Dov Perlysky; and our Class III directors are Elizabeth
Plaza and Howard Spindel.
Our
Board of Directors is recommending that Kirk Michel and Dov
Perlysky, our Class II directors, be re-elected to serve for a term
until the 2021 Annual Meeting of Stockholders or until successors
are duly elected and qualified.
If Messrs. Michel and Perlysky
become unavailable for any reason, a situation which is not
anticipated, substitute nominees may be proposed by the board, and
any shares represented by proxy will be voted for the substitute
nominees, unless the board reduces the number of
directors.
2
The
following table sets forth certain information concerning the
nominees for director and each of the other members of the Board of
Directors:
|
Name
|
|
Age
|
|
Positions with the Company
|
|
Director Since
|
|
Year Term Expires and Class
|
|
Elizabeth
Plaza (3)
|
|
54
|
|
Chairman
of the Board
|
|
2006
|
|
2019
Class III
|
|
Kirk
Michel (1),(2)
|
|
63
|
|
Director
|
|
2006
|
|
2018
Class II
|
|
Dov
Perlysky (2),(3)
|
|
55
|
|
Director
|
|
2004
|
|
2018
Class II
|
|
Howard
Spindel (1)
|
|
72
|
|
Director
|
|
2006
|
|
2019
Class III
|
|
Irving
Wiesen (1),(2),(3)
|
|
63
|
|
Director
|
|
2006
|
|
2020
Class I
|
_________________________
(1)
Member of the Audit
Committee and Compensation Committee.
(2)
Member of the
Mergers and Acquisition Committee.
(3)
Member of the
Nominating Committee.
CLASS I - TERM EXPIRING AT 2020 ANNUAL MEETING
Irving Wiesen
, a director since January
2006, has practiced as an attorney specializing in food and drug
law and regulation in the pharmaceutical and medical device
industries for over thirty years. For more than the past ten years
he has been of counsel to the New York law firms, Ullman, Shapiro
and Ullman, LLP and Cohen, Tauber, Spievack & Wagner. Prior to
that, Mr. Wiesen was a partner in the New York food and drug law
firm, Bass & Ullman, and also served as division counsel of
Boehringer Ingelheim Pharmaceuticals, Inc. Mr. Wiesen represents
pharmaceutical, medical device and biotechnology companies in all
aspects of FDA regulation, corporate practice and compliance,
litigation and allied commercial transactions. Mr. Wiesen received
his J.D. degree from the New York University School of Law and
holds an M.A. in English Literature from Columbia University and a
B.A., cum laude, from Yeshiva University.
Mr.
Wiesen brings extensive leadership, business, and legal experience
to the Board. He has practiced as an attorney specializing in food
and drug law and regulation in the pharmaceutical and medical
device industries for over thirty years. His experience as a
practicing lawyer in the pharmaceutical and medical device
industries has given him broad understanding and expertise,
particularly relating to legal and industry matters impacting the
Company.
CLASS II - TERM EXPIRING AT 2018 ANNUAL MEETING
Kirk Michel
, a director since January
2006, is the founder and a managing director of KEMA Advisors, Inc.
(KEMA). Founded in 2000, KEMA is a boutique investment banking firm
located in Hillsborough, North Carolina. KEMA provides corporate
finance advisory services to middle market companies and
governmental agencies. Prior to KEMA, from 1995 to 2000, Mr. Michel
was the co-founder and a managing director of Bahia Group Holdings,
LLC, which provided corporate finance, public finance and merger
and acquisition services to middle market companies and
governmental agencies. Mr. Michel holds a M.B.A. degree in Finance
and Accounting from the Columbia University Graduate School of
Business and a B.A. in Economics from Northwestern
University.
Mr.
Michel brings extensive leadership, business, and finance
experience to the Board. His experience as an investment banker has
given him broad understanding and expertise, particularly relating
to business and finance matters.
Dov Perlysky
, a director since 2004, has
been the managing member of Nesher, LLC, a private investment firm
since 2000. From 1998 until 2002, Mr. Perlysky was a vice president
in the private client group of Laidlaw Global Securities, a
registered broker-dealer. He received his B.S. in Mathematics and
Computer Science from the University of Illinois in 1985 and a
Masters in Management from the JL Kellogg Graduate School of
Northwestern University in 1991. Mr. Perlysky is currently a
director of Enzo Biochem, Inc., a growth-oriented life sciences and
clinical laboratory company listed on the New York Stock Exchange,
Engex, Inc., a closed-end mutual fund, and Highlands Bancorp, Inc.,
a New Jersey community bank.
Mr.
Perlysky brings extensive leadership and business experience, as
well as in-depth understanding of the Company’s history and
tremendous knowledge of our business and the pharmaceutical
industry, to the Board. His experience as a former president of the
Company has given him broad understanding and expertise,
particularly relating to the Company’s business and
industry.
3
CLASS III - TERM EXPIRING AT 2019 ANNUAL MEETING
Elizabeth Plaza
has served as the
Chairman of the Board since January 2006. Also, Ms. Plaza assumed
the role of Senior Strategic Consultant of the Company on January
1, 2013. Ms. Plaza served as our president and chief executive
officer from January 2006 to December 2012, and as our principal
executive officer from January 1, 2014 to December 31, 2014. Ms.
Plaza founded Pharma-Bio Serv PR, Inc., a division of Pharma-Bio
Serv, Inc. on February 1993. Prior to founding her own company, she
worked for Warner Lambert, Inc, and McNeil Pharmaceutical, a
Johnson & Johnson company, as a Pharmaceutical Scientist. Ms.
Plaza graduated from the University of Puerto Rico, Magna Cum Laude
with a degree in Pharmaceutical Sciences. Also, Ms. Plaza has
attended the Executive Development program of the Massachusetts
Institute of Technology (MIT) and the Kellogg Management
Development Program for Minority CEO’s at Northwestern
University in Illinois.
Ms.
Plaza is and has been a member of numerous professional
organizations. She served as a member of the US Department of
Commerce, MBDA, and Washington DC National Advisory Council on
Minority Business Enterprise from 2010-2013; she is a director of
the Board of Directors of the Puerto Rico Manufacturers Association
(“PRMA”) and the President of the Industrial Women
Chapter under PRMA; and she served on the Export Commerce Advisory
Council for Puerto Rico Government from 2009-2012. On her
philanthropic activities, she is founder and President of the Board
of Directors of nonprofit 501c3 foundation Ángeles Vivientes,
which provides programs and education on children mistreatment
prevention. In addition, she is an active member of professional
organizations including the Parenteral Drug Association (PDA),
where she was one of the authors of the Technical Report on the new
FDA Process Validation Guidance. She is a member of the Delaware
Valley International Society of Pharmaceutical Engineers (ISPE),
the American Society for Quality Control (ASQC) and the American
Association of Pharmaceutical Scientists (AAPS).
Ms.
Plaza brings extensive leadership and business experience, as well
as an in-depth understanding of the Company's history and
tremendous knowledge of our business and the pharmaceutical
industry, to the Board. Her experience as our former president and
chief executive officer, and as an entrepreneur serving the
pharmaceutical industry has given her broad understanding and
expertise, along with a strong network of industry professionals
and executives in the industry in Puerto Rico and
abroad.
Howard Spindel
, a director since January
2006, has been a consultant with Integrated Management Solutions, a
securities industry consulting and recruitment firm which he
founded, since 1985. In this capacity, he has also acted as a
financial and operations principal, general securities principal,
registered representative and options principal for several
broker-dealers during this period. He is also a director of Engex,
Inc., a closed-end investment company, and Oak Tree Educational
Partners, Inc., a training company. Mr. Spindel received a B.S
(Accounting) degree from Hunter College.
Mr.
Spindel brings extensive leadership, business, and accounting
experience to the Board. His experience as a consultant, accountant
and board member to other companies has given him broad
understanding and expertise, particularly relating to business,
accounting and finance matters.
Family Relationships
There
are no family relationships among our executive officers and
directors.
Vote Required and Recommendation
Directors will be
elected by a plurality of the votes of the shares present in person
or represented by proxy at the Annual Meeting and entitled to vote
on the election of directors. Stockholders do not have the right to
cumulate their votes for directors.
The
Board of Directors recommends a vote “
FOR
” the nominees
listed above.
4
Directors' Compensation
Effective January
1, 2014, the Compensation Committee of the Board approved the
following compensation to our non-employee directors (i) a $10,000
quarterly retainer fee and (ii) an automatic annual stock option
grant of 20,000 shares to be granted on the tenth day of January
each year. Also, each non-employee director received an option to
purchase 25,000 shares of the Company’s common stock on the
date of his first election. Ms. Plaza received consulting fees
during the year ended October 31, 2017 as set forth below. Ms.
Plaza did not receive compensation as a director for the year ended
October 31, 2017.
The
following table summarizes the compensation earned and paid to our
directors for the year ended October 31, 2017.
|
Name
|
Fees Earned
(1)
|
OptionAwards
(2)(3)
|
All Other
Compensation
|
Total
|
|
Elizabeth
Plaza
|
$
-
|
$
-
|
$
500,792
(4)
|
$
500,792
(4)
|
|
Kirk
Michel
|
$
40,000
|
$
11,364
|
$
-
|
$
51,364
|
|
Dov
Perlysky
|
$
40,000
|
$
11,364
|
$
-
|
$
51,364
|
|
Howard
Spindel
|
$
40,000
|
$
11,364
|
$
-
|
$
51,364
|
|
Irving
Wiesen
|
$
40,000
|
$
11,364
|
$
-
|
$
51,364
|
(1)
Except for
Elizabeth Plaza, during the fiscal year ended October 31, 2017 all
members of the Board of Directors individually earned fees of
$40,000 each, of which $30,000 were paid within the fiscal year and
$10,000 subsequently on December 2017.
(2)
Amounts shown do
not reflect compensation actually received by the directors.
Instead, the amounts shown are the compensation costs recognized by
us in fiscal year 2017 for option grants that were made to
directors as determined pursuant to FASB ASC Topic 718. The
assumptions used to calculate the value of option awards are set
forth under Note I - Stock Options, Restricted Stock Units and
Stock Based Compensation in our audited financial statements for
the fiscal year ended October 31, 2017, included in our Annual
Report on Form 10-K for the fiscal year ended October 31,
2017.
(3)
The options grants
have a term of five years from the grant date and an exercise price
equal to the fair market value on the date of grant. The options
are exercisable as to 50% of the shares six months from the date of
grant and as to the remaining 50% 18 months from the date of
grant.
(4)
Represents
consulting fees and company lease payments for the vehicle under
Elizabeth Plaza’s use for the year ended October 31, 2017 in
the amount of $483,000 and $17,792, respectively. For additional
information regarding these consulting fees, see Employment
Agreements and Consulting Agreement- Elizabeth Plaza - Consulting
Agreement below.
As of
October 31, 2017, each of the below named directors held the
following number of options to purchase shares of common
stock:
|
Messrs.
Perlysky, Spindel, Michel, and Wiesen
|
|||||
|
Grant
Date
|
|
Options
|
|
Exercise
Price
|
|
|
1/02/2013
|
|
10,000
|
|
$
|
0.75
|
|
1/10/2014
|
|
20,000
|
|
$
|
2.05
|
|
1/10/2015
|
|
20,000
|
|
$
|
1.28
|
|
1/10/2016
|
|
20,000
|
|
$
|
0.95
|
|
1/10/2017
|
|
20,000
|
|
$
|
0.91
|
Board Meetings; Annual Meeting Attendance;
Independence
The
Board oversees our business and affairs and monitors the
performance of management. The Board met regularly during the
fiscal year ended October 31, 2017 (“fiscal 2017”) and
continues to meet regularly to review matters affecting our Company
and to act on matters requiring Board approval. The Board also
holds special meetings whenever circumstances require and may act
by unanimous written consent. During fiscal 2017, the Board of
Directors held four meetings, and took one action by written
consent. During fiscal 2017, all directors attended at least 75% of
all Board and committee meetings held during this period. The Board
of Directors encourages, but does not require, its directors to
attend the Company's annual meeting. Ms. Plaza and Mr. Perlysky
attended the 2017 Annual Meeting of Stockholders.
5
The
Board has determined that the following directors are independent
pursuant to Nasdaq Rule 5605 (“Nasdaq Rules”)
(even though the Company's securities are not traded on the Nasdaq
market): Kirk Michel, Dov Perlysky, Howard Spindel and Irving
Wiesen.
Code of Ethics
We have
adopted a Code of Ethics that applies to all our senior management,
including our principal executive officer, principal financial
officer and principal accounting officer, and directors. We intend
to post amendments to or waivers from our Code of Ethics (to the
extent applicable to our Principal Executive Officer, Principal
Financial Officer, Principal Accounting Officer or controller, or
persons performing similar functions) on our website,
www.pharmabioserv.com. Our website is not part of this proxy
statement.
Board Leadership Structure
The
Board of Directors has no policy regarding the need to separate or
combine the offices of Chairman of the Board and Principal
Executive Officer and instead the Board of Directors remains free
to make this determination from time to time in a manner that seems
most appropriate for the Company. Currently, the positions of
Chairman and Chief Executive Officer are separate at Pharma-Bio
Serv, Inc. Elizabeth Plaza serves as our Chairman and Victor
Sanchez serves as our President and Chief Executive Officer. At
this time, the Company believes this segregation allows the Board
of Directors to effectively provide guidance to and oversight of
its management. Also, this structure allows Ms. Plaza the
opportunity to focus on the Company's strategic expansion into new
markets and mergers and acquisition activities.
Currently, the
Company has not designated a lead independent director and
executive sessions of the Board of Directors are presided over by
the Chairman of the Board Committee having authority over the
subject matter discussed at the executive session, as appropriate.
We believe this leadership structure is appropriate based on the
Company's size and characteristics and its commitment to a strong,
independent Board of Directors, exemplified by four out of five of
its directors qualifying as an independent director.
Board Oversight of Enterprise Risk
The
Board of Directors is actively involved in the oversight and
management of risks that could affect the Company. This oversight
and management is conducted primarily through the committees of the
Board of Directors identified below but the full Board of Directors
has retained responsibility for general oversight of risks. The
Audit Committee is primarily responsible for overseeing the risk
management function, specifically with respect to management's
assessment of risk exposures (including risks related to liquidity,
credit, operations and regulatory compliance, among others), and
the processes in place to monitor and control such exposures. The
other committees of the Board of Directors consider the risks
within their areas of responsibility. The Board of Directors
satisfies their oversight 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 the
Company.
Committees
The
standing committees of the Board of Directors are the Audit
Committee, the Compensation Committee, the Mergers and Acquisition
Committee, and the Nominating Committee.
Audit Committee
The
members of the Audit Committee are Howard Spindel, Chairman, Kirk
Michel and Irving Wiesen, all of whom are independent directors as
determined by the Nasdaq Rules. The responsibilities and duties of
the Audit Committee consist of but are not limited to: (1)
overseeing the financial reporting process; (2) meeting with our
external auditors regarding audit results; (3) engaging and
ensuring independence of our outside audit firm and (4) reviewing
the effectiveness of the Company's internal controls. The Audit
Committee met four times during fiscal 2017.
Our
Board has determined that Mr. Spindel qualifies as an “Audit
Committee financial expert” within the meaning of applicable
regulations of the SEC, promulgated pursuant to the Sarbanes-Oxley
Act of 2002. Our Board of Directors has adopted a written charter
for the Audit Committee which the Audit Committee reviews and
reassesses for adequacy on an annual basis. A copy of the Audit
Committee's charter is located on our website at
www.pharmabioserv.com.
6
Compensation
Committee
The
members of the Compensation Committee are Kirk Michel, Chairman,
Howard Spindel and Irving Wiesen, all of whom are independent
directors as determined by the Nasdaq Rules. The responsibilities
and duties of the Compensation Committee consist of, but are not
limited to: (1) approving salaries and incentive compensation of
executive officers, as well as the compensation of our Board
members; (2) reviewing compensation plans, policies and benefit
programs for employees, generally and (3) administering the
employee stock option and benefit plans, when designed by the
Board. While performing its duties, the Compensation Committee
receives substantial input from the Principal Executive Officer
regarding the appropriate level and type of compensation for our
executives, excluding the compensation paid to the Principal
Executive Officer. The Compensation Committee has determined that
no risks exist rising from the Company's compensation policies and
practices for its employees that are reasonably likely to have a
material adverse effect on the Company. The Compensation Committee
did not retain a compensation consultant to review our policies and
procedures with respect to executive compensation for fiscal
2017.
The
Compensation Committee took one action by written consent
and held no meetings
during
fiscal 2017. A copy of the Compensation Committee's charter is
located on our website at www.pharmabioserv.com.
Mergers and Acquisitions Committee
The
members of the Mergers and Acquisitions Committee are Dov Perlysky,
Kirk Michel and Irving Wiesen. Messrs. Michel, Perlysky and Wiesen
are independent directors as determined by the Nasdaq Rules. The
responsibilities and duties of the Mergers and Acquisitions
Committee consist of (1) reviewing and providing guidance to
management and the Board with respect to business development
activities including acquisitions, investment and divestiture
strategies, (2) assisting management in the assessment of potential
transactions, and (3) advising management and the Board in the
selection and use of financial, legal and other
advisors.
Nominating Committee
The
members of the Nominating Committee are Dov Perlysky, Elizabeth
Plaza and Irving Wiesen. We have not adopted a written charter for
this committee at the present time. If the Nominating Committee
identifies a need to replace a current member of the Board, to fill
a vacancy on the Board, or to expand the size of the Board, the
Nominating Committee considers candidates from a variety of
sources. The process followed by the Nominating Committee to
identify and evaluate candidates include (a) meetings to evaluate
biographical information and background material relating to
candidates, (b) requiring candidates to complete questionnaires to
elicit information of the type required to be disclosed by us in
reports filed with the SEC, (c) conducting background
investigations by qualified independent organizations experienced
in conducing criminal and civil investigatory reviews, (d)
interviews of selected candidates by members of the Board and (e)
such other personal and financial reviews and analyses as the
Nominating Committee may deem appropriate in connection with the
consideration of candidates. While the Nominating Committee does
not have a formal policy on diversity, when considering the
selection of director nominees, the Nominating Committee considers
individuals with diverse backgrounds, viewpoints, accomplishments,
cultural background and professional expertise, among other
factors.
Recommendations by
the Nominating Committee of candidates for inclusion in the Board
slate of director nominees are based upon criteria such as business
experience and skills, independence as defined by the Nasdaq
listing requirements (even though the Company's securities are not
traded on the Nasdaq market) or other independence standard deemed
appropriate by the Nominating Committee, distinction in their
activities, integrity, the ability to commit sufficient time and
attention to the Board's activities and the absence of potential
conflicts with the Company's interests. The Nominating Committee
also considers any other relevant factors that it may from time to
time deem appropriate, including the current composition of the
Board, the balance of management and independent directors, the
need for Audit Committee expertise and the evaluation of all
prospective nominees. The Nominating Committee considers candidates
for Board membership, including those suggested by stockholders
applying the same criteria to all candidates. We intend to adopt a
stockholder nomination policy in the near future. The Nominating
Committee
took one action
by written consent
and held no
meetings
during fiscal 2017.
7
Communications with our Board of Directors
Any
stockholder who wishes to send a communication to our Board of
Directors should address the communication either to the Board of
Directors or to the individual director c/o Mr. Pedro J. Lasanta,
Chief Financial Officer, Vice President - Finance and
Administration and Secretary, c/o Pharma-Bio Serv, Inc., the
Pharma-Bio Serv Building, #6 Road 696, Dorado, Puerto Rico, 00646.
Mr. Lasanta will forward the communication either to all of the
directors, if the communication is addressed to the Board, or to
the individual director, if the communication is directed to a
director.
Nominees for Director
Any
stockholder who wants to nominate a candidate for election to the
Board must deliver timely notice to our secretary at our principal
executive offices. In order to be timely, the notice must be
delivered as follows:
●
in the case of an
annual meeting, not less than 120 calendar days prior to the
anniversary date of the Company's release of the proxy statement to
shareholders in connection with the immediately preceding annual
meeting of stockholders, although if we did not hold an annual
meeting or the annual meeting is called for a date that is not
within 30 days of the anniversary date of the prior year's annual
meeting, the notice must be received a reasonable time before we
begin to print and mail our proxy materials; and
●
in the case of a
special meeting of stockholders called for the purpose of electing
directors, the notice must be received a reasonable time before we
begin to print and mail our proxy materials.
The
stockholder's notice to the secretary must set forth:
●
as to each person
whom the stockholder proposes to nominate for election as a
director (a) his or her name, age, business address and residence
address, (b) his or her principal occupation and employment, (c)
the number of shares of our common stock owned beneficially or of
record by him or her and (d) any other information relating to the
nominee that would be required to be disclosed in a proxy statement
or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and the rules and regulations of the
SEC thereunder; and
●
as to the
stockholder giving the notice (a) his or her name and record
address, (b) the number of shares of common stock of the
corporation which are owned beneficially or of record by him, (c) a
description of all arrangements or understandings between the
stockholder and each proposed nominee and any other person or
persons (including their names) pursuant to which the nomination(s)
are to be made by the stockholder, (d) a representation by him or
her that he or she is a holder of record of our stock entitled to
vote at such meeting and that he intends to appear in person or by
proxy at the meeting to nominate the person or persons named in
this notice and (e) any other information relating to the
stockholder that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act and the rules and regulations of the
SEC thereunder.
The
notice delivered by a stockholder must be accompanied by a written
consent of each proposed nominee to being named as a nominee and to
serve as a director if elected. The stockholder must be a
stockholder of record on the date on which he gives the notice
described above and on the record date for the determination of
stockholders entitled to vote at the meeting.
Any
person who desires to nominate a candidate for director at our 2019
Annual Meeting should provide the information required not later
than January 25, 2019.
8
PROPOSAL 2: SELECTION OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
We are
asking our stockholders to ratify the Audit Committee's selection
of Horwath Velez & Co. PSC (“Horwath”) as our
independent certified public accountants for the year ending
October 31, 2018. If the stockholders do not ratify the appointment
of Horwath, the selection of our independent certified public
accountants may be reconsidered by our Audit
Committee.
We
engaged Horwath as our independent public accountants on September
25, 2006. Horwath audited the Company's consolidated financial
statements for the fiscal years ended October 31, 2017 and 2016,
which are included in our Annual Report for the year ended October
31, 2017.
Representatives of Horwath are
expected to be present at the Annual Meeting and will have the
opportunity to make a statement if they desire to do so. It is also
expected that they will be available to respond to appropriate
questions.
Principal Accountant Fees and Services
We were
billed by Horwath in 2017 and 2016 as follows:
|
Description
of services:
|
Fiscal
2017
|
Fiscal
2016
|
|
Audit
|
$
45,500
|
$
50,500
|
|
Audit-Related
|
27,900
|
28,275
|
|
Tax and other
services
|
6,000
|
12,399
|
|
Total
Fees
|
$
79,400
|
$
91,174
|
Audit
fees above are professional services associated with the integrated
audit of our consolidated financial statements. Audit-Related fees
are primarily attributable to services rendered in connection to
reviews of our quarterly condensed financial statements. Tax and
other services are mainly attributable to retirement plan
compliance audit and international tax compliance
services.
Policy on Audit Committee Pre-Approval of Audit and Permissible
Non-Audit Services of Independent Auditors
The
Audit Committee’s policy is to pre-approve all audit and
permissible non-audit services provided by the independent public
accountants. These services may include audit services,
audit-related services, tax services and other services.
Pre-approval is generally provided for up to one year and any
pre-approval is detailed as to the particular service or category
of services and is generally subject to a specific budget. Horwath
and management are required to periodically report to the Audit
Committee regarding the extent of services provided by the
independent public accountants in accordance with this
pre-approval, and the fees for the services performed to date. The
Audit Committee may also pre-approve particular services on a case
by case basis. The Audit Committee approved one hundred percent
(100%) of all services provided by Horwath during fiscal 2017 and
2016.
The
Audit Committee has considered the nature and amount of the fees
billed by Horwath, and believes that the provision of the services
for activities unrelated to the audit is compatible with
maintaining Horwath’s independence.
Vote Required and Recommendation
The
proposal to approve the selection of Horwath as our independent
accountant for the fiscal year ending October 31, 2018 requires the
affirmative vote of a majority of the votes cast.
The
Board of Directors recommends a vote “
FOR
”
the proposal.
9
REPORT OF THE AUDIT COMMITTEE
The
Audit Committee reviews the Company's financial reporting process
on behalf of the Board. Management has the primary responsibility
for establishing and maintaining adequate internal control over
financial reporting for preparing the financial statements and for
the report process. The Audit Committee members do not serve as
professional accountants or auditors, and their functions are not
intended to duplicate or to certify the activities of management or
the independent public accounting firm. We have engaged Horwath
Velez & Co. (PSC) (“Horwath”) as our independent
public accountants to report on the conformity of the Company's
financial statements to accounting principles generally accepted in
the United States. In this context, the Audit Committee hereby
reports as follows:
1) The
Audit Committee has reviewed and discussed the audited financial
statements with management of the Company.
2) The
Audit Committee has discussed with Horwath the matters required to
be discussed under Public Company Accounting Oversight Board
(“PCAOB”) Auditing Standards No. 1301, Communications
with Audit Committees.
3) The
Audit Committee has also received the written disclosures and the
letter from Horwath required by applicable requirements of the
PCAOB regarding the independent accountant's communications with
the Audit Committee concerning independence and the Audit Committee
has discussed the independence of Horwath with that
firm.
4) Based
on the review and discussion referred to in paragraphs (1) through
(3) above, the Audit Committee recommended to the Board and the
Board approved the inclusion of the audited financial statements in
the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 2017, for filing with the SEC.
The
foregoing has been furnished by the Audit Committee:
Howard
Spindel, Chairman
Kirk
Michel
Irwin
Wiesen
This “Audit Committee Report” is not “Soliciting
Material,” is not deemed filed with the SEC and it not to be
incorporated by reference in any filing of the Company under the
Securities Act of 1933, as amended or the Securities Exchange Act
of 1934, whether made before or after the date hereof and
irrespective of any general incorporation language in any such
filing.
10
MANAGEMENT
Executive Officers
The
following table sets forth certain information with respect to our
executive officers.
|
Name
|
|
Age
|
|
Position
|
|
Victor
Sanchez
|
|
47
|
|
Chief
Executive Officer, President and President of European
Operations
|
|
Pedro
J. Lasanta
|
|
58
|
|
Chief
Financial Officer, Vice President - Finance and Administration and
Secretary
|
Victor Sanchez
has served as our Chief
Executive Officer and President since January 1, 2015 and as the
President of the European Operations of the Company since January
2011. Prior to joining the Company, he served as Operations Manager
in the LOCM and OSD divisions of Merck Sharp & Dohme, a
pharmaceutical company, in Madrid, Spain from April 2010 to January
2011 and as Operations Manager of the LOCM division of
Schering-Plough S.A., a pharmaceutical company, in Madrid, Spain,
from September 2004 to April 2010. He served as Quality Control
Validations Manager for Schering-Plough Products, LLC, a
pharmaceutical company (“Schering-Plough”), in Puerto
Rico from December 2000 to August 2004 and as Quality Control
Laboratory Supervisor of Schering-Plough from April 1996 to
December 2000. Mr. Sanchez holds a Bachelor of Science in
Chemistry, summa cum laude, and a M.B.A. in Industrial Management,
cum laude, from the Interamerican University of Puerto Rico. He
holds a Post Graduate Diploma in Pharmaceutical Validation
Technology from the Dublin Institute of Technology, Ireland. Mr.
Sanchez is a chemist licensed by the Puerto Rico State Department
and a member of the American Chemical Society, the Parenteral Drug
Association, the Regulatory Affairs Professional Society, and the
International Society for Pharmaceutical Engineers.
Pedro J. Lasanta
has served as our Chief
Financial Officer and Vice President - Finance and Administration
since November 2007, and our Secretary since December 1, 2014. From
2006 until October 2007, Mr. Lasanta was in private practice as an
accountant, tax and business counselor. From 1999 until 2006, Mr.
Lasanta was the Chief Financial Officer for Pearle Vision Center
PR, Inc. In the past, Mr. Lasanta was also an audit manager for
Ernst & Young, formerly Arthur Young & Company. He is a cum
laude graduate in business administration (accounting) from the
University of Puerto Rico. Mr. Lasanta is a Certified Public
Accountant. In 2012, he was awarded the Puerto Rico Manufacturers
Association (North Region) Service Manager of the Year. Mr. Lasanta
has served as a Member of the Puerto Rico District Export Council
for the U.S. Department of Commerce since January
2014.
11
EXECUTIVE COMPENSATION
Summary Compensation Table
The
following table provides the compensation paid to our principal
executive officer and other executive officers whose total
compensation exceeded $100,000 for the fiscal years ended October
31, 2017 and 2016 (the “Named Executive
Officers”).
|
Name and
Principal Position
|
|
Fiscal
Year
|
Salary
|
Bonus
|
Stock
Awards
($)
(1)
|
Option Awards
($)(1)
|
All
Other
Compensation
|
Total
|
|
Victor
Sanchez
|
|
2017
|
$
220,600
|
$
-
|
$
4,167
|
$
9,894
|
$
14,950
(2)
|
$
249,611
|
|
President
and
Chief Executive
Officer
|
|
2016
|
$
220,600
|
$
-
|
$
6,506
|
$
11,506
|
$
11,917
(2)
|
$
250,529
|
|
|
|
|
|
|
|
|
|
|
|
Pedro
Lasanta,
|
|
2017
|
$
160,600
|
$
-
|
$
-
|
$
9,894
|
$
-
|
$
170,494
|
|
Chief Financial
Officer, Vice President -Finance and Administration and
Secretary
|
|
2016
|
$
160,600
|
$
-
|
$
-
|
$
11,506
|
$
-
|
$
172,106
|
__________
(1)
Amounts shown do
not reflect compensation received by the executive officers.
Instead, the amounts shown are the compensation costs recognized by
us in fiscal year 2017 and 2016 for option grants and restricted
units awards, as applicable, that were made to officers as
determined pursuant to FASB ASC Topic 718. The assumptions used to
calculate the value of option and restricted stock units awards are
set forth under Note I - Stock Options, Restricted Stock Units and
Stock Based Compensation in our audited financial statements for
the fiscal year ended October 31, 2017 included in our Annual
Report on Form 10-K for the fiscal year ended October 31,
2017.
(2)
Represents health
insurance plan expenses incurred pursuant to Mr. Sanchez’s
employment agreement.
Outstanding Equity Awards at Fiscal Year-End Table
The
following table summarizes information regarding equity-based
awards held by our Named Executive Officers as of October 31,
2017.
|
|
Option
Awards
|
Stock
Awards
|
||||||
|
Name
|
Number of
Securities Underlying Unexercised Options Exercisable
|
Number of
Securities Underlying Unexercised Options
Unexercisable
|
Option
Exercise Price
|
Option
Expiration Date
|
Number of
Shares or Units of Stock that have not Vested
|
Market Value
of Shares or Units of Stock that have not Vested
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other
Rights that have not Vested
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares,
Units or Other Rights that have not Vested
|
|
Victor
Sanchez
|
41,666
(1)
|
83,334
(1)
|
$
0.86
|
Dec. 16,
2020
|
-
|
$
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Pedro
Lasanta
|
41,666
(1)
|
83,334
(1)
|
$
0.86
|
Dec. 16,
2020
|
-
|
$
-
|
-
|
-
|
__________
(1)
Represents options
to purchase 125,000 shares of common stock which were granted on
December 17, 2015. These options vest in three annual installments
beginning on December 17, 2016.
12
Employment Agreements and Consulting Agreement
Victor Sanchez – Employment Agreement
On
January 1, 2015, the Company entered into an Employment Agreement
with Victor Sanchez, the President, Chief Executive Officer and
President of Europe Operations of the Company (the
“Employment Agreement”). Pursuant to the Employment
Agreement, Mr. Sanchez is entitled to receive an annual base salary
of $220,000 and such discretionary bonus, stock options and other
equity-based incentives as determined by the Compensation Committee
of the Company. Also, Mr. Sanchez is entitled to receive benefits
provided to all other executive officers of the
Company.
Also,
pursuant to the Employment Agreement, if the Company terminates the
Employment Agreement and Mr. Sanchez’s employment other than
for death, disability or cause, the Company shall (1) pay to Mr.
Sanchez within 30 days after the date of termination (a) a lump-sum
severance payment in an amount equivalent to one (1) year of salary
at the time of the termination, less legal withholdings, or the
severance established by PR labor law No. 80 of May 30, 1976, known
as the “Wrongful Discharge Act” (“Ley de Despido
Injustificado”), whichever amount is higher; (b) any bonuses
that he may have earned up to the date of his termination, and (c)
the value of any unused accrued vacation days, (2) provide
executive one (1) year health coverage for the executive and
dependents, and (3) provide that any restricted stock units,
options or other similar granted awards held by him will become
vested and exercisable for a three month period following the
termination. Also, pursuant to the Employment Agreement, in the
event of a change of control of the Company in connection with a
sale, merger or acquisition of the Company or the Company ceases to
be a public company, and is no longer subject to the reporting
obligations of the Securities Exchange Act of 1934, as amended, any
restricted stock units, options or other similar granted awards
held by Mr. Sanchez will become vested and exercisable immediately
prior to such event. If the Employment Agreement is terminated for
death, disability or cause, no additional compensation will be
payable subsequent to the date of such termination. The Employment
Agreement also includes standard provisions relating to
non-competition, non-solicitation and confidentiality.
Pedro Lasanta – Employment Agreement
On
November 5, 2007, we entered into an employment agreement with
Pedro Lasanta, our chief financial officer, for a one year term
pursuant to which we paid Mr. Lasanta an annual salary of $100,000
plus a monthly car allowance of $500. Mr. Lasanta’s
employment agreement has a non-competition provision pursuant to
which he agrees that during the term of the agreement and for one
year thereafter, Mr. Lasanta will not, directly or indirectly,
engage in a competing business or solicit any customer or seek to
persuade any customer to reduce the amount of business it does with
us or seek to persuade any employee to leave our
employment.
On
December 17, 2008, we entered into an amendment to the employment
agreement with Pedro Lasanta pursuant to which the term of the
contract was extended indefinitely. The amended employment
agreement provides that we will pay Mr. Lasanta an annual salary of
$110,000 and an annual bonus in cash or Company stock options to be
granted based on performance metrics to be established. Pursuant to
the amended employment agreement, we will grant Mr. Lasanta options
to purchase 30,000 shares of Company stock having an exercise price
equal to fair market value on the date of grant and vesting in
three equal annual installments beginning one year from November 1,
2008. In addition, upon termination of Mr. Lasanta’s
employment for reasons other than those set forth in his amended
employment agreement, Mr. Lasanta will receive a lump-sum severance
payment in an amount equivalent to six months of his salary at the
time of the termination, less legal withholdings, or the severance
established by Ley de Despido Injustificado, whichever amount is
higher. All other terms and conditions of Mr. Lasanta’s
employment agreement remain the same.
On
March 11, 2009, upon the approval of the Company’s
Compensation Committee, the Company entered into an amendment to
employment agreement with Pedro J. Lasanta to reduce Mr.
Lasanta’s current annual base salary from $110,000 to
$106,000 and to eliminate Mr. Lasanta’s automobile allowance
effective March 1, 2009. Effective January 1, 2010, the Company
amended the employment agreement of Mr. Lasanta, dated November 5,
2007, to restore Mr. Lasanta's annual base salary to $110,000. On
January 31, 2012, the Company amended the employment agreement of
Mr. Lasanta, dated November 5, 2007, to increase Mr. Lasanta's
annual base salary from $110,000 to $125,000. On December 31, 2012,
the Company amended the employment agreement of Mr. Lasanta, dated
November 5, 2007, to increase Mr. Lasanta's annual base salary from
$125,000 to $150,000 as of January 1, 2013. All other terms and
conditions of Mr. Lasanta's employment agreement, as amended,
remain the same.
13
On
February 17, 2014, the Company amended the employment agreement of
Pedro Lasanta, dated November 5, 2007, to increase Mr.
Lasanta’s salary to $160,000, effective January 1, 2014 (the
“Lasanta Amendment”). Also, pursuant to the Lasanta
Amendment, if the Company terminates the employment agreement of
Mr. Lasanta other than for death, disability or cause, the Company
shall (1) pay to the executive within 30 days after the date of
termination (a) a lump-sum severance payment in an amount
equivalent to one (1) year of salary at the time of the
termination, less legal withholdings, or the severance established
by Ley de Despido Injustificado, whichever amount is higher; (b)
any bonuses that the executive may have earned up to the date of
his termination, and (c) the value of any unused accrued vacation
days, (2) provide executive one (1) year health coverage for the
executive and dependents, and (3) provide that any restricted stock
units, options or other similar granted awards held by the
executive will become vested and exercisable for a three month
period following the termination. Also, pursuant to the Lasanta
Amendment, in the event of a change of control of the Company in
connection with a sale, merger or acquisition of the Company or the
Company ceases to be a public company, and is no longer subject to
the reporting obligations of the Securities Exchange Act of 1934,
as amended, any restricted stock units, options or other similar
granted awards held by Mr. Lasanta will become vested and
exercisable immediately prior to such event.
Elizabeth Plaza - Consulting Agreement
On
December 31, 2013, the Company entered into a consulting agreement
with Strategic Consultants International, LLC (the
“Consultant”) and Ms. Elizabeth Plaza, effective as of
January 1, 2014. On January 1, 2015, the consulting agreement was
amended to extend the term of the consulting agreement for an
additional year to December 31, 2015. On December 30, 2015, the
consulting agreement was amended to extend the term of the
consulting agreement for an additional year to December 31, 2016
and to amend the monthly retainer to $31,500 effective January 1,
2016. On January 17, 2017, the consulting agreement was amended to
extend the term of the consulting agreement for an additional year
to December 31, 2017 and to amend the monthly retainer to $42,000
effective January 1, 2017. On January 8, 2018, the consulting
agreement was amended to extend the term of the consulting
agreement for an additional year to December 31, 2018 (the
“Extension Term”). The Company will compensate
Consultant a monthly retainer of $33,700 during the Extension Term.
Additionally, in the event the Company achieves at least eighty
percent (80%) of its budget for the year ending October 31, 2018,
Consultant shall receive a payment in the amount of $100,000 (the
“Incentive Fee”). If the Company achieves one hundred
percent (100%) or more of its budget for the year ending October
31, 2018, the Incentive Fee shall be $120,000. All other terms and
conditions of the consulting agreement remain the same. Pursuant to
the consulting agreement, the Consultant will consult with the
Board regarding the Company’s strategic initiatives, company
services, management, operations and other matters as may be
requested from time to time by the Board. In addition to the
monthly fee, Ms. Plaza will receive a company automobile and such
insurance as she was provided by the Company during her last year
of employment with the Company. The consulting agreement also
included standard provisions relating to non-competition,
confidentiality, and nondisparagement.
14
BENEFICIAL OWNERSHIP OF SECURITIES AND SECURITY OWNERSHIP
MANAGEMENT
The
following table provides information as to shares of common stock
beneficially owned as of May 21, 2018 by:
●
each
director;
●
each officer named
in the summary compensation table (“Named Executive
Officers”);
●
each person owning
of record or known by us, based on information provided to us by
the persons named below, to own beneficially at least 5% of our
common stock; and
●
all directors and
executive officers as a group.
As of
May 21, 2018, the Company had 23,062,531 shares of common stock
outstanding. As used herein, the term beneficial ownership with
respect to a security is defined by Rule 13d-3 under the Securities
Exchange Act of 1934 as consisting of sole or shared voting power
(including the power to vote or direct the vote) and/or sole or
shared investment power (including the power to dispose or direct
the disposition of) with respect to the security through any
contract, arrangement, understanding, relationship or otherwise,
including a right to acquire such power(s) during the next 60 days.
Unless otherwise noted, beneficial ownership consists of sole
ownership, voting and investment rights and the address for each
person is c/o Pharma-Bio Serv, Inc., the Pharma-Bio Serv Building,
#6 Road 696, Dorado, Puerto Rico, 00646.
|
Name
|
Shares of
Common Stock Beneficially Owned at
May
21,
2018
|
Percentage
|
|
Directors and
Executive Officers
|
|
|
|
Elizabeth
Plaza(1)
|
9,169,518
|
39.8
%
|
|
Dov
Perlysky(2)
|
2,042,655
|
8.8
%
|
|
Kirk
Michel(3)
|
438,469
|
1.8
%
|
|
Howard
Spindel(4)
|
105,310
|
*
|
|
Irving
Wiesen(5)
|
105,205
|
*
|
|
Victor
Sanchez(6)
|
132,544
|
*
|
|
Pedro
Lasanta(7)
|
153,900
|
*
|
|
All Directors and
Executive Officers as a group
|
|
|
|
(seven
persons)(8)
|
12,147,601
|
51.6
%
|
|
5% or Greater
Stockholders
|
|
|
|
Venturetek,
L.P.(9)
|
3,132,932
|
13.6
%
|
|
Ramon Luis
Dominguez Thomas (10)
|
2,060,060
|
8.9
%
|
|
Addison McKinley
Levi III (11)
|
2,050,059
|
8.9
%
|
__________
* Less
than 1%.
(1)
Includes 4,099,241
shares owned by Ms. Plaza directly and 5,070,277 shares subject to
a voting proxy in favor of Ms. Plaza. In conjunction with
certification as a minority controlled business, Ms. Plaza received
irrevocable proxies (“Voting Proxies”) to vote an
aggregate of 5,070,277 shares of the Company’s common stock
from Venturetek LP, Krovim, LLC and LDP Family Partnership. These
Voting Proxies are effective until December 19, 2018, unless the
business certification expires sooner.
(2)
The shares of
common stock beneficially owned by Mr. Perlysky include (i) 25,310
shares directly owned, (ii) 1,164,554 shares of common stock owned
by Krovim, LLC, (iii) 772,791 shares owned by LDP Family
Partnership and (iv) options issued to Mr. Perlysky to purchase
80,000 shares of common stock, which are vested as of May 21, 2018.
Elizabeth Plaza exercises voting power over the shares owned by
Krovim pursuant to a Voting Proxy and Mr. Perlysky as the manager
of Nesher, LLC, which is the manager of Krovim, may be deemed to
exercise dispositive power over these shares. Mr. Perlysky
disclaims beneficial interest in the shares owned by Krovim.
Elizabeth Plaza exercises voting power over the shares owned by the
LDP Family Partnership pursuant to a Voting Proxy and Mr.
Perlysky’s wife, the general partner of LDP Family
Partnership, is deemed to exercise dispositive power over these
shares. Mr. Perlysky disclaims beneficial ownership in the
securities owned by his wife.
(3)
The shares of
common stock beneficially owned by Mr. Michel consist of (i) 17,763
shares directly owned, (ii) 80,000 shares of common stock issuable
upon exercise of options, which are vested as of May 21, 2018, and
(iii) 340,706 shares of common stock owned by KEMA Advisors, of
which Mr. Michel is managing director.
(4)
The shares of
common stock owned by Mr. Spindel represent 25,310 shares owned by
his spouse and 80,000 shares issuable upon exercise of options,
which are vested as of May 21, 2018. Mr. Spindel disclaims
beneficial ownership of the shares held by his spouse.
(5)
The shares of
common stock owned by Mr. Wiesen represent 25,205 shares directly
owned and 80,000 shares issuable upon exercise of options, which
are vested as of May 21, 2018.
(6)
The shares of
common stock owned by Mr. Sanchez represent 49,211 shares directly
owned and 83,333 shares issuable upon exercise of options, which
are vested as of May 21, 2018.
(7)
The shares of
common stock owned by Mr. Lasanta represent 70,567 shares directly
owned and 83,333 shares issuable upon exercise of options, which
are vested as of May 21, 2018.
(8)
Includes 446,666
shares issuable upon the exercise of options, which are vested as
of May 21, 2018.
(9)
This information
was obtained from Amendment No. 4 to Schedule 13 D/A filed by
Venturetek, L.P. (“Venturetek”) on September 6, 2011.
Does not include 1,565,058 shares underlying warrants, which
warrants expired in January 2011, listed in the Schedule 13 D/A
filed on January 5, 2011. Mr. David Selengut, the manager of
TaurusMax LLC, which is the general partner of Venturetek has sole
dispositive power and Elizabeth Plaza has sole voting power over
these shares pursuant to a Voting Proxy. The mailing address for
Venturetek, L.P. is 150 East 42nd Street, New York, NY
10017.
(10)
This information
was obtained from a Schedule 13D filed by Ramon Luis Dominguez
Thomas on March 27, 2014. The business address for this person is
c/o San Juan Holdings, Inc., MCS Plaza, Suite #305, 255 Ponce de
Leon Avenue, San Juan, PR, 00917.
(11)
This information
was obtained from a Schedule 13D filed by Addison McKinley Levi III
on March 27, 2014. The business address for this person is c/o San
Juan Holdings, Inc., MCS Plaza, Suite #305, 255 Ponce de Leon
Avenue, San Juan, PR, 00917.
15
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section
16(a) of the Securities Exchange Act requires our executive
officers and directors, and persons who own more than 10% of our
common stock, to file reports regarding ownership of, and
transactions in, our securities with the Securities and Exchange
Commission and to provide us with copies of those filings. To the
Company’s knowledge, based solely on a review of the copies
of such reports furnished to the Company and written
representations that no other reports were required, during the
year ended October 31, 2017, all such filing requirements
applicable to the Company’s directors, executive officers and
greater than 10% beneficial owners were complied with.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Party Transactions
In
February 2007, we entered into an agreement for our main resource
facilities in Dorado, Puerto Rico with Plaza Professional Center,
Inc., a company controlled by Elizabeth Plaza, our Chairman of the
Board. These facilities accommodate our testing laboratory, our
customer-specialized training facilities, and our Puerto Rico
consulting and headquarters offices. The agreement is for a five
year term, with initial monthly installments of $18,750, which will
increase by 5% annually. The agreement also requires the payment of
utilities, property taxes, insurance and a portion of expenses
incurred by the affiliate in connection with the maintenance of
common areas. The agreement provided for a renewal option under the
same terms, which became effective February 2012 for a period of
five additional years. In July 2016, with effective date January 1,
2016, the Company renegotiated the lease agreement. It incorporates
additional space for a laboratory testing facility expansion, is
for a five-year term, with a renewal option of five years, and
monthly rental payments of $30,316 for the term of the lease
agreement and renewal option. The lease agreement also requires the
payment of utilities, property taxes, insurance and expenses
incurred by the affiliate in connection with the maintenance of
common areas. During the years ended October 31, 2017 and October
31, 2016, we paid approximately $363,800 and $359,000,
respectively, to Plaza Professional Center, Inc. in connection with
the lease of these facilities.
Also,
see Employment Agreements and Consulting Agreement - Elizabeth
Plaza - Consulting Agreement above for a description of the
consulting agreement. During the years ended October 31, 2017 and
October 31, 2016, we paid consulting fees and company lease
payments in the amount of $483,000 and $17,792, and $399,000 and
$18,936, respectively under the consulting agreement.
On
November 28, 2014, Pharma-Bio PR entered into an Independent
Contractor Agreement with Nelida Plaza, Elizabeth Plaza’s
sister, pursuant to which Ms. N. Plaza provides independent
services with project deliverables as requested by Pharm-Bio PR at
a rate ranging from $90 to $125 per hour. During the years ended
October 31, 2017 and 2016, Ms. N. Plaza was compensated $181,045
and $242,193 respectively, pursuant to the Independent Contractor
Agreement.
FINANCIAL STATEMENTS
A copy
of our Form 10-K for the year ended October 31, 2017, without
exhibits, is being mailed with this proxy statement. Stockholders
are referred to the report for financial and other information
about us.
Additional copies
of our Form 10-K for the year ended October 31, 2017 may be
obtained without charge by writing to Mr. Pedro J. Lasanta, Chief
Financial Officer, Vice President - Finance and Administration and
Secretary, Pharma-Bio Serv, Inc., #6 Road 696, Dorado, Puerto Rico,
00646. Exhibits will be furnished upon request and upon payment of
a handling charge of $.25 per page, which represents our reasonable
cost on furnishing such exhibits. The SEC maintains a web site that
contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
SEC. The address of such site is http://www.sec.gov.
16
OTHER MATTERS
Other Matters to be Submitted
Our
board of directors does not intend to present to the meeting any
matters not referred to in the form of proxy. If any proposal not
set forth in this proxy statement should be presented for action at
the meeting, and is a matter which should come before the meeting,
it is intended that the shares represented by proxies will be voted
with respect to such matters in accordance with the judgment of the
persons voting them.
Proxy Solicitation Costs
We will
pay for preparing, printing and mailing this proxy statement.
Proxies may be solicited on our behalf by our directors, officers
or employees in person or via the internet, electronic transmission
and facsimile transmission, but such persons will not receive any
special compensation for such services. We will reimburse banks,
brokers and other custodians, nominees and fiduciaries for their
out-of-pocket costs of sending the proxy materials to our
beneficial owners.
Deadline for Submission of Stockholder Proposals for the 2019
Annual Meeting
Proposals of
stockholders intended to be presented at the 2019 Annual Meeting of
Stockholders pursuant to SEC Rule 14a-8 must be received at our
principal office not later than January 25, 2019 to be included in
the proxy statement for that meeting.
In
addition, in order for a stockholder proposal to be presented at
our meeting without it being included in our proxy materials,
notice of such proposal must be delivered to the Secretary of our
Company at our principal offices no later than January 25, 2019. If
notice of any stockholder proposal is received after January 25,
2019, then the notice will be considered untimely and we are not
required to present such proposal at the 2019 Annual Meeting, then
the persons named in proxies solicited by the board of directors
for the 2019 Annual Meeting may exercise discretionary voting power
with respect to such proposal.
A copy
of the Annual Report has been mailed to every stockholder of
record. The Annual Report is not considered proxy soliciting
material.
May 25,
2018
17
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