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Item 5.02
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Departure of Directors of Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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As previously
announced, at the beginning of 2019 we began to carefully evaluate our business with the goal of achieving and sustaining profitability.
As part of this process, we reviewed all aspects of our Company to find opportunities to cut costs responsibly. We currently manufacture
in two facilities. At our Petaluma, CA facility we primarily manufacture our U.S. dermatology line. At our other Guadalajara, Mexico,
facility we primarily manufacture products for our international business. Our facility in Mexico is a large, modern state-of-the-art
plant that has recently manufactured approximately 400,000 units per month with capacity to expand as needed. By closing one of
our manufacturing facilities and consolidating manufacturing, we expect to realize, after one-time closing costs, significant savings
that we expect will strengthen the Company as a whole. Thus, we have made the decision to close our Petaluma offices and manufacturing
in the summer of 2020. We are in the process of relocating manufacturing from California to Mexico. Additionally, we plan to migrate
some U.S. corporate functions to our existing office in Woodstock, Georgia.
As part of this
migration, effective on April 14, 2020, our Board of Directors appointed Grant Edwards as our new Chief Financial Officer. Mr.
Edwards, age 42, is a Partner with TechCXO, LLC. He has over 15 years of experience with SEC reporting and has held financial leadership
positions at Harbinger Group Inc. and Sciele Pharma, Inc. Mr. Edwards gained CPA firm experience at Deloitte & Touche LLP and
Arthur Anderson LLP. He is a licensed Certified Public Accountant in Georgia and North Carolina. He holds a Masters in Accountancy
from East Carolina University. Mr. Edwards is also an adjunct professor for accounting at Georgia State University.
We agreed to compensate
Mr. Edwards $225 per hour. We will also grant him $25,000 in common stock in two tranches. The first tranche will be issued as
soon as practicable after signing of his agreement, with the closing stock price on the grant date as measure for the number of
shares, and the second tranche will be issued on or after October 14, 2020, with the closing stock price on the grant date as measure
for the number of shares. The grant, regardless of issue date, will vest in three years, with the first third vesting on April
14, 2021, second third will vest on April 14, 2022 and remaining third will vest on April 14, 2023. If we terminate him prior to
April 14, 2021, all stock will vest immediately on the termination date. If we terminate him on or after April 14, 2021, including
by not renewing this agreement, all unvested stock will be forfeited. If Mr. Edwards terminates his agreement, all unvested stock
will be forfeited.
As part of the
transition to Georgia, on April 15, 2020, Mr. John Dal Poggetto was released as our Chief Financial Officer effective on April
24, 2020. We thank Mr. Dal Poggetto for all of his services over the last 17 years and wish him the best in his future endeavors.
In connection
with Mr. Dal Poggetto’s termination we entered into a mutual separation and release agreement. Pursuant to the agreement
Mr. Dal Poggetto will receive $50,000 in cash as a separation payment, plus $31,400 for accrued paid time off, and 3,086 shares
of our common stock. We will continue to reimburse Mr. Dal Poggetto for his health care expenses for him and his dependents for
six months. He waives his rights to any further payments as well as to the grant of $100,000 signing bonus in equity that was promised
to him in his employment agreement. The bonus options granted to Mr. Dal Poggetto on December 31, 2019 will expire on his termination
date according to their terms. All other vested equity grants will be exercisable for a period of three months.
This report contains
forward-looking statements. Forward-looking statements include, but are not limited to, statements that express our intentions,
beliefs, expectations, strategies, predictions or any other statements related to our future activities or future events or conditions. These
statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made
by management. These statements are not guarantees of future performances and involve risks, uncertainties and assumptions
that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted
in the forward-looking statements due to numerous factors, including those risks discussed in our Annual Report on Form 10-K
and in other documents that we file from time to time with the SEC. Any forward-looking statements speak only as of the date
on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances
after the date of this report, except as required by law.