DEF 14A 1 cbmg_def14a.htm PROXY STATEMENT Blueprint
 

 
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
Filed by a Party other than the Registrant
 
Check the appropriate box:
 
Preliminary Proxy Statement
Confidential, For Use of the Commission Only (As Permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material under Rule 14a-12
 
 
Cellular Biomedicine Group, Inc.
(Name of Registrant as Specified In Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
Payment of Filing Fee (Check the appropriate box):
 
No fee required
 
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
 
Fee paid previously with preliminary materials.
 
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
 
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
 


 
 
 
 
 
19925 Stevens Creek Blvd., Suite 100
Cupertino, CA 95014
Dear Stockholders:
 
You are invited to attend the Annual Meeting of Stockholders (the “Annual Meeting”) of Cellular Biomedicine Group, Inc. (the “Company”) on April 27, 2018, which will be held at our office at 19925 Stevens Creek Blvd., Suite 100, Cupertino, California 95014 at 9:00 a.m. Pacific Daylight Time. Enclosed with this letter are your Notice of Annual Meeting of Stockholders, Proxy Statement and Proxy voting card. The Proxy Statement included with this notice discusses each of our proposals to be considered at the Annual Meeting. Please review our annual report for the fiscal year ended December 31, 2017, which will be on our website at http://www.cellbiomedgroup.com (under “Investor Relations”).
 
At this year’s meeting, you will be asked to: (1) elect three (3) “Class III” directors, each of whom will be elected for a term of three years; (2) ratify the appointment of BDO China Shu Lun Pan Certified Public Accountants LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018; and (3) transact such other business as may properly come before the Annual Meeting or any adjournments thereof.
 
The Board of Directors has fixed the close of business on March 9, 2018 as the record date for determining the stockholders entitled to notice of and to vote at the Annual Meeting and any adjournment and postponements thereof (the “Record Date”).
 
The Board of Directors believes that a favorable vote for each candidate for a position on the Board of Directors and for the ratification of BDO China Shu Lun Pan Certified Public Accounts LLP in Proposal 2 is in the best interest of the Company and its stockholders and recommends a vote "FOR" all candidates and all other matters. Accordingly, we urge you to review the accompanying material carefully and to return the enclosed proxy promptly. On the following pages, we provide answers to frequently asked questions about the Annual Meeting.
 
You are welcome to attend the Annual Meeting in person. Whether or not you expect to attend the meeting, you are requested to read the enclosed proxy statement and to sign, date and return the accompanying proxy as soon as possible. This will assure your representation and a quorum for the transaction of business at the meeting.
 
 
Sincerely,
 
 
 
/s/ Terry Belmont
 
Terry Belmont
 
Chairman of the Board of Directors
 
 
 
 
Cupertino, California
March 12, 2018
 
 
 
 
 
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
 
Meeting Date: April 27, 2018
 
To the Stockholders of Cellular Biomedicine Group, Inc.:
 
The 2018 Annual Meeting of Stockholders will be held at our office at 19925 Stevens Creek Blvd., Suite 100, Cupertino, California 95014 at 9:00 a.m. Pacific Daylight Time. During the Annual Meeting, stockholders will be asked to:
 
(1)
Elect three (3) “Class III” directors, each of whom will be elected for a three year term, or until the election and qualification of their successors;
 
(2)
Ratify the appointment of BDO China Shu Lun Pan Certified Public Accountants LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018; and
 
(3)
Transact any other business properly brought before the Annual Meeting or any adjournments thereof.
 
The Board of Directors has fixed the close of business on March 9, 2018, as the record date for determining the stockholders entitled to notice of, and to vote at, the Annual Meeting or any adjournments thereof. If you are a stockholder as of March 9, 2018, you may vote at the meeting. The date of disseminating this Notice of Meeting and Proxy Statement is on or about March 16, 2018.
 
For a period of 10 days prior to the Annual Meeting, a stockholders list will be kept at our office and shall be available for inspection by stockholders during usual business hours. A stockholders list will also be available for inspection at the Annual Meeting.
 
You are cordially invited to attend the meeting in person. Whether or not you expect to attend the meeting, you are requested to read the enclosed proxy statement and to sign, date and return the accompanying proxy as soon as possible. This will assure your representation and a quorum for the transaction of business at the meeting. If you attend the meeting in person, the proxy will not be used if you so request by revoking it as described in the proxy statement.
 
By order of our Board of Directors
 
 
 
/s/ Bizuo (Tony) Liu
 
Bizuo (Tony) Liu
 
Chief Executive Officer and Chief Financial Officer
 
 
 
 
IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 27, 2018:
 
This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. We encourage you to access and review all of the important information contained in the proxy materials before voting.
 
The Notice, Proxy Statement and the Annual Report on Form 10-K for the fiscal year ended December 31, 2017 are available at https://www.iproxydirect.com/CBMG. If you want to receive a paper or e-mail copy of these documents, you must request one. There is no charge to you for requesting a copy. Please make your request for a copy as instructed below on or before April 17, 2018 to facilitate timely delivery.
 
To request by phone: 1-866-752-VOTE(8683)
 
To request by e-mail: proxy@iproxydirect.com
 
To request on the Internet: https://www.iproxydirect.com/CBMG
 
If you have any questions about accessing materials or voting, please call Issuer Direct at 919-481-4000 ext 120 or 117.
 
 
 
 
TABLE OF CONTENTS
 
 
Page No.
 
 
The Proxy Procedure
i
 
 
Questions and Answers About the Meeting
1
 
 
Governance of the Company
3
 
 
Proposal 1 - Election of Directors
16
 
 
Proposal 2 - Ratification of Appointment of Independent Registered Public Accountant
19
 
 
Executive Compensation and Related Information
21
 
 
Security Ownership of Certain Beneficial Owners and Management
30
 
 
Certain Relationships and Related Transactions
33
 
 
Requirements for Advance Notification of Nominations and Stockholder Proposals
33
 
 
Other Matters
34
 
 
 
 
 
THE PROXY PROCEDURE
 
 
In lieu of a paper copy of the proxy materials, on or about March 16, 2018, we will first disseminate to our stockholders of record and beneficial owners of shares of common stock of Cellular Biomedicine Group, Inc. (which may be referred to in this Proxy Statement as “we,” “us,” “CBMG,” or the “Company”) a Notice of Internet Availability of Proxy Materials (the “Notice”) in connection with the solicitation of proxies by our board of directors (“Board”) for our annual meeting of stockholders to be held on April 27, 2018, at 9:00 a.m. PDT at our office at 19925 Stevens Creek Blvd., Suite 100, Cupertino, California 95014 (referred to as the “Annual Meeting”). Stockholders who received the notice will have the ability to access this Proxy Statement and the accompanying proxy card over the Internet and to request a paper copy of the proxy materials by internet, email, or telephone. Our Board encourages you to read this document thoroughly and to take this opportunity to vote on the matters to be decided at the Annual Meeting. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found in the Notice. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically on an ongoing basis. A stockholder’s election to receive proxy materials by mail or electronically by email will remain in effect until the stockholder terminates such election.
 
 
 
  i
 
 
QUESTIONS AND ANSWERS ABOUT THE MEETING
 
What am I voting on?
 
At this year’s meeting, you will be asked to:
 
(1)
Elect three (3) “Class III” directors, each of whom will be elected for a term of three years, or until the election and qualification of their successors;
 
(2)
Ratify the appointment of BDO China Shu Lun Pan Certified Public Accountants LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018; and
 
 
(3)
Transact any other business properly brought before the Annual Meeting or any adjournments thereof.
 
Who is entitled to vote at the Annual Meeting, and how many votes do they have?
 
Stockholders of record at the close of business on March 9, 2018 (the “Record Date”) may vote at the Annual Meeting. Pursuant to the rights of our stockholders contained in our charter documents each share of our common stock has one vote. There were 17,003,968 shares of common stock outstanding on March 9, 2018. From April 17, 2018 through April 26, 2018, you may inspect a list of stockholders eligible to vote. If you would like to inspect the list, please call Andrew Chan, our Secretary, at (408) 973-7884 to arrange a visit to our offices. In addition, the list of stockholders will be available for viewing by stockholders at the Annual Meeting.
 
How do I vote?
 
You may vote over the Internet, by telephone, by mail or in person at the Annual Meeting. Please be aware that if you vote by telephone or over the Internet, you may incur costs such as telephone and Internet access charges for which you will be responsible.
 
Vote by Internet. You can vote via the Internet at www.iproxydirect.com/CBMG. You will need to use the control number appearing on your proxy card to vote via the Internet. You can use the Internet to transmit your voting instructions up until 11:59 p.m. Eastern Time on April 26, 2018. Internet voting is available 24 hours a day. If you vote via the Internet, you do not need to vote by telephone or return a proxy card.
 
Vote by Telephone. You can vote by telephone by calling the toll-free telephone number 1-866-752-VOTE (8683). You will need to use the control number appearing on your proxy card to vote by telephone. You may transmit your voting instructions from any touch-tone telephone up until 11:59 p.m. Eastern Time on April 26, 2018. Telephone voting is available 24 hours a day. If you vote by telephone, you do not need to vote over the Internet or return a proxy card.
 
Vote by Mail. If you received a printed proxy card, you can vote by marking, dating and signing it, and returning it in the postage-paid envelope provided to Cellular Biomedicine Group, Inc., c/o Issuer Direct, 500 Perimeter Park Drive, Suite D, Morrisville, NC 27560. Please promptly mail your proxy card to ensure that it is received prior to the closing of the polls at the Annual Meeting.
 
Vote in Person at the Meeting. If you attend the Annual Meeting and plan to vote in person, we will provide you with a ballot at the Annual Meeting. If your shares are registered directly in your name, you are considered the stockholder of record and you have the right to vote in person at the Annual Meeting. If your shares are held in the name of your broker or other nominee, you are considered the beneficial owner of shares held in street name. As a beneficial owner, if you wish to vote at the Annual Meeting, you will need to bring to the Annual Meeting a legal proxy from your broker or other nominee authorizing you to vote those shares.
 
If you vote by any of the methods discussed above, you will be designating Tony Liu, our Chief Executive Officer and Chief Financial Officer, as your proxy, and he will vote your shares on your behalf as you indicate.
 
Submitting a proxy will not affect your right to attend the Annual Meeting and vote in person.
 
If your shares are held in the name of a bank, broker or other nominee, you will receive separate voting instructions from your bank, broker or other nominee describing how to vote your shares. The availability of Internet voting will depend on the voting process of your bank, broker or other nominee. Please check with your bank, broker or other nominee and follow the voting instructions it provides.
 
 
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Can I receive future materials via the internet?
 
If you vote by internet, simply follow the prompts for enrolling in electronic proxy delivery service. This will reduce the Company’s printing and postage costs in the future, as well as the number of paper documents you will receive.
 
What is a proxy?
 
A proxy is a person you appoint to vote on your behalf. By using the methods discussed above, you will be appointing Tony Liu, our Chief Executive Officer and Chief Financial Officer, as your proxy. He will vote on your behalf, and will have the authority to appoint a substitute to act as proxy. If you are unable to attend the Annual Meeting, please vote by proxy so that your shares of common stock may be voted.
 
How will my proxy vote my shares?
 
If you are a stockholder of record, your proxy will vote according to your instructions. If you choose to vote by mail and complete and return the enclosed proxy card but do not indicate your vote, your proxy will vote “FOR” the election of the nominated slate of Class III directors (see Proposal 1); and “FOR” the ratification of BDO China Shu Lun Pan Certified Public Accountants LLP (“BDO China”) as our independent registered public accounting firm for the fiscal year ending December 31, 2018 (see Proposal 2). We do not intend to bring any other matter for a vote at the Annual Meeting, and we do not know of anyone else who intends to do so. Your proxies are authorized to vote on your behalf, however, using their best judgment, on any other business that properly comes before the Annual Meeting.
 
If your shares are held in the name of a bank, broker or other nominee, you will receive separate voting instructions from your bank, broker or other nominee describing how to vote your shares. The availability of Internet voting will depend on the voting process of your bank, broker or other nominee. Please check with your bank, broker or other nominee and follow the voting instructions your bank, broker or other nominee provides.
 
You should instruct your bank, broker or other nominee how to vote your shares. If you do not give voting instructions to the bank, broker or other nominee, the bank, broker or other nominee will determine if it has the discretionary authority to vote on the particular matter. Under applicable rules, brokers have the discretion to vote on routine matters, such as the ratification of the selection of accounting firms, but do not have discretion to vote on non-routine matters. Under the regulations applicable to New York Stock Exchange member brokerage firms (many of whom are the record holders of shares of our common stock), the uncontested election of directors is no longer considered a routine matter. Matters related to executive compensation are also not considered routine. As a result, if you are a beneficial owner and hold your shares in street name, but do not give your broker or other nominee instructions on how to vote your shares with respect to these matters, votes may not be cast on your behalf. If your bank, broker or other nominee indicates on its proxy card that it does not have discretionary authority to vote on a particular proposal, your shares will be considered to be “broker non-votes” with regard to that matter. Broker non-votes will be counted as present for purposes of determining whether enough votes are present to hold our Annual Meeting, but a broker non-vote will not otherwise affect the outcome of a vote on a proposal that requires a majority of the votes cast. With respect to a proposal that requires a favorable vote of a majority of the outstanding shares, a broker non-vote has the same effect as a vote against the proposal.
 
How do I change my vote?
 
If you are a stockholder of record, you may revoke your proxy at any time before your shares are voted at the Annual Meeting by:
 
Notifying our corporate Secretary Andrew Chan, in writing at 19925 Stevens Creek Blvd., Suite 100, Cupertino, California 95014, that you are revoking your proxy;
 
Submitting a proxy at a later date via the Internet, or by signing and delivering a proxy card relating to the same shares and bearing a later date than the date of the previous proxy prior to the vote at the Annual Meeting, in which case your later-submitted proxy will be recorded and your earlier proxy revoked; or
 
Attending and voting by ballot at the Annual Meeting.
 
If your shares are held in the name of a bank, broker or other nominee, you should check with your bank, broker or other nominee and follow the voting instructions provided.
 
What constitutes a quorum?
 
The holders of a majority of the Company’s eligible votes as of the record date, either present or represented by proxy, constitute a quorum. A quorum is necessary in order to conduct the Annual Meeting. If you choose to have your shares represented by proxy at the Annual Meeting, you will be considered part of the quorum. Both abstentions and broker non-votes are counted as present for the purpose of determining the presence of a quorum. If a quorum is not present at the Annual Meeting, the stockholders present in person or by proxy may adjourn the meeting to a later date. If an adjournment is for more than 30 days or a new record date is fixed for the adjourned meeting, we will provide notice of the adjourned meeting to each stockholder of record entitled to vote at the meeting.
 
 
2
 
 
What vote is required to approve each proposal?
 
Election of Directors. For Proposal 1, the election of directors, the nominees will be elected by a plurality of the votes of the shares of common stock present in person or represented by proxy and entitled to vote at the Annual Meeting. You may choose to vote, or withhold your vote, separately for each nominee. A properly executed proxy or voting instructions marked “WITHHOLD” with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although it will be counted for the purposes of determining whether there is a quorum.
 
Ratification of the Appointment of Independent Registered Public Accounting Firm. For Proposal 2, the affirmative vote of the holders of shares of common stock entitled to vote must exceed the votes cast against the proposal, in order for the proposal to be approved.
 
Other Proposals. Any other proposal that might properly come before the meeting will require the affirmative vote of the holders of shares of common stock entitled to vote to exceed the votes cast against the proposal for the proposal to be approved, except when a different vote is required by law, our certificate of incorporation or our Bylaws. On any such proposal, abstentions will be counted as present and entitled to vote on that matter for purposes of establishing a quorum, but will not be counted for purposes of determining the number of votes cast.
 
Abstentions and broker non-votes with respect to any matter will be counted as present and entitled to vote on that matter for purposes of establishing a quorum, but will not be counted for purposes of determining the number of votes cast. Accordingly, abstentions and broker non-votes will have no effect on the outcome of voting with respect to any of the Proposals.
 
What percentage of our common stock do our directors and officers own?
 
As of March 9, 2018, our current directors and executive officers beneficially owned approximately 8.3% of our common stock outstanding. See the discussion under the heading “Security Ownership of Certain Beneficial Owners and Management” on page 30 for more details.
 
Who is soliciting proxies, how are they being solicited, and who pays the cost?
 
We, on behalf of our Board, through our directors, officers, and employees, are soliciting proxies primarily by mail. Further, proxies may also be solicited in person, by telephone, or facsimile. We will pay the cost of soliciting proxies. We will also reimburse stockbrokers and other custodians, nominees, and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to the owners of our common stock.
 
Who is our Independent Registered Public Accounting Firm, and will they be represented at the Annual Meeting?
 
BDO China has served as the independent registered public accounting firm auditing and reporting on our financial statements for the fiscal years ended December 31, 2015, 2016 and 2017. BDO China has been appointed by our Board to serve as our independent registered public accounting firm for the fiscal year ended December 31, 2018. We expect that representatives of BDO China will not be present at the Annual Meeting.
 
What are the recommendations of our Board?
 
The recommendations of our Board are set forth together with the description of each proposal of this Proxy Statement. In summary, the Board recommends a vote:
 
 FOR the election of the three nominated Class III directors (see Proposal 1); and
 FOR the ratification of BDO China Shu Lun Pan Certified Public Accountants LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018 (see Proposal 2).
 
With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the Board or, if no recommendation is given, in their own discretion.
 
If you sign and return your proxy card but do not specify how you want to vote your shares, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Board.
 
GOVERNANCE OF THE COMPANY
 
Our business, property and affairs are managed by, or under the direction of, our Board, in accordance with the Delaware General Corporation Laws and our Bylaws. Members of the Board are kept informed of our business through discussions with the Chief Executive Officer and other key members of management, by reviewing materials provided to them by management, and by participating in meetings of the Board and its committees comprised of certain directors (“Committees”).
 
 
3
 
 
Stockholders may communicate with the members of the Board, either individually or collectively, or with any independent directors as a group by writing to the Board at 19925 Stevens Creek Blvd., Suite 100, Cupertino, California 95014. These communications will be reviewed by the office of the corporate Secretary who, depending on the subject matter, will (a) forward the communication to the director or directors to whom it is addressed or who is responsible for the topic matter, (b) attempt to address the inquiry directly (for example, where it is a request for publicly available information or a stock related matter that does not require the attention of a director), or (c) not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic. At each meeting of the Board, the corporate Secretary presents a summary of communications received and will make those communications available to any director upon request.
 
Independence of Directors
 
In determining the independence of our directors, the Board applied the definition of “independent director” provided under the listing rules of The NASDAQ Stock Market LLC (“NASDAQ”). Pursuant to these rules, the Board concluded its annual review of director independence in January, 2018. After considering all relevant facts and circumstances, the Board affirmatively determined that Messrs. Terry Belmont, Hansheng Zhou, Chun Kwok Alan Au and Gang Ji, each of whom are now serving on the Board and are continuing to serve their terms, are independent within the definition of independence under the NASDAQ rules. Tony Liu and Wen Tao (Steve) Liu are not independent directors. Additionally, Nadir Patel and Bosun S. Hau, two of the directors nominated for election as a Class III director, have been determined to meet the definition of independence under the NASDAQ rules. If two of the candidates nominated for Class III director positions, namely Nadir Patel and Bosun S. Hau, are elected at the Annual Meeting, and assuming our other directors remain in office, our Board will consist of a majority of six independent directors out of a total of eight directors on our Board.
 
Board Meetings; Annual Meeting Attendance
 
Our Board of Directors held five formal meetings and four actions for unanimous written consent during the most recently completed fiscal year. Except that Steve Liu was unable to attend the July 2017 meeting due to a conflict, each of the other members of our Board of Directors was present at all of the Board of Directors meetings held. Other proceedings of the Board of Directors were conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the corporate laws of the State of Delaware and our bylaws, as valid and effective as if they had been passed at a meeting of the directors duly called and held.
 
We currently do not have a policy regarding the attendance of board members at the annual meeting of stockholders.
 
Board Committees
 
On February 20, 2013, the Board authorized formation of an audit committee, compensation committee and nominating committee and on March 12, 2013 adopted charters. Five of our six independent directors have been appointed to these committees as follows:
 
Name
 
Audit Committee
 
Compensation Committee
 
Nominating & Corporate Governance Committee
Nadir Patel
 
Chair
 
 
 
X
Terry A. Belmont
 
X
 
X
 
X
Gang Ji
 
 
 
X
 
 
Chun Kwok Alan Au
 
X
 
 
 
Chair
Hansheng Zhou
 
 
 
Chair
 
 
 
Audit Committee
 
The Audit Committee consists of Chun Kwok Alan Au, Terry Belmont and Nadir Patel (serving as Chairman), each of whom are “independent” as defined under section 5605 (a)(2) of the NASDAQ Listing Rules. In addition, the Board has determined that each member of the Audit Committee qualifies as an “audit committee financial expert” as defined in the rules of the Securities and Exchange Commission (SEC). The Audit Committee operates pursuant to a charter, which can be viewed on our website at www.cellbiomedgroup.com (under “Investor Relations”). The Audit Committee is expected to convene regular meetings following the Annual Meeting. The role of the Audit Committee is to:
 
oversee management’s preparation of our financial statements and management’s conduct of the accounting and financial reporting processes;
 
oversee management’s maintenance of internal controls and procedures for financial reporting;
 
oversee our compliance with applicable legal and regulatory requirements, including without limitation, those requirements relating to financial controls and reporting;
 
oversee the independent auditor’s qualifications and independence;
 
 
4
 
 
oversee the performance of the independent auditors, including the annual independent audit of our financial statements;
 
discharge such duties and responsibilities as may be required of the Audit Committee by the provisions of applicable law, rule or regulation.
 
Compensation Committee
 
The Compensation Committee consists of Hansheng Zhou (serving as Chairman), Terry Belmont and Gang Ji, each of whom is “independent” as defined in section 5605(a)(2) of the NASDAQ Listing Rules. The Compensation Committee is expected to convene regular meetings after the Annual Meeting. The role of the Compensation Committee is to:
 
develop and recommend to the Board the annual compensation (base salary, bonus, stock options and other benefits) for our President/Chief Executive Officer;
 
review, approve and recommend to the Board the annual compensation (base salary, bonus and other benefits) for all of our executives;
 
review, approve and recommend to the Board the aggregate number of equity awards to be granted to employees below the executive level;
 
ensure that a significant portion of executive compensation is reasonably related to the long-term interest of our stockholders; and
 
prepare certain portions of our annual Proxy Statement, including an annual report on executive compensation.
 
A copy of the charter of the Compensation Committee is available on our website at www.cellbiomedgroup.com (under “Investor Relations”).
 
The Compensation Committee may form and delegate a subcommittee consisting of one or more members to perform the functions of the Compensation Committee. The Compensation Committee may engage outside advisers, including outside auditors, attorneys and consultants, as it deems necessary to discharge its responsibilities. The Compensation Committee has sole authority to retain and terminate any compensation expert or consultant to be used to provide advice on compensation levels or assist in the evaluation of director, President/Chief Executive Officer or senior executive compensation, including sole authority to approve the fees of any expert or consultant and other retention terms. In addition, the Compensation Committee considers, but is not bound by, the recommendations of our Chief Executive Officer or President with respect to the compensation packages of our other executive officers.
 
Nominating and Corporate Governance Committee
 
The Nominating and Corporate Governance Committee, or the “Governance Committee”, consists of Alan Au (serving as Chairman), Nadir Patel and Terry Belmont, each of whom is “independent” as defined in section 5605(a)(2) of the NASDAQ Listing Rules. The Governance Committee is expected to convene regular meetings following the Annual Meeting. The role of the Governance Committee is to:
 
evaluate from time to time the appropriate size (number of members) of the Board and recommend any increase or decrease;
 
determine the desired skills and attributes of members of the Board and its committees, taking into account the needs of the business and listing standards;
 
establish criteria for prospective members, conduct candidate searches, interview prospective candidates, and oversee programs to introduce the candidate to us, our management, and operations;
 
review planning for succession to the position of Chairman of the Board and Chief Executive Officer and other senior management positions;
 
annually recommend to the Board persons to be nominated for election as directors and appointment as members of committees;
 
adopt or develop for Board consideration corporate governance principles and policies; and review and report to the Board on the effectiveness of corporate governance procedures and the Board as a governing body, including conducting an annual self-assessment of the Board and its standing committees.
 
periodically review and report to the Board on the effectiveness of corporate governance procedures and the Board as a governing body, including conducting an annual self-assessment of the Board and its standing committees.
 
A copy of the charter of the Governance Committee is available on our website at www.cellbiomedgroup.com (under “Investor Relations”).
 
 
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Policy with Regard to Stockholder Recommendations
 
The Governance Committee does not presently have a policy with regard to consideration of any director candidates recommended by our stockholders. No stockholder (other than members of the Governance Committee) has recommended a candidate to date.
 
Director Qualifications and Diversity
 
The Board seeks independent directors who represent a diversity of backgrounds and experiences that will enhance the quality of the Board’s deliberations and decisions. Candidates should have substantial experience with one or more publicly traded companies or should have achieved a high level of distinction in their chosen fields. The Board is particularly interested in maintaining a mix that includes individuals who are active or retired executive officers and senior executives, particularly those with experience in biomedicine, medical and drug regulation in China, intellectual property, early-stage companies, research and development, strategic planning, business development, compensation, finance, accounting and banking.
 
In evaluating nominations to the Board of Directors, the Governance Committee also looks for certain personal attributes, such as integrity, ability and willingness to apply sound and independent business judgment, comprehensive understanding of a director’s role in corporate governance, availability for meetings and consultation on Company matters, and the willingness to assume and carry out fiduciary responsibilities. The Governance Committee took these specifications into account in formulating and re-nominating its present Board members.
 
The current Class III director candidates, Wen Tao (Steve) Liu, Nadir Patel and Bosun S. Hau, were recommended by management and the Governance Committee and nominated by the full board of directors.
 
Code of Business Conduct and Ethics
 
We have adopted a code of ethics, which applies to all our directors, officers and employees and comprises written standards that are reasonably designed to deter wrongdoing and to promote the behavior described in Item 406 of Regulation S-K promulgated by the SEC. A copy of our “Code of Business Conduct and Ethics” is available on our website at www.cellbiomedgroup.com (under “Investor Relations/Corporate Governance”). In the event that we make any amendments to, or grant any waivers of, a provision of our Code of Business Conduct and Ethics for Officers, Directors and Employees that applies to the principal executive officer, principal financial officer or principal accounting officer that requires disclosure under applicable SEC rules, we intend to disclose such amendment or waiver and the reasons therefor in a Form 8-K or in our next periodic report.
 
Conflicts of Interest
 
Members of our management are associated with other firms involved in a range of business activities. Consequently, there are potential inherent conflicts of interest in their acting as officers and directors of our company. Although the officers and directors are engaged in other business activities, we anticipate they will devote an important amount of time to our affairs.
 
Our officers and directors are now and may in the future become stockholders, officers or directors of other companies, which may be formed for the purpose of engaging in business activities similar to ours. Accordingly, additional direct conflicts of interest may arise in the future with respect to such individuals acting on behalf of us or other entities. Moreover, additional conflicts of interest may arise with respect to opportunities which come to the attention of such individuals in the performance of their duties or otherwise. Currently, we do not have a right of first refusal pertaining to opportunities that come to their attention and may relate to our business operations.
 
Our officers and directors are, so long as they are our officers or directors, subject to the restriction that all opportunities contemplated by our plan of operation which come to their attention, either in the performance of their duties or in any other manner, will be considered opportunities of, and be made available to us and the companies that they are affiliated with on an equal basis. A breach of this requirement will be a breach of the fiduciary duties of the officer or director. If we or the companies with which the officers and directors are affiliated both desire to take advantage of an opportunity, then said officers and directors would abstain from negotiating and voting upon the opportunity. However, all directors may still individually take advantage of opportunities if we should decline to do so. Except as set forth above, we have not adopted any other conflict of interest policy with respect to such transactions.
 
Review, Approval or Ratification of Transactions with Related Persons
 
The Board of Directors reviews issues involving potential conflicts of interest, and reviews and approves all related party transactions, including those required to be disclosed as a “related party” transaction under applicable federal securities laws. The Board has not adopted any specific procedures for conducting reviews of potential conflicts of interest and considers each transaction in light of the specific facts and circumstances presented. However, to the extent a potential related party transaction is presented to the Board, the Company expects that the Board would become fully informed regarding the potential transaction and the interests of the related party, and would have the opportunity to deliberate outside of the presence of the related party. The Company expects that the Board would only approve a related party transaction that was in the best interests of, and fair to, the Company, and further would seek to ensure that any completed related party transaction was on terms no less favorable to the Company than could be obtained in a transaction with an unaffiliated third party.
 
 
6
 
 
Board Leadership Structure and Risk Oversight
 
The Chairman of the Board, who is a different individual from the Chief Executive Officer, presides at all meetings of the Board. The Chairman is appointed by majority vote of the directors, excluding the vote of the appointee.
 
Enterprise risks are identified and prioritized by management and each prioritized risk is assigned to a Board committee or the full Board for oversight as follows:
 
Full Board - Risks and exposures associated with strategic, financial and execution risks and other current matters that may present material risk to our operations, plans, prospects or reputation.
 
Audit Committee - Risks and exposures associated with financial matters, particularly financial reporting, tax, accounting, disclosure, internal control over financial reporting, financial policies, investment guidelines and credit and liquidity matters.
 
Nominating and Corporate Governance Committee - Risks and exposures relating to corporate governance and management and director succession planning.
 
Compensation Committee - Risks and exposures associated with leadership assessment, and compensation programs and arrangements, including incentive plans.
 
Compliance with Section 16(a) of the Exchange Act
 
Section 16(a) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) requires the Company’s directors and executive officers, and persons who beneficially own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of beneficial ownership and reports of changes in beneficial ownership of our common stock. The rules promulgated by the SEC under Section 16(a) of the Exchange Act require those persons to furnish us with copies of all reports filed with the Commission pursuant to Section 16(a). The information in this section is based solely upon a review of Forms 3, Forms 4, and Forms 5 received by us.
 
We believe that all of the Company's executive officers, directors and 10% stockholders have timely complied with their filing requirements during the year ended December 31, 2017, except that Mr. Andrew Chan inadvertently reported late three acquisitions of company securities, Mr. Tony Liu inadvertently reported late three acquisitions and one disposition of the Company’s securities and Mr. Yihong Yao inadvertently reported late two acquisitions and one disposition of the Company’s securities transpired in 2017.
 
REPORT OF THE AUDIT COMMITTEE
 
The following Report of the Audit Committee shall not be deemed incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent we specifically incorporate it by reference therein.
 
The Audit Committee of the Board has:
 
reviewed and discussed the Company’s audited financial statements for the year ended December 31, 2017 with management;
discussed with the Company’s independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1 AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; and
received the written disclosures and letter from the independent auditors required by the applicable requirements of the Public Accounting Oversight Board regarding the independent auditor communications with the Audit Committee concerning independence, and has discussed with BDO China matters relating to its independence.
 
In reliance on the review and discussions referred to above, the Audit Committee recommended to the Board that the financial statements audited by BDO China for the fiscal year ended December 31, 2017 be included in its Annual Report on Form 10-K for such fiscal year.
 
The Audit Committee and the Board have also, respectively, recommended and approved the selection of the Company’s current independent auditor, which approval is subject to ratification by the Company’s stockholders.
 
Submitted by:
 
The Audit Committee of the Board of Directors
 
/s/ Nadir Patel, Chairman
/s/ Chun Kwok Alan Au
/s/ Terry Belmont
 
 
7
 
 
REPORT OF THE COMPENSATION COMMITTEE
 
The following Report of the Compensation Committee shall not be deemed incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent we specifically incorporate it by reference therein.
 
Our Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis (“CD&A”) for the fiscal year ended December 31, 2017 included in this proxy statement. Based on that review and discussion, the Compensation Committee has recommended to the Board that the CD&A be included in this proxy statement.
 
Submitted by:
 
The Compensation Committee of the Board of Directors
 
/s/ Hansheng Zhou, Chairman
/s/ Gang Ji
/s/ Terry Belmont
 
COMPENSATION DISCUSSION AND ANALYSIS
 
2017 Named Executive Officers
 
Bizuo (Tony) Liu – Chief Executive Officer and Chief Financial Officer
Richard Wang – Former Chief Operating Officer (resigned in February 2017)
Xia Meng – Former Chief Operating Officer (from June 2017 to February 2018)
Yihong Yao – Chief Scientific Officer
Andrew Chan – Chief Legal Officer (General Counsel), Secretary and Senior Vice President
  
This section explains how the Compensation Committee of the Board of Directors oversees our executive compensation programs and discusses the compensation earned by CBMG’s named executive officers, also referenced to herein as our listed officers. For additional information about compensation to our named officers, see "Executive Compensation" in this proxy statement.
 
Executive Summary
 
BUSINESS PERFORMANCE AND PAY
 
2017 was a critical year for CBMG, reflected in our prioritization of our cancer therapeutic technologies and a focus of our efforts on developing CAR-T clinical trials.
 

For the fiscal year ended December 31, 2017, we achieved net revenue of $0.3 million, down 50% from 2016, operating loss of $27.6 million, or $0.8 million better than 2017, and diluted loss per share of $1.78, an improvement of $0.31 per share, or 15% from 2016. This improvement is mainly resulted from (i) the decrease in impairment of certain legacy investments and (ii) the receipt of more government subsidies. Total Shareholder Return (“TSR”) is a measure of the performance of the Company’s stock over time. It combines stock price appreciation and dividends paid, if any, to show the total return to the shareholder expressed as an annualized percentage. The Company’s TSR was 66.5% for 2015, -39% for 2016 and -14.1% for 2017. The Nasdaq Healthcare Index was 6.9%, -16.9% and 21.3% and Russell 3000 Index was 0.48%, 12.74% and 24.1%. The five-year cumulative TSR is 288.5% for the Company, 217.3% for the Nasdaq Healthcare Index and 211.3% for the Russell 3000 Index. Because our Stock and Option grants and awards are based on the grant date and cannot be accrued in accordance with U.S. GAAP, the earned awards are reported in arrears. For our stock performance graph of years 2012 to 2017 and related discussions, please refer to Item 5- Market for Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.
 
 
8
 
 
We used the Black Scholes model for our stock options grant valuation.  Specifically we used the following assumptions in our modeling for the 2017 issued options:
 
Expected volatility – 85.41% to 89.62%;
Risk-free rate of return – 1.86% to 2.29%;
Dividend yield –zero; and
Time to exercise – six years.
 
In addition, we did not consider non-transferability but used an 11% risk of forfeiture for employees, advisors and Directors and Officers.
 
Because the majority of our executive compensation is tied to performance and TSR, our Chief Executive Officer, Chief Scientific Officer, Secretary and Senior Vice President saw an increase in their total compensation in 2017 as compared to 2016. The increase is mainly a result of increased number of option awards. In 2017 we initiated the Long Term Incentive Plan (“LTIP”) and granted restricted stock units ("RSUs") to our listed officers, which better align their compensation with the long-term interests of CBMG stockholders by focusing our executive officers on TSR. We believe the compensation structure, including the grant of restricted stock awards to the listed officers in 2017, is commensurate with industry standards, namely for executives in the highly in-demand immune cell therapy industry and executives with substantial experience at larger pharmaceutical companies in the industry. However, attracted by a potentially large cancer immune cell therapy market in China, some U.S. companies have made inroads in China. Specifically, these U.S. companies had established their foothold in geographical areas close to our China operations. The presence of these companies in China created a talent retention risk that we addressed through the addition of the LTIP for officers beginning in 2017.
 
Stockholder Engagement and “Say on Pay” Vote
 
At our annual meeting of stockholders in 2014, our shareholders approved by advisory vote the Company’s compensation to its executives and determined to conduct advisory votes every three years. We also provided our shareholder with a nonbinding advisory vote on executive compensation at our 2017 annual meeting of stockholders. We plan to next provide shareholders with a nonbinding advisory vote on executive compensation at our 2020 annual meeting of stockholder. The Compensation Committee plans to take into consideration the percentage of votes cast “For” our advisory “say on pay” proposal. The Board believes that “say on pay” “For” results can be an affirmation of the structural soundness of our executive compensation programs, which will include our long-term incentive plan for business continuity and talent retention.
 
2017 Compensation of Our Listed Officers
 
PERFORMANCE AND INCENTIVE PAY FOR 2017
 
CBMG has a long-standing commitment to pay-for-performance that we implement by providing the majority of compensation through arrangements that are designed to hold our executive officers accountable for business results and reward them for strong corporate performance and creation of value for our stockholders. Our executive compensation programs are periodically adjusted over time so that they support our business goals and promote long-term growth of the company.
 
As illustrated below, approximately 85% of targeted total direct compensation in 2017 for Mr. Liu, our Chief Executive Officer, was performance-based, consisting of approximately 80% equity, and 5% annual incentive cash bonus. Only 14% of his compensation, in the form of base salary, was fixed, ensuring a strong link between his targeted total direct compensation and the company result. The remaining 1% of other compensation is healthcare insurance premium expense.
 
 
9
 
 
 
 
 
Note: 2017 Officers Compensation data is prepared on the below basis: (i) Salary, bonus and all other compensation is on a cash basis. and (ii) For restricted stock and option awards, the illustrated amount is the grant date fair value calculated according to U.S. GAAP without amortizing over the vesting periods. Under this method, the compensation cannot be accrued due to the Company's inability to ascertain the stock option exercise price and grant date, and the amount of cash bonus that the Compensation Committee may grant to each officer as of the fiscal year end.
 
The following chart shows the allocation of the listed officers’ total direct compensation paid or granted for 2017, reflecting the extent to which their total direct compensation consists of performance-based compensation.
 
 
 
The majority of executive compensation for our listed officers is delivered through programs that link pay realized by executive officers with both operational results and with. As noted below, equity-based compensation comprises a significant portion of each listed officer’s compensation package and consists of variable performance-based stock options and RSUs, which we believe aligns compensation with the long-term interests of CBMG’s stockholders by focusing our listed officers on TSR. As a result, total compensation for each listed officer varies with both individual performance and CBMG’s performance in achieving financial and nonfinancial objectives established by our Compensation Committee.
 
 
10
 
 
  2017 Cash Compensation
 
As reflected in the table below and commensurate with the industry’s practice, Mr. Tony Liu, Mr. Yihong Yao and Mr. Andrew Chan’s salary were increased to reflect increased responsibilities.
 
 
On January 18, 2018, the Compensation Committee reviewed peer companies’ compensation and incentive information, competitive landscape of the cell therapy industry as well as major aspects of the management’s achievements in 2017, including launch of the GMP facility, significant strategic partnerships, achievements in clinical trials and addition of key talents. Based on review of such factors, the Compensation Committee approved salary increases of the three executive officers as listed in the above table.
 
2017 Incentive Compensation Payouts
 
Based in part on the significant achievement in the December 2017 closing of a $14.5 million funding at a premium to market share price, the formation of the General Electric and Thermo Fisher strategic partnership, implementation of the U.S. GMP facility to produce master cell bank from donor adipose tissue which will enable filing the U.S. FDA IND for the allogeneic KOA clinical trial, addition of key talents, and launch of the new world class GMP facility, the Chief Executive Officer received a performance cash bonus paid out in 2017.
 
In addition, we strive to be competitive with other similarly situated companies in our industry. The process of developing biopharmaceutical products and bringing those products to market is a long-term proposition and outcomes may not be measurable for several years. Therefore, in order to build long-term value for us and our stockholders, and in order to achieve our business objectives, we believe that we must compensate our officers and employees in a competitive and fair manner that reflects our current activities but also reflects contributions to building long-term value. On January 28, 2018, the Compensation Committee reviewed the 2017 annual performance results evaluated how each listed officer met his performance targets in 2017 and determined the final performance-based payouts as follows:
 
 
 
Cash bonus for 2017 ($)
 
 
 
 
 
Bizuo (Tony) Liu
  150,000 
 
    
Andrew Chan
  115,000 
 
    
Yihong Yao
  78,600 
 
The table below summarizes the 2017 performance goals criteria which the Compensation Committee uses to evaluate the listed officers’ performance and determine their incentive compensation payouts.
 
Category
 
2017 Goals
Financials
 
Financing; progress in clinical trials development, talents acquisition, management of approved budget, and maintenance of ample working capital
Corporate Development
 
Develop strategic partnership and acquisition of complementary technologies
Product Development
 
Manage Clinical Trials execution
 
 
2017 Officers Compensation data is prepared on the below basis: (i) salary, bonus and all other compensation is on a cash basis. and (ii) for stock and option awards, the illustrated amount is the grant date fair value calculated according to U.S. GAAP without amortizing over the vesting periods. Under this method, the compensation cannot be accrued due to the Company's inability to ascertain the stock option exercise price and grant date, and the amount of cash bonus that the Compensation Committee may grant to each officer as of the fiscal year end. For purpose of clarity and in order to reflect the Compensation Committee’s 2018 decision as to 2017 performance, we are providing a pro-forma 2017 Officers Compensation to indicate all compensation that has been earned and accrued by each listed officer in 2017.
 
 
11
 
 
 
Note 1: Approved by Compensation Committee in January 2018 as earned 2017 performance award. included in 2017 year end general accruals.
Note 2: All these are restricted common stock and options under long-term incentive plan approved by Compensation Committee in January and June 2017.
Note 3: Predominantly health insurance expenses.
 
Changes To Compensation Program
 
We believe that 2017 was an outstanding year for us due, in large part, to our achievement of significant talent recruitment, talent retention in a fiercely competitive China market, clinical, manufacturing, strategic alliance and funding milestones. With respect to the 2017 compensation decisions, our Compensation Committee and our Board focused on ensuring that a significant portion of the total compensation awarded to the executive officers were linked to meeting our long-term strategic plan and to create long-term stockholder value. We further aligned our executives’ interests with those of our stockholders through the LTIP that we implemented in early 2017. The majority of our 2017 compensation to the executive officers was in the form of equity incentive awards. We believe that equity awards incentivize our executive officers to create long-term stockholder value. Attracted by a potentially large cancer immune cell therapy market in China, U.S. biopharmaceutical companies started to make inroads in China, establishing their foothold in geographical areas close to our China operations. We have spent many years recruiting talent and training our people. Our employees are highly coveted and have cultivated valuable relationships with the cell therapy clinical partners. However, cell therapy is a relatively new science, the talent pool is limited and there is a dearth of trained specialists in this discipline. Against this backdrop, the Compensation Committee conducted a review of our compensation program in late January 2017. The Committee reviewed its compensation structure and its individual components to ensure we provide a competitive executive compensation scheme commensurate to retain and attract talented leaders to bolster our continued journey to advance our clinical trials and to bring our cell therapies to commercialization. The Committee established a LTIP that took effect in 2017 to mitigate increased talent retention risk. We believe this new addition of the long-term incentive plan has helped retain key personnel. One of the elements in the long-term incentive is tied to long-term stock price performance. We believe that upon diligent execution and product commercialization the fundamentals will speak for itself and the stock price will eventually reflect our value. The 2017 LTIP has not only encouraged talent retention, it has further aligned our executive officers with stockholders’ best interests. Hence the Compensation Committee decided in January 2018 that there will not be additional grant in equity compensation. However, commensurate with the industry’s standard the Compensation Committee made adjustment to the three key named executive officers’ salary.
 
Elements of Our Compensation Program and Why We Chose Each
 
Main Compensation Components
 
Our companywide compensation program, including for our key executives, is broken down into three main components: base salary, performance cash bonuses and potential long-term compensation in the form of stock options or RSUs. We believe these three components constitute the minimum essential elements of a competitive compensation package in our industry. In January 2017, in an effort to boost talent retention, we also created an LTIP for our named executives and selected senior officers, which compensates such employees with performance-based RSUs as well as time-based RSUs and stock options.
 
 
 
12
 
 
Salary
 
Base salary is used to recognize the leadership, experience, skills, knowledge, execution, and responsibilities required of our executives as well as recognizing the fiercely competitive nature of the biopharmaceutical industry. This is determined partially by evaluating our peer companies as well as the degree of responsibility and experience levels of our executives and their overall vision, execution and contributions to our company. Base salary is one component of the compensation package for our key executives; the other components being cash bonuses, annual equity grants, a long-term incentive plan and our benefit programs. Base salary is determined in advance whereas the other components of compensation are awarded in varying degrees following an assessment of the performance of the executive. This variegated approach to compensation reflects the philosophy of our board of directors and its Compensation Committee to emphasize and reward, on an annual basis, performance levels achieved by our executives.
 
Performance Cash Bonus Plan
 
We have a performance cash bonus plan under which bonuses are paid to our executives based on achievement of our performance goals and objectives established by the Compensation Committee and/or our Board as well as on individual performance. The bonus program is discretionary and is intended to: (i) strengthen the connection between individual compensation and the Company’s corporate achievements; (ii) encourage teamwork among all disciplines within our company; (iii) reinforce our pay-for-performance philosophy by awarding higher bonuses to higher performing employees; and (iv) help ensure that our cash compensation is competitive. The Compensation Committee and our Board also has the discretion, after consulting with our CEO, to not pay cash bonuses in order that we may conserve cash and support ongoing development programs and commercialization efforts. Regardless of our cash position, we consistently grant annual merit-based stock options to continue incentivizing both our senior management and our employees.
 
Based on their employment agreements, each executive is assigned a target payout under the performance cash bonus plan, expressed as a percentage of base salary for the year. Actual payouts under the performance cash bonus plan are based on an assessment of both individual and corporate achievements, each of which is separately weighted as a component of such officer’s target payout. For executive officers, the corporate goals receive the highest weighting in order to ensure that the bonus system for our management team is closely tied to our corporate performance. Each such employee also has specific individual goals and objectives as well that are tied to the overall corporate goals the performance of which is evaluated by the Compensation Committee and the Board.
 
Equity Incentive Compensation
 
We view long-term compensation, currently in the form of stock options and RSUs, as a tool to align the interests of our executives and employees generally with the creation of stockholder value, to motivate our employees to achieve and exceed corporate and individual objectives and to encourage them to remain employed by us. While cash compensation is a significant component of employees’ overall compensation, the Compensation Committee and our Board, together with our CEO, believe that the driving force of any employee working in a small biotechnology company should be strong equity participation. We believe that this not only creates the potential for substantial longer-term corporate value but also motivates employees and fosters loyalty and commitment with appropriate personal compensation. The Compensation Committee believes that stock options and RSUs equity grants constitute a significant retention incentive and a tool to foster continuity of management, an important factor in business continuity in a company with rich talents in a rapidly growing industry in China.
 
Long Term Incentive Plan (LTIP)
 
In January 2017, in anticipation of the commencement of substantial clinical trials initiation towards product commercialization and to mitigate risk of talent retention, the Compensation Committee approved our LTIP. The LTIP is designed as an attractive incentive for our senior management to focus on creating shareholder value for us by advancing the clinical trials towards product commercialization.
 
The LTIP is a four-year long-term incentive award comprised of the following grants from the 2014 Equity Incentive Plan:
 
1) Stock Price Sensitive Performance RSU awards (“Performance RSUs”) to be vested and delivered in 2021; and
2) Time Sensitive RSUs and Stock Options, which vest monthly over a period of 48 months.
 
The total number of Performance RSUs currently contemplated to be issuable under the LTIP is 568,000. The Performance RSUs under the LTIP will not vest upon granting, but instead are subject to potential vesting in 2021 depending on the achievement of certain stock price performance by us. Performance RSUs will be valued on the date of issuance and will vest and be delivered in 2021.
 
The total number of time sensitive RSUs currently contemplated to be issuable under the LTIP is 283,500. The total number of time sensitive stock options covered by the LTIP is 282,500. Both the time sensitive RSUs and Stock Options are subject to monthly vesting over a 4 year term.
 
 
 
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Other Compensation
 
In addition to the main components of compensation outlined above, the LTIP also provides contractual severance and/or change in control benefits to the executives and certain key members of management. The change in control benefits for all applicable persons has a “double trigger.” A double-trigger means that the executive officers will receive the change in control benefits described in the agreements only if there is both (1) a Change in Control of our company (as defined in the agreements) and (2) a termination by us of the applicable person’s employment “without cause” or a resignation by the applicable persons for “good reason” (as defined in the agreements) within a specified time period following the Change in Control. We believe this double trigger requirement creates the potential to maximize stockholder value because it prevents an unintended windfall to management as no benefits are triggered solely in the event of a Change in Control while providing appropriate incentives to act in furtherance of a change in control that may be in the best interests of the stockholders. We believe these severance/change in control benefits are important elements of our compensation program that assist us in retaining talented individuals at the executive and senior managerial levels and that these arrangements help to promote stability and continuity of our executives and senior management team. We also believe that the interests of our stockholders will be best served if the interests of these members of our management are aligned with theirs. Furthermore, we believe that providing change in control benefits lessens or eliminates any potential reluctance of members of our management to pursue potential change in control transactions that may be in the best interests of the stockholders. Finally, we believe that it is important to provide severance benefits to members of our management, to promote stability, business continuity and to focus on the job at hand.
 
We do not have deferred compensation plans, pension arrangements or post-retirement health coverage for our executive officers or employees. All of our employees not specifically under contract are “at-will” employees, which mean that their employment can be terminated at any time for any reason by either us or the employee. Our key executives (as well as certain of our senior managers) have employment agreements that provide lump sum compensation in the event of their termination without cause or, under certain circumstances, upon a Change of Control.
 
Determination of Compensation Amounts
 
A number of factors impact the determination of compensation amounts for our executives, including the individual’s role in our company and individual performance, length of service with us, competition for talent, individual compensation package, assessments of internal pay equity and industry data. Stock price performance has generally not been a significant factor in determining annual compensation because the price of our common stock is subject to a variety of factors outside of our control.
 
Utilizing publicly available information, our Compensation Committee establishes a list of peer companies to best assure ourselves that we are compensating our executives on a fair and reasonable basis. We also utilize Hewitt-prepared data for below-executive level personnel, which data focuses on similarly sized life science companies in China. The availability of peer data is used by the Compensation Committee strictly as a guide in determining compensation levels with regard to salaries, cash bonuses and performance related annual equity grants to all employees. However, the availability of this data does not imply that the Compensation Committee is under any obligation to follow peer companies in compensation matters.
 
Pay Ratio Disclosure
 
In August 2015 pursuant to a mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd – Frank Act”), the SEC adopted a rule requiring annual disclosure of the ratio of the median employee’s annual total compensation to the total annual compensation of the principal executive officer (‟PEO”). The Company’s PEO is Mr. Liu. The purpose of the new required disclosure is to provide a measure of the equitability of pay within the organization.
 
We identified the median employee by examining the 2017 total cash compensation for all individuals, excluding our CEO, who were employed by us as of December 31, 2017. We included all employees, whether employed on a full-time, part-time, or seasonal basis. In terms of geographic locations, 116 of our 125 employees are based in China while the rest are based in the United States.
 
The following assumptions, adjustments, or estimates applied to our analysis of total compensation: share based compensation has been taken into consideration of total annual compensation, which is calculated based on the grant date fair value calculated according to U.S. GAAP without amortizing over the vesting periods. Additionally, we annualized the compensation for all full-time and temporary employees as of December 31, 2017. We believe that the use of cash and equity compensation for all employees is a consistently applied compensation measure because annual equity awards to employees are a key component of our compensation program and approximately 73% of our current employees receive annual equity awards as part of their compensation. After identifying the median employee based on total cash and equity compensation, we calculated annual total compensation of such employee.The medical benefits and other social funds borne by the Company was included in the total compensation. The Company did not have a 401(k) Plan in 2017.
 
As illustrated in the table below, our 2017 PEO to median employee pay ratio is 70:1.
 
 
14
 
 
 Median Employee total annual compensation
 $29,212 
 Mr. Liu (‟PEO”) total annual compensation
 $2,051,063 
 Ratio of PEO to Median Employee Compensation
  70:1 
 
Compensation of Directors
 
Prior to the February 2013 merger with acquire Cellular Biomedicine Group Ltd. (the “Merger”), by which the Company acquired its primary biomedicine business, the Company compensated directors through options to purchase common stock as consideration for their joining our Board and/or providing continued services as a director. Directors were not provided with cash compensation, although the Company would reimburse their expenses.
 
After the Merger, the Company determined that the annual cash compensation (prorated daily) to be paid to each director shall consist of $30,000 for each independent director and $20,000 for each non-independent director. In addition, each independent director of the Board is eligible to receive a non-qualified option grant under the Plan, under which such director’s initial option grant shall be for a number of shares of common stock as set forth in the Independent Director Agreement for each such director and shall include such other terms to be determined by the Board and or its Compensation Committee.
 
On September 19, 2015, the Company held a Board meeting and approved new director compensation plan. The director compensation adjustment was made as a result of a compensation review undertaken by a professional, independent firm which included a comparison with industry peers. The Committee determined that annual cash compensation (prorated daily based on a 360 day year for any portion of the year if such director serves for less than a full term) to be paid to each non-independent director shall consist of : (i) $36,000 per year for services as a director, plus (ii) either (x) $40,000 for each committee on which such director serves, or (y) $110,000 for each committee on which such director serves as chairperson (or, if such director is the chairman of the full board, for such chair position). Such compensation shall be paid, at each director’s election, in either (a) thirty percent (30%) in cash and seventy percent (70%) in non-qualified stock options, or (b) fifty percent (50%) in cash and fifty percent (50%) in non-qualified stock options. On January 28, 2018, the Compensation Committee reviewed our compensation of the Directors and decided that there will be no change to the current compensation structure.
 
Accordingly, compensation for independent non-executive directors in calendar year 2017, as expressed on an annualized basis (reflecting adjustments during the year due to changes in committee composition), was as follows:
 
 
 
Cash compensation for 2017 ($)
 
 
Options granted for 2017 (note)
 
 
Note
 
 
Total compensation ($)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Terry A. Belmont
  67,800 
  14,648 
  1 
  226,000 
 
    
    
    
    
Chun Kwok Alan Au
  55,800 
  12,056 
  1 
  186,000 
 
    
    
    
    
Nadir Patel
  93,000 
  8,611 
  1 
  186,000 
 
    
    
    
    
Zhou Hansheng
  55,800 
  12,056 
  1 
  186,000 
 
    
    
    
    
Ji Gang
  22,800 
  4,926 
  1 
  76,000 
 
Note 1: These non-qualified options with exercise price of $10.8 were all granted on April 28, 2017 and will be fully vested on April 28, 2018.
 
 
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PROPOSAL 1 — ELECTION OF DIRECTORS
 
Nominees for Election
 
The Board determined it was in the best interest of the Company to authorize the nomination of Wen Tao (Steve) Liu, Nadir Patel and Bosun S. Hau for a new Class III term. Accordingly, the Board has authorized the nomination of these three nominees to serve as Class III directors, and Class III has three director positions up for election at the Annual Meeting.
 
Subsequent to stockholder approval of this proposal, the Board will have a total of eight members, divided into three classes as follows:
 
Class
 
Term
 
Directors
 
 
 
 
 
Class I
 
Class I directors serve for a term of three years, and are elected by the stockholders at the beginning of each term. The next full 3-year term for Class I directors extends from the date of the 2019 annual meeting to the date of the 2022 annual meeting.
 
1. Terry A. Belmont
2. Hansheng Zhou, Ph.D
 
 
 
 
 
Class II
 
Class II directors serve for a term of three years, and are elected by the stockholders at the beginning of each term. The next full 3-year term for Class II directors extends from the date of the 2017 annual meeting to the date of the 2020 annual meeting.
 
3. Chun Kwok Alan Au
4. Gang Ji
5. Bizuo (Tony) Liu
 
 
 
 
 
Class III
 
Class III directors serve for a term of three years, and are elected by the stockholders at the beginning of each term. The next full 3-year term for Class III directors extends from the date of this 2018 Annual Meeting to the date of the 2021 annual meeting.
 
6. Wen Tao (Steve) Liu
7. Nadir Patel
8. Bosun S. Hau
 
Our Board has nominated three Class III director candidates for election at the Annual Meeting, who are the same individuals listed above in position numbers 6, 7 and 8. Each nominee has agreed, if elected, to serve a three-year term or until the election and qualification of his successor. If any nominee is unable to stand for election, which circumstance we do not anticipate, the Board may provide for a lesser number of directors or designate a substitute. In the latter event, shares represented by proxies may be voted for a substitute nominee.
 
If a quorum is present at the Annual Meeting, then nominees will be elected by a plurality of the votes of the shares of common stock present in person or represented by proxy and entitled to vote at the meeting. There is no cumulative voting in the election of directors.
 
The following biographical information is furnished as to each nominee for election as a Class III director:
 
Wen Tao (Steve) Liu, Director
 
Wen Tao (Steve) Liu has been a director of the Company since October 2013. Dr. Liu has over 30 years of professional career encompassing biomedicine, clean energy and semiconductor industries. He has led multi-national businesses as well as entrepreneurial companies, with a proven track record of delivering financial results and shareholder value. He served on board of directors of various public and private companies in the United States, China, Hong Kong, Canada, and Australia. Dr. Liu previously served as Chairman and CEO of Cellular Biomedicine Group Inc. In October 2013, he transitioned to the role of Executive Chairman of the Board and, in February 2016, to the role of director and strategic advisor to CBMG’s management. Prior to CBMG, Dr. Liu served as President and CEO of Seeo Inc. from July 2010 to Feb 2012, and as director to Aug 2015 where he led a team of scientists and entrepreneurs for the development of solid-state lithium ion battery for electric vehicles and smart grid applications. Under his leadership, Seeo received multiple funding from Department of Energy and venture capital firms. Seeo was elected to Global Cleantech 100 and top Energy Technology Startups in 2011. Before that, Mr. Liu worked 25 years in semiconductor industry. From 2003 to 2009, he was President and CEO of Shanghai Huahong NEC Electronics Company (now HHGRACE), for which he received the White Magnolia Award from Shanghai Government for his contribution to international collaboration and economic development of the city. From 1989 to 2002, he was Vice President and GM of Peregrine Semiconductor, Vice President and GM of Integrated Device Technology, Vice President and General Manager of Quality Semiconductor and Managing Director of Quality Semiconductor Australia. Mr. Liu served Cypress Semiconductor in various engineering capacity from 1984 to 1989. Mr. Liu earned a Bachelor’s degree in Chemistry from Nanjing University, Nanjing China. He holds a Doctorate in Physical Chemistry from Rensselaer Polytechnic Institute, Troy New York. In considering Dr. Liu’s eligibility to serve on the Board, the Board considered Dr. Liu’s board experience as well as his prior experience as a leader and executive officer.
 
 
16
 
 
Nadir Patel – Director
 
Mr. Patel has served as an independent director of the Company since July 2014. Mr. Patel is a senior Canadian diplomat currently serving in India. He previously held the position of Chief Financial Officer for Canada’s Department of Foreign Affairs, Trade and Development, which included the responsibilities of strategic planning, corporate finance and operations, risk management and performance. Mr. Patel has previously served as Canada’s Consul General in Shanghai, promoting trade and investment between Canada and China, as well as Canada’s Chief Air Negotiator where he negotiated bilateral treaties on behalf of the Canadian government.  Mr. Patel also served on the Board of Governors of the International Development Research Centre (and on its Audit and Finance Committee), as well as the Advisory Board of Wilfrid Laurier University’s School of Business and Economics. He has a Master of Business Administration (MBA) from New York University’s Stern School of Business, the London School of Economics and Political Science, and the HEC Paris School of Management.  In considering Mr. Patel’s eligibility to serve on the Board, the Board considered his financial expertise, international experience, and knowledge of corporate governance practices through his past participation on public sector Boards. Mr. Patel serves as Chair of the Audit Committee and as a member of the Nominating and Governance Committee for CBMG.
 
Bosun S. Hau– Director
 
Mr. Hau has been a director of the Company since February 2018. Mr. Hau has nearly 15 years of healthcare industry experience, primarily as an investor in both private and publicly-listed companies. Since October 2015, Mr. Hau has served as a Managing Director and Partner of Sailing Capital. From August 2009 to October 2015, Mr. Hau served as a Partner of MVM Life Science Partners. From July 2004 to August 2007, Mr. Hau served as an equity research analyst covering the medical device and pharmaceutical industries for JP Morgan Securities, Inc. and Prudential Securities, Inc. Since 2009, Mr. Hau has served as a member of the board of directors of several private biotechnology, specialty pharmaceutical and medical device companies. Mr. Hau received a B.S. in Molecular and Cellular Biology, a B.S.H.S. in Physiological Sciences and a B.A. in Psychology from the University of Arizona, an M.Sc. in Biotechnology from Johns Hopkins University and an M.B.A in Finance and Health Management from the Wharton School at the University of Pennsylvania. The Company believes Mr. Hau’s extensive experience in the venture capital/private equity and financial services industries qualifies him to serve on our Board. In considering Mr. Hau’s eligibility to serve on the Board, the Board considered Mr. Hau’s extensive biomedicine and pharmaceutical background as well as venture capital tenure in the industry. Mr. Hau was nominated by Sailing Capital Overseas Investment Ltd. in accordance with the terms of the private placement consummated in February 2018.
 
Compensation of Directors
 
The Company has determined that the annual cash compensation (prorated daily) to be paid to each director shall consist of $36,000 for each director. In addition, each independent director of the Board is eligible to receive a non-qualified option grant under the Company’s stock incentive plan, under which such director’s initial option grant shall be for a number of shares of common stock as set forth in the Independent Director Agreement for each such director and shall include such other terms to be determined by the Board and or its Compensation Committee.
 
Non-Executive Director Agreement
 
The Company has and will continue to enter into agreements with independent non-executive directors. Effective January 2016, directors are paid based on three components from the September 2015 Compensation Committee’s engagement with Deloitte Consulting LLP (“Deloitte Consulting”) to review the competitiveness of the Company’s non-employee director compensation program. The three components (each prorated daily based on a 360 day year for any portion of the year if he serves for less than a full term) are: (i) $36,000 per year for services as a director, plus (ii) $40,000 for each committee on which such director serves, and/or (iii) $110,000 for each committee for which such director serves as chairperson (or if such director is chair of the full board, for such chair position). Such compensation shall be paid, at each director’s election, in either (x) thirty percent (30%) cash and seventy percent (70%) in non-qualified stock options, or (y) fifty percent (50%) in cash and fifty percent (50%) in non-qualified stock options. Such options shall vest on the anniversary date of the director’s appointment to the committee or to his position as committee chair, or on the next annual meeting date as the case may be. Deloitte Consulting was solely engaged to review the competitiveness of the Company’s non-employee director compensation program. It determined different components of the director compensation based on custom industry peer group data and the National Association of Corporate Directors’ ("NACD”) 2014-2015 Director Compensation Report. Director compensation data from the industry peer group was used as the predominant source to understand the competitiveness of the Company’s director compensation program, while information from the NACD survey provided a supplemental market reference. Deloitte Consulting’s analysis of director compensation included these components of pay: annual retainer, board and committee meeting fees, additional committee retainers (including both chair and member retainers), total cash compensation (the sum of annual cash retainer and meeting fees), annual equity awards and total compensation (the sum of total cash compensation and annual equity awards). The Company reviewed the director’s compensation program again in January 2018 and determined that no changes should be made.
 
 
17
 
 
Consulting Agreement with Wen Tao (Steve) Liu
 
The Company entered into a consulting agreement with Wen Tao (Steve) Liu, which is effective as of February 7, 2016 and was to terminate on February 7, 2018, pursuant to which Steve Liu will advise the Chief Executive Officer on strategic opportunities, advise the Company on Chinese hospitals management and provide other consulting services and advice as reasonably requested by the Company from time to time.  The Company agreed to: (i) pay cash compensation of $3,666 per month; (ii) reimburse the actual travel and other out-of-pocket expenses incurred solely in connection with services performed pursuant to the Company’s request; and (iii) pay premiums changed to continue medical coverage pursuant to the Company’s existing employee health plan.  Provided Steve Liu is ineligible to receive, or the Company is not able to provide, continuation coverage under the Company’s existing employee health plan, the Company shall pay cash payment equal to $1,667 for each month during the period and aggregate cash payment should not exceed $20,000; (iv) the terms of stock options shall be amended as additional consideration for the services rendered as follows: (1) all options will expire on May 6, 2017 or 3 months after Steve Liu ceases to serve on the Board, whichever is later; (2) Any unvested portion of the non-qualified stock option issued in 2013 with a strike price of $3.00 will continue to vest at a monthly rate until fully vested; and (3) Any unvested portion of the non-qualified stock option issued in 2015 with a strike price of $15.53 will continue to vest at a monthly rate until fully vested.
 
On January 28, 2018 the Compensation Committee approved the renewal of Steve Liu’s agreement for another two-year term, increased the cash compensation from $3,666 per month to $5,333 per month, and increased the continuation coverage under the Company’s existing employee health plan from $20,000 to $36,000.
 
The following table sets forth compensation actually paid to directors as of December 31, 2017:
 
2017 DIRECTOR COMPENSATION TABLE
 

Year
 
Salary
 
 
Bonus
 
 
Stock
 
 
Option
 
 
Non-Equity
 
 
Nonqualified
 
 
All Other
 
 
Total
 
 
 
 
($)
 
 
($)
 
 
Awards
 
 
Awards
 
 
Incentive Plan
 
 
Deferred
 
 
Compensation
 
 
($)
 
 
 
 
 
 
 
 
 
 
($)
 
 
($)
 
 
Compensation
 
 
Compensation
 
 
($)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
($)
 
 
Earnings
 
 
 
 
 
 
 
 Name and Principal Position
 
 
 
 
(note 1)
 
 
 
 
 
 
 
 
(note 2)
 
 
 
 
 
($)
 
 
 
 
 
 
 
Terry A. Belmont
2017
  67,800 
  - 
  - 
  116,334 
  - 
  - 
  - 
  184,134 
Bizuo (Tony) Liu *
2017
  36,000 
  - 
  - 
  - 
  - 
  - 
  - 
  36,000 
Wen Tao (Steve) Liu * (note 3)
2017
  36,000 
  - 
  - 
  - 
  - 
  - 
  79,735 
  115,735 
Nadir Patel
2017
  80,600 
  - 
  - 
  68,389 
  - 
  - 
  - 
  148,989 
Chun Kwok Alan Au
2017
  55,800 
  - 
  - 
  95,749 
  - 
  - 
  - 
  151,549 
Hansheng Zhou
2017
  43,868 
  - 
  - 
  95,749 
  - 
  - 
  - 
  139,617 
Gang Ji
2017
  - 
  - 
  - 
  39,122 
  - 
  - 
  - 
  39,122 
 
* Non-independent director
 
Note 1: Salary disclosed above is on cash basis. As of December 31, 2017, there was director fee of $25,882 due to Mr. Gang Ji.
 
Note 2: Option awards is the grant date fair value calculated according to U.S. GAAP without amortizing over the vesting periods.
 
Note 3: In January 2016, the Company and Steve Liu mutually agreed not to renew their employment agreements at the end of their respective terms. The Company then entered into consulting agreements with Steve Liu, which became effective as of February 7, 2016. These consultation fees are included as all other compensation in above table. Details of the consulting agreement could be referred to in the section entitled “—Consulting Agreement with Wen Tao (Steve) Liu” above.
 
Risk Management in Compensation Policies and Procedures
 
Due to the Company's lack of cash flow, it has historically compensated its officers predominantly in stock and with a smaller cash salary. By compensating these officers predominantly in stock, we believe they have a greater incentive to take steps to increase the value of the Company's stock than they would if compensated in cash. As the Company's value is largely based on the value of the equity it receives from its stockholders, paying the officers using Company stock may incentivize them to take additional risks in an attempt to increase the value of the Company's stock.
 
Vote and Recommendation
 
The affirmative vote of the holders of a plurality of the shares of common stock present in person or represented by proxy and entitled to vote on the nominees will be required to approve each nominee. This means that the three nominees with the greatest number votes for election will be elected.
 
Our Board recommends a vote “FOR” each of the nominees.
 
 
18
 
 
PROPOSAL 2 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
The Audit Committee of the Board has appointed BDO China as our independent registered public accounting firm to audit our financial statements for the fiscal year ending December 31, 2018. BDO China has also served as our independent registered public accounting firm for the fiscal years ended December 31, 2017, 2016 and December 31, 2015.
 
Stockholder ratification of the selection of BDO China as our independent registered public accounting firm is not required by our Bylaws or the Delaware General Corporation Law. The Board seeks such ratification as a matter of good corporate practice. Should the stockholders fail to ratify the selection of BDO China as our independent registered public accounting firm, the Audit Committee will reconsider whether to retain that firm for fiscal year 2018. In making its recommendation to the Board that stockholders ratify the appointment of BDO China as our independent registered public accounting firm for the fiscal year ending December 31, 2018, the Audit Committee considered whether BDO China’s provision of non-audit services is compatible with maintaining the independence of our independent registered public accounting firm.
 
Audit Fees
 
The Company paid or accrued the following fees in each of the prior two fiscal years to its accountants, including to its principal accountants, BDO China:
 
 
 
Year ended
December 31,
2017
 
 
Year ended
December 31,
2016
 
 
 
 
 
 
 
 
Audit and review fees
 
 
 
 
 
 
BDO USA, LLP
  25,000 
  166,051 
BDO China Shu Lun Pan Certified Public Accountants LLP
  314,634 
  296,681 
Shanghai Ying Ming De CPA SGP
  768 
  710 
Wuxi Zhong Xing CPA Co., Ltd.
  838 
  710 
C.K.Lam & Co.
  1,733 
  - 
 
  342,973 
  464,152 
 
    
    
Other assurance and tax fees
    
    
Shanghai Ying Ming De CPA SGP
  1,536 
  1,421 
Wuxi Zhong Xing CPA Co., Ltd.
  2,792 
  2,415 
C.K.Lam & Co.
  385 
  1,764 
Total of audit related and tax fees
  4,713 
  5,600 
 
    
    
Overall total of audit, review and assurance fees
 $347,686 
 $469,752 
 
Audit fees include fees for the audit of our annual financial statements, reviews of our quarterly financial statements, and related consents for documents filed with the SEC. All other fees include fees for auditing of listing agreement clients as required by the SEC for listing.
 
The Audit Committee is required to review and approve in advance the retention of the independent auditors for the performance of all audit and lawfully permitted non-audit services (if any) and the fees for such services. The Audit Committee may delegate to one or more of its members the authority to grant pre-approvals for the performance of non-audit services, and any such Audit Committee member who pre-approves a non-audit service must report the pre-approval to the full Audit Committee at its next scheduled meeting. All of the services provided by our independent registered public accountants described above were approved by our Audit Committee.
 
Our principal accountants did not engage any other persons or firms other than the principal accountant’s full-time, permanent employees.
 
The Board has received and reviewed the written disclosures and the letter from the independent registered public accounting firm required by Public Company Accounting Oversight Board (“PCAOB”), and has discussed with its auditors its independence from the Company. The Board has considered whether the provision of services other than audit services is compatible with maintaining auditor independence.
 
Auditor Representatives at Annual Meeting
 
We expect that representatives of BDO China will not be present at the Annual Meeting.
 
 
19
 
 
Vote Required and Recommendation
 
The affirmative vote of the holders of shares of common stock entitled to vote must exceed the votes cast against this proposal for the proposal to be approved.
 
The Board recommends that stockholders vote “FOR” ratification of the appointment of BDO China Shu Lun Pan Certified Public Accountants LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018 as described in this Proposal 2.
 
 
 
 
20
 
 
EXECUTIVE COMPENSATION AND RELATED INFORMATION
 
Executive Officers and Directors
 
Set forth below is information regarding the Company's current directors and executive officers as of the date of this Proxy Statement. The executive officers serve at the pleasure of the Board of Directors.
 
Effective February 3, 2017, Richard Wang resigned as the Company’s Chief Operating Officer. Additionally, on June 26, 2017, Meng Xia was appointed as the Company’s Chief Operating Officer but transitioned to the role of Head of Early Diagnosis and Intervention on February 6, 2018. As a result, although they are not listed as a current officer below, Mr. Wang and Ms. Xia are listed as “named executive officers” (as such term is defined in Item 402 of Regulation SK promulgated under the Exchange Act) and the terms of their compensation is disclosed herein.
 
On February 5, 2018, the Company closed a private placement of approximately $30.6 million. Pursuant to the securities purchase agreement for this private placement, the investors have the right to nominate one director to the board of directors of the Company to stand for election at the 2018 Annual Meeting of Stockholders. Effective as of the closing of above private placement, Bosun S. Hau was appointed as a nonexecutive Class III director of the Company pursuant to the Company’s agreement with investors in connection with the private placement consummated in February 2018.
 
The directors are divided into three classes and serve three year terms, as follows:
 
Name
 
Age
 
Position
 
Term
Wen Tao (Steve) Liu
 
62
 
Director
 
Class III
Hansheng Zhou (2)
 
54
 
Independent Director
 
Class I
Tony (Bizuo) Liu
 
53
 
Chief Executive Officer and Chief Financial Officer
 
Class II
Chun Kwok Alan Au (1)(3)
 
45
 
Independent Director
 
Class II
Gang  Ji (2)
 
43
 
Independent Director
 
Class II
Terry A. Belmont (1)(2)(3)
 
71
 
Chairman of the Board and Independent Director
 
Class I
Nadir Patel (1)(3)
 
47
 
Independent Director
 
Class  III
Bosun S. Hau
 
39
 
Independent Director
 
Class  III
Yihong Yao
 
50
 
Chief Scientific Officer
 
N/A
Andrew Chan
 
60
 
Chief Legal Officer (General Counsel) Secretary and Senior Vice President
 
N/A
 
(1)
Member of Audit Committee
(2)
Member of Compensation Committee
(3)
Member of Nominating and Corporate Governance Committee
 
There are no family relationships between any of our directors or executive officers. There is no arrangement or understanding between any of the directors or officers of the Company and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management stockholders will exercise their voting rights to continue to elect the current directors to the Company’s Board. Except for the board observer seat granted to Wuhan Dangdai as a condition of its $43.3 million investment in the Company and the nomination of Bosun S. Hau as a Class III director at this Annual Meeting, there are no arrangements, agreements or understandings between non-management stockholders that may directly or indirectly participate in or influence the management of the Company’s affairs. There are no agreements or understandings for any officer or director to resign at the request of another person, and none of the officers or directors are acting on behalf of, or will act at the direction of, any other person.
 
The following is a brief description of the business experience during the past five years of our executive officers and directors as of the date of this Proxy Statement who are not up for election at this Annual Meeting:
 
Bizuo (Tony) Liu, Chief Executive Officer, Chief Financial Officer and Director
 
Tony Liu has served as the Company’s Chief Executive Officer since February 2016 and Chief Financial Officer and Secretary since January 2014.He has also served as Director of the Company from February 2013 to January 2014. Since January 2013, Mr. Liu has served as the Corporate Vice President at Alibaba Group, handling Alibaba’s overseas investments.  Since joining Alibaba in 2009, Mr. Liu has severed in various positions including Corporate Vice President at B2B corporate investment, corporate finance, and General Manager for a global ecommerce platform.  From July 2011 to December 2012, he served as CFO for HiChina, a subsidiary of Alibaba, an internet infrastructure service provider.  Prior to joining Alibaba, Mr. Liu spent 19 years at Microsoft Corporation where he served a variety of finance leadership roles. He was the General Manager at Corporate Strategy looking after Microsoft China investment strategy and Microsoft corporate strategic planning process.  Mr. Liu was a leader in Microsoft corporate finance organization during the 1990s as Corporate Accounting Director.  Mr. Liu earned a B.S. degree in Physics from Suzhou University, Suzhou, China and has completed MBA/MIS course work at Seattle Pacific University. Mr. Liu obtained his Washington State CPA certificate in 1992.  
 
 
21
 
 
In considering Mr. Liu’s eligibility to serve on the Board, the Board considered Mr. Liu’s leadership, extensive accounting and financial control background, as well as multinational corporate executive management experience in diverse industries. 
 
Hangsheng Zhou – Director
 
Dr. Zhou has been a director of the Company since July 2016. Dr. Zhou is a well-respected and seasoned executive with over 28 years of experience in the science and technology industries in China. He currently serves as Chief Executive Officer and Chairman of Wuhan Dangdai Science & Technology Industries Group Co., Ltd. (“Wuhan Dangdai”), a China based privately held conglomerate with a substantial medical and pharmaceutical portfolio in China. Dr. Zhou previously served as Chief Financial Officer and Managing Director of Wuhan Humanwell Healthcare Group Co., Ltd. He holds a bachelor’s degree in Cell Biology and masters in Animal Biology from Wuhan University and has also earned his PhD degree in Applied Chemistry from Beijing Institute of Technology. Dr. Zhou is a member of the Company’s Compensation Committee. In considering Dr. Zhou’s eligibility to serve on the Board, the Board considered his leadership experience in managing both large pharmaceutical company in China and multinationals in substantially similar industries.
 
Chun Kwok Alan Au - Director
 
Alan was served as a member of our Board since November 2014. He currently serves as a member of the Audit Committee and Chair of the Nomination Committee.
 
Alan has over 15 years of experience across healthcare investment banking, private equity and venture capital investments in Asia/China. He is Founder/Managing Partner at GT Healthcare Group, a private equity fund focusing on cross border healthcare investments.
 
Alan is an Adviser to Simcere Pharmaceutical Group, a leading pharmaceutical company in China (previously listed on NYSE:SCR, privatized in Dec 2013, when Alan was Chairman of the Special Committee on the Board of Directors). He was also a member of the Board, Audit Committee and Compensation Committee of China Nepstar Chain Drugstore Ltd. (NYSE: NPD, privatized in Sep 2016) from 2013 to 2016. Alan also serves as a panel member for the Entrepreneur Support Scheme (ESS Program) of the Innovation and Technology Fund of the Hong Kong SAR Government since 2014.
 
Before that, Alan was Head of Asia Healthcare Investment Banking of Deutsche Bank Group, advising healthcare IPOs and M&A in the region between 2011 and 2012. Prior to that, he was Executive Director at JAFCO Asia Investment Group, responsible for healthcare investments in China from 2008 to 2010, and Investment Director at Morningside Group, responsible for healthcare investments in Asia from 2000 to 2005. From 1995 to 1999, Mr. Au worked at KPMG and KPMG Corporate Finance Ltd., responsible for regional M&A transactions and financial advisory services.
 
Alan is a Certified Public Accountant in the U.S. and holds the Chartered Financial Analyst (CFA) designation. He is an associate member of the Hong Kong Institute of Financial Analysts and member of the American Institute of Certified Public Accountants. Alan received his Bachelor's degree in Psychology from the Chinese University of Hong Kong, and a Master's degree in Management from Columbia Business School in New York. In considering Mr. Au’s eligibility to serve on the Board, the Board considered his expertise in healthcare investment and his financial acumen.
 
Terry A. Belmont – Chairman of the Board and Director
 
Mr. Belmont has been serving CBMG as an Independent Director since December 2013 and as Vice Chairman of the Board from March 2015 to January 2016, when he was elected to serve as Chairman of the Board. He also serves as a member of the Audit Committee and the Compensation Committee.
 
Mr. Belmont has over 20 years of experience in leading major academic and non-academic medical centers and healthcare entities with multi-campus responsibility. Since 2009, Mr. Belmont has overseen UC Irvine Medical Center, the main campus of UC Irvine Health, in Orange, Calif., and its licensed ambulatory facilities in Orange, Irvine, Costa Mesa, Anaheim and Santa Ana. Since his arrival in 2009, Mr. Belmont has led several expansion and renovation projects. He helped open the state-of the-art UC Irvine Douglas Hospital and led the development of a patient-centered healing garden and a 7-story clinical laboratory building. Mr. Belmont launched a 10-year facility master planning project for facility development at UC Irvine Medical Center and clinics throughout Orange County. Prior to joining UC Irvine Medical Center, Mr. Belmont served as CEO of Long Beach Memorial Medical Center and Miller Children’s Hospital from 2006-2009. He has also served as president and chief executive officer in several entities, including St. Joseph Hospital of Orange, Pacific Health Resources, California Hospital Medical Center and HealthForward.
 
Mr. Belmont’s substantial community involvement includes board positions with the Orange County World Affairs Council, Southern California College of Optometry, American Heart Association and Children’s Fund. He serves on the Board of Trustees of the University of Redlands. Mr. Belmont received his master’s in public health with a major in hospital administration from UC Berkeley, and a bachelor’s in business from the University of Redlands. In considering Mr. Belmont's eligibility to serve on the Board, the Board considered Mr. Belmont's business acumen in the healthcare industry.  
 
 
22
 
 
Gang Ji – Director
 
Mr. Ji has been a director of the Company since October 2016. Mr. Ji has sixteen years of experience in finance and investment. He has been serving as Vice President of Ant Financial since January 2016 responsible for global strategic investments of Ant Financial. Before joining Ant Financial, he served Alibaba Group as Vice President responsible for strategic investment for seven years. Prior to joining Alibaba, Mr. Ji worked for several venture capital funds and also served as an auditor of KPMG. He currently serves as a director of Asia Game Technology Ltd., a company listed on the Hong Kong Stock Exchange (HKEX: 8279) as well as several private technology companies. Mr. Ji holds a bachelor’s degree in international business management from University of International Business and Economics (Beijing). He currently serves on the Company’s Compensation Committee. In considering Mr. Ji’s eligibility to serve on the Board, the Board considered Mr. Ji’s board experience, leadership, extensive accounting and financial control background, venture capital tenure as well as multinational corporate executive management experience in a highly regulated industry.
 
Yihong Yao – Chief Scientific Officer
 
Mr. Yao has been Chief Scientific Officer since August 2015. Mr. Yao brings nearly twenty years of experience in the life sciences industry and academia with strong expertise in clinical biomarker discovery and development, strategy and personalized medicine. From 2005 until his appointment as Chief Scientific Officer, Mr. Yao served in various senior scientific positions at MedImmune, including most recently as director and head of pharmacogenomics and bioinformatics in the department of Translational Sciences from 2011 to July 2015. From 2001 to 2005, Mr.Yao served as Senior Scientist, Translational Science at Abbott Bioresearch Center. He holds a bachelor’s degree in Biochemistry from Fudan University, Shanghai, China, a master’s degree in Bioinformatics from Boston University, and a PhD in Molecular Biology and Biochemistry from the University of Kansas, and he was a postdoctoral fellow at Johns Hopkins University School of Medicine.
 
Andrew Chan – Secretary, Senior Vice President and Chief Legal Officer (General Counsel)
 
Mr. Chan served as Senior Vice President of Corporate Business Development since January 2014, and was appointed Secretary and General Counsel in September 2016 and February 2018, respectivelly. He previously served as Secretary and Chief Financial Officer from February 2011 to January 2014. From 2003 until 2011, Mr. Chan was with Jazz Semiconductor and held various management roles focusing on business operations, business and corporate development. Prior to 2003, Mr. Chan was Vice President of Business Operations and Supply Chain Management for Mindspeed Technologies. In 2000, Mr. Chan served as Vice President of Supply Chain Management at Conexant Systems. Mindspeed and Jazz were spin-offs of Conexant. Previously, Mr. Chan’s focus was in aviation and aerospace services. He served in diverse technical and operations management roles at Eastern Airlines, Continental Express and at Allied Signal (now called Honeywell) as Sr. Director of Strategic Business Development. Mr. Chan earned a B.S. degree in Management from Embry Riddle Aeronautical University and an MBA with specialization in Computer System Management and Operations Research from Nova University. He also holds a Jurisprudence Doctorate (J.D.) degree from South Texas College of Law. 
 
Summary Compensation Table
 
The following table sets forth for the years ended December 31, 2017, 2016, and 2015 compensation awarded to, paid to, or earned by, Bizuo (Tony) Liu (our current CEO and CFO), Andrew Chan (our former CFO, Senior Vice President, Corporate Business Development and Secretary), Richard L Wang (our former COO), Yihong Yao (our CSO) and Xia Meng, (our former COO).
 
 
23
 
 

Year
 
Salary(4)
 
 
Bonus(4)
 
 
Stock
 
 
Option
 
 
Non-Equity
 
 
Nonqualified
 
 
All Other
 
 
 
 
($)
 
 
($)
 
 
Awards(3)
 
 
Awards
 
 
Incentive Plan
 
 
Deferred
 
 
Compensation
(1)(4)

 
 
 
 
 
 
 
 
 
($)
 
 
($)
 
 
Compensation
 
 
Compensation
 
 
($)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
($)
 
 
Earnings
 
 
 
 
 Name and Principal Position
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
($)
 
 
 
 
Bizuo (Tony) Liu, Chief Executive Officer, Chief Financial Officer and Director
2017
  300,000 
  100,000 
  238,750 
  1,384,800 
  - 
  - 
  27,513 
 
2016
  240,000 
  - 
  - 
  637,240 
  - 
  - 
  23,017 
 
2015
  226,750 
  - 
  - 
  3,507,780 
  - 
  - 
  - 
Andrew Chan, Senior Vice President, Corporate Business Development, Company Secretary
2017
  259,796 
  80,000 
  45,745 
  351,630 
  - 
  - 
  38,028 
 
2016
  242,584 
  80,000 
  - 
  206,700 
  - 
  - 
  26,015 
 
2015
  228,338 
  61,217 
  - 
  - 
  - 
  - 
  - 
Richard L. Wang, Former Chief Operating Officer
2017
  35,442 
  50,000 
  - 
    
  - 
  - 
    
 
2016
  225,000 
  41,664 
  - 
  137,800 
  - 
  - 
  14,126 
 
2015
  128,461 
  - 
  590,800 
  659,100 
  - 
  - 
  - 
Yihong Yao, Chief Scientific Officer
2017
  259,375 
  75,000 
  52,716 
  244,065 
  - 
  - 
  25,225 
 
2016
  250,000 
  30,648 
  - 
  137,800 
  - 
  - 
  23,985 
 
2015
  116,045 
  - 
  613,865 
  490,000 
  - 
  - 
  - 
Xia Meng, Former Chief Operating Officer(2)
2017
  91,550 
  - 
  37,094 
  161,650 
  - 
  - 
  19,863 
 
2016
  - 
  - 
  - 
  - 
  - 
  - 
  - 
 
2015
  - 
  - 
  - 
  - 
  - 
  - 
  - 
 
(1)
All other compensation of these officers represents health insurance expenses.
 
(2)
Xia Meng was appointed as COO of the Company on June 22, 2017 and transitioned to the role of Head of Early Diagnosis and Intervention in February 6, 2018. Before June 22, 2017, she was the consultant of the Company and all other compensation comprised of consulting fee of $7,459 before the employment of COO and health insurance expense of $12,404.
 
(3)
Stock awards is comprised of fair value of the delivered stock and cash payout of surrendered restricted stock for individual income tax payment purpose.
 
(4)
Salary, bonus and all other compensation included above are on a cash basis. Pursuant to the Compensation Committee’s January 28, 2018 meeting and the Board’s Executive Session on January 28, 2018 the Board has granted the following compensation and awards for 2017. In approving the cash bonuses listed below, the Compensation Committee reviewed the performance results of the executives listed and the challenges they managed to overcome in 2017.
 
 
 
Cash bonus for 2017 ($)
 
 
 
 
 
Bizuo (Tony) Liu
  150,000 
 
    
Andrew Chan
  115,000 
 
    
Yihong Yao
  78,600 
 
 
 
24
 
 
The following table sets forth information concerning outstanding stock options for each named executive officer and director as of December 31, 2017.
 
   
 Outstanding Equity Awards at Fiscal Year-End
                   
Name
  Option awards
  Stock awards
 
 
Number of securities underlying unexercised options(#) exercisable
 
 
Number of securities underlying unexercised options (#) unexercisable
 
 
Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)
 
 
Option exercise price ($)
 
 
Option expiration date
 
 
Number of shares or units of stock that have not vested(#)
 
 
Market value of shares of units of stock that have not vested($)
 
 
Equityincentive plan awards: Number of unearned shares, units or other rights that have not vested (#)
 
 
Equityincentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)
 
(a)
 
(b)
 
 
(c)
 
 
(d)
 
 
(e)
 
 
(f)
 
 
(g)
 
 
(h)
 
 
(i)
 
 
(j)
 
Wen Tao (Steve) Liu (1)
  146,667 
  - 
  - 
 $3.00 
 
2017-5-6 or 3 months after board role ends, whichever is later
 
  - 
  - 
  - 
  - 
Wen Tao (Steve) Liu (2)
  22,444 
  - 
  - 
 $15.53 
 
2017-5-6 or 3 months after board role ends, whichever is later
 
  - 
  - 
  - 
  - 
Andrew Chan, Company Secretary, Senior Vice President, Corporate Business Development (3)
  38,880 
  - 
  - 
 $3.00 
 
2/20/2023
 
  - 
  - 
  - 
  - 
Andrew Chan (4)
  37,904 
  - 
  - 
 $5.61 
 
5/16/2024
 
  - 
  - 
  - 
  - 
Andrew Chan (5)
  4,500 
  - 
  - 
 $18.61 
 
4/8/2026
 
  - 
  - 
  - 
  - 
Andrew Chan (6)
  - 
  10,500 
  - 
 $18.61 
 
4/8/2026
 
  - 
  - 
  - 
  - 
Andrew Chan (7)
  15,000 
  - 
  - 
 $12.55 
 
1/20/2027
 
  - 
  - 
  - 
  - 
Andrew Chan (8)
  4,790 
  18,210 
  - 
 $12.40 
 
3/3/2027
 
  - 
  - 
  - 
  - 
Bizuo (Tony) Liu, Chief Executive Officer and Chief Financial Officer (9)
  255,000 
  - 
  - 
 $5.00 
 
1/3/2024
 
  - 
  - 
  - 
  - 
Bizuo (Tony) Liu (10)
  5,300 
  - 
  - 
 $7.23 
 
3/5/2023
 
  - 
  - 
  - 
  - 
Bizuo (Tony) Liu (11)
  15,000 
  - 
  - 
 $20.63 
 
7/23/2021
 
  - 
  - 
  - 
  - 
Bizuo (Tony) Liu (12)
  15,000 
  - 
  - 
 $20.63 
 
8/14/2021
 
  - 
  - 
  - 
  - 
Bizuo (Tony) Liu (13)
  97,800 
  - 
  - 
 $15.53 
 
12/31/2021
 
  - 
  - 
  - 
  - 
Bizuo (Tony) Liu (14)
  8,000 
  - 
  - 
 $15.53 
 
12/31/2021
 
  - 
  - 
  - 
  - 
Bizuo (Tony) Liu (15)
  18,000 
  12,000 
  - 
 $35.53 
 
4/6/2025
 
  - 
  - 
  - 
  - 
Bizuo (Tony) Liu (16)
  12,000 
  28,000 
  - 
 $20.00 
 
4/11/2026
 
  - 
  - 
  - 
  - 
Bizuo (Tony) Liu (17)
  30,000 
  - 
  - 
 $12.55 
 
1/21/2027
 
  - 
  - 
  - 
  - 
Bizuo (Tony) Liu (18)
  25,000 
  95,000 
  - 
 $12.40 
 
3/3/2027
 
  - 
  - 
  - 
  - 
Terry A. Belmont (19)
  4,000 
  - 
  - 
 $12.94 
 
12/9/2024
 
  - 
  - 
  - 
  - 
Terry A. Belmont (20)
  3,000 
  - 
  - 
 $15.62 
 
11/7/2024
 
  - 
  - 
  - 
  - 
Terry A. Belmont (21)
  8,761 
  - 
  - 
 $20.00 
 
2/9/2023
 
  - 
  - 
  - 
  - 
Terry A. Belmont (22)
  11,895 
  - 
  - 
 $13.35 
 
12/28/2026
 
  - 
  - 
  - 
  - 
Terry A. Belmont (23)
  - 
  14,648 
  - 
 $10.80 
 
4/28/2027
 
  - 
  - 
  - 
  - 
Nadir Patel (24)
  5,000 
  - 
  - 
 $5.00 
 
1/3/2024
 
  - 
  - 
  - 
  - 
Nadir Patel (25)
  2,000 
  - 
  - 
 $15.62 
 
11/7/2024
 
  - 
  - 
  - 
  - 
Nadir Patel (26)
  5,000 
  - 
  - 
 $13.79 
 
1/3/2025
 
  - 
  - 
  - 
  - 
Nadir Patel (27)
  5,946 
  - 
  - 
 $20.00 
 
2/9/2023
 
  - 
  - 
  - 
  - 
Nadir Patel (28)
  6,992 
  - 
  - 
 $13.35 
 
12/28/2026
 
  - 
  - 
  - 
  - 
Nadir Patel (29)
  - 
  8,611 
    
 $10.80 
 
4/28/2027
 
  - 
  - 
  - 
  - 
Chun Kwok Alan Au (30)
  4,000 
  - 
  - 
 $15.62 
 
11/7/2024
 
  - 
  - 
  - 
  - 
Chun Kwok Alan Au (31)
  5,056 
  - 
  - 
 $20.00 
 
2/9/2023
 
  - 
  - 
  - 
  - 
Chun Kwok Alan Au (32)
  2,060 
  - 
  - 
 $20.00 
 
3/25/2023
 
  - 
  - 
  - 
  - 
Chun Kwok Alan Au (33)
  9,789 
  - 
  - 
 $13.35 
 
12/28/2026
 
  - 
  - 
  - 
  - 
Chun Kwok Alan Au (34)
  - 
  12,056 
  - 
 $10.80 
 
4/28/2027
 
  - 
  - 
  - 
  - 
Yihong Yao, Chief Scientific Officer (35)
  15,000 
  10,000 
  - 
 $26.53 
 
8/4/2025
 
  - 
  - 
  - 
  - 
Yihong Yao (36)
  - 
  - 
  - 
  - 
  N/A 
  10,000 
 $237,700 
  - 
  - 
Yihong Yao (37)
  3,000 
  7,000 
  - 
 $18.61 
 
4/8/2026
 
  - 
  - 
  - 
  - 
Yihong Yao (38)
  5,520 
  20,980 
  - 
 $12.40 
 
3/3/2027
 
  - 
  - 
  - 
  - 
Hansheng Zhou (39)
  5,300 
  - 
  - 
 $16.00 
 
7/8/2026
 
  - 
  - 
  - 
  - 
Hansheng Zhou (40)
  - 
  12,056 
  - 
 $10.80 
 
4/28/2027
 
  - 
  - 
  - 
  - 
Gang Ji (41)
  3,620 
  - 
  - 
 $14.70 
 
11/11/2026
 
  - 
  - 
  - 
  - 
Gang Ji (42)
  - 
  4,926 
  - 
 $10.80 
 
4/28/2027
 
  - 
  - 
  - 
  - 
Xia Meng, Chief Operation Officer (43)
  3,864 
  22,636 
  - 
 $8.30 
 
6/22/2027
 
  - 
  - 
  - 
  - 
Bizuo (Tony) Liu (44)
  - 
  - 
  - 
  - 
  N/A 
  95,000 
  N/A 
  240,000 
  N/A 
Andrew Chan (45)
  - 
  - 
  - 
  - 
  N/A 
  18,210 
  N/A 
  48,000 
  N/A 
Yihong Yao (46)
  - 
  - 
  - 
  - 
  N/A 
  20,980 
  N/A 
  54,000 
  N/A 
Xia Meng (47)
  - 
  - 
  - 
  - 
  N/A 
  22,636 
  N/A 
  53,000 
  N/A 
 
 
25
 
 
(1)  
Represents an option to purchase up to 146,667 shares that were issued on 2/20/2013 with a monthly vesting schedule over a 36 month period, an exercise price of $3.00 and an expiration date will be May 6, 2017 or 3 months after his board role ends, whichever is later.
(2)  
Represents an option to purchase up to 22,444 shares that were issued on 2/11/2015 vesting at monthly rate until February 6, 2017, an exercise price of $15.53 and an expiration date will be May 6, 2017 or 3 months after his board role ends, whichever is later.
(3)  
Represents an option to purchase up to 46,667 shares that were issued on 2/20/2013 with a monthly vesting schedule over a 36-month period, an exercise price of $3.00 and an expiration date of 2/20/2023, within which 7,787 shares has been exercised in 2015 and 2016.
(4)  
Represents an option to purchase up to 47,000 shares that were issued on 5/16/2014 with a monthly vesting schedule over a 31-month period, an exercise price of $5.61 and an expiration date of 5/16/2024, within which 9,096 shares has been exercised in 2015 and 2016.
 (5)
Represents an Incentive Stock Option (ISO) to purchase up to 4,500 shares that were issued on 4/8/2016, with full vesting at the one year anniversary of the grant date, an exercise price of $18.61 and an expiration date of 4/8/2026.
(6)
Represents an option to purchase up to 10,500 shares that were issued on 4/8/2016, with 4,500 shares vesting on February 7, 2018 and 6,000 shares vesting on February 7, 2019, an exercise price of $18.61 and an expiration date of 4/8/2026.
(7)  
Represents an option to purchase up to 15,000 shares that were issued on 1/20/2017, with an exercise price of $12.55 and an expiration date of 1/20/2027, which were all vested and became exercisable on 1/20/2017.
(8)
Represents an option to purchase up to 23,000 shares that were issued on 3/3/2017 with a monthly vesting schedule over a 48-month period, an exercise price of $12.4 and an expiration date of 3/3/2027.
(9)  
Represents an option to purchase up to 255,000 shares that were issued on 1/3/2014 with a monthly vesting schedule over a 36-month period, an exercise price of $5 and an expiration date of 1/3/2024.
(10)  
Represents an option to purchase up to 5,300 shares that were issued on 3/5/2013 with a monthly vesting schedule over a 36-month period, an exercise price of $7.23 and an expiration date of 3/5/2023.
 (11)  
Represents an option to purchase up to 15,000 shares that were issued on 2/11/2015 vesting 1/3 on 7/23/2015 and each anniversary, an exercise price of $20.63 and an expiration date of 7/23/2021.
(12)  
Represents an option to purchase up to 15,000 shares that were issued on 2/11/2015 vesting 1/3 on 8/14/2015 and each anniversary, an exercise price of $20.63 and an expiration date of 8/14/2021.
(13)  
Represents an option to purchase up to 97,800 shares that were issued on 2/11/2015 vesting 1/3 on 12/31/2015 and each anniversary, an exercise price of $15.53 and an expiration date of 12/31/2021.
(14)  
Represents an option to purchase up to 8,000 shares that were issued on 2/11/2015 vesting 1/3 on 12/31/2015 and each anniversary, an exercise price of $15.53 and an expiration date of 12/31/2021.
(15)  
Represents an option to purchase up to 30,000 shares that were issued on 4/6/2015, with full vesting of 30%, 30% and 40% at each year anniversary of the grant date for 3 years, an exercise price of $35.53 and an expiration date of 4/6/2025.
(16)
Represents an option to purchase up to 40,000 shares that were issued on 4/11/2016, with full vesting of 30%, 30% and 40% at each year anniversary of February 6, 2016 for 3 years, an exercise price of $20 and an expiration date of 4/11/2026.
(17)
Represents an option to purchase up to 30,000 shares that were issued on 1/21/2017, with an exercise price of $12.55 and an expiration date of 1/20/2027, which were all vested and became exercisable on 1/21/2017.
(18)
Represents an option to purchase up to 120,000 shares that were issued on 3/3/2017 with a monthly vesting schedule over a 48-month period, an exercise price of $12.4 and an expiration date of 3/3/2027.
(19)  
Represents an option to purchase up to 4,000 shares that were issued on 12/9/2014, with full vesting at the one year anniversary of the grant date, an exercise price of $12.94 and an expiration date of 12/9/2024.
(20)
Represents an option to purchase up to 3,000 shares issued on 11/7/2014 with full vesting at the one year anniversary of the grant date, an exercise price of $15.62 and an expiration date of 11/7/2024.
(21)
Represents an option to purchase up to 8,761 shares issued on 2/9/2016 with full vesting on 11/8/2016, an exercise price of $20 and an expiration date of 2/9/2023.
(22)
Represents an option to purchase up to 11,895 shares issued on 12/28/2016 with full vesting on 6/2/2017, an exercise price of $13.35 and an expiration date of 12/28/2026.
 (23)
Represents an option to purchase up to 14,648 shares issued on 4/28/2017 with full vesting on 4/28/2018, an exercise price of $10.8 and an expiration date of 4/28/2027.
(24)  
Represents an option to purchase up to 5,000 shares that were issued on 1/3/2014, with full vesting at the one year anniversary of the grant date, an exercise price of $5 and an expiration date of 1/3/2024.
 (25)  
Represents an option to purchase up to 2,000 shares that were issued on 11/7/2014, with full vesting at the one year anniversary of the grant date, an exercise price of $15.62 and an expiration date of 11/7/2024.
(26)
Represents an option to purchase up to 5,000 shares that were issued on 1/3/2015, with full vesting at the one year anniversary of the grant date, an exercise price of $13.79 and an expiration date of 1/3/2025.
(27)
Represents an option to purchase up to 5,946 shares that were issued on 2/9/2016, with full vesting on November 8, 2016, an exercise price of $20 and an expiration date of 2/9/2023.
(28)
Represents an option to purchase up to 6,992 shares issued on 12/28/2016 with full vesting on June 2, 2017, an exercise price of $13.35 and an expiration date of 12/28/2026.
(29)
Represents an option to purchase up to 8,611 shares issued on 4/28/2017 with full vesting on 4/28/2018, an exercise price of $10.8 and an expiration date of 4/28/2027.
(30)  
Represents an option to purchase up to 4,000 shares that were issued on 11/7/2014, with full vesting at the one year anniversary of the grant date, an exercise price of $15.62 and an expiration date of 11/7/2024.
 (31)  
Represents an option to purchase up to 5,056 shares that were issued on 2/9/2016, with full vesting on November 8, 2016, an exercise price of $20 and an expiration date of 2/9/2023.
(32)
Represents an option to purchase up to 2,060 shares that were issued on 3/25/2016, with full vesting on November 6, 2016, an exercise price of $20 and an expiration date of 3/25/2023.
(33)
Represents an option to purchase up to 9,789 shares issued on 12/28/2016 with full vesting on June 2, 2017, an exercise price of $13.35 and an expiration date of 12/28/2026.
(34)
Represents an option to purchase up to 12,056 shares issued on 4/28/2017 with full vesting on 4/28/2018, an exercise price of $10.8 and an expiration date of 4/28/2027.
 
 
26
 
 
(35)  
Represents an option to purchase up to 25,000 shares that were issued on 8/4/2015, with full vesting of 30%, 30% and 40% at each year anniversary of the grant date for 3 years, an exercise price of $26.53 and an expiration date of 8/4/2025.
(36)  
Represents a right to obtain restricted stock up to 25,000 shares that were issued on 8/4/2015, with full vesting of 30%, 30% and 40% at each year anniversary of the grant date for 3 years.
(37)
Represents an option to purchase up to 10,000 shares that were issued on 4/8/2016, with full vesting of 30%, 30% and 40% at each year anniversary of the grant date for 3 years, an exercise price of $18.61 and an expiration date of 4/8/2026.
(38)
Represents an option to purchase up to 26,500 shares that were issued on 3/3/2017 with a monthly vesting schedule over a 48-month period, an exercise price of $12.4 and an expiration date of 3/3/2027.
(39)
Represents an option to purchase up to 5,300 shares that were issued on 7/8/2016, with full vesting at the one year anniversary of the grant date, an exercise price of $16 and an expiration date of 7/8/2026.
(40)
Represents an option to purchase up to 12,056 shares issued on 4/28/2017 with full vesting on 4/28/2018, an exercise price of $10.8 and an expiration date of 4/28/2027.
(41)
Represents an option to purchase up to 3,620 shares that were issued on 11/11/2016, with full vesting on June 2, 2017, an exercise price of $14.7 and an expiration date of 11/11/2026.
(42)
Represents an option to purchase up to 4,926 shares issued on 4/28/2017 with full vesting on 4/28/2018, an exercise price of $10.8 and an expiration date of 4/28/2027.
(43)
Represents an option to purchase up to 26,500 shares that were issued on 6/22/2017 with a monthly vesting schedule over a 48-month period, an exercise price of $8.3 and an expiration date of 6/22/2027.
(44)
Pursuant to the long-term incentive plan, Mr. Bizuo (Tony) Liu has a right to obtain restricted stock up to 120,000 shares that were issued from 3/27/2017 with a monthly vesting schedule over a 48-month period till 2/27/2021. As of 12/31/2017, there is 95,000 shares of restricted stock to be vested. In addition, Mr. Bizuo (Tony) Liu is also eligible for a stock price sensitive restricted stock awards when the Company’s common stock’s 20-day volume weighted average price (VWAP) is over $30 per share at closing between 2/27/2017 and 2/27/2021. This restricted stock rewards is in linear 1% incremental, earned and upon award trigger in accordance with the common stock price target. The eligible common stock shares could vary from 60,000 shares to 240,000 shares when the Company’s VWAP during the period varies from $30 to $60 per share. The stock price sensitive restricted stock awards will be delivered on 2/27/2021.
(45)
Pursuant to the long-term incentive plan, Mr. Andrew Chan has a right to obtain restricted stock up to 23,000 shares that were issued from 3/27/2017 with a monthly vesting schedule over a 48-month period till 2/27/2021. As of 12/31/2017, there is 18,210 shares of restricted stock to be vested. In addition, Mr. Andrew Chan is also eligible for a stock price sensitive restricted stock awards when the Company’s common stock’s 20-day volume weighted average price (VWAP) is over $30 per share at closing between 2/27/2017 and 2/27/2021. This restricted stock rewards is in linear 1% incremental, earned and upon award trigger in accordance with the common stock price target. The eligible common stock shares could vary from 12,000 shares to 48,000 shares when the Company’s VWAP during the period varies from $30 to $60 per share. The stock price sensitive restricted stock awards will be delivered on 2/27/2021.
(46)
Pursuant to the long-term incentive plan, Mr. Yihong Yao has a right to obtain restricted stock up to 26,500 shares that were issued from 3/27/2017 with a monthly vesting schedule over a 48-month period till 2/27/2021. As of 12/31/2017, there is 20,980 shares of restricted stock to be vested. In addition, Mr. Yihong Yao is also eligible for a stock price sensitive restricted stock awards when the Company’s common stock’s 20-day volume weighted average price (VWAP) is over $30 per share at closing between 2/27/2017 and 2/27/2021. This restricted stock rewards is in linear 1% incremental, earned and upon award trigger in accordance with the common stock price target. The eligible common stock shares could vary from 13,500 shares to 54,000 shares when the Company’s VWAP during the period varies from $30 to $60 per share. The stock price sensitive restricted stock awards will be delivered on 2/27/2021.
(47)
Pursuant to the long-term incentive plan, Ms. Xia Meng has a right to obtain restricted stock up to 26,500 shares that were issued from 6/27/2017 with a monthly vesting schedule over a 48-month period till 5/27/2021. As of 12/31/2017, there is 22,636 shares of restricted stock to be vested. In addition, Ms. Xia Meng is also eligible for a stock price sensitive restricted stock awards when the Company’s common stock’s 20-day volume weighted average price (VWAP) is over $30 per share at closing between 6/22/2017 and 6/22/2021. This restricted stock rewards is in linear 1% incremental, earned and upon award trigger in accordance with the common stock price target. The eligible common stock shares could vary from 13,500 shares to 54,000 shares when the Company’s VWAP during the period varies from $30 to $60 per share. The stock price sensitive restricted stock awards will be delivered on 6/22/2021.
   
 
 
27
 
 
Option Exercises and Stock Vested during the Year Ended December 31, 2017
 
Name
 
Option awards  
 
 
Stock awards  
 
 
 
Number of shares acquired on exercise
 
 
Value realized on exercise ($)
 
 
Number of shares acquired on vesting
 
 
Value realized on vesting ($)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bizuo (Tony) Liu, Chief Executive Officer and Chief Financial Office
  - 
  - 
  25,000 
  238,750 
 
    
    
    
    
Andrew Chan, Senior Vice President, Corporate Business Development, Company Secretary
  - 
  - 
  4,790 
  45,745 
 
    
    
    
    
Yihong Yao, Chief Scientific Officer
  - 
  - 
  13,020 
  117,216 
 
    
    
    
    
Xia Meng, Former Chief Operating Officer
  - 
  - 
  3,864 
  37,094 
 
Note: Stock awards in above table includes all the entitled restricted stock rewards under long-term incentive plan and doesn’t consider the withheld restricted stock for individual income tax payment purpose.
 
Compensation Committee Interlocks and Insider Participation
 
None of the members of the Compensation Committee is or has been an executive officer of the Company, nor did they have any relationships requiring disclosure by the Company under Item 404 of Regulation S-K. None of the Company’s executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity, an executive officer of any other entity, an executive officer of which served as a director of the Company or member of the Compensation Committee during 2017.
 
Executive Employment Agreements
 
At the closing of the merger with CBMG BVI, the Company entered into an executive employment agreement with Andrew Chan, dated February 6, 2013 (the “Employment Agreement”). As of August 30, 2013, the Employment Agreement was amended to revise Mr. Chan’s salary to $200,000. Mr. Chan was also eligible to participate in the Company’s Amended and Restated 2011 Incentive Stock Option Plan (the “Plan”) and receive an option grant thereunder for the purchase of common stock of the Company at the discretion of the board of directors of the Company. The term of the Employment Agreement was three years.
 
In connection with Tony Liu’s appointment as Chief Financial Officer in January 2014, the Company entered into an employment agreement with Mr. Liu on substantially the same terms as Mr. Chan’s Employment Agreement, except that, Mr. Liu will receive an annual base salary of $210,000.  
 
On May 24, 2015, the Board approved the appointment of Richard L. Wang as the Company’s Chief Operating Officer.  In connection with Mr. Wang’s appointment, the Company entered into an agreement with Mr. Wang, pursuant to which Mr. Wang will receive an annual base salary of $210,000. The term of the agreement is effective as of May 18, 2015 for a period of three years, with a probation period from May 18, 2015 to November 18, 2015.  Additionally, on May 18, 2015 the Company issued to Mr. Wang 20,000 restricted common stock and 30,000 options to purchase common stock with full vesting of 30%, 30% and 40% at each year anniversary of the grant date for 3 years.  The strike price related to above option was $29.54 and its expiration date is May 18, 2025. Mr. Wang resigned on February 27, 2017.
 
On May 24, 2015, the Board approved the appointment of Yihong Yao as the Company’s Chief Scientific Officer.  In connection with Mr. Yao’s appointment, the Company entered into an agreement with Mr. Yao, pursuant to which Mr. Yao will receive an annual base salary of $250,000. The term of the agreement is effective as of August 4, 2015 for a period of three years, with a six-month probation period.  Additionally, on August 4, 2015 the Company issued to Mr. Yao 25,000 restricted common stock and 25,000 options to purchase common stock with full vesting of 30%, 30% and 40% at each year anniversary of the grant date for 3 years.  The strike price related to above option was $26.53 and its expiration date is August 4, 2025. 
 
In February 2016, the Board elected Bizuo (Tony) Liu to serve as Chief Executive Officer of the Company. In connection with Mr. Liu’s election, the Company entered into an employment agreement (the “Agreement”) with Mr. Liu on April 11, 2016, the terms of which are effective retroactive to February 7, 2016. Pursuant to the Agreement, Mr. Liu will receive an annual base salary of $240,000 and, commencing with the end of the calendar year during his first year of employment, shall be eligible for an annual cash bonus.  Such annual salary and bonus eligibility will be reviewed annually by the Board and its compensation committee and may be changed in the sole direction of the Board and/or its compensation committee.  In addition, Mr. Liu will be granted 120, 000 options under the Company’s 2014 Equity Incentive Plan.
 
 
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The term of the Agreement is effective as of February 7, 2016 for a period of one year (the “Initial Term”) which will be renewed automatically for another one year term (the “First Renewal Term”) unless the Company provides Mr. Liu with 90 days’ notice of non-renewal prior to the expiration of the Initial Term.  After the First Renewal Term, the Agreement shall be renewed automatically for another one year term unless the Company provides Mr. Liu with 90 days’ notice of non-renewal prior to the expiration of the First Renewal Term, provided that in no event shall the Agreement remain in effect past February 6, 2019.
 
The agreement could not be terminated by either party during the Initial Term except upon Mr. Liu’s death, disability or for cause. "Cause," as defined in the agreement, includes, but is not limited to: (1) conviction for or pleading of felony, (2) misappropriation of company assets, (3) willful violation of company policy or a directive of the Board and (4) failure to perform duties. The Company may terminate for cause with a 3-day advance written notice. Upon termination by the Company for cause, the Company will have no obligation to provide Mr. Liu with any form of severance or any other benefits, except as may be required by COBRA. If Mr. Liu’s employment is terminated by the Company for reasons other than his death, disability or for cause after February 6, 2017, the Company will pay Mr. Liu severance in the amount equal to his base salary and, subject to Mr. Liu’s election to receive COBRA, his COBRA premiums during the twelve month period commencing with continuation coverage following the month in which the date of termination occurs. 
 
On January 20, 2017, the Compensation Committee met and deliberated a new retention plan with long-term incentives as recommended by the CEO for eight key management executives. Besides Mr. Tony Liu, Mr. Yihong Yao and Mr. Andrew Chan, the retention plan also included five management executives in the LTIP. On January 21, 2017, the Board ratified the Compensation Committee’s recommendation to implement the retention plan, pursuant to which the Company will enter into a new four-year employment agreement with each of the eight key management executives.  It was approved that the new agreement terms would include customary change of control provisions and a four-year long-term incentive award under the 2014 Incentive Plan, comprised of:
 
1.Stock Price Sensitive Performance RSU awards (“Performance RSUs”) to be vested and delivered in 2021; and
2.Time Sensitive RSUs and Stock Options, which vest monthly vesting over 48 months.
 
At the January 20, 2017 meeting and as ratified by the Board on January 21, 2017, the Compensation Committee determined that Mr. Tony Liu would receive an annual base salary of $300,000 and would be granted 240,000 shares of Performance RSUs and 120,000 shares in each of the Time Sensitive RSUs and Stock Options.
 
On the recommendation of the CEO, and as approved by the Compensation Committee, it was determined that Mr. Yihong Yao would receive an annual base salary of $262,500 and will be granted 27,000 shares of Performance RSUs and 26,500 shares in each of the Time Sensitive RSUs and Stock Options and Mr. Andrew Chan would receive an annual base salary of $240,000 and will be granted 24,000 shares of Performance RSUs and 23,000 shares in each of the Time Sensitive RSUs and Stock Options.
 
On March 3, 2017, the Company amended and restated its existing employment agreements (each, a “2017 Employment Agreement”) with each of Tony Liu, Andrew Chan and Yihong Yao. In addition to the compensation terms ratified by the Board or Compensation Committee and discussed above, the 2017 Employment Agreements amended certain terms of each officer’s prior employment agreement, including but not limited to the duration of such officer’s employment, and the conditions of such officer’s termination, non-competition and non-solicitation provisions. Each 2017 Employment Agreement has a term of four years starting from the agreement date (“Initial Employment Term”). At the end of the Initial Employment Term and on each succeeding anniversary of the 2017 agreement date, and subject to earlier termination set forth under the agreement, the term of each 2017 Employment Agreement will be automatically extended by an additional twelve months (each, a “Renewed Term”), unless either party provides the other party with notice of non-renewal prior to the end of the Initial Employment Term or any Renewal Term, as applicable.
 
In addition to termination upon non-renewal, each officer may terminate the agreement for good reason. Good reason, as defined in each 2017 Employment Agreement, includes a material deduction in base salary and relocation of an executive’s principal office by more than 50 miles. In addition, pursuant to Mr. Liu and Mr. Chan’s 2017 Employment Agreements, good reason includes a material adverse change in title, duties or responsibilities. Each officer is required to provide 30 days’ written notice in advance in the event of his voluntary termination. In addition, the Company may terminate the agreement for cause. Cause, as defined in each 2017 Employment Agreement, includes: (i) material and intentional breach of the agreement, (ii) willful and continued failure to substantially perform duties, (iii) intentional misconduct, (iv) conviction or indictment for felonies, (v) intentional or knowing violation of antifraud provisions of securities laws, (vii) current use or abuse of illegal substance that affects performance, and (viii) knowing and material violations of the Company’s code of ethics.
 
Pursuant to the 2017 Employment Agreements, upon the officer’s voluntary termination without good reason, termination by the Company for cause or non-renewal, such officer will not be entitled to a base salary or any right to participate in benefit plans after such termination. If the employment is terminated by the officer for good reason or by the Company without cause, the officer will be entitled to certain amount of cash salary, bonus as well as health insurance coverage for 12 months after such termination, subject to certain conditions and forfeiture.
 
 
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Each 2017 Employment Agreement includes a non-solicitation and a non-competition provision that will apply during each officer’s employment and for a period of two years following termination.
 
On June 22, 2017, the Board approved the appointment of Dr. Xia Meng as the Company’s Chief Operating Officer.  In connection with Ms. Meng’s appointment, the Company entered into an agreement with Ms. Meng, pursuant to which Ms. Meng will receive an annual base salary of approximately $175,487. The term of the agreement is effective as of June 22, 2017 for a period of four years.  Additionally, on June 22, 2017 Ms. Meng was granted 27,000 shares of Performance RSUs and 26,500 shares in each of the Time Sensitive RSUs and Stock Options.  The strike price related to above option was $8.30 and its expiration date is June 22, 2027. Except for her change in title, Mr. Xia’s employment agreement remains in effect following her transition from COO to Head of Early Diagnosis and Intervention on February 6, 2018.
 
On January 28, 2018, the Compensation Committee approved and determined that Mr. Tony Liu would receive an annual base salary of $350,000. On the recommendation of the CEO, and as approved by the Compensation Committee on January 28, 2018, it was determined that Mr. Yihong Yao would receive an annual base salary of $270,000 and Mr. Andrew Chan would be promoted to Chief Legal Officer, Secretary & SVP-Corporate Development and receive an annual base salary of $280,000.
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The following table lists ownership of our common stock as of March 9, 2018, unless indicated otherwise. The information includes beneficial ownership by (i) holders of more than 5% of parent Common Stock, (ii) each of our directors and executive officers and (iii) all of our directors and executive officers as a group. Except as noted below, to our knowledge, each person named in the table has sole voting and investment power with respect to all shares of the Company’s Common Stock beneficially owned by them. Except as otherwise indicated below, the address for each listed beneficial owner is c/o Cellular Biomedicine Group, Inc., 19925 Stevens Creek Blvd., Suite 100, Cupertino, California, 95014.
 
 
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Name and Address of Beneficial Owner
 
Shares of Common Stock
 
 
Percent
 
 
 
Beneficially Owned
 
 
of Class
 
 
 
 
 
 
 
 
Named Executive Officers and Directors
 
 
 
 
 
 
 
 
 
 
 
Wen Tao (Steve) Liu (1)
  382,187 
  2.1%
Director
    
    
 
    
    
Bizuo (Tony) Liu (2)
  678,992 
  3.7%
Director, Chief Executive Officer and Chief Financial Officer
    
    
 
    
    
Andrew Chan (3)
  268,286 
  1.5%
Senior Vice President, Corporate Business Development and Company Secretary
    
    
 
    
    
Yihong Yao
  55,924 
  * 
Chief Scientific Officer (4)
    
    
 
    
    
Bosun S. Hau (5)
  1,689 
  * 
Independent Director
    
    
 
    
    
Terry A. Belmont (6)
  42,304 
  * 
Independent Director, Chairman of the Board
    
    
 
    
    
Nadir Patel (7)
  33,549 
  * 
Independent Director
    
    
 
    
    
Chun Kwok Alan Au (8)
  32,961 
  * 
Independent Director
    
    
 
    
    
Hansheng Zhou (9)
  17,356 
  * 
Independent Director
    
    
 
    
    
Gang Ji (10)
  8,546 
  * 
Independent Director
    
    
 
    
    
 
    
    
All Officers and Directors as a Group
  1,521,794 
  8.3%
 
    
    
5% or more Stockholders
    
    
 
    
    
Dangdai International Group Co Ltd. (11)
  2,270,000 
  12.3%
 
    
    
Sailing Capital Overseas Investments Ltd. (12)
  1,719,324 
  9.3%
 
    
    
MapleBrook Limited (13)
  1,077,253 
  5.9%
 
    
    
Mission Right Limited (14)
  1,036,040 
  5.6%
 
* Less than 1%
 
 
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(1)  
Total shares owned by Wen Tao (Steve) Liu includes (i) 213,076 shares of common stock; (ii)146,667 options issued under 2011 Plan vested as of March 9, 2018; (iii) 22,444 options issued under 2014 Plan vested as of March 9, 2018.
 
 
(2)  
Total shares owned by Bizuo (Tony) Liu includes (i) 158,892 shares of common stock; (ii) 35,300 options issued under 2011 Plan vested as of March 9, 2018; (iii)255,000 options issued under 2013 Plan vested as of March 9, 2018; (iv) 224,800 options issued under 2014 Plan vested/to be vested within 60 days as of March 9, 2018; (v) 5,000 shares of common stock to be vested within 60 days as of March 9, 2018.
 
 
(3)  
Total shares owned by Andrew Chan includes (i) 159,838 shares of common stock; (ii) 53,880 options issued under 2011 Plan vested as of March 9, 2018; (iii) 37,904 options issued under 2013 Plan vested as of March 9, 2018; (iv) 15,706 options issued under 2014 Plan vested/to be vested within 60 days as of March 9, 2018; (v) 958 shares of common stock to be vested within 60 days as of March 9, 2018.
 
 
(4)  
Total shares owned by Yihong Yao includes (i) 26,092 shares of common stock; (ii) 28,728 options issued under 2014 Plan vested/to be vested within 60 days as of March 9, 2018; (iii) 1,104 shares of common stock to be vested within 60 days as of March 9, 2018.
 
 
(5)  
Total shares owned by Bosun S. Hau includes (i) 1,404 shares of common stock; (ii) 285 options issued under 2014 Plan to be vested within 60 days as of March 9, 2018.
 
 
(6)  
Total shares owned by Terry A. Belmont includes (i) 7,000 options issued under 2013 Plan vested as of March 9, 2018; (ii) 35,304 options issued under 2014 Plan vested/to be vested within 60 days as of March 9, 2018.
 
 
(7)  
Total shares owned by Nadir Patel includes (i) 12,000 options issued under 2013 Plan vested as of March 9, 2018; (ii) 21,549 options issued under 2014 Plan vested/to be vested within 60 days as of March 9, 2018.
 
 
(8)  
Total shares owned by Chun Kwok Alan Au includes (i) 4,000 options issued under 2013 Plan vested as of March 9, 2018; (ii) 28,961 options issued under 2014 Plan vested/to be vested within 60 days as of March 9, 2018.
 
 
(9)
Total shares owned by Hansheng Zhou includes 17,356 options issued under 2014 Plan vested/to be vested within 60 days as of March 9, 2018.
 
(10)
Total shares owned by Gang Ji includes 8,546 options issued under 2014 Plan vested/to be vested within 60 days as of March 9, 2018.
 
(11)  
Represents 2,270,000 shares held by Dangdai International Group Co., Limited. Wuhan Dangdai Technology & Industries Group Inc. has voting and dispositive power over the shares of Dangdai International Group Co., Limited in Hong Kong. Wuhan Dangdai Technology & Industries Group Inc. is controlled by Hansheng Zhou, Xiaodong Zhang, Luming Ai, Xuehai Wang, Lei Yu, Xiaoling Du and Haichun Chen. Such individuals share voting and dispositive power over the shares held by Dangdai International Group Co., Limited.
 
(12)
Total shares owned by Sailing Capital Overseas Investments Ltd. include 1,404,494 shares owned by Wealth Map Holdings Limited, 308,426 shares owned by Earls Mill Limited, 5,000 shares owned by Rui Zhang and 1,404 shares owned by Bosun S. Hau (currently a Class III director). Sailing Capital Overseas Investments Fund, L.P. is the sole shareholder of Wealth Map. James Xiao Dong Liu is the sole director of Earls Mill and the Chairman of Sailing Capital. The investment committee of Sailing Capital Overseas Investments Fund, L.P. has decision making power over voting and disposition of the CBMG securities owned by Wealth Map Holdings Limited. James Xiao Dong Liu, as the sole director of Earls Mill Limited, has voting and dispositive power over the CBMG securities owned by Earls Mill Limited. Bosun Hau and Rui Zhang each has voting and dispositive power over the CBMG securities owned by such individual stockholder.
 
(13)
Represents 1,077,253 shares held by MapleBrook Limited. RTSing Raffles Limited and RTSing Marina Limited, as the MapleBrook Limited’s corporate directors, can act jointly to dispose of and vote on the securities in accordance with the Memorandum of Association of MapleBrook Limited. Britta Pfister, Patricia Tan and Chue Chee Chen, individual directors of both RTSing Raffles Limited and RTSing Marina Limited, have voting and dispositive power over the shares owned by MapleBrook Limited.
 
(14)
Based on information available as of February 7, 2018, 1,036,040 shares are held by Mission Right Limited. Mission Right Limited is 50% owned by Yusen Holdings Limited and 50% by Zeacome Investment Limited. Chan Boon Ho Peter controls Yusen Holdings. Zeacome Investment Limited is owned by Perfect Touch Technology Inc., which is owned by CST Mining Group Limited. CST Mining Group Limited is a public company listed on the Hong Kong Stock Exchange under the ticker code “985.” Accordingly, Chan Boon Ho Peter and CST Mining Group Limited beneficially own the shares held by Mission Right Limited.
 
 
 
32
 
 
Change of Control
 
The Company knows of no arrangements resulting in a change in control of the Company. No officer, director, promoter, or affiliate of the Company has, or proposes to have, any direct or indirect material interest in any asset proposed to be acquired by the Company through security holdings, contracts, options, or otherwise.
 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
As previously disclosed in the Company’s Current Reports on Form 8-K on April 20 and July 14, 2016, Wuhan Dangdai, through its wholly owned subsidiary Dangdai International Group Co., invested $43.1 million in the Company (the “Financing”). Dangdai International Group Co. has been a major shareholder of the Company since February 2016 in connection with the first closing of the Financing. Dr. Hansheng Zhou, one of the Company’s directors, currently serves as Chief Executive Officer and Chairman of Wuhan Dangdai.
 
The Company lent petty cash to Tony (Bizuo) Liu and Ms. Xia Meng, its current CFO and COO, mainly for business travel purpose. As of December 31, 2017 there are $7,458 and $1,073 due from Tony (Bizuo) Liu and Ms. Xia Meng. As of December 31, 2016 there are no receivables due from officers.
 
As of December 31, 2017 and 2016, accrued expenses included director fees of $25,882 and $3,082 due to independent director Mr. Gang Ji.
 
On December 15, 2017, upon the approval of the Company’s indepdendent directors, the Company entered into a Share Purchase Agreement with three of its executive officers, pursuant to which the Company agreed to sell, and the three executive officers agreed to purchase an aggregate of 41,667 shares of the Company’s common stock, par value $0.001 per share at $12.00 per share, for total net proceeds of approximately $500,000. The transaction closed on December 22, 2017.
 
As previously disclosed in the Company’s Current Reports on Form 8-K on January 31 and February 5, 2018, Sailing Capital Overseas Investment Ltd. and its affiliates (collectively “Sailing”), invested $30.6 million in the Company (the “Sailing Financing”). Sailing has been a major shareholder of the Company since February 2018 in connection with the closing of the Sailing Financing. Bosun Hau was nominated as a Class III director of the Company pursuant to the Securities Purchase Agreement by and among the Company and Sailing.
 
Except as disclosed herein, there have been no transactions or proposed transactions in which the amount involved exceeds $120,000 since January 1, 2016 or are currently being proposed in which any of our directors, executive officers or beneficial holders of more than 5% of the outstanding shares of common stock, or any of their respective relatives, spouses, associates or affiliates, has had or will have any direct or material indirect interest.
 
Review, Approval or Ratification of Transactions with Related Persons
 
The Company’s Board of Directors reviews issues involving potential conflicts of interest, and reviews and approves all related party transactions, including those required to be disclosed as a “related party” transaction under applicable federal securities laws. The Board has not adopted any specific procedures for conducting reviews of potential conflicts of interest and considers each transaction in light of the specific facts and circumstances presented. However, to the extent a potential related party transaction is presented to the Board, the Company expects that the Board would become fully informed regarding the potential transaction and the interests of the related party, and would have the opportunity to deliberate outside of the presence of the related party. The Company expects that the Board would only approve a related party transaction that was in the best interests of, and fair to, the Company, and further would seek to ensure that any