UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
SCHEDULE 14A
(Rule 14a-101)
__________________
INFORMATION REQUIRED IN PROXY STATEMENT
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3600 Green Court, Suite 350
Ann Arbor, Michigan 48105
May 10, 2018
April 29, 2021
You are cordially invited to attend the annual meeting of stockholders of ENDRA Life Sciences Inc. to be held at 10:00 a.m., Eastern Time, on June 8, 2021. Due to concerns about the COVID-19 pandemic and the related protocols implemented by federal, state and local time,governments, this year’s annual meeting will be held via the internet and will be a completely virtual meeting. You may attend the annual meeting on Tuesday, June 12, 2018, in the auditorium locatedinternet at 3600 Green Court, Ann Arbor, Michigan.https://agm.issuerdirect.com/ndra. Prior to the meeting you may submit questions by logging into https://agm.issuerdirect.com/ndra and, during the meeting until polls are closed, you may vote by logging into https://www.iproxydirect.com/NDRA using your shareholder information provided on the Notice of Internet Availability of Proxy Materials described below.
We are using the “Notice and Access” method of providing proxy materials to you via the internet. We believe that this process should provide you with a convenient and quick way to access your proxy materials and vote your shares, while allowing us to conserve natural resources and reduce the costs of printing and distributing the proxy materials. On or about April 29, 2021, we are mailing to our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access our proxy statement and vote electronically via the internet or by telephone. The Notice also contains instructions on how to receive a paper copy of your proxy materials.
We look forward to your participation in the annual meeting by attending either in personvirtually or by submitting your proxy. Further details regarding the matters to be acted upon at this meeting appear in the accompanying Notice of 2018 Annual Meeting and Proxy Statement. Please give this material your careful attention.
| | |
| | 
|
| | David Wells
Chief Financial Officer and Secretary
|
ENDRA Life Sciences Inc.
3600 Green Court, Suite 350
Ann Arbor, Michigan 48105
NOTICE OF 20182021 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June
12, 20188, 2021
To the Stockholders of ENDRA Life Sciences Inc.:
NOTICE IS HEREBY GIVEN that the 20182021 Annual Meeting of Stockholders of ENDRA Life Sciences Inc., a Delaware corporation, will be heldtake place on Tuesday, June 12, 20188, 2021 at 10:00 a.m., local time, inEastern Time. The annual meeting will be a virtual meeting, held on the auditorium locatedinternet at 3600 Green Court, Ann Arbor, Michigan,https://agm.issuerdirect.com/ndra, for the following purposes: 1.
To elect the five nominees to the Board of Directors nominated by the Board of Directors.
2.
To approve the First Amendment to the ENDRA Life Sciences Inc. 2016 Omnibus Incentive Plan, which would, among other things, provide for an automatic annual increase to the pool of shares available for issuance each January 1 beginning in 2019 by an amount equal to the lesser of (i) the number of shares necessary such that the aggregate number of shares available under the plan equals 25% of the number of fully-diluted outstanding shares on the increase date (assuming the conversion of all outstanding shares of preferred stock and other outstanding convertible securities and exercise of all outstanding options and warrants to purchase shares) and (ii) if the Board of Directors takes action to set a lower amount, the amount determined by the Board of Directors.3.
To ratify the appointment of RBSM LLP as our independent registered public accounting firm for
2018.4. 2021.
3.
To transact such other business as may properly come before the annual meeting and any adjournments or postponements thereof.
Only stockholders of record of our common stock and preferred stock at the close of business on April 30, 2018,22, 2021, the record date fixed by the Board of Directors, are entitled to notice of and to vote at the annual meeting and any adjournment or postponement thereof. ENDRA’s warrants do not have voting rights. If you plan to attend the annual meeting and you require directions, please call us at (734) 335-0468.
| | By Order of the Board of Directors, |
| | |
| | Francois Michelon
Chief Executive Officer and Chairman
|
Ann Arbor, Michigan
May 10, 2018April 29, 2021
PROXY STATEMENT
TABLE OF CONTENTS
GENERAL INFORMATION | | 1 |
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | | 5
7 |
PROPOSAL 1—ELECTION OF DIRECTORS | | 6
10 |
INFORMATION CONCERNING DIRECTORS AND NOMINEES FOR DIRECTOR | | 7
10 |
INFORMATION CONCERNING EXECUTIVE OFFICERS | | 9
13 |
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS | | 10
15 |
THE BOARD OF DIRECTORS AND ITS COMMITTEES | | 13
19 |
REPORT OF THE AUDIT COMMITTEE | | 15
21 |
COMPENSATION AND OTHER INFORMATION CONCERNING DIRECTORS AND OFFICERS | | 16
22 |
Proposal 2 — First Amendment of ENDRA Life Sciences Inc. 2016 Omnibus Incentive Plan
| | 20
|
PROPOSAL 32—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | | 26
30 |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | | 27
31 |
DELINQUENT SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE REPORTS | | 29
32 |
OTHER BUSINESS | | 29
32 |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 12, 2018 8, 2021 | | 29
32 |
i
ENDRA Life Sciences Inc.
3600 Green Court, Suite 350
Ann Arbor, Michigan 48105
The Board of Directors (the “Board”) of ENDRA Life Sciences Inc. (the “Company,” “ENDRA,” “we,” “us” or “our”) is providing these materials to you in connection with ENDRA’s 20182021 annual meeting of stockholders (the “2018“2021 Annual Meeting”). The 20182021 Annual Meeting will take place on Tuesday, June 12, 2018,8, 2021, 10:00 a.m., local time, inEastern Time, and will be held on the auditorium locatedinternet at 3600 Green Court, Ann Arbor, Michigan.https://agm.issuerdirect.com/ndra. This proxy statement and the accompanying notice and form of proxy are being made available, and the Notice of Internet Availability of Proxy Materials (the “Notice”) is being mailed, to stockholders on or about May 10, 2018.April 29, 2021.
Why am I receiving these materials?
You have received these proxy materials because the Board is soliciting your proxy to vote your shares at the
20182021 Annual Meeting. This proxy statement includes information that we are required to provide to you under Securities and Exchange Commission (“SEC”) rules and is designed to assist you in voting your shares.
Pursuant to the “notice and access” rules adopted by the SEC, we have elected to provide stockholders access to our proxy materials over the internet. Accordingly, we sent the Notice to all of our stockholders as of the record date. The Notice includes instructions on how to access our proxy materials over the internet and how to request a printed copy of these materials. In addition, by following the instructions in the Notice, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.
The Board is asking for your proxy. This means that you authorize persons selected by us to vote your shares at the
20182021 Annual Meeting in the way that you instruct. We have designated two of our executive officers to serve as proxy holders for the
20182021 Annual Meeting. All shares represented by valid proxies received before the
20182021 Annual Meeting will be voted in accordance with the stockholder’s specific voting instructions.
What is included in these materials?
These materials include:
•
●
this proxy statement for the
20182021 Annual Meeting;
•
●
a proxy card for the
20182021 Annual Meeting; and
•
●
our Annual Report on Form 10-K for the year ended December 31,
2017.2020.
What items will be voted on at the
20182021 Annual Meeting?
There are
threetwo proposals scheduled to be voted on at the
20182021 Annual Meeting:
•
●
the election of the nominees to the Board nominated by our Board of Directors; and
●
• the approval of the First Amendment to the ENDRA Life Sciences Inc. 2016 Omnibus Incentive Plan, which would, among other things, provide for an automatic annual increase to the pool of shares available for issuance each January 1 beginning in 2019 by an amount equal to the lesser of (i) the number of shares necessary such that the aggregate number of shares available under the plan equals 25% of the number of fully-diluted outstanding shares on the increase date (assuming the conversion of all outstanding shares of preferred stock and other outstanding convertible securities and exercise of all outstanding options and warrants to purchase shares) and (ii) if the Board of Directors takes action to set a lower amount, the amount determined by the Board.1
•the ratification of the Audit Committee’s appointment of RBSM LLP (“RBSM”) as ourthe Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018.
2021.
The Board is not aware of any other matters to be brought before the meeting. If other matters are properly raised at the meeting, the proxy holders may vote any shares represented by proxy in their discretion.
What are the Board’s voting recommendations?
The Board recommends that you vote your shares:
●
•FOR the nominees to the Board;
and
●
•FOR the approval of the First Amendment of the ENDRA Life Sciences Inc. 2016 Omnibus Incentive Plan; and•FOR the ratification of the Audit Committee’s appointment of RBSM as ourthe Company’s independent registered public accounting firm for 2018.
2021.
Why is the Annual Meeting being held in a virtual-only format?
Due to public health concerns resulting from the coronavirus (COVID-19), and the related protocols that federal, state, and local governments have implemented, the Board has determined to hold the Annual Meeting solely by means of remote communication via webcast. This is often referred to as a “virtual annual meeting.” The webcast will allow all shareholders to join the meeting, regardless of location.
How can I participate in the 2021 Annual Meeting?
You may view the 2021 Annual Meeting online at https://agm.issuerdirect.com/ndra. The Annual Meeting will begin at approximately 10:00 a.m. local time, with log-in beginning at 9:45 a.m., on June 8, 2021. As with an in-person meeting, you will be able to vote during the meeting by logging into https://www.iproxydirect.com/NDRA and entering your stockholder information provided on the Notice previously mailed to you; however, in order to submit questions for consideration at the meeting we ask that you log onto https://agm.issuerdirect.com/ndra and follow the instructions to submit a question prior to 5:00 p.m. on June 4, 2021. If you hold shares in street name, you must vote by giving instructions to your bank or broker. You should follow the instructions on the form that you receive from your bank or broker in order to submit your vote or questions.
What if I have technical difficulties or trouble accessing the annual meeting webcast?
We encourage you to test your computer and internet browser prior to the meeting. If you experience technical difficulties, please visit the help pages found at https://www.webcaster4.com/Support.
Who can attend
and participate in the
20182021 Annual Meeting?
Admission
Issuer Direct is hosting the annual meeting online at https://agm.issuerdirect.com/ndra. While all stockholders will be permitted to listen online to the 20182021 Annual Meeting, is limited to:•only stockholders of record and beneficial owners as of the close of business on April 30, 201822, 2021 (the “record“record date”);
• holders may vote and ask questions. To vote or submit a question if you are participating online, stockholder of valid proxiesrecord will need the control number included on their proxy cards or Notices, and to follow the instructions posted at www.iproxydirect.com/NDRA. Beneficial owners who do not have a control number may gain access to the meeting by following the instructions provided by their broker, bank, or other nominee. We encourage you to access the meeting prior to start time and submit any questions in advance, as described above under “How Can I Participate in the 2021 Annual Meeting?”. Please allow time for online check-in, which will begin at 9:45 a.m. local time. If you have difficulties checking in or during the 20182021 Annual Meeting; and
•Meeting, please call Issuer Direct technical support at 919-744-2718. our invited guests.
Each stockholder may be asked to present valid picture identification, such as a driver’s license or passport, and proof of stock ownership as of the record date.
When is the record date and who is entitled to vote?
The Board set April
30, 201822, 2021 as the record date. All record holders of ENDRA common
stock and preferred stock as of the close of business on that date are entitled to vote. Each
outstanding share of common stock is entitled to one vote.
ENDRA’s warrants do not have voting rights.Each outstanding share of Series A Convertible Preferred Stock (“Series A Preferred Stock”) entitles the holder thereof to a number of votes equal to the number of shares of common stock into which each such share of preferred stock could be converted based upon an issue price of $1,000 per share, subject to adjustment for accrued dividends, and a conversion price of $0.87 per share. Accordingly, as of the record date, each share of Series A Preferred Stock is entitled to approximately 1,244 votes. As of the record date, there were outstanding
3,923,02741,640,168 shares of common stock entitled to
3,923,02741,640,168 votes at the
20182021 Annual
Meeting and 141.397 shares of Series A Preferred Stock entitled to approximately 175,898 votes at the 2021 Annual Meeting.
ENDRA’s warrants do not have voting rights.
What is a stockholder of record?
A stockholder of record or registered stockholder is a stockholder whose ownership of ENDRA
common stock is reflected directly on the books and records of our transfer agent,
CorporateVStock Transfer, LLC, or whose ownership of Series A Preferred Stock
Transfer, Inc.is reflected directly on the books and records kept by ENDRA. If you hold stock through an account with a bank, broker or similar organization, you are considered the beneficial owner of shares held in “street name” and are not a stockholder of record. For shares held in street name, the stockholder of record is your bank, broker or similar organization. We only have access to stock ownership information for registered stockholders.
If you are not a stockholder of record, we will require additional documentation to evidence your stock ownership as of the record date, such as a copy of your brokerage account statement, a letter from your broker, bank or other nominee or a copy of your notice or voting instruction card. As described below, if you are not a stockholder of record, you will not be able to vote your shares unless you have a proxy from the stockholder of record authorizing you to vote your shares.
You may vote by any of the following methods:
●
•Virtually during the 2021 Annual Meeting. You may vote by attending the 2021 Annual Meeting online. Please follow the instructions for attending and voting virtually posted at https://agm.issuerdirect.com/ndra.
●
By mail (if you received a paper copy of the proxy materials by mail).In person. Stockholders of record and beneficial stockholders with shares held in street name may vote in person at the 2018 Annual Meeting. If you hold shares in street name, you must also obtain a proxy from the stockholder of record authorizing you to vote your shares.•By mail. Stockholders of record may vote by signing and returning the proxy card provided.
2
●
•By submitting your proxy by phone or via the Internet.internet. You may
votesubmit your voting instructions by proxy, by phone or via the Internet by following the instructions provided in the
accompanyingNotice or the proxy card
orincluded with a paper copy of the
voting instruction card provided.•proxy statement.
●
Beneficial owners of shares held in “street name.” You may vote by following the voting instructions provided to you by your bank or broker.
How can I change or revoke my vote?
•
If you are a stockholder of record, you may change or revoke your proxy any time before it is voted at the
20182021 Annual Meeting by:
•
●
timely delivering a properly executed, later-dated proxy;
•
●
delivering a written revocation of your proxy to our Secretary at our principal executive offices; or
•
●
voting
in person at the
meeting.2021 Annual Meeting.
If you hold your shares beneficially in street name, you may change your vote by submitting new voting instructions to your bank, broker or nominee following the instructions they provide.
What happens if I do not give specific voting instructions?
Stockholders of record. If you are a stockholder of record and you sign and return a proxy card without giving specific voting instructions, then the proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this proxy statement and as the proxy holders may determine in their discretion for any other matters properly presented for a vote at the meeting. Beneficial owners of shares held in “street name.” If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, the organization that holds your shares may generally vote on routine matters but cannot vote on non-routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization that holds your shares will inform the inspector of election that it does not have the authority to vote on this matter with respect to your shares. This is referred to as a “broker non-vote.”
Which ballot measures are considered “routine” or “non-routine”?
The election of directors (“Proposal 1”)
and the approval of the First Amendment to the ENDRA Life Sciences Inc. 2016 Omnibus Incentive Plan (“Proposal 2”) areis considered to be
a non-routine
mattersmatter under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and therefore there may be broker non-votes on
Proposals 1 and 2.Proposal 1.
The ratification of the appointment of RBSM as our independent registered public accounting firm for
20182021 (“Proposal
3”2”) is considered to be a routine matter under applicable rules. A broker or other nominee may generally vote on routine matters, and we do not expect there to be any broker non-votes with respect to Proposal
3.2.
What is the quorum for the
20182021 Annual Meeting?
The presence, in person or by proxy, of the holders of not less than one-third in voting power of the outstanding shares of stock entitled to vote at the meeting is necessary for the transaction of business at the
20182021 Annual Meeting. This is called a quorum.
What is the voting requirement to approve each of the proposals?
The following are the voting requirements for each proposal:
•
●
Proposal 1: Election of
Directors.Directors. The five nominees receiving the highest number of votes will be elected as directors.
3
•Proposal2:Approval of the First Amendment to the ENDRA Life Sciences Inc. 2016 Omnibus Incentive Plan. The First Amendment to the ENDRA Life Sciences 2016 Omnibus Incentive Plan will be approved if a majority of the voting power of the voting stock present in person or represented by proxy and entitled to vote votes in favor of the proposal.
•
●
Proposal
3:2: Ratification of Appointment of Independent Registered Public Accounting
Firm.Firm. The Audit Committee’s appointment of RBSM as our independent registered public accounting firm for
20182021 will be ratified if a majority
of thein voting power of the
votingshares of stock
of the Company which are present
in person or represented by proxy and entitled to vote
thereon votes in favor of the proposal.
How are abstentions and broker non-votes treated?
Broker non-votes and abstentions are counted for purposes of determining whether a quorum is present at the
20182021 Annual Meeting. However, broker non-votes are not counted as votes
presentcast for any non-routine proposal considered at the
20182021 Annual Meeting and, therefore, will have no effect on
(i) the proposal regarding the election of
directors or (ii) the proposal regarding the approval of the First Amendment to the ENDRA Life Sciences 2016 Omnibus Incentive Plan.directors. We expect no broker non-votes on the routine proposal to appoint RBSM as our independent registered public accounting firm for
2018.2021.
Abstentions will be counted as votes present and entitled to vote on the proposals considered at the
20182021 Annual Meeting and, therefore, will be counted as votes against
(i) the proposal to approve the First Amendment to the ENDRA Life Sciences 2016 Omnibus Incentive Plan and (ii) the proposal to appoint RBSM as our independent registered public accounting firm for
2018.2021. Abstentions will have no effect on the proposal regarding the election of directors.
Who pays for solicitation of proxies?
ENDRA is paying the cost of soliciting proxies and will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for sending proxy materials to stockholders and obtaining their votes. In addition to soliciting the proxies by mail, certain of our directors, officers and regular employees, without compensation, may solicit proxies personally or by telephone, facsimile and email.
Where can I find the voting results of the
20182021 Annual Meeting?
We will announce voting results in a Current Report on Form 8-K filed with the SEC within four business days following the meeting.
How can I submit a proposal for the
20192022 annual meeting of stockholders?
Requirements for Stockholder Proposals to Be Considered for Inclusion in the Company’s Proxy Materials. Stockholder proposals to be considered for inclusion in the proxy statement and form of proxy relating to the 20192022 annual meeting of stockholders must be received by January 7, 2019.December 30, 2021. In addition, all proposals will need to comply with Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which lists the requirements for the inclusion of stockholder proposals in company-sponsored proxy materials. Stockholder proposals must be delivered to the Company’s Secretary at 3600 Green Court, Suite 350, Ann Arbor, Michigan 48105. Requirements for Stockholder Proposals to Be Brought Before the 20192022 Annual Meeting of Stockholders. Notice of any director nomination or other proposal that you intend to present at the 2018 Annual Meeting2021 annual meeting of stockholders, but do not intend to have included in the proxy statement and form of proxy relating to the 20192022 annual meeting of stockholders, must be delivered to the Company’s Secretary at 3600 Green Court, Suite 350, Ann Arbor, Michigan 48105, not earlier than the close of business on February 12, 20198, 2022 and not later than the close of business on March 14, 2019.10, 2022. In addition, your notice must set forth the information required by our bylaws with respect to each director nomination or other proposal that you intend to present at the 20192022 annual meeting of stockholders.4
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following
table setstables set forth certain information regarding beneficial ownership of our voting stock as of April
30, 201822, 2021 by:
•
●
each person or group of affiliated persons known by us to be the beneficial owner of more than 5% of any class of our voting stock;
•
●
each
named executive officer included in the Summary Compensation Table below;
•
●
each person nominated to become director; and
•
●
all executive officers, directors and nominees as a group.
Unless otherwise noted below, the address of each person listed
onin the
tabletables is c/o ENDRA Life Sciences Inc. at 3600 Green Court, Suite 350, Ann Arbor, Michigan 48105. To our knowledge, each person listed below has sole voting and investment power over the shares shown as beneficially owned except to the extent jointly owned with spouses or otherwise noted below.
Beneficial ownership is determined in accordance with the rules of the SEC. The information does not necessarily indicate ownership for any other purpose. Under these rules, shares of stock which a person has the right to acquire (i.e., by the exercise of any option or warrant) within 60 days after April 30, 201822, 2021 are deemed to be beneficially owned and outstanding for purposes of calculating the number of shares and the percentage beneficially owned by that person. However, these shares are not deemed to be beneficially owned and outstanding for purposes of computing the percentage beneficially owned by any other person. The applicable percentagepercentages of common stock outstanding as of April 30, 201822, 2021 is based upon 3,923,027 shares outstanding on that date.Name and Address of Beneficial Owner | | Total Shares Beneficially Owned | | Percentage of Common Stock Outstanding |
Directors and Executive Officers | | | | | | |
Francois Michelon | | 163,299 | (1) | | 4.0 | % |
Michael Thornton | | 205,558 | (2) | | 5.1 | % |
David R. Wells | | 30,833 | (3) | | * | |
Dr. Sanjiv Sam Gambhir | | 28,832 | (4) | | * | |
Michael Harsh | | 17,371 | (5) | | * | |
Alexander Tokman | | 21,170 | (6) | | * | |
Anthony DiGiandomenico | | 76,720 | (7) | | 1.9 | % |
All directors and executive officers as a group (7 individuals) | | 546,780 | | | 12.7 | % |
Other 5% or More Shareholders | | | | | | |
Longboard Capital Advisors, LLC | | 652,463 | (8) | | 15.7 | % |
Beneficial Ownership of Common Stock
| Name of Beneficial Owner | Shares of Common Stock Beneficially Owned | Percentage of Common Stock Beneficially Owned |
| Directors and Executive Officers | | |
| Francois Michelon | 723,325(1) | 1.7% |
| Michael Thornton | 950,963(2) | 2.2% |
| David Wells | 241,112(3) | * |
| Louis Basenese | 115,735(4) | * |
| Anthony DiGiandomenico | 499,212(5) | 1.2% |
| Michael Harsh | 198,641(6) | * |
| Alexander Tokman | 126,113(7) | * |
| All directors and executive officers as a group (8 persons) | 2,739,366 | 6.3% |
_________________
(1)
Consists of 92,091 shares of common stock, issuable upon the exercise of options that are presently exercisable.
(2)
Consists of 18,833293,710 shares of common stock, and 12,000 shares of common stock issuable upon the exercise of options that are presently exercisable.
(3)
Consists of 429,437104,789 shares of common stock, and 223,026128,792 shares of common stock issuable upon the exercise of warrants owned by Longboard. Mr. Conrad isoptions that are presently exercisable or becoming exercisable within 60 days of April 22, 2021 and 7,531 shares of common stock issuable upon the managing memberexercise of Longboard and has the power to make voting and investment decisions regarding therestricted warrants.
(4)
Consists of 99,068 shares of common stock and warrants held by Longboard. The16,667 shares of common stock issuable upon the exercise of options that are presently exercisable or becoming exercisable within 60 days of April 22, 2021.
(5)
Consists of 382,012 shares of common stock, 93,256 shares of common stock issuable upon the exercise of options that are presently exercisable or becoming exercisable within 60 days of April 22, 2021 and 23,944 shares of common stock issuable upon the exercise of restricted warrants.
(6)
Consists of 69,243 shares of common stock, 123,342 shares of common stock issuable upon the exercise of options that are presently exercisable or becoming exercisable within 60 days of April 22, 2021 and 6,056 shares of common stock issuable upon the exercise of restricted warrants.
(7)
Consists of 32,857 shares of common stock and 93,256 shares of common stock issuable upon the exercise of options that are presently exercisable or becoming exercisable within 60 days of April 22, 2021.
Beneficial Ownership of Series A Preferred Stock
| Name of Beneficial Owner | Shares of Series A Preferred Stock Beneficially Owned | Percentage of Series A Preferred Stock Beneficially Owned |
| Directors and Executive Officers | | |
| Francois Michelon | - | * |
| Michael Thornton | - | * |
| David Wells | - | * |
| Michael Harsh | - | * |
| Alexander Tokman | - | * |
| Anthony DiGiandomenico | - | * |
| All directors and executive officers as a group (8 persons) | - | * |
| 5% Stockholders | | |
Donald Kendall (1) | 106.421 | 75.3% |
Mark R. Busch (2) | 17.488 | 12.4% |
Juan R. Rivero (3) | 17.488 | 12.4% |
_________________
(1)
Mr. Kendall’s address
for this investor is
1312 Cedar2000 Edwards Street,
Santa Monica, CA 90405.5
Suite B-100, Houston, TX 77007.
(2)
Shares jointly owned with spouse. Mr. Busch’s address is 300 S. Tryon St., Suite 1000, Charlotte, NC 28202.
(3)
Mr. Rivero’s address is 14521 Jockey Circle, N. Davie, FL 33330.
PROPOSAL 1—ELECTION OF DIRECTORS The Company’s Board of Directors currently consists of five members. Upon the recommendation of the Corporate Governance and Nominating Committee of our Board of Directors, the Board has nominated the five current directors for election at the
20182021 Annual Meeting to hold office until the next annual meeting of stockholders or until his
or her successor is duly elected and qualified.
Shares represented by all proxies received by the Board and not marked so as to withhold authority to vote for any individual nominee will be votedFOR the election of the nominees named below. The Board knows of no reason why any nominee would be unable or unwilling to serve, but if such should be the case, proxies may be voted for the election of some other person nominated by the Board of Directors. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR THE NOMINEES LISTED BELOW
The following table sets forth the nominees to be elected at the 20182021 Annual Meeting, the year such director was first elected as a director, and the positions currently held by each director with ENDRA.
Director’s Name | | Year First Became Director | | Position with the Company |
Francois Michelon | 2015 | 2015
| | Chief Executive Officer and Chairman of the Board |
Anthony DiGiandomenico
Louis J. Basenese | 2020 | 2013
| | Director |
Dr. Sanjiv Sam Gambhir
Anthony DiGiandomenico | 2013 | 2008
| | Director |
Michael Harsh | 2015 | 2015
| | Director |
Alexander Tokman | 2008 | 2008
| | Director |
6
INFORMATION CONCERNING DIRECTORS AND NOMINEES FOR DIRECTOR
Set forth below is background information for each current director and nominee for director, as well as information regarding additional experience, qualifications, attributes or skills that led the Board of Directors to conclude that such director or nominee should serve on the Board.
Francois Michelon, age 52,55, joined ENDRA as Chief Executive Officer and Chairman of our board of directors in 2015. He has over 20 years of healthcare technology experience in general management, operations, strategy and marketing across the diagnostic imaging, surgical instrument and dental sectors. From 2012 to 2014, Mr. Michelon served as Vice President of Global Marketing for the 3i division of Biomet, Inc. (now Zimmer Biomet Holdings, Inc.), a provider of oral reconstruction technologies, where he was responsible for the upstream and downstream development of the division’s global portfolio. From 2004 to 2011, Mr. Michelon served as Group Director of Global Services and Visualization for Smith & Nephew plc’s Advanced Surgical Devices division, where he led in the B2B service and capital equipment sectors, and had responsibility over the financial performance of these as well. From 1997 to 2004, Mr. Michelon worked at GE Healthcare in a variety of global upstream and downstream marketing roles.
Mr. Michelon received an MBA from Carnegie-Mellon University and a BA in Economics from the University of Chicago. He has also earned his Six Sigma Black Belt certification.
Mr. Michelon’s extensive industry and executive experience and his intimate understanding of our business as our Chief Executive Officer, position him well to serve as a member of our
boardBoard of
directors.Directors.
Louis J. Basenese, age 43, joined our Board of Directors in April 2020. Mr. Basenese is the Founder and Chief Analyst of Disruptive Tech Research, LLC, an independent equity research and advisory firm focused exclusively on disruptive technology companies that has served the investment management community since June 2014. Since 2005, Mr. Basenese has also managed The Basenese Group, LLC, a consulting business focused on communications and business development for private and public small and microcap businesses.
Mr. Basenese holds an M.B.A. in Finance from the Crummer Graduate School of Business at Rollins College and a Bachelor of Arts from the University of Florida. He is also a former Series 7 and Series 66 license holder.
Mr. Basenese’s experience with investor relations and business development of technology-focused companies, as well as financing and strategic planning, provides him with the qualifications and skills necessary to serve as a member of our Board of Directors.
Anthony DiGiandomenico, age 51,54, joined our boardBoard of directorsDirectors in 2013. A co-founder of MDB Capital Group LLC, Mr. DiGiandomenico focuses on corporate finance and capital formation for growth-oriented companies. He has participated in all areas of corporate finance including private capital, public offerings, PIPEs, business consulting and strategic planning, and mergers and acquisitions. Mr. DiGiandomenico has also worked on a wide range of transactions for growth-oriented companies in biotechnology, nutritional supplements, manufacturing and entertainment industries. Prior to forming MDB Capital Group LLC in 1997, Mr. DiGiandomenico served as President and CEO of the Digian Company, a real estate development company.
Currently, Mr. DiGiandomenico
serveshas also served on the board of directors of Cue Biopharma, Inc., an immunotherapy
company, and currently serves on the board of directors of Provention Bio, Inc., a clinical-stage biopharmaceutical company.
Mr. DiGiandomenico holds an MBA from the Haas School of Business at the University of California, Berkeley and a BS in Finance from the University of Colorado.
Mr. DiGiandomenico’s financial expertise, general business acumen and significant executive leadership experience position him well to make valuable contributions to our
board of directors.Dr. Sanjiv Sam Gambhir, age 55, joined our board of directors in 2008. He is the Virginia & D.K. Ludwig Professor of Cancer Research and the Chair of Radiology at Stanford University School of Medicine. He also heads the Canary Center at Stanford for Cancer Early Detection and directs the Molecular Imaging Program at Stanford (MIPS).
He received an MD/PhD from the UCLA Medical Scientist Training Program. He has many publications in the field and numerous patents pending or granted. He has developed and clinically translated several multimodality molecular imaging strategies including imaging of gene and cell therapies. He has also pioneered imaging areas such as Bioluminescence Resonance Energy Transfer (BRET), split-reporter technology, Raman imaging in vivo, Molecular Photoacoustic imaging, PET reporter genes, and novel in vitro and in vivo strategies for the early detection of cancer.
Dr. Gambhir serves on numerous academic advisory boards for universities around the world and also served as a member of the Board of Scientific Advisors of the National Cancer Institute from 2004 to 2012. He has also founded or co-founded several startups in the diagnostics space. Among his many awards are the George Von Hevesy Prize and the Paul C. Aebersold Award for outstanding achievement in basic nuclear medicine science from the Society of Nuclear Medicine, Outstanding Researcher Award from the Radiological Society of Northern America, the Distinguished Clinical Scientist Award from the Doris Duke Charitable Foundation, the Holst Medal, the Tesla Medal, and the Hounsfield Medal from Imperial College, London. He was elected to the Institute of Medicine of the U.S. National Academies in 2008.
7
Dr. Gambhir’s unique and extensive scientific and technical expertise positions him well to serve on our board of directors.
Directors.
Michael Harsh, age 63,66, joined our boardBoard of directorsDirectors in 2015. He has 39 years’ experienceis a co-founder and Chief Product Officer of Terapede Systems, a digital X-ray startup that focuses on developing an ultra-high resolution medical flat panel X-ray detector. He co-founded Terapede in healthcare technology, focused on diagnostic imaging.2015. Prior to Terapede, Mr. Harsh was most recentlyhad a 36-year career with General Electric (“GE”). He held numerous positions within GE Healthcare’sand served as Vice President and Chief Technology Officer leadingof GE Healthcare, a multi-billion dollar division of GE, where he led its global science and technology organization and research and development teams in diagnostics, healthcare IT and life sciences.In 2004, Mr. Harsh was named Global Technology Leader – Imaging Technologies Lab at the GE Global Research Center, where he led the research for imaging technologies across the company as well as the research associated with computer visualization/image analysisvisualization and superconducting systems. He led the Engineering division for GE Industrial and Enterprise Solutions from 2006 to 2009.
Additionally, Mr. Harsh
was named an officer of General Electric Company in November 2006. Mr. Harsh is
the co-founder of Terapede Systems, a digital x-ray detector startup, a member of the boards of directors of
FloDesign Sonics,Compute Health (NYSE: CPUH-UN), Imagion Biosystems
(IBX.AX), and EmOpti, as well as a member
of the Radiological Society of North America
(“RSNA”)(RSNA), Research & Education Foundation Board of Trustees.
He had previously served as a director for FloDesign Sonics until its acquisition by MilliporeSigma, a division of the Merck Group. He is also a McKinsey Senior Advisor and a consultant in the medical device industry.
Mr. Harsh is a graduate of Marquette University, where he earned a bachelor’s degree in Electrical Engineering. He holds numerous U.S. patents in the field of medical imaging and instrumentation. In 2008, Mr. Harsh was elected to the American Institute for Medical and Biological Engineering College of Fellows for his significant contributions to the medical and biological engineering field.
Mr. Harsh’s extensive industry, executive and board experience position him well to serve on our
boardBoard of
directors.Directors.
Alexander Tokman, age 56,59, joined our boardBoard of directorsDirectors in 2008. He hascurrently serves as a President of iUNU, a privately held AI/Computer Vision SaaS company and most recently was a CEO-in-Residence at the Allen Institute for Artificial Intelligence (AI2), from 2019 to 2020.
Mr. Tokman served as President, Chief Executive Officer, and a director of Microvision, Inc., a publicly traded laser beam scanning projection and imaging company, from January 2006 to December 2017.
Previously, Mr. Tokman completed a 10+ year tenure as an executive with GE Healthcare, where he led several global businesses, most recently as a General Manager of its Global Molecular Imaging and Radiopharmacy multi-technology business unit from 2003 to 2005.
Between 1995 and 2003, Mr. Tokman served in various leadership roles at GE Healthcare, where he led the definition and successful commercialization of several product segments, including PET/CT, which generated over $500 million of revenue within the first three years of its launch.
Mr. Tokman is a certified Six Sigma and Design for Six Sigma (DFSS) Black Belt and Master Black Belt and as one of General Electric Company’s Six Sigma pioneers, he drove the quality culture change across GE Healthcare in the late 1990s. From 1989 to 1995, Mr. Tokman served as development programs lead and a head of Industry and Regional Development at Tracor Applied Sciences. Mr. Tokman has both an MS and BS in Electrical Engineering from the University of Massachusetts, Dartmouth.
Mr. Tokman’s industry expertise and significant executive leadership and director experience position him well to make valuable contributions to our
boardBoard of
directors.8
Directors.
INFORMATION CONCERNING EXECUTIVE OFFICERS
Set forth below is background information relating to our executive officers:
| Age | | | |
Francois Michelon | 55 | 52
| | Chief Executive Officer and Chairman |
Michael Thornton | 52 | 49
| | Chief Technology Officer |
David Wells | 58 | 55
| | Chief Financial Officer |
| Renaud Maloberti | 52 | Chief Commercial Officer |
Francois Michelon is discussed above underInformation Concerning Directors and Nominees for Director. Michael Thornton joined ENDRA as Chief Technology Officer in 2007. Prior to that, Mr. Thornton was a founder and President of Enhanced Vision Systems Corp., or EVS, a developer and supplier of medical imaging equipment to the pharmaceutical, biotech, and academic sectors. In 2002, EVS was acquired by General Electric Company and was integrated into the Functional and Molecular Imaging business unit of GE Medical Systems (now GE Healthcare, a subsidiary of General Electric Company). Following the acquisition of EVS by GE Medical Systems, Mr. Thornton held a number of positions at GE Healthcare, including Sales Manager, Global Product Manager, and Site Leader. He was a member of the leadership team that expanded the pre-clinical imaging business to include: computed tomography, optical, and positron emission tomography imaging technologies, with global market reach. He is also a founder of Volumetrics Medical Corp., a developer and manufacturer of quality assurance devices for diagnostic imaging.
Prior to founding EVS, Mr. Thornton developed medical imaging related technologies at the Robarts Research Institute (London, Ontario, Canada) for which he obtained an MSc in Electrical Engineering from the University of Western Ontario. Mr. Thornton also holds a BASc in Electrical Engineering from the University of Toronto and is a member of the American Association of Physicists in Medicine.
David Wells became our Chief Financial Officer on an interim basis in 2014 and on a continuing basis in 2017. He possesses over 30 years of experience in finance, operations and administrative positions. While mainly focused on technology companies, Mr. Wells has also worked in the water treatment, supply-chain management, manufacturing and professional services industries. Mr. Wells is the founder of Wells Compliance Group, a technology-based services firm supporting the financial reporting needs of publicly traded companies and privately held firms whose investor or shareholder base requires timely GAAP-compliant financial reporting. Through StoryCorp Consulting (d/b/a/ Wells Compliance Group), Mr. Wells consults with several emerging growth
companies and has served as the principal financial officer of Mount Tam Biotechnologies, Inc., a biopharmaceutical company (August 2015 to April 2016), Content Checked Holdings, Inc., a technology company (April 2015 to November 2016), and LiveXLive Media, Inc. (formerly Loton, Corp.), a media company (February 2016 to April 2017).companies. From 2009 to 2013, he was the President, CFO and a Director of Sionix Corporation, a publicly traded water treatment company.
Mr. Wells holds an MBA from Pepperdine University and a BS in Finance and Entrepreneurship from Seattle Pacific University.
9
Renaud Maloberti joined ENDRA in May 2019 as our Chief Commercial Officer. He brings over 20 years of global commercial experience in medical imaging, including 12 years in ultrasound. Most recently, Mr. Maloberti was Chief Commercial Officer of Bionik Laboratories, a company in the AI-enhanced rehabilitation robotics market. From 2012 to 2018, Mr. Maloberti held various positions at FujiFilm SonoSite Inc., most recently as vice president and general manager of the SonoSite High Frequency division, where he led the development and launch of the world's first ultra-high frequency ultrasound and led the division through double-digit revenue growth for six years.
Mr. Maloberti previously served as general manager, Americas for BK Medical Systems, the ultrasound subsidiary of Analogic Corporation (Nasdaq: ALOG). Earlier in his career, Mr. Maloberti worked at Draeger Medical Systems, a leader in patient monitoring and healthcare IT systems. Mr. Maloberti also spent 10 years in sales and marketing roles at GE Healthcare, a global leader in diagnostic imaging, healthcare IT systems and services.
Maloberti holds an M.B.A. in global marketing from Babson College and a bachelor’s degree in International Finance from ESLSCA Business School in Paris, France. He is fluent in English and French.
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
The Board of Directors has determined that each of Mr.
Basenese, Mr. DiGiandomenico,
Dr. Gambhir, Mr. Harsh and Mr. Tokman is an independent director within the meaning of the director independence standards of The
NASDAQNasdaq Stock Market (“
NASDAQ”Nasdaq”). Furthermore, the Board has determined that all of the members of the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee are independent within the meaning of the director independence standards of
NASDAQNasdaq and the rules of the SEC applicable to each such committee.
In reaching this determination, the Board considered Mr. Tokman’s providing advisory services to the Company with respect to potential strategic partnerships. Mr. Tokman was compensated for the services at a rate of $10,000 per month during September through December 2020, for an aggregate of $40,000. After consideration, the Board determined that this arrangement did not impact Mr. Tokman’s ability to serve as an independent director.
Board Leadership Structure
We have a Chairman of the Board who presides at all meetings of the Board. Currently, Mr. Michelon serves as the Chairman of the Board and Chief Executive Officer. ENDRA has no fixed policy with respect to the separation of the offices of the Chairman of the Board and Chief Executive Officer. Our bylaws permit these positions to be held by the same person, and the Board believes that it is in the best interests of the Company to retain flexibility in determining whether to separate or combine the roles of Chairman and Chief Executive Officer based on our circumstances. The Board has determined that it is appropriate for Mr. Michelon to serve as both Chairman and Chief Executive Officer because combining the roles of Chairman and Chief Executive Officer: (1) enhances the alignment between the Board and management in strategic planning and execution as well as operational matters, (2) avoids the confusion over roles, responsibilities and authority that can result from separating the positions, and (3) streamlines board process in order to conserve time for the consideration of the important matters the Board needs to address. Further, four of our five current Board members have been deemed to be independent by our Board; therefore, we believe our Board structure provides sufficient independent oversight of our management. The Board has not named a lead independent director.
Communications with the Board of Directors
Security holders who wish to communicate directly with the Board, the independent directors of the Board or any individual member of the Board may do so by sending such communication by certified mail addressed to the Chairman of the Board, the entire Board of Directors, to the independent directors as a group or to the individual director or directors, in each case, c/o Secretary, ENDRA Life Sciences Inc., 3600 Green Court, Suite 350, Ann Arbor, Michigan 48105. The Secretary reviews any such security holder communication and forwards relevant communications to the addressee.
Policies Regarding Director Nominations The Board has delegated to its Corporate Governance and Nominating Committee responsibility for establishing membership criteria for the Board, identifying individuals qualified to become directors consistent with such criteria and recommending the director nominees.
The Corporate Governance and Nominating Committee is responsible for, among other things: (1) recommending to the Board persons to serve as members of the Board and as members of and chairpersons for the committees of the Board, (2) considering the recommendation of candidates to serve as directors submitted from the stockholders of the Company, (3) assisting the Board in evaluating the Board’s and its committees’ performance, (4) advising the Board regarding the appropriate board leadership structure for the Company, (5) reviewing and making recommendations to the Board on corporate governance and (6) reviewing the size and composition of the Board and recommending to the Board any changes it deems advisable.
The Board seeks members from diverse professional backgrounds who combine a broad spectrum of relevant industry and strategic experience and expertise that, in concert, offer us and our stockholders diversity of opinion and insight in the areas most important to us and our corporate mission. The Corporate Governance and Nominating Committee has not set specific, minimum qualifications that must be met by director candidates. Rather, in determining candidates to recommend to the Board to serve as members of the Board, the Corporate Governance and Nominating Committee will consider, among other things, whether a candidate is of the highest ethical character and shares the Company’s values and whether the candidate’s reputation, both personal and professional, in consistent with the image and reputation of the Company. In addition, nominees for director are selected to have complementary, rather than overlapping, skill sets. However, the Corporate Governance and Nominating Committee does not have a formal policy concerning the diversity of the Board.
10
Procedures for Recommendation of Director Nominees by Stockholders The Corporate Governance and Nominating Committee considers individuals properly recommended by stockholders in the same manner as it considers director nominees identified by other means. To submit a recommendation to the Corporate Governance and Nominating Committee for director nominee candidates, a stockholder must make such recommendation in writing and include:
•
●
as to the stockholder making the recommendation and the beneficial owner, if any, on whose behalf the nomination is made:
•
o
the name and address of such stockholder, as they appear on the Company’s books, and of such beneficial owner;
•
o
the class or series and number of shares of capital stock of the Company which are owned beneficially and of record by such stockholder and such beneficial owner;
•
o
a description of any agreement, arrangement or understanding with respect to the nomination or proposal between or among such stockholder and/or such beneficial owner, any of their respective affiliates or associates, and any others acting in concert with any of the foregoing, including, in the case of a nomination, the nominee;
•
o
description of all arrangements or understandings among the stockholder and the candidate and any other person or persons pursuant to which the recommendation is being made;
•
o
a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination;
•
o
a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (a) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Company’s outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (b) otherwise to solicit proxies or votes from stockholders in support of such proposal or nomination; and
•
o
any other information relating to such stockholder and beneficial owner, if any, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in an election contest pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder; and
•
●
as to each person whom the stockholder proposes to nominate for election as a director:
•
o
full biographical information concerning the director candidate, including a statement about the candidate’s qualifications;
•
o
all other information regarding each director candidate proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission;•SEC;
o
a description of all relationships between the candidate and any of the Company’s competitors, customers, suppliers, labor unions or other persons with special interests regarding the Company; and
•
o
such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected.
Recommendations must be sent to the Chairperson of the Corporate Governance and Nominating Committee, c/o Secretary, ENDRA Life Sciences Inc., 3600 Green Court, Suite 350, Ann Arbor, Michigan 48105. The Secretary must receive any such recommendation for nomination not later than the close of business on the
90th90th day nor earlier than the close of business on the
120th120th day prior to the first anniversary of the date of the preceding year’s annual meeting of stockholders; provided, however, that with respect to a special meeting of stockholders called by us for
11
the purpose of electing directors to the Board of Directors, the Secretary must receive any such recommendation not earlier than the 120th120th day prior to such special meeting nor later than the later of (1) the close of business on the 90th90th day prior to such special meeting or (2) the close of business on the 10th10th day following the day on which a public announcement is first made regarding such special meeting. We will promptly forward any such nominations to the Corporate Governance and Nominating Committee. Once the Corporate Governance and Nominating Committee receives a recommendation for a director candidate, such candidate will be evaluated in the same manner as other candidates and a recommendation with respect to such candidate will be delivered to the Board of Directors.
Policy Governing Director Attendance at Annual Meetings of Stockholders
Each director is encouraged to attend the
20182021 Annual Meeting of stockholders either in person or telephonically.
We did not have a 2017One of our six directors on the Board at the time attended last year’s annual meeting
of stockholders.either in-person or telephonically.
Code of Business Conduct and Ethics
We have in place a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to all of our directors, officers and employees. The Code of Ethics is designed to deter wrongdoing and to promote:
•
●
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
•
●
full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications that we make;
•
●
compliance with applicable governmental laws, rules and regulations;
•
●
the prompt internal reporting of violations of the Code of Ethics to an appropriate person identified in the Code of Ethics; and
•
●
accountability for adherence to the Code of Ethics.
A current copy of the Code of Ethics is available at
www.endrainc.com. www.endrainc.com. A copy may also be obtained, free of charge, from us upon a request directed to ENDRA Life Sciences, Inc., 3600 Green Court, Suite 350, Ann Arbor, Michigan 48105, attention: Investor Relations. We intend to disclose any amendments to or waivers of a provision of the Code of Ethics required to be disclosed by applicable SEC rules by posting such information on our website available at
www.endrainc.com and/or in our public filings with the SEC.
12
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Our bylaws state that the number of directors constituting the entire Board of Directors shall be determined by resolution of the Board. The Board has the authority to increase the number of directors, fill any vacancies on the Board and to decrease the number of directors. The number of directors currently fixed by our Board is five.
Our Board of Directors met four times during the year ended December 31,
2017.2020. No director attended less than 75 percent of all meetings of the Board and applicable committee meetings in
20172020 held during the period for which he was a director. The Board of Directors currently has standing Audit, Compensation and Corporate Governance and Nominating Committees. The Board and each standing committee
retainsretain the authority to engage its own advisors and consultants. Each standing committee has a charter that has been approved by the Board of Directors. A copy of each committee charter is available at
www.endrainc.com. www.endrainc.com. Each committee reviews the appropriateness of its charter annually or at such other intervals as
eachsuch committee determines.
The following table sets forth the current members of the Audit, Compensation and Corporate Governance and Nominating Committees of the Board:
| Audit | Compensation | | | | Corporate Governance and Nominating |
Anthony DiGiandomenico
Louis J. Basenese | X | Chair
X | | X
| | |
Michael Harsh
Anthony DiGiandomenico | Chair | X | | X
| | Chair
|
Alexander Tokman
Michael Harsh | X | X | | Chair | | X
|
Dr. Sanjiv Sam Gambhir
Francois Michelon | | | |
| Alexander Tokman | | Chair | X |
Committees
CommitteesAudit Committee. Our Audit Committee consists of Mr. DiGiandomenico,Basenese, Mr. HarshDiGiandomenico, and Mr. Tokman.Harsh. The Board of Directors has determined that each member of the Audit Committee is independent within the meaning of the NASDAQNasdaq director independence standards and applicable rules of the SEC for audit committee members. The Board of Directors has elected Mr. DiGiandomenico as Chairperson of the Audit Committee and has determined that he qualifies as an “audit committee financial expert” under the rules of the SEC. The Audit Committee is responsible for assisting the Board of Directors in fulfilling its oversight responsibilities with respect to financial reports and other financial information. The Audit Committee (1) reviews, monitors and reports to the Board of Directors on the adequacy of the Company’s financial reporting process and system of internal controls over financial reporting, (2) has the ultimate authority to select, evaluate and replace the independent auditor and is the ultimate authority to which the independent auditors are accountable, (3) in consultation with management, periodically reviews the adequacy of the Company’s disclosure controls and procedures and approves any significant changes thereto, (4) provides the audit committee report for inclusion in our proxy statement for our annual meeting of stockholders and (5) recommends, establishes and monitors procedures for the receipt, retention and treatment of complaints relating to accounting, internal accounting controls or auditing matters and the receipt of confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters. The Audit Committee was formedmet four times in December 2016 and met one time in 2017.
2020.
Compensation Committee. Our Compensation Committee presently consists of Mr. Basenese, Mr. DiGiandomenico, Mr. Harsh and Mr. Tokman, each of whom is a non-employee director as defined in Rule 16b-3 of the Exchange Act. The Board has also determined that each member of the Compensation Committee is also an independent director within the meaning of NASDAQ’sNasdaq’s director independence standards. Mr. Tokman serves as Chairperson of the Compensation Committee. The Compensation Committee (1) discharges the responsibilities of the Board of Directors relating to the compensation of our directors and executive officers, (2) oversees the Company’s procedures for consideration and determination of executive and director compensation, and reviews and approves all executive compensation, and (3) administers and implements the Company’s incentive compensation plans and equity-based plans. The Compensation Committee was formedmet two times in December 2016 and did not meet in 2017.2020.
Corporate Governance and Nominating Committee. Our Corporate Governance and Nominating Committee consists of Mr. Harsh and Mr. Tokman and Dr. Gambhir.Tokman. The Board of Directors has determined that each member of the Corporate Governance and Nominating Committee is an independent director within the meaning of the NASDAQ13
Nasdaq director independence standards and applicable rules of the SEC. Mr. Harsh serves as Chairperson of the Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee (1) recommends to the Board of Directors persons to serve as members of the Board of Directors and as members of and chairpersons for the committees of the Board of Directors, (2) considers the recommendation of candidates to serve as directors submitted from the stockholders of the Company, (3) assists the Board of Directors in evaluating the performance of the Board of Directors and the Board committees, (4) advises the Board of Directors regarding the appropriate board leadership structure for the Company, (5) reviews and makes recommendations to the Board of Directors on corporate governance and (6) reviews the size and composition of the Board of Directors and recommends to the Board of Directors any changes it deems advisable. The Corporate Governance and Nominating Committee was formed in December 2016 and did not meet separately from the Board of Directors in 2017.
2020 but acted by written consent.
Role of the Board of Directors in Risk Oversight
Enterprise risks are identified and prioritized by management and the Board receives periodic reports from the Company’s head of compliance regarding the most significant risks facing the Company. These risks include, without limitation, the following:
•
●
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;•reputation.
●
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;•matters.
●
risks and exposures relating to corporate governance, and management and director succession
planning;planning. and
●
•risks and exposures associated with leadership assessment, and compensation programs and arrangements, including incentive
plans.14
plans.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is comprised of
Louis Basenese, Anthony DiGiandomenico
and Michael
Harsh and Alexander Tokman.Harsh. None of the current or former members of the Audit Committee is an officer or employee of the Company, and the Board has determined that each member of the Audit Committee meets the independence requirements promulgated by The
NASDAQNasdaq Stock Market and the SEC, including Rule 10A-3(b)(1) under the Exchange Act.
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls and the certification of the integrity and reliability of the Company’s internal controls procedures. In fulfilling its oversight responsibilities, the Audit Committee has reviewed the Company’s audited financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2017,2020, and has discussed them with both management and RBSM LLP (“RBSM”), the Company’s independent registered public accounting firm. The Audit Committee has also discussed with the independent registered public accounting firm the matters required to be discussed by the Auditing Standard No. 1301,Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board. The Audit Committee has reviewed permitted services under rules of the SEC as currently in effect and discussed with RBSM its independence from management and the Company, including the matters in the written disclosures and the letter from the independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence. The Audit Committee has also considered and discussed the compatibility of non-audit services provided by RBSM with that firm’s independence. Based on its review of the financial statements and the aforementioned discussions, the Audit Committee concluded that it would be reasonable to recommend, and on that basis did recommend, to the Board of Directors that the audited financial statements be included in the Company’s Annual Report.
Respectfully submitted by the Audit Committee.
| | |
| | |
| | Louis Basenese Anthony DiGiandomenico, Chair
Michael Harsh
Alexander Tokman
|
15
COMPENSATION AND OTHER INFORMATION CONCERNING DIRECTORS AND OFFICERS
As a “smaller reporting company,” we have opted to comply with scaled executive and director compensation disclosure rules applicable to “smaller reporting companies.”
Our compensation philosophy is to offer our
named executive officers
(as defined below) compensation and benefits that are competitive and meet our goals of attracting, retaining and motivating highly skilled management, which is necessary to achieve our financial and strategic objectives and create long-term value for our stockholders. We believe the levels of compensation we provide should be competitive, reasonable and appropriate for our business needs and circumstances.
TheExcept as described below, the principal elements of our
named executive
officer compensation program
have to datefor 2019 and 2020 included base salary and long-term equity compensation in the form of stock options. We believe successful long-term Company performance is more critical to enhancing stockholder value than short-term results. For this reason and to conserve cash and better align the interests of management and our stockholders, we emphasize long-term performance-based equity compensation over base annual salaries.
The following table sets forth information concerning the compensation earned by the individual that served as our Principal Executive Officer during
20172020 and our two most highly compensated executive officers other than the individual who served as our Principal Executive Officer during
20172020, determined in accordance with SEC rules (collectively, the “named executive officers”):
Summary Compensation Table
Name and Principal Position | | | | | | | | | | | | All Other Compensation ($) | | |
Francois Michelon | | 2017 | | 347,452 | (3) | | 93,275 | | — | | 1,378,076 | | — | | 1,818,803 |
Chief Executive Officer | | 2016 | | 262,152 | (4) | | — | | — | | — | | — | | 262,152 |
Michael Thornton | | 2017 | | 281,570 | (5) | | 44,198 | | — | | 1,402,537 | | — | | 1,728,305 |
Chief Technology Officer | | 2016 | | 218,056 | (6) | | — | | — | | — | | — | | 218,056 |
David R. Wells(7) | | 2017 | | 92,000 | | | 10,000 | | 94,165 | | 72,907 | | — | | 269,072 |
Chief Financial Officer | | 2016 | | 60,000 | | | — | | — | | — | | — | | 60,000 |
____________
Name and Principal Position | Year | | | Non-equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | |
| Francois Michelon | 2020 | 377,441(5)
| -- | 133,310 | 587 | 511,338 |
| Chief Executive Officer | 2019 | 352,763(6)
| 514,618 | 111,935 | -- | 979,316 |
| Michael Thornton | 2020 | 280,832(7)
| -- | 82,544(8) | 392 | 363,768 |
| Chief Technology Officer | 2019 | 265,288(9) | 484,272 | 61,478 | -- | 811,038 |
| David Wells | 2020 | 244,054(10) | 30,497 | 54,936 | 1,519 | 331,006 |
| Chief Financial Officer | 2019 | 179,514(11) | 189,935 | 48,300 | -- | 417,749 |
(1)
As a cash-conserving measure taken in light of the adverse economic conditions caused by the COVID-19 pandemic, in April 2020 the Company reduced the cash salaries of members of management by 33% for the remainder of 2020, including the salaries of its named executive officers. In lieu of cash, the Company paid this portion of management salaries in the form of restricted stock units (“RSUs”) that vested over the remainder of the year. The amounts shown in this column indicate the grant date fair value of stockRSU awards granted in the subject year computed in accordance with FASB ASC Topic 718. For additional information regarding the assumptions made in calculating these amounts, see notes 2 and 6note 8 to our audited financial statements included herein.
(2)
The amounts shown in this column indicate the grant date fair value of option awards granted in the subject year computed in accordance with FASB ASC Topic 718. For additional information regarding the assumptions made in calculating these amounts, see notes 2 and
78 to our audited financial statements included
herein.in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The shares underlying these option awards vest and become exercisable in three equal annual installments beginning on the first anniversary of their respective grant dates.
(3) Amount
Amounts paid pursuant to our annual incentive program were previously reported in the “Bonus” column for the year in which they were paid. We have since concluded that it is more appropriate to include such amounts in the “Non-equity Incentive Plan Compensation” column for the year in which they were earned.
(4)
Represents insurance premiums paid by the Company with respect to life insurance for the benefit of the named executive officer.
(5)
$86,145 of the amount shown reflects the grant date fair value of RSUs granted in lieu of cash amounts paid to Mr. Michelon in 2017, which amount includes payment for accrued salarysalary.
(6)
As of
$53,819 that remained unpaid from his salary earned in 2015. During 2017,March 25, 2019, Mr. Michelon’s annual salary was raised from
$250,000$345,000 to
$325,000 per year on May 12, 2017. Accordingly, his base salary was $293,633 for calendar 2017.(4) Amount$355,350.
(7)
$67,572 of the amount shown reflects the grant date fair value of RSUs granted in lieu of cash amounts paid to Mr. Michelon in 2016, whichsalary.
(8)
$45,858 of the amount includes payment for accrued salary of $12,152 that remained unpaid from his salary earned in 2015. During 2016, Mr. Michelon’s base salary was $250,000.(5) Amount shown reflects cash amounts paid tothe grant date fair value of RSUs accepted by Mr. Thornton in 2017, which amount includes payment for accrued salarylieu of $51,438 that remained unpaid from his salary earned in 2015. During 2017,the cash bonus owed to him under our annual incentive program.
(9)
As of March 25, 2019, Mr. Thornton’s annual salary was raised from
$200,000$260,000 to
$245,000 per year on May 12, 2017. Accordingly, his base salary was $230,132 for calendar 2017.(6) Amount$267,800.
(10)
$55,757 of the amount shown reflects the grant date fair value of RSUs granted in lieu of cash amountssalary.
(11)
Amounts paid
in 2019 until we entered into an employment agreement with Mr. Wells effective May 13, 2019 represent fees paid pursuant to
Mr. Thornton in 2016, which amount includes payment for accrued salary of $18,056 that remained unpaid from his salary earned in 2015. During 2016, Mr. Thornton’s base salary was $200,000.(7) Represents fees earned bya consulting agreement with StoryCorp Consulting (d/b/a Wells Compliance Group). Pursuant to the consulting agreement described below, we issued 18,833 sharesAs of our common stock valued at $94,165 in 2017.
16
Outstanding Equity Awards at 2017 Fiscal Year End
The following table provides information regarding equity awards held by the named executive officersMay 13, 2019, Mr. Wells’ annual salary was established as of December 31, 2017.
| | |
| | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | | |
Francois Michelon | | 23,665 | | 11,833 | (1) | | 10.01 | | 7/1/20 |
| | — | | 307,310 | (2) | | 5.00 | | 5/12/25 |
| | — | | 31,960 | (2) | | 4.55 | | 5/12/25 |
Michael Thornton | | 29,471 | | — | | | 10.01 | | 11/1/18 |
| | — | | 313,338 | (2) | | 5.00 | | 5/12/25 |
| | — | | 31,960 | (2) | | 4.55 | | 5/12/25 |
David Wells | | 2,500 | | 12,500 | (3) | | 5.00 | | 5/12/21 |
| | 7,000 | | — | | | 5.00 | | 5/12/22 |
17
Equity Compensation Plan Table
The following table presents information on the Company’s equity compensation plans as of December 31, 2017. All outstanding awards relate to our common stock.
| | Number of Securities to Be Issued upon Exercise of Outstanding Options, Warrants and Rights
(a) | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
(b) | | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
(c) |
Equity compensation plans approved by security holders | | 940,121 | (1) | | $ | 5.65 | | 404,953 | (2) |
Equity compensation plans not approved by security holders | | — | | | | — | | — | |
Total | | 940,121 | | | $ | 5.65 | | 404,953 | |
$230,000.
Employment Agreements and Change of Control Arrangements
The following is a summary of the employment arrangements with our named executive officers.
Francois Michelon. Effective May 12, 2017, the Company entered into an amended and restated employment agreement with Francois Michelon, our Chief Executive Officer and Chairman of our boardthe Board of directors. The term ofDirectors, which agreement was amended on December 27, 2019. Mr. Michelon’s employment with the Company is “at will” and may be terminated by him or the Company at any time and for any reason. Pursuant to the employment agreement, runs through December 31, 2019. The employment agreement provides forMr. Michelon receives an annual base salary that is subject to adjustment at the boardBoard of directors’Directors’ discretion. Effective April 2018,March 25, 2019, the boardBoard approved an increase in Mr. Michelon’s salary to $345,000. Under$355,350. Effective April 9, 2020, as a cash-saving measure in light of the employment agreement,economic downturn caused by the COVID-19 pandemic, the Board of Directors reduced Mr. Michelon’s salary by 33% for the remainder of 2020 and issued 123,064 RSUs in lieu thereof that vested in 2020. Mr. Michelon is also eligible for an annual cash bonus based upon achievement of performance-based objectives established by our boardthe Board of directors. Directors.
Pursuant to
Mr. Michelon’sthe employment agreement,
uponin connection with the closing of our initial public offering
hein May 2017, Mr. Michelon was granted options to purchase
307,310an aggregate of 339,270 shares of common
stock.stock (the “Michelon IPO Award”). The
options have an exercise price of $5.00 per share of common stock and vestMichelon IPO Award vested in three equal annual installments beginning on May 12,
2018. Upon termination without cause, any portion2018 and has an exercise price of
Mr. Michelon’s options scheduled$5.00 per share with respect to
vest within 12 months will automatically vest,307,310 shares of common stock and
upon termination without cause within 12 months following a change$4.55 per share with respect to 31,960 shares of
control, the entire unvested portion of the option will automatically vest. Upon termination for any other reason, the entire unvested portion of the option will terminate.common stock.
If Mr. Michelon’s employment is terminated by the Company without cause
(as defined in the 2016 Plan) or if Mr. Michelon resigns for good reason (as defined in the employment agreement), Mr. Michelon will be entitled to receive,
subject to his execution of a standard release agreement, 12 months’ continuation of his current base salary and a lump sum payment equal to 12 months of continued healthcare coverage (or 24 months’ continuation of his current base salary and a lump sum payment equal to 24 months of continued healthcare coverage if such termination occurs within one year following a change in control).
Under his employment agreement, Mr. Michelon is eligible to receive benefits that are substantially similar to those of the Company’s other senior executive officers.
Michael Thornton. Effective May 12, 2017, the Company entered into an amended and restated employment agreement with Michael Thornton, our Chief Technology Officer. The term of the employmentOfficer, which agreement runs throughwas amended on December 31,27, 2019. The employment agreement provides that Mr. Thornton’s employment with the Company is “at will” and may be terminated by him or the Company at any time and for any reason. Pursuant to the employment agreement, Mr. Thornton receives an annual base salary that is subject to adjustment at the boardBoard of directors’Directors’ discretion. Effective April 2018,March 25, 2019, the boardBoard approved an increase in Mr. Thornton’s salary to $260,000. Under$267,800. Effective April 9, 2020, as a cash-saving measure in light of the employment agreement,economic downturn caused by the COVID-19 pandemic, the Board of Directors reduced Mr. Thornton’s salary by 33% for the remainder of 2020 and issued 96,213 RSUs in lieu thereof that vested in 2020. Mr. Thornton is also eligible for an annual cash bonus based upon achievement of performance-based objectives established by our boardthe Board of directors.Directors. Pursuant to Mr. Thornton’sthe employment agreement, uponin connection with the closing of our initial public offering hein May 2017, Mr. Thornton was granted options to purchase 313,338an aggregate 345,298 shares of common stock.stock (the “Thornton IPO Award”). The options have an exercise price of $5.00 per share of common stock and vestThornton IPO Award vested in three equal annual installments beginning on May 12, 2018. Upon termination without cause, any portion2018 and has an exercise price of Mr. Thornton’s option scheduled$5.00 per share with respect to vest18
within 12 months will automatically vest,307,310 shares of common stock and upon termination without cause within 12 months following a change$4.55 per share with respect to 31,960 shares of control, the entire unvested portion of the option will automatically vest. Upon termination for any other reason, the entire unvested portion of the option will terminate.
common stock.
If Mr. Thornton’s employment is terminated by the Company without cause
(as defined in the 2016 Plan) or if Mr. Thornton resigns for good reason (as defined in the employment agreement), Mr. Thornton will be entitled to receive,
subject to his execution of a standard release agreement, 12 months’ continuation of his current base salary and a lump sum payment equal to 12 months of continued healthcare coverage (or 24 months’ continuation of his current base salary and a lump sum payment equal to 24 months of continued healthcare coverage if such termination occurs within one year following a change in control).
Under his employment agreement, Mr. Thornton is eligible to receive benefits that are substantially similar to those of the Company’s other senior executive officers.
David R. Wells. On May 12, 2017,13, 2019, the Company entered into an employment agreement with David Wells that provides for an annual base salary of $230,000 and eligibility for an annual cash bonus to be paid based on attainment of Company and individual performance objectives to be established by the Board of Directors. Effective April 9, 2020, as a cash-saving measure in light of the economic downturn caused by the COVID-19 pandemic, the Board of Directors reduced Mr. Wells’ salary by 33% for the remainder of 2020 and issued 79,653 RSUs in lieu thereof that vested in 2020. The employment agreement also provides for eligibility to receive benefits substantially similar to those of the Company’s other senior executive officers.
Pursuant to the employment agreement, on May 13, 2019, Mr. Wells was granted stock options to purchase 56,000 shares of the Company’s common stock. The stock options have an exercise price of $1.38 per share, and vest in three equal annual installments beginning on the first anniversary of the grant date. Upon termination without cause (as defined in the 2016 Plan) that is not the result of death or disability, any portion of the award scheduled to vest within 12 months will automatically vest, and upon termination without cause that is not the result of death or disability within 12 months following a change in control, the entire unvested portion of the award will automatically vest. Upon termination for any other reason, the entire unvested portion of the award will terminate.
Mr. Wells’ employment agreement superseded a consulting agreement withbetween the Company and StoryCorp Consulting (“StoryCorp”),dated May 12, 2017, pursuant to which DavidMr. Wells providesprovided services to the Company as its Chief Financial Officer. Pursuant to the consulting agreement, the Company payspaid to StoryCorp a monthly fee of $9,000. In June 2018, this monthly fee was increased to $9,540. Additionally, pursuant to the consulting agreement, the Company granted to Mr. Wells a stock option to purchase 15,000 shares of common stock in connection with the closing of our initial public offering, having an exercise price per share equal to $5.00 and vesting in twelve equal quarterly installments, and, for so long ason the anniversary of the date of the consulting agreement, is in place, will grantgranted to Mr. Wells a stock option to purchase the same number of shares of common stock with the same termsterms.
Additionally, our named executive officers are eligible to participate in our health and welfare programs and 401(k) plan, and other benefit programs on eachthe same basis as other employees.
Outstanding Equity Awards at 2020 Fiscal Year End
The following table provides information regarding equity awards held by the named executive officers as of December 31, 2020.
| | |
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date |
| Francois | 307,310 | - | 5.00 | 5/12/25 |
| Michelon | 31,960 | - | 4.55 | 5/12/25 |
| 83,333 | 41,667(1) | 2.25 | 12/13/26 |
| | 203,998 | 407,996(2) | 0.90 | 12/11/29 |
| Michael | 313,338 | - | 5.00 | 5/12/25 |
| Thornton | 31,960 | - | 4.55 | 5/12/25 |
| | 83,333 | 41,667(1) | 2.25 | 12/13/26 |
| | 191,969 | 383,937(2) | 0.90 | 12/11/29 |
| David Wells | 15,000 | - | 5.00 | 5/12/21 |
| 7,000 | - | 5.00 | 5/12/22 |
| | 23,333 | 11,667(3) | 2.25 | 12/13/22 |
| | 18,667 | 37,333(4) | 1.38 | 5/13/29 |
| | 46,125 | 92,250(5) | 0.90 | 12/11/29 |
_________________
(1)
Represents unvested portion of stock option award which vests in three equal annual anniversaryinstallments beginning on December 13, 2019.
(2)
Represents unvested portion of the datestock option award which vests in three equal annual installments beginning on December 11, 2020.
(3)
Represents unvested portion of
the consulting agreement.Director Compensation
Effectivestock option award which vests in twelve equal quarterly installments beginning on March 13, 2019.
(4)
Represents unvested portion of stock option award which vests in three equal annual installments beginning on May 12, 2017,13, 2020.
(5)
Represents unvested portion of stock option award which vests in three equal annual installments beginning on December 11, 2020.
Equity Compensation Plan Table
The following table presents information on the Company’s equity compensation plans as of December 31, 2020. All outstanding awards relate to our common stock.
| Plan Category | Number of Securities to Be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) |
| Equity compensation plans approved by security holders | 3,569,707(1) | $2.13 | 2,291,951(2) |
| Equity compensation plans not approved by security holders | — | — | — |
| Total | 3,569,707 | $2.13 | 2,291,951 |
_________________
(1)
Consists of outstanding stock options exercisable for shares of common stock issued under our 2016 Omnibus Incentive Plan (as amended, the “2016 Plan”), which amended and restated our Second Amended and Restated 2013 Stock Incentive Plan.
(2)
On January 1, 2021, as a result of an automatic increase to the pool of shares available for issuance under the 2016 Plan on such date, the number of shares available for future issuance under the 2016 Plan was 5,491,091 shares.
Director Compensation
Effective March 25, 2019, the Company adopted a non-employee director compensation policy (the “Compensation Policy”) pursuant to which each of our non-employee directors receive on an annual basis a $36,000 retainer paid in cash and an annual equity award with a valuereceives, upon his or her initial election to the Board of $30,000. The equity award consists ofDirectors, a stock option exercisable for 50,000 shares of common stock with a per share exercise price equal to the closing price of the common stock on the Nasdaq on the grant madedate. To make up for the fact that each of the Company’s non-employee directors as of the effective date of the Compensation Policy did not receive such a stock option upon joining the Board, each such non-employee director received a stock option exercisable for 50,000 shares of common stock on the effective date of the Compensation Policy with a per share exercise price equal to $3.09, the closing price of the common stock on the Nasdaq on the grant date. All such stock options vest in three equal annual installments beginning on the one-year anniversary of the grant date. Under the policy, on the first trading day following December 31 of each calendar year, coveringeach non-employee director is awarded a number ofstock option exercisable for 12,000 shares of common stock, with a per share exercise price equal to $30,000 divided by the closing price of itsthe common stock on suchthe Nasdaq on the grant date, which vests in fullbecomes exercisable on the one yearfirst anniversary of grant; provided,its grant date. Additionally, pursuant to the grantspolicy, each non-employee director is paid an annual cash retainer of $40,000, prorated for 2017 were made on May 12, 2017 upon the closingpartial years of service and paid quarterly in arrears.
In April 2020, as a cash-conserving measure taken in light of the
Company’s initial public offeringadverse economic conditions caused by the COVID-19 pandemic, the Company amended the Compensation Policy to provide that its non-employee directors’ annual retainers for the second, third and
each covered 6,000 sharesfourth fiscal quarters of
common stock.2020 would be paid in in the form of RSUs rather than cash. Such RSUs vested in three equal quarterly installments on the last date of the fiscal quarter of 2020.
The following table sets forth information with respect to compensation earned by or awarded to each of our non-employee directors who served on
our boardthe Board of
directorsDirectors during the fiscal year ended December 31,
2017: | | Fees Earned or Paid in Cash
($) | | | | |
Anthony DiGiandomenico | | 14,129 | | 48,696 | | 62,825 |
Dr. Sanjiv Sam Gambhir | | 14,129 | | 48,696 | | 62,825 |
Michael Harsh | | 14,129 | | 48,696 | | 62,825 |
Alexander Tokman | | 14,129 | | 48,696 | | 62,825 |
| Name | Fees Earned or Paid in Cash ($)(1) | | All Other Compensation ($) | |
| Louis Basenese | 29,011(3) | 62,544 | -- | 91,565 |
| Anthony DiGiandomenico | 40,000(4) | 21,483 | -- | 61,483 |
| Dr. Sanjiv Sam Gambhir | 21,978(5) | 21,483 | -- | 43,461 |
| Michael Harsh | 40,000(6) | 21,483 | -- | 61,483 |
| Alexander Tokman | 40,000(7) | 21,483 | 40,000(8) | 101,483 |
(1)
As a cash-conserving measure taken in light of the adverse economic conditions caused by the COVID-19 pandemic, in April 2020 the Company amended its Compensation Policy to provide that its non-employee directors’ annual retainers for the second, third and fourth fiscal quarters of 2020 would be paid in in the form of RSUs rather than cash. Such restricted stock units issued under the Director Compensation Policy will vest in three equal quarterly installments on the last date of the fiscal quarter. The amounts shown in this column indicate the grant date fair value of RSU awards granted in the subject year computed in accordance with FASB ASC Topic 718. For additional information regarding the assumptions made in calculating these amounts, see note 8 to our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
(2)
The amounts shown in this column indicate the grant date fair value of option awards granted in the subject year computed in accordance with FASB ASC Topic 718. For additional information regarding the assumptions made in calculating these amounts, see note 7Notes 2 and 8 to ourthe audited financial statements included herein.in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The following table shows the number of shares subject to outstanding option awards held by each non-employee director as of December 31, 2017:2020:
| | Shares Subject to Outstanding Stock Option Awards (#)
|
Anthony DiGiandomenico
Louis Basenese | | 23,157
50,000 |
Anthony DiGiandomenico | 100,390 |
| Dr. Sanjiv Sam Gambhir | | 34,893
36,527 |
Michael Harsh | | 23,432
105,281 |
Alexander Tokman | | 27,231
105,057 |
19
Proposal 2 — First Amendment of ENDRA Life Sciences Inc.
2016 Omnibus Incentive PlanBackground
(3)
The
Company currently maintains the ENDRA Life Sciences Inc. 2016 Omnibus Incentive Plan (the “Omnibus Plan”), which was adopted by the Board on November 14, 2016 and approved by our stockholders effective December 5, 2016. Upon its approval, the Omnibus Plan amended and restated in its entirety the Company’s Second Amended and Restated 2013 Stock Incentive Plan.Under the Omnibus Plan, the Company initially reserved 1,345,074 shares of common stock for issuance to eligible employees, officers, non-employee directors, consultants, and advisors of the Company or of any affiliate. This amount of shares represented 18% of the total number of shares of Company common stock outstanding (on a fully-diluted basis) immediately after our initial public offering. Omnibus Plan awards may take the form of incentive stock options (“ISOs”), nonqualified stock options (“NSOs”), stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance awards, and other cash- or stock-based awards.
We are asking stockholders to approve a first amendment to the Omnibus Plan (the “Omnibus Plan Amendment”), which would, among other things, provide for an automatic annual increase to the pool of shares available for issuance each January 1 beginning in 2019 by an amount equal to the lesser of (i) the number of shares necessary such that the aggregate number of shares available under the plan equals 25% of the number of fully-diluted outstanding shares on the increase date (assuming the conversion of all outstanding shares of preferred stock and other outstanding convertible securities and exercise of all outstanding options and warrants to purchase shares) and (ii) if the Board of Directors takes action to set a lower amount, the amount determined by the Board.
The Board believes that the Omnibus Plan is an important part of the Company’s compensation philosophy and programs. Our ability to attract, retain, and motivate qualified officers, non-employee directors, employees, consultants, and advisors is important to our success. The Board believes that the interests of the Company and its stockholders will be advanced if we can continue to offer our officers, non-employee directors, key employees, consultants, and advisors the opportunity to acquire or increase a direct proprietary interest in the Company. In connection with its continuous evaluation of the Company’s compensation program, the Board has determined that it is in the best interest of the Company to approve, subject to further stockholder approval, the Omnibus Plan Amendment.
Material Features of Omnibus Plan, as Amended by the Omnibus Plan Amendment
The material terms of the Omnibus Plan, as amended by the Omnibus Plan Amendment, are summarized below. This summary of the Omnibus Plan is not intended to be a complete description of the plan, as amended by the Omnibus Plan Amendment, and is qualified in its entirety by the terms of the Omnibus Plan. The proposed changes to the Omnibus Plan as a result of the Omnibus Plan Amendment are set forth inAppendix A.
Administration
The Omnibus Plan may be administered by the Board or a committee designated by the Board (the “Administrator”). The Board has designated its Compensation Committee to be the Administrator. The Administrator has the authority to take all actions and make all determinations required to administer the plan, including to: (1) designate participants; (2) determine the types of awards to be made to participants; (3) determine the number of shares to be subject to awards; (4) establish the terms and conditions of awards; (5) prescribe the form of each award agreement; and (6) amend, modify, or supplement the terms or conditions of outstanding awards.
All actions, determinations, and decisions by the Administrator under the Omnibus Plan, any award, or any award agreement will be in the Administrator’s sole discretion and will be final, binding, and conclusive. No member of the Board or of its Compensation Committee will be liable for any action or determination made in good faith under the plan, any award, or award agreement.
Eligibility
Omnibus Plan awards may be made to any employee, officer, non-employee director, consultant, or advisor of the Company or any of our affiliates as the Administrator may determine and designate from time to time. As of
20
April 30, 2018, approximately 20 individuals would have been eligible to receive awards under the plan (based on the flexible definition of eligible participant), including three executive officers and four non-employee directors. However, the Company historically has granted awards under its equity compensation plans to a total of approximately 15 employees and directors, in the aggregate, in any given fiscal year.
Number of Authorized Shares
The Omnibus Plan offers awards based on shares of our common stock. When the plan originally became effective, 1,345,074 shares were available for grant (which represented 18% of the total number of fully-diluted outstanding shares immediately after our initial public offering). As of April 30, 2018, the total number of shares of our common stock available for issuance under the plan was 357,163 shares. Further, upon approval of the Omnibus Plan Amendment, on each January 1 beginning in 2019, the number of shares authorized to be issued under the plan will be increased by an amount equal to the lesser of (1) the number of shares necessary such that the aggregate number of shares available to be issued under the plan equals 25% of the number of fully-diluted outstanding shares on such date (assuming the conversion of all outstanding shares of preferred stock and other outstanding convertible securities and exercise of all outstanding options and warrants to purchase shares) and (2) if the Board of Directors takes action to set a lower amount, the amount determined by the Board.
Shares issued under the Omnibus Plan may consist in whole or in part of authorized but unissued shares, treasury shares, or shares purchased on the open market or otherwise.
Any Omnibus Plan award settled in cash will not be counted as issued shares under the plan. If any plan award expires, or is terminated, surrendered, or forfeited, the unissued shares covered by the award will again be available for the grant of plan awards. If shares issued under the plan are repurchased by, or are surrendered or forfeited to the Company, at no more than cost, then those shares will again be available for the grant of plan awards. If shares issuable upon exercise, vesting, or settlement of an award, or shares owned by a participant are surrendered or tendered to the Company in payment of the option price or purchase price of an award or any taxes required to be withheld in respect of an award, such surrendered or tendered shares will again be available for the grant of plan awards. Substitute awards will not be counted against the number of shares available for the grant of plan awards.
Following approval of the Omnibus Plan Amendment, the 357,163 shares currently available for issuance under the Omnibus Plan will remain available for ISOs.
Awards to Non-Employee Directors
The maximum value of Omnibus Plan awards granted to any non-employee director during any calendar year, taken together with any cash fees paid to that non-employee director under any other equity compensation plan of the Company or an affiliate during the calendar year, may not exceed $300,000 in total value (calculating the value of any equity awards based on the fair market value as ofshown reflects the grant date for financial reporting purposes). However, any awardsfair value of RSUs granted to non-employee directors upon their initial election to the Board or the board of directors of an affiliate will not be counted towards this limit.
Adjustments
Subject to any required action by our stockholders, in the event of any change in our common stock effected without receipt of consideration by us, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in our capital structure, or in the event of paymentlieu of a dividend or distribution to our stockholders in a form other than our common stock (excepting normal cash dividends) that has a material effect onportion of the annual retainer under the Compensation Policy.
(4)
$30,000 of the amount shown reflects the grant date fair
market value of
our common stock, appropriate and proportionate adjustments will be madeRSUs granted in
lieu of a portion of the
number and class of shares subject to the Omnibus Plan and to any outstanding awards, and in the option exercise price, SAR exercise price, or purchase price per share of any outstanding awards in order to prevent dilution or enlargement of existing stockholders’ rightsannual retainer under the
plan.If a majority of our common shares are exchanged for, converted into, or otherwise become shares of another corporation, the Administrator may unilaterally amend outstanding Omnibus Plan awards to provide that such awards are for new shares. In the event of any such amendment, the number of shares subject to, and the option exercise price, SAR exercise price, or purchase price per shareCompensation Policy.
(5)
$11,978 of the
outstanding awards will be adjusted in a fair and equitable21
manner as determined by the Administrator. The Administrator may also make adjustments in the terms of any plan award to reflect, or related to, changes in our capital structure or distributions as it deems appropriate.
Types of Awards
The Omnibus Plan permits the issuance of NSOs, ISOs, SARs, RSUs, restricted stock, and other types of equity and cash incentive grants.
Option Awards (NSOs and ISOs). The plan provides foramount shown reflects the grant date fair value of options to purchase sharesRSUs granted in lieu of our common stock at exercise prices, and subject toa portion of the terms, conditions, and limitations, determined by the Administrator and set forth in option agreements. An option agreement will specify when and how a grantee may exercise the options, and it will contain the applicable terms and conditions. For example, options may not be immediately exercisable because the options vest over time or rightsannual retainer under the option agreement may change ifCompensation Policy.
(6)
$30,000 of the
grantee’s employment status changes. An option that the Administrator intends to be an ISO may be granted only to our employees and will be subject to the requirements of Internal Revenue Code (“Code”) Section 422. The Board will have no liability if an option that is intended to be an ISO does not qualify as one. An option that does not qualify as an ISO is referred to as an NSO.Stock Appreciation Rights (SARs). The plan provides foramount shown reflects the grant date fair value of SARs, which may be awarded either alone orRSUs granted in tandem with, or aslieu of a component of, other awards. A SAR award agreement will include information about the terms and conditions under which a SAR will be exercisable, including any performance requirements. A SAR gives the right to receive, upon exercise, a paymentportion of the excessannual retainer under the Compensation Policy.
(7)
$30,000 of
(1) the
amount shown reflects the grant date fair
market value of
one shareRSUs granted in lieu of
common stock on the exercise date over (2) the SAR exercise price. The SAR exercise price will be set forth in the SAR award agreement.Restricted Stock. The plan provides for the grant of awards to acquire shares of our common stock, subject to certain restrictions. In general, a restricted stock award is an actual share of our common stock that is subject to certain vesting requirements and that we may hold until the applicable vesting date, at which time the share is released to the grantee. Alternatively, at the discretionportion of the Administrator, we may issue a restricted stock certificateannual retainer under the Compensation Policy.
(8)
This amount represents compensation paid to
the grantee bearing the legends required by applicable securities laws. The Administrator will determine the terms and conditions of any restricted stock award, which will be set forth in the restricted stock agreement. Grantees will have all the rights of a stockholderMr. Tokman for advisory services with respect to
the restricted shares, including voting and dividend rights, subject, however, to the restrictions and conditions specified in the restricted stock agreement.Restricted Stock Units (RSUs). An RSU represents the right to earn one sharepotential strategic partnerships. Mr. Tokman was compensated at a rate of common stock (or its cash equivalent) upon the satisfaction of specified terms and conditions. An RSU may be settled in cash rather than stock to the extent provided in the RSU award agreement. The Administrator will determine the terms and conditions of any RSUs, which will be set forth in the RSU award agreement. In general, a grantee will not have any rights of a stockholder by virtue of receiving RSUs unless and until the grantee earn shares under those RSUs.
Performance Awards. The plan authorizes the Administrator to make awards conditioned on the attainment of certain performance goals, which includes stock- and cash-based annual or long-term incentive awards. The Administrator determines who may receive a performance award under the plan. The Administrator will settle a performance award in cash, shares, other awards offered under the plan, or property. The Administrator may adjust downward the permissible amount of any such award.
Other Common Stock-Based Awards. The Administrator may grant other stock-based awards based upon our common stock, either alone or in addition to or in conjunction with other plan awards. Such other stock-based awards will be subject to terms and conditions as the Administrator may determine.
Clawback
All awards, amounts, or benefits received or outstanding under the Omnibus Plan will be subject to clawback, cancellation, recoupment, rescission, payback, reduction, or other similar action in accordance with the terms of any Company clawback or similar policy or any applicable law related to such actions, as may be in effect from time to time. Acceptance of a plan award will be deemed to constitute acknowledgement of and consent to the Company’s application, implementation, and enforcement of any applicable ENDRA clawback or similar policy that may apply, whether adopted before or after November 14, 2016, and any provision of applicable law relating to clawback, cancellation, recoupment,
22
rescission, payback, or reduction of compensation, and agreement that the Company may take any actions that may be necessary to effectuate any such policy or applicable law, without further consideration or action.
Transferability
Omnibus Plan awards are not transferable other than by will or the laws of descent and distribution, except that in certain instances transfers may be made to or$10,000 per month for the benefit of grantees’ designated family members for no value.
Change in Control
The Administrator may provide in any award agreement, or in the event of a change in control (as defined in the Omnibus Plan) may take such actions as it deems appropriate to provide, for the acceleration of the exercisability, vesting, or settlement — in connection with the change in control — of any outstanding plan awards.
Under the Omnibus Plan, in the event of a change in control, outstanding plan awards will remain the Company’s obligation or be assumed by the surviving or acquiring entity, or will be substituted for a substantially equivalent award for the acquiror’s stock. An award will be deemed assumed if, after the change in control, the award confers the right to receive, subject to the terms of the plan and the applicable award agreement, the consideration toservices, which our stockholders were entitled under the change in control in exchange for each share subject to the award immediately before the change in control. However, if such consideration is not solely common stock of the acquiror, the Administrator may, with the consent of the acquiror, provide for the consideration to be received upon the exercise or settlement of an award, for each share subject to the award, to consist solely of common stock of the acquiror equal in fair market value to the per share consideration received by our stockholders in the change in control. If any portion of the consideration may be received by our stockholders in the change in control on a contingent or delayed basis, the Administrator may determine the fair market value per share at the time of the change in control on the basis of the Administrator’s good faith estimate of the present value of the probable future payment of such consideration. Any plan award that is not assumed or continued by the acquiror upon a change in control, nor exercised or settled as of the change in control, will terminate and cease to be outstanding effective upon the change in control.
Additionally, the Administrator may determine that upon a change in control, each or any plan award outstanding immediately before the change in control and not previously exercised or settled will be canceled in exchange for a payment for each vested share (and each unvested share, if determined by the Administrator) subject to the canceled award in (1) cash, (2) our stock or stock of a business entity a party to the change in control, or (3) other property that has a fair market value equal to the fair market value of the consideration to be paid per share of common stock in the change in control (reduced by any exercise or purchase price under the award).
Term, Termination, and Amendment of the Omnibus Plan
The Company may annul Omnibus Plan awards if a grantee is terminated for “cause” as defined in the plan.
Except as otherwisehe provided by the Administrator, if a grantee breaches a non-competition, non-solicitation, non-disclosure, non-disparagement, or other restrictive covenant set forth in an Omnibus Plan award agreement or any other agreement between the grantee and the Company or an affiliate, whether during or after the grantee’s service, in addition to any other penalties or restrictions that may apply, the grantee will forfeit or pay to the Company the following: (1) any and all outstanding plan awards granted, including awards that have become vested or exercisable; (2) any shares held in connection with the plan that were acquired after the separation from service and within the 12-month period immediately before the separation from service; (3) the profit realized from the exercise of any options or SARs that the grantee exercised after the separation from service or within the 12-month period immediately before the separation from service; and (4) the profit realized from the sale, or other disposition for consideration, of any shares received under the plan after the separation from service and within the 12-month period immediately before the separation from service (where the sale or disposition occurs during that same time period).
Unless earlier terminated by the Administrator, the Omnibus Plan will terminate, and no further awards may be granted, after May 7, 2028. The applicable terms and conditions of the plan, and any terms and conditions applicable to awards granted before the termination of the plan, will survive the termination of the plan and continue to apply to those awards. The Administrator may amend, suspend, or terminate the plan at any time, except that, if required by applicable law, regulation, or stock exchange rule, stockholder approval will be required for any amendment. The
23
amendment, suspension, or termination of the plan or the amendment of an outstanding award may not materially impair grantees’ rights under an outstanding award.
New Plan Benefits
If the Omnibus Plan Amendment is adopted, there will be additional shares available under the Omnibus Plan for awards to officers, employees, and non-employee directors. The benefits to be received by grantees in the normal course under the Omnibus Plan cannot be determined at this time because grants under the Omnibus Plan are made at the discretion of the Administrator.
Federal Income Tax Information
This section contains only a general discussion of the potential federal income tax consequences to the Company and to U.S. taxpayers of awards under the Omnibus Plan as of the date of this proxy statement. State or local tax rules, and tax rules applicable in jurisdictions outside the United Sates, are not discussed. The federal income tax consequences relating to the plan are complex and are subject to change.
ISOs. ISOs granted under the plan are subject to the applicable provisions of the Code, including Code Section 422. If shares of our common stock are issued to a grantee upon the exercise of an ISO, and if the grantee make no “disqualifying disposition” of those shares within one year after the exercise of the ISO or within two years after the date the ISO was granted, then (1) the grantee will recognize no income upon grant; (2) the grantee will recognize no income, for regular income tax purposes, upon exercise; (3) upon sale of the ISO shares, any amount realized in excess of the exercise price will be taxed for regular income tax purposes as a capital gain and any loss will be a capital loss; and (4) we will not be allowed to take any deduction for federal income tax purposes. The applicable capital gain tax rate will depend on how long the grantee holds the shares and on the grantee’s income tax bracket. If a grantee makes a “disqualifying disposition” of the ISO shares, the grantee will realize taxable ordinary income in an amount equal to the lesser of (A) the excess of the fair market value of the shares purchased at the time of exercise over the exercise price (the “bargain purchase element”) and (B) the gain on the sale, and we will be entitled to a federal income tax deduction equal to such amount. The amount of any gain in excess of the bargain purchase element realized upon a “disqualifying disposition” will be taxable as capital gain (for which we will not be entitled a federal income tax deduction). Upon exercise of an ISO, the grantee may be subject to the alternative minimum tax. The grantee must notify the Company within 30 days of any disqualifying disposition of shares acquired by exercising an ISO.
NSOs. For NSOs granted under the plan, (1) a grantee will recognize no income upon grant; (2) upon exercise, the grantee will recognize ordinary income in an amount equal to the difference between the exercise price and the fair market value of the shares on the exercise date, and we will receive a tax deduction for the same amount; and (3) on sale of the option shares, appreciation or depreciation after the exercise date will be treated as a capital gain or loss, in which case the applicable capital gain tax rate will depend on how long the grantee holds the shares and on the grantee’s income tax bracket.
SARs. For each SAR granted under the plan, (1) a grantee will recognize no income upon grant and (2) upon exercise, the grantee will recognize ordinary income in an amount equal to the difference between the SAR exercise price and the fair market value of the shares on the exercise date. We will receive a tax deduction for the same amount.
Restricted Stock. For restricted stock awards under the plan, if a grantee becomes entitled to receive shares at the end of the applicable restriction period without a forfeiture, the grantee will have ordinary income in an amount equal to the fair market value of the shares at that time. However, if the grantee makes a proper election under Code Section 83(b) within 30 days of the grant date, the grantee will have ordinary taxable income on the grant date equal to the fair market value of the shares of restricted stock as if the shares were unrestricted and could be sold immediately. If the grantee forfeits the shares subject to an 83(b) election, the grantee will not be entitled to any deduction, refund, or loss for tax purposes. Upon sale of the shares after the restriction period has expired for a restricted stock award, the holding period to determine whether a grantee has long- or short-term capital gain or loss begins when the restriction period expires, and the grantee’s tax basis will be equal to the fair market value of the shares when the restriction period expires. However, if the grantee makes a proper election under Code Section 83(b) within 30 days of the grant date, the holding period begins on the grant date and the grantee’s tax basis will be equal to the fair market value of the shares on the grant date as if the shares were then unrestricted and could be sold immediately. We will be entitled to a deduction equal to the amount that is taxable as ordinary compensation income to the grantee.
24
RSUs. A grantee will not recognize income and we will not be allowed a deduction at the time of grant. When the grantee receives payment for RSUs in cash or shares, the amount of the cash and the fair market value of the shares received will be ordinary income to the grantee and will be allowed as a deduction for federal income tax purposes to us. However, if there is a substantial risk that any shares used to pay out earned RSUs will be forfeited (for example, because the Administrator conditions the shares on the performance of future services), the taxable event is deferred until the risk of forfeiture lapses. In this case, the grantee can elect to make a Code Section 83(b) election as previously described. We can take the deduction at the time the grantee recognizes the income.
Cash- and Stock-Based Performance Awards and Other Stock-Based Awards. Typically, a grantee will not have taxable income upon the grant of cash- or stock-based performance awards or other stock-based awards. Subsequently, when the conditions and requirements for the grants have been satisfied and the payment determined and made, any cash received and the fair market value of any common stock received will constitute ordinary income to the grantee.
Section 409A of the Code. Certain plan awards may provide for the deferral of compensation subject to Code Section 409A, including RSUs and other stock-based awards. Generally, a deferral of compensation occurs for purposes of Code Section 409A when an award vests in one year, but payment under the award is not made until a later year. If a grantee receives an award that is subject to Code Section 409A and the terms of the award do not comply with certain requirements of Section 409A, ordinary income under the award may be accelerated to the year of vesting, rather than the year of payment. Further, the grantee may be required to pay an additional 20% penalty tax on the value of the award, as well as interest penalties.
Vote Required for Approval
Approval of the Omnibus Plan Amendment requires the affirmative vote of the holders of a majority of the voting power of the shares of stock present in person or represented by proxy and entitled to vote.
Board Recommendation
The Board unanimously recommends that stockholders vote “FOR” the approval of the Omnibus Plan Amendment.
25
September through December 2020.
PROPOSAL 32—RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed RBSM LLP (“RBSM”) as our independent registered public accounting firm for the fiscal year ending December 31, 2018.2021. We are presenting this selection to our stockholders for ratification at the 20182021 Annual Meeting. RBSM audited our financial statements for
2017.2020. A representative of RBSM is
not expected to be present at the
20182021 Annual Meeting,
but will be available by telephone and will have an opportunity to make a statement if RBSM desires, and
will be
availableable to respond to appropriate
questions.questions submitted through https://agm.issuerdirect.com/ndra prior to 5:00 p.m. Eastern Time on June 4, 2021.
The following table sets forth the aggregate fees billed or expected to be billed by RBSM for audit and non-audit services in
20172020 and
2016,2019, including “out-of-pocket” expenses incurred in rendering these services. The nature of the services provided for each category is described following the table.
| | | | |
Audit Fees(1) | | $ | 118,500 | | $ | 50,000 |
Audit-Related Fees | | $ | 0 | | $ | 0 |
Tax Fees | | $ | 5,000 | | $ | 0 |
Total | | $ | 123,500 | | $ | 50,000 |
| Fee Category | | |
| Audit Fees (1) | $154,000 | $93,500 |
| Audit-Related Fees | ‒ | ‒ |
| Tax Fees (2) | $15,000 | $13,000 |
| Total | $169,000 | $106,500 |
_________________
(1)
Audit fees include fees for professional services rendered for the audit of our annual statements, quarterly reviews, consents and assistance with and review of documents filed with the SEC.
(2)
Tax fees include fees (or, for 2020, estimated fees) for professional services rendered for tax compliance, tax advice and tax planning.
Pre-Approval Policies and Procedures
The Audit Committee has adopted a policy that requires that all services to be provided by the Company’s independent public accounting firm, including audit services and permitted non-audit services, to be pre-approved by the Audit Committee. All audit and permitted non-audit services provided by RBSM during
20172020 were pre-approved by the Audit Committee.
Since the Audit Committee was not formed until December 2016 in connection with the Company’s initial public offering, it did not pre-approve any audit or permitted non-audit services provided by RBSM during 2016.Vote Required for Approval
Ratification of the appointment of our independent registered public accounting firm requires the affirmative vote of the holders of a majority of the voting power of the shares of stock of the Company present in person (or virtually) or represented by proxy and entitled to vote.vote thereon. If our stockholders fail to ratify the selection of RBSM as the independent registered public accounting firm for 2018,2021, the Audit Committee will reconsider whether to retain that firm. Even if the selection is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year. The Board of Directors unanimously recommends that the stockholders voteFOR ratification of the appointment of RBSM as our independent registered public accounting firm for 2018.26
2021.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Policy for Review of Related Person Transactions
In December 2016, our
The Board of Directors
has adopted a written policy with regard to related person transactions, which sets forth our procedures and standards for the review, approval or ratification of any transaction required to be reported in our filings with the SEC or in which one of our executive officers or directors has a direct or indirect material financial interest, with limited exceptions. Our policy is that the Corporate Governance and Nominating Committee shall review the material facts of all related person transactions (as defined in the related person transaction approval policy) and either approve or disapprove of the entry into any related person transaction. In the event that obtaining the advance approval of the Corporate Governance and Nominating Committee is not feasible, the Corporate Governance and Nominating Committee shall consider the related person transaction and, if the Corporate Governance and Nominating Committee determines it to be appropriate, may ratify the related person transaction. In determining whether to approve or ratify a related person transaction, the Corporate Governance and Nominating Committee will take into account, among other factors it deems appropriate, whether the related person transaction is on terms comparable to those available from an unaffiliated third-party under the same or similar circumstances and the extent of the related
person’sperson's interest in the transaction.
Related Person Transactions
SEC regulations define the related person transactions that require disclosure to include any transaction, arrangement or relationship in which the amount involved exceeds the lesser of
(a) $120,000 or
(b) one percent of the average of the Company’s total assets at
year endyear-end for the last two completed fiscal years in which
we wereit was or
areis to be a participant and in which a related person had or will have a direct or indirect material interest. A related person is: (i) an executive officer, director or director nominee of the Company, (ii) a beneficial owner of more than 5% of
our common stock,any class of the Company’s voting securities, (iii) an immediate family member of an executive officer, director or director nominee or beneficial owner of more than 5% of
our common stock,any class of the Company’s voting securities, or (iv) any entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons has a substantial ownership interest or control.
For the period from January 1,
20162019 through December 31,
2017,2020, described below are certain transactions or series of transactions between
usthe Company and certain related
persons.persons:
On
January 28, 2016, we issued convertible promissory notes to Sanjiv Gambhir (the “Gambhir Note”), Michael Harsh (the “Harsh Note”December 11, 2019, the Company closed a private placement offering in which it sold an aggregate of 6,338.490 shares of its Series A Convertible Preferred Stock (“Series A Preferred Stock”) and
Alexander Tokman (the “Tokman Note���), each a member0.9 million shares of
our boardcommon stock, along with warrants exercisable for an aggregate of
directors. The Gambhir Note and the Tokman Note are each8.2 million shares of common stock. Investors in the
principal sum of $20,000 and the Harsh Note is in the principal sum of $10,000. None of the notes accrue interest and all three are payable upon the earlier of (1) completion by the Company of an equity financing of $4.0 million or more and (2) the one-year anniversary of the issuance date. All outstanding amounts due under the Harsh Note, Tokman Note and Gambhir Note were paid in full on May 15, 2017.From April 2016 through March 2017, we issued convertible promissory notes to the following related persons:offering included (i) Francois Michelon, our Chief Executive Officer, in the principal sum of $35,000, (ii) Michael Thornton, our Chief Technology Officer, in the principal sum of $52,000, (iii) AnthonyMr. DiGiandomenico, a director of the Company, in the principal sum of $25,000, (iv) a trust beneficially owned by Robert C. Clifford, a beneficial owner of more than 5% of our common stock at the time of the transaction, in the principal sum of $19,474, (v) a trust beneficially owned by Daniel Landry, a beneficial owner of more than 5% of our common stock at the time of the transaction, in the principal sum of $25,000, (vi) Benjamin L. Padnos, a beneficial owner of more than 5% of our common stock at the time of the transaction, in the principal sums of $35,000, $54,500 and $100,000, (vii) Cynthia Padnos, an immediate family member of a beneficial owner of more than 5% of our common stock at the time of the transaction, in the principal sum of $12,096, (viii) Daniel Padnos, an immediate family member of a beneficial owner of more than 5% of our common stock at the time of the transaction, in the principal sums of $7,258 and $25,000, (ix) Jeffrey S. Padnos and Margaret M. Padnos (including trusts which they beneficially own), joint beneficial owners of more than 5% of our common stock at the time of the transaction, in the principal sums of $25,000 and $96,811, (x) Jonathan Padnos, an immediate family member of a beneficial owner of more than 5% of our common stock at the time of the transaction, in the principal sums of $17,258 and $25,000, (xi) Sivan Padnos Caspi, an immediate family member of a beneficial owner of more than 5% of our common stock at the time of the transaction, in the principal sum of $7,258, (xii) Michael Thornton, our Chief Technology Officer, in the principal sum of $20,000, and (xiii) Conal Thornton, the father of Michael Thornton, our Chief Technology Officer, in the principal sum of $20,000. Each such note accrued
27
interest at the rate of 8% per annum and was secured by all assets of the Company. Upon the election of noteholders holding a majority of the outstanding principal amount of the convertible promissory notes, all outstanding convertible promissory notes were convertible into shares of the Company’s common stock, in each case at a conversion price of $1.40 per share. Pursuant to such terms, the noteholders elected to convert all of the outstanding principal and accrued interest on the convertible promissory notes into an aggregate of 1,232,859who purchased 100,503 shares of common stock and warrants exercisable for 1005,503 shares of common stock for $100,000, (ii) Mr. Michelon, a director and the Company on May 12, 2017, immediately prior toCompany’s Chief Executive Officer, who purchased 4.372 shares of Series A Preferred Stock and warrants exercisable for 5,026 shares of common stock for $5,000, (iii) Mr. Thornton, the completionCompany’s Chief Technology Officer, who purchased 43.719 shares of our initial public offering.
28
Series A Preferred Stock and warrants exercisable for 50,252 shares of common stock for $50,000, and (iv) Mr. Wells, the Company’s Chief Financial Officer, who purchased 8.744 shares of Series A Preferred Stock and warrants exercisable for 10,051 shares of common stock for $10,000.
DELINQUENT SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCEREPORTS
Section 16(a) of the Exchange Act requires our directors, executive officers and persons who own more than ten percent of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. Such persons are required by SEC regulations to furnish us with copies of all such filings. Based solely on our review of the copies of the reports that we received and written representations that no other reports were required, we believe that our executive officers, directors and greater than 10% stockholders complied with all applicable filing requirements on a timely basis during
2017,2020, except that
(i) each of directors and executive officersLouis Basenese failed to timely file
a Form 3 upon the effectiveness of the registration of our common stock under Section 12(b) of the Exchange Act, (ii) Alexander Tokman filed one
late Form 4 with respect to
the granting of stock options, (iii) Anthony DiGiandomenico filed one late Form 4 with respect to the conversion of a convertible promissory note into common stock and the grantingan award of stock options and
(iv) Sanjiv Gambhir filed one late Form 4 with respect to the granting of stock options.RSUs on April 9, 2020.
The Board knows of no business that will be presented for consideration at the
20182021 Annual Meeting other than those items stated above. If any other business should properly come before the
20182021 Annual Meeting, votes may be cast pursuant to proxies in respect to any such business in the best judgment of the person or persons acting under the proxies.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE
12, 20188, 2021
The proxy statement and annual report to stockholders are available at
http://investors.endrainc.com/NDRA/sec_filings.A copy of the Company’s Annual Report for the fiscal year ended December 31,
20172020 is available without charge upon written request to: Secretary, ENDRA Life Sciences Inc., 3600 Green Court, Ste. 350, Ann Arbor, Michigan 48105.
29
Appendix A
First Amendment to
ENDRA Life Sciences Inc. 2016 Omnibus Incentive PlanThis First Amendment, dated May 7, 2018 (the “Amendment”), to the 2016 Omnibus Incentive Plan (the “Existing Plan”; as amended hereby, the “Plan”), of ENDRA Life Sciences Inc., a Delaware corporation (the “Company”), is made and adopted by the Company, subject to approval of the stockholders of the Company (the “Stockholders”).
Statement of Purpose
The Existing Plan was originally approved by the Company’s Board of Directors (the “Board”) on November 14, 2016, and by the Stockholders on December 5, 2016. The Board may amend the Existing Plan at any time, pursuant to and subject to Section 5.2 of the Existing Plan, contingent on approval by the Stockholders if the Stockholders’ approval is required by applicable securities exchange rules or applicable law. The Board has determined that it is advisable and in the best interest of the Company to amend the Existing Plan to provide for an annual increase in the number of Shares authorized for issuance under the Plan.
NOW, THEREFORE, the Existing Plan is hereby amended as follows, subject to approval by the Stockholders:
1. Amendment to Section 4.1 of Existing Plan. Section 4.1 of the Existing Plan is hereby deleted in its entirety and replaced with the following:
“4.1. Authorized Number of Shares
Subject to adjustment underSection 15, the aggregate number of Shares that may be issued pursuant to the Plan shall equal 357,163, the number of available Shares remaining for the grant of Awards as of May 7, 2018;provided, however, that on each January 1 beginning in 2019, the number of Shares authorized to be issued under the Plan shall be increased by an amount equal to the lesser of (i) the number of Shares necessary such that the aggregate number of Shares available to be issued under the Plan equals 25% of the number of fully diluted outstanding Shares on the increase date (assuming the conversion of all outstanding shares of preferred stock and other outstanding convertible securities and exercise of all outstanding options and warrants to purchase Shares) and (ii) if the Board takes action to set a lower amount, the amount determined by the Board. Shares issued under the Plan may consist in whole or in part of authorized but unissued Shares, treasury Shares, or Shares purchased on the open market or otherwise.
Notwithstanding the foregoing, the maximum number of Shares available for issuance under Incentive Stock Options under the Plan shall be 357,163.”
2.Reference to and Effect on the Plan. The Plan, as amended hereby, and all other documents, instruments, and agreements executed and/or delivered in connection therewith, shall remain in full force and effect, and are hereby ratified and confirmed.
* * *
Effective this 7th day of May 2018, subject to approval of the Stockholders.
A-1
ENDRA LIFE SCIENCES INC. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS ANNUAL MEETING OF STOCKHOLDERS – JUNE 8, 2021 AT 10:00 AM EASTERN TIME | | | | | |
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| REQUEST ID: | | | | | | | |
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The undersigned stockholder of ENDRA LIFE SCIENCES INC., a Delaware Corporation (the "Company"), hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement and hereby appoints Francois Michelon and David Wells or any of them, proxies and attorneys-in-fact, with full power to each of substitution and revocation, on behalf and in the name of the undersigned, to represent the undersigned at the Annual Meeting of Stockholders of the Company to be held on June 8, 2021, at 10:00 am Eastern time, athttps://agm.issuerdirect.com/ndraor at any adjournment or postponement thereof, and to vote, as designated below, all shares of capital stock of the Company which the undersigned would be entitled to vote if then and there personally present, on the matters set forth below.
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| (CONTINUED AND TO BE SIGNED ON REVERSE SIDE.) |
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| VOTING INSTRUCTIONS | | | | | | |
| If you vote by phone, fax or internet, please DO NOT mail your proxy card. | | | | | | |
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| MAIL: | Please mark, sign, date, and return this Proxy Card promptly using the enclosed envelope. | | | | | |
| FAX: | Complete the reverse portion of this Proxy Card and Fax to202-521-3464. | | | | | |
| INTERNET: | https://www.iproxydirect.com/NDRA by 11:59 pm Eastern time on June 7, 2021 | | | | | |
| PHONE: | 1-866-752-VOTE(8683) | | | | | |
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ANNUAL MEETING OF THE STOCKHOLDERS OF ENDRA LIFE SCIENCES INC. | PLEASE COMPLETE, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE:☒ |
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| PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS | |
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Proposal 1 | | FOR ALL | | WITHHOLD ALL | | FOR ALL EXCEPT | | | |
| Election of Directors | | ☐ | | ☐ | | | | | |
| Francois Michelon | | | | | | ☐ | | | |
| Louis J. Basenese | | | | | | ☐ | | CONTROL ID: | |
| Anthony DiGiandomenico | | | | | | ☐ | | REQUEST ID: | |
| Michael Harsh | | | | | | ☐ | | | |
| Alexander Tokman | | | | | | ☐ | | | |
Proposal 2 | | FOR | | AGAINST | | ABSTAIN | | | |
| To ratify the appointment of RBSM LLP as the Company’s independent registered accounting firm for 2021. | | ☐ | | ☐ | | ☐ | | | |
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| To transact such other business as may properly come before the annual meeting and any adjournments or postponements thereof. | | | | | | | | | |
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THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR ALL PERSONS LISTED IN PROPOSAL 1 AND A VOTE FOR PROPOSAL 2. THE UNDERSIGNED HEREBY REVOKES ANY PROXY OR PROXIES HERETOFORE GIVEN TO VOTE OR ACT WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY AND HEREBY RATIFIES AND CONFIRMS ALL THAT THE PROXY, OR HIS SUBSTITUTES, OR ANY OF THEM, MAY LAWFULLY DO BY VIRTUE HEREOF. | | | | MARK HERE FOR ADDRESS CHANGE☐ New Address (if applicable): IMPORTANT:Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. Dated: ________________________, 2021 |
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| (Print Name of Stockholder and/or Joint Tenant) |
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| (Signature of Stockholder) |
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| (Second Signature if held jointly) |
