UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
Filed
by
the Registrant x
Filed
by
a Party other than the Registrant ¨
Check
the
appropriate box:
¨
|
Preliminary
Proxy Statement
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¨
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Confidential,
for Use of the Commission Only (as Permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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¨
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Definitive
Additional Materials
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¨
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Soliciting
Material Pursuant to §240.14a-12
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INTERPHARM
HOLDINGS, INC.
(Name
of
Registrant as Specified in its Charter)
Payment
of Filing Fee (Check the appropriate box):
¨
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1)
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Title
of each class of securities to which transaction
applies:
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2)
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Aggregate
number of securities to which transaction
applies:
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3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was
determined):
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4)
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Proposed
maximum aggregate value of
transaction:
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¨
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Fee
paid previously with preliminary
materials.
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¨
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee
was paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement
No.:
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INTERPHARM
HOLDINGS, INC.
75
Adams Avenue
Hauppauge,
New York 11788
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON NOVEMBER 16, 2006
To
the
Stockholders of Interpharm Holdings, Inc.:
You
are
cordially invited to attend the Annual Meeting of Stockholders of Interpharm
Holdings, Inc., a Delaware corporation, to be held at the Hilton Hotel, 598
Broadhollow Road, Melville, New York 11747, on Thursday, November 16, 2006,
at
10:00 a.m. local time, for the following purposes:
1.
To
elect six members to the Board of Directors of the Company to serve until
their
respective successors are elected and qualified; and
2.
To
ratify and approve Marcum & Kliegman, LLP, as our independent public
accountants, to audit our financial statements for the fiscal year ending
June
30, 2007; and
3.
To
transact such other matters as may properly come before the meeting or any
adjournment thereof.
Only
stockholders of record at the close of business on October 6, 2006 (the “Record
Date”) are entitled to notice of, and to vote at the meeting.
A
proxy
statement and proxy are enclosed herewith. If you are unable to attend the
meeting in person you are urged to sign, date and return the enclosed proxy
promptly in the enclosed addressed envelope, which requires no postage if
mailed
within the United States. If you attend the meeting in person, you may withdraw
your proxy and vote your shares. Also enclosed herewith is our 2006 Annual
Report.
By
Order
of the Board
of
Directors
Maganlal
K. Sutaria, Chairman
Hauppauge,
New York
October
27, 2006
PROXY
STATEMENT
INTERPHARM
HOLDINGS, INC.
75
Adams Avenue
Hauppauge,
New York 11788
ANNUAL
MEETING OF STOCKHOLDERS
NOVEMBER
16, 2006
INFORMATION
CONCERNING SOLICITATION AND VOTING
General
The
Board
of Directors of Interpharm Holdings, Inc., a Delaware corporation (the
“Company,” “we” or “us”), is soliciting the enclosed proxy for the annual
meeting of stockholders to be held on November 16, 2006, at 10:00 a.m. local
time, at the Hilton Hotel, 598 Broadhollow Road, Melville, New York 11747,
or
any continuation or adjournment thereof. At the meeting, the stockholders
will
be asked to vote on proposals, which are listed in the notice of annual meeting
of stockholders and described in more detail below.
This
proxy statement and the enclosed proxy card are being mailed on or about
October
27, 2006, to all stockholders entitled to vote at the meeting. Our 2006 Annual
Report on Form 10-K is also being mailed to all stockholders entitled to
vote at
the annual meeting. The Annual Report does not constitute a part of the proxy
solicitation material.
At
the
meeting, our stockholders will be asked:
1.
To
elect six members to the Board of Directors to serve until their respective
successors are elected and qualified;
2.
To
ratify and approve Marcum & Kliegman, LLP, as our independent public
accountants, to audit our financial statements for the fiscal year ending
June
30, 2007; and
3.
To
approve such other matters as may properly come before the meeting or any
adjournment thereof.
Record
Date; Outstanding Shares
Only
stockholders of record at the close of business on October 6, 2006 (the “Record
Date”) are entitled to receive notice of, and vote at our annual meeting. As of
the Record Date, the classes of stock entitled to vote at the meeting, and
the
number of shares of each class outstanding as of the Record Date and entitled
to
vote consisted of:
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·
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64,609,554
shares of $.01 par value per share common stock;
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·
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10,000
shares of series B-1 convertible preferred stock, par value $.01
per share
(“Series B-1 Stock”);
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·
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10,000
shares of series C-1 convertible preferred stock, par value $.01
per share
(“Series C-1 Stock”);
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·
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277,004
shares of series C convertible preferred stock, par value $.01
per share
(“Series C Stock”).
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Each
share of our common stock and Series C Stock is entitled to one vote on all
matters. Each share of Series C Stock votes with the common stock. Each share
of
Series B-1 Stock and Series C-1 Stock also votes with the common stock and
has a
number of votes equal to the number of shares of common into which it is
convertible on the record date for the action to be voted upon. The aggregate
number of votes for each of the Series B-1 Stock and Series C-1 Stock as
of the
Record Date for this Meeting is 6,519,755. The
Series A-1 preferred stock (of which there were 4,855,389 shares outstanding
as
of the Record Date) is not entitled to vote. We do not have any other voting
securities.
Expenses
of Soliciting Proxies
We
will
pay the expenses of soliciting proxies to be voted at the annual meeting.
Following the original mailing of the proxies and other proxy materials,
we or
our agents may supplement the solicitation of proxies by mail, telephone,
internet, telegraph or in person. Following the original mailing of the proxies
and other proxy materials, we will request that brokers, custodians, nominees
and other record holders of our common stock forward copies of the proxy
and
other annual meeting materials to persons for whom they hold shares of common
stock and request authority for the exercise of proxies. In these cases,
we will
reimburse such record holders for their reasonable expenses if requested
to do
so.
Revocability
of Proxies
If
you
attend the meeting, you may vote in person, regardless of whether you have
submitted a proxy. Any person giving a proxy in the form accompanying this
proxy
statement may revoke it at any time before it is voted. A proxy may be revoked
by (i) written notice of revocation or submission of a new proxy sent to
our
Corporate Secretary at 75 Adams Avenue, Hauppauge, New York 11788, or (ii)
attending the meeting and voting in person.
Voting
and Votes Required for Approval
Every
stockholder of record is entitled to one vote, for each share held, on each
proposal or item that comes before the meeting. There are no cumulative voting
rights. By submitting your proxy, you authorize Bhupatlal K. Sutaria, or
any
person designated as his substitute, to represent you and vote your shares
at
the meeting in accordance with your instructions. If the meeting is adjourned,
Mr. Sutaria or his substitute will be authorized to vote your shares at any
adjournment or postponement of the meeting.
To
vote
by mail, please sign, date and complete the enclosed proxy and return it
in the
enclosed self-addressed envelope, to Continental Stock Transfer & Trust
Company, 17 Battery Place, New York, New York 10004. If you hold your shares
through a bank, broker or other nominee, it will give you separate instructions
for voting your shares.
In
addition to solicitations by mail, we may solicit proxies in person, by
telephone, facsimile or e-mail. In the event that additional solicitation
material is used, it will be filed with the SEC prior to its use.
Proposal
1: Election of Directors.
Directors are elected by a plurality vote and the six nominees who receive
the
most votes will be elected. In the election of Directors, votes may be cast
in
favor of or withheld with respect to each nominee.
Proposal
2: Ratification of Selection of Auditors.
The
affirmative vote of stockholders owning at least a majority of our shares
of
common and preferred stock entitled to vote, and voting together as a single
class, present in person or represented by proxy at our annual meeting at
which
a quorum is present is necessary for ratification of the selection of our
auditors.
Tabulation
of Votes
The
votes
received by proxy will be tabulated and certified by our transfer agent,
Continental Stock Transfer & Trust Company. All other votes will be
tabulated by an inspector of election at the meeting.
Voting
by Street Name Holders
If
you
are the beneficial owner of shares held in “street name” by a broker, the
broker, as the record holder of the shares, is required to vote those shares
in
accordance with your instructions. If you do not give instructions to the
broker, the broker will nevertheless be entitled to vote the shares with
respect
to “discretionary” items but will not be permitted to vote the shares with
respect to “non-discretionary” items (in which case, the shares will be treated
as “broker non-votes”).
Quorum;
Abstentions; Broker Non-Votes
The
required quorum for the transaction of business at the annual meeting is
one-third of the issued and outstanding shares of common stock and Series
B-1
Stock, Series C-1 Stock and Series C Stock, collectively, at the annual meeting,
in person or by proxy. Shares that are voted “FOR,” “AGAINST” or “WITHHELD FROM”
a matter are treated as being present at the meeting for purposes of
establishing a quorum and are also treated as shares represented and voting
the
votes cast at the annual meeting with respect to such matter.
While
there is no definitive statutory or case law authority in Delaware as to
the
proper treatment of abstentions, we believe that abstentions should be counted
for purposes of determining both: (i) the presence or absence of a quorum
for
the transaction of business; and (ii) the total number of votes cast with
respect to a proposal (other than the election of directors). In the absence
of
controlling precedent to the contrary, we intend to treat abstentions in
this
manner. Accordingly, abstentions will have the same effect as a vote against
the
proposal.
Under
current Delaware case law, while broker non-votes (i.e. the votes of shares
held
of record by brokers as to which the underlying beneficial owners have given
no
voting instructions) should be counted for purposes of determining the presence
or absence of a quorum for the transaction of business, broker non-votes
should
not be counted for purposes of determining the number of votes cast with
respect
to the particular proposal on which the broker has expressly not voted. We
intend to treat broker non-votes in this manner. Thus, a broker non-vote
will
make a quorum more readily obtainable, but the broker non-vote will not
otherwise affect the outcome of the voting on a proposal.
PROPOSALS
TO STOCKHOLDERS
PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
Our
Board
of Directors presently consists of six members. The Board of Directors has
determined to nominate the existing six directors. Unless otherwise instructed,
the proxy holder will vote the proxies received by him for the nominees named
below. In the event that any nominee is unable or declines to serve as a
director at the time of the annual meeting, the proxies will be voted for
any
nominee who shall be designated by the current Board of Directors to fill
the
vacancy. The term of office of each person elected as a director will continue
until the next annual meeting of stockholders or until a successor has been
duly
elected and qualified or until his or her earlier resignation, removal from
office, death or incapacity.
Article
III of our By-laws gives power to our Board of Directors to change the number
of
directors of the Company by resolution and to fill any vacancies created
by an
increase in the number of directors by a vote of the directors without the
necessity of a vote by stockholders on such matter. Certain members of the
Board
have expressed a desire to enlarge our Board of Directors and elect candidates
who have significant and relevant business experience. Accordingly, the Board of
Directors may do so from time to time between annual meetings of stockholders.
The
following table sets forth the names and ages of all current directors and
all
persons nominated or chosen to become directors along with their current
positions, offices and term:
Name
of Nominee
|
Age
|
Position
with Interpharm
|
Director
Since
|
|
|
|
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Dr.
Maganlal K. Sutaria
|
70
|
Chairman
|
May
2003
|
|
|
|
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David
Reback (1)(2)(3)(4)
|
64
|
Director
|
November
1997
|
|
|
|
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Stewart
Benjamin (1)(4)
|
41
|
Director
|
May
2001
|
|
|
|
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Kennith
Johnson (1)(2)(3)(4)
|
53
|
Director
|
November
2004
|
|
|
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Richard
J. Miller
|
47
|
Director
|
May
2006
|
|
|
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Joan
P. Neuscheler
|
47
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Director
|
August
2006
|
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(1)
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Member
of the audit committee
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|
(2) |
Member
of the compensation committee
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(3)
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Member
of the nominating committee
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(4)
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Member
of corporate governance committee
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The
Board
of Directors has determined that David Reback, Stewart Benjamin, Kennith
Johnson, Richard J. Miller and Joan P. Neuscheler are independent (as
independence is defined in Section 121A of the listing standards of the American
Stock Exchange).
The
following information with respect to the principal occupation or employment
of
the nominees, the name and principal business of the corporation or other
organization in which such occupation or employment is carried on and other
affiliations and business experience during the past five years has been
furnished to us by the respective nominees:
DR.
MAGANLAL K. SUTARIA is a cardiovascular surgeon who received his medical
degree
from the Medical College, Ahmedabad, Gujarat University in 1961 and since
1991
served as the Chairman of Interpharm, Inc. Dr. Sutaria has been a Director
and
Chairman of our Board of Directors since May 29, 2003.
DAVID
C.
REBACK has served as a director since November 1997. Since 1969, Mr. Reback
has
been a partner with Reback & Potash, LLP, a law firm specializing in
litigation, appellate matters and real estate. Mr. Reback received a B.A.
from
Syracuse University, and in 1965 he received a Juris Doctor’s degree from
Syracuse University College of Law.
STEWART
BENJAMIN has served as a Director since May 2001. Mr. Benjamin is a certified
public accountant in the State of New York. From January 1996 to the present,
Mr. Benjamin has been self-employed as a sole practitioner under the name
of
Stewart H. Benjamin, CPA, P.C. From 1985 through December 1995, Mr. Benjamin
was
employed as a staff accountant in both private industry and local public
accounting firms. Mr. Benjamin received a Bachelor of Business Administration
degree from Pace University in 1985.
KENNITH
JOHNSON has served as a Director since November 18, 2004. He currently serves
as
the Chairman of our Audit and Compensation Committees. He is a CPA with more
than 30 years of financial/accounting experience and presently Vice President
of
Finance & Administration with the operations of Fairfax Financial Holdings
Ltd. a financial and insurance holding company. Prior to joining Fairfax,
he had
been a consultant and the Senior Vice President and Chief Financial Officer
for
the Movado Group, Inc., a manufacturer and distributor of Swiss watches and
jewelry. Prior thereto, he was Vice President, Chief Financial Officer for
Wenger-The Swiss Army Knife Company, a distributor and importer of Swiss
made
products. He has held financial positions with C.R. Bard, Inc., Becton Dickinson
Company and Pfizer Corporation.
RICHARD
J. MILLER has served as a director since May 30, 2006. Mr. Miller is the
managing member of Shippan Point Advisors, LLC, a private equity advisory
firm.
As part of his private equity work, Mr. Miller was a member of
Tullis-Dickerson Capital Focus III, LP’s general partner from April 2002 to June
2006, serving as the Chairman and CEO of SupplyPro, Inc. from January 2004
to
June 2006, as well as consulting with other private equity firms.
Previously he served as Senior Vice President of GE Equity, a division of
GE Capital, where he led successful strategic investments in healthcare and
technology companies and as a partner of RFE Investment Partners, a venture
capital firm.
JOAN
P.
NEUSCHELER has served as a director since August 23, 2006. Ms. Neuscheler
has 17
years of experience in private equity investing as an officer of
Tullis-Dickerson & Co., Inc. (“TD”), a health care-focused venture
capital firm. Since July 1998, Ms. Neuscheler has been the President
of TD. Ms. Neuscheler’s previous experience includes three
years in public accounting with Arthur Andersen and five years experience
as a senior officer in a reinsurance firm. Ms. Neuscheler is a
Director of Adams Respiratory Therapeutics, Inc. (NasdaqGS: ARXT), a
specialty pharmaceutical company, and a number of privately held companies.
She
received her B.B.A. and her M.B.A. from Pace University.
Directors
are elected by a plurality vote and the six nominees who receive the most
votes
of our Series B-1 Stock, Series C-1 Stock, Series C Stock and common stock,
voting together as a class, will be elected. In the election of directors,
votes
may be cast in favor of or withheld with respect to each nominee.
Family
Relationships
The
following are the family relationships among our nominees for director and
officers: Raj Sutaria, an officer of Interpharm, Inc., is the son of Maganlal
K.
Sutaria and the nephew of Bhupatlal K. Sutaria, our President. Maganlal K.
Sutaria and Bhupatlal K. Sutaria are brothers.
THE
BOARD
OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE ELECTION AS A
DIRECTOR OF EACH OF THE NOMINEES SET FORTH ABOVE. PROXIES SOLICITED HEREBY
WILL
BE VOTED “FOR” EACH DIRECTOR NAMED ABOVE UNLESS A VOTE AGAINST A NOMINEE OR AN
ABSTENTION IS SPECIFICALLY INDICATED.
MANAGEMENT
The
following table sets forth the names and ages of all current Interpharm officers
along with their current positions. Officers are appointed to serve until
the
meeting of the board of directors following the next annual meeting of
stockholders and until their successors have been duly elected and qualified.
Name
|
Age
|
Position
|
Cameron
Reid
|
52
|
Chief
Executive Officer
|
|
|
|
Bhupatlal
K. Sutaria
|
60
|
President
|
|
|
|
George
Aronson
|
57
|
Chief
Financial Officer
|
|
|
|
Kenneth
Cappel
|
40
|
Executive
Vice President and General Counsel
|
|
|
|
Raj
Sutaria
|
34
|
Chief
Operating Officer
|
|
|
|
Jeffrey
Weiss
|
39
|
Executive
Vice President - Sales and Marketing
|
|
|
|
Jonathan
Berlent
|
37
|
Senior
Vice President - Business
Development
|
CAMERON
REID has served as the CEO of the Company since January 24, 2005. From 1992
through March 2004, Mr. Reid was the President of Dr. Reddy’s Laboratories, Inc.
Prior to joining Dr. Reddy’s, Mr. Reid was an Executive Vice President of, and
headed Roussel Corp., a division of Roussel UCLAF, a pharmaceutical company
based in Montvale, New Jersey. Mr. Reid holds a Bachelor of Science degree
in
chemistry and geology from the University of Calgary. He is also a graduate
of
the executive management program at INSEAD in France.
BHUPATLAL
K. SUTARIA. Mr. Sutaria has served as the President of Interpharm Inc. since
1990. Prior to joining Interpharm, Inc., Mr. Sutaria was an entrepreneur
involved in several of his own businesses, including a motorcycle dealership
and
a franchised restaurant. Mr. Sutaria received a Bachelor’s degree in Chemistry
from Saurashpra University in India in 1972 and a Masters of Business
Administration degree from the University of Palm Beach in 1974. Mr. Sutaria
is
the brother of Dr. Maganlal K. Sutaria.
GEORGE
ARONSON became our Chief Financial Officer in January 2004. Prior to joining
Interpharm, from 1995 through 2003, Mr. Aronson served as the Chief Financial
Officer of Direct Insite Corporation, an application service provider (ASP)
for
large enterprise customers. Prior to 1995, he served as Chief Financial Officer
of Hayim & Co., an importer/distribution organization from 1988 through
1994. Mr. Aronson holds a Bachelor of Science degree from Long Island University
and is a Certified Public Accountant in the State of New York, is a member
of
the American Institute of Certified Public Accountants and the Financial
Executives Institute.
KENNETH
CAPPEL joined us in February 2005 and became our General Counsel on March
30,
2006. Mr. Cappel brings to us over 15 years of experience in pharmacy,
pharmaceutical development and intellectual property law. After holding
positions as a pharmacist in retail and hospital pharmacies, Mr. Cappel worked
as a pharmaceutical scientist in the Schering-Plough Research Institute from
October 1992 to September 2000. He then worked from September 2000 to March
2003
as an associate in the law firm of Budd Larner where his practice focused
on
ANDA litigation, patent opinions and Hatch-Waxman/FDA regulatory issues.
Mr.
Cappel was next employed at Dr. Reddy’s Laboratories, Inc. where from March 2003
to February 2005 he advised several key business units. Mr. Cappel graduated
Rutgers College of Pharmacy in 1989 and Seton Hall School of Law in 2000.
He is
a registered pharmacist and a member of the New Jersey bar.
JEFFREY
WEISS became our Executive Vice President of Sales and Marketing in April
2005.
Mr. Weiss brings with him over 17 years of experience in the pharmaceutical
industry, having served in many senior level management positions in sales
and
marketing. Prior to joining us, Mr. Weiss served as CEO of Glenmark
Pharmaceuticals Inc. from 2003 until joining us in April, 2005. Prior, Mr.
Weiss
served as Vice President of Sales for Dr. Reddy’s Laboratories, Inc. from 2001
to 2003. Mr. Weiss holds a Bachelors degree from William Paterson College
in
Business Management.
JONATHAN
BERLENT became our Vice President of Business Development in August 2004.
He was
promoted to Senior Vice President on July 1, 2006. Mr. Berlent brings with
him
over eleven years of experience from the capital markets division of FleetBoston
as a manager and equities trader where he ran FleetBoston’s Long Island desk
from March 2000 to August 2001. Mr. Berlent earned a Masters of Business
Administration from New York University’s Stern School of Business in May 2001
where he double-majored in Finance and Management and he graduated in May
1991
from the University of Michigan with a Bachelor of Arts in
Economics.
RAJ
SUTARIA has been our Chief Operating Officer since November, 2004. Between
1997
and 2004, Mr. Sutaria served as Production Manager, Director of Manufacturing,
Vice President and Chief Operating Officer of Interpharm, Inc. Mr. Sutaria
earned a B.B.A. in Marketing from the University of Colorado at Boulder in
1997
and is the son of Maganlal K. Sutaria and the nephew of Bhupatlal K. Sutaria.
BOARD
OF DIRECTORS MEETINGS AND COMMITTEES
Our
Board
of Directors held a total of six meetings during the fiscal year ended June
30,
2006. The Board of Directors did not act by unanimous written consent during
the
fiscal year nor did the independent directors meet during the fiscal year
without the presence of non-independent directors and management. During
the
fiscal year ended June 30, 2006, each of our directors attended at least
75% of
the aggregate number of all meetings of the Board of Directors and of the
committees, if any, on which such director served. The Board of Directors
has
standing Audit, Nominating, Compensation and Corporate Governance Committees.
Audit
Committee and Audit Committee Report
The
Board
of Directors created the audit committee in 1994. The audit committee is
responsible for reviewing reports of financial results, audits, internal
controls, and adherence to its Business Conduct Guidelines in compliance
with
federal procurement laws and regulations. The committee recommends to the
Board
of Directors the selection of Interpharm’s outside auditors and reviews their
procedures for ensuring their independence with respect to the services
performed for Interpharm.
The
audit
committee is comprised of three directors: Kennith Johnson, Stewart Benjamin
and
David Reback. In the opinion of the Board of Directors, Messrs. Johnson,
Benjamin and Reback are independent of management and free of any relationship
that would interfere with their exercise of independent judgment as members
of
this committee and they are independent as defined in Section 121(A) of the
AMEX
listing standards. The Board of Directors has adopted a written charter for
the
audit committee. The Audit Committee met four times during the fiscal year
ended
June 30, 2006.
AUDIT
COMMITTEE REPORT
The
Audit
Committee oversees the Company’s financial reporting process on behalf of the
Board of Directors. The Committee is comprised of three Directors and operates
under a written charter adopted by the Board of Directors. All of the audit
committee members are independent within the meaning of Rule 121(A) of the
AMEX
listing standards, and are “independent,” as that term is defined in Section 10A
of the Securities Act of 1934, as amended. Management has the primary
responsibility for the financial statements and the reporting process, including
the Company’s systems of internal control. In fulfilling its responsibilities,
the Committee reviewed the audited financial statements in the Annual Report
with management, including discussing with management the quality and
acceptability of the Company’s financial reporting and controls.
The
Committee reviewed with the independent auditors, who are responsible for
expressing an opinion on the conformity of those audited financial statements
with generally accepted accounting standards, their judgments as to the quality
and acceptability of the Company’s financial reporting and such other matters as
are required to be discussed with the Committee under generally accepted
auditing standards, including the matters required to be discussed by SAS
61
(Communication with Audit Committees). In addition, the Committee has discussed
with the independent auditors the auditors’ independence from management and the
Company, including the matters in the auditors’ written disclosures required by
Independent Standards Board Standard No. 1 (Independence Discussions with
Audit
Committees). Furthermore, the Audit Committee has considered whether the
provision of non-audit services by the independent auditors for the fiscal
year
ended June 30, 2006 is compatible with maintaining their
independence.
In
reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors that the audited financial statements
for
the fiscal year ended June 30, 2006 be included in the Company’s Annual Report
on Form 10-K for the fiscal year ended June 30, 2006, for filing with the
SEC.
Management
is responsible for the Company’s financial reporting process including its
systems of internal control, and for the preparation of consolidated financial
statements in accordance with generally accepted accounting principles. The
Company’s independent auditors are responsible for auditing those financial
statements. Our responsibility is to monitor and review these processes.
It is
not the Committee’s duty or responsibility to conduct auditing or accounting
reviews or procedures. The Committee has relied, without independent
verification, on management’s representation that the financial statements have
been prepared with integrity and objectivity and in conformity with accounting
principles generally accepted in the United States of America and on the
independent auditors’ report on the Company’s financial
statements.
The
Committee’s oversight does not provide it with an independent basis to determine
that management has maintained appropriate accounting and financial reporting
principles or policies, or appropriate internal controls and procedures designed
to assure compliance with accounting standards and applicable laws and
regulations. Furthermore, the Committee’s considerations and discussions with
management and the independent auditors do not assure that the Company’s
financial statements are presented in accordance with generally accepted
accounting principles, that the audit of the Company’s financial statements has
been carried out in accordance with generally accepted auditing standards
or
that the Company’s independent accountants are in fact
“independent.”
The
Audit
Committee is pleased to submit this report to the stockholders with regard
to
the above matters.
/s/
Kennith Johnson
/s/
Stewart Benjamin
/s/
David
Reback
The
Company believes that Kennith Johnson and Stewart Benjamin qualify as a
“financial experts” as defined in Rule 401(k) of Regulation S-K.
Compensation
Committee
In
August
1994, the Board of Directors established a Compensation Committee, which
is
responsible for decisions regarding salaries, stock option grants and other
matters regarding executive officers and key employees. Kennith Johnson and
David C. Reback currently serve on the Compensation Committee. During the
fiscal
year ended June 30, 2006, the compensation committee met one time.
Nominating
Committee
In
March,
2004 the Board of Directors established a Nominating Committee, which is
responsible for determination of the appropriate size, functioning and needs
of
the Board, including, recruitment and retention of high quality Board members,
committee composition and structure, Board assessment of director performance
and related party and conflicts oversight. Kennith Johnson and David C. Reback
currently serve on the Nominating Committee. All of the Nominating Committee
members are independent within the meaning of Rule 121(A) of the AMEX listing
standards, and are “independent,” as that term is defined in Section 10A of the
Securities Act of 1934, as amended. During the fiscal year ended June 30,
2006
the Nominating Committee met one time.
The
Nominating Committee considers nominees recommended by any stockholder entitled
to vote in the election of directors. Any stockholder wishing to nominate
an
individual for election to the Board must comply with the advance notice
procedures described in the “Stockholders’ Proposals” section at the end of this
proxy statement. The nomination must contain the following information about
the
nominee: name, age, business and residence addresses, principal occupation
or
employment, the number of shares of common stock held by the nominee, the
information that would be required under SEC rules in a proxy statement
soliciting proxies for the election of such nominee as a director, and a
signed
consent of the nominee to serve as a director of the Company, if elected.
The
Nominating Committee has not specified any minimum qualifications for serving
on
the Board. However, in its assessment of potential candidates, the Nominating
Committee will review the candidate’s character, business experience and
understanding of the Company’s business environment, and ability to devote the
time and effort necessary to fulfill his or her responsibilities, all in
the
context of the
perceived needs of the Board at that time.
A
copy of
our Nominating Committee Charter is available on our website at
www.interpharminc.com.
Corporate
Governance Committee
In
March,
2004, the Board of Directors established a Corporate Governance Committee,
which
is responsible for reviewing the Company’s corporate governance and making
recommendations as to changes and improvements as necessary. Kennith Johnson,
David C. Reback and Stewart Benjamin currently serve on the Corporate Governance
Nominating Committee. All of the Corporate Governance Committee members are
independent within the meaning of Rule 121(A) of the AMEX listing standards,
and
are “independent,” as that term is defined in Section 10A of the Securities Act
of 1934, as amended. During the fiscal year ended June 30, 2006 the Corporate
Governance Committee did not meet.
BOARD
OF DIRECTORS COMPENSATION
Compensation
of Directors
We
compensate members of our Board of Directors annually as follows: (i) Board
member - $750; (ii) attendance in person per meeting - $500, telephonically
-
$250; (iii) committee chairman - $1,000; (iv) committee member - $250.
Further, all directors are entitled to reimbursement of reasonable travel
and
lodging expenses related to attending meetings of the Board of Directors
and any
committee on which they serve. In addition, the Company and its
Compensation Committee are currently working to determine the compensation
of
directors for the fiscal year ended June 30, 2006.
COMPENSATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The
Compensation Committee of the Board of Directors of Interpharm Holdings,
Inc.
(the “Company”) is charged with developing and administering a compensation
policy for senior management that contains appropriate performance incentives
and equity-linked components, and reviewing annually the performance of the
executive officers of the Company.
The
Compensation Committee also administers the stock option and stock incentive
plans and approves grants of stock options and other incentives under those
plans.
Compensation
programs for executive officers are designed to attract, retain and motivate
employees who will contribute to the achievement of corporate goals and
objectives. Elements of executive compensation include salaries, bonuses
and
awards of stock options, with the last two being variable. The Committee’s
policy is to achieve a balance between cash and other compensation in order
to
attract and retain qualified personnel, and to incentivize them in their
duties.
In
making
its decisions or recommendations, the Committee takes into account factors
it
deems relevant to the specific compensation component being considered,
including: compensation paid by other business organizations of comparable
size
in the same industry and related industries; profitability; the attainment
of
annual individual and business objectives; an assessment of individual
contributions relative to others; and historic compensation awards.
The
Committee considered the factors described above in determining Cameron Reid’s
total compensation to serve as Chief Executive Officer. Specifically, the
Committee and the Board recognized Mr. Reid prior experience and his key
contributions in developing the Company’s business plan while a member of the
Company’s Board of Directors. While Mr. Reid’s cash compensation is the highest
of any employee of the Company, at $300,000, it is less than that earned
by
CEO’s of comparable companies. In consideration of this, during the fiscal year
ended June 30, 2005, the Committee awarded Mr. Reid options to purchase 2
million shares of Company common stock which it believes to be fair compensation
and adequate incentive to meet the Company’s long-term goals.
THE
COMPENSATION COMMITTEE
/s/
David
Reback
David
Reback
/s/
Kennith Johnson
Kennith
Johnson
COMPENSATION
COMMITTEE INTERLOCKS
AND
INSIDER PARTICIPATION
In
August
1994, the Board of Directors established a Compensation Committee, which
is
responsible for decisions regarding salaries, stock option grants and other
matters regarding executive officers and key employees. During the fiscal
year
ended June 30, 2006, David C. Reback, Kennith Johnson and, until his resignation
from the Board of Directors on March 6, 2006, Dr. Mark Goodman, were members
of
the Compensation Committee. In the opinion of the Board of Directors, each
of
such persons was and is independent of management and free of any relationship
which would interfere with his exercise of independent judgment as a member
of
our Compensation Committee.
PERFORMANCE
GRAPH
Prior
to
May 30, 2003, we were in the computer/systems integration business as Atec
Group, Inc. On May 30, 2003, that business was sold, Interpharm, Inc. was
acquired and we changed our name to Interpharm Holdings, Inc. SEC disclosure
rules require that registrants provide a line graph comparing the yearly
percentage change in the registrant’s cumulative total stockholder return on a
class of common stock registered under Section 12 of the Exchange Act with
the
cumulative total return of a broad equity market index. We believe that
historical stock prices prior to May 30, 2003 are not representative of our
current business and a comparison of our stock price between May 30, 2003
and
June 30, 2003 to an index would not be meaningful and could be misleading.
Accordingly, we have omitted this information prior to May 30,
2003.
The
following chart compares for the period from May 30, 2003 to June 30, 2006,
the
cumulative total stockholder return on the Common Stock with (i) the S&P
SmallCap 600 Index and (ii) the RDG Microcap Pharmaceutical Index (the “RDG
Industry Index”), and assumes an investment of $100 on May 30, 2003 in each of
the Common Stock, the stocks comprising the S&P SmallCap 600 Index and the
stocks comprising the RDG Industry Index. The total return for each of the
Company’s Common Stock, the S&P SmallCap 600 Index and the RDG Industry
Index assumes the reinvestment of all dividends (although no dividends were
declared on the Company’s Common Stock during such period). Each index is
adjusted for additions and deletions of securities from the index.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table provides certain compensation information for the years ended
June 30, 2006, 2005 and 2004 concerning our Chief Executive Officer, the
four
most highly compensated executive officers other than our Chief Executive
Officer who earned in excess of $100,000 during the year ended June 30, 2006
and
Munish K. Rametra, who was one of our four most highly compensated executive
officers until his death in March 2006.
SUMMARY
COMPENSATION TABLE
For
the Years Ended June 30, 2006, 2005 and 2004
Annual
Compensation Awards Payouts
|
|
|
|
ANNUAL
COMPENSATION |
|
|
|
|
|
LONG
TERM
COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards
|
|
Payouts
|
|
Name
And
Principal
Position
|
|
Position
|
|
Year
Ended
|
|
Salary($)
|
|
Bonus($)
|
|
Other
Annual
Compensation(1)
($)
|
|
Restricted
Stock
Awards
$
|
|
Securities
Underlying
Options/
SARS
|
|
LTIP
Payouts
|
|
All
Other Compensation
|
|
Cameron
|
|
|
CEO*
|
|
|
6/30/2006
|
|
$
|
296,538
|
|
$
|
—
|
|
$
|
12,687
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Reid
|
|
|
|
|
|
6/30/2005
|
|
$
|
76,154
|
|
$
|
—
|
|
$
|
5,286
|
|
$
|
—
|
|
|
2,000,000
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
6/30/2004
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
1,000,000
|
|
$
|
—
|
|
$
|
—
|
|
Bhupatlal
K.
|
|
|
President
|
|
|
6/30/2006
|
|
$
|
270,865
|
|
$
|
—
|
|
$
|
21,778
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Sutaria
|
|
|
|
|
|
6/30/2005
|
|
$
|
198,077
|
|
$
|
15,000
|
|
$
|
20,578
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
6/30/2004
|
|
$
|
155,231
|
|
$
|
34,000
|
|
$
|
20,119
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Munish
K.
|
|
|
EVP/
|
|
|
6/30/2006
|
|
$
|
251,869
|
|
$
|
—
|
|
$
|
18,880
|
|
$
|
—
|
|
|
100,000
|
|
$
|
—
|
|
$
|
—
|
|
Rametra(2)
|
|
|
Secretary**
|
|
|
6/30/2005
|
|
$
|
164,865
|
|
$
|
15,000
|
|
$
|
29,474
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
6/30/2004
|
|
$
|
113,766
|
|
$
|
10,000
|
|
$
|
28,022
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Kenneth
|
|
|
EVP
and
|
|
|
6/30/2006
|
|
$
|
231,731
|
|
$
|
—
|
|
$
|
24,674
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Cappel
|
|
|
General
|
|
|
6/30/2005
|
|
$
|
117,723
|
|
$
|
—
|
|
$
|
10,281
|
|
$
|
—
|
|
|
226,500
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
Counsel
|
|
|
6/30/2004
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
George
|
|
|
CFO
|
|
|
6/30/2006
|
|
$
|
221,479
|
|
$
|
—
|
|
$
|
20,746
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Aronson
|
|
|
|
|
|
6/30/2005
|
|
$
|
147,692
|
|
$
|
15,000
|
|
$
|
20,746
|
|
$
|
—
|
|
|
131,250
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
6/30/2004
|
|
$
|
67,308
|
|
$
|
14,000
|
|
$
|
8,640
|
|
$
|
—
|
|
|
250,000
|
|
$
|
—
|
|
$
|
—
|
|
Jeffrey
|
|
|
EVP/Sales
|
|
|
6/30/2006
|
|
$
|
225,000
|
|
$
|
459,504
|
|
$
|
24,687
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Weiss(3)
|
|
|
and
|
|
|
6/30/2005
|
|
$
|
77,795
|
|
$
|
—
|
|
$
|
6,057
|
|
$
|
—
|
|
|
243,500
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
Marketing
|
|
|
6/30/2004
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
* Cameron
Reid became the Chief Executive Officer in January, 2005.Pursuant to his
agreement with us, as amended;
Mr. Reid’s annual salary is $300,000, effective July 1, 2005.
** Munish
K.
Rametra died on March 2, 2006.
(1)
Includes
Major Medical, auto expenses and mobile phone allowances.
(2)
We
granted to the Estate of Munish K. Rametra 100,000 SAR’s exercisable at $1.55
and having a maximum cash value of $250,000 payable to the executive officers’
estate. The
SARs
must be exercised between July 1, 2008 and December 31, 2008.
(3)Bonus
represents sales commissions earned during fiscal year ended June 30,
2006.
Stock
Option Grants in Last Fiscal Year
During
the fiscal year ended June 30, 2006 we did not grant stock options to any
of the
individuals mentioned in the above Summary Compensation Table.
Year
End Option Table
The
following table sets forth certain information regarding the stock options
held
as of June 30, 2006, by the individuals named in the above Summary Compensation
Table. None of such persons exercised any stock options during the fiscal
year
ended June 30, 2006
AGGREGATED
OPTION EXERCISES IN LAST FISCAL YEAR
AND
FISCAL YEAR-END OPTION VALUE
|
|
Shares
Acquired on Exercise
|
|
Value
Realized
$
|
|
Securities
Underlying
Unexercised
Options at
Fiscal
Year End (#)
|
|
Value
of Unexercised
In-the-Money-Options
At
Fiscal Year End ($) (1)
|
|
Name
|
|
|
|
|
|
Exercisable
|
|
Unexercisable
|
|
Exercisable
|
|
Unexercisable
|
|
Cameron
Reid
|
|
|
--
|
|
$
|
--
|
|
|
3,000,000
|
(2) |
|
—
|
|
$
|
510,000
|
|
$
|
—
|
|
Jeffrey
Weiss
|
|
|
--
|
|
$
|
--
|
|
|
53,375
|
(3) |
|
190,125
|
(4) |
$
|
9,074
|
|
$
|
32,321
|
|
Bhupatlal
Sutaria
|
|
|
100,000
|
|
$
|
30,800
|
|
|
300,000
|
(5) |
|
400,000
|
(5) |
$
|
215,400
|
|
$
|
287,200
|
|
Kenneth
Cappel
|
|
|
--
|
|
$
|
--
|
|
|
81,125
|
(6) |
|
145,375
|
(7) |
$
|
13,791
|
|
$
|
24,714
|
|
Estate
of Munish K. Rametra
|
|
|
--
|
|
$
|
--
|
|
|
450,000
|
(8) |
|
--
|
|
$
|
324,000
|
|
$
|
--
|
|
George
Aronson
|
|
|
--
|
|
$
|
--
|
|
|
301,563
|
(9) |
|
79,687
|
(10) |
$
|
51,266
|
|
$
|
13,547
|
|
(1)
|
The
computation is based on the closing price of our Common Stock on
the
American Stock Exchange on June 30, 2006, which was $1.40 per
share.
|
(2)
|
Represents
fully vested options that: (i) are exercisable at $1.23 per share
through
June 30, 2010 and (ii) were repriced as follows: options to purchase
2,000,000 shares of common stock originally granted at $2.24 per
share
were repriced to $1.23 per share and options to purchase 1,000,000
shares
of common stock originally granted at $3.97 per share were repriced
to
$1.23 per share.
|
(3)
|
Represents
30,000 options that are exercisable at $1.23 per share through
June 30,
2015 and 23,375 options that are exercisable at $1.23 per share
through
June 30, 2011.
|
(4)
|
Represents
120,000 options exercisable at $1.23 per share that have various
vesting
dates through June 30, 2010 and are exercisable through June 30,
2015 and
70,125 options exercisable at $1.23 per share through June 30,
2011.
|
(5)
|
Represents
options that are exercisable at $0.682 per share. These options
have the
following vesting provisions: 25% of the options vested on January
1, 2005
and December 31, 2005, respectively and an additional 25% will
vest on
each of December 31, 2006 and December 31, 2007,
respectively.
|
(6)
|
Represents
62,000 fully vested repriced options that are exercisable at $1.23
per
share through June 30, 2010 and 19,125 options exercisable at $1.23
per
share through June 30, 2011. The repriced options were originally
granted
at $1.94 per share.
|
(7)
|
Represents
options that are exercisable at $1.23 per share. 41,125 of such
options
vest on June 30, 2007, June 30, 2008 and June 30, 2009, respectively.,
and
22,000 options vest on June 30,
2010.
|
(8)
|
Represents
450,000 fully vested options that are exercisable at $0.68 per
share
through March 31, 2009.
|
(9)
|
Represents
(i) 275,000 fully vested repriced options that are exercisable
at $1.23
per share through June 30, 2010 and (ii) 26,563 options that are
exercisable at $1.23 per share through June 30, 2011. Of the 275,000
repriced options, 250,000 originally granted at $4.41 per share
were
repriced to $1.23 per share and 25,000 originally granted at $2.24
per
share were repriced to $1.23 per
share.
|
(10)
|
Represents
options exercisable at $1.23 per share. 26,563 of such options
vest on
June 30, 2007, 2008 and 2009, respectively, and are exercisable
through
June 30, 2011.
|
Equity
Compensation Plan Information
The
following table gives information about our common stock that may be issued
upon
the exercise of options, warrants and rights under all of our equity
compensation plans as of June 30, 2006. The table includes the following
plans:
1997 Stock Option Plan and 2000 Flexible Stock Plan.
Plan
category
|
|
Number
of securities to be issued upon exercise of outstanding
options, warrants
and rights
|
|
Weighted
average exercise price of outstanding options, warrants
and
rights
|
|
Number
of securities remaining available for future issuance
|
|
Equity
compensation plans approved by security holders
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Equity
compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
1997
Stock Option Plan
|
|
|
1,411,650
|
|
$
|
1.93
|
|
|
0
|
|
2000
Flexible Stock Plan(1)
|
|
|
10,671,288
|
|
$
|
0.90
|
|
|
9,004,511
|
|
Total
|
|
|
12,082,938
|
|
$
|
1.02
|
|
|
9,004,511
|
|
(1)
Securities available for future issue increase each year by 10% of our
outstanding common stock at the beginning of each year. The total amount
of
common stock available under the plan cannot exceed 20 million
shares.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The
following table sets forth as of October 6, 2006, certain information with
respect to the beneficial ownership of our voting securities by (i) any person
known by Interpharm to be the beneficial owner of more than 5% of our voting
securities, (ii) each director and nominee, (iii) each executive officer
named
in the Summary Compensation table appearing herein and (iv) all directors
and
executive officers as a group.
Name
and
|
|
|
|
Amount
and
|
|
|
|
Address
of
|
|
Title
of
|
|
Nature
of Beneficial
|
|
Percent
of
|
|
Beneficial
Owner
|
|
Class
|
|
Ownership
|
|
Class
(1)
|
|
|
|
|
|
|
|
|
|
Maganlal
K. Sutaria
|
|
|
Common
Stock
|
|
|
643,500
|
(2) |
|
*
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rajs
Holdings I, LLC(3)
|
|
|
Common
Stock
|
|
|
15,526,100
|
(3) |
|
24.03
|
%
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bhupatlal
K. Sutaria
|
|
|
Common
Stock
|
|
|
404,000
|
(4) |
|
*
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rametra
Holdings I, LLC
|
|
|
Common
Stock
|
|
|
8,014,930
|
(5) |
|
12.41
|
%
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Reback
|
|
|
Common
Stock
|
|
|
30,000
|
(6) |
|
*
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stewart
Benjamin
|
|
|
Common
Stock
|
|
|
15,000
|
(7) |
|
*
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ravis
Holdings I, LLC
|
|
|
Common
Stock
|
|
|
10,518,645
|
(8) |
|
16.28
|
%
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perry
Sutaria
|
|
|
Common
Stock
|
|
|
44,093,771
|
(9) |
|
68.25
|
%
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kennith
C. Johnson
|
|
|
Common
Stock
|
|
|
0
|
|
|
*
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cameron
Reid
|
|
|
Common
Stock
|
|
|
3,175,000
|
(10) |
|
4.70
|
%
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George
Aronson
|
|
|
Common
Stock
|
|
|
301,563
|
(11) |
|
*
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P&K
Holdings, LLC
|
|
|
Common
Stock
|
|
|
8,014,930
|
(12) |
|
12.41
|
%
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
J. Miller
|
|
|
Common
Stock
|
|
|
0
|
|
|
*
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joan
P. Neuscheler
|
|
|
Common
Stock
|
|
|
8,864,755
|
(13) |
|
12.08
|
%
|
c/o
Tullis Dickerson Co., Inc.
|
|
|
|
|
|
|
|
|
|
|
Two
Greenwich Plaza
|
|
|
|
|
|
|
|
|
|
|
Greenwich,
Connecticut 06830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tullis
Dickerson Capital Focus III, L.P.
|
|
|
Common
Stock
|
|
|
8,864,755
|
(14) |
|
12.08
|
%
|
Two
Greenwich Plaza
|
|
|
|
|
|
|
|
|
|
|
Greenwich,
Connecticut 06830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aisling
Capital II, L.P.
|
|
|
Common
Stock
|
|
|
8,801,669
|
(15) |
|
11.99
|
%
|
888
Seventh Avenue, 30th
Floor
|
|
|
|
|
|
|
|
|
|
|
New
York, New York 10106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Directors and
|
|
|
Common
Stock
|
|
|
16,292,848
|
(16) |
|
20.94
|
%
|
Officers
as a
|
|
|
|
|
|
|
|
|
|
|
Group
(13 persons)
|
|
|
|
|
|
|
|
|
|
|
*
Less
than 1%
(1)
|
Computed
based upon a total of 64,609,554 shares of common stock outstanding
as of
October 6, 2006.
|
(2)
|
The
foregoing figure reflects the ownership of 543,500 shares of common
stock
and vested options to acquire 100,000 shares. It does not include
non-vested options to acquire 600,000 shares of common stock, 350,000
options held by his spouse and 1,873,900 shares of Series A-1 Preferred
Stock held by an annuity he controls.
|
(3)
|
Raj
Sutaria is the sole member of Rajs Holdings I, LLC. The sole manager
of
Rajs Holdings I, LLC is Perry
Sutaria.
|
(4)
|
The
foregoing figure includes vested options to acquire 300,000 shares,
but
does not include non-vested options to acquire 400,000 shares of
common
stock and 400,000 options held by his
spouse.
|
(5)
|
Mona
Rametra is the sole member of Rametra Holdings I, LLC. The sole
manager of
Rametra Holdings I, LLC is Perry
Sutaria.
|
(6)
|
The
foregoing figure includes vested options to acquire 30,000, but
excludes
non-vested options to acquire 5,000 shares of common
stock.
|
(7)
|
The
foregoing figure includes 15,000 shares of common stock which may be
acquired upon exercise of currently exercisable options and excludes
non-vested options to acquire an additional 5,000 shares of common
stock.
|
(8)
|
Ravi
Sutaria is the sole member of Ravis Holdings I, LLC. The sole manager
of
Ravis Holdings I, LLC is Perry Sutaria.
|
(9)
|
Includes
an aggregate of 42,074,605 shares of common stock owned directly
by the
following New York limited liability companies of which Perry Sutaria
is
the sole manager: P&K Holdings, LLC; Rajs Holdings I, LLC; Ravis
Holdings I, LLC; and Rametra Holdings I, LLC. Does not include
his
beneficial interest in Series A-1 Preferred Stock held by a trust
of which
he is a beneficiary.
|
(10)
|
The
foregoing figure includes options to purchase 3,000,000 shares
of common
stock.
|
(11)
|
The
foregoing figure includes vested options to acquire 301,563 shares,
but
excludes non-vested options to acquire 79,687 shares of common
stock which
are subject to several performance
criteria.
|
(12)
|
Perry
Sutaria is the sole member and manager of P&K Holdings,
LLC.
|
(13)
|
Includes
an aggregate of 6,519,755 shares of common stock issuable upon
conversion
of Series B-1 Stock held Tullis-Dickerson Capital Focus III, L.P.
(“TD
III”) , 2,281,914 shares of common stock issuable upon exercise of
warrants held by TD III and 63,086 shares of common stock issued
in
payment of dividends. Ms. Neuscheler is a principal of TD III.
Ms.
Neuscheler disclaims beneficial ownership of shares within the
meaning of
SEC Rule 13d-3.
|
(14)
|
Includes
an aggregate of 6,519,755 shares of common stock issuable upon
conversion
of Series B-1 Stock, 2,281,914 shares of common stock issuable
upon
exercise of warrants and 63,086 shares of common stock issued in
payment
of dividends.
|
(15)
|
Includes
an aggregate of 6,519,755 shares of common stock issuable upon
conversion
of Series C-1 Stock and 2,281,914 shares of common stock issuable
upon
exercise of warrants.
|
(16)
|
The
foregoing figure includes vested options to acquire an aggregate
of
4,399,813shares, but does not include non-vested options to acquire
an
aggregate of 1,856,437 shares of common stock, 400,000 options
held by the
spouse of one executive officer and 1,873,900 shares of Series
A-1
Preferred Stock held by an annuity controlled by one director.
The
foregoing also includes the shares referred to in footnote (13)
.
|
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We
lease
our 100,000 square foot facility at 75 Adams Avenue in Hauppauge, New York
which
is owned by Sutaria Family Realty, LLC which is owned by Perry Sutaria, Raj
Sutaria and Mona Rametra.
Effective
October 2006, our annual base rents for the facility at 75 Adams Avenue,
Hauppauge, N.Y. became $660,000, plus property taxes, insurance, maintenance
and
other expenses related to the leased facility. According to the terms of
the
lease, every three years hereafter the annual rent may be adjusted to fair
market value, as determined by an independent third party.
In
February and April 2005, we purchased 5.0 Class A membership interests
(“Interests”) from each of Cameron Reid (“Reid”), our Chief Executive Officer,
and John Lomans (“Lomans”), who has no affiliation with us, for an aggregate
purchase price of $1,022,500 (including costs of $22,500) of APR, LLC, a
Delaware limited liability company primarily engaged in the development of
complex bulk pharmaceutical products (“APR”). The purchases were made pursuant
to separate Class A Membership Interest Purchase Agreements dated February
16,
2005 between us and Reid and Lomans (the “Purchase Agreements”). At the time of
the purchases, Reid and Lomans owned all of the outstanding Class A membership
interests of APR, which had outstanding 100 Class A membership interests
and 100
Class B membership interests. The two classes of membership interests have
different economic and voting rights, and the Class A members have the right
to
make most operational decisions. All of the Class B interests are held by
one of
our major suppliers. We currently own 10 Interests out of the 100 Class A
Interests now outstanding.
In
accordance with the terms of the Purchase Agreements, we have granted to
Reid
and Lomans each a proxy to vote 5 of the Interests owned by us on all matters
on
which the holders of Interests may vote. Our Board of Directors approved
the
purchases of Interests at a meeting held on February 15, 2005, based on an
analysis and advice from an independent investment banking firm. Reid did
not
participate during the deliberations on this matter. We are accounting for
our
investment in APR pursuant to the cost method of accounting.
COMPLIANCE
WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
To
our
knowledge, except as set forth below, based solely on a review of such materials
as are required by the Securities and Exchange Commission, none of our officers,
directors or beneficial holders of more than ten percent of our issued and
outstanding shares of Common Stock has failed to timely file with the Securities
and Exchange Commission any form or report required to be so filed pursuant
to
Section 16(a) of the Securities Exchange Act of 1934 during the fiscal year
ended June 30, 2006:
Form
4s
for Mona Rametra, Perry Sutaria, Ravi Sutaria, Rajs Holdings I, LLC,
Bhupatlal Sutaria, Maganlal Sutaria and Raj Sutaria filed in July 2006 which
were required to be filed in May or June 2006.
A
Form 5
for Kenneth Cappel was filed in October 2006 which reported his holdings
of
options to purchase the Company’s common stock which was required to be reported
on a Form 3 in February 2005 and an additional grant of options to Mr. Cappel
which was required to be reported in a Form 4 in July 2005.
A
Form 5
for Jeffrey Weiss was filed in October 2006 which reported his holdings of
the
Company’s securities which were required to be reported on a Form 3 in April
2005 and the grant to Mr. Weiss in July 2005 of options to purchase the
Company’s common stock and certain additional purchases of the Company’s common
stock by Mr. Weiss commencing in July 2005 which were required to be reported
on
Forms 4 commencing in July 2005.
PROPOSAL
NO. 2
RATIFICATION
OF SELECTION OF AUDITORS
Our
Audit
Committee has recommended the appointment of Marcum & Kliegman, LLP as our
independent auditor for the fiscal year ending June 30, 2007. Acting on that
recommendation, the Board of Directors appointed Marcum & Kliegman, LLP as
our auditor for the fiscal year ending June 30, 2007. Marcum & Kliegman, LLP
served as our independent auditor for the three fiscal years ended June 30,
2006
and the six month period ended June 30, 2003, and provided services to us
with
respect to those periods that included, but were not limited to, consultations
on various tax and information services matters, as well as consultation
with
respect to the acquisition of Interpharm, Inc.
Audit
and Non-Audit Fees
The
following table sets forth the fees billed to us for the fiscal years ended
June
30, 2006 and June 30, 2005 by Marcum & Kliegman, LLP:
|
|
|
|
|
|
|
|
Fiscal
Year
|
|
Fiscal
Year
|
|
|
|
Ended
|
|
Ended
|
|
|
|
June
30, 2006
|
|
June
30, 2005
|
|
|
|
|
|
|
|
Audit
Fees
|
|
$
|
232,675
|
|
$
|
151,500
|
|
Audit
Related Fees (1)
|
|
|
39,797
|
|
|
0
|
|
Tax
Fees (2)
|
|
|
26,170
|
|
|
26,021
|
|
All
Other Fees
|
|
|
0
|
|
|
21,048
|
(3) |
|
(1)
|
Consists
of fees for services relating to review of proposed accounting
treatments
and documents filed with the SEC.
|
|
(2)
|
Consists
of tax filing and tax related compliance and other advisory
services.
|
|
(3)
|
Consists
primarily of consultation on real estate acquisition and review
of
proposed accounting policies.
|
The
Audit
Committee of our Board of Directors determined that the provision of the
above
non-audit services is compatible with Marcum & Kliegman, LLP maintaining its
independence.
Pre-Approval
of Services by the Independent Auditor
The
Audit
Committee has adopted a policy for approval of audit and permitted non-audit
services by our independent auditor. The Audit Committee will consider annually
and approve the provision of audit services by its external auditor and consider
and, if appropriate, approve the provision of certain defined audit and
non-audit services. Our Management, may, however, approve de minimus amounts
for
non-audit services without the approval of the Audit Committee.
The
Audit
Committee also will consider on a case-by-case basis and, if appropriate,
approve specific engagements in excess of $15,000. Any proposed specific
engagement may be presented to the Audit Committee for consideration at its
next
regular meeting or, if earlier consideration is required, to the Audit Committee
or one or more of its members. The member or members to whom such authority
is
delegated shall report any specific approval of services at its next regular
meeting. The Audit Committee will regularly review summary reports detailing
all
services being provided to us by our external auditor. During the fiscal
year
ended June 30, 2006, 100% of the Audit Related Fees and all other fees were
approved by the Audit Committee.
A
representative of Marcum & Kliegman, LLP is expected to be present at the
Annual Meeting, either in person, or via teleconference, to respond to
appropriate questions and to make such statements as may be appropriate.
In the
event stockholders do not ratify the appointment of Marcum & Kliegman, LLP
as our independent auditor for the fiscal year ending June 30, 2007, such
appointment will be reconsidered by the Board of Directors.
In
order
to approve this proposal, the affirmative vote of a majority of the votes
cast
at the meeting, in person or by proxy, must be received in favor of this
proposal. Unless a contrary choice is specified, proxies solicited by the
Board
of Directors will be voted “FOR” ratification the selection of Marcum &
Kliegman, LLP as our auditor.
THE
BOARD
OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” RATIFICATION OF THE
APPOINTMENT OF MARCUM & KLIEGMAN, LLP AS OUR INDEPENDENT AUDITOR FOR FISCAL
2007.
STOCKHOLDER
COMMUNICATIONS
We
encourage stockholder communications to the Board of Directors and/or individual
Directors. Stockholders who wish to communicate with the Board of Directors
or
an individual Director should send their communications to the care of Mary
Demaio, Corporate Secretary, Interpharm Holdings, Inc., 75 Adams Avenue,
Hauppauge, New York 11788. Communications regarding financial or accounting
policies should be sent to the attention of the Chairman of the Audit Committee.
All other communications should be sent to the attention of the Chairman
of the
Nominating Committee.
STOCKHOLDERS’
PROPOSALS
A
stockholder of record may present a proposal for action at the 2007 Annual
Meeting of Stockholders provided that we receive such proposal at our executive
office no later than June 30, 2007. We anticipate that the 2007 Annual Meeting
will be held in November 2007. The proponent may submit a maximum of one
(1)
proposal of not more than five hundred (500) words for inclusion in our proxy
materials for a meeting of security holders. At the 2007 Annual Meeting,
management proxies will have discretionary authority, under Rule 14a-4 of
the
Securities Exchange Act of 1934, to vote on stockholder proposals that are
not
submitted for inclusion in our proxy statement unless received by us before
September 1, 2007.
GENERAL
Unless
contrary instructions are indicated on the proxy, all shares of Series B-1
Stock, Series C-1 Stock, Series C Stock and common stock represented by valid
proxies received pursuant to this solicitation (and not revoked before they
are
voted) will be voted FOR Proposal Nos. 1 and 2.
OTHER
BUSINESS
The
Board
of Directors knows of no business other than that set forth above to be
transacted at the meeting, but if other matters requiring a vote of the
stockholders arise, the persons designated as proxies will vote the shares
of
common stock represented by the proxies in accordance with their judgment
on
such matters. If a stockholder specifies a different choice on the proxy,
his or
her shares of common stock will be voted in accordance with the specification
so
made.
IT
IS
IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WE URGE YOU TO FILL IN, SIGN
AND
RETURN THE FORM OF PROXY IN THE PREPAID ENVELOPE PROVIDED, NO MATTER HOW
LARGE
OR SMALL YOUR HOLDINGS MAY BE.
By
Order
of the Board of Directors,
Maganlal
K. Sutaria, Chairman
Hauppauge,
New York
October
27, 2006