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)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
(Amendment
No. )
Filed
by the Registrant
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the appropriate box:
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Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
☒
Definitive Proxy
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☐
Definitive
Additional Materials
☐
Soliciting Material
Pursuant to Rule
§
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):
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computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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of each class of securities to which transaction
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(2)
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Aggregate
number of securities to which transaction applies:
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Per
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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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maximum aggregate value of transaction:
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registration statement number, or the Form or Schedule and the date
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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 26, 2020
To our
Stockholders:
The
Annual Meeting of Stockholders of Pharma-Bio Serv, Inc. (the
“Company”) will be held on Friday, June 26, 2020, at
9:00 a.m. local time at the Exchange Bank located at 6081 Lake
Oconee Parkway, Greensboro, Georgia 30642 for the following
purposes:
1. The
election of one (1) director as a Class I director to serve for a
term until the 2023 Annual Meeting of Stockholders or until his
successor is duly elected and qualified;
2. The
ratification of the selection of Crowe PR PSC as the Company's
independent certified public accountants for the fiscal year ending
October 31, 2020; 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 19, 2020
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, 2019 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 27,
2020
IMPORTANT NOTICE
REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 26,
2020
The Company's proxy statement and the 2019 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
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PROPOSAL 1: ELECTION OF DIRECTORS
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3
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PROPOSAL 2: SELECTION OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
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9
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REPORT OF THE AUDIT COMMITTEE
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10
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MANAGEMENT
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11
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EXECUTIVE COMPENSATION
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12
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BENEFICIAL OWNERSHIP OF SECURITIES AND SECURITY OWNERSHIP
MANAGEMENT
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15
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DELINQUENT SECTION 16(A) REPORTS
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17
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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17
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FINANCIAL STATEMENTS
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18
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OTHER MATTERS
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18
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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 26, 2020
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 2020 Annual Meeting of Stockholders and at any and all
postponements or adjournments thereof. Our Annual Meeting will be
held on Friday, June 26, 2020, at 9:00 a.m. local time at the
Exchange Bank located at 6081 Lake Oconee Parkway, Greensboro,
Georgia 30642. This proxy statement and the enclosed form of proxy
are first being sent to stockholders on or about May 28, 2020. 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 one director as a Class I director to serve for a term
until the 2023 Annual Meeting of Stockholders or until his
successor is duly elected and qualified (the
“
Election of Directors
Proposal
”
);
(2) The
ratification of the selection of Crowe PR PSC as the Company's
independent certified public accountants for the fiscal year ending
October 31, 2020; 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 19, 2020, the record date, will be entitled to
notice of, and to vote at, the Annual Meeting. On that date, we had
23,001,627 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. As a result, any broker that is a member of the NYSE
will not have the discretion to vote on 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 Exchange Bank’s website at
https://exch.bank/About-Us/Locations/Lake-Oconee/
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.
2
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 Irving Wiesen, our Class I
director, be re-elected to serve for a term until the 2023 Annual
Meeting of Stockholders or until his successor is duly elected and
qualified.
If Irving
Wiesen becomes 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
nominee, unless the board reduces the number of
directors.
The
following table sets forth certain information concerning the
nominee 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)
|
|
56
|
|
Chairman
of the Board
|
|
2006
|
|
2022
Class III
|
|
Kirk
Michel
(1),(2)
|
|
65
|
|
Director
|
|
2006
|
|
2021
Class II
|
|
Dov
Perlysky
(2),(3)
|
|
57
|
|
Director
|
|
2004
|
|
2021
Class II
|
|
Howard
Spindel
(1)
|
|
73
|
|
Director
|
|
2006
|
|
2022
Class III
|
|
Irving
Wiesen
(1),(2),(3)
|
|
65
|
|
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.
3
CLASS II - TERM EXPIRING AT 2021 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. 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,
and was a Director of Highlands Bancorp, Inc., a New Jersey
community bank until its sale to Lakeland Bank in 2019, and was a
director of Engex, Inc., a closed end investment company until its
dissolution in 2018. 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 brings extensive leadership and business experience, as
well as an in-depth understanding of the Company's history, as the
former president of the Company from 2004 to 2006, and tremendous
knowledge of our business and the pharmaceutical industry, to the
Board.
CLASS III - TERM EXPIRING AT 2022 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 through Strategic Consultants
International, LLC. 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 CEAL (Latin American Entrepreneur Council), 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
Á
ngeles
Vivientes, which provides programs and education on children
mistreatment prevention.
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 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 Oak Tree Educational Partners, Inc., a training
company, and was a director of Engex, Inc., a closed end investment
company until its dissolution in 2018. Mr. Spindel received a B.S
(Accounting) degree from Hunter College in 1968 and is a former
Certified Public Accountant.
4
Mr.
Spindel brings extensive leadership, business, and accounting
experience to the Board. His experience as a consultant, certified
public 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 nominee listed
above.
Director 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, 2019 as set forth below. Ms. Plaza did not
receive compensation as a director for the year ended
October
31,
2019.
The
following table summarizes the compensation earned and paid to our
directors for the year ended October
31,
2019.
|
Name
|
Fees Earned
(1)
|
Option Awards (2)(3)
|
All Other Compensation
|
Total
|
|
Elizabeth
Plaza
|
$
-
|
$
-
|
$
539,666
(4)
|
$
539,666
(4)
|
|
Kirk
Michel
|
$
40,000
|
$
10,736
|
$
-
|
$
50,736
|
|
Dov
Perlysky
|
$
40,000
|
$
10,736
|
$
-
|
$
50,736
|
|
Howard
Spindel
|
$
40,000
|
$
10,736
|
$
-
|
$
50,736
|
|
Irving
Wiesen
|
$
40,000
|
$
10,736
|
$
-
|
$
50,736
|
____________________
(1)
Except for
Elizabeth Plaza, during the fiscal year ended October 31, 2019 all
members of the Board of Directors individually earned and were paid
fees of $40,000 each.
(2)
Amounts shown do
not reflect compensation received by the directors.
Instead, the amounts shown reflect
the grant date fair value of options granted to the directors
determined pursuant to FASB ASC Topic 718.
The assumptions used to calculate
the value of the option awards are set forth under Note J
–
Stock Options,
Restricted Stock Units and Stock Based Compensation in our audited
financial statements for the fiscal year ended October 31, 2019
included in our Annual Report on Form 10-K for the fiscal year
ended October 31, 2019.
(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, incentive fee and company lease payments for the
vehicle under Elizabeth Plaza
’
s use for the year ended October 31,
2019 in the amount of $404,400, $120,000 and $15,266, respectively.
The incentive fee was paid on January 2020. For additional
information regarding these consulting fees, see Employment
Agreements and Consulting Agreement- Elizabeth Plaza - Consulting
Agreement above.
5
As of
October 31, 2019, each of the below named directors held the
following number of options to purchase shares of common
stock:
|
|
|
OPTIONS GRANTED TO
|
|||
|
Grant Date
|
Exercise Price
|
H. Spindel
|
K. Michel
|
I. Wiesen
|
D. Perlysky
|
|
1/10/2015
|
$
1.28
|
20,000
|
20,000
|
20,000
|
20,000
|
|
1/10/2016
|
$
0.95
|
20,000
|
20,000
|
20,000
|
20,000
|
|
1/10/2017
|
$
0.91
|
20,000
|
20,000
|
20,000
|
20,000
|
|
1/10/2018
|
$
0.52
|
20,000
|
20,000
|
20,000
|
10,000
|
|
1/10/2019
|
$
1.00
|
20,000
|
20,000
|
20,000
|
20,000
|
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, 2019 (
“
fiscal 2019
”
) 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 2019, the Board of Directors held five (5)
meetings, and took one (1) action by written consent. During fiscal
2019, 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
2019 Annual Meeting of Stockholders.
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.
6
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 (4) times during fiscal 2019, and took one (1)
action by written consent.
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.
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
2019.
The
Compensation Committee took one action by written consent and held
no meetings during fiscal 2019. 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.
7
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
2019.
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 2021
Annual Meeting should provide the information required not later
than January 28, 2021.
8
PROPOSAL 2: SELECTION OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
We are
asking our stockholders to ratify the Audit Committee's selection
of Crowe PR PSC (formerly known as Horwath Velez & Co. PSC)
("Crowe") as our independent certified public accountants for the
year ending October 31, 2020. If the stockholders do not ratify the
appointment of Crowe, the selection of
our independent certified public
accountants may be reconsidered by our Audit
Committee.
We
engaged Crowe as our independent public accountants on September
25, 2006. Crowe audited the Company's consolidated financial
statements for the fiscal years ended October 31, 2019 and 2018,
which are included in our Annual Report for the year ended October
31, 2019.
Representatives of Crowe 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.
|
Description of services:
|
Fiscal 2019
|
Fiscal 2018
|
|
Audit
|
$
47,775
|
$
45,500
|
|
Audit-related
fees
|
28,700
|
28,700
|
|
Tax
fees
|
7,368
|
9,674
|
|
All other
services
|
6,000
|
6,000
|
|
Total
Fees
|
$
89,843
|
$
89,874
|
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.
Crowe 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 Crowe during fiscal 2019 and
2018.
The
Audit Committee has considered the nature and amount of the fees
billed by Crowe , and believes that the provision of the services
for activities unrelated to the audit is compatible with
maintaining Crowe
’
s
independence.
Vote Required and Recommendation
The
proposal to approve the selection of Crowe as our independent
accountant for the fiscal year ending October
31, 2020 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 Crowe PR
PSC (formerly known as Horwath Velez & Co. PSC) ("Crowe") 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 Crowe, our independent
registered public accounting firm, the matters required to be
discussed by the applicable requirements of the Public Company
Accounting Oversight Board (the “PCAOB”) and the
Securities and Exchange Commission.
3) The
Audit Committee has also received the written disclosures and the
letter from Crowe 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 Crowe 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, 2019, 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
|
|
49
|
|
Chief
Executive Officer, President and President of European
Operations
|
|
Pedro
J. Lasanta
|
|
60
|
|
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 (
“
MSD
”
), 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 from
January 2014 to December 2017.
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 $100,000 for the fiscal years ended October
31, 2019 and 2018 (the "Named Executive Officers").
|
Name and Principal Position
|
Fiscal Year
|
Salary
|
Bonus
|
Option Awards($) (1)
|
All Other Compensation
|
Total
|
|
Victor
Sanchez
|
2019
|
$
220,600
|
$
-
|
$
-
|
$
14,950
(2)
|
$
235,550
|
|
President and Chief
Executive Officer
|
2018
|
$
220,600
|
$
-
|
$
-
|
$
14,950
(2)
|
$
235,550
|
|
|
|
|
|
|
|
|
|
Pedro
Lasanta,
|
2019
|
$
161,177
|
$
25,000
(3)
|
$
48,422
|
$
-
|
$
234,599
|
|
Chief Financial
Officer, Vice President-Finance and Administration and
Secretary
|
2018
|
$
160,600
|
$
75,000
(4)
|
$
-
|
$
-
|
$
235,600
|
__________________
(1)
Amounts shown do
not reflect compensation received by the executive officers.
Instead, the amounts shown reflect the grant date fair value of
options granted to the executive officers determined pursuant to
FASB ASC Topic 718. The assumptions used to calculate the value of
the option awards are set forth under Note J
–
Stock Options, Restricted Stock
Units and Stock Based Compensation in our audited financial
statements for the fiscal year ended October 31, 2019 included in
our Annual Report on Form 10-K for the fiscal year ended October
31, 2019.
(2)
Represents health
insurance plan expenses incurred pursuant to Mr.
Sanchez
’
s employment
agreement.
(3)
Represents bonus
for services in fiscal 2019, which were paid in November
2019.
(4)
Represents bonus
for services in fiscal 2018, which were paid in November
2018.
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,
2019.
|
|
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
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Pedro
Lasanta
|
-
|
100,000
(1)
|
$
0.88
|
Oct.
4, 2024
|
-
|
$
-
|
-
|
-
|
________________
(1)
Represents options
to purchase 100,000 shares of common stock which were granted on
October 4, 2019. These options vest in three equal annual
installments beginning on October 4, 2020.
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 PR labor law
No. 80 of May 30, 1976 known as the
“
Wrongful Discharge
Act
”
(
“
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 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 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.
On
October 7, 2019, the Company amended the Employment Agreement of
Mr. Lasanta to increase his salary from $160,000 to $175,000,
effective October 7, 2019.
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. On December
31, 2018, the consulting agreement was amended to extend the term
of the consulting agreement for an additional year to December 31,
2019 and maintain the past compensation structure, including an
Incentive Fee for the year ending October 31, 2019. On December 27,
2019, the consulting agreement was amended to extend the term of
the consulting agreement for an additional year to December 31,
2020 and maintain the past compensation structure, including an
Incentive Fee for the year ending October 31, 2020. 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 19, 2020
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 19, 2020 , the Company had 23,001,627 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 19,
2020
|
Percentage
|
|
Directors and Executive Officers
|
|
|
|
Elizabeth
Plaza(1)
|
9,169,518
|
39.9
%
|
|
Dov
Perlysky(2)
|
2,047,455
|
8.9
%
|
|
Kirk
Michel(3)
|
436,515
|
1.9
%
|
|
Howard
Spindel(4)
|
115,310
|
*
|
|
Irving
Wiesen(5)
|
115,205
|
*
|
|
Victor
Sanchez(6)
|
10,224
|
*
|
|
Pedro
Lasanta(7)
|
94,552
|
*
|
|
All Directors and Executive Officers as a group
|
|
|
|
(seven
persons)
(8)
|
11,988,779
|
51.4
%
|
|
5% or Greater Stockholders
|
|
|
|
Venturetek,
L.P.(9)
|
3,132,932
|
13.6
%
|
|
Ramon Luis
Dominguez Thomas (10)
|
2,060,060
|
9.0
%
|
|
Addison McKinley
Levi III (11)
|
2,050,059
|
8.9
%
|
|
Adam Hirsh
(12)
|
1,172,179
|
5.1
%
|
___________________
*
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.
(2)
The shares of
common stock beneficially owned by Mr. Perlysky include (i) 30,110
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 19, 2020.
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.
15
(3)
The shares of
common stock beneficially owned by Mr. Michel consist of (i) 25,809
shares directly owned, (ii) 70,000 shares of common stock issuable
upon exercise of options, which are vested as of May 19, 2020, 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 90,000 shares issuable upon exercise of options,
which are vested as of May 19, 2020. 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 90,000 shares issuable upon exercise of options, which
are vested as of May 19, 2020.
(6)
The shares of
common stock owned by Mr. Sanchez represent 10,224 shares directly
owned.
(7)
The shares of
common stock owned by Mr. Lasanta represent 94,552 shares directly
owned.
(8)
Includes 330,000
shares issuable upon the exercise of options, which are vested as
of May 19, 2020.
(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 6414
Stanton Drive, Apartment #208, Charlotte, North Carolina
28216.
(12)
This information
was obtained from a Schedule 13G filed by Adam Hirsh on October 15,
2019. The address for this person is 1021 Saturn Court Incline
Village, Nevada 89451.
16
DELINQUENT SECTION 16(A) REPORTS
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, 2019, all such filing requirements
applicable to the Company’s directors, executive officers and
greater than 10% beneficial owners were complied with, except
Victor Sanchez and Pedro Lasanta each untimely filed a Form 4
reporting three transactions.
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 (through
September 2018), 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 incurredby 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 incorporated 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.
As part of the Company
’
s sale of substantially all of its
laboratory business assets (
“
Laboratory Assets
”
) in September 2018, this lease was
amended to (i) allow the Company to sublease to the Laboratory
Assets purchaser (the
“
Subtenant
”
) the laboratory leased space area,
and (ii) if Subtenant defaults under the sublease or terminates the
sublease, the Company shall have the option to either (a) terminate
the sublease and re-occupy the subleased premises pursuant to the
terms of the lease, or (b) modify the lease to terminate the lease
for the portion of the premises that is the subleased premises
only, without penalty.
During the years ended
October
31,
2019 and October 31, 2018, we paid
approximately $374,674 and $363,800 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. Under the Consulting Agreement we paid for
the year ended October 31, 2019, consulting fees, an incentive fee,
and company lease payments for the vehicle under Elizabeth
Plaza
’
s use in the amount
of $404,400, $120,000 and $15,266, respectively. Under the
Consulting Agreement we paid for the year ended October 31, 2018,
consulting fees, an incentive fee, a bonus and company lease
payments for the vehicle under Elizabeth Plaza
’
s use in the amount of $421,000,
$120,000, $125,000 and 15,502, respectively.
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, 2019 and 2018,
Ms.
N.
Plaza was compensated
$206,977
and
$183,032,
respectively, pursuant to the Independent Contractor
Agreement.
17
FINANCIAL STATEMENTS
A copy
of our Form 10-K for the year ended October 31, 2019, 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, 2019 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
.
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 2021
Annual Meeting
Proposals of
stockholders intended to be presented at the 2021 Annual Meeting of
Stockholders pursuant to SEC Rule 14a-8 must be received at our
principal office not later than January 28, 2021 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 28, 2021. If
notice of any stockholder proposal is received after January 28,
2021, then the notice will be considered untimely and we are not
required to present such proposal at the 2021 Annual Meeting, then
the persons named in proxies solicited by the board of directors
for the 2021 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.
18
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TABLE OF CONTENTS