PROPOSAL 5
PROPOSAL 2
APPROVAL, FOR THE PURPOSES OF COMPLYING WITH NASDAQ LISTING RULE 5635(d), THE ISSUANCE OF MORE THAN 20% OF THE COMPANY'S ISSUED AND OUTSTANDING COMMON STOCK PURSUANT TO THE COMPANY'S PURCHASE AGREEMENT WITH LINCOLN PARK CAPITAL FUND, LLC
On February 3, 2023, we entered into a purchase agreement (“LP Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”) and a registration rights agreement (the “Registration Agreement”) pursuant to which Lincoln Park has agreed to purchase from us up to an aggregate of $10.0 million worth of our common stock. We are submitting this Proposal 2 to you in order to obtain the requisite stockholder authorization in accordance with The Nasdaq Listing Rules to sell shares of our common stock to Lincoln Park in excess of 20% of our outstanding shares of common stock as of the date we entered into the LP Purchase Agreement, if we so choose, as more fully described below.
Agreement with Lincoln Park
Under the terms and subject to the conditions of the LP Purchase Agreement, we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase, up to $10.0 million worth of shares of common stock. Such sales of common stock by us, if any, will be subject to certain limitations, and may occur from time to time, at our sole discretion, over the 36-month period commencing after certain conditions have been satisfied (“Commencement Date”) as per the LP Purchase Agreement and the Registration Agreement.
Under the LP Purchase Agreement, from and after the Commencement Date, on any business day that we select , we may direct Lincoln Park to purchase up to 35,000 shares of our common stock in a “Regular Purchase” on such business day, provided, however, that (i) the Regular Purchase may be increased to up to 40,000 shares of our common stock, provided that the closing sale price of our common stock is not below $6.00 on the purchase date, (ii) the Regular Purchase may be increased to up to 45,000 shares of our common stock, provided that the closing sale price of our common stock is not below $8.00 on the purchase date and (ii) the Regular Purchase may be increased to up to 50,000 shares of our common stock, provided that the closing sale price of our common stock is not below $10.00 on the purchase date (such share amount limitation, the “Regular Purchase Share Limit”). In each case, Lincoln Park’s maximum commitment in any single Regular Purchase may not exceed $1.0 million.
The purchase price per share for each such Regular Purchase will be 98.5% of the lower of: (i) the lowest sale price for our common stock on the applicable purchase date for such shares of our common stock; and (ii) the arithmetic average of the three lowest closing sale prices for our common stock during the 10 consecutive business days ending on the business day immediately preceding the purchase date of such shares of our common stock.
In addition to Regular Purchases described above, we may also direct Lincoln Park, on any business day on which we have properly submitted a Regular Purchase notice directing Lincoln Park to purchase the maximum number of shares of our common stock that we are then permitted to include in a single Regular Purchase notice, to purchase an additional amount of our common stock, which we refer to as an Accelerated Purchase, not to exceed the lesser of: (i) 20% of the aggregate number of shares of our common stock traded during all or, if certain trading volume or market price thresholds specified in the LP Purchase Agreement are crossed on the applicable Accelerated Purchase date, which is defined as the next business day following the purchase date for the corresponding Regular Purchase, the portion of the normal trading hours on the applicable Accelerated Purchase date prior to such time that any one of such thresholds is crossed, which period of time on the applicable Accelerated Purchase date we refer to as the Accelerated Purchase Measurement Period; and (ii) two times the number of purchase shares purchased pursuant to the corresponding Regular Purchase.
The purchase price per share for each such Accelerated Purchase will be equal to 97% of the lower of: (i) the volume weighted average price of our common stock on Nasdaq during the Accelerated Purchase Measurement Period on the applicable Accelerated Purchase date; and (ii) the closing sale price of our common stock on the Nasdaq on the applicable Accelerated Purchase date.
We may also direct Lincoln Park, not later than 1:00 p.m., Eastern time, on a business day on which an Accelerated Purchase has been completed and all of the shares of our common stock to be purchased thereunder (and under the corresponding Regular Purchase) have been properly delivered to Lincoln Park in accordance with the LP Purchase Agreement prior to such time on such business day, to purchase an additional amount of our common stock, which we refer to as an Additional Accelerated Purchase, of up to the lesser of: (i) 20% of the aggregate number of shares of our common stock traded during a certain portion of the normal trading hours on such Accelerated Purchase date as determined in accordance with the Purchase Agreement, which period of time we refer to as the Additional Accelerated Purchase Measurement Period; and (ii) two times the number of purchase shares purchased pursuant to the Regular Purchase corresponding to the Accelerated Purchase that was completed on such Accelerated Purchase date on which an Additional Accelerated Purchase notice was properly received.
The purchase price per share for each such Additional Accelerated Purchase will be equal to 97% of the lower of: (i) the volume weighted average price of our common stock during the applicable Additional Accelerated Purchase Measurement Period on the applicable Additional Accelerated Purchase date; and (ii) the closing sale price of our common stock on the applicable Additional Accelerated Purchase date.
In all instances, we may not sell shares of our common stock to Lincoln Park under the LP Purchase Agreement if it would result in Lincoln Park beneficially owning more than 9.99% of our common stock. There are no upper limits on the price per share that Lincoln Park must pay for shares of common stock.
From the Commencement Date through July 21, 2023, we offered and sold 125,000 shares of our common stock pursuant to the LP Purchase Agreement. These sales resulted in gross proceeds to us of approximately $0.4 million. As of July 21, 2023, shares of our common stock having an aggregate value of approximately $9.6 million remained available for sale under this offering program, subject to the application of the Lincoln Park Exchange Cap and the number of shares registered for resale on effective registration statements. However, under a covenant in the Underwriting Agreement from our June 6, 2023 public offering, we may not issue any additional shares under the LP Purchase Agreement until six months after the closing of that offering. We currently intend to use the net proceeds from the sale of securities to Lincoln Park for general corporate purposes.
Requirement to Seek Stockholder Approval
As a result of our listing on The Nasdaq Capital Market, issuances of our common stock are subject to the Nasdaq Marketplace Rules, including Rule 5635(d), which requires us to obtain stockholder approval prior to the issuance of securities in connection with a transaction, other than a public offering, involving the sale, issuance or potential issuance by us of more than 19.99% of our outstanding shares of our common stock (or securities convertible into or exercisable for shares of our common stock) at a price less than the lower of: (i) the closing price (as reflected on Nasdaq.com) immediately preceding the signing of the binding agreement; or (ii) the average closing price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately preceding the signing of the binding agreement (the “Nasdaq 20% Rule”).
Under the Nasdaq 20% Rule, in no event may we issue or sell to Lincoln Park under the LP Purchase Agreement more than 19.99% of the shares of our common stock outstanding immediately prior to the execution of the LP Purchase Agreement (which was 359,114 shares based on our shares outstanding immediately prior to the execution of the LP Purchase Agreement) (the “Lincoln Park Exchange Cap”), unless we obtain stockholder approval to issue shares of common stock in excess of the Lincoln Park Exchange Cap, or unless the average purchase price of shares of common stock sold pursuant to the LP Purchase Agreement equals or exceeds $3.538 per share (the "Signing Market Price"), which was the closing price of the common stock for the five consecutive trading days
immediately preceding the date of the LP Purchase Agreement. In any event, the LP Purchase Agreement specifically provides that we may not issue or sell any shares of our common stock under the LP Purchase Agreement if such issuance or sale would breach any applicable Nasdaq rules.
As of July 21, 2023, we had issued 125,000 shares of our common stock to Lincoln Park under the LP Purchase Agreement, leaving 234,114shares of our common stock available for issuance without seeking stockholder approval. However, as of July 20, 2023, shares of our common stock having an aggregate value of approximately $9.6 millionremained available for sale under this offering program. Based on the closing sale price of our common stock as reported on Nasdaq on such date, to fully utilize the remaining amount available to us, we would need to issue 15,099,036 shares of common stock to Lincoln Park, which would be significantly in excess of the Nasdaq 20% Rule. Accordingly, in order to be able to sell to Lincoln Park the full amount remaining under the LP Purchase Agreement, we are seeking stockholder approval to issue greater than 20% of our outstanding shares as of the date we entered into the agreement with Lincoln Park.
In order to comply with the Nasdaq 20% Rule and to satisfy conditions under the LP Purchase Agreement, we are seeking stockholder approval to permit issuance of more than 20% of our common stock to Lincoln Park pursuant to the Purchase Agreement.
Effect of Failure to Obtain Stockholder Approval
As of July 21, 2023, we had issued a total of 125,000 shares of common stock to Lincoln Park pursuant to the LP Purchase Agreement. If the stockholders do not approve Proposal 2, we will be unable to issue shares of common stock to Lincoln Park pursuant to the LP Purchase Agreement in excess of the Lincoln Park Exchange Cap unless the average sale price of all shares sold under the LP Purchase Agreement equals or exceeds the Signing Market Price.
Effect of Approval
Upon obtaining the stockholder approval requested in this Proposal 2, we would no longer be bound by the Nasdaq 20% Rule restriction on issuances of common stock to Lincoln Park. If this Proposal 2 is approved by our stockholders, we would be able to issue more than the original Lincoln Park Exchange Cap (or 359,114 shares) to Lincoln Park under the LP Purchase Agreement . The maximum number of shares of common stock that we may issue would fluctuate from time to time based on the price of our common stock. Assuming we received the stockholder approval we are requesting in this Proposal 2, and assuming and the total number of shares issuable under the purchase agreement were issued on July 20, 2023 at the closing price on that date, a total of 15,099,036 additional shares would be issuable to Lincoln Park, which have an approximate value of $9.6 million.
In addition, the additional shares that we could issue to Lincoln Park will result in greater dilution to existing stockholders and may result in a decline in our stock price or greater price volatility.
Each addition share of common stock that would be issuable to Lincoln Park would have the same rights and privileges as each share of our currently authorized common stock.
Vote Required
The affirmative vote of a majority of the voting power of the outstanding voting stock present in person or represented by proxy at the Special Meeting and entitled to vote thereon is required for the approval, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of more than 20% of the Company’s issued and outstanding common stock pursuant to the Company’s purchase agreement with Lincoln Park .
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL FOR PURPOSES OF COMPLYING WITH NASDAQ LISTING RULE 5635(d), THE ISSUANCE OF MORE THAN 20% OF THE COMPANY’S ISSUED AND OUTSTANDING COMMON STOCK PURSUANT TO THE COMPANY’S PURCHASE AGREEMENT WITH LINCOLN PARK. PROPERLY AUTHORIZED PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED “FOR” THE APPROVAL OF THE ISSUANCE OF MORE THAN 20% OF THE COMPANY’S ISSUED AND
OUTSTANDING COMMON STOCK PURSUANT TO THE COMPANY’S PURCHASE AGREEMENT WITH LINCOLN PARK UNLESS INSTRUCTIONS TO THE CONTRARY ARE GIVEN.
PROPOSAL 3
TO APPROVE THE ADJOURNMENT OF THE ANNUALSPECIAL MEETING, IN ORDERIF NECESSARY, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT SHARES TO BE VOTED IN FAVOR OF ANY OF PROPOSALS 1-4INSUFFICIENT VOTES AT THE TIME OF THE ANNUALSPECIAL MEETING TO APPROVE PROPOSAL NO. 1 AND PROPOSAL NO. 2
Background of and Rationale for the Adjournment Proposal
The Board believes that, if the number of affirmative votes received from the holders of our common stock are insufficient to approve any of the other Proposals being considered at the Annual Meeting,Proposal No. 1 and Proposal No. 2, it is in the best interests of the stockholders to enable the Board to continue to seek to obtain a sufficient number of additional affirmative votes to approve that proposal.the proposals.
In the Adjournment Proposal, we are asking stockholders to authorize the holder of any proxy solicited by the Board to vote in favor of adjourning the AnnualSpecial Meeting or any adjournment thereof. If our stockholders approve this proposal, we could adjourn the AnnualSpecial Meeting, and any adjourned session of the AnnualSpecial Meeting, to use the additional time to solicit additional proxies in favor of the other applicable Proposals.Proposal No. 1 and Proposal No. 2.
Additionally, approval of the Adjournment Proposal could mean that, in the event we receive proxies indicating that a majority of the voting power of the outstanding voting stock present in person or represented by proxy at the AnnualSpecial Meeting and entitled to vote thereon have voted against any of Proposal Nos. 1-4No. 1 and Proposal No. 2 or abstained from voting on suchthose proposals, we could adjourn the AnnualSpecial Meeting without a vote on such proposalsProposal No. 1 and Proposal No. 2 and use the additional time to solicit the holders of those shares to change their vote in favor of such proposals.Proposal No. 1 and Proposal No. 2.
Vote Required
The affirmative vote of a majority of the voting power of the outstanding voting stock present in person or represented by proxy at the AnnualSpecial Meeting and entitled to vote thereon is required to approve the adjournment of the AnnualSpecial Meeting, in orderif necessary, to solicit additional proxies if there are insufficient votes at the time of the AnnualSpecial Meeting to approve any of the other Proposals.Proposal No. 1 and Proposal No. 2.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ADJOURNMENT OF THE ANNUALSPECIAL MEETING, IN ORDERIF NECESSARY, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE INSUFFICIENT VOTES AT THE TIME OF THE ANNUALSPECIAL MEETING TO APPROVE ANY OF THE OTHER PROPOSALS.PROPOSAL NO. 1 AND PROPOSAL NO. 2. PROPERLY AUTHORIZED PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED “FOR” PROPOSAL NO. 53 UNLESS INSTRUCTIONS TO THE CONTRARY ARE GIVEN.
EXECUTIVE COMPENSATION
We are a “smaller reporting company” under Rule 405 of the Securities Act of 1933, as amended. As a result, we have elected to comply with the reduced disclosure requirements applicable to smaller reporting companies in accordance with Securities and Exchange Commission rules. Our named executive officers during the fiscal year ended December 31, 2022 were Brian M. Strem, Ph.D., our President and Chief Executive Officer, Eric J. Daniels, MD, MBA, our Chief Development Officer, Melissa Tosca, our Executive Vice President of Finance, Stephen From, our former Executive Chairman, and Sarah Romano, our former Chief Financial Officer. Dr. Strem was appointed as President and Chief Executive Officer on July 23, 2021. Melissa Tosca was appointed as Executive Vice President of Finance effective as of September 13, 2022. Stephen From was appointed as the Executive Chairman of our board of directors effective February 1, 2021, and had served as President and Chief Executive Officer prior to that date. Mr. From ceased serving as our Executive Chairman effective as of January 31, 2022. Sarah Romano resigned as our Chief Financial Officer effective as of February 25, 2022.
Summary Compensation Table
The following table sets forth information concerning the compensation of our named executive officers during our fiscal years ended December 31, 2022 and December 31, 2021.
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Name and Principal Position | Year | Salary ($) | Bonus ($)1 | Stock Awards ($)2 | Option Awards ($)3 | All Other Compensation ($)9 | Total ($) |
Brian M. Strem, Ph.D | 2022 | 400,000 | | 64,932 | | 84,750 | | 164,500 | | — | | 714,182 | |
President and Chief Executive Officer4 | 2021 | 169,231 | | — | | — | | 274,750 | | — | | 443,981 | |
Eric J. Daniels, MD, MBA | 2022 | 350,463 | | 21,008 | | 67,800 | | 107,638 | | — | | 546,909 | |
Chief Development Officer5 | 2021 | 68,382 | | — | | — | | 87,700 | | — | | 156,082 | |
Melissa Tosca | 2022 | 85,385 | | — | | 16,950 | | 30,200 | | — | | 132,535 | |
Executive Vice President of Finance6 | 2021 | — | | — | | — | | — | | — | | — | |
Stephen From | 2022 | 18,219 | | — | | — | | — | | 363,633 | | 381,852 | |
Former Executive Chairman; former President and Chief Executive Officer8 | 2021 | 245,292 | | 160,000 | | — | | 57,730 | | — | | 463,022 | |
Sarah Romano | 2022 | 56,538 | | 61,875 | | — | | 34,075 | | 18,750 | | 171,238 | |
Former Chief Financial Officer7 | 2021 | 275,000 | | 64,500 | | — | | 172,731 | | — | | 512,231 | |
1The amounts in this column represent discretionary bonus payments granted by the board in the applicable fiscal year.
2The amounts in this column represent the aggregate grant date fair value of stock awards granted to the officer in the applicable fiscal year, computed in accordance with FASB ASC Topic 718. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for a discussion of the assumptions made by us in determining the grant date fair value of our equity awards. In accordance with Securities and Exchange Commission rules, the grant date fair value of an award subject to performance conditions is based on the probable outcome of the conditions.
3The amounts in this column represent the aggregate grant date fair value of option awards granted to the officer in the applicable fiscal year, computed in accordance with FASB ASC Topic 718. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for a discussion of the assumptions made by us in determining the grant date fair value of our equity awards. In accordance with Securities and Exchange Commission rules, the grant date fair value of an award subject to performance conditions is based on the probable outcome of the conditions.
4Dr. Strem was appointed as our President and Chief Executive Officer as of July 23, 2021.
5Mr. Daniels was appointed as our Chief Development Officer as of October 21, 2021.
6Ms. Tosca was appointed as our Executive Vice President of Finance as of September 13, 2022.
7Ms. Romano resigned as our Chief Financial Officer as of February 25, 2022.
8Mr. From was appointed as the Executive Chairman of our board of directors effective February 1, 2021, and had served as President and Chief Executive Officer prior to that date. Mr. From ceased serving as Executive Chairman as of January 31, 2022.
9 The amounts in this column include severance and vacation payouts for Mr. From and vacation payout for Ms. Romano.
Narrative Disclosure to Compensation Tables
Employment Agreements
Brian M. Strem, Ph.D.
In connection with Dr. Strem’s appointment as President and Chief Executive Officer, on July 22, 2021, we entered into an Employment Agreement with Dr. Strem. Pursuant to the agreement, Dr. Strem receives an annual base salary of $400,000 and he is entitled to receive a performance bonus with a target of up to 50% of his annual base salary for the applicable fiscal year. Dr. Strem also received an option to purchase up to 2,500 shares of the Company’s common stock, which vested respect to one-third of the underlying shares on the one-year anniversary of the grant date, and thereafter will vest in equal monthly installments over a two-year period. Dr. Strem is also entitled to receive two further options to purchase an aggregate of up to 2,500 shares of our common stock based on the achievement of market capitalization-based milestones as set forth in his agreement. Effective January 1, 2023, Dr. Strem's annual base salary was increased to $416,000.
Eric J. Daniels, MD, MBA
In connection with Dr. Daniels’ appointment as Chief Development Officer, on October 21, 2021, we and our Australian subsidiary entered into an Employment Agreement with Dr. Daniels. Pursuant to the employment agreement, Dr. Daniels receives an annual base salary of AUD$492,000 and he is entitled to receive a performance bonus with a target of up to 40% of his annual base salary for the applicable fiscal year. Pursuant to the employment agreement, we granted Dr. Daniels an option to purchase up to 1,250 shares of our common stock. The option vested with respect to one-third of the underlying shares on the one-year anniversary of the grant date, and thereafter will vest in equal monthly installments over a two-year period. Effective January 1, 2023, Dr. Daniels' annual base salary was increased to AUD$511,680.
Melissa Tosca
In connection with Ms. Tosca’s appointment as Executive Vice President of Finance, we entered into an Offer Letter with Ms. Tosca on August 18, 2022 and effective as of September 13, 2022. Pursuant to the offer letter, Ms. Tosca receives an annual base salary of $300,000 and she is entitled to receive a performance bonus with a target of up to 25% of her annual base salary for the applicable fiscal year. Additionally, the Company granted Ms. Tosca an option to purchase up to 7,500 shares of the Company’s common stock. The option will vest with respect to one-third of the underlying shares on the one-year anniversary of the grant date, and thereafter will vest in equal monthly installments over a two-year period. Effective January 1, 2023, Ms. Tosca's annual base salary was increased to $304,479.
Stephen From
In connection with Mr. From’s appointment as Executive Chairman, on January 29, 2021, we entered into a Fourth Amended and Restated Employment Agreement with Mr. From, with a term extending until January 31, 2022 unless earlier terminated in accordance with its terms (the “Fourth A&R Agreement”). Pursuant to the Fourth A&R Agreement, Mr. From received a monthly base salary of $20,000 for the first through sixth months and $17,550 for the sixth through twelfth months. Effective upon Mr. From’s termination of employment on January 31, 2022, Mr. From became eligible to receive (i) monthly payments of $33,333.33 for eighteen months following the termination date, (ii) a lump sum cash payment of $300,000 payable on date of the last monthly payment under clause (i), (iii) 18 months of COBRA subsidy payments, and (iv) 18 months of accelerated vesting of stock options and/or restricted stock awards that are unvested at the time of termination.
Sarah Romano
On March 23, 2020, we entered into an Employment Agreement with Ms. Romano that superseded her offer letter. Pursuant to that agreement, Ms. Romano received an annual base salary of $275,000 and was entitled to receive a bonus with an annual target of up to 30% of her annual base salary. The agreement also provided that upon termination of Ms. Romano by us without Cause or by Ms. Romano for Good Reason (as such terms are defined in the agreement), Ms. Romano would be eligible to receive (i) six months of salary continuation payments, (ii) an amount equal to 0.5 multiplied by the maximum performance bonus that she would have been eligible to receive in the year of termination, assuming achievement of all applicable performance metrics at target level, (iii) six months of COBRA subsidy payments, and (iv) six months of accelerated vesting of stock options and/or restricted stock awards that are unvested at the time of termination. Ms. Romano resigned as our Chief Financial Officer effective as of February 25, 2022.
Change of Control
Each of our named executive officers is eligible to receive certain benefits in the event of a change in control or if his or her employment is terminated under certain circumstances, as described under “Potential Payments Upon Termination or Change in Control” below.
Equity Compensation
We grant stock options and restricted shares to our named executive officers as the long-term incentive component of our compensation program. Stock options allow employees to purchase shares of our Common Stock at a price per share equal to the fair market value of our Common Stock on the date of grant and may or may not be intended to qualify as “incentive stock options” for United States federal income tax purposes. Generally, one third of the equity awards we grant vest on the first year anniversary, with the remainder vesting in equal monthly installments over 24 months, subject to the employee’s continued employment with us on the vesting date and our board of directors has discretion to provide that granted options will vest on an accelerated basis if a change of control of our company occurs, either at the time such award is granted or afterward.
Potential Payments Upon Termination or Change in Control
Brian M. Strem, Ph.D.
Pursuant to his employment agreement, if we terminate the employment of Dr. Strem without Cause or if he resigns for Good Reason, then he would be eligible to receive:
•continued payment of base salary for 3 months, which period will be extended to 6 months if the termination date is between 18 and 36 months following his start date and will be extended to 12 months if the termination date is on or after the 36-month anniversary of his start date or if termination occurs following a Change of Control (as such term is defined in his agreement);
•a lump-sum cash payment, payable no later than the last installment of his severance, equal to 0.25 multiplied by the maximum performance bonus that he would have been eligible to receive in the year of termination, which multiple will be increased to 0.5 if the termination date is between 18 and 36 months following his start date and will be increased to 1.0 if the termination date is on or after the 36-month anniversary of his start date or if termination occurs following a Change of Control;
•payment by us of monthly premiums under COBRA for up to 3 months following termination, which period will be extended to 6 months if the termination date is between 18 and 36 months following his start date and will be extended to 12 months if the termination date is on or after the 36- month anniversary of his start date or if termination occurs following a Change of Control of us; and
•3 months of accelerated vesting of stock options and/or restricted stock awards that are unvested at the time of termination, which period will be extended to 6 months if the termination date is
between 18 and 36 months following his start date and will be extended to 12 months if the termination date is on or after the 36-month anniversary of his start date.
“Cause” means (i) a willful failure to perform duties, (ii) a willful failure to comply with a valid directive of the board, (iii) engagement in dishonesty, illegal conduct, or misconduct that is materially injurious to us, (iv) embezzlement, misappropriation or fraud, (v) conviction or plea to a crime that constitutes a felony or misdemeanor involving moral turpitude, (vi) material violation of our written policies or code of conduct, or (vii) material breach of a material obligation under the employment agreement or other written agreement with us.
“Good Reason” means a resignation after one of the following conditions has come into existence without the officer’s consent: (i) a material reduction in duties, authority or responsibility; (ii) a material reduction in annual base salary; or (iii) a material breach by us of his employment agreement.
Upon a Change in Control, as defined in Dr. Strem’s employment agreement, all of Dr. Strem’s outstanding unvested stock options and/or restricted stock awards would have become fully vested and immediately exercisable.
Eric J. Daniels, MD, MBA
Pursuant to his employment agreement, if we terminate the employment of Dr. Daniels’ without Cause or he resigns for Good Reason (as such terms are defined in his employment agreement), then Dr. Daniels will be eligible to receive:
•continued payment of base salary for 3 months, which period will be extended to 6 months if the termination date is on or after the 18-month anniversary of the Effective Date or if termination occurs following a Change of Control (as such term is defined in his employment agreement);
•a lump-sum cash payment, payable no later than the last installment of his severance, equal to 0.25 multiplied by the maximum performance bonus that he would have been eligible to receive in the year of termination, which multiple will be increased to 0.5 if the termination date is on or after the 18-month anniversary of the relevant effective date or if termination occurs following a Change of Control; and
•continued coverage under a private health and dental insurance plan for up to 3 months following termination, which period will be extended to 6 months if the termination date is on or after the 18-month anniversary of the relevant effective date or if termination occurs following a Change of Control.
Additionally, if we terminate Dr. Daniels’ employment without Cause or he resigns for Good Reason, then that portion of his then unvested stock options and restricted stock awards that would have otherwise become vested over the 3 month period following termination will become fully vested and immediately exercisable on the date of such termination, which period will be extended to 6 months if the termination date is on or after the 18-month anniversary of the relevant effective date. In the event that a Change of Control occurs, all of Dr. Daniels’ unvested stock options and restricted stock awards will become fully vested and immediately exercisable.
“Cause” means (i) willful failure to perform his duties, (ii) willful failure to comply with any valid directive of the board of directors, (iii) engagement in dishonesty, illegal conduct, or serious misconduct, (iv) embezzlement, misappropriation, or fraud (v) conviction or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent) or a crime that constitutes a misdemeanor involving moral turpitude, (vi) material violation of the employer’s written policies or codes of conduct, or (vii) material breach of any material obligation under the employment agreement, the confidentiality agreement or any other written agreement.
“Good Reason” means a resignation after one of the following conditions has come into existence without the officer’s consent: (i) a material reduction in duties, authority or responsibility; (ii) a material reduction in annual base salary; or (iii) a material breach by us of his employment agreement.
Melissa Tosca
Pursuant to her offer letter, Ms. Tosca is not entitled to any additional consideration in the event of her termination.
Stephen From
Pursuant to his employment agreement, upon the termination Mr. From’s employment on January 31, 2022, he became entitled to receive monthly payments of $33,333.33 for 18 months following the termination date. Additionally, Mr. From became eligible to receive:
•a lump sum cash payment of $300,000 payable on date of the last monthly payment described above;
•payment by us of the monthly premiums under COBRA for Mr. From for up to 18 months following the termination; and
•18 months of accelerated vesting of stock options and/or restricted stock awards that are unvested at the time of termination.
Sarah Romano
Pursuant to her employment agreement, if we had terminated the employment of Ms. Romano without Cause or if she had resigned for Good Reason, then she would have been eligible to receive:
•continued payment of base salary for six months;
•a lump-sum cash payment equal to 0.5 multiplied by the maximum performance bonus that she would have been eligible to receive in the year of termination, assuming achievement of all applicable performance metrics at target level;
•payment by us of the monthly premiums under COBRA for Ms. Romano for up to six months following the termination; and
•six months of accelerated vesting of stock options and/or restricted stock awards that are unvested at the time of termination.
“Cause” means the officer’s unlawful or dishonest conduct, or a breach of any of her obligations made under her employment agreement, including, but to limited to, the confidentiality provisions thereof.
“Good Reason” means a resignation after one of the following conditions has come into existence without the officer’s consent: (i) a material reduction in duties, authority or responsibility; (ii) a material reduction in annual base salary; (iii) a relocation of principal place of employment that increases her one- way commute by more than 50 miles; or (iv) a material breach by us of her employment agreement.
Upon a Change in Control, as defined in Ms. Romano’s employment agreement, all of Ms. Romano’s outstanding unvested stock options and/or restricted stock awards would have become fully vested and immediately exercisable.
Ms. Romano resigned as our Chief Financial Officer without Good Reason effective February 25, 2022.
Change in Control Severance Plan
On November 27, 2017, we adopted a Change in Control Severance Plan, which we amended and restated on November 26, 2019 (as amended and restated, the “Change in Control Severance Plan”). The Change in Control Severance Plan provides us with assurance that we will have the continued
dedication of, and the availability of objective advice and counsel from, executives and other employees and promotes certainty and minimize potential disruption for our employees in the event we are faced with or undergo a change in control. All of our full-time employees are participants in the Change in Control Severance Plan, with the exception of Dr. Strem. Under the Change in Control Severance Plan, upon a termination of employment without Cause by us or for Good Reason by the employee (as such terms are defined in the Change in Control Severance Plan), in either case during the period starting on the date when the definitive agreement for a Change in Control (as defined in the Change in Control Severance Plan) is executed and ending on the six-month anniversary following the consummation of such Change in Control transaction, subject to the execution of a release of claims, our full-time employees (other than Dr. Strem) would be entitled to the following compensation and benefits:
•a lump sum severance payment equal to three weeks of such employee’s then-effective base salary rate for each year of service completed by the employee, subject to the following minimum and maximum amounts:
•for all participants that are executive officers or have the title of vice president or higher, a minimum amount equal to 26 weeks of base salary and a maximum amount equal to 52 weeks of base salary, and
•for all other participants, a minimum amount equal to eight weeks of base salary and a maximum amount equal to 26 weeks of base salary;
•a lump sum payment of the employee’s prorated annual incentive award for the year of termination, determined assuming achievement of target performance;
•the payment of any annual incentive that has been earned but not yet paid in respect of any performance period that has concluded as of the executive officer’s termination of employment; and
•payment of health insurance premiums under COBRA for six months following the date of termination, provided that all such premium payments will cease if the executive officer becomes entitled to receive health insurance coverage under another employer-provided plan.
In the event that any payments under the plan are subject to Section 280G of the Internal Revenue Code, such payments will be reduced, unless not reducing the amount would result in an after-tax benefit to the employee of at least 5% greater than the reduced amount. The Change in Control Severance Plan does not provide excise tax gross-ups on payments to participants.
Employee Benefits and Perquisites
Our named executive officers are eligible to participate in our health and welfare plans to the same extent as all full-time employees.
Outstanding Equity Awards at 2022 Fiscal Year-End
The following table shows certain information regarding outstanding equity awards held by our named executive officers as of December 31, 2022.
Generally, one-third of the options and shares of restricted stock granted to our named executive officers vest on the one-year anniversary of grant, with the remaining options or shares, as applicable, vesting monthly for two years thereafter, subject to our repurchase right in the event that the executive’s service terminates before vesting in such shares. For information regarding the vesting acceleration provisions applicable to the options held by our named executive officers, please see “Employment Agreements”
above.
Option Awards
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Grant Date | | Number of Securities Underlying Unexercised Options (#) Vested | | Number of Securities Underlying Unexercised Options (#) Unvested7 | Option Exercise Price ($) | | Option Expiration Date |
Brian M Strem, Ph.D. | | 26-Jul-21 | | 1,174 | | | 1,326 | | 124.80 | | 27-Jul-31 |
| | 1-Feb-22 | | — | | 1,876 | | 30.62 | | 1-Feb-32 |
| | 21-Oct-22 | | — | | 18,750 | | 6.78 | | 21-Oct-32 |
Eric J. Daniels, MD, MBA | | 21-Oct-21 | | 481 | | 769 | | 79.60 | | 21-Oct-31 |
| | 1-Feb-22 | | — | | 625 | | 30.62 | | 1-Feb-32 |
| | 21-Oct-22 | | — | | 15,000 | | 6.78 | | 21-Oct-32 |
Melissa Tosca, CPA8 | | 21-Oct-22 | | — | | 5,000 | | 6.78 | | 21-Oct-32 |
All option awards were granted under our 2005 Equity Incentive Plan, or the 2005 Plan, and our 2014 Equity Incentive Plan, or the 2014 Plan.
Restricted Stock Awards
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Grant Date | | Number of Shares of Units That Have Not Vested (#)9 | | Market Value of Shares or Units of Stock That Have Not Vested ($)10 | Equity Incentive Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
Brian M Strem, Ph.D. | | 21-Oct-22 | | 12,500 | | 42,875 | — | | — |
| | | | | | | | | |
Eric J. Daniels, MD, MBA | | 21-Oct-22 | | 10,000 | | 34,300 | — | | — |
| | | | | | | | | |
Melissa Tosca, CPA | | 21-Oct-22 | | 2,500 | | 8,575 | — | | — |
All restricted share awards were granted under the 2014 Plan.
7One-third of these options vest on the one-year anniversary of the grant date, with the remainder vesting in equal monthly installments over the remaining two years, subject to continued service through each applicable vesting date.
8Ms. Tosca was appointed as Executive Vice President of Finance as of September 13, 2022.
9One-third of these restricted shares vest on each of the one-year, two-year and three-year anniversaries of the grant date, subject to continued service through each applicable vesting date.
10Based on a closing price of $3.43 as of December 30, 2022.
Limitations of Liability and Indemnification Matters
Our restated certificate of incorporation and our amended and restated bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by the Delaware General Corporation Law, which prohibits our restated certificate of incorporation from limiting the liability of our directors for the following:
•any breach of the director’s duty of loyalty to us or our stockholders;
•acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
•unlawful payment of dividends or unlawful stock repurchases or redemptions; or
•any transaction from which the director derived an improper personal benefit.
Our restated certificate of incorporation and our amended and restated bylaws also provide that if Delaware law is amended to authorize corporate action further eliminating or limiting the personal liability of a director, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law, as so amended. This limitation of liability does not apply to liabilities arising under the federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.
Our restated certificate of incorporation and our amended and restated bylaws also provide that we shall have the power to indemnify our employees and agents to the fullest extent permitted by law. Our amended and restated bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his 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 entered into separate indemnification agreements with our directors and executive officers, in addition to indemnification provided for in our restated certificate of incorporation and amended and restated bylaws. These agreements, among other things, provide for indemnification of our directors and executive officers for certain expenses, judgments, fines and settlement amounts, among others, incurred by such person in any action or proceeding arising out of such person’s services as a director or executive officer in any capacity with respect to any employee benefit plan or as a director, partner, trustee or agent of another entity at our request. We believe that these provisions in our restated certificate of incorporation and amended and restated bylaws and indemnification agreements are necessary to attract and retain qualified persons as directors and executive officers.
The above description of the indemnification provisions of our restated certificate of incorporation, our amended and restated bylaws and our indemnification agreements is not complete and is qualified in its entirety by reference to these documents.
The limitation of liability and indemnification provisions in our 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 Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore 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.
Pay Versus Performance
We are providing the following information about the relationship between executive compensation actually paid and certain financial performance of our company as required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year | Summary Compensation Table Total for first Principal Executive Officer (“PEO”) | Summary Compensation Table Total for second PEO | Summary Compensation Table Total for third PEO | Compensation Actually Paid to first PEO | Compensation Actually Paid to second PEO | Compensation Actually Paid to third PEO | Average Summary Compensation Table Total for Non-PEO Named Executive Officers (“NEOs”) | Average Compensation Actually Paid to Non-PEO NEOs | Value of Initial Fixed $100 Investment Based On Total Shareholder Return (“TSR”) | Net Loss (thousands) |
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) |
2022 | $ | — | | $381,852 | $ | 714,182 | | $— | $335,670 | $562,515 | $ | 425,341 | | $ | 318,452 | | $ | (69) | | $ | (13,584) | |
2021 | $ | 581,457 | | $463,022 | $ | 443,981 | | $425,865 | $324,752 | $284,906 | $ | 334,156 | | $ | 229,213 | | $ | (94) | | $ | (13,771) | |
(1)The dollar amounts reported in columns (b), (c) and (d) are the amounts of total compensation reported for Franz Obermayr, Ph.D., our former Acting Chief Executive Officer between February 1, 2021 and July 23, 2021 (shown as first PEO), Mr. From, our former Chief Executive Officer until January 31, 2021 and Executive Chairman from February 1, 2021 through January 31, 2022 (shown as second PEO), and Dr. Strem, our President and Chief Executive Officer from July 24, 2021 to present (shown as third PEO), for each corresponding year in the “Total” column of the Summary Compensation Table. Refer to “Executive Compensation—Summary Compensation Table”. For Dr. Obermayr's compensation with respect to the fiscal year ended December 31, 2021, refer to "Executive Compensation—Summary Compensation Table" from our definitive proxy statement on Schedule 14A filed with the Securities and Exchange Commission on August 15, 2022, which is incorporated herein by reference.
(2)The dollar amounts reported in columns (e), (f) and (g) represent the amount of “compensation actually paid” to Dr. Obermayr (shown as first PEO), Mr From (shown as second PEO) and Dr. Strem (shown as third PEO), as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to Dr. Obermayr, Mr. From or Dr. Strem during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Dr. Obermayr, Mr. From and Dr. Strem’s total compensation for each year to determine the compensation actually paid:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Year | | Reported Summary Compensation Table Total for first PEO ($) | | Exclusion of Equity Awards Reported in Summary Compensation Table (a) ($) | | Equity Award Adjustments (b) ($) | | Compensation Actually Paid to first PEO ($) |
2022 | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
2021 | | $ | 581,457 | | | $ | (172,500) | | | $ | 16,908 | | | $ | 425,865 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Year | | Reported Summary Compensation Table Total for second PEO ($) | | Exclusion of Equity Awards Reported in Summary Compensation Table (a) ($) | | Equity Award Adjustments (b) ($) | | Compensation Actually Paid to second PEO ($) |
2022 | | $ | 381,852 | | | $ | — | | | $ | (46,182) | | | $ | 335,670 | |
2021 | | $ | 463,022 | | | $ | (57,730) | | | $ | (80,540) | | | $ | 324,752 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Year | | Reported Summary Compensation Table Total for third PEO ($) | | Exclusion of Equity Awards Reported in Summary Compensation Table (a) ($) | | Equity Award Adjustments (b) ($) | | Compensation Actually Paid to third PEO ($) |
2022 | | $ | 714,182 | | | $ | (249,250) | | | $ | 97,583 | | | $ | 562,515 | |
2021 | | $ | 443,981 | | | $ | (274,750) | | | $ | 115,675 | | | $ | 284,906 | |
(a)The grant date fair value of equity awards represents the sum of the totals of the amounts reported in the “Stock Awards” and “Option Awards” columns in the Summary Compensation Table for the applicable year.
(b)The equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following: (i) the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year; (ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any awards granted in prior years that are outstanding and unvested as of the end of the applicable year; (iii) for awards that are granted and vest in same applicable year, the fair value as of the vesting date; (iv) for awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (v) for awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, a deduction for the amount equal to the fair value at the end of the prior fiscal year; and (vi) the dollar value of any dividends or other earnings paid on stock or option awards in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any other component of total compensation for the applicable year. The amounts deducted or added in calculating the equity award adjustments are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year | | Year End Fair Value of Outstanding and Unvested Equity Awards Granted in the Year for first PEO ($) | | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years for first PEO ($) | | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year for first PEO ($) | | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year for first PEO ($) | | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year for first PEO ($) | | Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation for first PEO ($) | | Total Equity Award Adjustments for first PEO ($) |
2022 | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
2021 | | $ | 16,908 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 16,908 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year | | Year End Fair Value of Outstanding and Unvested Equity Awards Granted in the Year for second PEO ($) | | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years for second PEO ($) | | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year for second PEO ($) | | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year for second PEO ($) | | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year for second PEO ($) | | Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation for second PEO ($) | | Total Equity Award Adjustments for second PEO ($) |
2022 | | $ | — | | | $ | (16,160) | | | $ | — | | | $ | (30,022) | | | $ | — | | | $ | — | | | $ | (46,182) | |
2021 | | $ | 9,711 | | | $ | (31,914) | | | $ | — | | | $ | (58,337) | | | $ | — | | | $ | — | | | $ | (80,540) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year | | Year End Fair Value of Outstanding and Unvested Equity Awards Granted in the Year for third PEO ($) | | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years for third PEO ($) | | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year for third PEO ($) | | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year for third PEO ($) | | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year for third PEO ($) | | Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation for third PEO ($) | | Total Equity Award Adjustments for third PEO ($) |
2022 | | $ | 94,383 | | | $ | 1,697 | | | $ | — | | | $ | 1,503 | | | $ | — | | | $ | — | | | $ | 97,583 | |
2021 | | $ | 115,675 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 115,675 | |
(3)The dollar amounts reported in column (h) represent the average of the amounts reported for our company’s named executive officers as a group (excluding the PEO's) in the “Total” column of the Summary Compensation Table in each applicable year.
(4)The dollar amounts reported in column (i) represent the average amount of “compensation actually paid” to the named executive officers as a group (excluding the PEO's), as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average amount of compensation earned by or paid to the named executive officers as a group (excluding the PEO's) during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation for the named executive officers as a group (excluding the PEO's) for each year to determine the compensation actually paid, using the same methodology described above in Note (2):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Year | | Average Reported Summary Compensation Table Total for Non-PEO NEOs ($) | | Exclusion of Average Reported Value of Equity Awards Reported in the Summary Compensation Table for Non-PEO NEOs ($) | | Average Equity Award Adjustments for Non-PEO NEOs (a) ($) | | Average Compensation Actually Paid to Non-PEO NEOs ($) |
2022 | | $425,341 | | $(128,331) | | $21,442 | | $318,452 |
2021 | | $334,156 | | $(130,215) | | $25,272 | | $229,213 |
(a)The amounts deducted or added in calculating the total average equity award adjustments are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year | | Average Year End Fair Value of Outstanding and Unvested Equity Awards Granted in the Year ($) | | Year over Year Average Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years ($) | | Average Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year ($) | | Year over Year Average Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year ($) | | Average Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year ($) | | Average Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation ($) | | Total Average Equity Award Adjustments ($) |
2022 | | $ | 32,665 | | | $ | (6,004) | | | $ | — | | | $ | (5,219) | | | $ | — | | | $ | — | | | $ | 21,442 | |
2021 | | $ | 45,572 | | | $ | (5,693) | | | $ | — | | | $ | (14,607) | | | $ | — | | | $ | — | | | $ | 25,272 | |
(5)Cumulative TSR reported in column (j) is calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between our company’s share price at the end and the beginning of the measurement period by our company’s share price at the beginning of the measurement period. No dividends were paid on stock or option awards in 2021 or 2022.
(6)The dollar amounts reported in column (k) represent the amount of net loss reflected in our consolidated audited financial statements for the applicable year.
Analysis of the Information Presented in the Pay versus Performance Table
We generally seek to incentivize long-term performance, and therefore do not specifically align our performance measures with “compensation actually paid” (as computed in accordance with Item 402(v) of Regulation S-K) for a particular year. In accordance with Item 402(v) of Regulation S-K, we are providing the following descriptions of the relationships between information presented in the Pay Versus Performance table.
Compensation Actually Paid and Net Income (Loss)
Our company has not historically looked to net income (loss) as a performance measure for our executive compensation program. Our net loss was approximately $(13.8)million in 2021 and approximately $(13.6)million in 2022.
Compensation Actually Paid and Cumulative TSR
As shown in the following graph, the compensation actually paid to the PEOs and the average amount of compensation actually paid to our non-PEO NEOs as a group (excluding the PEOs) during the periods presented do not have significant correlation given that a significant portion of their compensation is in the form of long-term equity awards. However, equity awards values are significantly impacted by changes in our stock price each period. These equity awards strongly align our executive officers’ interests with those of our stockholders by providing a continuing financial incentive to maximize long-term value for our stockholders and by encouraging our executive officers to continue in our employment for the long-term.
All information provided above under the “Pay Versus Performance” heading will not be deemed to be incorporated by reference in any filing of our company under the Securities Act of 1933, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing
Report of the Compensation Committee
Under rules of the Securities and Exchange Commission, as a Smaller Reporting Company, we are not required to provide a report of the Compensation Committee.
Director Compensation
We use a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on our board of directors. In setting director compensation, the board of directors and the compensation committee consider the significant amount of time that directors expend in fulfilling their duties to the Company as well as the skill-level required by the Company of
members of the board of directors. Brian M. Strem, Ph.D., our President and Chief Executive Officer, receives no compensation for his service as a director, and Stephen From, our former Executive Chairman, received no compensation for his service as a director.
Each independent member of our board of directors who is not our employee is entitled to receive the following cash compensation for board services, as applicable:
•$40,000 per year for service as a board member;
•$60,000 per year for service as non-executive chairman or lead independent director of the board of directors;
•$15,000 per year for service as chairman of the audit committee;
•$15,000 per year for service as chairman of the compensation committee;
•$7,500 per year for service as chairman of the nominating and corporate governance committee;
•$10,000 per year for service as non-chairman member of the audit committee;
•$7,500 per year for service as non-chairman member of the compensation committee; and
•$5,000 per year for service as non-chairman member of the nominating and corporate governance committee.
The amounts listed above will be reduced proportionally to the extent that a director attends, either telephonically or in person, fewer than 75% of the meetings of the board or committees on which such director serves, as applicable.
Each new independent non-employee member of our board of directors that is elected to our board of directors will receive a grant of non-statutory stock options under the 2014 Equity Incentive Plan. Such option will be granted following his or her initial election to the board of directors and will be a non- statutory stock option to purchase shares of Common Stock with an exercise price equal to the fair market value of our Common Stock on the grant date. These initial option grants will vest with respect to one-third (1/3) of the underlying shares on the first anniversary of the applicable grant date and ratably in monthly installments over the following 24 months. For purposes of our director grant program, an independent non- employee director is a director who is not employed by us and who does not receive compensation from us (excluding the non-employee director compensation described above) or have a business relationship with us that would require disclosure under certain Securities and Exchange Commission rules, and who has been determined to be independent under applicable Nasdaq rules by our board of directors.
In addition, each non-employee director is eligible to receive an annual non-statutory stock option to purchase 8,000 shares of our Common Stock with an exercise price equal to the fair market value of our Common Stock on the grant date. Automatic annual grants vest in full on the one-year anniversary of the grant date.
All options granted to the non-employee directors as described above will have a maximum term of ten years.
We also reimburse our non-employee directors for their reasonable out-of-pocket expenses incurred in attending board of directors and committee meetings.
Director Compensation Table
The following table presents the compensation provided by us to the non-employee directors who served during the fiscal year ended December 31, 2022.
| | | | | | | | | | | | | | | | | |
Name 11,12,13 | Fees earned or paid in cash | | Option awards | | Total |
Paul Chaney | $ | 75,000 | | | $ | 3,408 | | | $ | 78,408 | |
Kenneth Gayron | $ | 62,500 | | | $ | 3,408 | | | $ | 65,908 | |
David Hollander, MBA, MD | $ | 47,500 | | | $ | 6,150 | | | $ | 53,650 | |
Aron Shapiro | $ | 47,292 | | | $ | 3,408 | | | $ | 50,700 | |
Praveen Tyle, Ph.D | $ | 65,000 | | | $ | 3,408 | | | $ | 68,408 | |
Erin Parsons14 | $ | 52,500 | | | $ | 6,134 | | | $ | 58,634 | |
11Brian M. Strem, Ph.D., our President and Chief Executive Officer, is not included in this table as Dr. Strem is our employee, and thus received no compensation for his service as directors. The compensation received by Dr. Strem as an employee of the Company is shown in the Summary Compensation Table earlier in this proxy statement.
12Based on the aggregate grant date fair value computed awards in accordance with the provisions of FASB ASC 718, “Compensation — Stock Compensation” excluding the impact of estimated forfeitures. Assumptions used in the calculation of this amount are summarized in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
13The aggregate number of option awards outstanding at our 2022 fiscal year end and held by the non-employee directors as of that date were as follows: 475 for Mr. Chaney, 225 for Mr. Gayron, 225 for Dr. Hollander, 225 for Mr. Shapiro, 466 for Dr. Tyle and 225 for Ms. Parsons.
14Ms. Parsons was appointed to the board of directors effective January 31, 2022.
SECURITY OWNERSHIP OF
CONTENTSCERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information with respect to the beneficial ownership of our Common Stock as of July 1, 2023, by:
•each of our named executive officers;
•each of our directors;
•all of our directors and executive officers as a group; and
•each person or group of affiliated persons known by us to beneficially own more than 5% of our Common Stock.
Beneficial ownership is determined in accordance with the rules and regulations of the Securities and Exchgange Commission. In general, a person is deemed to be the beneficial owner of (i) any shares of our Common Stock over which such person has sole or shared voting power or investment power, plus (ii) any shares which such person has the right to acquire beneficial ownership of within 60 days of July 1, 2023, whether through the exercise of options, warrants or otherwise.
| | | | | | | | | | | | | | |
| | Common Stock Beneficially Owned |
Name of Beneficial Owner | | Shares | | Percent (2) |
5% or Greater Stockholders | | | | |
Lincoln Park Capital Fund, LLC(3) | | 454,044 | | | 6.25 | % |
440 North Wells, Suite 410, Chicago IL 60654 | | | | |
Lind Global Fund II LP(4) | | 728,654 | | | 9.99 | % |
444 Madison Ave, Floor 41, New York, NY 10022 | | | | |
| | | | |
Named Executive Officers, Directors and Nominees (1) | | | | |
Brian M. Strem, Ph.D.(5) | | 31,457 | | | * |
Eric Daniels, MD, MBA(6) | | 26,915 | | | * |
Melissa Tosca(7) | | 4,900 | | | * |
Paul Chaney(8) | | 627 | | | * |
Kenneth Gayron(9) | | 203 | | | * |
David Hollander, MD, MBA(10) | | 175 | | | * |
Erin Parsons(11) | | 175 | | | * |
Aron Shapiro(12) | | 197 | | | * |
Praveen Tyle, Ph.D.(13) | | 571 | | | * |
All current executive officers, directors and nominees as a group (total 9 persons)(14) | | 65,220 | | | |
* Represents beneficial ownership of less than one percent (1%) of our outstanding Common Stock.
(1)Unless otherwise indicated, the address of each beneficial owner listed below is c/o Kiora Pharmaceuticals, Inc., 332 Encinitas Boulevard, Suite 102, Encinitas, CA 92024.
(2)Based on 6,910,720 shares of Common Stock outstanding on July 1, 2023 together with the applicable options and warrants for each stockholder that are exercisable within 60 days.
(3)This information is based on a holdings confirmation provided by Lincoln Park Capital, LLC. Consists of (i) 104,698 shares of Common Stock, and (iii) warrants to purchase 349,346 shares of Common Stock, subject to a 9.99% beneficial ownership limitation on the exercise of warrants.
(4)This information is based in part upon a Schedule 13G filed jointly by Lind Global Fund II LP, Lind Global Partners II LLC, and Jeff Easton, with Securities and Exchange Commission on June 13, 2023. Consists of (i) 345,510 shares of Common Stock, (ii) warrants to purchase 1,818,180
shares of Common Stock, subject to a 9.99% beneficial ownership limitation, and (iii) shares of Series F Convertible Preferred Stock convertible into 563,580 shares of Common Stock, subject to a 9.99% beneficial ownership limitation. The number of shares reported as being beneficially owned reflects the application of such beneficial ownership limitations.
(5)Consists of 28,783 shares held and 2,674 shares issuable pursuant to stock options exercisable within 60 days of July 1, 2023.
(6)Consists of 25,838 shares held and 1,077 shares issuable pursuant to stock options exercisable within 60 days of July 1, 2023.
(7)Consists of 4,900 shares held.
(8)Consists of 152 shares held and 475 shares issuable pursuant to stock options exercisable within 60 days of July 1, 2023.
(9)Consists of 203 shares issuable pursuant to stock options exercisable within 60 days of July 1, 2023.
(10)Consists of 175 shares issuable pursuant to stock options exercisable within 60 days of July 1, 2023.
(11)Consists of 175 shares issuable pursuant to stock options exercisable within 60 days of July 1, 2023.
(12)Consists of 197 shares issuable pursuant to stock options exercisable within 60 days of July 1, 2023.
(13)Consists of 105 shares held and 466 shares issuable pursuant to stock options exercisable within 60 days of July 1, 2023.
(14)Consists of (i) 59,778 shares held and (ii) 5,442 shares issuable pursuant to stock options exercisable within 60 days of July 1, 2023.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of December 31, 2022 concerning the number of shares of Common Stock issuable under our existing equity compensation plans.
| | | | | | | | | | | | | | | | | | | | |
Plan Category | | Number of Securities to be Issued Upon Exercise of Outstanding Options, Restricted Stock Units, Warrants and Rights | | Weighted Average Exercise Price of Outstanding Options, Warrants, and Rights | | Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) |
| | (a) | | (b) | | (c) |
Equity compensation plans approved by security holders15 | | 298,848 | | | $ | 17.01 | | | 11,175 | |
Equity compensation plans not approved by security holders | | — | | — | | — |
Total | | 298,848 | | | $ | 17.01 | | | 11,175 | |
EXPENSES OF SOLICITATION
We will pay the entire expense of soliciting proxies for the Special Meeting. In addition to solicitations by mail, certain of our directors, officers and employees (who will receive no compensation for their services other than their regular compensation) may solicit proxies by telephone, telegram, personal interview, facsimile, e-mail or other means of electronic communication. In addition, banks, brokerage houses, custodians, nominees and other fiduciaries have been requested to forward proxy materials to the beneficial owners of shares of Common Stock held of record by them as of the Record Date, and such custodians will be reimbursed for their expenses.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2024 ANNUAL MEETING
Stockholder proposals intended to be presented at our 2024 annual meeting of stockholders must be received by us on or before December 30, 2023 or, if the date of such 2024 annual meeting of stockholders changes by more than 30 days from the date of this year’s Annual Meeting, a reasonable time before we begin to print and send proxy materials, in order to be considered for inclusion in our proxy statement and form of proxy for that meeting. These proposals must also comply with the rules of the Securities and Exchange Commission governing the form and content of proposals in order to be included in our proxy statement and form of proxy and should be mailed to: Secretary, Kiora Pharmaceuticals, Inc., 332 Encinitas Boulevard, Suite 102, Encinitas, CA 92024.
Our By-laws provide that any stockholder of record wishing to nominate an individual for director or have a stockholder proposal that is not included in our proxy statement considered at an annual meeting must provide written notice of such proposal and appropriate supporting documentation, as set forth in the By-laws, to our Secretary at our principal executive office not less than 45 days or not more than 75 days prior to the first anniversary of the date when we first mailed proxy materials for the preceding year’s annual meeting to stockholders. In the event, however, that the annual meeting is scheduled to be held more than 30 days before the first anniversary of the preceding year’s annual meeting or more than 30 days after such anniversary date, notice must be delivered not later than the later of (i) 10 days following the date of public announcement of the date of such meeting or (ii) 90 days prior to the date of such meeting. Proxies solicited by the board of directors will confer discretionary voting authority on the proxy holders with respect to these proposals, subject to rules of
15 Consists of our 2014 Plan and our 2005 Plan.
the Securities and Exchange Commission governing the exercise of this authority. In order for stockholders to give timely notice of nominations for directors for inclusion on a universal proxy card in connection with the 2024 annual meeting, notice must be submitted by the same deadline as discussed above under the advance notice provision of our By-laws and must include the information in the notice required by our By-laws and by Rule 14a-19(b)(2) under the Securities Exchange Act of 1934, as amended.
SUBMISSION OF SECURITYHOLDER RECOMMENDATIONS FOR DIRECTOR CANDIDATES
Our nominating and corporate governance committee identifies, evaluates and recommends director candidates to our board of directors for nomination. The process followed by the nominating and corporate governance committee to identify and evaluate director candidates includes requests to current directors and others for recommendations, meetings to evaluate potential candidates and interviews of selected candidates. The Company does not pay any fees to third parties to identify or evaluate potential nominees.
Our nominating and corporate governance committee will evaluate all such proposed director candidates, including those recommended by security holders in compliance with the procedures established by our nominating and corporate governance committee, in the same manner, with no regard to the source of the initial recommendation of such proposed director candidate. When considering a potential candidate for membership on the board of directors, our nominating and corporate governance committee may consider, in addition to the minimum qualifications and other criteria for board membership approved by the board of directors, all facts and circumstances that the nominating and corporate governance committee deems appropriate or advisable, including, among other things, the skills of the proposed director candidate, his or her availability, depth and breadth of business experience or other background characteristics, his or her independence and the needs of the board of directors. At a minimum, each nominee must have high personal and professional integrity, have demonstrated ability and judgment, and be effective, in conjunction with the other directors and nominees, in collectively serving the long-term interests of the stockholders. In addition, the nominating and corporate governance committee will recommend that the board select persons for nomination to help ensure that a majority of the board shall be “independent” in accordance with Nasdaq rules and each of its audit, compensation and nominating and corporate governance committees shall be comprised entirely of independent directors; provided, however, in accordance with Nasdaq rules, under exceptional and limited circumstances, if a committee has at least three members, the board may appoint one individual to such committee who does not satisfy the independence standards. The nominating and corporate governance committee may consider whether the nominee, if elected, assists in achieving a mix of board members that represents a diversity of background and experience. The nominating and corporate governance committee also may consider whether the nominee has direct experience in the biotechnology, pharmaceutical and/or life sciences industries or in the markets in which the Company operates.
All security holder recommendations for director candidates must be submitted in writing to our Secretary at Kiora Pharmaceuticals, Inc., 332 Encinitas Boulevard, Suite 102, Encinitas, CA 92024, who will forward all recommendations to the nominating and corporate governance committee. All security holder recommendations for director candidates must be submitted to us not less than 120 calendar days prior to the anniversary of the date on which our proxy statement was released to security holders in connection with the previous year’s annual meeting. All security holder recommendations for director candidates must include:
•the name and address of record of the security holder,
•a representation that the security holder is a record holder of our securities, or if the security holder is not a record holder, evidence of ownership in accordance with Rule 14a-8(b)(2) of the Securities Exchange Act of 1934,
•the name, age, business and residential address, educational background, public company directorships, current principal occupation or employment, and principal occupation or employment for the preceding five full fiscal years of the proposed director candidate,
•a description of the qualifications and background of the proposed director candidate which addresses the minimum qualifications and other criteria for board membership approved by the board of directors and set forth in the nominating and corporate governance committee charter,
•a description of all arrangements or understandings between the security holder and the proposed director candidate,
•the consent of the proposed director candidate to be named in the proxy statement, to have all required information regarding such director candidate included in the proxy statement, and to serve as a director if elected, and
•any other information regarding the proposed director candidate that is required to be included in a proxy statement filed pursuant to the rules of the SEC.
MULTIPLE STOCKHOLDERS SHARING THE SAME ADDRESS
Owners of Common Stock in street name who share an address may receive only one proxy statement. This practice, known as “householding,” is designed to reduce printing and postage costs. However, if any stockholder residing at such an address wishes to receive a separate notice of internet availability of proxy materials, annual report or proxy statement, we will promptly deliver a separate copy to any stockholder upon written or oral request to our investor relations department at Kiora Pharmaceuticals, Inc., 1371 East 2100 South,332 Encinitas Boulevard, Suite 200, Salt Lake City, UT 84105102, Encinitas, CA 92024 or by telephone at (781) 788-8869.(858) 224-9600. In addition, any stockholder who receives multiple copies at the same address can request delivery of a single copy by notifying our investor relations department pursuant to the contact information provided above.
OTHER MATTERS
The board of directors does not know of any matters, other than those described in this Proxy Statement that will be presented for action at the AnnualSpecial Meeting. If other matters are duly presented, proxies will be voted in accordance with the best judgment of the proxy holders.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUALSPECIAL MEETING, PLEASE CAST YOUR VOTE ONLINE, BY TELEPHONE OR BY COMPLETING, DATING, SIGNING AND PROMPTLY RETURNING YOUR PROXY CARD OR VOTING INSTRUCTIONS CARD IN THE POSTAGE-PAID ENVELOPE BEFORE THE ANNUALSPECIAL MEETING SO THAT YOUR SHARES ARE REPRESENTED AT THE ANNUALSPECIAL MEETING.
OUR ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 2021,2022, INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, HAS BEEN FILED WITH THE SEC SECURITIES AND EXCHANGE COMMISSIONAND PROVIDES ADDITIONAL INFORMATION ABOUT US. IT IS AVAILABLE ON THE INTERNET AT WWW.KIORAPHARMA.COMAND IT IS AVAILABLE TO BENEFICIAL AND RECORD HOLDERS OF OUR COMMON STOCK AT WWW.PROXYVOTE.COM. THE COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 20212022 AND ANY EXHIBITS THERETO TO ANY STOCKHOLDER, UPON WRITTEN REQUEST TO KIORA PHARMACEUTICALS, INC., 1371 EAST 2100 SOUTH,332 ENCINITAS BOULEVARD, SUITE 200, SALT LAKE CITY, UTAH 84105.102, ENCINITAS, CA 92024.
A LIST OF STOCKHOLDERS ENTITLED TO VOTE AT THE ANNUALSPECIAL MEETING WILL BE AVAILABLE FOR INSPECTION BY STOCKHOLDERS DURING REGULAR BUSINESS HOURS AT OUR OFFICES AND THE OFFICES OF OUR TRANSFER AGENT DURING THE TEN DAYS PRIOR TO THE ANNUALSPECIAL MEETING AS WELL AS AT THE ANNUALSPECIAL MEETING.