https://www.prnewswire.com/news-releases/ronin-trading-and-sw-investment-management-issue-letter-to-stockholders-of-peregrine-pharmaceuticals-300487810.html

These are excerpts from the "Letter to Shareholders" (above), from the group that brought the Deriviative lawsuit, got the three removed from the BOD, and brought about the resulting Settlement where they were to pay (or caused to be paid) $1.5M and forfeit approx 70K Options. 

Poor Corporate Governance Is to Blame – Changes Must Be Made

"In our opinion, underpinning Peregrine's extreme losses, dilution, and stockholder value destruction are Peregrine's three independent directors, Eric S. Swartz, Carlton M. Johnson and David H. Pohl, who we believe are primarily responsible for Peregrine's problems. With little-to-no interest alignment with stockholders, no experience with contract manufacturing, track records of enormous stockholder losses and questionable public company dealings outside of Peregrine, we do not believe it is appropriate for these individuals to continue serving as directors of Peregrine. We believe that radical changes to Peregrine's Board are urgently needed to ensure that stockholders' best interests are appropriately represented in the boardroom.

Severe Interest Misalignment with Stockholders

Messrs. Swartz and Johnson have each served as directors since 1999, while Mr. Pohl has served as a director since 2004. Despite their unusually long tenures, these three independent directors collectively outright own less than 0.22% of the shares outstanding. Although these directors have been granted hundreds of thousands of stock options, most of these options are deep out-of-the-money, meaning they don't have much of a vested financial interest in the Company. More telling as to just how little skin in the game these directors have is that no independent director has personally made an open market purchase of Peregrine shares in over nine years,3 and Mr. Pohl has not purchased a single Peregrine share in his nearly 13 years on the Board, and owns just 286 shares outright.

Despite Peregrine's abysmal stock price performance during their tenure, the continuous dilution of stockholders and repeated clinical failures, these three directors have collectively earned over $10 million in total compensation since the start of FY 2010, and that is not even counting whatever they have received after April 30, 2016!4

The average director compensation for LARGE pharmaceutical firms Pfizer Inc., Merck & Co., Inc., Johnson & Johnson, Eli Lilly and Company and AbbVie Inc. is approximately $301,000 per year, with only one of such company's average director compensation being higher than $300,000.5 As disclosed in Peregrine's proxy statement for the 2016 Annual Meeting, the Company's independent directors each received an average of over $518,000 in total compensation, over 72% higher than the average compensation received by directors of the aforementioned highly successful large-cap pharmaceutical companies.

With immaterial stock ownership and unjustifiably high compensation, there is effectively no interest alignment between the Board and Peregrine's stockholders. We have little doubt that this interest misalignment has played a key role in the relentless dilution which has led to the destruction of stockholder value.

The interest misalignment also appears to extend to Peregrine's management team. Steven W. King (CEO) and Paul J. Lytle (CFO) have each been at the Company for 20 years. Despite their long tenure, combined they own outright less than 0.14% of the Company. Peregrine's five named executive officers ("NEO's") own outright a combined 93,467 shares of the Company, a mere 0.21% stake!6 While the NEO's have been granted over 1 million options,7 only a fraction of those options are in-the-money, leaving them with a minimal vested financial interest.

Most recently, on April 28, 2017, Messrs. King and Lytle and Joseph S. Shan (Vice President) each filed Form 4's indicating purchases of 19,941 shares, 37,389 shares and 39,177 shares, respectively.8 Even though these shares were purchased on April 28th, a day on which Peregrine's stock closed at $0.6156 per share, these insiders purchased their shares for $0.2712per share, giving them an instant gain of over 125%. How was this possible?

Messrs. King, Lytle and Shan purchased their shares through Peregrine's Employee Stock Purchase Plan, which gives certain insiders a six month look-back window (the two windows ending October 31st and April 30th) to purchase stock at 85% of the fair market value on either the first or last day of the window. With April 28th being the final trading day of the window, insiders were allowed to purchase stock at 85% of the price of Peregrine's shares on either April 28, 2017 or November 1, 2016. Accordingly, despite the price of Peregrine's stock rising materially from its close of $0.319 per share on November 1, 2016, Peregrine insiders were able to purchase stock from the Company on April 28, 2017 at 85% of the price of Peregrine shares six months ago (i.e. $0.2712 per share). 

Peregrine's Employee Stock Purchase Plan, which allows management to profit at the direct expense of stockholders, is yet another example of the misalignment of interests and the cultural leadership plague that has harmed Peregrine's stockholders. Management being allowed to profit directly at stockholders' expense is insulting. We believe these purchases are unfair, dilutive and fail to properly incentivize management.

Independent Directors Lack Relevant Experience

It appears that not one of the three independent directors possess ANY experience, no matter how tangential, in either contract manufacturing or biotechnology.

Mr. Pohl is a semi-retired attorney who serves as Of Counsel for Herold & Sager, a small law firm based in California. Although his area of practice for Herold & Sager is not described, his bio for Peregrine notes that he previously worked as general counsel for large financial services companies. He has served as a director on one other public board – a company without any revenues in its history that has unsuccessfully attempted to license semiconductor technology. Mr. Pohl does not appear to have any experience whatsoever with biotechnology or contract manufacturing.

Mr. Swartz is a financier who was most recently registered as a broker for NMS Capital Advisors LLC for one year, ending in 2016, according to FINRA records. We were unable to find any recent activity with the various investment entities that he owns and manages (as described further in the section below). Mr. Swartz does not appear to have any experience of any kind with biotechnology or contract manufacturing, nor does he have any public board experience outside of Peregrine.

Mr. Johnson is a self-employed attorney, although he is also described as having been a stockholder of the law firm of Smith, Sauer, DeMaria, Johnson out of Florida. Although various websites describe this firm's specialty as "elder care," oddly, no website exists for the firm. None of Mr. Johnson's biographical information suggests any background in biotechnology or contract manufacturing. He has served on three other public company boards, none of which relate to biotechnology or contract manufacturing.

Despite their apparent lack of relevant experience, these directors somehow annually make hundreds of thousands of dollars more for their service on Peregrine's Board than their counterparts who serve as directors of the hundred-billion dollar pharmaceutical firms noted above.

Independent Directors Have Records of Value Destruction and Questionable Dealings

In addition to the severe interest misalignment with stockholders and absence of relevant experience to Peregrine's businesses, the involvement with public companies that Messrs. Johnson, Pohl and Swartz do have is characterized by shockingly consistent failure and stockholder value destruction that should deeply concern all Peregrine stockholders.

Mr. Pohl currently serves on the advisory board of Max Sound Corp. ("Max Sound"), a $2.0 million market cap company with a stock price of roughly $0.002 per share and no revenue in the company's history.9 Mr. Pohl joined Max Sound's advisory board in August 2014 with a grandiose press release describing him as a "famed attorney" joining Max Sound's self-proclaimed "prestigious" advisory board. Mr. Pohl joined the advisory board despite possessing no identifiable background in the type of audio "disruptive technology" that Max Sound claims to own (and has unsuccessfully tried to sue companies like Google for royalties). Shares of Max Sound have lost nearly 99% of their value since Mr. Pohl joined the company. 

Mr. Pohl's only other public company experience was serving as a director of Patriot Scientific Corp. ("Patriot Scientific"), a $5.6 million market cap company with a stock price of roughly $0.014 per share,10 from 2001-2008, while also serving as its CEO from 2005-2007. Patriot Scientific (where Mr. Johnson has also served as a director since 2001), like Max Sound, is a failed intellectual property company that has not generated any material revenue in the life of the company and has had zero revenues since 2010. Since 2001, Patriot Scientific's stock has lost roughly 94% of its value.

Mr. Swartz is the founder, principal and/or manager of several financial firms including Roswell Capital Partners, LLC, Equiplace Securities, LLC, Swartz Investments, LLC, BridgePointe Master Fund Ltd. and Centurion Private Equity, LLC (collectively, the "Roswell entities"). These are a mix of related finance and investment vehicles managed by Mr. Swartz, and they have been involved with raising capital for questionable pink sheet stocks since the mid-1990s.

According to his Peregrine biography, Mr. Johnson worked for Mr. Swartz since at least 1996, acting as in-house legal counsel for Roswell Capital affiliated entities until becoming "self-employed" in 2013. Mr. Johnson has also served as a director of Patriot Scientific since August 2001 (where Mr. Pohl previously served as a director and CEO as noted above), during which time its fully diluted share count has increased by roughly 650% while its stock has lost approximately 94% of its value. Mr. Johnson previously served as a director of Cryoport, Inc. from 2009-2012,11 during which time the stock lost 84% of its value while the fully diluted share count increased by over 800%. He also previously served as a director of ECOtality, Inc. from 2009-2011,12 during which time the stock lost 90% of its value while the fully diluted share count increased by over 500%, with the company later filing for bankruptcy in 2013.

Unfortunately, Messrs. Swartz's and Johnson's track record with failed and highly questionable companies at the Roswell entities is so long that for the sake of brevity we are limited to providing a partial list of the penny stock companies and a very brief description of the relevant outcomes for stockholders. According to public records, below is a limited list of public companies which Messrs. Swartz and Johnson have provided (or attempted to provide) financing to and have generally been involved with.

While the value destruction speaks for itself, even more troubling is that many of these companies appear to follow a disturbing pattern: pink sheet stocks trading for pennies, no history of revenues or business activities, large reverse-splits, frequent changes to the company's name, a flurry of highly promotional press releases and paid promotional campaigns and stocks which collapsed in a short amount of time after raising capital, eventually being delisted. We have been hard-pressed to find a single stock which the Roswell entities raised capital for that did not resemble one of these extremely troubling fact patterns.

Typically, the Roswell entities provided "equity funding facilities" that allowed highly questionable companies to issue soon-to-be-worthless stock to the general public. Importantly, the Roswell entities were merely acting as a conduit to raise money for such companies, and were not actually investing capital into them. In fact, most of these equity funding facilities permitted the Roswell entities to short the stocks before purchasing discounted shares from the company, effectively allowing the Roswell entities to lock in a profit at the expense of the public without making any investment in the companies. There is no shortage of other unsettling public company dealings from the Roswell entities, which we can detail in future communications.

We believe it is EXTREMELY inappropriate to allow people who appear to be consistently associated with stockholder value destruction to be entrusted as fiduciaries in ANY capacity at ANY public company. The stockholders of Peregrine deserve a Board comprised of highly-qualified independent directors with relevant industry experience and track records of creating stockholder value. Instead, the current Board consists of individuals with track records of value destruction and questionable dealings that cast immense doubt on their ability to act in stockholders' best interests.

ISS Has Previously Recommended WITHHOLD Votes Against ALL Independent Directors

Based on the results from last year's annual meeting, where every independent director received at least 30% WITHHOLD votes with respect to their re-election, it is clear that we are not the only ones who are extremely displeased with the composition of the Board and ready for immediate change. In addition, leading independent proxy advisory firm Institutional Shareholder Services (ISS) recommended a WITHHOLD vote with respect to each of Peregrine's directors, stating:

"WITHHOLD votes are warranted for compensation committee members Carlton M. Johnson Jr., David H. Pohl, and Eric S. Swartz due to continued problematic pay practices and the board's failure to adequately respond to shareholder concerns."

In fact, ISS has recommended WITHHOLD votes against ALL independent directors at each of the past THREE annual meetings. While change is desperately needed at Peregrine, the incumbents appear committed to a pattern of entrenchment. In fact, we are concerned that the Company may have deliberately taken action to frustrate our nomination of director candidates, including by closing its transfer books for an extended period of time.

The status quo, as evidenced by the outrageous equity dilution and abysmal corporate governance practices, has proven untenable, which is why we have formally nominated three independent, highly-qualified candidates, Gregory P. Sargen, Brian W. Scanlan and Saiid Zarrabian, for election at the upcoming 2017 Annual Meeting. In the 16 months since bavituximab's failure of its Phase III SUNRISE trial, the Board has failed to address the Company's problems, and instead, stockholders continue to be diluted at a preposterous rate. We believe the individuals we have nominated possess the financial, operational and strategic acumen the Board urgently needs to enhance stockholder value. ..."

 .... complete Letter at the link above.