SCHEDULE 14A(RULE 14a-101)INFORMATION REQUIRED IN PROXY STATEMENT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULESchedule 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒
Filed by a Partyparty other than the Registrant ☐
Check the appropriate box:
| Preliminary Proxy Statement |
| ☐ | Confidential, for |
| Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material |
IPSIDY INC.
authID Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)all boxes that apply):
| ☒ | No fee | |
| ☐ | Fee paid previously with preliminary materials. | |
| ☐ | ||
| 0-11 | ||
IpsidyauthID Inc.
20212023
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
December 29, 2021*, 2023
at 10:00 a.m. Eastern Time
Virtual Meeting to be Held by Webcast
IpsidyauthID Inc.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 29, 2021*, 2023
The 20212023 Annual Meeting of Stockholders (the “Annual Meeting”) of IpsidyauthID Inc. (“Ipsidy”authID” or the “Company”) will be held virtually by webcast, on December 29, 2021,*, 2023, at 10:00 a.m. Eastern Time, to consider the below proposals. DueAs in recent years, in order to the public healthprovide safe and expanded access, improved communication, reduced environmental impact of the coronavirus outbreak (COVID-19) and to support the health and well-being of our employees and stockholders,cost savings, the Annual Meeting will be held in a virtual meeting format at https://edge.media-server.com/mmc/p/afo9uvqp.ki9r33k7.
| 1. | To elect the seven director nominees named in the Proxy Statement to hold office until the next annual meeting of stockholders and until their successors are duly elected and qualified; |
| 2. | To ratify the appointment of Cherry Bekaert LLP as the Company’s independent auditors for the fiscal year ending December 31, |
3. | To approve an amendment to our certificate of incorporation to effect a reverse stock split at a ratio not less than 1-for-2 and not greater than 1-for-50, with the exact ratio to be set within that range at the discretion of our board of directors before June 30, 2024 without further approval or authorization of our stockholders (the “Reverse Split Proposal”). The board of directors may alternatively elect to abandon such proposed amendment and not effect the reverse stock split authorized by stockholders, in its sole discretion (The form of the proposed amendment to our charter to effect the reverse stock split is attached as Exhibit A to this proxy statement); |
| To approve and ratify the |
| 5. |
| To act on such other matters as may properly come before the meeting or any adjournment thereof. |
BECAUSE OF THE SIGNIFICANCE OF THESE PROPOSALS TO THE COMPANY AND ITS STOCKHOLDERS, IT IS VITAL THAT EVERY STOCKHOLDER VOTE AT THE ANNUAL MEETING IN PERSON OR BY PROXY.
These proposals are fully set forth in the accompanying Proxy Statement which you are urged to read thoroughly. For the reasons set forth in the Proxy Statement, your Board of Directors recommends a vote “FOR” the directors set forth in Proposal 1 and “FOR” Proposals 2, 3 and 4 and that you vote for a three-year interval between the say-on-pay votes.4. A list of all stockholders entitled to vote at the Annual Meeting will be available at the principal office of the Company during usual business hours for examination by any stockholder for any purpose germane to the Annual Meeting for 10 days prior to the date thereof. Stockholders are cordially invited to attend the Annual Meeting.
As we did for the 20202022 Annual Meeting, duein order to the public healthprovide safe and expanded access, improved communication, reduced environmental impact of the coronavirus outbreak (COVID-19) and to support the health and well-being of our employees and stockholders,cost savings we are very pleased that for this year’s Annual Meeting we will again be hosting a completely virtual meeting of stockholders, which will be conducted solely online via live webcast. You will be able to attend and participate in the Annual Meeting online and submit your questions prior to and during the meeting by visiting: https://edge.media-server.com/mmc/p/afo9uvqpki9r33k7 at the meeting date and time described in the accompanying proxy statement. There is no physical location for the Annual Meeting.
Having regard to the current pandemic weWe are pleased to embrace the latest technology to provide safe and expanded access, improved communication, reduced environmental impact and cost savings for our stockholders and the Company. If you plan to attend the meeting virtually on the Internet, please follow the registration instructions as outlined in this proxy statement.
However, whether or not you plan to attend the meeting virtually, your shares should be represented and voted. After reading the enclosed Proxy Statement, please sign, date, and return promptly the enclosed Proxy in the accompanying postpaid envelope we have provided for your convenience to ensure that your shares will be represented. Alternatively, please provide your response by telephone or electronically through the Internet by following the instructions set out on the enclosed Proxy card. If you do attend the meeting virtually and wish to vote your shares personally, you may revoke your Proxy.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held December 29, 2021.*, 2023. In addition to the copies you have received, the Proxy Statement and our 20202022 Annual Report on Form 10-K to Stockholders are available at: http://www.edocumentview.com/www.investorvote.com/AUID.
| By Order of the Board of Directors | |
| /s/ | |
| Chairman of the Board of Directors |
WHETHER OR NOT YOU PLAN ON ATTENDING THE MEETING VIRTUALLY, PLEASE VOTE AS PROMPTLY AS POSSIBLE TO ENSURE THAT YOUR VOTE IS COUNTED.
IpsidyauthID Inc.670 Long Beach Boulevard1385 S. Colorado Blvd.,
Long Beach, New York 11561Building A, Suite 322,
Denver, CO 80222
516-274-8700
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of IpsidyauthID Inc. dba auithID.ai (“authID.ai” “Ipsidy”authID” or the “Company”) to be voted at the Annual Meeting of Stockholders (the “Annual Meeting”) which will be held virtually via webcast on December 29, 2021,*, 2023, at 10:00 a.m. Eastern Time, and at any postponements or adjournments thereof. The proxy materials will be furnished to stockholders on or about November 19, 2021.*, 2023.
REVOCABILITY OF PROXY AND SOLICITATION
Any stockholder executing a proxy that is solicited hereby has the power to revoke it prior to the voting of the proxy. Revocation may be made by attending the Annual Meeting and voting the shares of stock virtually in person, or by delivering to the Corporate Secretary of the Company at the principal office of the Company prior to the Annual Meeting a written notice of revocation or a later-dated, properly executed proxy. Solicitation of proxies may be made by directors, officers and other employees of the Company by personal interview, telephone, facsimile transmittal or electronic communications. No additional compensation will be paid for any such services. This solicitation of proxies is being made by the Company, which will bear all costs associated with the mailing of this Proxy Statement and the solicitation of proxies.
RECORD DATE
Stockholders of record at the close of business on November 9, 2021,*, 2023, will be entitled to receive notice of, attend virtually and vote at the Annual Meeting.
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Why am I receiving these materials?
IpsidyauthID Inc. has furnished these materials to you in connection with the Company’s solicitation of proxies for use at the Annual Meeting of Stockholders to be held on December 29, 2021,*, 2023, at 10:00 a.m. Eastern Standard Time virtually via webcast. These materials describe the proposals on which the Company would like you to vote and also give you information on these proposals so that you can make an informed decision. We are furnishing our proxy materials on or about November 19, 2021*, 2023 to all stockholders of record entitled to vote at the Annual Meeting.
How can I attend the Annual Meeting?
The Annual Meeting will be a completely virtual meeting of stockholders, which will be conducted exclusively by webcast. You are entitled to participate in the Annual Meeting only if you were a stockholder of the Company as of the close of business on the Record Date, or if you hold a valid proxy for the Annual Meeting. No physical meeting will be held.
You will be able to attend the Annual Meeting online and submit your questions during the meeting by visiting https://edge.media-server.com/mmc/p/afo9uvqp.ki9r33k7. You also will be able to vote your shares online by going to http://www.investorvote.com/AUID.
To participate in the Annual Meeting, you will need to review the information included on your Notice, on your proxy card or on the instructions that accompanied your proxy materials.
If you hold your shares through an intermediary, such as a bank or broker, you must register in advance using the instructions below.
The online meeting will begin promptly at 10.00 a.m., Eastern Time. We encourage you to access the meeting prior to the start time leaving ample time for the check in. Please follow the registration instructions as outlined in this proxy statement.
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How do I register to attend the Annual Meeting virtually on the Internet?
Prior to the commencement of the meeting please go to https://edge.media-server.com/mmc/p/afo9uvqp.ki9r33k7. There you will be asked to register with your name, e-mail address and company details – or if none insert “Individual”.
We encourage stockholders to vote prior to the meeting but if you wish to vote on the day of the meeting you will be able to vote your shares online by going to http://www.investorvote.com/AUID and please follow the instructions in “How to Vote” below and on your Proxy Card.
Why are you holding a virtual meeting instead of a physical meeting?
DueIn order to the public healthprovide safe and expanded access for all stockholders, improved communication, reduced environmental impact of the coronavirus outbreak (COVID-19) and to support the health and well-being of our employees and stockholders,cost savings we are very pleased that for this year’s Annual Meeting will again be hosting a completely virtual meeting of stockholders, which will be conducted solely online via live webcast. You will be able to attend and participate in the Annual Meeting online and submit your questions prior to and during the meeting by visiting: https://edge.media-server.com/mmc/p/afo9uvqp atki9r33k7at the meeting date and time described in the accompanying proxy statement. You will be able to vote your shares electronically by going to http://www.investorvote.com/AUID. There is no physical location for the Annual Meeting.
Having regard to the current pandemic we are pleased to embrace the latest technology to provide safe and expanded access, improved communication and cost savings for our stockholders and the Company. If you plan to attend the meeting virtually on the Internet, please follow the registration instructions as outlined in this proxy statement.
Notice of Internet Availability (Notice and Access)
Instead of mailing a printed copy of our proxy materials to each shareholder, we are furnishing proxy materials via the Internet. This reduces both the costs and the environmental impact of sending our proxy materials to our shareholders. If you received a “Notice of Internet Availability,” you will not receive a printed copy of the proxy materials unless you specifically request a printed copy. The Notice of Internet Availability will instruct you how to access and review all of the important information contained in the proxy materials. The Notice of Internet Availability also instructs you how to submit your proxy on the Internet and how to vote by telephone.
If you would like to receive a printed or emailed copy of our proxy materials, you should follow the instructions for requesting such materials included on the documents you received. In addition, if you received paper copies of our proxy materials and wish to receive all future proxy materials, proxy cards and annual reports electronically, please follow the electronic delivery instructions on the documents you received. We encourage shareholders to take advantage of the availability of the proxy materials on the Internet to help reduce the cost and environmental impact of our annual shareholder meetings.
The Notice of Internet Availability is first being sent to shareholders on or about November 19, 2021.*, 2023. Also on or about November 19, 2021,*, 2023, we will first make available to our shareholders this Proxy Statement and the form of proxy relating to the 20212023 Annual Meeting filed with the SEC on November 19, 2021.*, 2023.
What is included in these materials?
These materials include:
| ● | this Proxy Statement for the Annual Meeting; and |
| ● | the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, |
What is the proxy card?
The proxy card enables you to appoint Thomas L. Thimot,Rhoniel A. Daguro, our Chief Executive Officer, and Stuart P. Stoller,Graham Arad, our Chief Financial Officer,General Counsel, as your representatives at the Annual Meeting. By completing and returning a proxy card, or by voting electronically or by telephone you are authorizing these individuals to vote your shares at the Annual Meeting in accordance with your instructions on the proxy card (or submitted electronically or by telephone). This way, your shares will be voted whether or not you attend the Annual Meeting.
What is the purpose of the Annual Meeting?
At our Annual Meeting, stockholders will act upon the matters outlined in the Notice of Annual Meeting on the cover page of this Proxy Statement, including:
(i) the election of seven persons named herein as nominees for directors of the Company, to hold office subject to the provisions of the bylaws of the Company, until the next annual meeting of stockholders and until their successors are duly elected and qualified;
| (i) | the election of seven persons named herein as nominees for directors of the Company, to hold office subject to the provisions of the bylaws of the Company, until the next annual meeting of stockholders and until their successors are duly elected and qualified; |
(ii) ratification of the appointment of Cherry Bekaert LLP as the Company’s independent auditors for the fiscal year ending December 31, 2021;
(iii) To approve and ratify the adoption of the 2021 Equity Incentive Plan and to authorize 1,250,000 shares of common stock for issuance thereunder;
(iv) To approve, on an advisory basis, the compensation of the Company’s named executive officers;
(v) To recommend, on an advisory basis, a one, two or three-year frequency with which the Company should conduct future stockholder advisory votes on named executive officer compensation.
| (ii) | ratification of the appointment of Cherry Bekaert LLP as the Company’s independent auditors for the fiscal year ending December 31, 2023; | |
| (iii) | approval of an amendment to our certificate of incorporation to effect a reverse stock split at a ratio not less than 1-for-2 and not greater than 1-for-50, with the exact ratio to be set within that range at the discretion of our board of directors before June 30, 2024 without further approval or authorization of our stockholders (the “Reverse Split Proposal”). The board of directors may alternatively elect to abandon such proposed amendment and not effect the reverse stock split authorized by stockholders, in its sole discretion (The form of the proposed amendment to our charter to effect the reverse stock split is attached as Exhibit A to this proxy statement); and | |
| (iv) | approval and ratification of the authorization of an additional 2,900,000 shares of common stock for issuance under the 2021 Equity Incentive Plan. |
In addition, management will respond to questions from stockholders.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of one-third of the number of shares of common stock issued and outstanding on the record date will constitute a quorum permitting the meeting to conduct its business. As of the record date, there were 23,206,155* shares of IpsidyauthID common stock issued and outstanding. Thus, the presence of the holders of common stock representing at least 7,735,385* votes will be required to establish a quorum.
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What is the difference between a stockholder of record and a beneficial owner of shares held in street name?
Our stockholders may hold their shares in an account at a brokerage firm, bank or other nominee holder, rather than holding share certificates in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially in street name.
How can I get electronic access to the proxy materials?
In addition to the copies of this proxy that you may receive, the Notice of Internet Availability provides you with instructions regarding how to:
| ● | view the Company’s proxy materials for the Annual Meeting on the Internet at |
| ● | request hard copies of the materials; and |
| ● | instruct the Company to send future proxy materials to you electronically by email. |
Choosing to receive future proxy materials by email will save the Company the cost of printing and mailing documents to you and will reduce the impact of the Company’s annual meetings on the environment. If you choose to receive future proxy materials by email, you will receive an email message next year with instructions containing a link to those materials and a link to the proxy voting website. Your election to receive proxy materials by email will remain in effect until you terminate it.
Stockholder of Record
If on November 9, 2021,*, 2023, your shares were registered directly in your name with our transfer agent, Computershare Trust Company N.A., you are considered a stockholder of record with respect to those shares, and the Notice of Internet Availability, or Notice of Annual Meeting and Proxy Statement was sent directly to you by the Company. As the stockholder of record, you have the right to direct the voting of your shares via the Internet or by returning the proxy card to us. Whether or not you plan to attend the Annual Meeting, if you do not vote over the Internet, please complete, date, sign and return a proxy card to ensure that your vote is counted.
Beneficial Owner of Shares Held in Street Name
If on November 9, 2021,*, 2023, your shares were held in an account at a brokerage firm, bank, broker-dealer, or other nominee holder, then you are considered the beneficial owner of shares held in “street name,” and the Notice of Annual Meeting & Proxy statement was forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As the beneficial owner, you have the right to instruct that organization on how to vote the shares held in your account. However, since you are not the stockholder of record, you may not vote these shares in person at the Annual Meeting unless you receive a valid proxy from the organization.
How do I vote?
Stockholders of Record.If you are a stockholder of record, you may vote by any of the following methods:
| ● | Via the Internet. You may vote by proxy via the Internet by following the instructions provided on the Notice of Internet Availability or the enclosed Proxy Card. |
| ● | By Telephone.You may vote by calling the toll free number found on the Proxy Card. |
| ● | By Mail.You may vote by completing, signing, dating and returning your Proxy Card in the pre-addressed, postage-paid envelope provided. |
| ● | In Person Virtually. You may attend and vote at the Annual Meeting virtually. When you log on to the Webcast there will be instructions about how to vote. |
Beneficial Owners of Shares Held in Street Name. If you are a beneficial owner of shares held in street name, you may vote by any of the following methods:
| ● | Via the Internet. You may vote by proxy via the Internet by following the instructions provided on the Notice of Internet Availability or the enclosed Proxy Card. |
| ● | By Telephone.You may vote by proxy by calling the toll-free number found on the vote instruction form. |
| ● | By Mail.You may vote by proxy by filling out the vote instruction form and returning it in the pre-addressed, postage-paid envelope provided. |
| ● | In Person Virtually. If you are a beneficial owner of shares held in street name and you wish to vote in person at the Annual Meeting, you must obtain a legal proxy from the organization that holds your shares. When you log on to the Webcast there will be instructions about how to vote. |
How will my vote be counted if I have not yet exchanged my stock certificate for new Common Shares?
On June 14, 2021 we completed a 1-for-30 reverse stock split of our shares of common stock. At that time all stockholders were notified and encouraged to exchange their old paper stock certificates for new shares of common stock in electronic book entry form. If you have not yet exchanged your certificate you will still be able to vote your shares and your votes will be counted on a “as exchanged”, post-split basis. That is to say to say you will get 1 vote for every 30 shares represented by a stock certificate as of November 9, 2021.the record date *, 2023.
We encourage you to exchange your old paper certificate for new electronic shares, using the exchange form provided. If you have lost your certificate or the exchange form, or have any questions about the exchange process, please contact Computershare at 1-877-373-6374+1-800-368-5948 (U.S.) 1-781-575-3100+1-781-575-4223 (Outside the US), via the website http://www.computershare.com/ or by e-mail to web.queries@computershare.com.
What are abstentions and broker non-votes?
While the inspector of elections will treat shares represented by proxies that reflect abstentions or include “broker non-votes” as shares that are present and entitled to vote for purposes of determining the presence of a quorum, abstentions or “broker non-votes” do not constitute a vote “for” or “against” any matter and thus will be disregarded in any calculation of “votes cast.” However, abstentions and “broker non-votes” will have the effect of a negative vote if an item requires the approval of a majority of a quorum or of a specified proportion of all issued and outstanding shares.
Brokers holding shares of record for customers generally are not entitled to vote on “non-routine” matters, unless they receive voting instructions from their customers (see What happens if I do not give specific voting instructions). As used herein, “uninstructed shares” means shares held by a broker who has not received voting instructions from its customers on a proposal. A “broker non-vote” occurs when a nominee holding uninstructed shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that non-routine matter.
What happens if I do not give specific voting instructions?
Stockholders of Record.If you are a stockholder of record and you:
| ● | indicate when voting on the Internet or by telephone that you wish to vote as recommended by the Board of Directors, or |
| ● | 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 of Directors on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Annual 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, under the rules of various national and regional securities exchanges, the organization that holds your shares may generally vote on routine matters, but not on non-routine matters. Under New York Stock Exchange (“NYSE”) rules, if your shares are held by a member organization, as that term is defined under NYSE rules, responsibility for making a final determination as to whether a specific proposal constitutes a routine or non-routine matter rests with that organization, or third parties acting on its behalf.
What are the Board’s recommendations?
The Board’s recommendation is set forth together with the description of each item in this Proxy Statement. In summary, the Board recommends a vote:
| ● | forelection of the seven director nominees named in the Proxy Statement to hold office until the next annual meeting of stockholders and until their successors are duly elected and qualified; |
| ● | for ratification of the appointment of Cherry Bekaert LLP as the Company’s independent auditors for the fiscal year ending December 31, | |
●
| for the Reverse Split Proposal; and | |
| ● | for the approval and ratification of the
|
With respect to any other matter that properly comes before the Annual Meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, in their own discretion.
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How are proxy materials delivered to households?
Only one copy of the Company’s Notice of Internet Availability, Annual Report on Form 10-K for the fiscal year ending December 31, 2020 and2022 or this Proxy Statement, as applicable, will be delivered to an address where two or more stockholders reside with the same last name or who otherwise reasonably appear to be members of the same family based on the stockholders’ prior express or implied consent.
We will deliver promptly upon written or oral request a separate copy of the Company’s Notice of Internet Availability, Annual Report on Form 10-K for the fiscal year ending December 31, 2020 and2022 or this Proxy Statement.Statement, as applicable. If you share an address with at least one other stockholder, currently receive one copy of our Annual Report on Form 10-K and Proxy Statement at your residence, and would like to receive a separate copy of our Annual Report on Form 10-K and Proxy Statement for future stockholder meetings of the Company, please specify such request in writing and send such written request to IpsidyauthID Inc.,1624 Market St., 670 Long Beach Boulevard, Long Beach, New York 11561;Ste 226, Unit 51767 Denver, Colorado 80202-1559; Attention: Chief Financial Officer.Corporate Secretary.
Interest of Officers and Directors in matters to be acted upon
Except for the election to our Board of the nominees set forth herein, and the right for Mr. Daguro and Mr. Szoke to receive additional option grants following the authorization of additional shares to be issued under the 2021 Equity Incentive Plan, none of our officers or directors has any interest in any of the matters to be acted upon at the Annual Meeting.
How much stock is owned by 5% stockholders, directors, and executive officers?
The following table sets forth the number of shares known to be beneficially owned by all persons who own at least 5% of Ipsidy’sauthID’s outstanding common stock, the Company’s directors, the Company’s executive officers, and the directors and executive officers as a group as of November 9, 2021,May 5, 2023, unless otherwise noted. Unless otherwise indicated, the stockholders listed in the table have sole voting and investment power with respect to the shares indicated.
| Name | Position | Number of Shares of Common Stock | Percentage of Common Stock | ||||||||
| Officers and Directors | |||||||||||
| Thomas L. Thimot | Director & CEO | 146,426 | (2) | 0.6 | % | ||||||
| Phillip L. Kumnick | Director | 1,308,221 | (3) | 5.4 | % | ||||||
| Philip R. Broenniman | Director | 1,125,935 | (4) | 4.7 | % | ||||||
| Thomas R. Szoke | Chief Solutions Architect | 1,069,444 | (5) | 4.5 | % | ||||||
| Stuart P. Stoller | Chief Financial Officer | 371,529 | (6) | 1.6 | % | ||||||
| Cecil N. Smith III (Tripp) | President and Chief Technology Officer | 44,642 | (7) | 0.2 | % | ||||||
| Jacqueline L. White | Director | 20,833 | (8) | 0.1 | % | ||||||
| Michael L. Koehneman | Director | 22,833 | (8) | 0.1 | % | ||||||
| Sanjay Puri | Director | 20,833 | (8) | 0.1 | % | ||||||
| Michael A. Gorriz | Director | 20,833 | (9) | 0.1 | % | ||||||
| Neepa Patel | Director | 0 | (10) | 0.0 | |||||||
| Total Officers and Directors | 4,151,529 | 17.3 | % | ||||||||
| 5% Stockholders | |||||||||||
| Stephen Garchik | Stockholder | 1,801,212 | (11) | 7.7 | % | ||||||
| Andras Vago | Stockholder | 1,578,942 | (12) | 6.8 | % | ||||||
| Total 5% Stockholders | 3,380,154 | 14.5 | % | ||||||||
| Total Officers, Directors and 5% Stockholders | 7,531,683 | 31.9 | % | ||||||||
| Number of | ||||||||||
| Shares of Common | Percentage of Common | |||||||||
| Name | Position | Stock | Stock (1) | |||||||
| Officers and Directors | ||||||||||
| Rhoniel A. Daguro | Director, CEO | 533,056 | (2) | 2.0 | % | |||||
| Thomas R. Szoke | Director, CTO | 839,998 | (3) | 3.2 | % | |||||
| Michael C. Thompson | Director | 299,000 | (4) | 1.2 | % | |||||
| Michael L. Koehneman | Director | 90,129 | (5) | 0.4 | % | |||||
| Jacqueline L. White | Director | 78,129 | (6) | 0.3 | % | |||||
| Hang Thi Bich (Annie) Pham | CFO | 43,740 | (7) | 0.2 | % | |||||
| Ken Jisser | Director | 33,813 | (8) | 0.1 | % | |||||
| Joseph Trelin | Director | 1,800 | (9) | 0.0 | % | |||||
| Total Officers and Directors | 1,919,665 | 7.4 | % | |||||||
| 5% Stockholders | ||||||||||
| Stephen J. Garchik | Stockholder | 2,619,182 | (10) | 9.9 | % | |||||
| Andras Vago | Stockholder | 1,578,942 | (11) | 6.1 | % | |||||
| Philip R. Broenniman | Stockholder | 1,484,633 | (12) | 5.6 | % | |||||
| Total 5% Stockholders | 5,682,757 | 21.6 | % | |||||||
| Total Officers, Directors and 5% Stockholders | 7,602,423 | 29.0 | % | |||||||
| (1) | Applicable percentage ownership is based on |
| (2) | Comprises a stock option to acquire 2,455,000 shares of common stock at an exercise price of $0.397 per share, which vesting over three years, subject to earlier vesting on upon meeting performance criteria, of which 533,056 will be vested as of July 4, 2023. |
| (3) | Includes |
| (4) | Includes (i) 299,000 shares of common stock, and (ii) a stock option to acquire |
| (5) | Includes (i) 11,772 shares of common stock, (ii) 228 shares of common stock held by Mrs. Koehneman, (iii) a stock option to acquire 62,500 shares of common stock at an exercise price of $7.80 per share, which vest over a three-year period after each Annual Meeting subject to continued service, of which 41,667 are vested, (iv) a stock option to acquire 10,238 shares of common stock at $15.16 per share, and (v) a stock option to acquire 34,966 shares of common stock at $3.03 per share that vest on a monthly basis over 12 months from September 20, 2022 |
| (6) | Includes (i) a stock option to acquire 62,500 shares of common stock at an exercise price of $7.80 per share, which vest over a three-year period after each Annual Meeting subject to continued service, of which 41,667 are vested, (ii) a stock option to acquire 10,238 shares of common stock at $15.16 per share, and (iii) a stock option to acquire 34,966 shares of common stock at $3.03 per share that vest on a monthly basis over 12 months from September 20, 2022. |
| (7) | Includes (i) a stock option to acquire 350,000 shares of common stock at an exercise price of $2.41 per share vesting over a four-year period and subject to certain performance vesting criteria, of which |
| Includes (i) |
| (9) | Includes (i) 1,800 shares of |
| (10) | Includes (i) 2,040,754 shares of common stock held by Mr. Garchik personally, (ii) 78,175 shares of common stock held by Marla Garchik, Mr. Garchik’s wife, (iii) 166,667 shares of common stock held by the Garchik 2019 Irrevocable Trust (“2019 Trust”) of which Mr. Garchik is a trustee and beneficiary, (iv) 11,667 shares of common stock held by Garchik Universal Limited Partnership, which Mr. Garchik jointly controls with his sister, (v) 89,306 shares of common stock held by the Marla Garchik 2020 Irrevocable Trust (the “2020 Trust”) of which Mr. Garchik is a beneficiary, (vi) a common stock |
| Includes 106,667 shares held by Multipolaris Corporation, 832,275 shares held by Interpolaris Pte. Ltd. and 640,000 held by MP Informatikai Kft. Mr. Vago is an officer and principal of each of these entities, and he may be deemed the beneficial owner or the shares held by such entities. |
| (12) | Includes (i) |
6
INFORMATION ABOUT THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors oversees our business and affairs and monitors the performance of management. In accordance with corporate governance principles, the Board does not involve itself in day-to-day operations. The directors keep themselves informed through discussions with the Chief Executive Officer and other key executives, visits to the Company’s facilities, by reading the reports and other materials that we send them and by participating in Board and committee meetings. Each director’s term will continue until the election and qualification of his or her successor, or his or her earlier death, resignation or removal. Except as set forth in this Proxy Statement, none of our directors held directorships in other reporting companies or registered investment companies at any time during the past five years. Our Board currently consists of eight persons, seven of whom have been nominated by the Company to stand for re-election. The Board and its Governance Committee believe the Board nominees possess the skills and experience to effectively monitor performance, provide oversight, and advise management on the Company’s long-term strategy. Below is the biographical information pertaining to our executive officers and directors.
| Name | Age | Position (s) and Offices Held | ||||
| 48 | Director and Chief Executive Officer | |||||
| Joseph Trelin (1)(3) | 62 | Chairman of the Board of Directors | ||||
| Hang Thi Bich Pham (Annie) | 47 | Chief Financial Officer | ||||
| Ken Jisser | ||||||
| Director | ||||||
| Michael L. Koehneman* (1)(2) | 62 | Director | ||||
| Thomas R. Szoke | 58 | Director and Chief Technology Officer | ||||
| Michael C. Thompson (2)(3) | 62 | Director | ||||
| Jacqueline L. White* (1)(3) | 59 | Director | ||||
| * | denotes Committee Chair |
| (1) | Audit Committee |
| (2) | Governance Committee |
| (3) | Compensation Committee |
Thomas L. ThimotRhoniel A. Daguro
Mr. Thimot was appointed as Chief Executive Officer and as a Director of our company on June 14, 2021. From 2018 through November 2020, Mr. Thimot served as Chief Executive Officer and Director of Socure, Inc., a leading provider of identity verification and fraud risk solutions. Prior to joining Socure, from September 2015 to October, 2018, Mr. Thimot served as CEO and Director of Clarity Insights a privately held provider of data science consulting acquired by Accenture plc. where he was responsible for all operational aspects of the business. Prior to Clarity Insights, Mr. Thimot served as the Vice President of Cognizant Technology Solutions (Nasdaq: CTSH), a consulting firm and emerging business accelerator where he was responsible for all emerging services related to social, mobile, data analytics and cloud. Prior to 2015, Mr. Thimot held various roles and founded various businesses including his own consulting business, CaseCentral (an eDiscovery cloud-based software service now part of Oracle), Kazeon (a data and analytics software provider now part of Dell), GoRemote, Netegrity and Enigma. Mr. Thimot started his career with Oracle, Price Waterhouse and Accenture and received his BS Mechanical Engineering from Marquette University.
Phillip L. Kumnick
Mr. Kumnick was appointed a director of the Company in December 2019 and served as the Chief Executive Officer from May 2020-June 2021. On October 30, 2020 he also became the Chairman of the Board of Directors of the Company. From 2010 to 2018, Mr. Kumnick was Senior Vice President Global Acquirer Processing at Visa, Inc., and was the executive in charge of leading and growing Visa’s acquirer and merchant processing services and omni-channel solutions on a global basis. Mr. Kumnick was also a key contributor to the design of the Secure Remote Commerce (SRC) standard now being rolled out by the card brands, which aims to provide a simple and secure card payment experience. SRC uses tokenization to protect consumers’ sensitive data and intelligent identity authentication to help distinguish legitimate cardholders from fraudsters. Mr. Kumnick was the product owner and developer of Visa’s critical entry into encryption and tokenization products and services for their acquiring partners for transactions at the physical point of sale. Prior to joining Visa, Mr. Kumnick was the leader of the Cards & Payments practice of Cap Gemini Consulting from October 2009 through June 2010. Prior to Cap Gemini Consulting. Mr. Kumnick was a Senior Vice President at TSYS Acquiring Solutions from 2001 to 2009, with responsibility for leading the Product Management team and expanding the Company’s portfolio of merchant and acquirer products. He was also a leader of key M&A activities, including business development and strategic investment in Europe, Latin America and Asia, and helped expand TSYS’ client footprint to over 70 countries. Mr. Kumnick started his payments career at MasterCard International where he worked from 1988 to 2000, in various capacities, rising to Vice President & Chief Settlement Officer – Global Settlement Operations. In that role he was responsible for the 7 x 24 x 365 mission critical clearing and payment operations of a $3.0 billion per day global EFT and treasury operation. Mr. Kumnick was a strategic subject matter expert and key contributor to the evolution of MasterCard’s global processing functions. Mr. Kumnick has an MBA- Finance and a BS Finance from St. Louis University.
Cecil N. Smith III (Tripp)
Mr. Smith was appointed as President and Chief Technology Officer on June 14, 2021. Mr. Smith is a technologist and thought leader specializing in data, analytics and AI. His experience spans entrepreneurial ventures to Fortune 100 enterprises, centered around strategy, product engineering, sales, and building high performance data science and engineering teams. In 2011, Mr. Smith joined Clarity Insights, a RLH Equity and Salesforce Ventures-backed data consultancy with deep data science, artificial intelligence and machine learning expertise. There he worked with hyper scale technology companies ultimately rising to Chief Technology Officer. Mr. Smith led Clarity Insights to a $100MM+ ARR and an acquisition by Accenture AI in 2020. In 2020, Mr. Smith joined Socure Inc., a leading provider of identity verification and fraud risk solutions, as an advisor supporting Product, Technology, Marketing, and Sales functions. Mr. Smith previously held technical leadership roles at Hewlett Packard and the Advisory Board Company and is a graduate of the University of North Carolina at Chapel Hill.
Stuart Stoller
On January 31, 2017, Stuart Stoller was appointed Chief Financial Officer of the Company. Prior to joining the Company Mr. Stoller served as Chief Financial Officer and Board Member for TestAmerica Environmental Services LLC from May 2016 to October 2017. From December 2013 to April 2016, he was the Chief Financial Officer of Associated Food Stores. Mr. Stoller served as Chief Financial and Administrative Officer for Sleep Innovations from August 2009 to October 2013. Prior to joining Sleep Innovations, Mr. Stoller for 29 years served various roles with the New York Times Company including Senior Vice President for Process Reengineering and Corporate Controller and various capacities at Macy’s which included the role of Senior Vice President and Corporate Controller. He also was the controller of Coopers & Lybrand LLP. He is a Certified Public Accountant.
Thomas R. Szoke
Thomas R. Szoke serves as Chief Solutions Architect of the Company. Mr. Szoke is a co-founder of Innovation in Motion (“IIM”) a predecessor of Ipsidy and has over 25 years of product engineering, global sales and operations management experience. He has held several executive positions in the Company and has successfully led it from its inception to its listing on the OTC Market as well as expanding its market presence and product portfolio through strategic acquisitions in the United States, South America and Africa. Mr. Szoke pioneered the concept and development of certain product lines as well as its Multi-Factor Out-of-Band Identity and Transaction Authentication Platform.
Prior to founding IIM, Mr. Szoke spent 23 years with Motorola, Inc. holding various management positions in field and product engineering, systems integration, program management and sales. He spent the last 10 years of his career at Motorola in the Biometrics Industry as Director of Integration and Project Management and then Director of Global Business Development for Civil Biometrics. From 2008-2011, Mr. Szoke was President of Thomas Szoke LLC, a technology consulting company focused on identity management and secure credentialing solutions. Mr. Szoke holds a degree in Electrical Engineering and Applied Mathematics from the University of Akron, in Ohio and is fluent in Hungarian.
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Philip R. Broenniman
Philip Broenniman was appointed a director of the Company in March 2020 and served as the President and Chief Operating Officer from May 2020-June 2021. Since 2011, Mr. Broenniman has been Managing Partner and Portfolio Manager for Varana Capital, LLC (“VCLLC”), an investment firm he co-founded in 2011. As part of the VCLLC investment strategy of cooperative engagement, Mr. Broenniman sits on or advises the Board of multiple public/private companies, working with each on strategic planning, operational dynamics, and balance sheet needs/restructuring. Prior to co-founding Varana Capital in 2011, he held the positions of Principal and Portfolio Manager at Visium Asset Management, LP; Managing Partner and Portfolio Manager at Cadence Investment Partners, LLC; and Investment Analyst with the Bass Family Office in Fort Worth, TX. He began his career at Salomon Brothers Inc. trading fixed-income futures and options. Mr. Broenniman earned a BS in Computer Science from Duke University in 1987, an MBA from the Darden School at the University of Virginia in 1993 and the Chartered Financial Analyst (CFA) designation in 2000.
Michael A. Gorriz
Dr. GorrizDaguro joined our company as a director on JuneMarch 9 2021. Dr. Gorriz2023 and was appointed CEO on March 23, 2023. He has beenover 20 years of sales, marketing, technology, and venture capital experience. He has built multiple profitable software and professional services firms. Most recently, from 2018 to 2022, he served as the Chief InformationRevenue Officer and a member of the management team of Standard Chartered Bank, Singapore since 2015. He is also Non-Executive Director of the Standard Charted Bank Hong Kong Board and the mox HK Board.Socure Inc. Prior to that, heMr. Daguro held various executive sales positions with Persistent Systems, Hortonworks, and Oracle.
Joseph Trelin
Mr. Trelin joined our company as a Director on April 18, 2022 and became Chairman of the Board on March 16, 2023. Mr. Trelin, is a senior, creative business and product leader, technologist and entrepreneur. Since June 2021, Mr. Trelin has served in a consultant capacity advising start-ups to mid-size companies on operations, product strategy and growth. From January 2016 to July 2019, Mr. Trelin served as the Chief Platform Officer of Clear Secure Inc. Mr. Trelin served as the VP Product, Digital Products at NBCUniversal, Inc. from January 2015 through January 2016 and in various roles including as Product Management & Technology Business Leader and General Manager for Amazon.com, Inc. from January 2009 to January 2015. Mr. Trelin also previously served as the Vice President, Product Development and IT for Standard and Poor’s. Mr. Trelin received a Masters Equivalent in Computer Science from Hofstra University and a BA in Sociology from the State University of New York Albany.
Annie Pham
Mrs. Hang Thi Bich Pham (“Annie”) serves as Chief Financial Officer of the Company since June 21, 2022. Mrs. Pham has served in senior finance leadership roles in the technology sector, most recently at SonicWall, Inc, where she served as Chief InformationAccounting Officer from 2017 to the present. From 2014 to 2017, Mrs. Pham served as Vice President of Finance at Daimler AGApplied Micro Circuits Corporation (acquired by MACOM Technology Solutions Holding and from 2007. Dr. Gorriz attended2008 to 2014 as Director, Assistant Corporate Controller at Broadcom (formerly Avago), where she scaled Avago’s global financial function to meet the requirements of a publicly traded and high-growth company with revenues growing from $1+billion to $2+billion over a three-year period. Mrs. Pham earned her MBA at the University of Konstanz,Sydney, Australia. She is a Licensed Certified Public Accountant (active) in the Universitystate of Freiburg and obtained his Doctorate in Engineering from the University of Stuttgart.California.
Ken Jisser
Mr. Jisser joined authID as a Director on March 9, 2023. He is the Founder & CEO of The Pipeline Group, Inc., a technology-enabled services company that aims to deliver business results for companies looking to build predictable and profitable pipeline. Mr. Jisser founded the company in his garage in 2017, and it reached #415 among the fastest growing private companies in America, according to Inc. Magazine rankings published in 2021. Prior to that, Mr. Jisser served as GTM Advisor at Druva Inc., where he rebuilt the global inside sales team.
Michael L. Koehneman
Mr. Koehneman joined our company as a Director on June 9, 2021. Mr. Koehneman previously held various positions at Pricewaterhouse Coopers, a global accounting firm, through 2020, including the Global Advisory Chief Operating Officer and Human Capital Leader from 2016 through 2019, the U.S. Advisory Operations Leader from 2005 through 2016 responsible for the oversight of Advisory services for PwC, including business unit performance, finance, investments, human resources, acquisitions, and administration, and the Lead Engagement Partner for Financial Statement Audits and Internal Control and Security Reviews from 1993 through 2004 for several public and private company audits. Since 2020 he has also served as a director and member of the Audit Committee of Aspen Group, Inc.
Neepa PatelThomas R. Szoke
Ms. Patel joined our companyMr. Thomas Szoke is a co-founder of AuthID and has over 35 years of executive management, solutions engineering, and operations management experience in Government Security, Identity Access Management and SaaS solutions industries. He rejoined the Company as a Director on November 15,March 9, 2023 and was appointed as Chief Technology Officer on April 12, 2023. Mr. Szoke previously served as a Director and the Company’s Chief Solutions Architect and has held several other executive positions since its inception, from 2013 through 2021. Neepa Patel isHe has also expanded the FounderCompany’s market presence and CEOproduct portfolio through technological innovation and global strategic partnerships. Mr. Szoke has been issued several US and international patents focused on identity solutions and has pioneered the concept and development of Themis - a collaborative tech platform to help fintechs, banks and crypto companies create a strong governance, risk and compliance framework. Neepa has 15+ years of experience in various regulatory and compliance positions across the public and private sector. Prior to founding Themis in March 2020, she was the Head of Compliance for an enterprise blockchain company, R3 from 2016 through December 2019. Before that she had several risk and compliance positions at Deutsche Bank from 2014 to 2016 and at Morgan Stanley between 2011 and 2014. At Morgan Stanley, she helped develop a compliance frameworkdifferent product lines for the newly formed banking entities, Morgan Stanley BankCompany including its Multi-Factor Out-of-Band Identity and Morgan Stanley Private Bank post crisis. Neepa began her career as a Bank Examiner atTransaction Authentication Platform. Since 2021, he has been an independent consultant for the Office of the Comptroller of the Currency (OCC), where she worked from 2005 to 2011. Neepa attended Georgia Tech.Company and others.
Michael C. Thompson
Sanjay Puri
Mr. PuriThompson joined our companythe Company as a Director on JuneMarch 9, 2021.2023. He has over 38 years of domestic and international experience in publicly traded and private equity backed consumer and commercial businesses. Since 2022, Mr. Puri is currentlyThompson has been a managing Directorpartner at Progress Partners, Inc.Hemingway Capital, an operationally focused private equity firm. Previously, he served as Chief Executive Officer for companies in the bedding (Corsicana Mattress from 2018 to 2022), polyurethane foam and pet products industries and was an operating executive for two leading middle-market private equity firms. Mr. Puri is an established entrepreneur whoThompson has spent the last two decades startingalso held executive positions with Rubbermaid Commercial Products, Merillat Industries, a division of Masco Corporation, and advising successful, high-growth businesses across fintech, entertainment/media, software, ecommerceBlack+Decker, and subscription industries. An expert in payment processors, identity management, and exhibitor relationships, Mr. Puri has raised more than $700 million in capital overbegan his career and in his most recent role as Founder and Managing Director of Progress Partners, Mr. Puri is focused on identifying new capital raising opportunities for companies.with Sunbeam Appliance Company.
Jacqueline L. White
Ms. White joined our company as a Director on June 9, 2021. Ms. White has been a leader in enterprise technology software and IT consulting for the past 25 years. Ms. White has held global positions at SAP, Oracle, and Accenture, always leading diverse, high performing organizations around the world. After leading the Banking & Capital Markets line of business of DXC Technology Co. (NYSE: DXC) as Senior Vice President and Practice Lead from September 2019 to January 2021, Ms. White recently joined in January 2021 the Executive Management Team of Temenos AG (Six: TEMN), a company specializing in enterprise software for banks and financial services, as the President of the Americas Region. From January 2018 through September 2019, Ms. White served as the Chief Revenue Officer of Saltstack, a VM Ware Company, and from January 2015 through January 2018 as Global Senior Vice President Global FSI Consulting for SAP (NYSE: SAP). Prior to joining SAP, Ms. White held various positions with Accenture Services Pvt. Ltd., Oracle, BearingPoint and Novell. Ms. White was named by Utah Business Magazine as “Top Executives to Watch” in July 2020. Ms. White received a BA in Comparative Literature from Brigham Young University and a Leadership Certificate from Boston University.
Director Independence
The Company is listed on the Nasdaq Capital Market and therefore the Company is complying with the Nasdaq Listing standards applicable to director independence. Pursuant to Rule 4200 of The Nasdaq Stock Market one of the definitions of an independent director is a person other than an executive officer or employee of a company. The Nasdaq rules require companies to maintain a Board a majority of the members of which are independent directors. Additionally, compensation committee members must not have a relationship with the Company that is material to the director’s ability to be independent from management in connection with the duties of a compensation committee member. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or be an affiliated person of the listed company or any of its subsidiaries.
Our Board of Directors has undertaken a review of the independence of each Director and considered whether each director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our board of directors determined that all of our directors, other than Mr. Thimot, our Chief Executive Officer, Mr. Kumnick our Chairman and Mr. Broenniman are “independent directors” as defined under the applicable listing requirements and rules of Nasdaq. In making these determinations, our board of directors reviewed and discussed information provided by the directors and by us with regard to each director’s business and personal activities and relationships as they may relate to us and our management, including the beneficial ownership of our common stock by each non-employee director.
Committees and Terms
Board & Committees
Board meetings during calendar year ended 20202022
During 2020,2022, the Board of Directors held thirteenseven meetings as well as committee meetings, as outlined below. Each director then in office attended all of the meetings of the Board and all of the meetings held by all committees on which such director served.served, apart from one meeting which one director was not able to attend. The Board also approved certain actions by unanimous written consent.
Committees established by the Board
The Board of Directors has standing Audit, Compensation, and Governance Committees. Information concerning the function of each Board committee follows.
Audit Committee
The Audit Committee is responsible for overseeing management’s implementation of effective internal accounting and financial controls, supervising matters relating to audit functions, reviewing and setting internal policies and procedures regarding audits, accounting and other financial controls, reviewing the results of our audit performed by the independent public accountants, and evaluating and selecting the independent public accountants. The Audit Committee has adopted an Audit Committee Charter which is posted on ourthe Corporate Governance landing page under the tab labeled “Investors”“Board Committees” on our Investor Relations website at http:https://www.authid.ai.investors.authid.ai. The Board has designated Mr. Koehnemanthe Chair of the Committee as the “audit committee financial expert” as defined by the SEC. During 2020,2022, the Audit Committee held five conference callsix meetings. The Committee also approved certain actions by unanimous written consent.
Compensation Committee
The Compensation Committee determines matters pertaining to the compensation of our named executive officers and administers our stock option and incentive compensation plans, or Equity Incentive Plans.plans. The Compensation Committee has adopted a Compensation Committee Charter which is posted on our which is posted on the Corporate Governance landing page under the tab labeled “Investors”“Board Committees” on our Investor Relations website at http:https://www.authid.ai.investors.authid.ai. During 2020,2022, the Compensation Committee held twothree meetings through conference calls.and also approved certain actions by unanimous written consent.
Governance Committee
The Governance Committee is responsible for considering potential Board members, nominating Directors for election to the Board, implementing the Company’s corporate governance policies, recommending compensation for the Board and for all other purposes outlined in the Governance Committee Charter, which is posted on ourthe Corporate Governance landing page under the tab labeled “Investors”“Board Committees” on our Investor Relations website at http:https://www. authid.ai.investors.authid.ai. During 2020,2022, the Governance Committee did not hold any meetings.held two meetings also approved certain actions by unanimous written consent.
Nomination of Directors
As provided in its charter, the Governance Committee is responsible for identifying individuals qualified to become directors. The Governance Committee seeks to identify director candidates based on input provided by a number of sources including (1) the Governance Committee members, (2) our other directors, (3) our stockholders, (4) our Chief Executive Officer or Chair of the Board, and (5) third parties such as service providers. In evaluating potential candidates for director, the Governance Committee considers the entirety of each candidate’s credentials.
Qualifications for consideration as a director nominee may vary according to the particular areas of expertise being sought as a complement to the existing composition of the Board of Directors. However, at a minimum, candidates for director must possess:
| ● | high personal and professional ethics and integrity; |
| ● | the ability to exercise sound judgment; |
| ● | the ability to make independent analytical inquiries; |
| ● | a willingness and ability to devote adequate time and resources to diligently perform Board and committee duties; and |
| ● | the appropriate and relevant business experience and acumen. |
Board Diversity
The Board believes that a diverse membership having a variety of skills, styles, experience and competencies is an important feature of a well-functioning board. Accordingly, the Board believes that diversity of viewpoints, backgrounds and experience (inclusive of gender, age, race and ethnicity) should be a consideration in Board succession planning and recruiting. In recent years, the Governance Committee has taken this priority to heart in its nominations process, and the diversity of the Board has grown significantly. One of the seven current members of the Board is female and two self identify as an underrepresented minority satisfying The Nasdaq Stock Market, LLC Listing Rules’ (the “NASDAQ Listing Rules”) objective for listed companies to have at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+. The chart below provides certain information regarding the diversity of the Board as of May 5, 2023.
| Board Diversity Matrix as of May 5, 2023 | ||||||||||||
| Total Number of Directors | 8 | |||||||||||
| Female | Male | Non-Binary | ||||||||||
| Part I: Gender Identity | ||||||||||||
| Directors | 1 | 6 | - | |||||||||
| Part II: Demographic Background | ||||||||||||
| African American or Black | - | - | - | |||||||||
| Alaskan Native or Native American | - | - | - | |||||||||
| Asian | - | 1 | - | |||||||||
| Hispanic or Latinx | - | 1 | - | |||||||||
| Native Hawaiian or Pacific Islander | - | - | - | |||||||||
| White | 1 | 5 | - | |||||||||
| Two or More Races or Ethnicities | - | - | - | |||||||||
| LGBTQ+ | 0 | 0 | 0 | |||||||||
Board Leadership Structure and Role in Risk Oversight
The Board recognizes that the leadership structure and combination or separation of the CEO and Chairman roles is driven by the needs of the Company at any point in time. As a result, no policy exists requiring combination or separation of leadership roles and our governing documents do not mandate a particular structure. This has allowed the Board the flexibility to establish the most appropriate structure for the Company at any given time.
In June 2021, the Board elected to separate the role of Chief Executive Officer and Chairman of the Board of Directors. Currently, Mr. Daguro serves as the Chief Executive Officer and Mr. Trelin serves as the Chairman of the Board. The Board believes that the separation of the Chairman of the Board and CEO roles currently provides the most efficient and effective leadership model for the Company as it encourages free and open dialogue regarding competing views and provides for strong checks and balances. Specifically, the balance of powers among our CEO and the Chairman of the Board facilitates the active participation of all directors and enables the Board to provide more effective oversight of management. In addition, the Board believes that this separation enables our CEO to focus on the management and operations of our business and the development and implementation of strategic initiatives, while our Chairman of the Board leads the Board in the performance of its responsibilities.
The Board, led by the Audit Committee, is actively involved in overseeing our risk management processes. The Board focuses on our general risk management strategy and ensures that appropriate risk mitigation strategies are implemented by management. Further, operational and strategic presentations by management to the Board at Board meetings include consideration of the challenges and risks of our businesses, and the Board and management actively engage in discussion on these topics. In addition, each of the Board’s committees considers risk within its area of responsibility.
Legal Proceedings
There are currently no legal proceedings, and during the past 10 years there have been no legal proceedings, that are material to the evaluation of the ability or integrity of any of our directors.
Family Relationships
There are no family relationships among our directors and executive officers. There is no arrangement or understanding between or among our executive officers and directors pursuant to which any director or officer was or is to be selected as a director or officer.
Involvement in Certain Legal Proceedings
To our knowledge, during the last ten years, none of our directors and executive officers has:
| ● | Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time. |
| ● | Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses. |
| ● | Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities. |
| ● | Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated. |
| ● | Been the subject to, or a party to, any sanction or order, not subsequently reverse, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
To our knowledge, none of our directors and executive officers has at any time been subject to any proceedings:
13
| ● | that were initiated by any regulatory, civil or criminal agency | |
| ● | in which claims alleging fraud were asserted and seeking damages in excess of $100,000 |
Code of Ethics
We have adopted a Code of Business Conduct and Ethics Policy (the “Code of Ethics”) that applies to all directors and officers.officers, which is posted on the Corporate Governance page under the tab labeled “Board Committees” on our Investor Relations website at https://investors.authid.ai. The Code of Ethics describes the legal, ethical and regulatory standards that must be followed by the directors and officers of the Company and sets forth high standards of business conduct applicable to each director and officer. As adopted, the Code of Ethics sets forth written standards that are designed to deter wrongdoing and to promote, among other things:
| ● | honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
| ● | compliance with applicable governmental laws, rules and regulations; |
| ● | the prompt internal reporting of violations of the Code of Ethics to the appropriate person or persons identified in the code; and |
| ● | accountability for adherence to the Code of Ethics. |
Stockholder CommunicationsSection 16(a) Beneficial Ownership Reporting Compliance
Stockholders requesting communication with directors can do so by writing to Ipsidy Inc., c/o SVP MarCom and Investor Relations (“SVP IR”), 670 Long Beach Boulevard, Long Beach, New York 11561 or emailing to investor-relations@authid.ai. At this time, we do not screen communications received and would forward any requests directly to the named director. If no director was named in a general inquiry, the SVP IR would contact either the ChairSection 16(a) of the BoardSecurities Exchange Act of Directors or1934, as amended, requires our directors and executive officers and persons who own more than 10% of the chairpersonissued and outstanding shares of our common stock to file reports of initial ownership of common stock and other equity securities and subsequent changes in that ownership with the SEC. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on a particular committee, if any, as appropriate. We do not providereview of the physical address, email address, or phone numberscopies of Directorssuch reports furnished to outside parties without a Director’s permission.us and written representations that no other reports were required, during the fiscal year ended December 31, 2022 all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with, except that one filing was inadvertently made late by Mr. Broenniman and Mr. Gorriz.
Compensation of Directors
The following table sets forth the compensation of non-management Directors earned during 2020.the year ended December 31, 2022.
| Name | Fees Earned or Paid in Cash ($) | Stock Awards (S) | Option Awards (S)(1) | Other Compensation ($) | Total ($) | |||||||||||||||
| Herb Selzer | - | - | 87,000 | - | 87,000 | |||||||||||||||
| Theodore Stern | - | - | 87,000 | - | 87,000 | |||||||||||||||
| Phillip Kumnick | - | - | 36,250 | - | 36,250 | |||||||||||||||
| Philip Beck | - | - | 36,250 | - | 36,250 | |||||||||||||||
| Philip Broenniman | 21,750 | 21,750 | ||||||||||||||||||
| Ricky Solomon | - | - | 833 | - | 833 | |||||||||||||||
The non-management Directors earned $72,000 per annum through May 2021 for Board membership, inclusive of all Board meeting and committee meeting attendance fees in the form of a stock grant and they earn an additional annual retainer for service on each committee of $5,000. The Company has recorded the expense associated with Board Compensation but has not granted or paid fees since October 2019. Total board compensation recorded in 2020 was approximately $269,000 of which $47,000 was the retainer for Board Committees and the balance of $222,000 was the retainer for service on the Board. Mr. Stern and Mr. Selzer each earned $15,000, Mr. Kumnick and Mr. Beck each earned $6,250, Mr. Broenniman earned $3,750 and Mr. Solomon $833.
The non-management Directors in 2020 were as follows:
The non-management Directors were compensated for their service in 2020 through the issuance of stock compensation following the Annual Meeting held in March 2021 by the issuance of a total of 93,470 Stock Options at an exercise price of $7.20, which were vested upon May 5, 2021 the date of grant.
During 2019, the Company recorded expense of $40,000 for the annual retainer for service on Board. The amounts recorded for Mr. Selzer, Mr. Stern and Mr. Solomon for the annual retainer for service on Board committees was $15,000, $15,000, and $10,000 in addition to their stock compensation of $72,000 each per annum. Total board compensation recorded in 2019 was approximately $256,000.
On his appointment Mr. Kumnick received a grant of an option to purchase 100,000 shares of common stock vesting in equal parts over three years, or earlier in the event of a change of control of the Company (as defined in the option grant). In March 2020, the Company entered into a restricted stock purchase agreement with Phillip Kumnick, providing Mr. Kumnick with the right to acquire 50,000 shares of common stock at par value subject to the Vesting Criteria (as defined in the stock purchase agreement). On his appointment, the Company entered into a restricted stock purchase agreement with Philip Broenniman, providing Mr. Broenniman with the right to acquire 50,000 shares of common stock at $0.003 per share subject to the Vesting Criteria. The performance element of the Vesting Criteria has been satisfied and the shares will vest on or before December 31, 2021, subject to continued service under certain conditions.
| Fees Paid in Cash ($) | Stock Awards ($) | Total ($) | ||||||||||
| Philip Kumnick | 15,500 | 659,000 | 674,500 | |||||||||
| Chairman of the Board, Former CEO and President (1)(2) | ||||||||||||
| Philip Broenniman | 11,000 | 820,000 | 831,000 | |||||||||
| Board Member, Former President (1)(2) | ||||||||||||
| Michael Gorriz | 15,000 | 234,000 | 249,000 | |||||||||
| Board Member (2) | ||||||||||||
| Michael Koehneman | 16,000 | 234,000 | 250,000 | |||||||||
| Board Member | ||||||||||||
| Neepa Patel | 16,000 | 129,000 | 145,000 | |||||||||
| Board Member (2) | ||||||||||||
| Joseph Trelin | 14,000 | 113,000 | 127,000 | |||||||||
| Board Member | ||||||||||||
| Jacqueline White | 17,500 | 234,000 | 251,500 | |||||||||
| Board Member | ||||||||||||
In May 2021, the Board resolved to adopt a new compensation policy for non-management directors, comprising the following:
(a) On appointment as a new director, each director shall receive a grant of options having a Black Scholes value of $270,000, subject to three-year
| ● | On appointment as a new director, each director shall receive a grant of options having a Black Scholes value of $270,000, subject to three- year vesting, one-third earned after each Annual Meeting. If the director does not serve for at least three years, then they will lose a proportionate part of the award. |
| ● | After each Annual Meeting, commencing with the first Annual Meeting at which a director is re-elected to the Board, each director would receive a grant of options having a Black Scholes value of $90,000, subject to one year vesting (one twelfth earned each month). If the director does not serve the full year, then they will lose a proportionate part of the award. |
In May 2022, the Board approved that the Compensation Plan be amended as follows:
| ● | For attendance at each Board or Committee meeting of the Company, each director, who is not a committee chair, shall receive the sum of $2,000. |
(b) After each Annual Meeting, commencing with the first Annual Meeting at which a director is re-elected to the Board, each director would receive a grant of options having a Black Scholes value of $90,000, subject to one year vesting (one twelfth earned each month). If the director does not serve the full year, then they will lose a proportionate part of the award.
| ● | For attendance at each Board or Committee meeting of the Company, each director, who is a committee chair shall receive the sum of $2,500. |
| ● | For attendance at each Board or Committee meeting of the Company, which lasts more than 2 hours, in lieu of the above sums, each director shall receive the sum of $1,000 per hour duration of such meeting. |
| ● | When Board and Committee meetings are held on the same day, the meetings shall be treated as a single meeting for the purpose of determining compensation. |
| ● | Payment shall be made quarterly in arrear in the month following completion of each fiscal quarter commencing July 2022 for the 2nd quarter. |
| (1) | Mr. Philip Kumnick served as CEO and President and Mr. Phillip Broenniman served as President of the Company through the middle of June 2021. The Company granted Mr. Kumnick stock options to acquire 583,333 shares of common stock that vest upon the achievement of certain market capitalization thresholds or performance conditions. In November 2021, Mr. Kumnick agreed to cancel 300,000 of these stock options in consideration of removing certain service conditions. The Company granted Mr. Broenniman stock options to acquire 583,333 shares of common stock that vest upon the achievement of certain market capitalization thresholds or performance conditions. In November 2021, Mr. Broenniman agreed to cancel 200,000 of these stock options in consideration of removing certain service conditions. On his appointment to the Board of Directors, Mr. Kumnick received a grant of an option to purchase 100,000 shares of common stock vesting in equal parts over three years, or earlier in the event of a change of control of the Company (as defined in the option grant). In March 2020, the Company entered into a restricted stock purchase agreement with Phillip Kumnick, providing Mr. Kumnick with the right to acquire 50,000 shares of common stock at par value subject to the Vesting Criteria (as defined in the stock purchase agreement). On Philip Broenniman’s appointment, the Company entered into a restricted stock purchase agreement with him, providing Mr. Broenniman with the right to acquire 50,000 shares of common stock at par value subject to the Vesting Criteria. The Vesting Criteria were met in 2021 and as a result the Company recorded a restricted stock expense of $127,500 each for Mr. Phillip Kumnick and Mr. Philip Broenniman. |
| (2) | Resigned March 9, 2023 |
EXECUTIVE COMPENSATION
Executive Compensation
The below table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to (i) all individuals serving as the Company’s principal executive officers or acting in a similar capacity during the last two completed fiscal years, regardless of compensation level, and (ii) the Company’s two most highly compensated executive officers other than the principal executive officers serving at the end of the last two completed fiscal years (collectively, the “Named Executive Officers”).
SUMMARY COMPENSATION TABLE
| Name and | Year | Salary ($) | Bonus ($) | Stock Awards (S) | Option Awards (S) | Other Compensation ($) | Total ($) | |||||||||||||||||||||
| Phillip Kumnick | 2020 | 85,813 | 64,980 | 127,500 | 1,033,333 | 1,311,626 | ||||||||||||||||||||||
| Chairman of the Board and Former CEO and President (1) | 2019 | - | - | - | - | - | - | |||||||||||||||||||||
| Philip Beck | 2020 | 138,889 | - | - | 308,104 | 446,993 | ||||||||||||||||||||||
| Former Chairman of the Board. CEO and President (2) | 2019 | 350,000 | - | - | - | 350,000 | ||||||||||||||||||||||
| Thomas Szoke | 2020 | 275,000 | - | - | - | - | 275,000 | |||||||||||||||||||||
| Chief Solutions Architect and a Former Director | 2019 | 275,000 | - | - | - | - | 275,000 | |||||||||||||||||||||
| Stuart Stoller | 2020 | 237,500 | - | 127,500 | - | 365,000 | ||||||||||||||||||||||
| CFO (4) | 2019 | 237,500 | - | - | - | 237,500 | ||||||||||||||||||||||
| Stock | Option | Non-Equity Incentive Plan | All Other | |||||||||||||||||||||||||||||
| Salary | Bonus | Awards | Awards | Compensation | Compensation | Total | ||||||||||||||||||||||||||
| Name and Title | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||||||
| Phillip Kumnick | 2022 | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Chairman of the Board, Former CEO and President (1) | 2021 | 65,939 | - | 127,500 | 2,201,498 | - | - | 2,394,937 | ||||||||||||||||||||||||
| Thomas Thimot | 2022 | 325,000 | - | - | - | 5,271 | 330,253 | |||||||||||||||||||||||||
| CEO (2) | 2021 | 168,542 | - | - | 5,272,000 | 75,000 | - | 5,515,542 | ||||||||||||||||||||||||
| Cecil Smith III | 2022 | 275,000 | - | - | 437,650 | - | 6,198 | 718,848 | ||||||||||||||||||||||||
| President and CTO (3) | 2021 | 140,073 | 50,000 | - | 2,636,000 | 75,000 | - | 2,901,073 | ||||||||||||||||||||||||
| Thomas Szoke | 2022 | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| Chief Solutions Architect and Former Director (4) | 2021 | 252,083 | - | - | 138,000 | 206,250 | 305,000 | 901,333 | ||||||||||||||||||||||||
| Stuart Stoller | 2022 | 110,681 | - | - | - | - | - | 110,681 | ||||||||||||||||||||||||
| CFO (5) | 2021 | 237,500 | - | 500,000 | 414,000 | 393,750 | - | 1,545,250 | ||||||||||||||||||||||||
| Hang Thi Bich Pham | 2022 | 147,019 | 25,000 | - | 768,170 | - | 3,025 | 943,214 | ||||||||||||||||||||||||
| CFO (6) | 2021 | - | - | - | - | - | ||||||||||||||||||||||||||
| (1) | Mr. Kumnick was hired as Chief Executive Officer on May 22, 2020 and as part of his compensation package was granted 1,111,111 stock options (“2020 Stock Options”) of which 20% vest at grant date and the balance vest subject to performance conditions. As of December 31, 2021, all of Mr. Kumnick’s 2020 |
| conditions. The stock option and restricted stock aggregate grant date fair value |
| (2) | Mr. Thomas Thimot was hired as Chief Executive Officer on June 14, 2021. Mr. Thimot and the Company entered into an Offer Letter pursuant to which Mr. Thimot will earn an annual salary of $325,000 with a bonus target at 50% of the base salary (pro-rated for 2021) upon terms to be agreed with the Compensation Committee for 2021, which was finally determined to be $75,000 and on the understanding that the 2022 target will include a requirement of the Company achieving three times the annual revenue of 2021. The Compensation Committee approved a bonus of $75,000 for 2021 on January 25, 2022. Additionally, Mr. Thimot was granted an option to acquire 1,200,000 shares of common stock at an exercise price of $7.80 per share for a term of ten years of which half of the options vest monthly over four years and the balance is subject to certain performance vesting requirements. The aggregate grant date fair value of Mr. Thimot’s stock options was $5,272,000. Mr. Thimot has not exercised or realized a gain on his vested stock options as of the date of the submission of this |
| Mr. |
| (4) | Mr. Szoke was the Chief Solutions Architect and former Director of the Company. Mr. Szoke retired in November 2021 and received an agreement to receive $305,000 over the ensuing year in lieu of his executive retention agreement. Additionally, the Company accelerated the vesting of the stock options granted in 2021. Mr. Szoke has not exercised or realized a gain on any of his vested stock options as of the date if the submission of this report. Mr. Szoke was reappointed as a Director of the Company on March 9, 2023. |
| (5) | Mr. Stoller was hired on January 31, 2017 and as part of his compensation package was granted 166,667 stock options which vest over three years and 166,667 shares of restricted stock which shares vest upon attainment of certain performance criteria. In |
| (6) | Ms. Pham was hired as Chief Financial Officer on April 25, 2022 and commenced employment on June 20, 2022. Ms. Pham and the Company entered an Offer Letter pursuant to which Ms. Pham received a signing bonus of $25,000 and will earn an annual salary of $275,000 with a bonus target at 40% of the base salary (pro-rated for 2022). In addition, Ms. Pham was granted an option to acquire 350,000 shares of common stock at an exercise price of $2.41 per share for a term of ten years of which half of the options vest monthly over four years and the balance is subject to certain performance vesting requirements. The aggregate grant date fair value of Ms. Pham’s stock options was $722,750. In December 2022, Ms. Pham was granted an option to purchase 60,000 shares of common stock at an exercise price of $0.79 per share for a term of ten years which will vest over one year period at the aggregate grant date fair value of $45,000. Mr. Pham has not exercised or realized a gain on |
Mr. SzokeMessrs. Thimot, Smith, and Mr. StollerMs. Pham each are party to an Executive Retention Agreement to encourage the executiveExecutive to continue to devote histhe Executive’s full attention and dedication to the success of the Company, and to provide specification compensation and benefits to the executiveExecutive in the event of a Termination Upon Change of Control or certain other terminations pursuant to the terms of this Agreement. These agreements include payment of salary and other benefits for one year in addition to acceleration and vesting of certain stock compensation plans.
Pursuant to theMr. Szoke’s Executive Retention Agreements, as more fully described below, certain executive officers couldAgreement, he would earn additional compensation if certain performance thresholdstargets were met. One of the Mr. Szoke’s performance target was met in 2021 and was paid an additional payment of approximately $206,000.
Pursuant to Mr. Stoller’s Executive Retention Agreement, he would earn additional compensation if certain performance targets were met. The targetsperformance target for Mr. Szoke and Stoller were not met in 2020 and 2019. No other incremental compensation targets for any executive were met in 2020 and 2019. The targets werewas met in 2021 upon the Company’s up-listing to Nasdaq. However, the Boardand was paid an additional payment of Directors may allocate salaries and benefits to the officers in its sole discretion.approximately $356,000. Additionally, Mr. Stoller received a discretionary bonus of $37,500 for 2021.
TheOther than the 401(k) retirement plan which allows employer match of 100% of up to 3% employee 401(k)payroll contribution and 50% of 4%-5% employee 401(k) payroll contribution, the Company currently has no other retirement, pension, or profit-sharing plan covering its officers and directors;directors. The Company provideprovides medical benefits on a cost sharing basis and has a dental plan which is fully paid by the employees. Seeemployees cost. (See “Executive Agreements” below.)
Grant of Plan-Based Awards
During the calendar year ended December 31, 2020,2022, the following grants were made to named executive officers:
| ● | The Company granted Mr. Smith stock options to acquire a total of 250,000 shares of common stock that vest over one year. |
| ● | The Company granted Ms. Pham stock options to acquire 350,000 shares of common stock of which half vest monthly over four years and the balance is subject to certain performance vesting requirements. Ms. Pham was granted stock options to acquire an additional 60,000 shares of common stock that vest over one year. |
During the calendar year ended December 31, 2021, the following grants were made to the named executive officers.
| ● | The Company granted Mr. |
| ● | The Company granted Mr. Kumnick stock options to acquire 583,333 shares of common stock that vest upon the achievement of certain market capitalization thresholds or performance conditions. In November 2021 Mr. Kumnick agreed to cancel 300,000 of these stock options in consideration of removing certain service conditions. |
| ● | In |
As previously described, in connection with their respective employment arrangements, Philip Beck and Stuart Stoller were awarded 500,000 and 166,667 common stock options in 2017. Additionally, Philip Beck and Stuart Stoller respectively received 500,000 and 166,667 restricted common shares in 2017. On October 30, 2020, pursuant to the terms of Mr. Beck’s Restricted Stock Agreement, as amended by the Separation Agreement, the Company repurchased for $1.00 the 500,000 shares of Unvested Restricted Stock
There were no other grants of plan-based awards or common stock options, to other named executive officers during the yearyears ended December 31, 2020.2022 and 2021.
Outstanding Equity Awards to Executive Officers
The following table sets forth information with respect to outstanding equity awards held by our Named Executive Officersnamed executive officers as of December 31, 2020.2022.
| Option Awards | Stock awards | |||||||||||||||||||||||||||||||||||
| (a) | Number of Securities Underlying Unexercised Options (#) Exercisable (b) | Number of Securities Underlying Unexercised Options (#) Unexercisable (c) | Equity Incentive Plan Awards Number of Securities Underlying Unexercised Unearned Options (#) (d) | Option Exercise Price ($) e | Option Expiration Date (f) | Number of shares or units of stock that have not vested (#) (g) | Market value of shares or units of stock that have not vested ($) (h) | Equity Incentive Plan Awards: Number of unearned shares or units of stock or rights that have not vested (#) (i) | Equity Incentive Plan Awards: Market or payout of unearned shares, units or other rights that have not vested ($) (j) | |||||||||||||||||||||||||||
| Executive Officer | ||||||||||||||||||||||||||||||||||||
| Phillip Kumnick (1) | 222,222 | 888,889 | - | $ | 2.10 per share | May 22, 2030 | 50,000 | 6,800 | - | - | ||||||||||||||||||||||||||
| Phillip Kumnick | 33,333 | 66,667 | - | $ | 1.65 per share | December 9, 2029 | - | - | - | - | ||||||||||||||||||||||||||
| Philip Beck (2) | 566,667 | - | - | $ | 1.50 per share | August 12, 2026 | - | - | - | - | ||||||||||||||||||||||||||
| Philip Beck | 500,000 | - | - | $ | 3.00 per share | January 31, 2027 | - | - | - | - | ||||||||||||||||||||||||||
| Stuart Stoller (1) | 166,667 | - | - | $ | 3.00 per share | January 31, 2027 | 166,667 | 22,667 | - | - | ||||||||||||||||||||||||||
| Stuart Stoller | - | 83,333 | - | $ | 2.78 per share | October 6, 2030 | - | - | - | - | ||||||||||||||||||||||||||
| Thomas Szoke | 333,333 | - | - | $ | 13.50 per share | September 25, 2025 | - | - | - | - | ||||||||||||||||||||||||||
| Plan Awards | ||||||||||||||||||||
| Number of | Number of | Number of | ||||||||||||||||||
| Securities | Securities | Securities | ||||||||||||||||||
| Underlying | Underlying | Underlying | ||||||||||||||||||
| Unexercised | Unexercised | Unexercised | Option | Option | ||||||||||||||||
| Options (#) | Options (#) | Unearned | Exercise | Expiration | ||||||||||||||||
| Exercisable | Unexercisable | Options (#) | Price ($) | Date | ||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | |||||||||||||||
| Executive Officer | ||||||||||||||||||||
| Phillip Kumnick | 100,000 | - | - | 1.65 | 12/10/29 | |||||||||||||||
| Phillip Kumnick | 1,111,111 | - | - | 2.39 | 5/22/25 | |||||||||||||||
| Phillip Kumnick (1) | 9,018 | - | 283,334 | 7.20 | 5/5/31 | |||||||||||||||
| Phillip Kumnick | 10,238 | - | - | 10.16 | 12/29/31 | |||||||||||||||
| Phillip Kumnick | 8,742 | 26,224 | - | 3.03 | 9/20/32 | |||||||||||||||
| Thomas Thimot (1) | 225,000 | 375,000 | 600,000 | 7.80 | 6/4/31 | |||||||||||||||
| Cecil Smith III (1) | 112,500 | 187,500 | 300,000 | 7.80 | 6/4/31 | |||||||||||||||
| Cecil Smith III | - | 150,000 | - | 2.83 | 3/18/32 | |||||||||||||||
| Cecil Smith III | - | 100,000 | - | 0.79 | 12/19/32 | |||||||||||||||
| Thomas Szoke | 333,333 | - | - | 13.50 | 9/25/25 | |||||||||||||||
| Thomas Szoke | 33,333 | - | - | 7.20 | 5/5/31 | |||||||||||||||
| Stuart Stoller | 166,667 | - | - | 3.00 | 1/31/27 | |||||||||||||||
| Stuart Stoller | 83,333 | - | - | 2.78 | 10/7/30 | |||||||||||||||
| Stuart Stoller | 100,000 | - | - | 7.20 | 5/5/31 | |||||||||||||||
| Hang Thi Bich Pham (1) | 21,875 | 153,125 | 175,000 | 2.41 | 6/20/32 | |||||||||||||||
| Hang Thi Bich Pham | - | 60,000 | - | 0.79 | 12/19/32 | |||||||||||||||
| (1) | The performance |
CompensationThere were no outstanding unvested stock awards for the named executive officers as of DirectorsDecember 31, 2022.
The non-management Directors consisting of Herb Selzer, Theodore Stern, Ricky Solomon (Resigned January 2020), Phillip Kumnick (appointed December 2019 through May 2020), Philip Broenniman (appointed March 2020 through May 2020)Option Exercises and Philip Beck (May 2020 through his resignation October 2020) receive $72,000 per annum for Board membership, inclusive of all Board meeting and committee meeting attendance fees in the form of an annual restricted common stock grant vesting in quarters at the end of each quarter after the date of the grant. Additionally, they will each receive, an annual retainer for service on each committee of $5,000 to be paid in cash.Stock Vested Table
During 2019There have been no option exercises and 2018,restricted stock vesting during the Company recorded expense of $40,000 for the annual retainer for service on Board. The amounts recorded for Mr. Selzer, Mr. Stern and Mr. Solomon for the annual retainer for service on Board committees was $15,000, $15,000 and $10,000. In 2019 the non-management directors did not receive their common stock grant, nor the full amount of their cash compensation.year ended December 31, 2022 by any named executive officers.
On his appointment Mr. Kumnick received a grant of an option to purchase 100,000 shares of common stock vesting in equal parts over three years, or earlier in the event of a change of control of the Company (as defined in the option grant). In March 2020 the Company entered into a restricted stock purchase agreement with Phillip Kumnick, providing Mr. Kumnick with the right to acquire 50,000 shares of common stock at par value subject to the Vesting Criteria (as defined in the stock purchase agreement). On his appointment, the Company entered into a restricted stock purchase agreement with Philip Broenniman, providing Mr. Broenniman with the right to acquire 50,000 shares of common stock at par value subject to the Vesting Criteria. The performance element of the Vesting Criteria has been satisfied and the shares will vest on or before December 31, 2021, subject to continued service under certain conditions. On May 22, 2020, Mr. Kumnick was appointed CEO and Mr. Broenniman was appointed President and COO; Mr. Beck resigned as CEO on May 22, 2020 and as Chairman and a member of the Board of Directors on October 30, 2020.
Executive Employment Agreements
Mr. Thomas Thimot and Mr. Cecil Smith, became employed by the Company as Chief Executive Officer and President and Chief Technology Officer effective June 14, 2021. Mr. Thimot and the Company entered into an Offer Letter pursuant to which Mr. Thimot will earn an annual salary of $325,000 with a bonus target at 50% of the base salary (pro-rated for 2021) upon terms to be agreed with the Compensation Committee for 2021 and on the understanding that the 2022 target will include a requirement of the Company achieving three times the annual revenue of 2021. Additionally, Mr. Thimot was granted an option to acquire 1,200,000 shares of common stock at an exercise price of $7.80 per share for a term of ten years of which half of the options vest monthly over four years and the balance is subject to certain performance vesting requirements. Mr. Thimot resigned upon the appointment of Mr. Daguro as Chief Executive Officer on March 23, 2023. On March 23, 2023, the Company and Thomas Thimot entered into a Confidential Separation Agreement and General Release for the purposes of separation of Mr. Thimot from the Company as Chief Executive Officer and an employee by mutual consent and settling, compromising and resolving all claims between them. Mr. Thimot’s resignation was effective March 23, 2023. In addition to the Company paying all accrued but unpaid salary and providing reimbursement for all outstanding expenses, the Company has agreed to pay Mr. Thimot $325,000 which shall be deferred until the earlier of April 1, 2025 and a change of control of the Company and is subordinated to the initial advance in the amount of $900,000 made pursuant to the Amended & Restated Facility Agreement entered into as of March 8, 2023 between the Company and Stephen Garchik, as well as to all present and future secured indebtedness of the Company under the Senior Convertible Notes issued by the Company as of March 21, 2022 and pursuant to such Facility Agreement. Mr. Thimot will also be eligible for certain health benefits. The exercise period with respect to Mr. Thimot’s stock option to acquire 262,500 shares of common stock at an exercise price of $7.20 per share was extended through March 23, 2027. All unvested grants or other equity awards lapsed and are no longer exercisable as of the separation date.
On June 14, 2021, Mr. Smith and the Company entered an into an Offer Letter pursuant to which Mr. Smith will earn an annual salary of $275,000 with a bonus target at 50% of the base salary (pro-rated for 2021) upon terms to be agreed with the Compensation Committee for 2021. In addition, Mr. Smith will receive a bonus of $50,000 after 90 days of service. Additionally. Mr. Smith was granted an option to acquire 600,000 shares of common stock at an exercise price of $7.80 per share for a term of ten years of which half of the options vest monthly over four years and the balance is subject to certain performance vesting requirements. On February 15, 2023, Mr. Smith ceased to be an employee, and the President and Chief Technology Officer of the Company.
In June 2021, Mr. Kumnick and Broenniman resigned from their positions as Chief Executive Officer and President upon Mr. Thimot and Mr. Smith joining the Company. The terms of their employment arrangement are below.
On May 22, 2020, Phillip L. Kumnick, Deputy Chairman of the Company, was appointed as Chief Executive Officer of the Company. Philip R. Broenniman, a director of the Company, was appointed as Chief Operating Officer and President of the Company. On December 31, 2020 effectiveEffective May 22, 2020, Mr. Kumnick and Mr. Broenniman each entered into Offer Letters with the Company providing that each of the executives will devote their full time and attention to the business of the Company on an “at will” basis. Mr. Kumnick and Mr. Broenniman each resigned as Executive Officers on June 14, 2021.
Pursuant to the Offer Letter entered with Mr. Kumnick, Mr. Kumnick base salary uponsince his engagement was $125,000 per annum and was increased to $187,500 per annum as of November 1, 2020. Subject to the Company achieving a revenue target of not less than $8,000,000 in a fiscal year (the “Revenue Target”), the base salary wasis to be increased to $250,000 per annum and to be again further reviewed by the Compensation Committee based on prevailing market conditions. Further, upon achieving the Revenue Target or a portion thereof or in the event of a change of control or involuntary termination, Mr. Kumnick will receive a bonus of up to $64,980.$64,980 (which was subsequently canceled). Mr. Kumnick wasis also eligible to receive the usual benefits available to the executives of the Company. Upon Mr. Kumnick’s resignation he ceased to be entitled to the bonus.
Pursuant to the Offer Letter entered with Mr. Broenniman, Mr. Broenniman base salary uponsince his engagement was $87,500 per annum and was increased to $131,250 per annum as of November 1, 2020. Subject to the Company achieving the Revenue Target,Targets, the base salary is to be increased to $175,000 per annum and to be again further reviewed by the Compensation Committee based on prevailing market conditions. Further, upon achieving the Revenue Target or a portion thereof or in the event of a change of control or involuntary termination, Mr. Broenniman will receive a bonus of up to $45,833.$45,833 (which was subsequently canceled). Mr. Broenniman wasis also eligible to receive the usual benefits available to the executives of the Company. Upon Mr. Broenniman’s resignation, Mr. Broenniman waived the payment of his base salary effective April 1, 2021 and he ceased to be entitled to the bonus.
In May 2020, Mr. Kumnick was granted options to acquire 1,111,111 shares of common stock and Mr. Broenniman was granted options to acquire 555,556555,555 shares of common stock, with vesting subject in part to performance conditions which have now been satisfied.
In May 2021 Mr. Kumnickstock. 20% of the options were vested at grant and Mr. Broenniman were each granted options to acquire 583,333 shares of common stock whichthe balance vest in tranches subject to performance conditions. In November 2021 Mr. Kumnick and Mr. Broenniman agreed to cancel 300,000 and 200,000, respectively, of these stock optionsAll performance conditions were met in consideration of removing certain service conditions.2021.
On January 31, 2017, Mr. Beck and theThe Company entered an Executive Retention Agreement pursuant to which Mr. Beck agreed to serve as Chief Executive Officer and President in consideration of an annual salary of $350,000 of which $50,000 shall be deferred until the Company raises in the aggregate $15 million in debt and/or equity capital. The Company agreed to provide a bonus of 75% of the base salary upon the Company timely filing its annual report on Form 10-K for the year ended December 31, 2017 and the Company raising gross proceeds of $15 million in debt and/or equity capital (“Milestone 1”) and a bonus of 150% of the base salary upon the Company achieving (i) any merger or sale of the Company or its assets, (ii) the Company achieving adjusted EBITDA of $10 million in a fiscal year, (iii) the Company achieving a listing on a national exchange and then or subsequently raising gross proceeds in the amount of $10 million or achieving a valuation of $125 million or (iv) the Company achieving $20 million of revenue on a trailing 12 months basis (“Milestone 2”).
The Company also granted Mr. Beck a stock option to acquire 500,000 shares of common stock of the Company at an exercise price of $3.00 per share for a period of ten years and the Company agreed to a Restricted Stock Purchase Agreement with Mr. Beck pursuant to which Mr. Beck purchased 500,000 shares of common stock at a per share price of $0.003, which shares of common stock vest upon achieving Milestone 2. The Stock Options vested with respect to (i) one-third of the shares of common stock as of January 31, 2017 and (ii) in 24 equal monthly tranches commencing on the grant date.
On May 22, 2020, the Company and Mr. Beck entered into a separation letter agreement, which provided for payment to Mr. Beck of one year’s severance in the amount of $350,000 as well as certain employee benefits, payable in accordance with the terms of Mr. Beck’s Retention Agreement. During 2020, the Company paid $287,500 plus his monthly medical insurance premiums. The remaining $87,500 was paid in February 2021. On October 30, 2020, Philip Beck resigned as a director of the Company and the Company repurchased Mr. Beck’s restricted stock for $1.00 under the provisions of his Restricted Stock Agreement.
On January 31, 2017, Mr. Szoke and the Company entered into an Executive Retention Agreement pursuant to which Mr. Szoke agreed to serve as Chief Technology Officer in consideration of an annual salary of $250,000. The Company has agreed to provide a bonus of up to 50% of the base salary in 2017 upon the Company achieving a gross margin to be mutually agreed upon by the Company and Mr. Szoke and a bonus of 75% of the base salary upon the Company achieving Milestone 2. The Company and Mr. Szoke entered into an Indemnification Agreement on January 31, 2017. Mr. Szoke’s annual salary was increased in late 2017 to $275,000 per year. Mr. Szoke did not meet the 2017 bonus requirement.
In May 2021 Mr. Szoke was granted options to acquire 33,333 shares of common stock which vest over a three-year period subject to continued service.
On January 31, 2017, the Company entered an Executive Retention Agreement with Stuart Stoller, pursuant to which Stuart Stoller agreed to serve as Chief Financial Officer in consideration of an annual salary of $225,000. The Company has agreed to provide two different bonus levels upon the achievement of certain performance, financial and other milestones. The Company also granted Mr. Stoller a stock option to acquire 166,667 shares of common stock at an exercise price of $3.00$0.10 per share for a period of ten years. Further, Company has agreed to a Restricted Stock Purchase Agreement in which Mr. Stoller purchased an additional 166,667 shares at a per share price of $0.0003,$0.0001, which shares of common stock vest upon meeting certain performance, milestones, which have been metfinancial and subject to continued service under certain conditions.other milestones. The Stock Options are fully vested.
vest with respect to (i) one third of common stock upon the anniversary of the grant date and (ii) in 24 equal installments commencing on the one year anniversary of the grant. In May 2021, Mr. Stoller was granted options to acquire 100,000 shares of common stock options which vest over a three-year period subjectthree years. In connection with his retirement in June 2022, the vesting of the remaining unvested stock options of all grants were approved by the Board to continued service.be fully accelerated.
OnMs. Pham was hired as Chief Financial Officer on April 25, 2022 and commenced employment on June 14, 2021, Mr. Thimot20, 2022. Ms. Pham and the Company entered an Offer Letter pursuant to which Ms. Pham received a signing bonus of $25,000 and will earn an annual salary of $275,000 with a bonus target at 40% of the base salary (pro-rated for 2022). In addition, Ms. Pham was granted an option to acquire 350,000 shares of common stock at an exercise price of $2.41 per share for a term of ten years of which half of the options vest monthly over four years and the balance is subject to certain performance vesting requirements. The aggregate grant date fair value of Ms. Pham’s stock options was $722,750.
On March 23, 2023, the Company and Rhoniel A. Daguro, a director of the Company, entered an Offer Letter pursuant to which Mr. ThimotDaguro agreed to serve as Chief Executive Officer of the Company in consideration of an initial annual salary of $325,000. The Company agreed$400,000. Mr. Daguro will be eligible for an annual target bonus of up to provide$375,000 based on performance milestones. For the period ending March 31, 2024, a bonus amount of 50%$75,000 shall be payable upon the Company achieving increments of the base salary (pro rated for 2021) upon terms$1,000,000 in total contract value of all customer agreements less claw backs (“Bookings”) up to be agreed withan aggregate of $5,000,000 in Bookings. For subsequent years, Mr. Daguro and the Compensation Committee of the Board will mutually agree as to the performance targets to earn for 2021the annual bonus.
The Company provided Mr. Daguro with an initial grant of options (“Initial Grant”) to purchase 2,455,000 shares of common stock for a period of ten years vesting subject to achievement of performance and service conditions, at an exercise price of $0.397. Upon the Company being able to grant additional options under a stock incentive plan, it will make an additional grant of options to Mr. Daguro to acquire 1,115,000 shares of common stock for a period of ten years vesting subject to achievement of performance and service conditions (the “Additional Grant”). The exercise price of the options shall be equal to the closing price of the common stock on the understandingNasdaq Stock Market on the date of such Additional Grant. If and to the extent that the 2022 target will include a requirementexercise price under the Additional Grant is higher than the exercise price under the Initial Grant, the Company shall determine the incremental cost of the Additional Grant by deducting the exercise price of the Initial Grant from the exercise price of the Additional Grant and multiplying the difference by 1,115,000 (the “Difference”). The Difference shall be payable by the Company achieving three timesto Mr. Daguro as a bonus payable upon exercise of options comprised in the annual revenueAdditional Grant, by way of 2021.offset against the exercise price of such options to the extent of the total exercise price of the options being exercised at that time. To the extent that the entire Difference cannot be applied to any particular exercise, the balance shall be carried forward and applied to future exercises of the Additional Grant. In addition,lieu of agreeing to pay the bonus, the Company may in its sole discretion elect to grant Mr. Thimot will receiveDaguro an additional 350,000 shares of common stock as part of the Additional Grant (for a one-time bonus opportunitytotal of 100%1,465,000 shares of base salary upon a change of control. common stock under the Additional Grant).
The employment of Mr. ThimotDaguro is at will and may be terminated at any time, with or without formal cause. The Company also entered an Executive Retention Agreement with Mr. Thimot,Daguro, pursuant to which the Company has agreed to provide specified severance and bonus amounts and to accelerate the vesting on his equity awards upon termination upon a change of control or an involuntary termination, as each term is defined in the agreements.agreement. In the event of a termination upon a change of control or an involuntary termination, after 12 months of service, Mr. ThimotDaguro is entitled to receive an amount equal to 100% of his base salary, and the targetactual bonus then in effectearned but unpaid for the executive officer forprevious year and any bonus that was earned but unpaid prior to the year in which such termination occurs. Mr. Thimot will be entitled to receivedate. Further, upon termination upon a paymentchange of 50% of his base salary in the event there iscontrol or an involuntary termination, after six months of service. At the election of the executive officer, the Company will also continue to providereimburse Mr. Daguro for the cost of continuation of health related employee insurance coverage for twelveMr. Daguro and his eligible dependents pursuant to COBRA until the earlier of 12 months atfollowing the Company’s expense.termination date, the date Mr. Thimot was granted an option to acquire 1,200,000 shares of common stock at an exercise price of $7.80 per shareDaguro and his dependents are eligible for health coverage from a term of ten years half of which is subject to certain performance vesting requirementsnew employer or the date Mr. Daguro and half of which vests on a monthly basis over a period of four years.his eligible dependents are no longer eligible for COBRA.
On June 14, 2021, Mr. SmithApril 12, 2023, the Company and Thomas R. Szoke, a director of the Company, entered an Offer Letter pursuant to which Mr. SmithSzoke agreed to serve as President and Chief Technology Officer of the Company in consideration of an initial annual salary of $275,000. The Company agreed$250,000. Mr. Szoke received an initial signing bonus of $20,833 and will be eligible for an annual target bonus of up to provide$200,000 based on performance milestones. For the period ending March 31, 2024, a bonus amount of 50%$40,000 shall be payable upon the Company achieving increments of the base salary (pro rated for 2021) upon terms$1,000,000 in total contract value of all customer agreements less claw backs (“Bookings”) up to be agreed withan aggregate of $5,000,000 in Bookings. For subsequent years, Mr. Szoke and the Compensation Committee of the Board will mutually agree as to the performance targets to earn for 2021the annual bonus.
The vesting criteria of Mr. Szoke’s Stock Options to acquire 100,000 shares of common stock previously granted to Mr. Szoke on March 14, 2023 (the “Original Grant”) were amended pursuant to an Amended and Restated Stock Non-Statutory Option Agreement providing for vesting subject to achievement of performance and service conditions. All other terms of the Original Grant were not changed. Upon the Company being able to grant additional options under a stock incentive plan, it will make an additional grant of options to Mr. Szoke to acquire 400,000 shares of common stock for a period of ten years vesting subject to achievement of performance and service conditions (the “Additional Grant”). The exercise price of the options shall be equal to the closing price of the common stock on the understanding thatNasdaq Stock Market on the 2022 target will include a requirementdate of the Company achieving three times the annual revenue of 2021. In addition, Mr. Smith will receive a one-time bonus opportunity of 50% of base salary upon a change of control and a bonus of $50,000 after 90 days of service. such Additional Grant.
The employment of Mr. SmithSzoke is at will and may be terminated at any time, with or without formal cause. The Company also entered an Executive Retention Agreement with Mr. Smith,Szoke, pursuant to which the Company has agreed to provide specified severance and bonus amounts and to accelerate the vesting on his equity awards upon termination upon a change of control or an involuntary termination, as each term is defined in the agreements.agreement. In the event of a termination upon a change of control or an involuntary termination, after 12 months of service, Mr. SmithSzoke is entitled to receive an amount equal to 100% of his base salary, and the targetactual bonus then in effectearned but unpaid for the executive officer forprevious year and any bonus that was earned but unpaid prior to the year in which such termination occurs. Mr. Smith will be entitled to receivedate. Further, upon termination upon a paymentchange of 50% of his base salary in the event there iscontrol or an involuntary termination, after six months of service. At the election of the executive officer, the Company will also continue to providereimburse Mr. Szoke for the cost of continuation of health related employee insurance coverage for twelveMr. Szoke and his eligible dependents pursuant to COBRA until the earlier of 12 months atfollowing the Company’s expense.termination date, the date Mr. Smith was granted an option to acquire 600,000 shares of common stock at an exercise price of $7.80 per shareSzoke and his dependents are eligible for health coverage from a term of ten years, half of which is subject to certain performance vesting requirementsnew employer or the date Mr. Szoke and half of which vests on a monthly basis over a period of four years. his eligible dependents are no longer eligible for COBRA.
Certain Relationships and Related Transactions and Director Independence
The Company is listed on the Nasdaq Capital Market and therefore the Company is complying with the Nasdaq Listing standards applicable to director independence. Pursuant to Rule 4200 of The Nasdaq Stock Market one of the definitions of an independent director is a person other than an executive officer or employee of a company. The Nasdaq rules require companies to maintain a Board a majority of the members of which are independent directors. Additionally, compensation committee members must not have a relationship with the Company that is material to the director’s ability to be independent from management in connection with the duties of a compensation committee member. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or be an affiliated person of the listed company or any of its subsidiaries.
The Company’s board of directors has reviewed the materiality of any relationship that each of the directors has with the Company, either directly or indirectly. Based on this review the board has determined that there are five (5)four (4) independent directors, including all the members of the Audit, Compensation and Governance Committees.
In connection with the Company’s ability to secure third-party financing, during the year ended December 31, 2018, the Company paid Network 1 Financial Securities, Inc. (“Network 1”), a registered broker-dealer, cash feesSale of $659,000, issued Network 1 2,470,000 common stock purchase warrants at a price of $0.165 cents per share. During the year ended December 31, 2019, the Company paid Network 1 cash fees of approximately $110,000, and issued Network 1 and issued 858,000 common stock purchase warrants at a price of $0.088 cents per share. A former member of the Company’s Board of Directors previously maintained a partnership with a key principal of Network 1. In connection with the offering of the 15% Senior Secured Convertible Notes in the aggregate amount of $1,510,000 in February 2020 (the “2020 Notes”), the Company paid Network 1 cash fees of approximately $104,800Common Stock
On August 10, 2016,March 18 and March 21, 2022, the Company entered into a Letter AgreementSubscription Agreements (the “Amendment”“Subscription Agreements”) with Parity Labs, LLC (“Parity”), a company principally owned by Mr. Beck (former directoran accredited investor and CEO)two directors and his family, to amend the compensation sectionan executive officer of that certain Advisory Agreement previously entered into between the Company, and, Parity on November 16, 2015 for the provision of strategic advisory services, to provide for the issuance to Parity of a common stock option (the “Parity Option”) to acquire 666,667 shares of common stock of the Company exercisable at $1.50 per share for a period of ten years. The Parity Option vested in entirety upon Mr. Beck becoming the Chief Executive Officer of the Company on January 31, 2017. The Company’s headquarters are located in Long Beach, New York where the Company currently leases offices on a month-to-month basis. The facilities are managed by Bridgeworks LLC, (“Bridgeworks”) a company providing office facilities to emerging companies, principally owned by Mr. Beck and his family. The arrangement with Bridgeworks LLC allows the Company to use offices and conference rooms for a fixed, monthly fee. Since 2014, Mr. Beck has served as managing member of Parity, and since 2016, as Chairman, a Member and co-founder of Bridgeworks. During 2020 and 2019, the Company paid Bridgeworks $52,500 and $89,100, respectively in each year for the use of the facilities.
In June 2019, two of the Company’s Directors and one officer purchased 52,083 shares of common stock of the 2019 of the common stock offering.
In December 2019 Mr. Beck former Chairman and CEO of the Company purchased $25,000 of 8% Notes.
In February 2020, Mr. Beck, Mr. Selzer and Mr. Stern purchased $50,000, $100,000 and $50,000 respectively of 2020 Notes. In addition, Mr. Stern is a trustee of the Stern Trust whose Stern Note was amended and restated as part of the 2020 Notes Offering. A comprehensive disclosure of the 2020 Notes can be found in Note 7pursuant to the Consolidated Financial Statements for the Year Ended December 31, 2020.
Mr. Beck converted all principalSubscription Agreements, those directors and officer invested a total of his 8% Notes and 2020 Notesapproximately $0.2 million to purchase shares of common stock in 2021. Mr. Selzer and Mr. Stern’s 2020 Notes and the Stern Note remain outstanding, as disclosed in Note 7 to the Consolidated Financial Statements.
In March 2020, the Company granted 50,000 shares of Restricted common stock to each of Phillip Kumnick and Philip Broenniman, new members of our Board of Directors, in connection with their compensation for service as Board Members. The restricted stock vests upon the achievement of certain performance criteria. The performance criteria have not been met as of December 31, 2020.
Mr. Phillip Kumnick and Mr. Philip Broenniman, two of the Company’s Director’s became employed by the Company as respectively Chief Executive Officer and President and Chief Operating Officer effective May 22, 2020. Mr. Kumnick earned an initial base salary of $125,000 per annum which was increased to $187,500 per annum as of November 1, 2020 and is subject to review after one year. Mr. Kumnick was granted options to acquire 1,111,111 shares of common stock of which 20% vest at grant and the balance vest subject to performance conditions. Mr. Broenniman earned an initial base salary of $87,500 per annum which was increased to $131,250 as of November 1, 2020 and is subject to review after one year. Mr. Broenniman was granted options to acquire 555,556 shares of common stock of which 20% vest at grant and the balance vest subject to performance conditions.
On June 30, 2020, Company entered into and consummated a private transaction pursuant to which a portion of the Company’s warrants exercisable at per share price of $3.00 (the “$3.00 Warrants”) were exercised for cash at an exercise price of $2.10 per share. In addition, the holders that exercised the $3.00 Warrants received a warrant exercisable for two years to acquire one share of common stock at an exercise price of $4.50 per share (the $4.50 Warrants”) for every four $3.00 Warrants exercised. Mr. Theodore Stern, a former director of the Company, participated in the private transaction resulting in the issuance of 33,333 shares of common stock and 8,333 $4.50 Warrants in consideration of $70,000; and Varana Capital Focused, LP (“VCFLP”), participated in the private transaction resulting in the issuance of 123,889 shares of common stock and 30,972 $4.50 Warrants, in consideration of $260,167. Mr. Philip Broenniman, a director, the former President and COO of the Company is the investment manager of VCFLP.stock.
On August 26, 2021, the Company closed a public offering (the “Public Offering”)completed the Offering of 1,642,856 shares of its common stock at a public offering price of $7.00 per share, including 214,285 shares sold upon full exercise of the underwriter’s option to purchase additional shares, for gross proceeds of approximately $11.5 million, before deducting underwriting discountsmillion. Two executive officers and offering expenses. Mr. Thimotthree members of the Board of Directors participated in the Public Offeringoffering and purchased 71,426approximately 1,314,000 shares.
Credit Facility
On March 21, 2022 the Company entered into a Credit Facility with an accredited investor Mr. Stephen Garchik, who is both a current shareholder of the Company and a Note Investor, pursuant to which the accredited investor agreed to provide a $10.0 million unsecured standby line of credit facility that will rank behind the Convertible Notes and may be drawn down in several tranches, subject to certain conditions described in the Credit Facility. Pursuant to the Credit Facility, the Company agreed to pay the Lender the Facility Commitment Fee of 100,000 shares of our common stock upon the effective date of the Facility Agreement. Upon request by Mr. Garchik and until the full amount due under the Credit Facility is repaid in full, the Company will provide for the nomination of one designee specified in writing by Garchik for appointment to our board of directors and for subsequent election to our board of directors and to recommend such nominee for election to our board of directors. On April 18, 2022, Joseph Trelin, as Garchik’s designee under the Credit Facility, was appointed as a member of the Board of Directors of the Company. By virtue of such right of nomination Mr. Garchik considers himself a “director by deputization”.
The Credit Facility was amended and restated effective March 6, 2023 pursuant to which amendment the amount of the facility was reduced to $3.6 million, an initial advance of $900,000 was made and subsequent advances under the Credit Facility are subject to various conditions including the granting of a security interest over substantially all the Company’s assets.
Convertible Notes Payable
On March 21, 2022, the Company entered into a Securities Purchase Agreement (“SPA”) with certain accredited investors, including two former directors, an affiliate of a director, an executive officer of the Company and a current director who was not a director at the time of the investment (the “Related Note Investors”), and, pursuant to the SPA, sold to the Related Note Investors Senior Secured Convertible Notes (“Convertible Notes”) with an aggregate initial principal amount of approximately $2.2 million and a conversion price of $3.70 per share. In connection with the issuance of the Convertible Notes a total of 3,883 shares of common stock were issued by way of an origination fee. The Convertible Notes will accrue interest at the rate of 9.75% per annum, which will be payable in cash or, for some or all of the first five interest payments, in shares of our common stock at the Company’s option, on the last day of each calendar quarter before the maturity date and on the maturity date. The maturity date of the Convertible Notes is March 31, 2025. During the period ended December 31, 2022, in connection with the payment of interest on the Convertible Notes, 20,761 shares were issued to the Related Note Investors (excluding the executive officer who had retired by the first interest date).
In 2021, the Company received conversion notices from Stern Trust of which Theodore Stern, (a former member of the Board of Directors until June 9, 2021) was the Trustee, converting the principal amount, repayment premium and interest in the amount of approximately $3.5 million payable under the Restated Stern Note into approximately 561,000 shares of common stock. Additionally, Theodore Stern and Herbert Selzer (also a former member of the Board of Directors until June 9, 2021) provided conversion notices for their respective 2020 Notes converting the principal, repayment premium and interest in the amount of approximately $256,000 into approximately 41,000 shares of common stock. The Stern Trust was owed approximately $0.7 million in interest under the Restated Stern Note as of December 31, 2021, which was repaid in full in December 2022.
Director & Executive Compensation
On April 25, 2022, Stuart Stoller indicated his intention to resign as Chief Financial Officer of the Company in connection with his planned retirement. The resignation and retirement were effective as of June 17, 2022 at which time Annie Pham was appointed Chief Financial Officer in his place.
On April 25, 2022, Ms. Hang Thi Bich Pham and the Company entered an Offer Letter pursuant to which Ms. Pham agreed to serve as Chief Financial Officer on June 20, 2022. Ms. Pham will receive an annual salary of $275,000. The Company agreed to provide a bonus of 40% of the base salary (pro rated for 2022) based on achievement of performance milestones, calculated and payable in accordance with the corporate milestones approved by the Board for the year 2022. For subsequent fiscal years the bonus shall be subject to performance targets to be mutually agreed with the Compensation Committee of the Board. In addition, Ms. Pham received a signing bonus in the amount of $25,000, which is fully refundable to the Company if Ms. Pham leaves her employment voluntarily or is terminated for cause prior to the first anniversary of the commencement of employment. The employment of Ms. Pham is at will and may be terminated at any time, with or without formal cause. The Company also entered an Executive Retention Agreement with Ms. Pham, pursuant to which the Company agreed to provide specified severance and bonus amounts and to accelerate the vesting on her equity awards upon termination upon a change of control or an involuntary termination, as each term is defined in the agreements. In the event of a termination upon a change of control or an involuntary termination, Ms. Pham is entitled to receive an amount equal to 100% of her base salary and the target bonus then in effect for the executive officer for the year in which such termination occurs. At the election of the executive officer, the Company will also continue to provide health related employee insurance coverage for up to twelve months, at the Company’s expense. Upon commencing employment, Ms. Pham was granted an option to acquire 350,000 shares of common stock with an exercise price of $2.41 and an exercise period of ten years subject to certain performance vesting requirements. In December 2022, Ms. Pham was granted an option to purchase 60,000 shares of common stock at an exercise price of $0.79 per share for a term of ten years which will vest over one year period.
On June 14, 2021, Phillip L. Kumnick resigned as Chief Executive Officer of authID, Inc., and Thomas L. Thimot was appointed Chief Executive Officer in his place. Further, Philip R. Broenniman resigned as President and Chief Operating Officer and Cecil N. Smith III (Tripp) was appointed President and Chief Technology Officer. In May 2021 the Company granted to each of Mr. Kumnick and Mr. Broenniman options (the “May 2021 Options”) to acquire a total of 1,166,667 shares of common stock at an exercise price of $7.20 per share for a term of ten years that vest upon the achievement of certain market capitalization thresholds, or performance conditions. In November 2021 Mr. Kumnick and Mr. Broenniman agreed to cancel 300,000 and 200,000, respectively, of these stock options in consideration of $499,982. removing certain service conditions.
Mr. Kumnick participatedThomas Thimot and Mr. Cecil Smith, became employed by the Company as Chief Executive Officer and President and Chief Technology Officer effective June 14, 2021. Mr. Thimot and the Company entered into an Offer Letter pursuant to which Mr. Thimot will earn an annual salary of $325,000 with a bonus target at 50% of the base salary (pro-rated for 2021) upon terms to be agreed with the Compensation Committee for 2021 and on the understanding that the 2022 target will include a requirement of the Company achieving three times the annual revenue of 2021. Additionally, Mr. Thimot was granted an option to acquire 1,200,000 shares of common stock at an exercise price of $7.80 per share for a term of ten years of which half of the options vest monthly over four years and the balance is subject to certain performance vesting requirements. Mr. Thimot resigned effective upon the appointment of Mr. Daguro as Chief Executive Officer on March 23, 2023.
On June 14, 2021, Mr. Smith and the Company entered an into an Offer Letter pursuant to which Mr. Smith will earn an annual salary of $275,000 with a bonus target at 50% of the base salary (pro-rated for 2021) upon terms to be agreed with the Compensation Committee for 2021. In addition, Mr. Smith will receive a bonus of $50,000 after 90 days of service. Additionally. Mr. Smith was granted an option to acquire 600,000 shares of common stock at an exercise price of $7.80 per share for a term of ten years of which half of the options vest monthly over four years and the balance is subject to certain performance vesting requirements. On February 15, 2023, Mr. Smith ceased to be an employee, and the President and Chief Technology Officer of the Company.
In April 2022, the Company appointed Joe Trelin as an additional independent director. The Company granted Mr. Trelin options to acquire 100,897 shares of common stock or a total of $270,000 at an exercise price of $3.13 per share for a term of ten years that vest one third per year after each Annual Meeting.
In September 2022 the Company granted additional options to acquire 34,996 shares of common stock each at an exercise price of $3.03 per share, to six of the non-employee Directors, by way of annual compensation under the Company’s compensation policy for non-employee directors, which vest monthly over a one-year-period.
In March 2023 Mr. Broenniman, Mr. Gorriz, Mr. Kumnick. Ms. Patel and Mr. Thimot resigned as directors of the Company. Upon their resignation 50,615 of Mr. Broenniman’s options and 154,222 of Mr. Kumnick’s options previously awarded to them for service as non-management directors were cancelled by agreement, or lapsed in accordance with their terms. 41,230 and 39,846 options respectively previously granted to Mr. Gorriz and Ms. Patel lapsed on their resignations, in accordance with their terms. Mr. Daguro, Mr. Jisser, Mr. Szoke and Mr. Thompson were appointed as additional directors and the Public Offeringsize of the Board was reduced to seven. The Company granted to each of Mr. Jisser, Mr. Szoke and purchased 71,425Mr. Thompson options to acquire 100,000 shares of common stock at an exercise price of $0.33 per share for a term of ten years that vest one third per year after each Annual Meeting.
On March 23, 2023, the Company and Rhoniel A. Daguro, a director of the Company, entered an Offer Letter pursuant to which Mr. Daguro agreed to serve as Chief Executive Officer of the Company in consideration of $499,975.an initial annual salary of $400,000. Mr. Broenniman participatedDaguro will be eligible for an annual target bonus of up to $375,000 based on performance milestones. The Company provided Mr. Daguro with an initial grant of options to purchase 2,455,000 shares of common stock for a period of ten years vesting subject to achievement of performance and service conditions at an exercise price is $0.397. Upon the Company being able to grant additional options under a stock incentive plan, it will make an additional grant of options to Mr. Daguro to acquire 1,115,000 shares of common stock for a period of ten years vesting subject to achievement of performance and service conditions. The employment of Mr. Daguro is at will and may be terminated at any time, with or without formal cause. The Company also entered an Executive Retention Agreement with Mr. Daguro, pursuant to which the Company agreed to provide specified severance and bonus amounts and to accelerate the vesting on his equity awards upon termination upon a change of control or an involuntary termination, as each term is defined in the Public Offeringagreement.
On April 12, 2023, the Company and Thomas R. Szoke, a director of the Company, entered an Offer Letter pursuant to which Mr. Szoke agreed to serve as VCFLP purchased 71,425 sharesChief Technology Officer of the Company in consideration of $499,975.an initial annual salary of $250,000. Mr. Smith participatedSzoke received an initial signing bonus of $20,833 and will be eligible for an annual target bonus of up to $200,000 based on performance milestones. The vesting criteria of Mr. Szoke’s Stock Options to acquire 100,000 shares of common stock previously granted to Mr. Szoke on March 14, 2023 (the “Original Grant”) were amended pursuant to an Amended and Restated Stock Non-Statutory Option Agreement providing for vesting subject to achievement of performance and service conditions. All other terms of the Original Grant were not changed. Upon the Company being able to grant additional options under a stock incentive plan, it will make an additional grant of options to Mr. Szoke to acquire 400,000 shares of common stock for a period of ten years vesting subject to achievement of performance and service conditions. The employment of Mr. Szoke is at will and may be terminated at any time, with or without formal cause. The Company also entered an Executive Retention Agreement with Mr. Szoke, pursuant to which the Company agreed to provide specified severance and bonus amounts and to accelerate the vesting on his equity awards upon termination upon a change of control or an involuntary termination, as each term is defined in the Public Offering and purchased 7,142 shares in consideration of $49,994.agreement.
InOn June 9, 2021 Theodore Stern, Herbert Selzer and Thomas Szoke resigned as directors of the Company. The size of the Board of directors was increased to seven and Dr. Michael A. Gorriz, Michael L. Koehneman, Sanjay Puri, Mr. Thimot and Jacqueline L. White were appointed as additional directors of the Company.
The Company granted each of the four new Directors appointed June 2021 stock options to acquire 62,500 shares of common stock or a total of 250,000 at an exercise price of $7.80 per share for a term of ten years that vest one third quarterper year after each Annual Meeting. The Company granted the previously serving non-employee Directors stock options to acquire 93,470 common shares that are vested as the services were previously rendered. The stock options were granted in lieu of other forms of Board of Director Compensation. The Company also granted Mr. Selzer and Mr. Stern 22,388 stock options to acquire common shares for service in 2021 prior to their resignation as Directors. Upon their resignation as directors in June 2021, 13,992 stock options were vested and the balance was cancelled.
Additionally, the Company appointed Neepa Patel as another independent Director in November 2021 and granted stock options to acquire 29,173 shares of common stock that vest one third a year after each Annual Meeting beginning in 2022. Sanjay Puri, one of the directors appointed in June did not stand for reelection to the Board of Directors in December 2021 and forfeited 41,667 stock options. In 2021, the Company and Progress Partners Inc. (“Progress”) modified their Business Advisory Agreement dated May 6, 2020 (“Progress Agreement”). The amended Progress Agreement provides for Progress to undertake continuing business development activities for the Company, for which the Company agreed to paypaid Progress $350,000 which was paid, October 15, 2021.$350,000. Additionally, the Company agreed to paypaid Progress, another $115,000 for additional consulting services. Mr. Puri, a former Director of the Company beginningfrom June 9, to December 29, 2021 is an employee and Managing Director of Progress but is not a principal shareholder nor an executive officer of Progress.
In December 2021, the Company granted additional options to acquire 10,238 shares of common stock each to five of the non-employee Directors, by way of annual compensation under the Company’s compensation policy for non-employee directors, which vest monthly over a one-year-period.
In 2021, the Company and Progress Partners Inc. (“Progress”) modified their Business Advisory Agreement dated May 6, 2020 (“Progress Agreement”). The amended Progress Agreement provides for Progress to undertake continuing business development activities for the Company, for which the Company paid Progress $350,000. Additionally, the Company paid Progress, another $115,000 for additional consulting services. Mr. Puri, a former Director of the Company from June 9, to December 29, 2021 is an employee and Managing Director of Progress but is not a principal shareholder nor an executive officer of Progress.
ACTIONS TO BE TAKEN AT THE MEETING
PROPOSAL NO. 1
PROPOSAL FOR ELECTION OF SEVEN DIRECTORS
At this year’s Annual Meeting, the Board of Directors proposes that the nominees listed below be elected to hold office until the next annual meeting of stockholders and until their successors are duly elected and qualified. All of the nominees are currently serving as directors. All nominees have consented to being named in this Proxy Statement and to serve if elected.
Assuming a quorum is present, the seven nominees receiving the highest number of affirmative votes of shares entitled to be voted for such persons will be elected as directors of the Company to hold office until the next annual meeting of stockholders and until their successors are duly elected and qualified. Unless marked otherwise, proxies received will be voted “FOR” the election of the nominees named below. In the event that additional persons are nominated for election as directors, the proxy holders intend to vote all proxies received by them in such a manner as will ensure the election of the nominees listed below, and, in such event, the specific nominees to be voted for will be determined by the proxy holders.
Information With Respect to Director Nominees
Listed below are the nominees for election to our Board with information showing the principal occupation or employment of the nominees for director, the principal business of the corporation or other organization in which such occupation or employment is carried on, and such nominees’ business experience during the past five years. Such information has been furnished to the Company by the director nominees.
| Name | Age | Position | ||||
| 48 | Director and Chief Executive Officer | |||||
| 62 | Chairman of the Board of Directors | |||||
| 46 | Director | |||||
| Michael L. Koehneman* (1)(2) | 62 | Director | ||||
| Director | ||||||
| Michael C. Thompson(2)(3) | 62 | Director | ||||
| Jacqueline L. White* (1)(3) | 59 | Director |
| * | denotes Committee Chair |
| (1) | Audit Committee |
| (2) | Governance Committee |
| (3) | Compensation Committee |
Thomas L. ThimotRhoniel A. Daguro
Mr. ThimotDaguro joined our company as a director on March 9 2023 and was appointed as Chief Executive OfficerCEO on March 23, 2023. He has over 20 years of sales, marketing, technology, and as a Director of our company on June 14, 2021. Fromventure capital experience. He has built multiple profitable software and professional services firms. Most recently, from 2018 through November 2020, Mr. Thimot served as Chief Executive Officer and Director of Socure, Inc., a leading provider of identity verification and fraud risk solutions. Prior to joining Socure, from September 2015 to October, 2018, Mr. Thimot served as CEO and Director of Clarity Insights a privately held provider of data science consulting acquired by Accenture plc. where2022, he was responsible for all operational aspects of the business. Prior to Clarity Insights, Mr. Thimot served as the Vice President of Cognizant Technology Solutions (Nasdaq: CTSH), a consulting firm and emerging business accelerator where he was responsible for all emerging services related to social, mobile, data analytics and cloud. Prior to 2015, Mr. Thimot held various roles and founded various businesses including his own consulting business, CaseCentral (an eDiscovery cloud-based software service now part of Oracle), Kazeon (a data and analytics software provider now part of Dell), GoRemote, Netegrity and Enigma. Mr. Thimot started his career with Oracle, Price Waterhouse and Accenture and received his BS Mechanical Engineering from Marquette University.
Mr. Thimot’s business management experience, his knowledge of the identity management industry, and his experience in developing strategy and strategic alliances led to the conclusion that he should serve on the Board of Directors, given the Company’s business and structure.
Phillip L. Kumnick
Mr. Kumnick was appointed a director of the Company in December 2019 and served as the Chief ExecutiveRevenue Officer from May 2020-June 2021. On October 30, 2020 he also became the Chairman of the Board of Directors of the Company. From 2010 to 2018, Mr. Kumnick was Senior Vice President Global Acquirer Processing at Visa,Socure Inc., and was the executive in charge of leading and growing Visa’s acquirer and merchant processing services and omni-channel solutions on a global basis. Mr. Kumnick was also a key contributor to the design of the Secure Remote Commerce (SRC) standard now being rolled out by the card brands, which aims to provide a simple and secure card payment experience. SRC uses tokenization to protect consumers’ sensitive data and intelligent identity authentication to help distinguish legitimate cardholders from fraudsters. Mr. Kumnick was the product owner and developer of Visa’s critical entry into encryption and tokenization products and services for their acquiring partners for transactions at the physical point of sale. Prior to joining Visa,that, Mr. Kumnick was the leader of the Cards & Payments practice of Cap Gemini Consulting from October 2009 through June 2010. Prior to Cap Gemini Consulting. Mr. Kumnick was a Senior Vice President at TSYS Acquiring Solutions from 2001 to 2009,Daguro held various executive sales positions with responsibility for leading the Product Management teamPersistent Systems, Hortonworks, and expanding the Company’s portfolio of merchant and acquirer products. He was also a leader of key M&A activities, including business development and strategic investment in Europe, Latin America and Asia, and helped expand TSYS’ client footprint to over 70 countries. Mr. Kumnick started his payments career at MasterCard International where he worked from 1988 to 2000, in various capacities, rising to Vice President & Chief Settlement Officer – Global Settlement Operations. In that role he was responsible for the 7 x 24 x 365 mission critical clearing and payment operations of a $3.0 billion per day global EFT and treasury operation. Mr. Kumnick was a strategic subject matter expert and key contributor to the evolution of MasterCard’s global processing functions. Mr. Kumnick has an MBA- Finance and a BS Finance from St. Louis University.Oracle.
Mr. Kumnick bringsDaguro has over 20 years’years of management and sales experience in the payments and technology industries,industry, with a focus on managing technology platforms and security related issues. This experience, working for some of the world’s leading companies, provides our Board of Directors with valuable insight regarding the Company’s business, products and industry.
Philip R. Broenniman
Philip Broenniman was appointed a director of the Company in March 2020 and served as the President and Chief Operating Officer from May 2020-June 2021. Since 2011, Mr. Broenniman has been Managing Partner and Portfolio Manager for Varana Capital, LLC (“VCLLC”), an investment firm he co-founded in 2011. As part of the VCLLC investment strategy of cooperative engagement, Mr. Broenniman sits on or advises the Board of multiple public/private companies, working with each on strategic planning, operational dynamics, and balance sheet needs/restructuring. Prior to co-founding Varana Capital in 2011, he held the positions of Principal and Portfolio Manager at Visium Asset Management, LP; Managing Partner and Portfolio Manager at Cadence Investment Partners, LLC; and Investment Analyst with the Bass Family Office in Fort Worth, TX. He began his career at Salomon Brothers Inc. trading fixed-income futures and options. Mr. Broenniman earned a BS in Computer Science from Duke University in 1987, an MBA from the Darden School at the University of Virginia in 1993 and the Chartered Financial Analyst (CFA) designation in 2000.
Mr. Broenniman brings over 20 years’particular experience in the investment industry, as well as experience running an operating business.identity verification and authentication. This experience provides our Board of Directors with important insighta valuable perspective regarding the capital marketsindustry in which the Company operates, management, sales and the Company’s fund raising needs, as well as operational matters.strategy.
Michael A. GorrizJoseph Trelin
Dr. GorrizMr. Trelin joined our company on April 18, 2022. Mr. Trelin is a senior, creative business and product leader, technologist and entrepreneur. Since June 2021, Mr. Trelin has served in a consultant capacity advising start-ups to mid-size companies on operations, product strategy and growth. From January 2016 to July 2019, Mr. Trelin served as the Chief Platform Officer of Clear Secure Inc. Mr. Trelin served as the VP Product, Digital Products at NBCUniversal, Inc. from January 2015 through January 2016 and in various roles including as Product Management & Technology Business Leader and General Manager for Amazon.com, Inc. from January 2009 to January 2015. Mr. Trelin also previously served as the Vice President, Product Development and IT for Standard and Poor’s. Mr. Trelin received a Masters Equivalent in Computer Science from Hofstra University and a BA in Sociology from the State University of New York Albany.
Mr. Trelin brings over 20 years of experience as a directorbusiness leader in technology companies focused on Juneproduct development, with particular experience in identity verification and authentication. This industry knowledge and experience, provides our Board of Directors with a valuable perspective regarding the identity verification industry, corporate management, technology operations, strategy and product development.
Ken Jisser
Mr. Jisser joined authID on March 9, 2021. Dr. Gorriz has been the Chief Information Officer and a member of the management team of Standard Chartered Bank, Singapore since 2015.2023. He is also Non-Executive Directorthe Founder & CEO of The Pipeline Group, Inc., a technology-enabled services company that aims to deliver business results for companies looking to build predictable and profitable pipeline. Mr. Jisser founded the Standard Charted Bank Hong Kong Boardcompany in his garage in 2017, and it reached #415 among the mox HK Board.fastest growing private companies in America, according to Inc. Magazine rankings published in 2021. Prior to that, heMr. Jisser served as Chief Information OfficerGTM Advisor at Daimler AG from 2007. Dr. Gorriz attendedDruva Inc., where he rebuilt the University of Konstanz, the University of Freiburg and obtained his Doctorate in Engineering from the University of Stuttgart.global inside sales team.
Dr. Gorriz brings unparalleled engineering knowledge to the Company, which coupled with hisMr. Jisser has over 30 years’20 years of management, entrepreneurial and sales experience in informationthe technology and hisindustry. This experience in managing two global leaders in the field of banking and industry, led to the conclusion that he should serve on theprovides our Board of Directors.Directors with a valuable perspective regarding management, operations, sales and strategy.
Michael L. Koehneman
Mr. Koehneman joined our company as a Director on June 9, 2021. Mr. Koehneman previously held various positions at Pricewaterhouse Coopers, a global accounting firm, through 2020, including the Global Advisory Chief Operating Officer and Human Capital Leader from 2016 through 2019, the U.S. Advisory Operations Leader from 2005 through 2016 responsible for the oversight of Advisory services for PwC, including business unit performance, finance, investments, human resources, acquisitions, and administration, and the Lead Engagement Partner for Financial Statement Audits and Internal Control and Security Reviews from 1993 through 2004 for several public and private company audits. Since 2020 he has also served as a director and member of the Audit Committee of Aspen Group, Inc.
Mr. Koehneman brings over 30 years’ experience working as a CPA and consultant to public and private companies. This accounting and financial expertise provides our Board of Directors with valuable insight regarding audit and financial matters, as well as corporate governance and management.
Neepa PatelThomas R. Szoke
Ms. Patel joined our companyMr. Thomas Szoke is a co-founder of AuthID and has over 35 years of executive management, solutions engineering, and operations management experience in Government Security, Identity Access Management and SaaS solutions industries. He rejoined the Company as a Director on November 15,March 9, 2023 and as Chief Technology Officer on April 12, 2023. Mr. Szoke previously served as a Director and the Company’s Chief Solutions Architect and has held several other executive positions since its inception, from 2013 through 2021. Neepa Patel isHe has also expanded the FounderCompany’s market presence and CEOproduct portfolio through technological innovation and global strategic partnerships. Mr. Szoke has been issued several US and international patents focused on identity solutions and has pioneered the concept and development of Themis -different product lines for the Company including its Multi-Factor Out-of-Band Identity and Transaction Authentication Platform. Since 2021, he has been an independent consultant for the Company and others.
Mr. Szoke’s business management experience, his engineering knowledge, his knowledge of the Company and the identity verification and authentication industry, and his experience in developing strategy and strategic alliances provides our Board of Directors with valuable insight and experience.
Michael C. Thompson
Mr. Thompson joined the Company as a collaborative tech platform to help fintechs, banks and crypto companies create a strong governance, risk and compliance framework. NeepaDirector on March 9, 2023. He has 15+over 38 years of domestic and international experience in various regulatory and compliance positions across the publicpublicly traded and private sector. Priorequity backed consumer and commercial businesses. Since 2022, Mr. Thompson has been a partner at Hemingway Capital, an operationally focused private equity firm. Previously, he served as Chief Executive Officer for companies in the bedding (Corsicana Mattress from 2018 to founding Themis in March 2020, she2022), polyurethane foam and pet products industries and was the Headan operating executive for two leading middle-market private equity firms. Mr. Thompson has also held executive positions with Rubbermaid Commercial Products, Merillat Industries, a division of Compliance for an enterprise blockchain company, R3 from 2016 through December 2019. Before that she had several riskMasco Corporation, and compliance positions at Deutsche Bank from 2014 to 2016Black+Decker, and at Morgan Stanley between 2011 and 2014. At Morgan Stanley, she helped develop a compliance framework for the newly formed banking entities, Morgan Stanley Bank and Morgan Stanley Private Bank post crisis. Neepa began herhis career as a Bank Examiner at the Office of the Comptroller of the Currency (OCC), where she worked from 2005 to 2011. Neepa attended Georgia Tech.with Sunbeam Appliance Company.
Ms. PatelMr. Thompson brings over 15 years of30 years’ experience serving as a business leaderan executive officer in technology companies and regulatory compliance.the products industry in addition to experience in the private equity industry. This experience, provides our Board of Directors with a valuable perspectiveimportant insight regarding financial regulatory compliance, technology operationsthe capital markets and strategy.the Company’s fund raising needs, as well as operational matters.
Jacqueline L. White
Ms. White joined our company as a Director on June 9, 2021. Ms. White has been a leader in enterprise technology software and IT consulting for the past 25 years. Ms. White has held global positions at SAP, Oracle, and Accenture, always leading diverse, high performing organizations around the world. After leading the Banking & Capital Markets line of business of DXC Technology Co. (NYSE: DXC) as Senior Vice President and Practice Lead from September 2019 to January 2021, Ms. White recently joined in January 2021 the Executive Management Team of Temenos AG (Six: TEMN), a company specializing in enterprise software for banks and financial services, as the President of the Americas Region. From January 2018 through September 2019, Ms. White served as the Chief Revenue Officer of Saltstack, a VM Ware Company, and from January 2015 through January 2018 as Global Senior Vice President Global FSI Consulting for SAP (NYSE: SAP). Prior to joining SAP, Ms. White held various positions with Accenture Services Pvt. Ltd., Oracle, BearingPoint and Novell. Ms. White was named by Utah Business Magazine as “Top Executives to Watch” in July 2020. Ms. White received a BA in Comparative Literature from Brigham Young University and a Leadership Certificate from Boston University.
Ms. White brings over 20 years of experience as a business leader in technology companies and international businesses. This experience, provides our Board of Directors with a valuable perspective regarding corporate management, technology operations and strategy.
Required Vote
The election of the directors of the Company requires the affirmative vote of a plurality of the shares of the Company’s common stock present in person or represented by Proxy at the Annual Meeting, which will be the nominees receiving the largest number of votes, which may or may not constitute a majority.
RECOMMENDATION OF THE BOARD FOR PROPOSAL NO. 1:
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF ALL THE NOMINEES DESCRIBED ABOVE.
PROPOSAL NO. 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
Cherry Bekaert LLP (“CB”), our independent auditors, audited our financial statements for the 2020 fiscal year. The Board selected CB as the independent auditors of the Company for the fiscal year ending December 31, 2021. Representatives of CB are expected to attend the 2021 Annual Meeting of Stockholders. CB was first engaged by us for the year ended December 31, 2015.
During the years ended December 31, 2020 and 2019, neither the Company nor anyone acting on its behalf consulted with CB regarding any of the matters or events set forth in Item 304(a)(2) of Regulation S-K, nor did CB receive any fees for any services during that time period relating to such matters or events set forth in Item 304(a)(2) of Regulation S-K.
The aggregate fees incurred for each of the last two years for professional services rendered by CB forCherry Bekaert LLP, the independent registered public accounting firm (PCAOB ID 00677) and the audit of the Company’s annual financial statements included in the Company’s Form 10-K and review of financial statements for its quarterly reports (Form 10-Q) are reported below.
The total fees paid to CBbilled by Cherry Bekaert, LLP in 20202022 aggregated $230,500$250,500 which includes fees for the audit of the 2020 annual financial statements and review of the quarterly financial statements for 2020.2022. Additionally, the Company paid Cherry Bekaert, LLP $5,000$2,500 for services associated with the updated filing of the Company’s S-1.S-3.
The total fees paid to CBbilled by Cherry Bekaert, LLP in 20192021 aggregated $250,000$248,900 which includes fees for the audit of the annual financial statements and review of the quarterly financial statements for 2019.2021. Additionally, the Company paid CB $16,000Cherry Bekaert, LLP $41,400 for services associated with the filing of the Company’s S-1.S-1, S-3 and S-8. Furthermore, the Company paid Cherry Bekaert, LLP $10,000 for assistance with the filing for certain tax credits.
The Audit Committee by its Charter shall pre-approvepre-approves all audit services to be provided to the Company, whether provided by the principal auditor or other firms, and all other services (review, attest and non-audit) to be provided to the Company by the independent auditor. The Audit Committee approved the services rendered for the audit of the financial statements for the year ended December 31, 20202022 and December 31, 20192021 in addition to the services rendered for the filing of the quarterly financial statements on Form 10-Q in 2020.2022 and 2021. Additionally, the Audit Committee approved the fee for Cherry Bekaert, LLP’s assistance with filing for certain tax credits in 2021.
Audit Taxes Filings Accounting $’s in
000’s
Total 2020 $ 225.5 5.0 230.5 2019 $ 234.0 — 16.0 — 250.0
| Audit | Taxes | Filings | Accounting | $’s in 000’s Total | ||||||||||||||||
| 2022 | $ | 248.0 | $ | - | $ | 2.5 | $ | - | $ | 250.5 | ||||||||||
| 2021 | $ | 197.5 | $ | 10.0 | $ | 41.4 | $ | - | $ | 248.9 | ||||||||||
The current policy of the directors, acting via the Audit Committee, is to approve the appointment of the principal auditing firm and any permissible audit-related services. The audit and audit related fees include fees for the annual audit of the financial statements and review of financial statements included in 10K and Q filings.
Required Vote
The ratification of the appointment of the Company’s independent auditors requires the receipt of the affirmative vote of a majority of the shares of the Company’s common stock present in person or by proxy and cast for this specific item.
RECOMMENDATION OF THE BOARD FOR PROPOSAL NO. 2:
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF APPOINTMENT OF CHERRY BEKAERT LLP AS OUR INDEPENDENT AUDITORS FOR THE YEAR ENDED DECEMBER 31, 2021.2022.
2627
PROPOSAL NO. 3
TO APPROVE AN AMENDMENT TO OUR CERTIFICATE OF
INCORPORATION TO EFFECT A REVERSE STOCK SPLIT
General
On May 4, 2023, our board of directors unanimously approved, subject to stockholder approval, an amendment to our certificate of incorporation to effect a reverse stock split of our outstanding common stock by combining outstanding shares of common stock into a lesser number of outstanding shares of common stock by a ratio of not less than 1-for-2 and not more than 1-for-50 at any time prior to June 30, 2024, with the exact ratio to be set within this range by our board of directors at its sole discretion. The board of directors may alternatively elect to abandon such proposed amendment and not effect the reverse stock split authorized by stockholders, in its sole discretion. Upon the effectiveness of the amendment to our certificate of incorporation effecting the reverse stock split, the outstanding shares of our common stock will be reclassified and combined into a lesser number of shares such that one share of our common stock will be issued for a specified number of shares. The form of the proposed amendment to our Charter to effect the reverse stock split is attached as Exhibit A to this proxy statement.
If this Proposal 3 is approved by our stockholders as proposed, our board of directors would have the sole discretion to effect the amendment and reverse stock split at any time prior to June 30, 2024, and to fix the specific ratio for the reverse stock split, provided that the ratio would be not less than 1-for-2 and not more than 1-for-50. We believe that enabling our board of directors to fix the specific ratio of the reverse stock split within the stated range will provide us with the flexibility to implement the split in a manner designed to maximize the anticipated benefits for our stockholders. The determination of the ratio of the reverse stock split will be based on a number of factors, described further below under the heading “Criteria to be Used for Decision to Apply the Reverse Stock Split.”
The reverse stock split, if approved by our stockholders, would become effective upon the filing of an amendment to our certificate of incorporation with the Secretary of State of the State of Delaware, or at the later time set forth in the amendment. The exact timing of the amendment will be determined by our board of directors based on its evaluation as to when such action will be the most advantageous to us and our stockholders, but will not occur after June 30, 2024. In addition, our board of directors reserves the right, notwithstanding stockholder approval and without further action by our stockholders, to abandon the amendment and the reverse stock split if, at any time prior to the effectiveness of the filing of the amendment with the Secretary of State, our board of directors, in its sole discretion, determines that it is no longer in our best interest and the best interests of our stockholders to proceed.
Background and Reasons for the Reverse Stock Split
On January 25, 2023, the Company received notice from The Nasdaq Stock Market (“Nasdaq”) that the closing bid price for the Company’s common stock had been below $1.00 per share for the previous 30 consecutive business days, and that the Company is therefore not in compliance with the minimum bid price requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). Nasdaq’s notice has no immediate effect on the listing or trading of the Company’s common stock on The Nasdaq Capital Market.
The notice indicates that the Company will have 180 calendar days, until July 24, 2023, to regain compliance with this requirement. The Company can regain compliance with the $1.00 minimum bid listing requirement if the closing bid price of its common stock is at least $1.00 per share for a minimum of ten (10) consecutive business days during the 180-day compliance period. If the Company does not regain compliance during the initial compliance period, it may be eligible for additional time of 180 calendar days to regain compliance. To qualify, the Company will be required to meet the continued listing requirement for market value of our publicly held shares and all other Nasdaq initial listing standards, except the bid price requirement, and will need to provide written notice to Nasdaq of its intention to cure the deficiency during the second compliance period. If the Company is not eligible or it appears to Nasdaq that the Company will not be able to cure the deficiency during the second compliance period, Nasdaq will provide written notice to the Company that the Company’s common stock will be subject to delisting. In the event of such notification, the Company may appeal Nasdaq’s determination to delist its securities, but there can be no assurance that Nasdaq would grant the Company’s request for continued listing.
The Company intends to actively monitor the minimum bid price of its common stock and may, as appropriate, consider available options to regain compliance with the Minimum Bid Price Requirement. There can be no assurance that the Company will be able to regain compliance with the Minimum Bid Price Requirement or will otherwise be in compliance with other Nasdaq listing criteria.
The Board believes that the Reverse Stock Split may be necessary to assure compliance with the Minimum Bid Price Requirement. The Board considers it important for the Company to maintain its Nasdaq listing. Delisting could adversely affect the trading market for the Company’s common stock. Further, delisting would adversely affect the Company’s ability to access the capital markets or pursue acquisitions.
The Company intends to monitor the closing bid price of its common stock. If, based on the bid price of the Company’s common stock closing at or above $1.00 per share for a minimum of 10 consecutive trading days, the Company achieves compliance with the Minimum Bid Price Requirement prior to effecting the Reverse Stock Split, the Company will then evaluate whether it needs to effect the Reverse Stock Split.
On April 4, 2023, the Company received an additional notice letter from Nasdaq indicating that the Company was not in compliance with Nasdaq Listing Rule 5550(b)(1) (“Rule 5550(b)(1)”) as the Company’s stockholders’ equity of $283,536, as reported on the Company’s Annual Report on Form 10-K for the period ended December 31, 2022, was below $2.5 million, which is the minimum stockholders’ equity required for compliance with Rule 5550(b)(1). Further, as of April 3, 2023, the Company did not meet the alternative compliance standards relating to the market value of listed securities, or net income from continuing operations. The notice does not result in the immediate delisting of the Company’s common stock from the Nasdaq Capital Market. The Company is currently evaluating options to regain compliance and intends to timely submit a plan to regain compliance with Nasdaq’s minimum stockholders’ equity requirement.
Even if the Company is able to regain compliance with the Minimum Bid Price Requirement, there can be no assurance that the Company will be able to regain compliance with Nasdaq’s minimum stockholders’ equity requirement or maintain compliance with the other listing requirements. Nasdaq has provided the Company with 45-calendar days, or until May 19, 2023, to submit a plan to regain compliance. If Nasdaq accepts the Company’s plan, Nasdaq may grant an extension of up to 180 calendar days from the date of the notice, or until October 1, 2023, for the Company to demonstrate compliance with Rule 5550(b)(1). If Nasdaq does not accept the Company’s plan, or if Nasdaq does not grant an extension until, and the Company does not regain compliance by, October 1, 2023, Nasdaq could provide notice that the Company’s securities will become subject to delisting. In such event, Nasdaq rules permit the Company to request a hearing before an independent Hearings Panel, which has the authority to grant the Company an additional extension of time of up to 180 calendar days to regain compliance.
Other Potential Benefits of Reverse Stock Split
In addition to helping regain compliance with the Minimum Bid Price Requirement, we believe that the Reverse Stock Split will make our common stock more attractive to a broader range of institutional and other investors, as we have been advised that the current market price of our common stock may affect its acceptability to certain institutional investors, professional investors and other members of the investing public. Many brokerage houses and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. In addition, some of those policies and practices may function to make the processing of trades in low-priced stocks economically unattractive to brokers. Moreover, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the current average price per share of common stock can result in individual stockholders paying transaction costs representing a higher percentage of their total share value than would be the case if the share price were substantially higher. We believe that the Reverse Stock Split will make our common stock a more attractive and cost-effective investment for many investors, which will enhance the liquidity of the holders of our common stock.
Reducing the number of outstanding shares of our common stock through the Reverse Stock Split is intended, absent other factors, to increase the per share market price of our common stock. However, other factors, such as our financial results, market conditions and the market perception of our business may adversely affect the market price of our common stock. As a result, there can be no assurance that the Reverse Stock Split, if completed, will result in the intended benefits described above, that the market price of our common stock will increase (proportionately to the reduction in the number of shares of our common stock after the Reverse Stock Split or otherwise) following the Reverse Stock Split or that the market price of our common stock will not decrease in the future. Accordingly, the total market capitalization of our common stock after the Reverse Stock Split could be lower or higher than the total market capitalization before the Reverse Stock Split.
Any amendment to our certificate of incorporation to effect the reverse stock split will include the reverse stock split ratio fixed by our board of directors, within the range approved by our stockholders.
Criteria to be Used for Decision to Apply the Reverse Stock Split
If our stockholders approve the reverse stock split, our board of directors will be authorized to proceed with the reverse split. In determining whether to proceed with the reverse split and determining the ratio of the reverse stock split, if any, our board of directors will consider a number of factors, including the Minimum Bid Requirement, market conditions, existing and expected trading prices of our common stock and the extent to which the reverse stock split may encourage greater interest in our common stock, enhance the acceptability and marketability of our common stock to the financial community and investing public and promote greater liquidity for our stockholders.
Effect of the Reverse Stock Split
The reverse stock split will be effected simultaneously for all outstanding shares of our common stock. The reverse stock split will affect all of our stockholders uniformly and will not affect any stockholder’s percentage ownership interest in our company, except to the extent that the reverse stock split results in any of our stockholders owning a fractional share. The reverse stock split will not change the terms of our common stock. After the reverse stock split, the shares of common stock will have the same voting rights and rights to dividends and distributions and will be identical in all other respects to the common stock now authorized, which is not entitled to preemptive or subscription rights, and is not subject to conversion, redemption or sinking fund provisions. The post-reverse stock split common stock will remain fully paid and non-assessable. The reverse stock split is not intended as, and will not have the effect of, a “going private transaction” covered by Rule 13e-3 under the Securities Exchange Act of 1934. Following the reverse stock split, we will continue to be subject to the periodic reporting requirements of the Securities Exchange Act of 1934.
As of the effective time of the reverse stock split, we will adjust and proportionately decrease the number of shares of our common stock reserved for issuance upon exercise of, and adjust and proportionately increase the exercise price of, all options and warrants, as well as the conversion price and shares issuable upon conversion of convertible promissory notes and other rights to acquire our common stock. In addition, as of the effective time of the reverse stock split, we will adjust and proportionately decrease the total number of shares of our common stock that may be the subject of the future grants under our stock plans.
Assuming reverse stock split ratios of 1-for-2, 1-for-25 and 1-for-50, which reflect the low end, middle and high end of the range that our stockholders are being asked to approve, the following table sets forth (i) the number of shares of our common stock that would be issued and outstanding, (ii) the number of shares of our common stock that would be reserved for issuance pursuant to outstanding warrants, options and convertible notes (excluding interest), and (iii) the weighted-average exercise price of outstanding options and warrants, each giving effect to the reverse stock split and based on securities outstanding as of May 5, 2023.
| Number of Shares Before Reverse Stock Split | Reverse Stock Split Ratio of 1-for-2 | Reverse Stock Split Ratio of 1-for-25 | Reverse Stock Split Ratio of 1-for-50 | |||||||||||||
| Number of Shares of Common Stock Issued and Outstanding | 25,864,437 | 12,932,219 | 1,034,577 | 517,289 | ||||||||||||
| Number of Shares of Common Stock Reserved for Issuance | 15,591,995 | 7,795,998 | 623,680 | 311,480 | ||||||||||||
| Weighted Average Exercise Price of Options and Warrants and Conversion Price of Convertible Notes | $ | 3.80 | 7.60 | 95.00 | 190.00 | |||||||||||
If this Reverse Split Proposal (Proposal 3) is approved and our board of directors elects to effect the reverse stock split, the number of outstanding shares of common stock will be reduced in proportion to the ratio of the split chosen by our board of directors. Accordingly, if a reverse stock split is effected, the number of authorized shares of common stock will be proportionally increased. As present, our board of directors has no immediate plans, arrangements or understandings to issue the additional shares of common stock created resulting from the reverse stock split. However, we desire to have the shares available to provide additional flexibility to use our common stock for business and financial purposes in the future as well to have sufficient shares available to provide appropriate equity incentives for our employees.
Additionally, if this Reverse Split Proposal (Proposal 3) is approved and our board of directors elects to effect the reverse stock split, we would communicate to the public, prior to the effective date of the stock split, additional details regarding the reverse split, including the specific ratio selected by our board of directors. If the board of directors does not implement the reverse stock split by June 30, 2024, the authority granted in this proposal to implement the reverse stock split will terminate.
Our directors and executive officers have no substantial interests, directly or indirectly, in the matters set forth in this proposed amendment, except to the extent of their ownership in shares of our common stock and securities convertible or exercisable for common stock.
Certain Risks and Potential Disadvantages Associated with the Reverse Stock Split
The effect of the reverse stock split upon the market prices for our common stock cannot be accurately predicted, and the history of similar stock split combinations for companies in like circumstances, including our previous reverse stock split, is varied. If the reverse stock split is implemented, the post-split market price of our common stock may be less than the pre-split price multiplied by the reverse stock split ratio.
In addition, a reduction in number of shares outstanding may impair the liquidity for our common stock, which may reduce the value of our common stock. Also, some stockholders may consequently own less than one hundred shares of our common stock. A purchase or sale of less than one hundred shares may result in incrementally higher trading costs through certain brokers, particularly “full service” brokers. Therefore, those stockholders who own less than one hundred shares following the reverse stock split may be required to pay modestly higher transaction costs should they then determine to sell their shares.
The issuance of authorized but unissued stock resulting from the reverse stock split could be used to deter a potential takeover of the Company that may otherwise be beneficial to stockholders by diluting the shares held by a potential suitor or issuing shares to a stockholder that will vote in accordance with the Board’s desires. A takeover may be beneficial to independent stockholders because, among other reasons, a potential suitor may offer such stockholders a premium for their shares of stock compared to the then-existing market price. The Company does not have any plans or proposals to adopt provisions or enter into agreements that may have material anti-takeover consequences.
Procedure for Effecting the Reverse Stock Split and Exchange of Stock Certificates
If our stockholders approve the proposal to effect the reverse stock split, and if our board of directors still believes that a reverse stock split is in the best interests of us and our stockholders, our board of directors will determine the ratio of the reverse stock split to be implemented and we will file the certificate of amendment with the Secretary of State of the State of Delaware. As soon as practicable after the effective date of the reverse stock split, stockholders will be notified that the reverse stock split has been effected.
Beneficial Owners of Common Stock. Upon the implementation of the reverse stock split, we intend to treat shares held by stockholders in “street name” (i.e., through a bank, broker, custodian or other nominee), in the same manner as registered stockholders whose shares are registered in their names. Banks, brokers, custodians or other nominees will be instructed to effect the reverse stock split for their beneficial holders holding our common stock in street name. However, these banks, brokers, custodians or other nominees may have different procedures than registered stockholders for processing the reverse stock split and making payment for fractional shares. If a stockholder holds shares of our common stock with a bank, broker, custodian or other nominee and has any questions in this regard, stockholders are encouraged to contact their bank, broker, custodian or other nominee.
Registered Holders of Common Stock. Most of our registered holders of common stock hold some or all of their shares electronically in book-entry form with our transfer agent. These stockholders do not hold physical stock certificates evidencing their ownership of our common stock. However, they are provided with a statement reflecting the number of shares of our common stock registered in their accounts. If a stockholder holds registered shares in book-entry form with our transfer agent, no action needs to be taken to receive post-reverse stock split shares or payment in lieu of fractional shares, if applicable. If a stockholder is entitled to post-reverse stock split shares, a transaction statement will automatically be sent to the stockholder’s address of record indicating the number of shares of our common stock held following the reverse stock split.
Holders of Certificated Shares of Common Stock. As of the date of this proxy statement, certain of our shares of common stock were held in certificated form. Stockholders of record at the time of the reverse stock split who hold shares of our common stock in certificated form will be sent a transmittal letter by the transfer agent after the effective time that will contain the necessary materials and instructions on how a stockholder should surrender his, her or its certificates, if any, representing shares of our common stock to the transfer agent.
Fractional Shares
We will not issue fractional shares in connection with the reverse stock split. Instead, the Company will issue one full share of the post-reverse split common stock to any stockholder of record who would have been entitled to receive a fractional share as a result of the process.
Adjustment of Number of Shares and Exercise Price or Conversion Price under Warrants, Options and Convertible Notes
Upon the implementation of the reverse stock split we will adjust and proportionately decrease the number of shares of our common stock reserved for issuance upon exercise of, and adjust and proportionately increase the exercise price of, all options and warrants, as well as the conversion price and shares issuable upon conversion of convertible promissory notes and other rights to acquire our common stock. The Company will send a Notice of Adjustment to each holder of any options, warrants or convertible notes indicating the adjustment in the number of shares and the applicable price, as a result of the reverse stock split.
No Appraisal Rights
No action is proposed herein for which the laws of the State of Delaware, or our certificate of incorporation or bylaws, provide a right to our stockholders to dissent and obtain appraisal of, or payment for, such stockholders’ capital stock.
Accounting Consequences
The reverse stock split will not affect total assets, liabilities or shareholders’ equity. However, the per share net income or loss and net book value of the common stock will be retroactively increased for each period because there will be fewer shares of common stock outstanding.
Federal Income Tax Consequences
The following summary of the federal income tax consequences of the Reverse Split is based on current law, including the Internal Revenue Code of 1986, as amended, and is for general information only. The tax treatment of a stockholder may vary depending upon the particular facts and circumstances of such stockholder, and the discussion below may not address all the tax consequences for a particular stockholder. For example, foreign, state and local tax consequences are not discussed below. Accordingly, each stockholder should consult his or her tax adviser to determine the particular tax consequences to him or her of a Reverse Split, including the application and effect of federal, state, local and/or foreign income tax and other laws. Generally, a reverse stock split will not result in the recognition of gain or loss for federal income tax purposes. The adjusted basis of the new shares of common stock will be the same as the adjusted basis of the common stock exchanged for such new shares. The holding period of the new, post-Reverse Split shares of the common stock resulting from implementation of the Reverse Split will include the stockholder’s respective holding periods for the pre-Reverse Split shares.
Required Vote
Pursuant to the Delaware General Corporation Law, this proposal must be approved by the affirmative vote of a majority of the outstanding shares of common stock of the Company entitled to vote on the proposal. Abstentions and broker non-votes with respect to this proposal will be counted for purposes of establishing a quorum and, if a quorum is present, abstentions will have the same practical effect as a vote against this proposal.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO EFFECT THE REVERSE STOCK SPLIT.
PROPOSAL NO. 4
APPROVAL OF THE IPSIDY INC. 2021 EQUITY INCENTIVE PLAN AND THE RESERVATIONAUTHORIZATION OF 1,250,000AN ADDITIONAL 2,900,000 SHARES OF
COMMON STOCK FOR ISSUANCE THEREUNDERUNDER THE AUTHID INC. 2021 EQUITY INCENTIVE PLAN
At the Annual Meeting, the Company’s stockholders are being asked to approve an increase in the number of shares of common stock authorized for issuance under the 2021 Equity Incentive Plan (the “2021 Incentive Plan”) and to authorize 1,250,000an additional 2,900,000 shares of common stock for issuance thereunder. The following is a summary of principal features of the 2021 Incentive Plan. The summary, however, does not purport to be a complete description of all the provisions of the 2021 Incentive Plan. Any stockholder of the Company who wishes to obtain a copy of the actual plan document may do so upon written request to the Company’s Secretary at the Company’s principal offices.
General
The 2021 Incentive Plan was adopted by the Board of Directors.Directors and approved by the stockholders. The Board of Directors hashad originally reserved 1,250,000 shares of common stock for issuance under the 2021 Incentive Plan.Plan, as well as the approximately 595,000 remaining shares which were allocated to the 2017 Incentive Stock Plan, which were not subject to any Awards. In addition, any shares subject to awardsAwards granted under the 2021 Incentive Plan or other compensation plans which are cancelled, forfeited or lapse, and any shares that are available for awards under the 2017 Incentive Stock Plan but which are not allocated to any award or grant under the old plan as of the effective date of the 2021 Incentive Plan shall become available for issuance under the 2021 Incentive Plan. Under the 2021 Incentive Plan, options may be granted which are intended to qualify as Incentive Stock Options (“ISOs”) under Section 422 of the Internal Revenue Code of 1986 (the “Code”) or which are not (“Non-ISOs”) intended to qualify as Incentive Stock Options thereunder. Other types of equity awards may also be granted under the Plan including but not limited to restricted stock, restricted stock units, and stock appreciation rights, which together with the ISO’s and Non-ISO’s are hereinafter collectively referred to as “Awards”.
The 2021 Incentive Plan is not a qualified deferred compensation plan under Section 401(a) of the Internal Revenue Code and is not subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).
Purpose
The primary purpose of the 2021 Incentive Plan is to attract and retain the best available personnel for the Company in order to promote the success of the Company’s business and to facilitate the ownership of the Company’s stock by employees. Since the launch of the 2021 Incentive Plan the Company has issued Non-ISO’s under the 2021 Plan and following recent terminations and hires there are approximately 3,969,000 shares outstanding under Awards granted under the 2021 Incentive Plan. Following the Company’s management reorganization in the first quarter of 2023 and the anticipated increase in business that the Company is seeking, the Company will need to hire additional personnel in order to support that business. Accordingly, on May 4, 2023 the Board, acting through its Compensation Committee resolved, subject to ratification by the stockholders, (1) to increase the number of Common Shares reserved for issuance under the 2021 Incentive Plan by 2,900,000 shares. If the increase is adopted there will be a total of 6,481,000 shares reserved for issuance under the 2021 Incentive Plan.
In the event that the proposed increase in the shares authorized for issuance under 2021 Incentive Plan is not adoptedapproved by the Company, the Company may have considerable difficulty in attracting and retaining qualified personnel, officers, directors and consultants. As present, our board of directors has no immediate plans, arrangements or understandings to issue awards under the 2021 Incentive Plan, except for the options to be granted under the compensation planplans for non-management directors, following the Annual Meeting (See “Compensation for Directors” on Page 14).Chief Executive Officer and the Chief Technology Officer, referenced above. The Board is not proposing any other amendment to the 2021 Incentive Plan at this time and the remaining provisions of the 2021 Incentive Plan shall remain in full force and effect, as previously adopted.
Administration
The 2021 Incentive Plan is administered by the Board or by a committee of the Board that may be designated by the Board to administer the Plan, composed of not less than two members of the Board all of whom are disinterested persons, as contemplated by Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All questions of interpretation of the 2021 Incentive Plan are determined by the Board or such Committee, and its decisions are final and binding upon all participants.
Eligibility
Under the 2021 Incentive Plan, equity grants may be granted to employees, officers, directors or consultants of the Company, as provided in the 2021 Incentive Plan.As of April 30 2023, approximately 16 employees (including three executive officers), four non-employee board members and 7 consultants are eligible to participate in the 2021 Incentive Plan.
Terms of Awards
The terms of Awards granted under the Plan shall be contained in an agreement between the participant and the Company and such terms shall be determined by the Board of Directors consistent with the provisions of the Plan. The terms of Awards may or not require a performance condition in order to vest the equity comprised in the relevant Award. The terms of each Option granted under the Plan shall be contained in a stock option agreement between the Optionee and the Company and such terms shall be determined by the Board of Directors consistent with the provisions of the Plan, including the following:
(a) PURCHASE PRICE. The purchase price of the Common Shares subject to each ISO shall not be less than the fair market value (as set forth in the 2021 Incentive Plan), or in the case of the grant of an ISO to a Principal Stockholder, not less that 110% of fair market value of such Common Shares at the time such Option is granted. The purchase price of the Common Shares subject to each Non-ISO shall be determined at the time such Option is granted, but in no case less than 100% of the fair market value of such Common Shares at the time such Option is granted.
(b) VESTING. The dates on which each Option (or portion thereof) shall be exercisable and the conditions precedent to such exercise, if any, shall be fixed by the Committee, in its discretion, at the time such Option is granted.
(c) EXPIRATION. The expiration of each Option shall be fixed by the Committee, in its discretion, at the time such Option is granted; however, unless otherwise determined by the Committee at the time such Option is granted, an Option shall be exercisable for ten (10) years after the date on which it was granted (the “Grant Date”). Each Option shall be subject to earlier termination as expressly provided in the 2021 Incentive Plan or as determined by the Committee, in its discretion, at the time such Option is granted.
(d) TRANSFERABILITY. No Option shall be transferable, except by will or the laws of descent and distribution, and any Option may be exercised during the lifetime of the Optionee only by him. No Option granted under the Plan shall be subject to execution, attachment or other process.
(e) OPTION ADJUSTMENTS. The aggregate number and class of shares as to which Options may be granted under the Plan, the number and class shares covered by each outstanding Option and the exercise price per share thereof (but not the total price), and all such Options, shall each be proportionately adjusted for any increase decrease in the number of issued Common Shares resulting from split-up spin-off or consolidation of shares or any like Capital adjustment or the payment of any stock dividend.
Except as otherwise provided in the 2021 Incentive Plan, or by resolution of the Directors, any Option granted hereunder shall terminate in the event of a merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation of the Company. However, the Optionee shall have the right immediately prior to any such transaction to exercise his Option in whole or in part notwithstanding any otherwise applicable vesting requirements.
(f) TERMINATION, MODIFICATION AND AMENDMENT. The 2021 Incentive Plan (but not Awards previously granted under the Plan) shall terminate ten (10) years from the earlier of the date of its adoption by the Board of Directors or the date on which the Plan is approved by the affirmative vote of the holders of a majority of the outstanding shares of capital stock of the Company entitled to vote thereon, and no Award shall be granted after termination of the Plan. Subject to certain restrictions, the Plan may at any time be terminated and from time to time be modified or amended by the affirmative vote of the holders of a majority of the outstanding shares of the capital stock of the Company present, or represented, and entitled to vote at a meeting duly held in accordance with the applicable laws of the State of Delaware.
FEDERAL INCOME TAX ASPECTS OF THE 2021 INCENTIVE PLAN
THE FOLLOWING IS A BRIEF SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION UPON THE PARTICIPANTS AND THE COMPANY WITH RESPECT TO THE PURCHASE OF SHARES UNDER THE 2021 INCENTIVE PLAN. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE AND DOES NOT ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES TO TAXPAYERS WITH SPECIAL TAX STATUS. IN ADDITION, THIS SUMMARY DOES NOT DISCUSS THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE, AND DOES NOT DISCUSS ESTATE, GIFT OR OTHER TAX CONSEQUENCES OTHER THAN INCOME TAX CONSEQUENCES. THE COMPANY ADVISES EACH PARTICIPANT TO CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF PARTICIPATION IN THE 2021 INCENTIVE PLAN AND FOR REFERENCE TO APPLICABLE PROVISIONS OF THE CODE.
Incentive Stock Options (ISO)
The recipient of an incentive stock option generally will not be taxed upon grant of the option. Federal income taxes are generally imposed only when the shares of common stock from exercised incentive stock options are disposed of, by sale or otherwise. The amount by which the fair market value of the common stock on the date of exercise exceeds the exercise price is, however, included in determining the option recipient’s liability for the alternative minimum tax. If the incentive stock option recipient does not sell or dispose of the shares of common stock until more than one year after the receipt of the shares and two years after the option was granted, then, upon sale or disposition of the shares, the difference between the exercise price and the market value of the shares of common stock as of the date of exercise will be treated as a capital gain, and not ordinary income. If a recipient fails to hold the shares for the minimum required time the recipient will recognize ordinary income in the year of disposition generally in an amount equal to any excess of the market value of the common stock on the date of exercise (or, if less, the amount realized or disposition of the shares) over the exercise price paid for the shares. Any further gain (or loss) realized by the recipient generally will be taxed as short-term or long-term gain (or loss) depending on the holding period. We will generally be entitled to a tax deduction at the same time and in the same amount as ordinary income is recognized by the option recipient, if any.
Nonstatutory Stock Options (Non-ISO)
The recipient of stock options not qualifying as incentive stock options generally will not be taxed upon the grant of the option. Federal income taxes are generally due from a recipient of nonstatutory stock options when the stock options are exercised. The excess of the fair market value of the common stock purchased on such date over the exercise price of the option is taxed as ordinary income. Thereafter, the tax basis for the acquired shares is equal to the amount paid for the shares plus the amount of ordinary income recognized by the recipient. We will generally be entitled to a tax deduction at the same time and in the same amount as ordinary income is recognized by the option recipient by reason of the exercise of the option.
Other Awards
Recipients who receive restricted stock unit awards will generally recognize ordinary income when they receive shares upon settlement of the awards, in an amount equal to the fair market value of the shares at that time. Recipients who receive awards of restricted shares subject to a vesting requirement will generally recognize ordinary income at the time vesting occurs, in an amount equal to the fair market value of the shares at that time minus the amount, if any, paid for the shares. However, a recipient who receives restricted shares which are not vested may, within 30 days of the date the shares are transferred, elect in accordance with Section 83(b) of the Code to recognize ordinary compensation income at the time of transfer of the shares rather than upon the vesting dates. Recipients who receive performance shares will generally recognize ordinary income at the time of settlement, in an amount equal to the cash received, if any, and the fair market value of any shares received. We will generally be entitled to a tax deduction at the same time and in the same amount as ordinary income is recognized by the recipient.
Restrictions on Resale
Certain officers and directors of the Company may be deemed to be “affiliates” of the Company as that term is defined under the Securities Act. The common stock acquired under the 2021 Incentive Plan may be reoffered or resold only pursuant to an effective registration statement, which the Company intends to amend assuming this proposal is approved by the shareholders, or pursuant to Rule 144 under the Securities Act or another exemption from the registration requirements of the Securities Act.
Required Vote
The affirmative vote of a majority of shares of common stock present in person or represented by proxy at the meeting and cast on this proposal is required for the approval of the 2021 Incentive Plan.
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE IPSIDY INC. 2021 INCENTIVE PLAN AND THE RESERVATIONAUTHORIZATION OF 1,250,000AN ADDITIONAL 2,900,000 SHARES OF COMMON STOCK FOR ISSUANCE THEREUNDER.
29
PROPOSAL NO. 4
NON-BINDING, ADVISORY VOTE TO APPROVEUNDER THE COMPENSATION OFOUR NAMED EXECUTIVE OFFICERS
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires the Company’s stockholders to have the opportunity to cast a non-binding, advisory vote to approve of the compensation disclosed in this Proxy Statement of the Company’s executive officers who are named above in the Summary Compensation Table (the “named executive officers”). The Company has disclosed the compensation of the named executive officers pursuant to rules adopted by the SEC.
Please read the “Executive Compensation” beginning on page 16 for additional details about our executive compensation program, including information about the fiscal year 2020 compensation of our named executive officers. We believe that our compensation policies for the named executive officers are designed to attract, motivate and retain talented executive officers and are aligned with the long-term interests of the Company’s stockholders. This advisory stockholder vote, commonly referred to as a “say-on-pay vote,” gives you as a stockholder the opportunity to vote for or against approval of the compensation of the named executive officers that is disclosed in this Proxy Statement by voting on the following resolution (or by abstaining with respect to the resolution):
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in the Company’sAUTHID INC. 2021 Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”
Because your vote is advisory, it is not binding on either the Board of Directors or the Company. Although non-binding, the Board of Directors and the Compensation Committee value the opinions that stockholders express in their votes and will review the voting results and take them into consideration as they deem appropriate when making future decisions regarding our executive compensation program.
Required VoteEQUITY INCENTIVE PLAN.
Adoption of the resolution requires the receipt of the affirmative vote of a majority of the shares of the Company’s common stock present in person or by proxy and voting at the Annual Meeting.
RECOMMENDATION OF THE BOARD FOR PROPOSAL NO. 4:
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE TO APPROVETHE COMPENSATION DISCLOSED IN THIS PROXY STATEMENT OF THECOMPANY’S EXECUTIVE OFFICERS.
30
PROPOSAL 5
TO VOTE, ON AN ADVISORY BASIS, THE PREFERRED
FREQUENCY OF STOCKHOLDER ADVISORY VOTES ON EXECUTIVE
COMPENSATION, REFERRED TO AS “SAY-ON-FREQUENCY”
Section 14A of the Securities Exchange Act also provides that stockholders must be given the opportunity to vote, on a non-binding, advisory basis, for their preference as to how frequently we should seek future advisory votes on the compensation of our Named Executive Officers, which we refer to as say-on-frequency. By voting with respect to this Proposal 5, stockholders may indicate whether they would prefer that we conduct future say-on-pay votes once every year, every two years or every three years. Stockholders, if they wish, also may abstain from casting a vote on this proposal.
After careful consideration, our Board of Directors has determined that a say-on-pay vote on executive compensation once every three years is the best approach for the Company, and therefore our Board recommends that you vote for a three-year interval between the say-on-pay votes.
Our Board of Directors recognizes the importance of stockholder input on executive compensation and has determined that a say-on-pay vote every three years will provide our stockholders with adequate input. The Board believes that a three-year vote cycle gives the Board sufficient time to thoughtfully consider the results of the advisory vote and implement any desired changes to our executive compensation policies and procedures, and will provide investors sufficient time to evaluate the effectiveness of our executive compensation program as it relates to the business outcomes of the Company. Finally, the three year interval will avoid the additional administrative burden on the Company of engaging in annual votes on executive compensation. Any stockholder who desires to provide input before the expiration of three years is welcome to contact the Board.
As with your vote on Proposal 4 above, your vote on this Proposal 6 is advisory, and therefore not binding on the Company, the Board of Directors or the Compensation Committee, and the Board may decide that it is in the best interests of our stockholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option approved by our stockholders. However, our Board and our Compensation Committee value the opinions of our stockholders and we will take our stockholders’ preferences into account in making determinations regarding the frequency of the say-on-pay vote.
Required Vote
Adoption of the resolution requires the receipt of the affirmative vote of a majority of the shares of the Company’s common stock present in person or by proxy and voting at the Annual Meeting.
RECOMMENDATION OF THE BOARD FOR PROPOSAL NO. 5:
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE TO APPROVE THE SAY-ON-PAY ON EXECUTIVE COMPENSATION EVERY THREE YEARS
OTHER MATTERS
The Board of Directors knows of no other business which will be presented at the Annual Meeting. If any other matters properly come before the meeting, the persons named in the enclosed Proxy, or their substitutes, will vote the shares represented thereby in accordance with their judgment on such matters.
ADDITIONAL INFORMATION
Annual Reports on Form 10-K
Additional copies of Ipsidy’sauthID’s Annual Report on Form 10-K for the fiscal year ended December 31, 20202022 may be obtained without charge by writing to the Chief Financial Officer, IpsidyauthID Inc., 670 Long Beach Boulevard, Long Beach, New York 11561. Ipsidy’s1624 Market St., Ste 226, Unit 51767 Denver, Colorado 80202-1559. authID’s Annual Report on Form 10-K can also be found on Ipsidy’sauthID’s website: www.authid.aiinvestors.authid.ai.
Stockholders Proposals for the 20222024 Annual Meeting.
Stockholder proposals intended to be presented at the Company’s 20222024 Annual Meeting must be received by the Company no later than July 20, 2022*, 2024 (pursuant to Rule 14a-8 of the Exchange Act, 120 days before the anniversary of the prior year’s mailing date) to be eligible for inclusion in the Company’s proxy statement and form of proxy for next year’s meeting. However, if the date of the 20222024 Annual Meeting of Stockholders is changed by more than 30 days from the date of the previous year’s meeting, then the deadline is a reasonable time before we begin to print and send our proxy statement for the 20222023 Annual Meeting of Stockholders. WeWe will disclose the new deadline by which stockholders proposals must be received under Item 5 of our earliest possible Quarterly Report on Form 10-Q, or, if impracticable, by any means reasonably calculated to inform stockholders. SEC rules set standards for eligibility and specify the types of stockholder proposals that may be excluded from a proxy statement. Proposals should be addressed to IpsidyauthID Inc., Attn. Corporate Secretary, 670 Long Beach Boulevard, Long Beach, New York 11561.1624 Market St., Ste 226, Unit 51767 Denver, Colorado 80202-1559.
Under Rule 14a-4(c) of the Exchange Act, our Board may exercise discretionary voting authority under proxies solicited by it with respect to any matter properly presented by a stockholder at the 20222024 Annual Meeting of Stockholders that the stockholder does not seek to have included in our proxy statement if (except as described in the following sentence) the proxy statement discloses the nature of the matter and how our Board intends to exercise its discretion to vote on the matter, unless we are notified of the proposal on or before October 3, 2022*, 2024 (pursuant to Rule 14a-4 of the Exchange Act, 45 days before the anniversary of the prior year’s mailing date) and the stockholder satisfies the other requirements of Rule 14a-4(c)(2). However, if the date of the 20222024 Annual Meeting of Stockholders is changed by more than 30 days from the date of the previous year’s meeting, then the deadline is a reasonable time before we begin to print and send our proxy statement for the 20222024 Annual Meeting of Stockholders. WeWe will disclose the new deadline by which stockholders’ proposals must be received under Item 5 of our earliest possible Quarterly Report on Form 10-Q, or, if impracticable, by any means reasonably calculated to inform stockholders. If we first receive notice of the matter after October 3, 2022,*, 2024, and the matter nonetheless is permitted to be presented at the 20222024 Annual Meeting of Stockholders, our Board may exercise discretionary voting authority with respect to the matter without including any discussion of the matter in the proxy statement for the meeting. We reserve the right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with the requirements described above and other applicable requirements. Accordingly, with respect to the Company’s 20222023 annual meeting of stockholders, notice must be provided to IpsidyauthID Inc., Attn. Corporate Secretary, 670 Long Beach Boulevard, Long Beach, New York 115611624 Market St., Ste 226, Unit 51767 Denver, Colorado 80202-1559 no later than October 3, 2022.*, 2024. If a stockholder fails to provide timely notice of a proposal to be presented at the 20222024 annual meeting, the chair of the meeting will declare it out of order and disregard any such matter.
Proxy Solicitation Costs
The proxies being solicited hereby are being solicited by the Company. The Company will bear the entire cost of solicitation of proxies including preparation, assembly, printing and mailing of the Notice, the Proxy Statement, the Proxy card and establishment of the Internet site hosting the proxy material. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of common stock beneficially owned by others to forward to such beneficial owners. Officers and regular employees of the Company may, but without compensation other than their regular compensation, solicit proxies by further mailing or personal conversations, or by telephone, telex, facsimile or electronic means. We will, upon request, reimburse brokerage firms and others for their reasonable expenses in forwarding solicitation material to the beneficial owners of stock.
| By Order of the Board of Directors, | |
| /s/ | |
| Chair of the Board of Directors |
Exhibit A – Form of Certificate of Amendment to the Articles of Incorporation, as amended
Exhibit B – Form of Proxy Card
ExhibitEXHIBIT A
CERTIFICATE OF AMENDMENT
IPSIDY INC. 2021 EQUITY INCENTIVE PLANOF
AMENDED AND RESTATED
OF
authID Inc.
a Delaware corporation
IPSIDYauthID INC. DBA AUTHID.AI, a Delaware corporation, organized and existing under and by virtue of the Delaware General Corporation Law (the “DGCL”), does hereby certify that:
2021 EQUITY Incentive Plan
FIRST: The name of the corporation is Ipsidy Inc. (the “Corporation”).
SECOND: The Board of Directors of the Corporation (the “Board of Directors”) has duly adopted resolutions proposing and declaring advisable the following amendment to the Amended and Restated Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”), directing that said amendment be submitted to the stockholders of the Corporation for consideration thereof, and authorizing the Corporation to execute and file with the Secretary of State of the State of Delaware this Certificate of Amendment of Amended and Restated Certificate of Incorporation (this “Certificate of Amendment”).
THIRD: Upon the effectiveness of this Certificate of Amendment pursuant to the DGCL, Article IV of the Certificate of Incorporation is hereby amended by adding the following paragraph to the end of Article IV:
“(4) Reverse Stock Split. Effective immediately upon the filing of this Certificate of Amendment of Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Effective Time”), each [__________] ([__________]) shares of Common Stock then issued and outstanding, or held in the treasury of this corporation, immediately prior to the Effective Time, shall automatically be reclassified and converted into one (1) share of Common Stock, without any further action by this corporation or the respective holders of such shares (the “Reverse Stock Split”). No fractional shares shall be issued in connection with the Reverse Stock Split. A holder of Common Stock who would otherwise be entitled to receive a fractional share as a result of the Reverse Stock Split will receive one whole share of Common Stock in lieu of such fractional share.”
FOURTH: This Certificate of Amendment has been duly approved by the Board of Directors in accordance with the applicable provisions of Section 242 of the DGCL.
FIFTH: This Certificate of Amendment has been duly approved by the stockholders of the Corporation in accordance with the applicable provisions of Section 228 of the DGCL.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be executed by the undersigned, and the undersigned has executed this Certificate of Amendment and affirms the foregoing as true under penalty of perjury this [ ] day of [ ], 2023.
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A-1
This IPSIDY INC. 2021 Equity Incentive Plan (the “Plan”) is designed to retain directors, executives and selected employees and consultants and reward them for making major contributions to the success of the Company. These objectives are accomplished by making equity incentive awards under the Plan thereby providing Participants with a proprietary interest in the growth and performance of the Company.
In the event of any change in the outstanding Stock by reason of a stock split, stock dividend, combination or reclassification of shares, recapitalization, merger, or similar event, the Board or the Committee may adjust proportionally (a) the number of shares of Stock (i) reserved under the Plan, (ii) available for Incentive Stock Options and Non-statutory Options and (iii) covered by outstanding Stock Awards or Restricted Stock Purchase Offers; (b) the Stock prices related to outstanding Grants; and (c) the appropriate Fair Market Value and other price determinations for such Grants. In the event of any other change affecting the Stock or any distribution (other than normal cash dividends) to holders of Stock, such adjustments as may be deemed equitable by the Board or the Committee, including adjustments to avoid fractional shares, shall be made to give proper effect to such event. In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board or the Committee shall be authorized to issue or assume stock options, whether or not in a transaction to which Section 424(a) of the Code applies, and other Grants by means of substitution of new Grant Agreements for previously issued Grants or an assumption of previously issued Grants.
