UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to
Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.)
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| Preliminary Proxy Statement | |
| ☐ | Confidential, |
| ☐ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material Pursuant to |
Hancock Jaffe Laboratories, Inc.HANCOCK JAFFE LABORATORIES, INC.
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other thanOther Than the Registrant)
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November 28, 2018
Dear Hancock Jaffe Shareholders:
Since joining Hancock Jaffe in April of 2018, this is the first occasion for me to address all of our shareholders as a group. I’d like to take the opportunity to re-highlight some of the changes that we have implemented over the past six months and explain how these improvements position our company for future success, and outline some of the milestones that we hope to achieve in the coming year.
My first priority after joining Hancock Jaffe was to complete our initial public offering. Public offerings and financings are always difficult, but sixty days after joining Hancock Jaffe, we traded as a Nasdaq listed public company. Our successful IPO is a testament to the new culture being established at Hancock Jaffe. As a small public company, we need to be better, faster, and more efficient, as we did with our initial public offering. Our success in becoming a public company demonstrates our ability to work through difficulties, execute our strategy, and achieve our goals.
Although successful, the IPO process uncovered areas where we could be more efficient and cost effective. For example, we were entirely reliant on expensive outside service providers for our accounting functions. In July of 2018, we appointed Bob Rankin as our new Chief Financial Officer. Bob has significant public company experience and has completely revamped and modernized our accounting infrastructure. By the end of 2018, our accounting services will be handled completely in-house, saving the company considerable money, allowing us to more easily meet our filing deadlines, and improving our accounts payable and cash management capabilities.
In addition to accounting enhancements, Hancock Jaffe has retained the law firm of Ellenoff, Grossman and Schole LLP as its new outside securities and corporate counsel. The Ellenoff firm specializes in smaller public companies, providing excellent advice and guidance to companies such as ours. Most matters for which the Ellenoff firm are engaged are paid for on a fixed fee basis. In addition to saving money, we now have a firm that is experienced in catering to the needs of small public companies.
Over the past 19 years, Hancock Jaffe has relied on a single vendor, a one-person operation, to provide tissue for all of its medical devices. In addition to the excessive risk inherent in relying on a single individual, there was no competition to ensure that the company was receiving the highest quality materials and at competitive prices. We now have three new tissue suppliers on board that are accustomed to servicing the medical community. These are state-of-the-art, sophisticated operations that will ensure that we have an uninterrupted flow of the tissue that we need to manufacture and test our products. We have selected vendors both inside and outside of the United States to insulate the company from the potential outbreak of any bovine or porcine related diseases that may impact our access to materials.
In October of 2018, we appointed 3 new independent directors to our board of directors. Two of the directors, Dr. Francis Duhay and Dr. Sanjay Shrivastava, are up for election at our upcoming annual meeting. Hancock Jaffe’s business model is to develop products and license and/or sell them to larger medical device companies. In addition to having deep experience and access to resources for the same types of products that we are currently developing, Drs. Duhay and Shrivastava have held senior leadership positions at several of the companies (e.g. Medtronic, Edwards Lifesciences, Abbott Vascular, BTG) that could be interested in licensing or purchasing our products. Marc Robins, our third independent director, is extremely well respected among the micro-cap community and has access to a large group of potential investors for medical technology and health care related companies. Having achieved multiple successes in their respective fields, our new independent directors recognize Hancock Jaffe’s upside and will provide guidance and support in helping us achieve success. They are well credentialed, highly capable people. We will be featuring our directors in a series of online interviews and articles in the coming months, so that you can get to know them and recognize their strengths.
OnHANCOCK JAFFE LABORATORIES, INC.
70 Doppler
Irvine, California 92618
July [●], 2020
Dear Stockholders:
It is an exciting time for Hancock Jaffe Laboratories, Inc. (“we” or the product side, we have also made great progress in recent months towards seminal milestones for“Company”). We are entering the final phases of our company. For the VenoValve®, we submitted our materials to INVIMA, the Colombian equivalent to the U.S. FDA, which is the last regulatory approval needed to begin ourVenoValve first-in-human study in Colombia. Our industry is highly regulated, both inside the United StatesColombia and throughout the world. Working with government agencies is never easy or predictable and can be frustrating. To help manage these challenges we intendpreparations have begun to hire or utilize the services of former government regulatorsfile our IDE application to guide us and assist us through the processes. That is what we have done in Colombia, by hiring a contract research organization that employs former INVIMA officials and specializes in obtaining regulatory approval. Although we may provide you with our best estimates in terms of timing when it comes to the regulators, regulatory authorities are notoriously unpredictable, regulatory delays are to be expected and are a part of developing products in the medical device industry. We currently expect to begin our first-in-human trial in Colombia in December of 2018 or January of 2019 and will update you once we have further information.
For the CoreoGraft®, we recently announced a sponsored research agreement with the world- renowned Texas Heart Institute. The Texas Heart Institute performed the first U.S. heart transplant, the first artificial heart, and continues to be at the forefront of cardiac innovation and the highest quality patient care. Top researchers at the Texas Heart Institute are excited about the potentialseek approval for the CoreoGraft, and have asked to work with us on all of the pre-clinical studies through FDA approval. We could not have a more experienced and well-respected partner.U.S. pivotal trial. The protocol and budget for the first feasibility study for the CoreoGraft has been approved for a first-in-human trial in Paraguay, and we are in the process of sourcing the specific bovine tissue necessaryexpect to manufacture our test units. We will announce the specificshave an update on patient enrollment and timing for the first study as soon as they are available.first-in-human trial in the coming weeks. Over the past 5 months and during these challenging economic times caused by the worldwide COVID pandemic, we have raised close to $9 million in a series of public and private financings which have significantly improved the financial condition of the company, and strengthened our balance sheet to help ensure that we regain compliance with equity requirements for The Nasdaq Capital Market for the continued listing of our stock.
Our Bioprosthetic heart valveIt is our pleasure to invite you to the special meeting of stockholders (the “Special Meeting”) of the Company. We will hold the meeting on [●] day, [●], 2020. Details regarding admission to the meeting and the business to be conducted at the meeting are more fully described in the accompanying Notice of Special Meeting of Stockholders and proxy statement. The notice and proxy include several proposals, including a proposal to increase the number of authorized shares of the company, and a proposal to authorize the Board to effectuate a reverse stock split. An increase in the authorized number of shares is necessary because the Company currently undergoing a gap analysishas no shares of common stock available to compareconduct its daily operations such as recruiting new employees, and for important events such as financings, acquisitions, etc. The primary intention of the pre-clinical testing that has been done to date with latest international standards for heart valve development. We have hired a former FDA examiner to complete the analysis and will announce next stepsBoard in obtaining approval for the heart valve once we have assessedauthority to effectuate a reverse stock split, as described in the resultsproxy statement, would be to increase the price of our common stock sufficiently above the $1.00 minimum bid price requirement for continued listing on Nasdaq. The proposals specified in the proxy are essential to our long-term success and outlined our plan.ability to capitalize on the potential of the VenoValve and the CoreoGraft.
A successful IPO, new CFO, improved accounting infrastructure, new securities counsel, three new tissue suppliers, three highly qualified independent directors, INVIMA submission, partnership withThe Special Meeting will be a completely virtual meeting of stockholders, which will be conducted via live webcast. You will be able to attend the Texas Heart Institute,Special Meeting online, vote and submit your questions during the Special Meeting by visiting www.virtualshareholdermeeting.com/HJLI2020SM. We are pleased to utilize the virtual stockholder meeting technology (i) to provide ready access and cost savings for our stockholders and the heart valve gap analysis. AllCompany and (ii) to promote social distancing pursuant to guidance provided by the Center for Disease Control and the U.S. Securities and Exchange Commission due to the novel coronavirus. The virtual meeting format allows attendance from any location in the world.
Even if you are changesplanning on attending the Special Meeting online, please promptly submit your proxy vote via the Internet, by telephone, or, if you received a printed form of proxy in the mail, by completing, dating, signing and milestones accomplished within a six-month time period. Although each of these eventsreturning the enclosed proxy, so your shares will be represented at the Special Meeting. Instructions on voting your shares are important on their own,the proxy materials you received for the Special Meeting. Even if you plan to attend the Special Meeting online, it is strongly recommended you vote before the sum of these accomplishments and their occurrence within an expedited time frame,Special Meeting date, to ensure that speaksyour shares will be represented at the Special Meeting if you are unable to attend.
Details regarding admission to the new corporate culture wemeeting and the business to be conducted at the meeting are establishing at Hancock Jaffe.more fully described in the accompanying Notice of Special Meeting of Stockholders and proxy statement.
We currently have three development stage products that fulfill unmet medical needs and with large addressable markets. Each product on its own would be enough to sustain the company. It is rare that medical devices work perfectly in their initial iterations, and history tells us that there may be set backs from time to time and obstacles to overcome. With all that we have accomplished over the past 6 months, and the world class resources that we now have at our disposal, we hope that you gain a sense of confidence in our abilities to overcome any difficulties, remain focused on our objectives, and achieve the progress that will be necessary to advance the development or our products and build shareholder value.
For those of you that are able to attend our annual meeting, we look forwardthe Special Meeting. Whether or not you plan to meeting you in person on December 21st. For those shareholders that cannot attend the meeting, weSpecial Meeting, please promptly sign, date and return the enclosed proxy card or voting instruction card in the envelope provided, or submit your proxy by telephone or over the Internet (if those options are always available to answer any questions and address any concerns that you may have. Please callyou) in accordance with the instructions on the enclosed proxy card or email us, even if it is just to introduce yourself.voting instruction card.
We believe thatThank you for your ongoing support of and continued interest in Hancock Jaffe has a bright future, and we look forward to getting to know you along the way. Thank you.Laboratories, Inc.
| Sincerely, | |
 | |
| Robert A. Berman | |
| Chief Executive Officer and Director |
Hancock Jaffe Laboratories, Inc.HANCOCK JAFFE LABORATORIES, INC.
70 Doppler
Irvine, California 92618
NOTICE OF ADJOURNED ANNUALSPECIAL MEETING OF STOCKHOLDERS
Originally held on November 27, 2018 and adjourned to Friday, December 21, 2018TO BE HELD ON [●], 2020
Pursuant to Delaware corporate law requirements,To the Stockholders of Hancock Jaffe Laboratories, Inc.:
Notice is hereby given that the Special meeting of the stockholders of Hancock Jaffe Laboratories, Inc. (the “Company”“Company”) originally called its 2018 Annualwill be held on [●], 2020, on a virtual basis. At the Special Meeting of Stockholdersor any postponement, adjournment or delay thereof (the “Meeting”“Special Meeting”), for November 27, 2018. When convened on such date, there were an insufficient number of shares of the Company’s common stock, $0.00001 par value per share (the “Common Stock”), present in person or represented by proxyyou will be asked to reach a valid quorum to transact business at the Meeting. As such, pursuant to the Amendedconsider and Restated Bylaws of the Company, Robert A. Berman, the Company’s Chief Executive Officer who acted as the chairman of the Meeting, adjourned the Meeting until a quorum could be obtained. The Meeting will reconvene on December 21, 2018, at 10:00 a.m. Pacific time, at the Company’s principal executive offices at 70 Doppler, Irvine, California 92618. The Meeting has been called forvote upon the following purposes:proposals:
| 1. | ||
| 2. | ||
| 3. | to grant authority to the Company’s Board of directors (the “Board”) to effectuate a reverse stock split of the Company’s common stock at a ratio of between one-for-five and one-for-fifty, with such ratio to be determined at the sole discretion of the “Board” and with such reverse stock split to be effectuated at such time and date, if at all, as determined by the Board in its sole discretion; | |
| 4. | ||
5. | to approve if necessary, for purposes of complying with applicable Nasdaq Listing Rules, the potential issuance of more than 20% of the Company’s issued and outstanding common stock in connection with the issuance of unregistered warrants to purchase up to an aggregate of 3,495,000 shares of common stock with respect to the waiver of certain rights of the purchaser signatories to those certain Securities Purchase Agreements, dated April 24, 2020, and June 1, 2020; and | |
| 6. | to approve the adjournment of the Special Meeting |
StockholdersYour attention is directed to the Proxy Statement which is set forth on the following pages, where the foregoing items of business are cordially invitedmore fully described. The Board has fixed the close of business on July 21, 2020 as the record date for the determination of stockholders entitled to attend the Meeting in person.However,notice of, and to assure your representationvote at, the Meeting, please complete and signSpecial Meeting.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE PROPOSALS.
Your vote is extremely important, regardless of the enclosed proxy card and return it promptly.Note that even ifnumber of shares you voted or submitted a proxy card for the Meeting as originally held on November 27, 2018, you should recast your vote for the adjourned Meeting on December 21, 2018own.In addition, even if you previously submitted a proxy card for the Meeting, as adjourned, you may choose to vote in person at the Meeting. Whether or not you expectplan to attend the Special Meeting, please read the attached Proxy Statement and thenwe ask that you promptly complete,sign, date sign and return the enclosed proxy card or voting instruction card in orderthe envelope provided, or submit your proxy by telephone or over the Internet (if those options are available to ensure your representation atyou) in accordance with the Meeting. If you hold your shares through a brokerage firm, you may cast your vote by visitingwww.proxyvote.com. If you are a registered stockholder, you may cast your vote by visitingwww.vstocktransfer.com/proxy . You may also have access toinstructions on the materials for the Meeting by visiting the websitehttp://www.hancockjaffe.com.enclosed proxy card or voting instruction card.
The Board of Directors unanimously recommendsproxy statement accompanying this notice provides a vote “FOR” the approval of eachmore complete description of the proposalsbusiness to be submittedconducted at the Special Meeting. We encourage you to read the proxy statement carefully and in its entirety.
| |
| Robert A. Berman | |
| Chief Executive Officer | |
| and Director |
YOU ARE RESPECTFULLY REQUESTED BY THE BOARD TO PROMPTLY SIGN, DATE AND RETURN THE ENCLOSED PROXY OR VOTE OVER THE INTERNET OR BY TELEPHONE. IF YOU GRANT A PROXY, YOU MAY REVOKE IT AT ANY TIME PRIOR TO THE MEETING OR VOTE AT THE MEETING. IF YOU RECEIVED THIS PROXY STATEMENT IN THE MAIL, A RETURN ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. THIS WILL NOT PREVENT YOU FROM VOTING AT THE MEETING BUT WILL, HOWEVER, HELP TO ASSURE A QUORUM AND AVOID ADDED PROXY SOLICITATION COSTS.
This Notice of Special Meeting of Stockholders, proxy statement and form of proxy are first being mailed to stockholders on or about [●], 2020.
Important Notice Regarding the Availability of Proxy Materials for the
Hancock Jaffe Laboratories, Inc. Special Meeting of Stockholders to be Held on [●], 2020.
The Proxy Statement is
available at www.proxyvote.com on the Investor Relations portion of our web site at
https://ir.hancockjaffe.com/.
HANCOCK JAFFE LABORATORIES, INC.
TABLE OF CONTENTS
| i |
Hancock Jaffe Laboratories, Inc.
70 Doppler Irvine, California 92618
(949) 261-2900
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
to be held on Friday, December 21, 2018, 10:00 a.m., Pacific Time
Hancock Jaffe Laboratories, Inc.
70 Doppler Irvine, California 92618
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS
Why am I receiving this Proxy Statement?
This Proxy Statement describes the proposals on which our Board of Directors (the “Board”) would like you, as a stockholder, to vote at our 2018 Annual Meeting of the Stockholders (the “Meeting”), which will take place on Friday, December 21, 2018 at Hancock Jaffe Laboratories, Inc.’s principal executive offices at 70 Doppler, Irvine, California 92618.
The Meeting was originally called pursuant to the requirements of Delaware law to be held on November 27, 2018, but a quorum of the outstanding shares of common stock, par value $0.00001 per share (“Common Stock”) was not present at the Meeting or represented by proxy as on such date. Therefore, the Meeting was adjourned pursuant to the Company’s Amended and Restated Bylaws until December 21, 2018 so that a quorum could be established, and we are sending you these updated notice and proxy materials accordingly.
This Proxy Statement also gives you information on these proposals so that you can make an informed decision. We intend to mail this Proxy Statement and accompanying proxy card on or about December 3, 2018, to all stockholders of record entitled to vote at the Meeting.
In this proxy statement, we refer to Hancock Jaffe Laboratories, Inc. as the “Company,” “we,” “us” or “our” or similar terminology.
Who can vote at the annual meeting of stockholders?
Stockholders who owned shares of our common stock, par value $0.00001 per share (“Common Stock”), on October 22, 2018 (the “Record Date”) may attend and vote at the Meeting. Each share is entitled to one vote. There were 11,717,308 shares of Common Stock outstanding on the Record Date. All shares of Common Stock shall have one vote per share and vote together as a single class. Information about the stockholdings of our directors and executive officers is contained in the section of this Proxy Statement entitled “Beneficial Ownership of Principal Stockholders, Officers and Directors”.
What is the proxy card?
The proxy card enables you to appoint Robert Berman, our Chief Executive Officer, and/or Robert Rankin, our Chief Financial Officer, as your representative at the Meeting. By completing and returning the proxy card or voting online as described herein, you are authorizing these persons to vote your shares at the Meeting in accordance with your instructions on the proxy card. This way, your shares will be voted whether or not you attend the Meeting. Even if you plan to attend the Meeting, we think that it is a good idea to complete and return your proxy card before the Meeting date just in case your plans change. If a proposal comes up for vote at the Meeting that is not on the proxy card, the proxies will vote your shares, under your proxy, according to their best judgment.
What am I voting on?
You are being asked to vote on:
How does the Board recommend that I vote?
Our Board unanimously recommends that the stockholders vote “FOR” all proposals being put before our stockholders at the Meeting.
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
Most of our stockholders 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.
Stockholder of Record
If, on the Record Date, your shares were registered directly in your name with our transfer agent, VStock Transfer, LLC, you are a “stockholder of record” who may vote at the Meeting, and we are sending these proxy materials directly to you. As the stockholder of record, you have the right to direct the voting of your shares by returning the enclosed proxy card to us or to vote in person at the Meeting. Whether or not you plan to attend the Meeting, please complete, date and sign the enclosed proxy card to ensure that your vote is counted.
Beneficial Owner
If, on the Record Date, your shares were held in an account at a brokerage firm or at a bank or other nominee holder, you are considered the beneficial owner of shares held “in street name,” and these proxy materials are being forwarded to you by your broker or nominee who is considered the stockholder of record for purposes of voting at the Meeting. As the beneficial owner, you have the right to direct your broker on how to vote your shares and to attend the Meeting. However, since you are not the stockholder of record, you may not vote these shares in person at the Meeting unless you receive a valid proxy from your brokerage firm, bank or other nominee holder. To obtain a valid proxy, you must make a special request of your brokerage firm, bank or other nominee holder. If you do not make this request, you can still vote by using the voting instruction card enclosed with this proxy statement; however, you will not be able to vote in person at the Meeting.
How do I vote?
(1) You may vote by mail. You may vote by mail by completing, signing and dating your proxy card and returning it in the enclosed, postage-paid and addressed envelope. If we receive your proxy card prior to the Meeting and if you mark your voting instructions on the proxy card, your shares will be voted:
If you return a signed card, but do not provide voting instructions, your shares will be voted:
(2) You may vote in person at the Meeting. We will pass out written ballots to anyone who wants to vote at the Meeting. However, if you hold your shares in street name, you must bring to the Meeting a valid proxy from the broker, bank or other nominee holding your shares that confirms your beneficial ownership of the shares and gives you the right to vote your shares. Holding shares in street name means you hold them through a brokerage firm, bank or other nominee, and therefore the shares are not held in your individual name. We encourage you to examine your proxy card closely to make sure you are voting all of your shares in the Company.
What does it mean if I receive more than one proxy card?
You may have multiple accounts at the transfer agent and/or with brokerage firms. Please sign and return all proxy cards to ensure that all of your shares are voted.
What if I previously voted for the Meeting that was called for November 27, 2018?
Even if you voted or submitted a proxy card for the Meeting as originally held on November 27, 2018, you should recast your vote for the adjourned Meeting to be held on December 21, 2018.
What if I change my mind after I return my proxy?
You may revoke your proxy and change your vote at any time before the polls close at the Meeting. You may do this by:
Please note, however, that if your shares are held of record by a brokerage firm, bank or other nominee, you must instruct your broker, bank or other nominee that you wish to change your vote by following the procedures on the voting form provided to you by the broker, bank or other nominee. If your shares are held in street name, and you wish to attend and vote at the Meeting, you must bring to the Meeting a legal proxy from the broker, bank or other nominee holding your shares, confirming your beneficial ownership of the shares and giving you the right to vote your shares.
Will my shares be voted if I do not sign and return my proxy card?
If your shares are held in street name or in your name and you do not sign and return your proxy card, your shares will not be voted unless you vote in person at the Meeting.
How are votes counted?
You may vote “for,” “against,” or “abstain” on each of the proposals being placed before our stockholders. Abstentions and broker non-votes(i.e., shares held by brokers on behalf of their customers, which may not be voted on certain matters because the brokers have not received specific voting instructions from their customers with respect to such matters) will be counted solely for the purpose of determining whether a quorum is present at the Meeting.
How many votes are required to elect each Dr. Francis Duhay and Dr. Sanjay Shrivastava as a Class I directors?
Our amended and restated bylaws, provides that directors are to be elected by a plurality of the votes of the shares present in person or represented by proxy at the Meeting and entitled to vote on the election of directors. This means that the two (2) candidates receiving the highest number of affirmative votes at the Meeting will be elected as Class I directors. Only shares that are voted in favor of a particular nominee will be counted toward that nominee’s achievement of a plurality. Shares present at the Meeting that are not voted for a particular nominee or shares present by proxy where the shareholder properly withheld authority to vote for such nominee will not be counted toward that nominee’s achievement of a plurality.
How many votes are required to ratify the Company’s independent public accountants?
The affirmative vote of a majority of the votes cast at the Meeting by the holders of shares of Common Stock entitled to vote is required to ratify Marcum LLP as our independent registered public accounting firm for the year ending December 31, 2018. Abstentions and broker non-votes will have no direct effect on the outcome of this proposal.
How many votes are required to approve other matters that may come before the stockholders at the Meeting?
An affirmative vote of a majority of the votes cast at the Meeting is required for approval of all other items being submitted to the stockholders for their consideration.
What happens if I don’t indicate how to vote my proxy?
If you just sign your proxy card without providing further instructions, your shares will be counted as a “for” vote for all of the proposals being placed before our stockholders at the Meeting.
Is my vote kept confidential?
Proxies, ballots and voting tabulations identifying stockholders are kept confidential and will not be disclosed except as may be necessary to meet legal requirements.
Where do I find the voting results of the Meeting?
We will announce voting results at the Meeting and file a Current Report on Form 8-K announcing the voting results of the Meeting.
Who can help answer my questions?
You can contact our Chief Financial Officer, Mr. Rankin, at (949) 261-2900 or by sending a letter to Mr. Rankin at offices of the Company at 70 Doppler Irvine, California 92618, with any questions about proposals described in this Proxy Statement or how to execute your vote.
Hancock Jaffe Laboratories, Inc.
70 Doppler Irvine, California 92618
(949) 261-2900
PROXY STATEMENT
2018 Annual MeetingThis proxy statement (the “Proxy Statement”) is furnished by the board of Stockholders
This Proxy Statement is being furnished to the holdersdirectors of our Common StockHancock Jaffe Laboratories, Inc. (the “Board”) in connection with the solicitation of proxies for use at the 2018 AnnualSpecial Meeting of Stockholders of the Companyor any postponement, adjournment or delay thereof (the “Meeting”“Special Meeting”). The Meeting is to be held at Hancock Jaffe Laboratories, Inc.’s principal executive offices at 70 Doppler, Irvine, California 92618 on Friday, December 21, 2018 at 10:00 a.m., Pacific Time, and at any adjournment or adjournments thereof.
The Meeting was originally called pursuant to the requirements of Delaware law to be heldlocal time, on November 27, 2018, but a quorum of the outstanding shares of Common Stock was not present at the Meeting or represented by proxy on such date. Therefore, the Meeting was adjourned pursuant to the Company’s Amended and Restated Bylaws until December 21, 2018 so that a quorum could be established, and we are sending you these updated notice and proxy materials accordingly.
The Board has fixed the close of business on October 22, 2018 (the “Record Date”) as the Record Date for the determination of stockholders entitled to notice of, and to vote and act at, the Meeting. Only stockholders of record at the close of business on that date are entitled to notice of, and to vote and act at, the Meeting. Thevirtual basis. This Proxy Statement, is firstalong with a Notice of Special Meeting of Stockholders and either a proxy card or a voting instruction card, are being mailed to stockholders of the Companybeginning on or about December 3, 2018.[●], 2020.
Proposals to be Submitted atUnless the Meeting
At the Meeting, stockholders will be acting upon the following proposals:
The principal executive offices of the Company are located at 70 Doppler Irvine, California 92618. The Company’s telephone number at such address is (949) 261-2900.
Information Concerning Solicitation and Voting
As of the Record Date, there were 11,717,308 outstanding shares of Common Stock, each share entitled to one vote on each matter to be voted on at the Meeting. Only holders of shares of Common Stock on the Record Date will be entitled to vote at the Meeting. The holders of Common Stock are entitled to one vote on all matters presented at the Meeting for each share held of record. The presencecontext otherwise requires, in person or by proxy of holders of record of a majority of the shares outstanding and entitled to vote as of the Record Date shall be required for a quorum to transact business at the Meeting. If a quorum should not be present, the Meeting may be adjourned until a quorum is obtained. To be elected, the nominee named in Proposal 1 must receive the vote of a majority of the votes of the shares of Common Stock cast in person or represented by proxy at the Meeting. For the purposes of election of such director, although abstentions will count toward the presence of a quorum, they will not be counted as votes cast and will have no effect on the result of the vote. “Broker non-votes,” which occur when brokers are prohibited from exercising discretionary voting authority for beneficial owners who have not provided voting instructions, will not be counted for the purpose of determining the number of shares present in person or by proxy on a voting matter and will have no effect on the outcome of the vote. Brokers who hold shares in street name may vote on behalf of beneficial owners with respect to Proposal 2.
The expense of preparing, printing and mailing this Proxy Statement, exhibitswe use the terms “we,” “our,” “us” and the proxies solicited hereby will be borne by the Company. In addition“the Company” to the use of the mails, proxies may be solicited by officers, directors and regular employees of the Company, without additional remuneration, by personal interviews, telephone, email or facsimile transmission. The Company will also request brokerage firms, nominees, custodians and fiduciariesrefer to forward proxy materials to the beneficial owners of shares of Common Stock held of record and will provide reimbursements for the cost of forwarding the material in accordance with customary charges.
Proxies given by stockholders of record for use at the Meeting may be revoked at any time prior to the exercise of the powers conferred. In addition to revocation in any other manner permitted by law, stockholders of record giving a proxy may revoke the proxy by an instrument in writing, executed by the stockholder or his attorney authorized in writing or, if the stockholder is a corporation, under its corporate seal, by an officer or attorney thereof duly authorized, and deposited either at the corporate headquarters of the Company at any time up to and including the last business day preceding the day of the Meeting, or any adjournments thereof, at which the proxy is to be used, or with the chairman of such Meeting on the day of the Meeting or adjournments thereof, and upon either of such deposits the proxy is revoked.
ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF A PROPOSAL IF NO CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF THE PERSONS NAMED IN THE PROXY WITH RESPECT TO ANY OTHER BUSINESS THAT MAY COME BEFORE THE MEETING.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF EACH OF THE PROPOSALS TO BE SUBMITTED AT THE MEETING.Hancock Jaffe Laboratories, Inc.
PROPOSAL 1QUESTIONS AND ANSWERS ABOUT
ELECTION OF CLASS I DIRECTORSTHE PROXY MATERIALS AND THE SPECIAL MEETING
The Board currently consists of three classes of directors, as follows:
The Board is soliciting your proxy to vote at the Special Meeting because you were a stockholder at the close of business on July 21, 2020, the record date (the “Record Date”), and are entitled to vote at the Special Meeting. This Proxy Statement summarizes the information you need to know to vote at the Special Meeting. You do not need to attend the Special Meeting to vote your shares. | ||||
| What information is contained in | ||||
| The information in this Proxy Statement relates to the proposals to be voted on at the Special Meeting, the voting process and certain other required information. | ||||
| What should I do if I receive more than one set of voting materials? | ||||
| You may receive more than one set of voting materials, including multiple copies of this Proxy Statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive. | ||||
| How may I obtain an additional set of proxy materials? | ||||
At the Meeting, stockholders will be asked to elect each of Dr. Francis Duhay and Dr. Sanjay Shrivastava as a Class I director, each to hold office until the 2021 Annual Meeting of Stockholders or until his successor is elected and qualified or until his earlier death, incapacity, removal or resignation. The Board has nominated Dr. Francis Duhay and Dr. Sanjay Shrivastava to stand for election at the Meeting.Proxy Advisory Group, LLC
18 East 41st Street, 20th Floor
New York, NY 10017
Tel: (212) 616-2181
The enclosed proxy, if returned, and unless indicated to the contrary, will be voted for the election of Drs. Duhay and Shrivastava. Proxies cannot be voted for a greater number of persons than the number of nominees named.
| Q: | What is the difference between holding shares as a stockholder of record and as a beneficial owner? |
| A: | Stockholders of Record. You are a stockholder of record if at the close of business on the Record Date your shares were registered directly in your name with our transfer agent, VStock Transfer, LLC. Beneficial Owner. You are a beneficial owner if at the close of business on the record date your shares were held by a brokerage firm or other nominee and not in your name. Being a beneficial owner means that, like many of our stockholders, your shares are held in “street name.” As the beneficial owner, you have the right to direct your broker or other nominee how to vote your shares by following the voting instructions your broker or other nominee provides. If you do not provide your broker or other nominee with instructions on how to vote your shares, your broker or other nominee may be able to vote your shares with respect to some of the proposals, but not all. Please see “Will my shares be voted if I do not return my proxy card or voting instruction card and do not attend the Special Meeting?” below for additional information. |
| Q: | What am I voting on at the Special Meeting? |
We have been advised by each of Drs. Duhay and Shrivastava that they are willing to be named as nominees and each are willing to serve as a director if elected. If some unexpected occurrence should make necessary, in the discretion of the Board, the substitution of some other person for the nominees, it is the intention of the persons named in the proxy to vote for the election of such other person as may be designated by the Board.
Directors and Executive Officers
Listed below are the names of the directors and executive officers of the Company, their ages as of the Record Date, their positions held and the year they commenced service with the Company
| Name | Age | Position(s) Held | Year of Service Commencement | |||
| Yury Zhivilo | 58 | Director, Chairman | 2007 | |||
| Robert A. Berman | 55 | Director, Chief Executive Officer | 2018 | |||
| Dr. Francis Duhay | 58 | Director | 2018 | |||
| Dr. Sanjay Shrivastava | 51 | Director | 2018 | |||
| Marcus W. Robins | 64 | Director | 2018 | |||
| Benedict Broennimann, M.D. | 60 | Chief Medical Officer, OUS | 2016 | |||
| Marc H. Glickman, M.D. | 69 | Senior Vice President and Chief Medical Officer | 2016 | |||
| Robert Rankin | 66 | Chief Financial Officer | 2018 |
There are no arrangements between our directors and any other person pursuant to which our directors were nominated or elected for their positions. There are no family relationships between any of our directors or executive officers.
Yury Zhivilo has served as Chairman of our board of directors since September 2007. In 2004, he co-founded Leman Cardiovascular S.A., a private company that develops, manufactures and markets bioprosthetic products used in cardiovascular surgery, as well as nephrology indications. Since 2010, he has been serving as President of Leman Cardiovascular S.A., Chief Executive Officer and President of Dante-Lido Financial Limited, and as Managing Director of Biodyne, all of which are based in Morge, Switzerland. Biodyne’s principal line of business is to invest in medical device technology companies. Mr. Zhivilo is also currently serving as a director of Dante-Lido Financial Limited and Biodyne. From 2004 to present, Mr. Zhivilo served as Chairman of the board of director of Leman Cardiovascular S.A. Prior to that, he served as Chairman and Chief Executive Officer of Base Metal Trading Limited from 1992 to 2004. Mr. Zhivilo received a Senior Specialist degree in economics in 1985 from Moscow State Institute of International Affairs. We believe Mr. Zhivilo is qualified to serve as a member of our board of directors because of his extensive experience in the medical device industry as both an operating executive and as a board member.
Robert A. Berman has served as our Chief Executive Officer and a member of our board of directors since April 2018. From September 2017 to March 2018, Mr. Berman worked as an independent strategic business consultant. From September 2012 to July 2017, he served as the President, Chief Executive Officer, and a member of the board of directors of ITUS Corporation (now called Anixa Biosciences), a Nasdaq listed company, that develops a liquid biopsy technology for early cancer detection. Prior to ITUS Corporation, Mr. Berman was the Chief Executive Officer of VIZ Technologies, a start-up company which developed and licensed a beverage dispensing cap, and he was the founder of IP Dispute Resolution Corporation, a company focused on intellectual property licensing. From 2000 to March 2007, Mr. Berman was the Chief Operating Officer and General Counsel of Acacia Research Corporation, which was a publicly traded company engaged in the licensing and enforcement of patented technologies. Mr. Berman was a Director of Business Development at QVC where he developed and selected products for on-air sales and distribution. Mr. Berman started his career at the law firm of Blank Rome LLP. He has a Bachelor of Science in Entrepreneurial Management from the Wharton School of the University of Pennsylvania and holds a Juris Doctorate degree from the Northwestern University Pritzker School of Law, where he serves as an adjunct faculty member. We believe Mr. Berman is qualified to serve as a member of our board of directors because of his experience in broad variety of areas including healthcare, finance, acquisitions, marketing, compliance, turnarounds, and the development and licensing of emerging technologies.
Dr. Francis Duhay has served as member of our board of directors since October 2018. A trained cardiac and thoracic surgeon, has served the President and Chief Operating officer of Aegis Surgical Inc., and Atrius Inc., makers of cardiac accessory devices, since 2016, and a Partner in K5_Ventures, an early stage venture fund since 2017. Dr. Duhay is the former Chief Medical Officer at Edwards Life Sciences, a world leader in heart valve products, where he led medical and clinical affairs for transcatheter and surgical heart valves. During his tenure at Edwards Life Sciences, from 2008 to 2016, Dr. Duhay led the preparation and submission, and ultimate regulatory approval, of two FDA Premarket Approval (PMA) applications for transcatheter and surgical heart valve therapies and was responsible for the design and execution of the applicable clinical trials. Dr. Duhay was also the Vice President and General Manager of the Ascendra™ transcatheter heart valve business unit at Edwards, where he grew the unit from sixteen to eighty employees and contributed to annual growth in sales from $3 million to $250 million. From 1998 to 2003, Dr. Duhay served as the Chief of the Department of Cardiothoracic Surgery and Cardiology at Kaiser Permanente. Dr. Duhay has also served as an industry representative and clinical expert, and a member of the working group for ISO 5840, the international quality standard for the design, development, and testing of heart valves. Dr. Duhay received his MBA from the University of Hawai’i - Shidler College of Business and received his board certification for Cardiothoracic Surgery and General Surgery from the Duke University School of Medicine and from the University of California, San Francisco, respectively.
Dr. Sanjay Shrivastavahas served as member of our board of directors since October 2018. He has been involved in developing, commercializing, evaluating, and acquiring medical devices for more than 18 years, including serving in Chief Executive Officer and board of director positions at several medical device start-ups, and leadership positions in research and development, business development, and marketing at BTG (from 2017 to 2018), Medtronic (2007 to 2017), Abbott Vascular (2003 to 2007), and Edwards Life Sciences (2000 to 2003). He is presently the Vice President of Marketing and Business Development at U.S. Vascular, LLC and a co-founder and board member of BlackSwan Vascular, Inc. While working as a vice president, upstream marketing and strategy at BTG, a medical device and specialty pharmaceutical company with annual revenue of about $800 million, Dr. Shrivastava worked on several acquisition and investment deals. At Medtronic, Dr. Shrivastava was the Director of Global Marketing for the Cardiac and Vascular Group where he helped build the embolization business, from its initiation to a substantial revenue with a very high CAGR over a period of six years. Dr. Shrivastava was a Manager of Research and Development for the peripheral vascular business at Abbott Vascular and a Principal Research and Development Engineer for Trans-Catheter heart valves at Edwards Life Sciences. Dr. Shrivastava received his Bachelor of Science in engineering at the Indian Institute of Technology, and his Doctorate of Philosophy in materials science and engineering from the University of Florida.
Marcus W. Robins, CFA has served as member of our board of directors since October 2018. He is an experienced fund manager, publisher and equity analyst. He is currently the fund manager at Crown Capital Management LP, a new micro-cap and small-cap fund he started in July 2018. Since 2003, Mr. Robins founded and has been a registered investment advisor at Catalyst Financial Resources LLC, a provider of institutional level research for micro-cap companies. Catalyst Financial is the follow-on toThe Red Chip Review, which Mr. Robins launched in 1993. At its peak,Red Chipprovided research coverage on over 500 companies and had a subscriber base of over 7,000 investors, 100 brokerage offices and 25 money managers. In addition toRed Chip, Mr. Robins has been published in numerous national publications includingThe Wall Street Journal,Bloomberg, Investor’s Business Daily, Kiplinger’s, andForbes,where he had his own column for 8 years. Mr. Robins received his Bachelor’s degree in Chemistry from Willamette University and a MBA from Willamette University – Atkinson Graduate School of Management.
Benedict Broennimann, M.D. has served as our Chief Medical Officer, Outside of United States, or OUS, since April 2018. He served as our Chief Executive Officer from September 2016 to August 2017, and our Co-Chief Executive Officer from August 2017 to April 2018. From 2006 to 2008, Dr. Broennimann served as our Chairman and Chief Executive Officer, and from 2009 to 2015 he was engaged by us as a consultant to facilitate our efforts to gain various regulatory approvals in Europe. From 2012 to 2016, he served as Chief Executive Officer and Chief Medical Officer of OstomyCure AS, where he was responsible for achieving CE marking of a Class IIb medical implant and leading strategic alliances and negotiations. From 2004 to 2008, he was also Chief Executive Officer of Leman Cardiovascular S.A., where he spearheaded fundraising and cardiovascular device developments. Dr. Broennimann served as Principal at Heidrick & Struggles from 2000 to 2002 and Highland Partners from 2003 to 2004. He also served as a Senior Partner at Rosewall from 2008 to 2011. Dr. Broennimann attended the University of Bern in Switzerland, where he received his Doctor of Medicine, and was Chief Resident in the Department of General Surgery and Transplantation at the Centre Hospitalier Universitaire Vaudois in Lausanne, Switzerland. Dr. Broennimann is also board certified in general surgery and pharmaceutical medicine.
Marc H. Glickman, M.D. has served as our Senior Vice President and Chief Medical Officer since May 2016 and served as member of our board of directors from July 2016 to August 2017. In 1981, Dr. Glickman started a vascular practice in Norfolk, Virginia. He established the first Vein Center in Virginia and also created a dialysis access center. He was employed by Sentara Health Care as director of Vascular Services until he retired in 2014. Dr. Glickman is a board certified vascular surgeon. Dr. Glickman received his Doctor of Medicine from Case Western Reserve, in Cleveland, Ohio and completed his residency at the University of Washington, Seattle. He is board certified in Vascular Surgery and was the past president of the Vascular Society of the Americas. He has served on the advisory boards of Possis Medical, Cohesion Technologies, Thoratec, GraftCath, Inc., TVA medical, Austin, Texas.
Robert Rankin has served as our Chief Financial Officer since July 2018. Mr. Rankin has more than twenty years of relevant experience helping to shape the operations and financial health of companies across multiple industries. Prior to joining our company, from November 2015 to December 2017, Mr. Rankin was the Chief Financial Officer of Horsburgh & Scott, a privately held company focused on the design, engineering, manufacturing and repair of heavy duty quality gears and gearboxes. From November 2009 to December 2014, Mr. Rankin was Chief Financial Officer, Chief Operating Officer and Secretary of Process Fab, Inc., a privately held engineering, design and manufacturing firm that provides flight hardware, ground support equipment and tooling to the spaceflight, aerospace and defense markets. Mr. Rankin also served as Vice President of Finance of TBGA LLC, the post-acquisition parent company of Process Fab, Inc., from December 2014 to August 2015. Prior to Process Fab, Inc., from 2004 to 2008, Mr. Rankin served as Chief Financial Officer, Chief Operating Officer and Director of the House of Taylor Jewelry, Inc. and Chief Financial Officer of Small World Kids, Inc., both publicly traded companies. Other experience as Chief Financial Officer for publicly traded companies included serving as Chief Financial Officer from 1992 to 1998 of DeCrane Aircraft Holdings, Inc. Mr. Rankin holds a Masters of Science degree in Industrial Administration from the Tepper School of Business at Carnegie Mellon University and a Bachelors of Science degree in Mechanical Engineering from Carnegie Mellon University.
There are no family relationships between or among any of the current directors or executive officers. There are no family relationships among our officers and directors and those of our subsidiaries and affiliated companies.
Except as set forth below, none of the Company’s directors or executive officers have been involved, in the past ten years and in a manner material to an evaluation of such director’s or officer’s ability or integrity to serve as a director or executive officer, in any of those “Certain Legal Proceedings” more fully detailed in Item 401(f) of Regulation S-K, which include but are not limited to, bankruptcies, criminal convictions and an adjudication finding that an individual violated federal or state securities laws.
On April 17, 2007, Mr. Rankin was hired as Chief Financial Officer of House of Taylor Jewelry, Inc. (“Taylor”). In June 2008, the licensors of Taylor’s primary licenses, Elizabeth Taylor and Kathy Ireland terminated such licenses citing deficient revenue and royalties. This caused Taylor to be in default of certain covenants contained in a secured loan facility, upon which the secured lender took procession of the collateral, which led to the closing of Taylor. Subsequently, Taylor declared for Chapter 7 liquidation in bankruptcy.
Our business and affairs are organized under the direction of our board of directors, which currently consists of five members. Our directors hold office until the earlier of their death, incapacity, removal or resignation, or until their successors have been elected and qualified. Our board of directors does not have a formal policy on whether the roles of a Chief Executive Officer and Chairman of our board of directors should be separate. The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counseling and direction to our management. Our board of directors meets on a regular basis. Our bylaws will be amended and restated to provide that the authorized number of directors may be changed only by resolution of the board of directors.
We have no formal policy regarding board diversity. Our priority in selection of board members is identification of members who will further the interests of our stockholders through his or her established record of professional accomplishment, the ability to contribute positively to the collaborative culture among board members, knowledge of our business and understanding of the competitive landscape.
Our amended and restated certificate of incorporation divides our board of directors into three classes, with staggered three-year terms, as follows:
Class I Directors (serving until the 2018 Annual Meeting of Stockholders, or until their earlier death, disability, resignation or removal):
Dr. Francis Duhay* and Dr. Sanjay Shrivastava *
Class II Directors (serving until the 2019 Annual Meeting of Stockholders, or until their earlier death, disability, resignation or removal):
Marc W. Robins*, Robert A. Berman
Class III Director (serving until the 2020 Annual Meeting of Stockholders, or until his earlier death, disability, resignation or removal):
Yury Zhivilo
(*) Independent Director.
At each annual meeting of stockholders to be held after the initial classification, the successors to directors whose terms then expire will serve until the third annual meeting following their election and until their successors are duly elected and qualified. The authorized size of our board of directors is currently five members. The authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed between the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of the board of directors may have the effect of delaying or preventing changes in our control or management. Our directors may be removed for cause by the affirmative vote of the holders of at least 66 2/3% of our voting stock.
The Nasdaq Marketplace Rules require a majority of a listed company’s board of directors to be comprised of independent directors within one year of listing. In addition, the Nasdaq Marketplace Rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees be independent and that audit committee members also satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act.
Under Rule 5605(a)(2) of the Nasdaq Marketplace Rules, a director will only qualify as an “independent director” if, in the opinion of our board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3 of the Exchange Act, 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 otherwise be an affiliated person of the listed company or any of its subsidiaries.
Our board of directors has reviewed the composition of our board of directors and its committees and the independence of each director. Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, our board of directors has determined that each of Mr. Robins and Drs. Duhay and Shrivastava is an “independent director” as defined under Rule 5605(a)(2) of the Nasdaq Marketplace Rules. Our board of directors also determined that Mr. Robins and Drs. Duhay and Shrivastava, who will each serve on our audit committee, our compensation committee, and our nominating and corporate governance committee, satisfy the independence standards for such committees established by the SEC and the Nasdaq Marketplace Rules, as applicable. In making such determinations, our board of directors considered the relationships that each such non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining independence, including the beneficial ownership of our capital stock by each non-employee director.
Meetings of the Board and Stockholders
Our board of directors met in person and telephonically 5 times during 2018 and also acted by unanimous written consent. Each member of our board of directors was present at least 60% of the board of directors meetings held. It is our policy that all directors must attend all stockholder meetings, barring extenuating circumstances.
Our board of directors has established three standing committees—audit, compensation, and nominating and corporate governance—each of which operates under a charter that has been approved by our board of directors. Prior to the completion of this offering, copies of each committee’s charter will be posted on the Investors section of our website, which is located at www.hancockjaffe.com. Each committee has the composition and responsibilities described below. Our board of directors may from time to time establish other committees.
Audit Committee
Our audit committee consists of Mr. Robins, who is the chair of the committee, and Drs. Shrivastava and Duhay. Our board of directors has determined that each of the members of our audit committee satisfies the Nasdaq Marketplace Rules and SEC independence requirements. The functions of this committee include, among other things:
| A: | You are voting on the following proposals: |
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| 3 |
| ● | to approve an amendment to the Company’s Amended and | |
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● ● | to approve, for purposes of complying with applicable Nasdaq Listing Rules, the potential issuance of more than 20% of the Company’s issued and outstanding common stock in connection with the private placement of 4,205,406 shares of the Company’s Series C Convertible Preferred Stock (the “Preferred Stock”) and unregistered warrants to purchase up to an aggregate of 6,078,125 shares of common stock (the “First Nasdaq Proposal”); to approve, for purposes of complying with applicable Nasdaq Listing Rules, the potential issuance of more than 20% of the Company’s issued and outstanding common stock in connection with the issuance of unregistered warrants to purchase up to an aggregate of 3,495,000 shares of common stock with respect to the waiver of certain rights of the purchaser signatories to those certain Securities Purchase Agreements, dated April 24, 2020, and June 1, 2020 (the “Second Nasdaq Proposal”); and | |
| ● |
The Board recommends a vote “FOR” each of the proposals.
| Q: | How do I vote and |
| A: | If you are a stockholder of |
| ● | ||
Our board of directors has determined that Mr. Robins qualifies as an “audit committee financial expert” within the meaning of applicable SEC regulations and meets the financial sophistication requirements of the Nasdaq Marketplace Rules. Both our independent registered public accounting firm and management periodically meet privately with our audit committee.
Compensation Committee
Our compensation committee consists of Dr. Shrivastava, who is the chair of the committee, and Mr. Robins and Dr. Duhay. Our board of directors has determined that each of the members of our compensation committee is an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, and satisfies the Nasdaq Marketplace Rules independence requirements. The functions of this committee include, among other things:
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Dr. Duhay, who is the chair of the committee, and Mr. Robins and Dr. Shrivastava. Our board of directors has determined that each of the members of this committee satisfies the Nasdaq Marketplace Rules independence requirements. The functions of this committee include, among other things:
Our board of directors has adopted a written code of conduct that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have posted on our website a current copy of the code and all disclosures that are required by law or Nasdaq Marketplace Rules concerning any amendments to, or waivers from, any provision of the code.
Our board of directors is free to select the Chairman of the board of directors and a Chief Executive Officer in a manner that it considers to be in the best interests of our company at the time of selection. Currently, Robert A. Berman serves as our Chief Executive Officer and Yury Zhivilo serves as Chairman of the board of directors. We currently believe that this leadership structure is in our best interests and strikes an appropriate balance between our Chief Executive Officer’s responsibility for the day-to-day management of our company and the Chairman of the board of directors’ responsibility to provide oversight, including setting the board of directors’ meeting agendas and presiding at executive sessions of the independent directors. Additionally, three of our five members of our board of directors have been deemed to be “independent” by the board of directors, which we believe provides sufficient independent oversight of our management. Our board of directors has not designated a lead independent director.
Our board of directors, as a whole and also at the committee level, plays an active role overseeing the overall management of our risks. Our Audit Committee reviews risks related to financial and operational items with our management and our independent registered public accounting firm. Our board of directors is in regular contact with our Chief Executive Officer and Chief Financial Officer, who report directly to our board of directors and who supervise day-to-day risk management.
Role of Board in Risk Oversight Process
Our board of directors believes that risk management is an important part of establishing, updating and executing on our business strategy. Our board of directors has oversight responsibility relating to risks that could affect the corporate strategy, business objectives, compliance, operations, and the financial condition and performance of our company. Our board of directors focuses its oversight on the most significant risks facing us and on our processes to identify, prioritize, assess, manage and mitigate those risks. Our board of directors receives regular reports from members of our senior management on areas of material risk to us, including strategic, operational, financial, legal and regulatory risks. While our board of directors has an oversight role, management is principally tasked with direct responsibility for management and assessment of risks and the implementation of processes and controls to mitigate their effects on us.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that our directors and executive officers and persons who beneficially own more than 10% of our common stock (referred to herein as the “reporting persons”) file with the SEC various reports as to their ownership of and activities relating to our common stock. Such reporting persons are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file.
Based solely upon a review of copies of Section 16(a) reports and representations received by us from reporting persons, and without conducting any independent investigation of our own, in fiscal year 2018, all Forms 3, 4 and 5 were timely filed with the SEC by such reporting persons, with exception of Form 3 by Dr. Francis Duhay.
THE BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OFDR. FRANCIS DUHAY AND DR. SANJAY SHRIVASTAVA TO EACH SERVE AS CLASS I
DIRECTORS ON THE COMPANY’S BOARD, TO HOLD OFFICE UNTIL THE 2021 ANNUAL
MEETING OF STOCKHOLDERS OR UNTIL THEIR SUCCESSORS ARE ELECTED AND
QUALIFIED OR UNTIL THEIR EARLIER RESIGNATION OR REMOVAL.
The following table sets forth total compensation paid to our named executive officers for the years ended December 31, 2017 and 2016. Individuals we refer to as our “named executive officers” include both of our previous Co-Chief Executive Officers and our two other most highly compensated executive officers whose salary and bonus for services rendered in all capacities exceeded $100,000 during the fiscal year ended December 31, 2017.
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||
| Benedict Broennimann, M.D. | 2017 | 360,000 | (1) | - | - | - | - | - | 360,000 | |||||||||||||||||||||||
| Former Co-Chief Executive Officer | 2016 | 140,000 | (1) | - | 155,290 | (5) | - | - | - | 295,290 | ||||||||||||||||||||||
| Steven A. Cantor | 2017 | 300,000 | (2) | 300,000 | (3) | - | - | - | 274,816 | (6) | 874,816 | |||||||||||||||||||||
| Former Co-Chief Executive Officer | 2016 | 42,046 | 215,000 | (4) | - | - | - | - | 257,046 | |||||||||||||||||||||||
| Marc H. Glickman, M.D. | 2017 | 300,000 | - | - | - | - | 41,717 | (7) | 341,717 | |||||||||||||||||||||||
| Chief Medical Officer and Senior Vice President | 2016 | 196,454 | - | 195,570 | (5) | - | - | 24,241 | (8) | 416,265 | ||||||||||||||||||||||
| Susan Montoya | 2017 | 295,192 | - | - | - | - | 43,539 | (9) | 338,731 | |||||||||||||||||||||||
| Vice President Operations, | 2016 | 301,187 | - | 867,610 | (5) | - | - | 43,000 | (10) | 1,211,797 | ||||||||||||||||||||||
| Quality Assurance/Regulatory Affairs | ||||||||||||||||||||||||||||||||
We have entered into various employment agreements with certain of our executive officers. Set forth below is a summary of many of the material provisions of such agreements, which summaries do not purport to contain all of the material terms and conditions of each such agreement. For purposes of the following employment agreements:
Benedict Broennimann, M.D.
On August 30, 2016, we entered into an employment agreement with Benedict Broennimann, M.D., one of our previous Co-Chief Executive Officers. Pursuant to the terms of his employment agreement, Dr. Broennimann’s initial base salary is $360,000, subject to annual review and adjustment at the discretion of our board of directors. Dr. Broennimann has orally agreed to defer certain amounts of cash compensation until such time as we and Dr. Broennimann agree. As a result, we owe Dr. Broennimann $410,000 as of December 31, 2017. On April 30, 2018, Dr. Broennimann assigned $200,000 of his compensation to Rosewall, which agreed to accept 44,444 shares of our common stock in satisfaction of the deferred compensation. Dr. Broennimann is not a U.S. taxpayer and is not, therefore, subject to U.S. tax laws governing deferred compensation.
In connection with his employment, Dr. Broennimann received an initial equity grant of an option to purchase up to 146,500 shares of our common stock with 20% of the shares vesting immediately and 80% vesting on a monthly basis over 24 months thereafter. Dr. Broennimann is an at-will employee and has a full-time commitment. Further, Dr. Broennimann’s employment agreement prohibits him from inducing, soliciting or entertaining any of our employees to leave our employ during the term of the agreement and for 12 months thereafter.
In April 2018, we entered into an amendment to Dr. Broennimann’s employment agreement to appoint him as our Chief Medical Officer, OUS. Other than Dr. Broennimann’s title and duties, the remaining terms of his employment agreement were unchanged.
On May 1, 2018, the Company entered into Service Agreement with Rosewall Ventures Ltd (“Rosewall”), which Dr. Broennimann is Chairman and principal owner, for Dr. Broennimann to contract his services through Rosewall as Chief Medical Officer, OUS for a $15,000 fixed fee per month.
Steven A. Cantor
On July 1, 2016, we entered into an employment agreement with Mr. Cantor, who prior to December 1, 2016, was our business development manager and commencing on December 1, 2016 became our Chief Business Development Officer. The employment agreement was amended on December 1, 2016, and again on June 12, 2017. Pursuant to the terms of his employment agreement, as amended to date, Mr. Cantor’s base salary was $300,000 and was subjected to annual review and adjustment at the discretion of our board of directors, and in no event was Mr. Cantor’s annual salary reduced from the preceding year without his consent. Mr. Cantor was entitled to receive a bonus of $250,000 upon the earlier of (i) a commercial sale of one of our product candidates, or (ii) the entry into a definitive agreement for the distribution or license of one of our product candidates. We also agreed to pay Mr. Cantor’s relocation expenses in connection with Mr. Cantor’s move to Orange County, California, and, after June 12, 2018 or at such time he no longer spends a substantial portion of his daily working day working on matters that reasonably can be determined at Mr. Cantor’s sole discretion to be in Orange County, California, to move Mr. Cantor back to New York when requested by him. In addition, so long as Mr. Cantor was living in Orange County, California, we agreed to pay or reimburse Mr. Cantor for all payments relating to (i) a furnished residence in Orange County, California and (ii) an automobile selected by Mr. Cantor, provided, however, that the amount of payments or reimbursements pursuant to (i) and (ii) would not exceed $5,000 per month. We further agreed to pay Mr. Cantor an amount equal to the aggregate federal, state and local income and employment taxes imposed on Mr. Cantor as a direct result of such payments or reimbursements in advance.
We also agreed to a net of withholdings and deductions lump sum payment to Mr. Cantor in the amount of twelve months’ gross salary, which was subjected to claw back if Mr. Cantor’s relocation was for less than twelve months. Such lump sum payment and withholdings and deductions were to be paid if we raised at least $3.0 million in one or more financings. We have raised at least $3.0 million since June 12, 2017 through the issuance of the 2017 Notes and the 2018 Notes. As a result, we paid Mr. Cantor $300,000 accordingly.
In connection with his employment, Mr. Cantor received 299,400 shares of our common stock, which we issued to replace shares of our common stock previously earned under Mr. Cantor’s prior employment agreement and we ratified the issuance to Mr. Cantor of a warrant to purchase 416,667 shares of our common stock at an exercise price of $12.00 per share. As of December 31, 2017, Mr. Cantor returned to us 250,000 of such warrants and transferred the balance of 166,667 warrants to others.
Mr. Cantor’s employment agreement prohibited him from inducing, soliciting or entertaining any of our employees to leave our employ during the term of the agreement and for 12 months thereafter.
Pursuant to the terms of his employment agreement, Mr. Cantor was entitled to severance in the event of certain terminations of employment. In the event Mr. Cantor’s employment was terminated by us without cause and other than by reason of disability or he resigned for good reason, subjected to his timely executing a release of claims in our favor and in addition to certain other accrued benefits, he was entitled to receive 12 months of continued base salary (or 24 months if such termination occurred within 24 months following a change of control).
On March 20, 2018, we terminated Mr. Cantor’s employment with our company.
Susan Montoya
On July 22, 2016, we entered into an employment agreement with Susan Montoya, our Senior Vice President of Operations and Quality Assurance/Regulatory Affairs. Pursuant to the terms of her employment agreement, Ms. Montoya’s base salary is $295,000, subject to annual review and adjustment at the discretion of our board of directors, and she will be eligible for an annual year-end discretionary bonus of up to 50% of her base salary, subject to the achievement of key performance indicators, as determined by our board of directors. In connection with her employment, Ms. Montoya received an initial equity grant of an option to purchase up to 818,500 shares of our common stock with 20% of the shares vesting immediately and 80% vesting on a monthly basis over 24 months thereafter. The initial term of Ms. Montoya’s employment agreement ends on December 31, 2018 and will be automatically extended for additional three-year terms, unless either party gives written notice to the other to terminate the agreement or unless sooner terminated under its terms. If we elect not to renew Ms. Montoya’s employment agreement, our non-renewal will be deemed a termination without cause or for good reason thereunder.
Ms. Montoya is entitled to participate in our employee benefit, pension and/or profit sharing plans, and we will pay certain health and dental premiums on her behalf. Ms. Montoya’s employment agreement prohibits her from inducing, soliciting or entertaining any of our employees to leave our employ during the term of the agreement and for 12 months thereafter.
Pursuant to the terms of her employment agreement, Ms. Montoya is entitled to severance in the event of certain terminations of employment. In the event Ms. Montoya’s employment is terminated by us without cause and other than by reason of disability or she resigns for good reason, subject to her timely executing a release of claims in our favor and in addition to certain other accrued benefits, she is entitled to receive 12 months of continued base salary (or 24 months if such termination occurs within 24 months following a change of control).
Marc H. Glickman, M.D.
On July 22, 2016, we entered into an employment agreement with Marc H. Glickman, M.D., our Senior Vice President and Chief Medical Officer. Pursuant to the terms of his employment agreement, Dr. Glickman’s base salary is $300,000, subject to annual review and adjustment at the discretion of our board of directors, and he will be eligible for an annual year-end discretionary bonus of up to 50% of his base salary, subject to the achievement of key performance indicators, as determined by our board of directors. In connection with his employment, Dr. Glickman received an initial equity grant of an option to purchase up to 184,500 shares of our common stock with 20% of the shares vesting immediately and 80% vesting on a monthly basis over 24 months thereafter. The initial term of Dr. Glickman’s employment agreement ends on December 31, 2018 and will be automatically extended for additional three-year terms, unless either party gives written notice to the other to terminate the agreement or unless sooner terminated under its terms. If we elect not to renew Dr. Glickman’s employment agreement, our non-renewal will be deemed a termination without cause or for good reason thereunder.
Dr. Glickman is entitled to participate in our employee benefit, pension and/or profit sharing plans, and we will pay certain health and dental premiums on his behalf. Dr. Glickman’s employment agreement prohibits him from inducing, soliciting or entertaining any of our employees to leave our employ during the term of the agreement and for 12 months thereafter.
Pursuant to the terms of his employment agreement, Dr. Glickman is entitled to severance in the event of certain terminations of employment. In the event Dr. Glickman’s employment is terminated by us without cause and other than by reason of disability or he resigns for good reason, subject to his timely executing a release of claims in our favor and in addition to certain other accrued benefits, he is entitled to receive 12 months of continued base salary (or 24 months if such termination occurs within 24 months following a change of control).
Robert A. Berman
On March 30, 2018, we entered into an employment agreement with Robert A. Berman, our current Chief Executive Officer and director. Pursuant to the terms of his employment agreement, Mr. Berman’s base salary is $400,000, subject to annual review and adjustment at the discretion of our compensation committee, and he will be eligible for an annual year-end discretionary bonus of up to 50% of his base salary, subject to the achievement of key performance indicators, as determined by our compensation committee. The initial term of Mr. Berman’s employment agreement may be terminated at anytime with or without cause and with or without notice or for good reason thereunder.
Mr. Berman is entitled to participate in our employee benefit, pension and/or profit sharing plans, and we will pay certain health and dental premiums on his behalf. Mr. Berman’s employment agreement prohibits him from inducing, soliciting or entertaining any of our employees to leave our employ during the term of the agreement and for 12 months thereafter.
Pursuant to the terms of his employment agreement, Mr. Berman is entitled to severance in the event of certain terminations of employment. In the event Mr. Berman’s employment is terminated by us without cause and other than by reason of disability or he resigns for good reason, subject to his timely executing a release of claims in our favor and in addition to certain other accrued benefits, he is entitled to receive 6 month of base salary if termination occurred prior to the second anniversary of his employment or 12 months of continued base salary on and after the second anniversary of his employment (or 24 months if such termination occurs within 24 months following a change of control).
Robert A Rankin
On July 16, 2018, the Company entered into an employment agreement with Mr. Rankin which provides for an annual base salary of $250,000 as well as standard employee insurance and other benefits. Pursuant to this agreement, Mr. Rankin is eligible for annual salary increases at the discretion of our board of directors as well as an annual year-end discretionary bonus of up to 30% of his base salary, subject to the achievement of key performance indicators, as determined by the board and the Chief Executive Officer of the Company in their sole discretion.
Mr. Rankin’s employment agreement provides for severance payments in the event of termination without Cause or he resigns for Good Reason (as defined in the agreement), equal to three months of base salary for each year that he has been employed by the Company at the time of termination, up to a total of one year of his base salary, provided, that if such termination results from a Change of Control (as defined in the agreement), Mr. Rankin’s severance will not be less than six months of his base salary
Mr. Rankin’s employment with the Company is “at-will”, and may be terminated at any time, with or without cause and with or without notice by either Mr. Rankin or the Company.
Potential Payments Upon Termination or Change-in-Control
Pursuant to the terms of the employment agreements discussed above, we will pay severance in the event of certain terminations of employment. In the event employment is terminated by us without cause and other than by reason of disability or if the executive resigns for good reason, subject to his or her timely executing a release of claims in our favor and in addition to certain other accrued benefits, he or she is entitled to receive severance pursuant to the terms of his or her employment agreements discussed above.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information regarding equity awards held by our named executive officers as of December 31, 2017.
| Name | Number of securities underlying unexercised options (#) exercisable (1) | Number of securities underlying unexercised options (#) unexercisable (1) | Equity incentive plan awards: Number of securities underlying unexercised unearned options (#) |
Option exercise price ($) | Option expiration date | |||||||||||||||||
| Benedict Broennimann, M.D. | 2017 | 97,669 | 48,831 | N/A | $ | 10.00 | October 1, 2026 | |||||||||||||||
| Former Co-Chief Executive Officer | 2016 | 39,067 | 107,433 | N/A | $ | 10.00 | October 1, 2026 | |||||||||||||||
| Steven A. Cantor | 2017 | - | - | N/A | - | - | ||||||||||||||||
| Former Co-Chief Executive Officer | 2016 | - | - | N/A | - | - | ||||||||||||||||
| Marc H. Glickman, M.D. | 2017 | 123,000 | 61,500 | N/A | $ | 10.00 | October 1, 2026 | |||||||||||||||
| Chief Medical Officer and Senior Vice President | 2016 | 49,200 | 135,300 | N/A | $ | 10.00 | October 1, 2026 | |||||||||||||||
Susan Montoya Vice President | 2017 | 545,669 | 272,831 | N/A | $ | 10.00 | October 1, 2026 | |||||||||||||||
| Operations, Quality Assurance/Regulatory Affair | 2016 | 218,267 | 600,233 | N/A | $ | 10.00 | October 1, 2026 | |||||||||||||||
Amended and Restated 2016 Omnibus Incentive Plan
On October 1, 2016, our board of directors and our stockholders adopted and approved the Hancock Jaffe Laboratories, Inc. 2016 Omnibus Incentive Plan, and, subsequently on April 26, 2018, our board of directors and our stockholders adopted and approved the Amended and Restated 2016 Omnibus Incentive Plan, or the 2016 plan. The principal features of the 2016 plan are summarized below. This summary is qualified in its entirety by reference to the text of the 2016 plan, which is filed as an exhibit to the registration statement of which this prospectus is a part.
Share Reserve
We have reserved 4,500,000 shares of our common stock for issuance under the 2016 plan, plus an annual increase on each anniversary of April 26, 2018 equal to 3% of the total issued and outstanding shares of our common stock as of such anniversary (or such lesser number of shares as may be determined by our board of directors), all of which may be granted as incentive stock options under Code Section 422. The shares of common stock issuable under the 2016 plan will consist of authorized and unissued shares, treasury shares or shares purchased on the open market or otherwise, all as determined by our company from time to time.
If any award is canceled, terminates, expires or lapses for any reason prior to the issuance of shares or if shares are issued under the 2016 plan and thereafter are forfeited to us, the shares subject to such awards and the forfeited shares will not count against the aggregate number of shares of common stock available for grant under the 2016 plan. In addition, the following items will not count against the aggregate number of shares of common stock available for grant under the 2016 plan: (1) shares issued under the 2016 Plan repurchased or surrendered at no more than cost or pursuant to an option exchange program, (2) any award that is settled in cash rather than by issuance of shares of common stock, (3) shares surrendered or tendered in payment of the option price or purchase price of an award or any taxes required to be withheld in respect of an award or (4) awards granted in assumption of or in substitution for awards previously granted by an acquired company.
Administration
The 2016 plan may be administered by our board of directors or our compensation committee. Our compensation committee, in its discretion, selects the individuals to whom awards may be granted, the time or times at which such awards are granted and the terms and conditions of such awards. Our board of directors also has the authority, subject to the terms of the 2016 plan, to amend existing options (including to reduce the option’s exercise price), to institute an exchange program by which outstanding options may be surrendered in exchange for options that may have different exercise prices and terms, restricted stock, and/or cash or other property.
Eligibility
Awards may be granted under the 2016 plan to officers, employees, directors, consultants and advisors of us and our affiliates. Incentive stock options may be granted only to employees of us or our subsidiaries.
Awards
The 2016 plan permits the granting of any or all of the following types of awards:
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Clawback
All cash and equity awards granted under the 2016 plan will be subject to all applicable laws regarding the recovery of erroneously awarded compensation, any implementing rules and regulations under such laws, any policies we adopted to implement such requirements and any other compensation recovery policies as we may adopt from time to time.
Change in Control
Under the 2016 plan, in the event of a change in control (as defined in the 2016 plan), outstanding awards will be treated in accordance with the applicable transaction agreement. If no treatment is provided for in the transaction agreement, each award holder will be entitled to receive the same consideration that stockholders receive in the change in control for each share of stock subject to the award holder’s awards, upon the exercise, payment or transfer of the awards, but the awards will remain subject to the same terms, conditions and performance criteria applicable to the awards before the change in control, unless otherwise determined by our compensation committee. In connection with a change in control, outstanding stock options and SARs can be cancelled in exchange for the excess of the per share consideration paid to stockholders in the transaction, minus the option or SARs exercise price.
Subject to the terms and conditions of the applicable award agreements, awards granted to non-employee directors will fully vest on an accelerated basis, and any performance goals will be deemed to be satisfied at target. For awards granted to all other service providers, vesting of awards will depend on whether the awards are assumed, converted or replaced by the resulting entity.
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Amendment and Termination of the 2016 planmail must be received by [●], 2020.
Unless earlier terminated by our board of directors, the 2016 plan will terminate, and no further awards may be granted, 10 years after the date on which it was approved by our stockholders. Our board of directors may amend, suspend or terminate the 2016 plan at any time, except that, if required by applicable law, regulation or stock exchange rule, stockholder approval will be required for any amendment. The amendment, suspension or termination of the 2016 plan or the amendment of an outstanding award generally may not, without a participant’s consent, materially impair the participant’s rights under an outstanding award.
Limitation of Liability and Indemnification Matters
Our amended and restated certificate of incorporation, which became effective upon the completion of our initial public offering, will limit the liability of our directors for monetary damages for breach of their fiduciary duties, except for liability that cannot be eliminated under the DGCL. Consequently, our directors will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for any of the following:
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If you vote via the internet or by telephone, your electronic vote authorizes the named proxies in the same manner as if you signed, dated, and returned your proxy card. If you vote via the internet or by telephone, do not return your proxy card.
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Beneficial Owners. If you are a beneficial owner of your shares, you should follow the voting instructions provided by your broker or nominee in order to instruct your broker or other nominee on how to vote your shares. The availability of telephone and internet voting will depend on the voting process of the broker or nominee. You may also vote during the Special Meeting by going to www.virtualshareholdermeeting.com/HJLI2020SM. You will need the 16-digit control number included in your proxy material.
| Q: | What can I do if I change my mind after I vote my shares? |
| A: | Stockholders of Record. If you are a stockholder of record, you may revoke or |
| ● | signing and returning a | |
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| ● | participating in | |
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Our amended and restated bylaws will also provide that we will indemnify our directors and executive officers and may indemnify our other officers and employees and other agents toBeneficial Owners. If you are a beneficial owner of your shares, you must contact the fullest extent permitted by law. Our amended and restated bylaws also permit us to secure insurance on behalf of any officer, director, employeebroker or other agentnominee holding your shares and follow their instructions for any liability arising out of hisrevoking or her actions in this capacity, regardless of whether our amended and restated bylaws would permit indemnification. We have obtained directors’ and officers’ liability insurance.
We have entered into separate indemnification agreements with our directors and executive officers, in addition to indemnification provided for in our amended and restated bylaws. These agreements, among other things, provide for indemnification of our directors and executive officers for expenses, judgments, fines and settlement amounts incurred by this person in any actionchanging your vote, or proceeding arising out of this person’s services as a director or executive officer orvote at our request. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers.
The above description of the indemnification provisions of our amended and restated bylaws and our indemnification agreements is not complete and is qualified in its entirety by reference to these documents, each of which is incorporated by reference as an exhibit to the registration statement to which this prospectus forms a part.
The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as indemnification for liabilities under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and may be unenforceable. There is no pending litigation or proceeding naming any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.
Director CompensationSpecial Meeting.
The Board determines the form and amount of director compensation after its review of recommendations made by the Compensation Committee. A substantial portion of each director’s annual retainer is in the form of equity. Under the Company’snonemployee director compensation programmembers of the Board who are not also Company employees (“Non-Employee Directors”) are granted twenty-five thousand (25,000) options and restricted stock units (“RSUs”) worth up to twenty-five thousand dollars ($25,000) per annum (the “Annual RSUs”). A Non-Employee Director who is newly appointed to the Board other than in connection with an annual meeting of stockholders will generally also receive a grant of sixty-thousand (60,000) options and RSUs worth up to seventy-five thousand dollars ($75,000) upon appointment (an “Initial RSU Award”, which together with the “Annual RSUs” are the “Award RSUs”). All Award RSUs to Non-Employee Directors will vest on three years following the date in which the award is granted.
The table below shows the compensation paid to our non-employee directors during 2017 and 2016.
| Name | Fees earned or paid in cash | Stock awards ($) | Option awards ($) | Non-equity incentive plan compensation ($) | Nonqualified deferred compensation earnings ($) | All other compensation($) | Total ($) | |||||||||||||||||||||||||
| Yury Zhivilo | 2017 | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| 2016 | - | - | - | - | - | - | - | |||||||||||||||||||||||||
| Robert A. Anderson | 2017 | - | - | $ | 86,860 | (1) | - | - | $ | 1,000 | (2) | $ | 87,860 | |||||||||||||||||||
| 2016 | - | - | - | - | - | - | - | |||||||||||||||||||||||||
| Robert W. Doyle | 2017 | - | - | $ | 86,860 | (1) | - | - | $ | 1,000 | (2) | $ | 87,860 | |||||||||||||||||||
| 2016 | - | - | - | - | - | - | - | |||||||||||||||||||||||||
| Steven Girgenti | 2017 | - | - | $ | 78,400 | (1) | - | - | - | $ | 78,400 | |||||||||||||||||||||
| 2016 | - | - | - | - | - | - | - | |||||||||||||||||||||||||
| Q: |
| A: | |
| Q: | Will my shares be voted if I do not return my proxy card or voting instruction card and do not attend the Special Meeting? |
| A: | If you do not vote your shares held of record (registered directly in your name, not in the name of a bank or broker), your shares will not be voted. |
| If you do not vote your shares held beneficially in street name with a broker, your broker will not be authorized to vote on non-routine matters. Proposals 2, 4, and 5 may be considered non-routine matters, and therefore brokers may not exercise discretionary authority regarding such proposals for beneficial owners who have not returned proxies to the brokers (so-called “broker non-votes”). If your broker is not able to vote your shares, they will constitute “broker non-votes,” which are counted for the purposes of determining the presence of a quorum, but otherwise do not affect the outcome of the foregoing matters being voted on at the Special Meeting. | |
| Q: | What are the voting requirements to approve each of the proposals? |
| A: | Each of Proposals 1, 2 and 3 requires the affirmative “FOR” votes of 66 2/3% of the shares of common stock and Preferred Stock of the Company, voting as a single class, outstanding on the record date. Each of Proposals 4, 5 and 6 requires the affirmative “FOR” votes of a majority of the votes cast on such proposal. Abstentions and “broker non-votes” will be counted for the purpose of establishing a quorum, but otherwise will have the same effect as votes “AGAINST” Proposals 1, 2 and 3 and will have no effect on the outcome of the vote on Proposals 4, 5, and 6. Notwithstanding the foregoing, to the extent a holder of common stock or Preferred Stock as of the Record Date was issued any of the securities described in Proposals 4 or 5, such holder cannot vote on such proposal, as applicable. |
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| Q: | How many votes do I have? |
| A: | You are entitled to one vote for each share of common stock and/or Preferred Stock that you held at the close of business on the record date, July 21, 2020. As of the Record Date, there were 38,036,974 shares of common stock and 4,205,406 shares of Preferred Stock outstanding, respectively. The holders of Preferred Stock have one vote per share of Preferred Stock. Notwithstanding the foregoing, to the extent a holder of common stock or Preferred Stock as of the Record Date was issued any of the securities described in Proposals 4 or 5, such holder cannot vote on such proposal, as applicable. |
| Q: | What happens if additional matters are presented at the Special Meeting? |
| A: | Other than the six items of business described in this Proxy Statement, we |
| Q: | How many shares must be present or represented to conduct business at the Special Meeting? |
| A: | A quorum will be present if at least a majority of the outstanding shares of our common stock entitled to |
| Q: | How can I attend the Special Meeting? |
| A: | We will be hosting the Special Meeting live via the internet. There will not be a physical location for the Special Meeting. Our virtual Special Meeting allows stockholders to submit questions and comments before and during the meeting. After the meeting, we will spend up to 15 minutes answering stockholder questions. To the extent time doesn’t allow us to answer all of the submitted questions, we will answer them in writing on our investor relations portion of our website, at Our virtual format allows stockholders from around the world to participate and ask questions and for us to give thoughtful responses. Any stockholder can listen to and participate in the Special Meeting live via the internet at www.virtualshareholdermeeting.com/HJLI2020SM. Stockholders may begin submitting written questions through the internet portal at [●] a.m. (Eastern time) on [●], 2020, and the webcast of Stockholders may also vote while connected to the Special Meeting on the internet. You will need the control number included on your Notice of Internet Availability of Proxy Materials or your proxy card (if you received a printed copy of the proxy materials) in order to be able to vote your shares or submit questions. Instructions on how to connect and participate via the internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/HJLI2020SM. We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual shareholder meeting log in page. If you do not have your control number, you will be able to listen to the meeting only — you will not be able to vote or submit questions |
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| Q: | How can I vote my shares at the Special Meeting? |
| A: | You need to have held stock as of the close of business on the record date of July 21, 2020 to vote or submit questions while participating in the |
| Q: | |
| A: | Proxy instructions, ballots and |
| Q: | How are votes counted? |
| A: | For each |
| Q: | Where can I find the voting results of the Special Meeting? |
| A: | We intend to announce preliminary voting results at the Special Meeting and publish final results in a Current Report on Form 8-K within four business days after the Special Meeting. |
| Q: | Who will bear the cost of soliciting votes for the Special Meeting? |
| A: | We are making this solicitation and will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials and soliciting votes. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic communication by our |
| Q: | What if I have questions for the Company’s transfer agent? |
| A: | Please contact our transfer agent, at the telephone number or address listed below, with questions concerning stock certificates, transfer of ownership or other matters pertaining to your stock account. |
VStock Transfer, LLC Woodmere, NY 11598 Tel: (212) 828-8436 | |
| Q: | Who can help answer my questions? |
| A: | If you have any questions about the Special Meeting or how to vote or revoke your proxy, please contact us at: |
Hancock Jaffe Laboratories, Inc. 70 Doppler Irvine, California 92618 Attention: Robert A. Berman Telephone: (949) 261-2900 | |
| You may also contact The Proxy Advisory Group, LLC at the telephone number or address listed below: |
The Proxy Advisory Group, LLC
18 East 41st Street, 20th Floor
New York, NY 10017
Tel: (212) 616-2181
PROPOSAL NO. 1: THE AUTHORIZED SHARE PROPOSAL
Our Amended and Restated Certificate of Incorporation currently authorizes the issuance of up to 50,000,000 shares of common stock. As of July 21, 2020, there were 38,036,974 shares of common stock outstanding.
As of the date of this proxy statement, we do not have a sufficient amount of authorized shares of common stock to issue any additional shares of common stock or to permit the conversion or exercise of any Outstanding Convertible Securities (as defined below) into shares of our common stock, including without limitation, (i) outstanding options, (ii) in connection with a potential merger between the Company with Catheter Precision, Inc. (as described in that certain non-binding letter of intent between the parties, dated May 22, 2020), (iii) in connection with a private placement of warrants to purchase up to 1,300,000 shares of common stock pursuant to that certain Securities Purchase Agreement, dated February 25, 2020, by and among the Company and the purchaser signatories thereto, (iv) in connection with a private placement of warrants to purchase up to 1,886,793 shares of common stock pursuant to that certain Securities Purchase Agreement, dated April 24, 2020 (the “April Purchase Agreement”), by and among the Company and the purchaser signatories thereto, (v) in connection with a private placement of warrants to purchase up to 2,930,402 shares of common stock pursuant to that certain Securities Purchase Agreement, dated June 1, 2020 (the “June Purchase Agreement”), by and among the Company and the purchaser signatories thereto, (vi) in connection with the wavier of certain rights of the purchaser signatories to the April Purchase Agreement and June Purchase Agreement, warrants to purchase up to 3,495,000 shares of common stock pursuant to certain waiver agreements, (vii) in connection with a public offering of shares of common stock and warrants, the warrants to purchase up to 14,375,000 shares of common stock pursuant to that certain Underwriting Agreement, dated July 17, 2020 (the “Underwriting Agreement”), between the Company and Ladenburg Thalmann & Co. Inc., as representative of the several underwriters named therein, and (viii) in connection with a private placement of (a) Preferred Stock, convertible into 6,078,125 shares of common stock, and (b) warrants to purchase up to 6,078,125 shares of common stock pursuant to that certain Securities Purchase Agreement, dated July 17, 2020 (the “July Purchase Agreement”), by and among the Company and the purchaser signatories thereto (the foregoing convertible or exercisable securities are collectively referred to herein as the “Outstanding Convertible Securities”).
Our Board has approved, subject to stockholder approval, an amendment to our Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock to 250,000,000 shares (the “Authorized Share Amendment”). The additional shares of common stock authorized by the Authorized Share Amendment, if and when issued, would have the same rights and privileges as the shares of common stock previously authorized. A copy of the Authorized Share Amendment is set forth in Annex A hereto.
The additional shares of common stock authorized by the Authorized Share Amendment could be issued at the discretion of the Board from time to time for any proper corporate purpose, including, without limitation, the acquisition of other businesses, the raising of additional capital for use in our business, a split of or dividend on then outstanding shares or in connection with any employee stock plan or program. Except to the extent required by applicable law or regulation, any future issuances of authorized shares of common stock may be approved by the Board without further action by the stockholders. The availability of additional shares of common stock would be particularly important (i) in the event that the Board needs to undertake any of the foregoing actions on an expedited basis in order to avoid the time and expense of seeking stockholder approval in connection with the contemplated issuance of common stock, where such approval might not otherwise be required, and (ii) to issue the Outstanding Convertible Securities.
Although the Board will issue common stock only when required or when the Board considers such issuance to be in our best interests, the issuance of additional common stock may, among other things, have a dilutive effect on the earnings per share (if any) and on the equity and voting rights of our existing stockholders.
Additionally, the presence of such additional authorized but unissued shares of common stock could discourage unsolicited business combination transactions which might otherwise be desirable to stockholders. The Board is not currently aware of any attempt to take over or acquire us. While it may be deemed to have potential anti-takeover effects, the proposed Authorized Share Amendment to increase the authorized shares of common stock is not prompted by any specific effort or takeover threat currently perceived by management. In addition, we do not have any plans to implement additional measures having anti-takeover effects. The Board believes that the benefits of providing it with the flexibility to issue shares without delay for any proper business purpose, including as an alternative to an unsolicited business combination opposed by the Board, outweigh the possible disadvantages of dilution and discouraging unsolicited business combination proposals and that it is prudent and in the best interests of stockholders to provide the advantage of greater flexibility which will result from the Authorized Share Amendment.
Vote Required
The affirmative vote of the holders of 66 2/3% of the outstanding shares of common stock and Preferred Stock, voting as a single class, entitled to vote at the Special Meeting will be required to approve the Authorized Share Amendment. Abstentions will be counted as present for purposes of determining the presence of a quorum, but will have the same effect as “Against” on the outcome of the vote.
Recommendation of the Board
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE AUTHORIZED SHARE PROPOSAL.
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PROPOSAL NO. 2: CHARTER AMENDMENT PROPOSAL
Our Amended and Restated Certificate of Incorporation currently provides that the approval of 66 2/3% of the voting power of the shares of the then outstanding voting stock of the Company entitled to vote thereon is required to amend, repeal, or adopt any provisions of the Company’s Amended and Restated Certificate of Incorporation.
Our Board has approved, subject to stockholder approval, an amendment to our Amended and Restated Certificate of Incorporation to adjust the vote required for amending, repealing, or adopting any provisions of the Company’s Amended and Restated Certificate of Incorporation to a majority of the voting power of the shares of the then outstanding voting stock of the Company entitled to vote thereon. The Board has recommended that the Charter Amendment Proposal be approved by our stockholders at this Special Meeting. A copy of the Amendment is set forth in Annex B hereto.
Many public companies have adopted charters that provide that approval of a majority, rather than 66 2/3%, of the voting power of the shares of the then outstanding voting stock entitled to vote thereon is required to amend, repeal, or adopt any provisions of such charter. Our Board has determined that the Charter Amendment Proposal is in line with such market practice and is in the best interests of the Company.
If the Charter Amendment Proposal is adopted and approved by our stockholders at this Special Meeting, promptly following the completion of the Special Meeting, we will file a certificate of amendment to our Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware.
Vote Required
The affirmative vote of the holders of 66 2/3% of the outstanding shares of common stock and Preferred Stock, voting as a single class, entitled to vote at the Special Meeting will be required to approve the Charter Amendment Proposal. Abstentions and “broker non-votes” will each be counted as present for purposes of determining the presence of a quorum, but will have the same effect as “Against” on the outcome of the vote.
Recommendation of the Board
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” CHARTER AMENDMENT PROPOSAL.
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COMPENSATION COMMITTEE REPORTPROPOSAL NO. 3: THE REVERSE SPLIT PROPOSAL
RecommendationsIntroduction
On July [●], 2020, the Board acted unanimously to adopt the Reverse Split Proposal to amend our Amended and Restated Certificate of Incorporation to enable a potential reverse split of our common stock at a ratio of between one-for-five and one-for-fifty (the “Reverse Split”), with such ratio to be determined at the Compensation Committee.The Compensation Committeesole discretion of the Board and with such Reverse Split to be effected at such time and date, if at all, as determined by the Board in its sole discretion and, at the same time. The Board is now asking you to approve this Reverse Split Proposal.
If approved, the Reverse Split will be effective upon the filing of a certificate of amendment to our Amended and Restated Certificate of Incorporation, in the form attached to this proxy statement as Annex B (the “Certificate of Amendment”), with the Secretary of State of Delaware, with such filing to occur, if at all, at the sole discretion of the Board.
The intention of the Board in obtaining approval for the authority to effect a Reverse Split would be to increase the stock price of our common stock sufficiently above the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market (“Nasdaq”) if necessary in the future. Additionally, we received notice from The NASDAQ Stock Market indicating that, because the closing bid price for the Company’s common stock had fallen below $1.00 per share for 30 consecutive business days, the Company no longer complies with the minimum bid price requirement for continued listing on the Nasdaq Capital Market under Rule 5550(a)(2) of Nasdaq Listing Rules. Nasdaq’s notice has no immediate effect on the listing of the Company’s common stock on the Nasdaq Capital Market. If we are unable to resolve the situation to allow for continued listing on the Nasdaq Capital Market, this will result in a de-listing of our common stock.
In addition, as discussed above in connection with Proposal 1, the effect of the Reverse split will be to increase the number of authorized but unissued shares of common stock of the Company. The Board, in its sole discretion, can elect to abandon the Reverse Split in its entirety at any time.
One principal effect of the Reverse Split would be to decrease the number of outstanding shares of our common stock. Except for de minimus adjustments that may result from the treatment of fractional shares as described below, the Reverse Split will not have any dilutive effect on our stockholders since each stockholder would hold the same percentage of our common stock (in hand or on an as converted basis) outstanding immediately following the Reverse Split as such stockholder held immediately prior to the Reverse Split. The relative voting and other rights that accompany the shares would not be affected by the Reverse Split.
The table below sets forth the number of shares of our common stock outstanding before and after the Reverse Split based on 38,036,974 shares of our common stock outstanding as of the Record Date.
| Prior to the Reverse Split | Assuming a One- for- Five Reverse Split | Assuming a One- for- Twenty Reverse Split | Assuming a One- for- Thirty Reverse Split | Assuming a One- for- Forty Reverse Split | Assuming a One- for- Fifty Reverse Split | |||||||||||
| Aggregate Number of Shares of common stock Outstanding | [●] | [●] | [●] | [●] | [●] | [●] |
The Reverse Split is not part of a broader plan to take us private.
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Reasons for the Reverse Split; Nasdaq Requirements for Continued Listing
The Board’s primary objective in proposing a potential Reverse Split is to raise the per share trading price of our common stock. Our common stock currently trades on Nasdaq under the symbol “HJLI.” In order to maintain our listing on Nasdaq we may be required to effect the Reverse Split so that our listed shares maintain a minimum bid price per share of at least $1.00. The closing trading price on July 23, 2020 was $0.354.
On April 14, 2020, the Company received written notice from the Nasdaq Listing Qualifications Staff (the “Staff”) indicating that, due to the Company’s continued non-compliance with Nasdaq Listing Rule 5550(b), the Staff had determined to delist the Company’s securities from Nasdaq unless the Company timely requested a hearing before the Panel. On April 21, 2020, the Company requested a hearing to appeal the Nasdaq’s decision to delist our common stock. The hearing was held on May 21, 2020, and on June 8, 2020 the Company received notice that The Nasdaq Hearings Panel had granted its request for continued listing on The Nasdaq Stock Market, subject to the certain conditions. Those conditions include that on or about July 31, 2020, the Company will have issued public disclosure that it has regained compliance with the minimum $2.5 million shareholder equity requirement of Listing Rule 5550(b)(1), and, in order to fully comply with the terms of the exception, the Company must be able to demonstrate compliance with all requirements for continued listing on The Nasdaq Stock Market. The Company is taking definitive steps to timely evidence compliance with the terms of the Panel’s decision; however, there can be no assurance that it will be able to do so by July 31, 2020, or that the Panel will grant a further extension if required, notwithstanding the fact that the Panel has the discretion to grant an extension through October 12, 2020, pursuant to the Nasdaq Listing Rules. As a result of the transactions that were consummated pursuant to the Underwriting Agreement and the July Purchase Agreement, the Company believes it has regained compliance with the minimum $2.5 million stockholders’ equity threshold for continued listing on The Nasdaq Capital Market as of July 21, 2020.
In addition, as discussed above in connection with Proposal 1, the Company needs to increase the availability of authorized but unissued shares of common stock. The Reverse Split would increase the availability of such shares, which could then be issued upon conversion or exercise of the Outstanding Convertible Securities, and in connection with an acquisition of another business or otherwise.
Our Board concluded that the liquidity and marketability of our common stock will be adversely affected if it is not listed on a national securities exchange as investors can find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, our common stock. Our Board believes that current and prospective investors will view an investment in our common stock more favorably if our common stock remains listed on Nasdaq.
Our Board also believes that the Reverse Split and any resulting increase in the per share price of our common stock will enhance the acceptability and marketability of our common stock to the financial community and investing public. Many institutional investors have policies prohibiting them from holding lower-priced stocks in their portfolios, which reduces the number of potential buyers of our common stock, although we have not been told by them that is the reason for not investing in our common stock. Additionally, analysts at many brokerage firms are reluctant to recommend lower-priced stocks to their clients or monitor the activity of lower-priced stocks. Brokerage houses frequently have internal practices and policies that discourage individual brokers from dealing in lower-priced stocks. Further, because brokers’ commissions on lower-priced stock generally represent a higher percentage of the stock price than commissions on higher priced stock, investors in lower-priced stocks pay transaction costs which are a higher percentage of their total share value, which may limit the willingness of individual investors and institutions to purchase our common stock.
We cannot assure you that the Reverse Split will have any of the desired effects described above. More specifically, we cannot assure you that after the Reverse Split the market price of our common stock will increase proportionately to reflect the ratio for the Reverse Split, that the market price of our common stock will not decrease to its pre-split level, that our market capitalization will be equal to the market capitalization before the Reverse Split, or that we will be able to maintain our listing on Nasdaq.
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Potential Disadvantages of the Reverse Split
As noted above, the principal purpose of the Reverse Split would be to help increase the per share market price of our common stock by up to factor of [●]. We cannot assure you, however, that the Reverse Split will accomplish this objective for any meaningful period of time. While we expect that the reduction in the number of outstanding shares of common stock will increase the market price of our common stock, we cannot assure you that the Reverse Split will increase the market price of our common stock proportionately based on the Reverse Split ratio, or result in any permanent increase in the market price of our common stock, which is dependent upon many factors, including our business and financial performance, general market conditions and prospects for future success. If the per share market price does not increase proportionately as a result of the Reverse Split, then the value of our Company as measured by our market capitalization will be reduced, perhaps significantly.
The number of shares held by each individual holder of common stock would be reduced if the Reverse Split is implemented. This will increase the number of stockholders who hold less than a “round lot,” or 100 shares. Typically, the transaction costs to stockholders selling “odd lots” are higher on a per share basis. Consequently, the Reverse Split could increase the transaction costs to existing holders of common stock in the event they wish to sell all or a portion of their position.
Although our Board believes that the decrease in the number of shares of our common stock outstanding as a consequence of the Reverse Split and the anticipated increase in the market price of our common stock could encourage interest in our common stock and possibly promote greater liquidity for our stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the Reverse Split.
Effecting the Reverse Split
Upon receipt of stockholder approval for the Reverse Split Proposal, if our Board concludes that it is in the best interests of our Company and our stockholders to effect the Reverse Split, the Certificate of Amendment will be filed with the Secretary of State of Delaware. The actual timing of the filing of the Certificate of Amendment with the Secretary of State of Delaware to effect the Reverse Split will be determined by our Board. In addition, if for any reason our Board deems it advisable to do so, the Reverse Split may be abandoned at any time prior to the filing of the Certificate of Amendment, without further action by our stockholders. In addition, our Board may deem it advisable to effect the Reverse Split even if the price of our common stock is above $1.00 at the time the Reverse Split is to be effected. The Reverse Split will be effective as of the date of filing with the Secretary of State of the State of Delaware (the “Effective Time”).
Upon the filing of the Certificate of Amendment, without further action on our part or our stockholders, the outstanding shares of common stock held by stockholders of record as of the Effective Time would be converted into a lesser number of shares of common stock based on a Reverse Split ratio as determined by the Board. For example, if you presently hold [●] shares of our common stock, you would hold [●] shares of our common stock following the Reverse Split if the ratio is one-for-five or you would hold [●] shares of our common stock if the ratio is one-for-fifty.
Effect on Outstanding Shares, Options and Certain Other Securities
If the Reverse Split is implemented, the percentage of our common stock owned by each stockholder will remain unchanged except for any de minimus change resulting from rounding up to the nearest number of whole shares so that we are not obligated to issue cash in lieu of any fractional shares that such stockholder would have received as a result of the Reverse Split. The number of shares of our common stock that may be purchased upon exercise of outstanding options or other securities convertible into, or exercisable or exchangeable for, shares of our common stock, and the exercise or conversion prices for these securities, will also be ratably adjusted in accordance with their terms as of the Effective Time.
| Prior to the Reverse Split | Assuming a [●] Reverse Split | Assuming a [●] Reverse Split | ||||||||||
| Preferred | [●] | [●] | [●] | |||||||||
| Warrants | [●] | [●] | [●] | |||||||||
| Options | [●] | [●] | [●] |
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Effect on Registration
Our common stock is currently comprised of Mr. Robins and Drs. Duhayand Shrivastava, each of whom the Board has determined to be independent. This report shall not be deemed incorporated by reference into any filingregistered under the Securities Act of 1933, as amended, (the “Securities Act”) orand we are subject to the periodic reporting and other requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) by virtue. The proposed Reverse Split will not affect the registration of our common stock.
Fractional Shares; Exchange of Stock Certificates
Our Board does not currently intend to issue fractional shares in connection with the Reverse Split. Therefore, we do not expect to issue certificates representing fractional shares. In lieu of any general statement in such filing incorporatingfractional shares, we will issue to stockholders of record who would otherwise hold a fractional share because the Annual Reportnumber of shares of common stock they hold of record before the Reverse Split is not evenly divisible by reference, exceptthe Reverse Split ratio that number of shares of common stock as rounded up to the extentnearest whole share. For example, if a stockholder holds [●] shares of common stock following the Reverse Split, that stockholder will receive certificate representing [●] shares of common stock. No stockholders will receive cash in lieu of fractional shares.
As of the Company specifically incorporatesRecord Date, we had 79 holders of record of our common stock (although we have significantly more beneficial holders). We do not expect the information containedReverse Split and the rounding up of fractional shares to whole shares to result in this sectiona reduction in the number of record holders. We presently do not intend to seek any change in our status as a reporting company for federal securities law purposes, either before or after the Reverse Split.
On or after the Effective Time, we will mail a letter of transmittal to each stockholder. Each stockholder will be able to obtain a certificate evidencing his, her or its post-Reverse Split shares only by referencesending the exchange agent (who will be the Company’s transfer agent) the stockholder’s old stock certificate(s), together with the properly executed and shallcompleted letter of transmittal and such evidence of ownership of the shares as we may require. Stockholders will not otherwisereceive certificates for post-Reverse Split shares unless and until their old certificates are surrendered. Stockholders should not forward their certificates to the exchange agent until they receive the letter of transmittal, and they should only send in their certificates with the letter of transmittal. The exchange agent will send each stockholder, if elected in the letter of transmittal, a new stock certificate after receipt of that stockholder’s properly completed letter of transmittal and old stock certificate(s). A stockholder that surrenders his, her or its old stock certificate(s) but does not elect to receive a new stock certificate in the letter of transmittal will be deemed filed under eitherto have requested to hold that stockholder’s shares electronically in book-entry form with our transfer agent.
Certain 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 have stock certificates evidencing their ownership of our common stock. They are, however, provided with a statement reflecting the Securities Actnumber of shares registered in their accounts. If a stockholder holds registered shares in book-entry form with our transfer agent, the stockholder may return a properly executed and completed letter of transmittal.
Stockholders who hold shares in street name through a nominee (such as a bank or broker) will be treated in the Exchange Act.same manner as stockholders whose shares are registered in their names, and nominees will be instructed to effect the Reverse Split for their beneficial holders. However, nominees may have different procedures and stockholders holding shares in street name should contact their nominees.
Stockholders will not have to pay any service charges in connection with the exchange of their certificates.
Anti-Takeover and Dilutive Effects
The Compensation Committee has reviewed and discussed with managementauthorized common stock will not be diluted as a result of the disclosure regarding Executive Compensation contained in this proxy statement for the Annual Meeting. Based on the review and discussions, the Compensation Committee recommended toReverse Split. The common stock that is authorized but unissued provide the Board with flexibility to effect among other transactions, public or private financings, acquisitions, stock dividends, stock splits and the granting of equity incentive awards. However, these authorized but unissued shares may also be used by our Board, consistent with and subject to its fiduciary duties, to deter future attempts to gain control of us or make such actions more expensive and less desirable. The Certificate of Amendment would continue to give our Board authority to issue additional shares from time to time without delay or further action by the stockholders except as may be required by applicable law or regulations. The Certificate of Amendment is not being recommended in response to any specific effort of which we are aware to obtain control of us, nor does our Board have any present intent to use the authorized but unissued common stock to impede a takeover attempt. There are no plans or proposals to adopt other provisions or enter into any arrangements that such disclosure be included in this proxy statement.have material anti-takeover effects.
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This Compensation Report has been furnished by the Compensation Committee of the Board.
/s/ Marcus W. Robin
/s/ Dr. Francis Duhay
/s/Dr. Sanjay ShrivastavaAccounting Consequences
As of the Effective Time, the stated capital attributable to common stock on our balance sheet will be reduced proportionately based on the Reverse Split ratio (including a retroactive adjustment of prior periods), and the additional paid-in capital account will be credited with the amount by which the stated capital is reduced. Reported per share net income or loss will be higher because there will be fewer shares of our common stock outstanding.
Federal Income Tax Consequences
The following summary describes certain material U.S. federal income tax consequences of the Reverse Split to holders of our common stock. This summary addresses the tax consequences only to a beneficial owner of our common stock that is a citizen or individual resident of the United States, a corporation organized in or under the laws of the United States or any state thereof or the District of Columbia or otherwise subject to U.S. federal income taxation on a net income basis in respect of our common stock (a “U.S. holder”). This summary does not address all of the tax consequences that may be relevant to any particular stockholder, including tax considerations that arise from rules of general application to all taxpayers or to certain classes of taxpayers or that are generally assumed to be known by investors. This summary also does not address the tax consequences to persons who may be subject to special treatment under U.S. federal income tax law or persons that do not hold our common stock as “capital assets” (generally, property held for investment). This summary is based on the provisions of the Internal Revenue Code of 1986, as amended, U.S. Treasury regulations, administrative rulings and judicial authority, all as in effect as of the date hereof. Subsequent developments in U.S. federal income tax law, including changes in law or differing interpretations, which may be applied retroactively, could have a material effect on the U.S. federal income tax consequences of the Reverse Split.
AUDIT COMMITTEE REPORTIf a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our common stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Partnerships that hold our common stock, and partners in such partnerships, should consult their own tax advisors regarding the U.S. federal income tax consequences of the Reverse Split.
The following ReportEach stockholder should consult his, her or its own tax advisor regarding the U.S. federal, state, local and foreign income and other tax consequences of the Audit Committee (the “Audit Report”) does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Audit Report by reference therein.Reverse Split.
Role of the Audit Committee
The Audit Committee’s primary responsibilities fall into three broad categories:
First,Reverse Split should be treated as a recapitalization for U.S. federal income tax purposes. Therefore, no gain or loss should be recognized by a U.S. holder upon the Audit Committee is charged with monitoringReverse Split. Accordingly, the preparation of quarterly and annual financial reports byaggregate tax basis in the Company’s management, including discussions with managementcommon stock received pursuant to the Reverse Split should equal the aggregate tax basis in the common stock surrendered and the Company’s outside auditors about draft annual financial statements and key accounting and reporting matters.
Second,holding period for the Audit Committee is responsiblecommon stock received should include the holding period for matters concerning the relationship between the Company and its outside auditors, including recommending their appointment or removal; reviewing the scope of their audit services and related fees, as well as any other services being provided to the Company; and determining whether the outside auditors are independent (based in part on the annual letter provided to the Company pursuant to Independence Standards Board Standard No. 1).
Third, the Audit Committee reviews financial reporting, policies, procedures and internal controls of the Company. The Audit Committee has implemented procedures to ensure that during the course of each fiscal year it devotes the attention that it deems necessary or appropriate to each of the matters assigned to it under the Audit Committee’s charter. In overseeing the preparation of the Company’s financial statements, the Audit Committee met with management and the Company’s outside auditors, including meetings with the Company’s outside auditors without management present, to review and discuss all financial statements prior to their issuance and to discuss significant accounting issues. Management advised the Audit Committee that all financial statements were prepared in accordance with generally accepted accounting principles, and the Audit Committee discussed the statements with both management and the outside auditors. The Audit Committee’s review included discussion with the outside auditors of matters required to be discussed pursuant to Statement on Auditing Standards No. 61 (Communication with Audit Committees).
With respect to the Company’s outside auditors, the Audit Committee, among other things, discussed with Marcum LLP matters relating to its independence, including the disclosures made to the Audit Committee as required by the Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees).
common stock surrendered.
Recommendations of the Audit Committee.In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the Board approve the inclusion of the Company’s audited financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, for filing with the SEC.
This report has been furnished by the Audit CommitteeText of the Board.In reliance on the reviews and discussions referred to above, the Audit Committee, comprisedProposed Certificate of the prior directors, recommended to the Board that the Board approve the inclusion of the Company’s audited financial statements in the Company’s Annual Report on Form S-1 for the fiscal year ended December 31, 2017, for filing with the SECAmendment; Effectiveness
The text of the proposed Certificate of Amendment is set forth in Annex B to this proxy statement. If and when effected by our Board, the Certificate of Amendment will become effective upon its filing with the Secretary of State of Delaware.
/s/ Marcus W. Robin
Vote Required
/s/ Dr. Francis Duhay
The affirmative vote of 66 2/3% of the issued and outstanding shares of common stock and Preferred Stock, voting as a single class, entitled to vote at the Special Meeting is required to approve the Reverse Split Proposal. Abstentions will be counted as present for purposes of determining the presence of a quorum, but will have the same effect as “Against” on the outcome of the vote.
/s/Dr. Sanjay Shrivastava
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF THE
COMPANY’S REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2018
On January 9, 2018, the Audit CommitteeRecommendation of the Board appointed the firm of Marcum LLP (“Marcum”) to serve as our registered public accounting firm for our fiscal year ended December 31, 2017. The independent accountant’s report of Marcum on our consolidated financial statements for the year ended December 31, 2017 contained no adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles.
Audit Fees.The aggregate fees billed by Marcum for professional services rendered for the audit of our annual financial statements, review of the financial information included in our Forms 10-Q for the respective periods and other required filings with the SEC for the years ended December 31, 2017 and 2016 totaled $128,709 and $192,142, respectively. The above amounts include interim procedures and audit fees, as well as attendance at audit committee meetings.
Audit-Related Fees.The aggregate fees billed by Marcum for audit-related fees for the years ended December 31, 2017 and 2016 were $216,875 and $0, respectively. The fees were provided in consideration of services consisting of review and update procedures associated with registration statements and other SEC filings.
Tax Fees.The aggregate fees billed by Berman, Romeri & Associates, LLP for professional services rendered for tax compliance for the years ended December 31, 2017 and 2016 were $4,000 and $9,500, respectively. The fees were provided in consideration of services consisting of preparation of tax returns and related tax advice.
All Other Fees.None.
The Audit Committee of our board of directors has established its pre-approval policies and procedures, pursuant to which the Audit Committee approved the foregoing audit and non-audit services provided by Marcum in 2017. Consistent with the Audit Committee’s responsibility for engaging our independent auditors, all audit and permitted non-audit services require pre-approval by the Audit Committee. The full Audit Committee approves proposed services and fee estimates for these services. The Audit Committee chairperson has been designated by the Audit Committee to approve any audit-related services arising during the year that were not pre-approved by the Audit Committee. Any non-audit service must be approved by the full Audit Committee. Services approved by the Audit Committee chairperson are communicated to the full Audit Committee at its next regular meeting and the Audit Committee reviews services and fees for the fiscal year at each such meeting. Pursuant to these procedures, the Audit Committee approved the foregoing services provided by Marcum.
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.None.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE AUDITREVERSE SPLIT PROPOSAL.
COMMITTEE’S APPROVAL OF THE APPOINTMENT OF MARCUM LLP AS THE
COMPANY’S REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2018.
PROPOSAL NO. 4: OTHER INFORMATIONTHE FIRST NASDAQ PROPOSAL
Proxy SolicitationIntroduction
All costsIn a private placement that closed concurrently with a public offering (the “July Public Offering”) of solicitationour securities on July 22, 2020, pursuant to the July Purchase Agreement we issued and sold to certain purchasers (i) 4,205,406 shares of proxies will be bornePreferred Stock at a price per share of $0.37, which may convert into 6,078,125 shares (the “Conversion Shares”) of common stock (not including the issuance of shares of common stock pursuant to certain dividend rights), which represents a conversion ratio of approximately 1-to-1.445, and (ii) unregistered warrants (the “July Warrants”) to purchase up to 6,078,125 shares (the “July Warrant Shares”) of common stock, at an exercise price of $0.32 per share.
The following is a summary of the material terms of the Preferred Stock. This summary is not complete. The following summary of the terms and provisions of the Preferred Stock is qualified in its entirety by us. In additionreference to solicitation by mail,the Certificate of Designations of the Preferred Stock (the “Certificate of Designations”) setting forth the terms of the Preferred Stock and our officersAmended and regular employees may solicit proxies personally or by telephone. We do not intend to utilize a paid solicitation agent.Restated Certificate of Incorporation.
A stockholder may revoke his, her The Preferred Stock ranks senior to our common stock and any future preferred stock of the Company with respect to dividend rights and/or its proxyrights upon distributions or liquidation.
Dividends
The holders of the Preferred Stock are entitled to receive dividends in kind at an annual rate equal to 8.0% of the per share purchase price of the Preferred Stock for each of the then outstanding shares of Preferred Stock, calculated on the basis of a 360-day year consisting of twelve 30-day months. Such dividends will begin to accrue and accumulate (to the extent not otherwise declared and paid as set forth above) on each share of Preferred Stock, from the date of issuance of such share of Preferred Stock.
Conversion
If at any time prior to its use by giving written noticeafter the later of (i) the date that we file an amendment to our Chief Financial Officer, by executing a revised proxy at a later date or by attending the MeetingAmended and voting in person. ProxiesRestated Certificate of Incorporation to reflect our stockholders’ approval of either an increase in the form enclosed, unless previously revoked, will be voted at the Meeting in accordance with the specifications made thereon or, in the absence of such specifications in accordance with the recommendationsnumber of our Board.authorized shares of common stock or a reverse stock split (as described in Proposals 1 and 3), and (ii) the date of approval as may be required by the applicable rules and regulations of The Nasdaq Stock Market LLC (or any successor entity) from the stockholders of the Company with respect to the transactions contemplated by the July Purchase Agreement, including the issuance of all of the Conversion Shares and the July Warrant Shares in excess of 19.99% of the issued and outstanding common stock on July 21, 2020 (collectively, a “Capital Event”), and subsequent to a Capital Event the Company (i) consummates a merger, or (ii) raises an aggregate of at least $8,000,000 in gross proceeds in a transaction or series of transactions within any twelve (12) month period, then the Company may force the automatic conversion of the Preferred Stock into Conversion Shares.
Securities Outstanding; Votes RequiredVoting Rights
AsThe holders of shares Preferred Stock will vote with holders of the close of business on the Record Date there were 11,717,308common stock, and with any other shares of Commonpreferred stock that vote with the common stock, with each holder of Preferred Stock outstanding. Thebeing entitled to one vote per share of Preferred Stock. Notwithstanding the foregoing, the holders of shares of Preferred Stock shall vote as a single class upon any action that would adversely alter, change or otherwise affect the powers, preferences or special rights of such holders and the affirmative vote of the holders of a majority of the sharesvoting power Preferred Stock shall be required for the approval of Commonany such action.
The July Warrants have an initial per share exercise price of $0.32, subject to customary adjustments, and will expire seven years from the date of issuance. The July Warrants are exercisable upon a Capital Event.
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In connection with the private placement of the Preferred Stock present atand the Meeting,July Warrants, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with each of the purchaser signatories to the July Purchase Agreement. Pursuant to the Registration Rights Agreement, the Company agreed to cause a resale registration statement on Form S-1 providing for the resale by holders of the Conversion Shares and the July Warrant Shares, to be filed thirty (30) calendar days following the approval of Proposals 1 or 3, and the Company will use commercially reasonable efforts to have such resale registration statement declared effective as soon as practicable.
The terms of the July Purchase Agreement, the Certificate of Designations and the July Warrants are complex and are only briefly summarized above. For further information regarding these agreements and the financing, please refer to our Current Report on Form 8-K filed with the SEC on July 21, 2020 and our Registration Statement on Form S-1, as amended (File No. 333-239658), initially filed with the SEC on July 2, 2020. The discussion herein is qualified in person orits entirety by proxy,reference to such filed transaction documents.
Why the Company Needs Stockholder Approval
We are seeking the Stockholder Approval in order to comply with Nasdaq Listing Rules 5635(d). Under Nasdaq Listing Rule 5635(d), stockholder approval is required for a transaction other than a public offering involving the sale, issuance or potential issuance by an issuer of common stock (or securities convertible into or exercisable for common stock) at a price that is less than the greater of book or market value of the stock if the number of shares of common stock to be issued is or may be equal to 20% or more of the common stock, or 20% or more of the voting power, outstanding before the issuance. Since the conversion price of the Preferred Stock under the Certificate of Designations and the exercise price of the July Warrants was lower than the market price of our common stock on the date of issuance of the Preferred Stock and July Warrants, the Company requires the stockholder approval described in the proxy statement to issue 20% or more of our outstanding common stock as calculated immediately prior to the date of the financing.
Effect of Proposal on Current Stockholders
If the First Nasdaq Proposal is adopted, based on the initial conversion rate per share of the Preferred Stock, 6,078,125 shares of common stock would be issuable upon conversion of the Preferred Stock (not including the issuance of shares of common stock pursuant to certain dividend rights), representing up to 15.98% of the shares of our common stock outstanding on the Record Date. Furthermore, if the First Nasdaq Proposal is adopted, based on an initial exercise price of the Warrants of $0.32 per share, up to a maximum of 6,078,125 shares of common stock would be issuable upon exercise of the July Warrants, representing up to 15.98% of the shares of our common stock outstanding on the Record Date.
The issuance of such shares could result in significant dilution to holders of our common stock, and could substantially reduce such holders’ percentage interest in the voting power of the Company. In addition, the sale or any resale of the Conversions Shares or July Warrant Shares could cause the market price of our common stock to decline further.
Consequence of a Failure to Provide Stockholder Approval
If our stockholders do not approve the First Nasdaq Proposal, we will have the right to issue shares up to 19.9% of the Company’s issued and outstanding common stock as calculated immediately prior to the financing upon conversion of the Preferred Stock or exercise of the July Warrants, without stockholder approval.
Vote Required
The approval of this proposal requires the affirmative vote of the majority of shares cast on the proposal. Abstentions and broker non-votes will have no effect on the outcome of this proposal. Notwithstanding the foregoing, to the extent a holder of common stock or Preferred Stock as of the Record Date was issued any of the securities described in this proposal, such holder cannot vote on this proposal.
Recommendation of the Board
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE FIRST NASDAQ PROPOSAL.
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PROPOSAL NO. 5: THE SECOND NASDAQ PROPOSAL
Introduction
April 2020 Transactions
On April 24, 2020, we entered into the April Purchase Agreement with certain purchasers (the “April Purchasers”) pursuant to which we issued and sold in a registered direct offering priced at the market, an aggregate of 1,886,793 shares (the “April Shares”) of common stock, at a purchase price of $0.405 per April Share, and in a concurrent private placement, warrants (the “April Warrants”) to purchase up to 1,886,793 shares (the “April Warrant Shares”), at a purchase price of $0.125 per April Warrant, for a combined purchase price per April Share and April Warrant of $0.53, which is priced at the market under Nasdaq rules. The April Warrants are exercisable immediately on the date of issuance at an exercise price of $0.405 per share and will expire five years following the date of issuance. The closing of these transactions occurred on April 28, 2020.
The terms of the April Purchase Agreement and the April Warrants are complex and are only briefly summarized above. For further information regarding these agreements and the financing, please refer to our Current Report on Form 8-K filed with the SEC on April 28, 2020. The discussion herein is qualified in its entirety by reference to such filed transaction documents.
June 2020 Transactions
On June 1, 2020, we entered into the June Purchase Agreement with certain purchasers (the “June Purchasers”) pursuant to which we issued and sold in a registered direct offering priced at the market, an aggregate of 2,930,402 shares (the “June Shares”) of common stock, at a purchase price of $ 0.33 per June Share, and in a concurrent private placement, warrants (the “June Warrants”) to purchase up to 2,930,402 shares (the “June Warrant Shares”), at a purchase price of $0.125 per June Warrant, for a combined purchase price per June Share and June Warrant of $0.455, which is priced at the market under Nasdaq rules. The June Warrants are exercisable immediately on the date of issuance at an exercise price of $0.33 per share and will expire five years following the date of issuance. The closing of these transactions occurred on June 3, 2020.
The terms of the June Purchase Agreement and the June Warrants are complex and are only briefly summarized above. For further information regarding these agreements and the financing, please refer to our Current Report on Form 8-K filed with the SEC on June 3, 2020. The discussion herein is qualified in its entirety by reference to such filed transaction documents.
July 2020 Waivers
The April Purchasers and the June Purchasers participated in the July Public Offering and agreed with the representative of the underwriters to enter into a lock-up and voting agreement (the “Lock-Up and Voting Agreements”) whereby among other terms, each of the April Purchasers and the June Purchasers agreed to vote all shares of common stock each beneficially owned as of the Record Date, with respect to the proposals contained in this proxy statement (however such purchasers cannot vote on this Proposal 5). Additionally, as consideration for the April Purchasers’ and June Purchasers’ waiver of certain rights set forth in April Purchase Agreement and June Purchase Agreement, each such purchaser was issued unregistered warrants (the “Waiver Warrants”) substantially similar to the warrants issued in the July Public Offering and the July Warrants, except that the Waiver Warrants have a term of five years, have an exercise price equal to $0.37 per share and carry piggy-back registration rights. The number of shares of common stock underlying the Waiver Warrants was equal to the dollar amount subscribed by such purchasers in the July Public Offering and/or the concurrent private placement, multiplied by 1.5, which equates to Waiver Warrants to purchase up to an aggregate of 3,495,000 shares (the “Waiver Warrant Shares”) of common stock.
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Why the Company Needs Stockholder Approval
We are seeking the Stockholder Approval in order to comply with Nasdaq Listing Rules 5635(d). Under Nasdaq Listing Rule 5635(d), stockholder approval is required for a transaction other than a public offering involving the sale, issuance or potential issuance by an issuer of common stock (or securities convertible into or exercisable for common stock) at a price that is less than the greater of book or market value of the stock if the number of shares of common stock to be issued is or may be equal to 20% or more of the common stock, or 20% or more of the voting power, outstanding before the issuance. Since the exercise price of the Waiver Warrants was lower than the market price of our common stock on the date of issuance of the Preferred Stock, the Company requires the stockholder approval described in the proxy statement to issue 20% or more of our outstanding common stock as calculated immediately prior to the date of the financing.
Effect of Proposal on Current Stockholders
If the Second Nasdaq Proposal is adopted, based on an initial exercise price per share of the April Warrants, the June Warrants, and the July Warrants, 8,312,195 shares of common stock would be issuable upon exercise of such warrants, representing up to 21.85% of the shares of our common stock outstanding on Record Date.
The issuance of such shares could result in significant dilution to our stockholders, and could substantially reduce our stockholders’ percentage interest in the voting power of the Company. In addition, the sale or any resale of the April Warrant Shares, the June Warrant Shares, or the Waiver Warrant Shares could cause the market price of our common stock to decline further.
Consequence of a Failure to Provide Stockholder Approval
If our stockholders do not approve the Second Nasdaq Proposal, we will have the right to issue shares up to 19.9% of the Company’s issued and outstanding common stock as calculated immediately prior to the financing upon exercise of the April Warrants, the June Warrants, and the Waiver Warrants without stockholder approval.
Vote Required
The approval of this proposal requires the affirmative vote of the majority of shares cast on the proposal. Abstentions and broker non-votes will have no effect on the outcome of this proposal. Notwithstanding the foregoing, to the extent a holder of common stock as of the Record Date was issued any of the securities described in this proposal, such holder cannot vote on this proposal.
Recommendation of the Board
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE SECOND NASDAQ PROPOSAL.
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PROPOSAL NO. 6: THE ADJOURNMENT PROPOSAL
The Adjournment Proposal, if adopted, will allow our Board to adjourn the Special Meeting to a later date or dates to permit further solicitation of proxies. The Adjournment Proposal will only be presented to our stockholders in the event that there are insufficient votes for, or otherwise in connection with, the approval of the proposals. Sharesother Proposals.
Vote Required
The affirmative vote of the Common Stock represented by executed proxies received byholders of a majority of the Companyoutstanding shares of common stock entitled to vote at the Special Meeting will be required to approve the Adjournment Proposal. Abstentions and “broker non-votes” will each be counted as present for purposes of establishingdetermining the presence of a quorum, atbut will have no effect on the Meeting, regardlessoutcome of how or whether such shares are voted on any specific proposal.the vote.
Other BusinessRecommendation of the Board
OurThe Board knowsrecommends a vote “FOR” the approval of no other matterthe Adjournment Proposal.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be presented atbeneficially owned by more than one person (if, for example, persons share the Meeting. Ifpower to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any additional matter should properly come beforeperson, the Meeting, itamount of shares outstanding is deemed to include the intentionamount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.
The following table sets forth information known to us regarding the beneficial ownership of our common stock as of July [●], 2020 by:
| ● | each person known by us at that date to be the beneficial owner of more than 5% of the outstanding shares of our common stock based solely on Schedule 13D/13G filings with the SEC; | |
| ● | each of our executive officers, directors and director nominees at such date; and | |
| ● | all of our executive officers, directors and director nominees at such date, as a group. |
Unless otherwise indicated, we believe that all persons named in the enclosed proxytable below have sole voting and investment power with respect to vote such proxy in accordance with their judgment on any such matters.all shares of common stock beneficially owned by them. As of July 21, 2020, there were [●] shares of our common stock outstanding.
| Beneficial Ownership | ||||||||
| Name and Address of Beneficial Owner (1) | Number of Shares | Percentage | ||||||
| 5% Stockholders | ||||||||
| Biodyne Holding, S.A.(2) | 1,705,433 | 7.1 | % | |||||
| Named Executive Officers and Directors | ||||||||
| Robert A. Berman (3) | 1,154,145 | 4.6 | % | |||||
| Marc Glickman, M.D.(3) | 300,056 | 1.2 | % | |||||
| Francis Duhay, M.D. (3) | 44,728 | * | ||||||
| Craig Glynn` | - | |||||||
| Dr. Sanjay Shrivastava (3) | 35,000 | * | ||||||
| Robert Gray(3) | 15,750 | * | ||||||
| Matthew Jenusaitis (3) | 15,000 | * | ||||||
| All directors and executive officers as a group (7 persons) | 1,564,678 | 6.1 | % | |||||
* Represents beneficial ownership of less than 1%.
| (1) | Except as otherwise noted below, the address for each person or entity listed in the table is c/o Hancock Jaffe Laboratories, Inc., 70 Doppler, Irvine, California 92618. |
| (2) | Based on Mr. Zhivilo’s public filings. Mr. Zhivilo is the controlling shareholder, President and director of Biodyne Holding, S.A., or Biodyne, and was chairman of the board of directors for the Company until his resignation on May 23, 2019. The principal business address of Biodyne is 13 Rue de la Gare, 1100 Morges, Switzerland. |
| (3) | Includes shares of common stock issuable upon exercise of options that are currently exercisable or exercisable within 60 days of July 21, 2020. |
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There are no material proceedings in which any of the Company’s directors, officers or affiliates, or any associate of any such director, officer, affiliate of the Company, is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.
Future Stockholders ProposalsSTOCKHOLDER PROPOSALS
The Board has not yet determined the date on which the next Annual Meeting of stockholders will be held. Stockholders may submit proposals on matters appropriate for stockholder action at annual meetings in accordance with the rules and regulations adopted by the Securities and Exchange Commission. Any proposal which an eligible stockholder desires to have included in our proxy statement and presented at the next Annual Meeting of Stockholders will be included in our proxy statement and related proxy card if it is received by us a reasonable time before we begin to print and send our proxy materials and if it complies with Securities and Exchange Commission rules regarding inclusion of proposals in proxy statements. In order to avoid controversy as to the date on which we receive a proposal, it is suggested that any stockholder who wishes to submit a proposal submit such proposal by certified mail, return receipt requested.
Other deadlines apply to the submission of stockholder proposals for the next Annual Meeting that are not required to be included in our proxy statement under Securities and Exchange Commission rules. With respect to these stockholder proposals for the next Annual Meeting, a stockholder’s notice must be timely. To be timely, a stockholder’s notice shall be delivered to the Chief Financial Officer +atat the principal executive offices of the corporation not later than the close of business on the ninetieth (90th)(90th) day, nor earlier than the close of business on the one hundred twentieth (120th)(120th) day, prior to the first anniversary of the preceding year’s annual meeting. The form of proxy distributed by the Board of Directors for such meeting will confer discretionary authority to vote on any such proposal not received by such date. If any such proposal is received by such date, the proxy statement for the meeting will provide advice on the nature of the matter and how we intend to exercise our discretion to vote on each such matter if it is presented at that meeting.
Stockholders wishing to communicate with the Board may direct such communications to the Board c/o the Company, Attn: Robert Rankin. Mr. Rankin will present a summary of all stockholder communications to the Board at subsequent Board meetings. The directors will have the opportunity to review the actual communications at their discretion.
Householding of Proxy MaterialsPROXY SOLICITATION
The SEC has adopted rules that permit companies and intermediaries (such as banks and brokers) to satisfy the delivery requirements for noticessolicitation of annual meetings, proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, whichproxies is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies. This year, a single noticemade on behalf of the annual meetingBoard and we will bear the cost of soliciting proxies. Proxies may be solicited through the mail and through telephonic or telegraphic communications to, or by meetings with, stockholders or their representatives by our directors, officers and other employees who will receive no additional compensation therefor. We have engaged The Proxy Advisory Group, LLC to assist in the solicitation of proxies and provide related advice and informational support, for a services fee and the reimbursement of customary disbursements, which are not expected to exceed $40,000 in total.
We request persons such as brokers, nominees and fiduciaries holding stock in their names for others, or holding stock for others who have the right to give voting instructions, to forward proxy material to their principals and to request authority for the execution of the proxy. We will reimburse such persons for their reasonable expenses.
DELIVERY OF PROXY MATERIALS TO HOUSEHOLDS
Only one copy of the proxy statement and annual report, will bethis Proxy Statement is being delivered to multiple registered stockholders sharingwho share an address unless we have received contrary instructions have been received from the affected stockholders. Once you have received notice from your bankone or broker that it will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement and annual report, please notify your bank or broker, and direct your written request to Robert Rankin, Chief Financial Officermore of the Company,stockholders. A separate form of proxy is being included for each account at (949) 261-2900 or at offices of the Company at 70 Doppler Irvine, California 92618. Stockholdersshared address. Registered stockholders who currently receive multiple copies of the proxy statement at theirshare an address and would like to receive a separate copy of this Proxy Statement, or have questions regarding the householding process, may contact The Proxy Advisory Group LLC, by calling (212) 616-2181, or by forwarding a written request addressed to The Proxy Advisory Group LLC, 18 East 41st Street, 20th Floor, New York, NY 10017. Promptly upon request, a separate copy of this Proxy Statement will be sent. By contacting The Proxy Advisory Group LLC, registered stockholders sharing an address can also (i) notify the Company that the registered stockholders wish to receive separate annual reports to stockholders, proxy statements and/or Notice of Internet Availability of Proxy Materials, as applicable, in the future or (ii) request delivery of a single copy of annual reports to stockholders, proxy statements and/or Notice of Internet Availability of Proxy Materials, as applicable, in the future if registered stockholders at the shared address are receiving multiple copies.
Many brokers, brokerage firms, broker/dealers, banks and other holders of record have also instituted “householding” (delivery of one copy of materials to multiple stockholders who share an address). If your family has one or more “street name” accounts under which you beneficially own shares of our common stock, you may have received householding of their communications should contact theirinformation from your broker, brokerage firm, broker/dealer, bank or broker.other nominee in the past. Please contact the holder of record directly if you have questions, require additional copies of this Proxy Statement or our Annual Report or wish to revoke your decision to household and thereby receive multiple copies. You should also contact the holder of record if you wish to institute householding.
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Management does not know of any other matters which are likely to be brought before the meeting. However, in the event that any other matters properly come before the meeting, the persons named in the enclosed proxy will vote said proxy in accordance with their judgment in said matters.
Additional InformationWHERE YOU CAN FIND MORE INFORMATION
We are subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith, we file periodic reports, documentsannual, quarterly and other reports and information with the SEC relatingSEC. We distribute to our business,stockholders annual reports containing financial statements audited by our independent registered public accounting firm and, other matters. Suchupon request, quarterly reports for the first three quarters of each fiscal year containing unaudited financial information. In addition, the reports and other information may be inspectedare filed through the Electronic Data Gathering, Analysis and Retrieval (known as “EDGAR”) system and are publicly available for copyingon the SEC’s Web site, located at http://www.sec.gov. We will provide without charge to you, upon written or oral request, a copy of the reports and other information filed with the SEC.
If you would like additional copies of this Proxy Statement or if you have questions about the proposals to be presented at the officesSpecial Meeting, you should contact the Company’s proxy solicitation agent at the following address and telephone number:
The Proxy Advisory Group, LLC
18 East 41st Street, 20th Floor
New York, NY 10017
Tel: (212) 616-2181
If you are a stockholder of the SEC, 100 F Street, N.E.Company and would like to request documents, please do so by [●], Washington, D.C. 20549 or may be accessed2020, in order to receive them before the Special Meeting.
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting: The Notice & Proxy Statement and the Annual Report are available at the Investor Relations portion of our website at www.sec.govhttps://ir.hancockjaffe.com/. Information regarding the operation of the public reference rooms may be obtained by calling the SEC at 1-800-SEC-0330
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HANCOCK JAFFE LABORATORIES, INC.
Hancock Jaffe Laboratories, Inc., a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), does hereby certify that:
| 1. | The name of the Corporation is: | |
| Hancock Jaffe Laboratories, Inc. | ||
| 2. | The following amendment to the Amended and Restated Certificate of Incorporation was approved by the directors of the corporation on the [●] day of July, 2020 and the stockholders of the corporation on the [●] day of [●], 2020. | |
| Resolved that Article Four Subsection A of the Amended and Restated Certificate of Incorporation be amended by deleting the second sentence and inserting the following sentence: | ||
| “The total number of shares which the Corporation is authorized to issue is Two Hundred and Sixty Million (260,000,000) shares, of which Two Hundred and Fifty Million (250,000,000) shares shall be Common Stock, and Ten Million (10,000,000) shares shall be Preferred Stock.” | ||
| 3. | The number of shares outstanding at the time of the adoption of the amendment was: [●]. | |
| The total number of shares entitled to vote thereon was: [●]. | ||
| 4. | This Certificate of Amendment to the Amended and Restated Certificate of Incorporation shall be effective as of [●], 2020 at [●] Eastern Time. |
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE FOLLOWS]
| 23 |
IN WITNESS WHEREOF, Hancock Jaffe Laboratories, Inc. has caused this Certificate to be executed by its duly authorized officer on this [●] day of [●], 2020.
| HANCOCK JAFFE LABORATORIES, INC. | ||
| By: | /s/ Robert Berman | |
| Name: | Robert Berman | |
| Title: | Chief Executive Officer | |
| 24 |
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
Hancock Jaffe Laboratories, Inc.
Hancock Jaffe Laboratories, Inc., a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), does hereby certify that:
| 1. | The name of the Corporation is: | |
| Hancock Jaffe Laboratories, Inc. | ||
| 2. | The following amendment to the Amended and Restated Certificate of Incorporation was approved by the directors of the corporation on the [●] day of July, 2020 and the stockholders of the corporation on the [●] day of [●], 2020. | |
| Resolved that Article Ten of the Amended and Restated Certificate of Incorporation be amended by deleting the second sentence and inserting the following sentence: | ||
| “Notwithstanding any other provision of this Restated Certificate or applicable law and in addition to any affirmative vote of the holders of any particular class of stock of the Corporation required by applicable law or by a Preferred Stock Designation or this Restated Certificate, the affirmative vote of the holders of a majority of the voting power of the shares of the then outstanding voting stock of the Corporation entitled to vote thereon, voting together as a single class, shall be required to amend, repeal, or adopt any provisions of this Restated Certificate.” | ||
| 3. | The number of shares outstanding at the time of the adoption of the amendment was: [●]. | |
| The total number of shares entitled to vote thereon was: [●]. | ||
| 4. | This Certificate of Amendment to the Amended and Restated Certificate of Incorporation shall be effective as of [●], 2020 at [●] Eastern Time. |
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE FOLLOWS]
| 25 |
IN WITNESS WHEREOF, Hancock Jaffe Laboratories, Inc. has caused this Certificate to be executed by its duly authorized officer on this [●] day of [●], 2020.
| HANCOCK JAFFE LABORATORIES, INC. | ||
| By: | /s/ Robert Berman | |
| Name: | Robert Berman | |
| Title: | Chief Executive Officer | |
| 26 |
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
Hancock Jaffe Laboratories, Inc.
Hancock Jaffe Laboratories, Inc.
70 Doppler Irvine, California 92618
(949) 261-2900
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED HEREBY APPOINTS ROBERT A. BERMAN AND BOB RANKIN, AND EACH OF THEM, AS PROXIES OF THE UNDERSIGNED, WITH FULL POWER OF SUBSTITUTION, TO VOTE ALL THE SHARES OF COMMON STOCK OF HANCOCK JAFFE LABORATORIES, INC. HELD OF RECORD BY THE UNDERSIGNED ON OCTOBER 22, 2018, AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON FRIDAY, DECEMBER 21, 2018, OR ANY ADJOURNMENT THEREOF.
1. Election, a corporation duly organized and existing under the General Corporation Law of Dr. Francis Duhay andDr. Sanjay Shrivastavaas Class I directors, to hold office until the 2021 Annual MeetingState of Stockholders or until their successors are elected and qualified or until their earlier death, incapacity, removal or resignation.Delaware (the “Corporation”), does hereby certify that:
| The name of the Corporation is: | ||
| Hancock Jaffe Laboratories, Inc. | ||
| The following amendment to the Amended and Restated Certificate of Incorporation was approved by the directors of the corporation on the [●] |
2. To ratify the appointment by the Audit CommitteeResolved that Article Four of the Company’s BoardAmended and Restated Certificate of DirectorsIncorporation be amended by adding the following new paragraph as subsection:
“Each outstanding share of Marcum LLP ascommon stock, par value $0.00001 per share, of this corporation will be combined and converted, automatically, without further action, into a number of shares of such common stock equal to the Company’s registered public accounting firm fornumber of shares immediately prior to such filing divided by [●]. Fractional shares will not be issued; any such fractional shares that will result from the fiscal year ending December 31, 2018;combination and conversion will be rounded up to the nearest whole number. At the effective date, there shall be no change in number of authorized shares of stock which this corporation shall have the authority to issue.”
| The number of shares outstanding at the time of the adoption of the amendment was: [●]. | ||||
| The total number of shares entitled to vote thereon was: [●]. | ||||
| 4. | This Certificate of Amendment to the Amended and Restated Certificate of Incorporation shall be effective as of [●], 2020 at [●] |
3. In the discretion[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE FOLLOWS]
| 27 |
IN WITNESS WHEREOF, Hancock Jaffe Laboratories, Inc. has caused this Certificate to be executed by its duly authorized officer on this [●] day of the Board of Directors, upon the transaction of any other matters which may properly come before the meeting or any adjournment thereof.[●], 2020.
| By: | /s/ Robert Berman | |
| Name: | Robert Berman | |
| Title: | Chief Executive Officer | |
| 28 |
The shares represented by this proxy, when properly executed, will be voted as specified by the undersigned stockholder(s). If this card contains no specific voting instructions, the shares will be votedFOR each of the proposals described on this card.
Please sign exactly as the name appears below. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign the corporate name by the president or other authorized officer. If a partnership, please sign in the partnership name by an authorized person.
VOTE BY INTERNET—www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.