UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. )
(Amendment No.__)
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Filed by a Party other than the Registrant [ ]☐
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☐Preliminary Proxy Statement ☐Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) ☑Definitive Proxy Statement ☐Definitive Additional Materials ☐Soliciting Material Pursuant to § 240.14a-12
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Helius Medical Technologies, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other thanOther Than the Registrant)
Payment of Filing Fee (Check the appropriate box)
☑No fee required.
☐Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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HELIUS MEDICAL TECHNOLOGIES, INC.
642 Newtown Yardley Road, Suite 400, 41 University Drive
100
Newtown, Pennsylvania 18940
August 16, 2016NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On June 28, 2018
Dear Stockholder,Shareholder:
You are cordially invited to attend the Annual Meeting of StockholdersShareholders of Helius Medical Technologies, Inc., a Wyoming corporation (the “Company”). The meeting will be held on June 28, 2018 at 10:00 a.m. local time at the Company’s offices at 642 Newtown Yardley Road, Suite 100, Newtown, Pennsylvania 18940 for the following purposes:
1.To elect the Board’s seven nominees for director.
2. | To ratify the selection by the audit committee of the Board of Directors of BDO USA, LLP as the independent registered public accounting firm of the Company for its fiscal year ending December 31, 2018. |
3.To approve the reincorporation of the Company from the State of Wyoming to the State of Delaware.
4. | To ratify the prior stock option grant to Joyce LaViscount, the Company’s Chief Financial Officer and Chief Operating Officer, to purchase 800,000 shares of common stock, on a pre-reverse stock split basis. |
5.To approve the Company’s 2018 Equity Incentive Plan
6.To conduct any other business properly brought before the meeting.
These items of business are more fully described in the Proxy Statement accompanying this Notice.
The record date for the Annual Meeting is May 18, 2018. Only shareholders of record at the close of business on that date may vote at the meeting or any adjournment thereof.
Important Notice Regarding the Availability of Proxy Materials for the Shareholders’ Meeting to Be Held on June 28, 2018 at 10:00 a.m. local time at the Company’s offices at The proxy statement and annual report to shareholders |
By Order of the Board of Directors
Joyce LaViscount
Secretary
Newtown, Pennsylvania
May 25, 2018
HELIUS MEDICAL TECHNOLOGIES, INC.
642 Newtown Yardley Road, Suite 100
Newtown, Pennsylvania 18940
PROXY STATEMENT
FOR THE 2018 ANNUAL MEETING OF SHAREHOLDERS
June 28, 2018
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
Why am I receiving these materials?
We have sent you these proxy materials because the Board of Directors of Helius Medical Technologies, Inc. (the(sometimes referred to as the “Company” or “Helius”) is soliciting your proxy to be held on Thursday, September 15, 2016 at 10:00 A.M. Eastern Timevote at the Sheraton Bucks County Hotel; 400 Oxford Valley Road (Rider Room); Langhorne, PA 19047.
The agenda for the2018 Annual Meeting includes:
of Shareholders, including at any adjournments or postponements of the election of seven directorsmeeting. You are invited to hold office untilattend the next annual meeting of shareholders or until his or her successor shall have been elected and qualified (Proposal 1);
the ratification of BDO Canada LLP as independent auditors for our fiscal year ending March 31, 2017 (Proposal 2);
an advisory vote to approve the compensation paid to our named executive officers (commonly known as a “say-on-pay” proposal) (Proposal 3);
an advisory vote to approve the frequency with which future stockholder advisory votes on the compensation of our named executive officers will be held (commonly known as a “say-on-frequency” proposal) (Proposal 4); and
the approval of our 2016 Omnibus Incentive Plan, approved and adopted by our Board of Directors (the “Board”) on August 8, 2016 (the “2016 Incentive Plan”) (Proposal 5).
The Board recommends a vote FOR the election of the directors, FOR the ratification of the appointment of BDO Canada LLP as our independent auditors, FOR the approval, on an advisory basis, of compensation paid to our named executive officers, FOR the approval of an advisory vote on the compensation of our named executive officers every THREE yearsproposals described in this proxy statement. However, you do not need to attend the meeting to vote your shares. Instead, you may simply complete, sign and FORreturn the approval of the 2016 Omnibus Incentive Plan.
Your interest in the Company and your vote are very important to us. The enclosed proxy materials contain detailed information regardingcard, or follow the business that will be considered at the Annual Meeting. It is important that all stockholders participate in the affairs of the Company, regardless of the number of shares owned. Accordingly, we encourage youinstructions below to read the proxy materials and vote your shares as soon as possible. You may votesubmit your proxy viaover the Internet or telephone or if you received a paper copy ofthrough the proxy materials, by mail by completing and returning the proxy card.internet.
On behalf of the Company, I would like to express our appreciation for your ongoing interest in Helius Medical Technologies, Inc.
Very truly yours,
Philippe DeschampsPresident and Chief Executive Officer
HELIUS MEDICAL TECHNOLOGIES, INC.NOTICE OF ANNUAL MEETING OF STOCKHOLDERSTO BE HELD ON SEPTEMBER 15, 2016
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on September 15, 2016:We intend to begin mailingmail these proxy materials on or about August 16, 2016June 1, 2018 to all shareholders of record entitled to vote at the annual meeting.
How do I attend the Annual Meeting. This proxy statement, our 2016 Annual Report on Form 10-K and the proxy card are also available at www.heliusmedical.com.
TABLE OF CONTENTS
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Appendix A: 2016 Incentive Plan
Suite 400, 41 University DriveNewtown, Pennsylvania 18940
PROXY STATEMENTMeeting?
The Board of Directors (the “Board”) of Helius Medical Technologies, Inc., a Wyoming corporation (the “Company,” “we,” “us” or “our”), has prepared this document to solicit your proxy to vote upon certain mattersmeeting will be held on June 28, 2018 at 10:00 a.m. local time at the Company’s 2016 Annual Meeting of Stockholders (the “Annual Meeting”).
These proxy materials contain information regardingoffices at 642 Newtown Yardley Road, Suite 100, Newtown, Pennsylvania 18940. Information on how to vote in person at the Annual Meeting to be held on September 15, 2016 beginning at 10:00 A.M.] Eastern Timeis discussed below.
Who can vote at the Sheraton Bucks County Hotel; 400 Oxford Valley Road (Rider Room); Langhorne, PA 19047, and at any adjournment or postponement thereof.Annual Meeting?
QUESTIONS ABOUT THE ANNUAL MEETING AND THESE PROXY MATERIALS
It is anticipated that we will begin mailing this proxy statement, the proxy card and our 2016 Annual Report on Form 10-K (the “Annual Report”) on or about August 16, 2016. It is also anticipated that these proxy materials will first be made available online to our stockholders, on or about August 16, 2016.
What may I vote on?
You may vote on the following proposals:
the electionOnly shareholders of seven directors for one-year terms expiring at the 2017 Annual Meeting of Stockholders once their respective successors have been duly elected and qualified, or their earlier resignation or removal (Proposal 1);
the ratification of the appointment of BDO Canada LLP (“BDO”) as independent auditors for our fiscal year ending March 31, 2017 (Proposal 2);
the approval, by non-binding vote, of the compensation paid to our named executive officers, as disclosed in these proxy materials (commonly known as a “say-on-pay” proposal) (Proposal 3);
the approval, by non-binding vote, of the frequency with which future stockholder advisory votes on the compensation of our named executive officers will be held (commonly known as a “say-on- frequency” proposal) (Proposal 4); and
the approval of our 2016 Omnibus Incentive Plan (the “2016 Incentive Plan”) (Proposal 5).
THE BOARD RECOMMENDS A VOTEFORTHE ELECTION OF THE SEVEN DIRECTORS,FORTHE RATIFICATION OF THE APPOINTMENT OF BDO AS THE INDEPENDENT AUDITORS,FORTHE APPROVAL, ON AN ADVISORY BASIS, OF COMPENSATION PAID TO THE NAMED EXECUTIVE OFFICERS (“SAY-ON-PAY”),FORTHE APPROVAL OF AN ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS EVERYTHREEYEARS ANDFORTHE APPROVAL OF THE 2016 INCENTIVE PLAN.
Who may vote?
Each stockholder of our Class A Common Stock, without par value (“Common Stock”),record at the close of business on August 10, 2016, 2016 (the “Record Date”) isMay 18, 2018 will be entitled to vote their respective shares at the Annual Meeting. Each share of common stock is entitled to one vote on each matter that is properly brought before the Annual Meeting. ThereOn this record date, there were 84,324,68423,312,291 shares of our Class A common stock, which we refer to as our common stock, outstanding and entitled to vote.
Effective after the close of business on august 10, 2016.January 22, 2018, we completed a 1-for-5 reverse stock split of our common stock. Unless otherwise noted, all share amounts in this Proxy Statement are reflected on a post-reverse stock split basis.
How do I vote?Shareholder of Record: Shares Registered in Your Name
We encourage you to voteIf, on May 18, 2018, your shares via the Internet. How you vote will depend on how you hold your shares of common stock.
Stockholders of Record
If your common stock iswere registered directly in your name with ourthe Company’s transfer agent, you are considered a stockholder of record with respect to those shares, and a full paper set of these proxy materials is being sent directly to you. As a stockholder of record, you have the right to vote by proxy.
You may vote by proxy in any of the following three ways:
Internet.Go to www.investorvote.com to use the Internet to transmit your voting instructions and for electronic delivery of information. Have your proxy card in hand when you access the website.
Phone. Call 1-866-732-VOTE(8683) using any touch-tone telephone to transmit your voting instructions. Have your proxy card in hand when you call.
Mail.Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided, or return it to Computershare Trust Company of Canada, 8th Floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1.
Voting by anythen you are a shareholder of these methods will not affect your right to attend the Annual Meeting andrecord. As a shareholder of record, you may vote in person. However, for those who will not be voting in person at the Annual Meeting,meeting or vote by proxy. Whether or not you plan to attend the meeting, we urge you to vote by proxy over the telephone or on the internet as instructed below or to complete, sign, date and return a proxy card to ensure your final voting instructions must be received by no later than 5:00 p.m.vote is counted.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
Beneficial Owners
If you holdMay 18, 2018, your shares throughwere held, not in your name, but rather in an account at a stockbroker,brokerage firm, bank, dealer or other nominee, rather than directly in your own name,similar organization, then you are considered the beneficial owner of shares held in street name,“street name” and the Notice isthese proxy materials are being forwarded to you by that organization. The organization holding your broker, bank or nominee whoaccount is considered with respect to those shares,be the stockholdershareholder of record.record for purposes of voting at the Annual Meeting. As thea beneficial owner, you have the right to direct your broker bank or nominee onother agent regarding how to vote.vote the shares in your account. You are also invited to attend the
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Annual Meeting. However, since you are not the shareholder of record, you may not vote your shares in person at the meeting unless you request and obtain a valid proxy from your broker or other agent.
What am I voting on?
There are four matters scheduled for a vote:
Election of seven directors (Proposal 1);
Ratification of the selection by the audit committee of the Board of Directors of BDO USA, LLP as independent registered public accounting firm of the Company for its fiscal year ending December 31, 2018 (Proposal 2);
Approval of the reincorporation of the Company from the State of Wyoming to the State of Delaware (the “Reincorporation Proposal”) (Proposal 3);
Ratification of the prior stock option grant to Joyce LaViscount, the Company’s Chief Financial Officer and Chief Operating Officer, to purchase 800,000 shares of common stock on a pre-reverse stock split basis (the “Stock Grant Ratification Proposal”) (Proposal 4); and
Approval of the 2018 Equity Incentive Plan (Proposal 5).
What if another matter is properly brought before the meeting?
The Board of Directors knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on those matters in accordance with their best judgment.
How do I vote?
You may either vote “For” all the nominees to the Board of Directors or you may “Withhold” your vote for any nominee you specify. For each of the other matters to be voted on, you may vote “For” or “Against” or abstain from voting.
The procedures for voting are fairly simple:
Shareholder of Record: Shares Registered in Your Name
If you are a shareholder of record, you may vote in person at the Annual Meeting, vote by proxy using the enclosed proxy card or vote by proxy over the telephone, or vote by proxy through the internet. Whether or not you plan to attend the meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the meeting and vote in person even if you have already voted by proxy.
To vote in person, come to the Annual Meeting and we will give you a ballot when you arrive.
To vote using the proxy card, simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the Annual Meeting, we will vote your shares as you direct.
To vote over the telephone, dial toll-free 1-866-732-8683 using a touch-tone phone and follow the recorded instructions. You will be asked to provide the company number and control number from the enclosed proxy card. Your telephone vote must be received by 5.00 p.m. Eastern time on June 26, 2018 to be counted.
To vote through the internet, go to http://www.investorvote.com to complete an electronic proxy card. You will be asked to provide the company number and control number from the enclosed proxy card. Your internet vote must be received by 5.00 p.m. Eastern time on June 26, 2018 to be counted.
Beneficial Owner: Shares Registered in the Name of Broker or Bank
If you are a beneficial owner of shares registered in the name of your broker, bank, or nominee has enclosedother agent, you should have received a voting instruction form forwith these proxy materials from that organization rather than from Helius. Simply complete and mail the voting instruction form to ensure that your vote is counted. Alternatively, you to usemay vote by
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telephone or over the internet as instructed by your broker or bank. To vote in directingperson at the Annual Meeting, you must obtain a valid proxy from your broker, bank or nomineeother agent. Follow the instructions from your broker or bank included with these proxy materials, or contact your broker or bank to request a proxy form.
Internet proxy voting may be provided to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your internet access, such as usage charges from internet access providers and telephone companies. |
How many votes do I have?
On each matter to be voted upon, you have one vote for each share of common stock you own as of May 18, 2018.
If I am a shareholder of record and I do not vote, or if I return a proxy card or otherwise vote without giving specific voting instructions, what happens?
If you are a shareholder of record and do not vote by completing your proxy card, by telephone, through the internet or in person at the Annual Meeting, your shares will not be voted.
If you return a signed and dated proxy card or otherwise vote without marking voting selections, your shares will be voted, as applicable, “For” the election of all seven nominees for director, “For” the ratification of selection by the audit committee of the Board of Directors of BDO USA, LLP as independent registered public accounting firm of the Company for its fiscal year ending December 31, 2018, “For” the approval of the Reincorporation Proposal, “For” the Stock Grant Ratification Proposal and “For” the approval of the 2018 Equity Incentive Plan. If any other matter is properly presented at the meeting, your proxyholder (one of the individuals named on your proxy card) will vote your shares using his or her best judgment.
If I am a beneficial owner of shares held in street name and I do not provide my broker or bank with voting instructions, what happens?
If you are a beneficial owner of shares held in street name and you do not instruct your broker, bank or other agent how to vote your shares. If you holdshares, your broker, bank or other agent may still be able to vote your shares through a member brokerage firm, such member brokerage firm hasin its discretion. In this regard, under the rules of the New York Stock Exchange (“NYSE”), brokers, banks and other securities intermediaries that are subject to NYSE rules may use their discretion to vote shares it holds on your behalf“uninstructed” shares with respect to Proposal 2 (the ratification of BDO as independent auditors for our fiscal year ending March 31, 2017),matters considered to be “routine” under NYSE rules, but not with respect to “non-routine” matters. In this regard, Proposals 1, 3, 4 and 5 are considered to be “non-routine” under NYSE rules meaning that your broker may not vote your shares on those proposals in the absence of your voting instructions. However, Proposal 1 (the election2 is considered to be a “routine” matter under NYSE rules meaning that if you do not return voting instructions to your broker by its deadline, your shares may be voted by your broker in its discretion on Proposal 2.
If you a beneficial owner of seven directors), Proposal 3 (the say-on-pay proposal), Proposal 4 (the say-on-frequency proposal),shares held in street name, in order to ensure your shares are voted in the way you would prefer, you must provide voting instructions to your broker, bank or Proposal 5 (approvalother agent by the deadline provided in the materials you receive from your broker, bank or other agent.
Who is paying for this proxy solicitation?
We will pay for the entire cost of soliciting proxies. In addition to these proxy materials, our directors and employees may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the 2016 Incentive Plan) ascost of forwarding proxy materials to beneficial owners.
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What does it mean if I receive more fully described under “What is a broker ‘non-vote?’” below.than one set of proxy materials?
If you receive more than one set of proxy materials, your shares may be registered in more than one name or in different accounts. Please follow the voting instructions on the proxy cards in the proxy materials to ensure that all of your shares are voted.
Can I change my vote?vote after submitting my proxy?
Shareholder of Record: Shares Registered in Your Name
Yes. You can revoke your proxy at any time before the final vote at the meeting. If you are the stockholderrecord holder of record,your shares, you may revoke your proxy before it is exercised by doingin any one of the following:following ways:
sendingYou may submit another properly completed proxy card with a letter to us statinglater date.
You may grant a subsequent proxy by telephone or through the internet.
You may send a timely written notice that you are revoking your proxy is revoked;
signing a new proxy and sending it to us; or
2our Corporate Secretary at 642 Newtown Yardley Road, Suite 100, Newtown, Pennsylvania 18940.
attendingYou may attend the Annual Meeting and votingvote in person. Simply attending the meeting will not, by ballot.itself, revoke your proxy.
Your most current proxy card or telephone or internet proxy is the one that is counted.
Beneficial ownersOwner: Shares Registered in the Name of Broker or Bank
If your shares are held by your broker or bank as a nominee or agent, you should follow the instructions provided by your broker or bank.
When are shareholder proposals and director nominations due for next year’s Annual Meeting?
Shareholder proposals intended to be presented at our 2019 Annual Meeting of Shareholders pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), must be received by us no later than 5:00 p.m., Eastern time, on February 28, 2019. Such proposals also must comply with Rule 14a-8 regarding the inclusion of shareholder proposals in company-sponsored proxy materials. Proposals should be addressed to the attention of our Corporate Secretary at Helius Medical Technologies, Inc., 642 Newtown Yardley Road, Suite 100, Newtown, Pennsylvania 18940.
If the Reincorporation Proposal is approved at this Annual Meeting and we reincorporate in the State of Delaware, and if you wish to submit a proposal (including a director nomination) that is not to be included in next year’s proxy materials, your proposal generally must be submitted in writing to the same address no later than March 30, 2019 but no earlier than February 28, 2019. Please review our bylaws to be adopted if the Reincorporation Proposal is approved at the Annual Meeting, attached as Appendix B to this proxy statement, which contain additional requirements regarding advance notice of shareholder proposals and nominations.
If the Reincorporation Proposal is approved at this Annual Meeting, and if you wish to submit a proposal (including a director nomination) at the meeting that is not to be included in next year’s proxy materials, your shareholder proposal or nomination of director for election to our Board must be submitted in writing not less than 30 calendar days prior to the actual date of the 2019 Annual Meeting, or the date that is 10 calendar days after the day on which disclosure of the date of such Annual Meeting was first made to shareholders, whichever is earlier, to the attention of our President at the same address. All proposals and nominations must include the information required by Section 2.19 of our Amended and Restated Bylaws. In addition, you may include a shareholder-nominated director candidate in our proxy materials for the 2019 Annual Meeting of Shareholders. Such nominations must be received by us no later than 5:00 p.m., Eastern time, on January 29, 2019. Such nominations must also provide the information required by Section 2.18 of our Amended and Restated Bylaws. Nominations should be addressed to the Board of Directors at the same address.
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You may contact theirour Corporate Secretary at the address above to obtain a copy of the relevant bylaw provisions regarding the requirements for making shareholder nominations and proposals.
How are votes counted?
Votes will be counted by the inspector of election appointed for the meeting, who will separately count, for the proposal to elect directors, votes “For,” “Withhold” and broker banknon-votes, and, with respect to other proposals, votes “For” and “Against,” abstentions and, if applicable, broker non-votes. Abstentions and broker non-votes will be counted towards the vote total for each of Proposals 2, 3, 4 and 5 and will have the same effect as “Against” votes.
What are “broker non-votes”?
As discussed above, when a beneficial owner of shares held in “street name” does not give instructions to the broker or nominee for instructionsholding the shares as to how to vote on changing their votes.matters deemed by the NYSE to be “non-routine,” the broker or nominee cannot vote the shares. These unvoted shares are counted as “broker non-votes.”
How many votes are needed to approve each proposal?
For the election of directors, the seven nominees receiving the most “For” votes from the holders of shares present in person or represented by proxy and entitled to vote on the election of directors will be elected. Only votes “For” will affect the outcome.
We have adopted a majority voting standard for the election of directors in uncontested elections. Any nominee for director in an uncontested election who receives a greater number of votes “Withheld” from his or her election than votes “For” such election shall promptly tender his or her resignation to the Board of Directors following certification of the shareholder vote. The Board of Directors will determine whether to accept or reject the director’s resignation, and will publicly disclose its decision within 90 days from the date of the certification of the election results.
To be approved, Proposal 2, the ratification of the selection of BDO USA, LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018, must receive “For” votes from the holders of a majority of shares present in person or represented by proxy and entitled to vote on the matter. If you “Abstain” from voting, it will have the same effect as an “Against” vote. Broker non-votes will have the same effect as a vote “Against” Proposal 2.
To be approved, Proposal 3, the Reincorporation Proposal, must receive “For” votes from the holders of a majority of the shares at which a quorum, consisting of a majority of the votes entitled to be cast, is present. If you mark your proxy to “Abstain” from voting, it will have the same effect as an “Against” vote. Broker non-votes will have the same effect as a vote “Against” Proposal 3.
To be approved, Proposal 4, the Stock Grant Ratification Proposal, must receive “For” votes from the holders of a majority of shares present in person or represented by proxy and entitled to holdvote on the Annual Meeting?matter. If you “Abstain” from voting, it will have the same effect as an “Against” vote. Broker non-votes will have the same effect as a vote “Against” Proposal 4.
To be approved, Proposal 5, the approval of the 2018 Equity Incentive Plan, must receive “For” votes from the holders of a majority of shares held by disinterested persons present in person or represented by proxy and entitled to vote on the matter. Uninstructed proxies will not be voted and will have the same effect as an “Against” vote. Broker non-votes will have the same effect as a vote “Against” Proposal 5. Also, shares held by interested persons (our directors and executive officers who are eligible to receive shares under the 2018 Equity Incentive Plan) will not be eligible to vote on the proposal.
What is the quorum requirement?
A “quorum”quorum of shareholders is necessary to hold a valid meeting. Except with respect to the Annual Meeting. A quorum isrequired in connection with Proposal 3, which shall require a quorum of greater than 50% of the total outstanding shares of the
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Company entitled to vote, a quorum will be present if shareholders holding at least 33 1/33% of the total outstanding shares of the Company entitled to vote as a separate voting group. They mayOn the record date, there were 23,312,291 shares outstanding and entitled to vote. Thus, the holders of 11,656,146 shares must be present in person or represented by proxy at the meeting to have a quorum for purposes of Proposal 3, and the holders of 7,769,987 shares must be present in person or represented by proxy at the meeting to have a quorum for purposes of the remaining proposals.
Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, the holders of a majority of shares present at the Annual Meetingmeeting in person or represented by proxy. Abstentionsproxy may adjourn the meeting to another date.
How can I find out the results of the voting at the Annual Meeting?
Preliminary voting results will be announced at the Annual Meeting. In addition, final voting results will be published in a current report on Form 8-K that we expect to file within four business days after the Annual Meeting. If final voting results are not available to us in time to file a Form 8-K within four business days after the meeting, we intend to file a Form 8-K to publish preliminary results and, broker “non-votes”within four business days after the final results are counted asknown to us, file an additional Form 8-K to publish the final results.
What proxy materials are available on the internet?
The proxy statement, and Form 10-K are available at www.investorvote.com.
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Election of Directors
Our Board of Directors consists of seven directors, each of whom is a nominee for reelection at this Annual Meeting. Each director to be elected and qualified will hold office until the next annual meeting of shareholders and until his successor is elected, or, if sooner, until the director’s death, resignation or removal. Each of the nominees listed below is currently a director of the Company who was previously elected by the shareholders. It is the Company’s policy to invite its nominees for directors to attend the Annual Meeting. One of the directors attended the 2017 Annual Meeting of Shareholders.
Directors are elected by a plurality of the votes of the holders of shares present in person or represented by proxy and entitled to vote for purposes of determining a quorum.
How many votes are needed to approve the proposals?
Proposal 1,on the election of directors. Accordingly, the seven directors:nominees receiving the highest number of affirmative votes will be elected.
For purposes of the vote on Proposal 1, you may vote “For” or withhold authority to vote for each of the nominees to the Board. We have adopted a majority voting standard for the election of directors in uncontested elections, which is generally defined aselections. Any nominee for director in an uncontested election in which the number of nominees does not exceed the number of directors to be elected at the meeting. Because the election of our directors at the Annual Meeting is uncontested, each director shall be elected by the vote ofwho receives a majority of the votes cast. A “majority of the votes cast” means that the number of shares voted “For” a director nominee must exceed thegreater number of votes “withheld” for that director nominee. For these purposes, abstentions and broker non-votes will not count as a vote“Withheld” from his or her election than votes “For” or “withheld” for a nominee’ssuch election and will have no effect in determining whether a director nominee has received a majority of the votes cast. If an incumbent director is not elected by a majority of the votes cast, the incumbent director mustshall promptly tender his or her resignation to the Board.Board of Directors following certification of the shareholder vote. The Board will determine whether to accept or reject the director’s resignation, and will publicly disclose its decision within 90 days from the date of the certification of the election results.
Proposal 2 (the ratification of BDO)
You may vote “For” or “Against,” or abstain from voting on Proposal 2 to ratify BDO as the Company’s independent registered public accounting firm for our fiscal year ending March 31, 2017. Proposal 2 will be approved if it receives the affirmative vote of shares representing a majority of the votes present in person or represented by proxy at the meeting and entitled to vote on the matter. Abstentions will have the same effect as a vote “Against.” We do not expect that there will be any broker non-votes, as this is a routine matter.
Proposal 3 (the say-on-pay proposal)
You may vote “For” or “Against,” or abstain from voting on Proposal 3 (to approve, on a non-binding, advisory basis, the compensation of our named executive officers). Proposal 3 will be approved if it receives the affirmative vote of shares representing a majority of the votes present in person or represented by proxy at the meeting and entitled to vote on the matter. Abstentions and broker non-votes will have the same effect as a vote “Against” Proposal 3.
Proposal 4 (the say-on-frequency proposal)
With respect to Proposal 4, the advisory, non-binding proposal on the frequency of holding future advisory votes on the compensation of our named executive officers, you may vote for “One Year,” “Two Years” or “Three Years” or mark your proxy “Abstain.” Proposal 4 will be approved if it receives the affirmative vote of shares representing a majority of the votes present in person or represented by proxy at the meeting and entitled to vote on the matter. Broker non-votes will have the same effect as a vote to “Abstain” for Proposal 4.
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Proposal 5 (the approval of the 2016 Incentive Plan)
You may vote “For” or “Against,” on Proposal 5 (to approve the 2016 Incentive Plan). Proposal 5 will be approved if it receives the affirmative vote of shares of Common Stock representing a majority of the votes present in person or represented by proxy at the meeting and entitled to vote on the matter. Broker non-votes will have the same effect as a vote “Against” Proposal 5.
Where can I find the voting results of the Annual Meeting?
The Company will announce preliminary voting results at the Annual Meeting and publish final results in a Current Report on Form 8-K filed with the SEC within four business days of the completion of the meeting.
What is an abstention?
An abstention is a properly signed proxy card that is marked “abstain.”
What is a broker “non-vote?”
A broker “non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power for that particular item and has not received timely instructions from the beneficial owner. Under current applicable rules, Proposal 2 (the ratification of BDO as independent auditor) is a “discretionary” item upon which member brokerage firms that hold shares as nominee may vote on behalf of the beneficial owners if such beneficial owners have not furnished voting instructions by the tenth day before the Annual Meeting.
However, member brokerage firms that hold shares as a nominee may not vote on behalf of the beneficial owners on the following proposals unless you provide voting instructions: Proposal 1 (the election of seven directors), Proposal 3 (the say-on-pay proposal), Proposal 4 (the say-on-frequency proposal), and Proposal 5 (the approval of the 2016 Incentive Plan). Therefore, if a member brokerage firm holds your common stock as a nominee, please instruct your broker how to vote your common stock on each of these proposals. This will ensure that your shares are counted with respect to each of these proposals.
Will any other matters be acted on at the Annual Meeting?
If any other matters are properly presented at the Annual Meeting or any adjournment or postponement thereof, the persons named in the proxy will have discretion to vote on those matters. We are not aware of any other matters to be presented at the Annual Meeting.
Who pays for this proxy solicitation?
We will pay the expenses of soliciting proxies. In addition to solicitation by mail, proxies may be solicited in person or by telephone or other means by our directors or associates. We will reimburse brokerage firms and other nominees, custodians and fiduciaries for costs incurred by them in mailing these proxy materials to the beneficial owners of common stock held of record by such persons.
Whom should I contact with other questions?
If you have additional questions about these proxy materials or the Annual Meeting, please contact: Helius Medical Technologies, Inc. 41 University Drive, Suite 400, Newtown, Pennsylvania 18940, Attention: Joyce LaViscount.
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ELECTION OF SEVEN DIRECTORS (PROPOSAL 1)
Election of Directors
Our Board is comprised of seven directors, and there are seven nominees for director this year. Each director to be elected and qualified will hold office until the next annual meeting of stockholders and until his or her successor is elected, or, if sooner, until the director’s death, resignation or removal. Each of the nominees listed below is currently a director of the Company. It is the Company’s policy to invite nominees for directors to attend the annual meeting.
Directors are elected by a majority of the votes cast by the holders of voting shares at a meeting of stockholders at which a quorum is present. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the seven nominees named below. If any nominee becomes unavailable for election as a result of an unexpected occurrence, shares that would have been voted for that nominee will instead be voted for the election of a substitute nominee proposed by the Company. Each person nominated for election has agreed to serve if elected. The Company’s management has no reason to believe that any nominee will be unable to serve.
Majority Voting Standard
The Company has adopted a majority voting standard for the election of directors in uncontested elections, which is generally defined as an election in which the number of nominees does not exceed the number of directors to be elected at the meeting. Because this is an uncontested election, each director shall be elected by the vote of a majority of the votes cast at a meeting of stockholders at which a quorum is present. A “majority of the votes cast” means that the number of shares voted “For” a director nominee must exceed the number of votes “withheld” for that director nominee. For these purposes, abstentions and broker non-votes will not count as a vote “For” or “withheld” for a nominee’s election and will have no effect in determining whether a director nominee has received a majority of the votes cast. If an incumbent director is not elected by a majority of the votes cast, the incumbent director must promptly tender his or her resignation to the Board. The Board will publicly disclose its decision within 90 days from the date of the certification of the election results.
Nominees
The following is a brief biography of each nominee for director his age on August 16, 2016, and a discussion of the specific experience, qualifications, attributes or skills of each nominee that led the Board to recommend that person as a nominee for director, as of the date of this proxy statement.
The Company seeks to assemble a board that, as a whole, possesses the appropriate balance of professional and industry knowledge, financial expertise and high-level management experience necessary to oversee and direct the Company’s business. To that end, the Board recommendshas identified and evaluated nominees in the broader context of the Board’s overall composition, with the goal of recruiting members who complement and strengthen the skills of other members and who also exhibit integrity, collegiality, sound business judgment and other qualities that the Committee views as critical to effective functioning of the Board. The brief biographies below include information, as of the date of this proxy statement, regarding the specific and particular experience, qualifications, attributes or skills of each director or nominee that led the Board to believe that that nominee should continue to serve on the Board. However, each of the members of the Board may have a vote “FOR” eachvariety of reasons why he believes a particular person would be an appropriate nominee listed below.for the Board, and these views may differ from the views of other members.
Name | Age | Principal Occupation/ |
Philippe Deschamps | 55 | Chief Executive Officer and Chairman of the Board |
Dane C. Andreeff | 52 | General Partner, Maple Leaf Partners, LP |
Thomas E. Griffin | 54 | Chief Financial Officer, Avedro, Inc. |
Huaizheng Peng | 55 | General Manager, China Medical System Holdings |
Edward M. Straw | 79 | Managing Director, Osprey Venture Partners |
Mitchell E. Tyler | 65 | Clinical Director, Advanced NeuroRehabilitation, LLC |
Blane Walter | 47 | Partner, Talisman Capital Partners |
Philippe Deschamps54,
Mr. Deschamps has served as our Chief Executive Officer, President and a Director
Mr. Deschamps has served as our CEO, President and a Director since June 13, 2014. Mr. Deschamps has extensive experience in pharmaceutical and healthcare commercialization. The depth of his expertise stems from his 30 years in the health sciences industry, approximately half spent at Bristol Myers Squibb (NYSE: BMY), and approximately half on the service side as CEO of GSW Worldwide, a healthcare commercialization company. From 1986 to 1998,Previously, Mr. Deschamps served as directorthe president of neuroscience marketing at Bristol Myers Squibb in Princeton, N.J., where he participated on several pre-launch global marketing teams in the neuroscience and pain therapeutic areas.NeuroHabilitation Corporation, our wholly-owned subsidiary, from October 2013 to June 2014. From February 2012 to October 2013, Mr. Deschamps started at GSW Worldwide in February 1998served as a Vice President and Account Director and became President and CEOchief executive officer of GSW Worldwide in January 2002, serving in that role until September 2011. Mr. Deschamps was responsible for the GSW Worldwide operations which includes offices in 15 major markets around the world. He primarily consulted on global marketing, commercialization and new business model development for pharmaceutical, device and diagnostics companies. In February 2012, Mr. Deschamps joined MediMedia Health, a marketing services company, as CEO where, among other things, he served until October 2013. At MediMedia Health, he was responsible for the evaluating the different businesses of the company and developingdeveloped recommendations for the sale of the companyMediMedia Health to theits private equity companysponsor. Prior to that owned it. In October 2013, he became President of NHC.time, Mr. Deschamps hasserved in various roles
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at GSW Worldwide, most recently as president and chief executive officer, and Bristol Myers Squibb, including as director of neuroscience marketing. Mr. Deschamps received a BSc. in chemistry from the University of Ottawa in Canada which he obtained in 1985. Our Board of Directors believes Mr. Deschamps is qualified to serve as a director based upon his role as our principal executive officer and his 30 years of experience in the health sciences industry.
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Savio Chiu,34, DirectorDane C. Andreeff
Mr. ChiuAndreeff has served as onea member of our Board of Directors since June 13, 2014. From June 2009 to present,August 2017. Mr. ChiuAndreeff is the general partner and portfolio manager at Maple Leaf Partners, LP, a position he has beenheld since 1996. Mr. Andreeff also serves as a member of the Senior Manager, Corporate Financeboard of V Baron Global Financial Canadadirectors of TraceSecurity, LLC, HDL Therapeutics, Inc. and Myocardial Solutions, Ltd. (“V Baron”), which provides us with corporate advisory services pursuant toMr. Andreeff received his Bachelor’s degree in Economics from the termsUniversity of Texas at Arlington in 1989 and his Master’s degree in Economics from the University of Texas at Arlington in 1991. Our Board believes that Mr. Andreeff’s extensive experience in the investment industry and capital markets will make him a management agreement. Since April 2011, valuable member of the Board.
Thomas E. Griffin
Mr. ChiuGriffin has served as the Chief Financial Officer and Corporate Secretarya member of Confederation Minerals Ltd. (TSXV: CFM). From December 2010 toour Board of Directors since August 2014,2016. Mr. Chiu served as a director of Finore Mining Inc. (CSE: FIN). From October 2010 to August 2013, Mr. Chiu servedGriffin currently serves as the Chief Financial Officer of Pan American Fertilizer Corp. (formerly Golden Fame Resources Corp.) (TSXV: PFE).Avedro, Inc., a position he has held since April 2017. From July 2010May 2016 to June 2011, heJanuary 2017, Mr. Griffin served as the Chief Financial Officervice president of Cassius Ventures Ltd. (TSXV: CZ).
Mr. Chiu is a Chartered Accountant and holds a Bachelor of Commerce degree in Accounting from the University of British Columbia which he obtained in 2005. Mr. Chiu’s accounting and financial expertise brings a valuable oversight role to the board.
Mitchell Tyler,63, Director
Mr. Tyler has served as one of our Directors since June 13, 2014. Mr. Tyler is a co-inventor of the PoNS™ device and co-owner of ANR and Clinical Director of ANR (2009 to present). Mr. Tyler is also the Clinical Director of the Tactile Communication and NeuroRehabilitation Laboratory, University of Wisconsin - Madison (1998 to present), and a Senior Lecturer in Biomedical Engineering. From 1998 through 2005, Mr. Tyler was the Vice President and Principal Investigator for Wicab Inc. He received his M.S. in Bioengineering from University of California, Berkeley in 1985 and is currently working on his Ph.D. in Biomedical Engineering at the UW-Madison. Mr. Tyler’s extensive knowledge of our principal product and history in the medical device industry brings invaluable experience to the board.
Edward M. Straw,77, Director
Vice Admiral Edward Straw has served as one of our Directors since November 18, 2014. He founded Osprey Venture Partners, a firm that mentors young entrepreneurs seeking investment capital and assists with business development, in 2011 and serves as the Managing Director. Previously he was President, Global Operations of The Estée Lauder Companies from 2000 to 2005, SVP, Global Operations of the Compaq Computer Corporation from 1998 to 2000, and former President of Ryder Integrated Logistics from 1996 to 1998. Prior to joining the private sector, he had a distinguished 35 year career in the U.S. Navy and retired as a three-star admiral. During his military service, Vice Admiral Straw was Chief Executive Officer of the Defense Logistics Agency, the largest military logistics command supporting the American armed forces. Vice Admiral Straw holds an MBA from The George Washington University, a Bachelor of Science degree from Annapolis, and is a graduate of the National War College. He has been a member of the Defense Science Board, Chairman of Odyssey Logistics and currently sits on the boards of: The Boston Consulting Federal Group, Performance Equity Management, and Capital Teas. He was a board member of: Eddie Bauer, MeadWestvaco, Ply Gem Industries and Panther Logistics. Vice Admiral Straw is an “audit committee financial expert” as that term is defined in Item 407(d)(5)(ii) of Regulation S-K. Vice Admiral Straw brings extensive leadership experience to our board.
Blane Walter,46, Director
Mr. Walter has served as one of our Directors since December 29, 2015. Mr. Walter has been a Partner at Talisman Capital Partners, a private investment partnership located in Columbus, Ohio, since 2011. He founded inChord Communications, Inc. in 1994, which he built into the largest independently-owned, healthcare communications company in the world. In 2005, inChord was acquired by Ventiv Health, the largest provider of outsourced sales and clinical services serving the pharmaceutical industry to create inVentiv Health. In 2008, Mr. Walter became CEO of the combined public company, a role in which he served until 2011.Mr. Walter currently serves as vice chairman of inVentiv Group Holdings, Inc., inVentiv Health’s parent company. Mr. Walter’s background in the healthcare and pharmaceutical industries lends important perspective to our board.
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Huaizheng Peng,54, Director
Dr. Peng has served as one of our Directors since December 29, 2015. Since 2013 Dr. Peng has served as the General Manager, and non-executive Director of China Medical System Holdings (“CMS”) where he is in charge of international operations, prior to becoming General Manager, Dr. Peng served on the CMS board of directors for a period of three years. Prior to joining CMS, Dr. Peng was a partner in a private equity firm, Northland Bancorp, from 2010 to 2012, head of global life sciences and a director of corporate finance at Seymour Pierce from 2007 to 2010, and served as a non-executive Director of China Medstar, an AIM listed medical service company from 2006 to 2008. Dr. Peng also worked as a senior portfolio manager, specializing in global life science and Asian technology investment at Reabourne Technology Investment Management Limited from 1999 to 2006. Dr. Peng was nominated to our board of directors by A&B pursuant to the terms of the A&B Credit Facility.
Dr. Peng received his Bachelor’s and Masters’ degree in medicine from Hunan Medical College, China. Dr. Peng was awarded his PhD in molecular pathology from University College London (UCL) Medical School where he subsequently worked as a clinical lecturer. We believe that Dr. Peng’s leadership experience in international contexts, knowledge of medicine and investment experience will help our board in its oversight role.
Thomas E. Griffin,53, Director
Tom is currently Vice President of Finance for Entellus Medical, Inc. (NASDAQ:ENTL), a medical technology company focused on delivering superior patient and physician experiences through products designed for the minimally invasive treatment of chronic and recurrent sinusitis in both adult and pediatric patients. Prior to his current role, TomPreviously, Mr. Griffin served as Chief Financial Officerchief financial officer at Entellus Medical from December 2007 to May 2016, and as acting chief financial officer, as a consultant, from July 2006 to December 2007. Tom has been a key contributor to Entellus from its first round of financing in August 2006 through its successful Initial Public Offering (“IPO”) in January 2015. Tom has also served as Chief Financial Officer and Secretary of Digital Gene Technologies, Inc., a privately held biotechnology company. He was also Controller for Centerpulse Spine-Tech, Inc. (now Zimmer Spine, Inc.) and CIMA Labs Inc. (now owned by Teva Pharmaceutical Industries Ltd.). Tom was the senior financial officer at CIMA during its Initial Public Offering in July 1994.
2016. Mr. Griffin received his Bachelor’s degreea BBA in Accounting (with a minor in Economics) from University of Minnesota (Duluth). Mr. Griffin received his Master’s degree in Business Administration1985 and an MBA from the University of St. Thomas. We believeThomas in 1995. Mr. Griffin is a Certified Public Accountant (inactive). Our Board of Directors believes Mr. Griffin is qualified to serve as a director based on his financial expertise in technology-based growth companies.
Huaizheng Peng, Ph. D.
Dr. Peng has served as a member of our Board of Directors since December 2015. Dr. Peng is the general manager of China Medical System Holdings, a position he has held since October 2013. Previously, Dr. Peng was a partner at Northland Bancorp, a private equity firm, from January 2010 to November 2012, and head of global life sciences and director of corporate finance of Seymour Pierce, from February 2006 to January 2010. Dr. Peng currently serves as a director of Faron Pharmaceuticals, Navamedica ASA and Destiny Pharma plc. Dr. Peng received a Bachelor’s degree and a Master’s degree in medicine from Hunan Medical College, China, and a Ph.D. in molecular pathology from University College London Medical School. Our Board of Directors believes that Dr. Griffin’s exceptional financialPeng is qualified to serve as a director based on his international medical and investment experience.
Edward M. Straw
Vice Admiral (Retired) Straw has served as a member of our Board of Directors since November 2014. He founded Osprey Venture Partners in 2011, a firm that mentors young entrepreneurs seeking investment capital and assists with business development, and serves as the managing director. Previously he was president, global operations of The Estée Lauder Companies from 2000 to 2005, senior vice president global operations of the Compaq Computer Corporation from 1998 to 2000, and president of Ryder Integrated Logistics from 1996 to 1998. Prior to joining the private sector, he had a distinguished 35-year career in the U.S. Navy and retired as a three-star admiral. During his military service, Vice Admiral (Retired) Straw was chief executive officer of the Defense Logistics Agency, the largest military logistics command supporting the American armed forces. He a member of the Defense Science Board, chairman of Odyssey Logistics and currently sits on the boards of The Boston Consulting Federal Group, Academy Securities and Lenitiv Scientific. He is a former board member of Eddie Bauer, MeadWestvaco, Ply Gem Industries and Panther Logistics. Vice Admiral (Retired) Straw received a B.S. from the United States Naval Academy, an MBA from The George Washington University, and is a graduate of the National War College. Our Board of Directors believes that Vice Admiral (Retired) Straw is qualified to serve as a director based on his extensive leadership experience wherein both the private sector and the U.S. military.
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Mr. Tyler has served as a member of our Board of Directors since June 2014. Mr. Tyler is a co-inventor of the PoNS device and is co-owner and clinical director of Advanced NeuroRehabilitation, LLC, a position he managed technology-based growth companies will bring financial expertisehas held since 2009. Mr. Tyler is a senior lecturer in biomedical engineering at the University of Wisconsin-Madison. From 1998 through 2017 Mr. Tyler also served as the clinical director of the Tactile Communication and NeuroRehabilitation Laboratory. He received his M.S. in Bioengineering from University of California, Berkeley in 1985 and is currently working on his Ph.D. in Biomedical Engineering at the University of Wisconsin – Madison. Mr. Tyler is a registered professional engineer in Wisconsin. Our Board of Directors believes that Mr. Tyler is qualified to serve as a director based on his extensive knowledge of PoNS treatment and his research and development experience in the medical device industry.
Blane Walter
Mr. Walter has served as a member of our board.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTEFORTHE ELECTION OF EACH OF THE SEVEN NOMINEES AS DIRECTORS.
OTHER BOARD INFORMATION
Board Meetings duringof Directors since December 2015. Mr. Walter is a partner at Talisman Capital Partners, a position he has held since 2011. Previously, Mr. Walter served as vice chairman of inVentiv Group from 2011 to August 2017. Mr. Walter received a B.S. in marketing and finance from Boston College in 1993. Our Board of Directors believes that Mr. Walter is qualified to serve as director based on his background in the fiscal year ended March 31, 2016healthcare and pharmaceutical industries.
The Board held five meetings during our fiscal year ended March 31, 2016.of Directors Recommends
A Vote in Favor of Each Named Nominee.
Director Attendance
During our fiscal year ended March 31, 2016, each
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INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Independence of The Board of Directors
The Board reviews its composition annually, including the determination of the independence of our directors attended at least 75% of the total number of meetings of the Board and committees on which he served that were held during the period he served as a director or committee member, as applicable.
We encourage, but do not require, our directors to attend our Annual Meetings of Stockholders. We did not hold a shareholder meeting during our fiscal year ended March 31, 2016.
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Director Independence
directors. Our Board has determinedconsults with the Company’s counsel to ensure that threethe Board’s determinations are consistent with relevant securities and other laws and regulations regarding the definition of our directors, Blane Walter, Edward Straw and Thomas Griffin, qualify as independent directors under the“independent,” including those set forth in pertinent listing standards of the Toronto Stock Exchange (the “TSX”) and The Nasdaq Stock Market (“Nasdaq”), as in effect from time to time.
Consistent with these considerations, after review of all relevant identified transactions or relationships between each director, or any of his or her family members, and the listing requirementsCompany, its senior management and its independent auditors, the Board has affirmatively determined that the following directors are independent directors within the meaning of the New York Stock Exchange’s NYSE MKT.applicable TSX and Nasdaq listing standards: Messrs. Griffin, Andreeff and Walter, Vice Admiral (Retired) Straw and Dr. Peng. In making this determination, the Board found that none of these directors or nominees for director had a material or other disqualifying relationship with the Company.
TermIn making those independence determinations, the Board took into account certain relationships and transactions that occurred in the ordinary course of Office
Ourbusiness between the Company and entities with which some of its directors are appointed to hold office untilor have been affiliated. The Board considered all relationships and transactions that occurred during any 12-month period within the next annual general meetinglast three fiscal years and determined that they were not relationships that would interfere with their exercise of our stockholdersindependent judgment in carrying out their responsibilities as directors.
The Board considered that the aggregate dollar amount of the transactions during any 12-month period within the last three fiscal years did not exceed the greater of $1 million or until they resign or2% of the other company’s consolidated gross revenues and, therefore, was not regarded as compromising the director’s independence. Based on this review, the Board affirmatively determined that all of the directors nominated for election at the Annual Meeting, other than Messrs. Deschamps and Tyler, are removed fromindependent under the boardstandards set forth in accordance with our bylaws.applicable TSX and Nasdaq rules.
Committees of theBoard Leadership Structure
The Company’s Board of Directors
Our Board has is currently chaired by the authority to appoint committees to perform certain managementPresident and administration functions. Our Board currently has an audit committee. The charter for the audit committee is available on our website.
Our audit committee is comprised of Thomas Griffin, Edward Straw and Blane Walter each of whom are independent directors under the rulesChief Executive Officer of the NYSE MKT and the SEC. The purpose of the audit committee is to assist our Board of Directors with oversight of: (i) the quality and integrity of our financial statements and its related internal controls over financial reporting, (ii) our compliance with legal and regulatory compliance, (iii) the independent registered public accounting firm’s qualifications and independence, and (iv) the performance of our independent registered public accounting firm. The audit committee’s primary function is to provide advice with respect to our financial matters and to assist our Board of Directors in fulfilling its oversight responsibilities regarding finance, accounting, and legal compliance. Thomas Griffin is an “audit committee financial expert” as that term is defined in Item 407(d)(5)(ii) of Regulation S-K.
Compensation Committee
We currently do not have a compensation committee and our Board performs the principal functions of a compensation committee. We have elected not to have a compensation committee because we do not believe one has been necessary or cost efficient for a company of our size. Until a formal compensation committee is established, our Board will continue to review all forms of compensation provided to our executive officers, directors, consultants and employees.
Family Relationships
There are no family relationships among our directors and officers.
Leadership StructureCompany, Mr. Deschamps.
The Board does not have a formal policy with respect to the separation of the offices of Chief Executive Officer and Chairpersonchairman of the Board. It is the Board’s view that rather than having a formal policy, the Board, upon consideration of all relevant factors and circumstances, will determine, as and when appropriate, whether it is in the best interests of the Company and its stockholdersshareholders for such offices to be separate or combined. Currently, Philippe Deschamps serves as both our CEO and Chairman of the Board. Our Board believes that our compensation system, our division of risk oversight responsibilities, and our Board leadership structure comprise and support the most effective risk management approach.
The Company currently believes that combining the positions of Chief Executive Officer and chairman helps to ensure that the Board and management act with a common purpose. In the Company’s view, separating the positions of Chief Executive Officer and chairman has the potential to give rise to divided leadership, which could interfere with good decision-making or weaken the Company’s ability to develop and implement strategy. Instead, the Company believes that combining the positions of Chief Executive Officer and chairman provides a single, clear chain of command to execute the Company’s strategic initiatives and business plans. In addition, the Company believes that a combined Chief Executive Officer/chairman is better positioned to act as a bridge between management and the Board, facilitating the regular flow of information. The Company also believes that it is advantageous to have a chairman with an extensive history with and knowledge of the Company (as is the case with Mr. Deschamps) as compared to a relatively less informed independent chairman.
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Role of the Board in Risk Oversight
The Board plays an active role in overseeing management of our risks. The Board regularly reviews information regarding our credit, liquidity and operations, as well as the risks associated with each. The Audit Committee of the Board is responsible for overseeing the management of financial risks. The BoardCompensation Committee also is responsible for overseeing the management of risks relating to our executive compensation policies and arrangements, and for managing risks relating to our director compensation policies and arrangements, and reviewing the independence of the Board and other corporate governance matters.
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Stockholder and Interested Party CommunicationsMeetings of the Board of Directors
The Board welcomesof Directors met 10 times during the last fiscal year. Each Board member attended 75% or more of the aggregate number of meetings of the Board and of the committees on which he served, held during the portion of the last fiscal year for which he was a director or committee member.
Information Regarding Committees of the Board of Directors
The Board has three committees: an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. The following table provides membership and meeting information for fiscal 2017 for each of the Board committees:
Name | Audit Committee | Compensation Committee(1) | Nominating and Corporate Governance Committee(1) |
Dane C. Andreeff | X* | X | |
Thomas E. Griffin | X* | X | X |
Huaizheng Peng | X | ||
Edward M. Straw | X | ||
Blane Walter | X | X* | |
Total meetings in fiscal 2017 | 4 | n/a | n/a |
(1) | The Compensation Committee and Nominating and Corporate Governance Committee were each established in March 2018. |
Below is a description of each committee of the Board of Directors. Each of the committees has authority to engage legal counsel or other experts or consultants, as it deems appropriate to carry out its responsibilities.
Audit Committee
The Audit Committee of the Board of Directors was established by the Board in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to oversee the Company’s corporate accounting and financial reporting processes and audits of its financial statements. For this purpose, the Audit Committee performs several functions. The Audit Committee evaluates the performance of and assesses the qualifications of the independent auditors; determines and approves the engagement of the independent auditors; determines whether to retain or terminate the existing independent auditors or to appoint and engage new independent auditors; reviews and approves the retention of the independent auditors to perform any proposed permissible non-audit services; monitors the rotation of partners of the independent auditors on the Company’s audit engagement team as required by law; reviews and approves or rejects transactions between the Company and any related persons; confers with management and the independent auditors regarding the effectiveness of internal control over financial reporting; establishes procedures, as required under applicable law, for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal controls or auditing matters and the confidential and anonymous
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submission by employees of concerns regarding questionable accounting or auditing matters; and meets to review the Company’s annual audited financial statements and quarterly financial statements with management and the independent auditor, including a review of the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The Audit Committee is composed of three directors: Messrs. Griffin and Walter and Vice Admiral (Retired) Straw, with Mr. Griffin serving as chair. The Audit Committee met four times during the last fiscal year. The Board has adopted a written Audit Committee charter that is available to shareholders on the Company’s website at www.heliusmedical.com.
The Board of Directors reviews the Nasdaq and TSX listing standards definition of independence for Audit Committee members on an annual basis and has determined that all members of the Company’s Audit Committee are independent.
The Board of Directors has also determined that Mr. Griffin qualifies as an “audit committee financial expert,” as defined in applicable SEC rules. The Board made a qualitative assessment of Mr. Griffin’s level of knowledge and experience based on a number of factors, including his formal education and experience as a chief financial officer for public reporting companies.
Report of the Audit Committee of the Board of Directors
The Audit Committee has reviewed and discussed the audited financial statements for fiscal year ended December 31, 2017 with management of the Company. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board (“PCAOB”). The Audit Committee has also received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent accountants’ communications from our stockholderswith the Audit Committee concerning independence, and other interested parties. Stockholders and other interested parties may send communicationshas discussed with the independent registered public accounting firm the accounting firm’s independence. Based on the foregoing, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.
Thomas E. Griffin
Edward M. Straw
Blane Walter
The material in this report is not “soliciting material,” is not deemed “filed” with the Commission and is not to be incorporated by reference in any particular directorfiling of the Company under the Securities Act of 1933, as amended or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
Compensation Committee
The Compensation Committee was established in March 2018. The Compensation Committee is composed of three directors: Messrs. Andreeff and Griffin and Dr. Peng, with Mr. Andreeff serving as chair. All members of the Company’s Compensation Committee are independent (as independence is currently defined in Rule 5605(d)(2) of Nasdaq listing standards and TSX independence rules). The Board has adopted a written Compensation Committee charter that is available to shareholders on the Company’s website at www.heliusmedical.com.
The Compensation Committee of the Board of Directors acts on behalf of the Board to review, recommend for adoption and oversee the Company’s compensation strategy, policies, plans and programs, including the:
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• | administration ofthe Company’s equity compensation plans, pension and profit-sharing plans,deferred compensation plans and other similar plans and programs. |
Prior to the establishment of a formal compensation committee in March 2018, the non-employee directors of the Board performed the duties of a compensation committee.
Compensation Determination: Processes and Procedures
The Compensation Committee will meet at least annually and with greater frequency if necessary and appropriate. The agenda for each meeting will be developed by the Chair of the Compensation Committee, in consultation with legal counsel or other advisers or consultants it deems necessary and appropriate. The Compensation Committee will meet regularly in executive session. However, from time to time, various members of management and other employees as well as outside advisors or consultants may be invited by the Compensation Committee to make presentations, to provide financial or other background information or advice or to otherwise participate in Compensation Committee meetings. The Chief Executive Officer may not participate in, or be present during, any deliberations or determinations of the Compensation Committee regarding his compensation or individual performance objectives. The charter of the Compensation Committee grants the Compensation Committee full access to all books, records, facilities and personnel of the Company. In addition, under the charter, the Compensation Committee has the authority to obtain, at the expense of the Company, advice and assistance from compensation consultants and internal and external legal, accounting or other advisors and other external resources that the Compensation Committee considers necessary or appropriate in the performance of its duties. The Compensation Committee has direct responsibility for the oversight of the work of any consultants or advisers engaged for the purpose of advising the Committee. In particular, the Compensation Committee has the sole authority to retain, in its sole discretion, compensation consultants to assist in its evaluation of executive and director compensation, including the authority to approve the consultant’s reasonable fees and other retention terms. Under the charter, the Compensation Committee may select, or receive advice from, a compensation consultant, legal counsel or other adviser to the Compensation Committee, other than in-house legal counsel and certain other types of advisers, only after taking into consideration six factors, prescribed by the SEC and Nasdaq, that bear upon the adviser’s independence; however, there is no requirement that any adviser be independent.
Prior to the establishment of a formal compensation committee in March 2018, the non-employee directors of the Board met at least four times per year, and regularly in executive session, to discuss compensation. The non-employee directors invited management and other employees, outside advisors and/or consultants to join its meetings as appropriate to provide advice and background information. The Chief Executive Officer did not participate in, and was not present during, any deliberations or determinations of the non-employee directors regarding his compensation or individual performance objectives.
During the past fiscal year, the Company engaged Sigma Integrated Resources (“Sigma”) as its compensation and human resources consultant. As part of its engagement, Sigma was invited to the meetings of the non-employee directors and requested to develop a comparative group of companies and to perform analyses of competitive performance and compensation levels for that group. Sigma ultimately developed recommendations that were presented to the non-employee directors for its consideration. Following an active dialogue with Sigma, the non-employee directors approved the recommendations.
Historically, the non-employee directors have made most of the significant adjustments to annual compensation, determined bonus and equity awards and established new performance objectives at one or more meetings held during the first quarter of the year. Generally, the process comprises two related elements: the determination of compensation levels and the establishment of performance objectives for the current year. For executives other than the Chief Executive Officer, the non-employee directors solicit and consider evaluations and recommendations submitted to the Committee by the Chief Executive Officer. In the case of the Chief Executive Officer, the evaluation of his performance is conducted by the non-employee directors, who determines any adjustments to his compensation as
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well as awards to be granted. The Chief Executive Officer may not be present during these discussions. For all executives and directors as part of its deliberations, the non-employee directors may review and consider, as appropriate, materials such as financial reports and projections, operational data, tax and accounting information, tally sheets that set forth the total compensation that may become payable to executives in various hypothetical scenarios, executive and director stock ownership information, company stock performance data, analyses of historical executive compensation levels and current Company-wide compensation levels and recommendations of the Company’s compensation consultant, including analyses of executive and director compensation paid at other companies identified by the consultant. The Compensation Committee now performs these duties and expects to follow similar practices to those of the non-employee directors.
Compensation Committee Interlocks and Insider Participation
None of the current members of our Compensation Committee has ever been an executive officer or employee of ours. None of our executive officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a group,member of our Board of Directors or Compensation Committee.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee was established in March 2018. The Nominating and Corporate Governance Committee of the Board of Directors is responsible for identifying, reviewing and evaluating candidates to serve as directors of the Company (consistent with criteria approved by the Board), reviewing and evaluating incumbent directors, selecting or recommending to the following address: Helius Medical Technologies, Inc., Suite 400, 41 University Drive Newtown, Pennsylvania 18940, Attention: Joyce LaViscount. Stockholders or interested parties should indicate clearly the director or directors to whom the communication is being sent so that each communication may be forwarded directlyBoard for selection candidates for election to the appropriate director(s).
NominationBoard of Directors, making recommendations to the Board regarding the membership of the committees of the Board, assessing the performance of management and the Board, and developing a set of corporate governance principles for the Company.
WeThe Nominating and Corporate Governance Committee is composed of three directors: Messrs. Andreeff, Griffin and Walter, with Mr. Walter serving as chair. All members of the Nominating and Corporate Governance Committee are independent (as independence is currently do not havedefined in Rule 5605(a)(2) of the Nasdaq listing standards and in the TSX Company Manual). The Board has adopted a written Nominating and Corporate Governance Committee charter that is available to shareholders on the Company’s website at www.heliusmedical.com.
Prior to the establishment of a formal nominating and corporate governance committee and ourin March 2018, the Board performs the principal functions of a nominating and corporate governance committee. We have elected not to have a nominating committee because we doperformed such duties as it did not believe one has beena formal committee was necessary or cost efficient for a company of our sizesize. The Board reviewed and we do not expectevaluated candidates to establish a nominating committee inserve as directors of the foreseeable future.Company (consistent with criteria approved by the Board), reviewed and evaluated incumbent directors, selected candidates for election to the Board of Directors, determined the membership of the committees of the Board and assessed the performance of management and the Board. The Nominating and Corporate Governance Committee now performs these duties and expects to follow similar practices to those of the Board.
Generally, director nominees are identified and suggested by our directors or management using their business networks. The Board willNominating and Corporate Governance Committee also intends to consider director nominees put forward by stockholders.shareholders. Our bylawsAmended and Restated Bylaws contain provisions that address the process by which a stockholdershareholder may nominate an individual to stand for election to the Board at the Annual Meeting. Stockholdersannual meeting. Shareholders may recommend individuals to our Board for consideration as potential director candidates by submitting the names of the recommended individuals, together with appropriate biographical information and background materials, to the Board at Helius Medical Technologies, Inc., 642 Newtown Yardley Road, Suite 400, 41 University Drive100, Newtown, Pennsylvania 18940, Attention:. Such Chairman of the Board. Such nomination must satisfy the notice, information and consent requirements set forth in our bylawsAmended and Restated Bylaws and must be received by us prior to the date set forth under “Stockholder Proposals And Nomination of Director Candidates”“When are shareholder proposals and director nominations due for next year’s annual meeting?” included herein.
The Board does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, based on whether or not the candidate was recommended by a shareholder.
The Nominating and Corporate Governance Committee does not have any specific minimum qualifications that director nominees must have in order to be considered to serve on the Board. However, the BoardNominating and Corporate
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Governance Committee does take into consideration areas of expertise that director nominees may be able to offer, including professional experience, knowledge, abilities and industry knowledge or expertise. The BoardNominating and Corporate Governance Committee also considers their potential contribution to the overall composition and diversity of the Board.
The Board conductsNominating and Corporate Governance Committee will conduct the appropriate and necessary inquiries (as determined by the Board)Committee) with respect to the backgrounds and qualifications of any potential nominees, without regard to whether a potential nominee has been recommended by our stockholders,shareholders, and, upon consideration of all relevant factors and circumstances, recommends to the Board for its approvalapproves the slate of director nominees to be nominated for election at our annual meeting of stockholders.shareholders. The BoardNominating and Corporate Governance Committee considers potential nominees without regard to race, color, creed, religion, national origin, age, gender, sexual orientation or disability. The BoardNominating and Corporate Governance Committee has not adopted a formal policy with respect to diversity. In general, the Company seeks a Board that includes a diversity of perspectives and includes individuals that possess backgrounds, skills, expertise and attributes that allow them to function collaboratively and effectively together in their oversight of the Company.
Voting Standard for Election OfShareholder Communications With the Board of Directors
The rulesBoard welcomes communications from our shareholders and other interested parties. Shareholders and other interested parties may send communications to the Board, to any particular director or the independent directors as a group, to the following address: Helius Medical Technologies, Inc., 642 Newtown Yardley Road, Suite 100, Newtown, Pennsylvania 18940, Attention: Joyce LaViscount. Shareholders or interested parties should indicate clearly the director or directors to whom the communication is being sent so that each communication may be forwarded directly to the appropriate director(s).
Code of the Toronto Stock Exchange, which became effective December 31, 2012, require a listed issuer to disclose in the materials sent to its stockholders for a meeting at which directors are to be elected, whether or not itEthics
The Company has adopted a majority voting policyCode of Business Conduct and if not,Ethics that applies to explain why it has not adopted such a policy in its meeting materials. A majority voting policy generally requires that a director tender his or her resignation if the director receives more “against” votes than “for” votes at any meeting where stockholders voteall officers, directors and employees. The Code of Business Conduct and Ethics is available on the uncontested election of directors. On August 8, 2016,Company’s website at www.heliusmedical.com. If the Board voted to implement a majority voting standard and director resignation policy for uncontested election of directors, which is described under “Majority Voting Standard” at the beginning of Proposal 1, above.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as described below and in “Executive Compensation”, there are no transactions since our inception, orCompany makes any currently proposed transactions, in which we were or are to be a participant and in which any “related person” had or will have a direct or indirect material interest. “Related person” includes:
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Related Party Transactions
Agreement and Plan of Merger with NHC
On June 6, 2014, we entered into an Agreement and Plan of Merger among us, HMT Mergersub, Inc., our wholly-owned subsidiary, and NHC. Pursuantsubstantive amendments to the AgreementCode of Business Conduct and Plan of Merger we issued 35,300,083 shares of our common stock to the shareholders of NHC. TwoEthics or grants any waiver from a provision of the shareholders of NHC that received 16,035,026 shares each were MPJ Healthcare, LLC and ANR. Messrs. Philippe Deschamps, our President, CEO andCode to any executive officer or director, and Jonathan Sackier, our Chief Medical Officer, are shareholders of MPJ Healthcare, LLC, and Messrs. Yuri Danilov and Mitch Tyler, two of our directors, are shareholders of ANR.
Sublicense Agreement with Advanced Rehabilitation, LLC
Pursuant to the Sublicense Agreement, ANR has granted NHC a worldwide, exclusive license to make, have made, use, lease and sell devices utilizing the Patent Pending Rights. In addition, ANR has agreed that ownership of any improvements, enhancements or derivative works of the Patent Pending Rights which are developed by NHC or ANR shall be owned by NHC, provided that if NHC decides not to patent such improvements, ANR may choose to pursue patent rights independently. Pursuant to the Sublicense Agreement, NHC has agreed to pay ANR royalties equal to 4% of NHC’s revenues collection from the sale of devices covered by the Patent Pending Rights and services related to the therapy or use of devices covered by the Patent Pending Rights in therapy services. Mitchell Tyler, one of our directors, and Yuri Danilov, one of our former directors, are each shareholders of ANR.
Consulting Agreement with Yuri Danilov
On July 1, 2014, Mr. Danilov, one of our former directors, entered into a consulting agreement, or the Danilov Consulting Agreement, with NHC to provide consulting services in relation to the development of the PoNS™ technology. The Danilov Consulting Agreement is valid for an initial period of 12 months, after which it continues on a month-to-month basis. Mr. Danilov will charge an hourly fee of $150 per hour or $1,000 per day if 8 or more hours are worked. Pursuant to the Danilov Consulting Agreement, Mr. Danilov will be an independent contractor and subject to the confidentiality provisions contained in the Danilov Consulting Agreement. The Company incurred charges from Mr. Danilov totaling $8,250 for the year ended March 31, 2015 in respect of this agreement. Mr. Danilov resigned as a director on December 29, 2015.
Consulting Agreement with Mitchell Tyler
On December 10, 2014, Mr. Tyler entered into a consulting agreement, or the Tyler Consulting Agreement, with NHC to provide consulting services in relation to the development of the PoNS™ technology. The Tyler Consulting Agreement is valid for an initial period of 12 months, after which it continues on a month-to-month basis. Mr. Tyler will charge an hourly fee of $150 per hour or $1,000 per day if 8 or more hours are worked. Pursuant to the Tyler
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Consulting Agreement, Mr. Tyler will be an independent contractor and subject to the confidentiality provisions contained in the Tyler Consulting Agreement. The Company incurred charges from Mr. Tyler totaling $19,950 for the year ended March 31, 2015 in respect of this agreement.
Consulting and Employment Agreements with Brian Bapty
On July 14, 2014, Dr. Bapty entered into a consulting agreement, or the Bapty Consulting Agreement, with NHC to provide consulting services in relation to the development of the PoNS™ technology. The Bapty Consulting Agreement was valid for an initial period of 12 months, after which it continued on a month-to-month basis. Dr. Bapty charged a monthly fee of $6,000. Under the terms of the Bapty Consulting Agreement, Dr. Bapty also received a onetime issuance of three-year options to purchase 100,000 common shares at a strike price of CAD$2.52 per share with the options vesting 25% on issuance, 25% on September 30, 2014, 25% on December 31, 2014 and 25% on March 31, 2015. The Bapty Consulting Agreement included certain customary confidentiality provisions contained in the Bapty Consulting Agreement. The Company incurred charges from Dr. Babty totaling CAD$36,000 ($US31,162) for the year ended March 31, 2015 in respect of this agreement. On November 2, 2015, we entered into an employment agreement with Dr. Bapty to serve as the Vice President of Strategy and Business Development of the Company. Pursuant to the employment agreement, Dr. Bapty will receive a base salary at an annualized rate of CAD$220,000 for his employment term, which is at-will. In addition to Dr. Bapty’s base salary, he shall have the opportunity to receive a target annual bonus of 25% of the base salary, conditional upon, and subject to upward or downward adjustment based upon achievements and individual goals to be established in good faith by the Company’s CEO and Dr. Bapty, which goals have not yet been established. If Dr. Bapty is terminated without cause or if Dr. Bapty resigns for good reason, the Company will pay Dr. Bapty an aggregate amount equal topromptly disclose the sum of his base salary and there will be accelerated vestingnature of the options described in the immediately preceding paragraph.amendment or waiver on its website.
Strategic Agreement with A&B and A&B Credit Facility
On October 13, 2015, the Company announced that it, through its wholly owned subsidiary NHC, entered into the Strategic Agreement with A&B for the development and commercialization of the PoNS™ therapy in the Territories. A&B is an investment and development company owned by Dr. Kong Lam and based in Hong Kong. The Strategic Agreement transfers ownership of certain Asian patents, patent applications, and product support material for the PoNS™ device from NHC to A&B and grants to A&B, among other things, an exclusive, perpetual, irrevocable and royalty-free license, with the right to sublicense, to certain NHC technology, as more particularly described in the Strategic Agreement, to market, promote, distribute and sell PoNS™ devices solely within the Territories. Pursuant to the Strategic Agreement, A&B has assumed all development, patent (both application and defense), future manufacturing, clinical trial, and regulatory clearance costs for the Territories. The Company and A&B will share and transfer ownership of any intellectual property or support material (developed by either party) for their respective geographies. In connection with the Strategic Agreement, A&B agreed to provide a credit facility to the Company.
On November 10, 2015, the Company announced that it had issued the Note to A&B in connection with the drawdown of US$2.0 million under the A&B Credit Facility. The Company elected to immediately satisfy the terms of the Note by issuing to A&B: (i) 2,083,333 common shares at a deemed price of US$0.96 per common share; and (ii) 1,041,667 common share purchase warrants, with each warrant entitling A&B to purchase an additional common share at a price of US$1.44 for a period of three years expiring on November 10, 2018.15
On December 29, 2015, the Company drew down the remaining US$5.0 million from the A&B Credit Facility in exchange for the issuance to A&B of 5,555,556 common shares at a price of US$0.90 per common share and warrants to purchase 2,777,778 commons shares for a period of three years having an exercise price of US$1.35 per common share. Additionally, pursuant to the terms of the funding commitment from A&B, the Company granted A&B the right to nominate one person to serve on the Board. A&B nominated Dr. Peng and the Board appointed Dr. Peng on December 29, 2015. The common shares and warrants issued to A&B, and the common shares underlying such warrants, are subject to a four-month statutory hold period.Proposal 2
Pursuant to the terms of the A&B Credit Facility, we have agreed to register the shares of common stock issued under the terms of the Credit Facility upon the request of A&B. A&B currently has beneficial ownership over 11,458,334 shares of our common stock.
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Consulting Agreement with Montel Media, Inc.
On April 13, 2016, Montel Media, Inc. (“Montel Media”) entered into a consulting agreement, or the Montel Media Consulting Agreement, with the Company to provide consulting services in relation to the promotion of clinical trials as well as ongoing media/marketing strategy. Montel Media is owned by Montel Williams. Mr. Williams is one of three board members of MPJ. The Montel Media Consulting Agreement is valid for a period of 12 months and Montel Media will charge a monthly fee of $15,000. The total projected dollar value of the contract is $180,000. Pursuant to the Montel Media Consulting Agreement, Montel Media will be an independent contractor and subject to the confidentiality provisions contained in the Montel Media Consulting Agreement.
Review, Approval and Ratification of Related Party Transactions
Our Board has responsibility for establishing and maintaining guidelines relating to any related party transactions between us and anySelection of our officers or directors. Any conflict of interest between a related party and us must be referred to the non-interested directors, if any, for approval. We intend to adopt written guidelines for the Board which will set forth the requirements for review and approval of any related party transactions.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS (PROPOSAL 2)
In accordance with the Audit Committee’s charter, the Audit Committee is responsible for the appointment and retention of our independent auditors. In our fiscal years ended March 31, 2016 and March 31, 2015, all audit and non-audit services were pre-approved by the Audit Committee and the majority of the independent directors.Independent Registered Public Accounting Firm
The Audit Committee of the Board of Directors has appointedselected BDO to serveUSA, LLP as ourthe Company’s independent auditorsregistered public accounting firm for ourthe fiscal year ended Marchending December 31, 2017, subject to2018 and has further directed that management submit the selection of its independent registered public accounting firm for ratification by our stockholders.2the shareholders at the Annual Meeting. BDO USA, LLP has audited the Company’s financial statements since January 4, 2017. Representatives of BDO USA, LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Neither the Company’s Amended and Restated Bylaws nor other governing documents or law require shareholder ratification of the selection of BDO USA, LLP as the Company’s independent registered public accounting firm. However, the Audit Committee of the Board is submitting the selection of BDO USA, LLP to the shareholders for ratification as a matter of good corporate practice. If the proposalshareholders fail to ratify BDO’s appointment is not approved, other certified public accountants will be considered bythe selection, the Audit Committee.Committee of the Board will reconsider whether or not to retain that firm. Even if the proposalselection is approved,ratified, the Audit Committee of the Board in its discretion may direct the appointment of newdifferent independent auditors at any time during the year if it believesthey determine that such a change would be in the best interestinterests of the Company and its stockholders.shareholders.
The affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the Annual Meeting will be required to ratify the selection of BDO USA, LLP.
Change in Independent AuditorRegistered Public Accounting Firm
On February 19, 2015,January 4, 2017, the Audit Committee of the Board of Directors approved the dismissalappointment of Davidson & CompanyBDO USA, LLP or Davidson, as ourthe Company’s independent registered public accounting firm effective February 19, 2015.
Davidson’s report on our annualto audit the Company’s financial statements for the fiscal year ending December 31, 2016, in place of BDO Canada LLP.
The report of BDO Canada LLP on the consolidated financial statements of the Company for the two years ended March 31, 20142016, dated June 27, 2016 and included in our Annual Report on Form 10-K filed with the periodSEC on June 28, 2016, states that the Company’s recurring losses from January 22, 2013operations and its accumulated deficit raise substantial doubt about the Company’s ability to March 31, 2013 did not contain ancontinue as a going concern. Other than the foregoing, BDO Canada LLP’s report on the financial statements for the past two years contained no adverse opinion or a disclaimer of opinion norand was itnot qualified or modified as to uncertainty, audit scope or accounting principles.
During the fiscal yearyears ended March 31, 20142016 and for2015 and through the period fromdate of BDO Canada LLP’s dismissal on January 22, 2013 (date of inception) to March 31, 2013 as well as the subsequent interim period through February 19, 2015,4, 2017, there have beenwere no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-Kbetween the Company and the related instructions) between us and DavidsonBDO Canada LLP on any matter of accounting principles or practices, financial statement disclosures,disclosure or auditing scope or procedure which, disagreements, if not resolved to the satisfaction of Davidson,BDO Canada LLP, would have caused itBDO Canada LLP to make reference to the subject matter of suchthe disagreements in connection with any report prepared by Davidson. Further,its reports for such fiscal years; and there have beenwere no reportable events (as describedas defined in Item 304(a)(1)(v) of Regulation S-K).S-K except for the material weakness in (i) the Company’s internal control over financial reporting disclosed in its Annual Report on Form 10-K/A for the fiscal year ended March 31, 2015, filed with the SEC on January 11, 2016, related to the design of controls with respect to the calculation of the fair value of the Company’s share based compensation, and (ii) the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2016, filed with the SEC on June 28, 2016, related to the Company’s accounting staff having insufficient technical accounting knowledge relating to accounting for income taxes and complex U.S. GAAP matters. The Company has authorized BDO Canada LLP to respond fully and without limitation to all requests of BDO USA, LLP concerning all matters related to the periods audited by BDO Canada LLP, including with respect to the subject matter of these reportable events. BDO Canada LLP’s letter to the SEC stating its agreement with the statements in this paragraph was filed as an exhibit to the Company’s Current Report on Form 8-K dated January 10, 2017.
On February 19, 2015,During the Board of Directors approvednine months ended December 31, 2016 and the fiscal year ended March 31, 2016, and any subsequent interim period before the Company’s engagement of BDO CanadaUSA, LLP, orthe Company did not consult with BDO Canada, as our independent registered public accounting firm to perform independent audit services. Neither we, nor anyone on our behalf, has consulted BDO CanadaUSA, LLP regarding the application of accounting principles related to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on ourthe Company’s financial statements or as to any disagreement or reportable event as described in Item 304(a)(1)(iv)statements.
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Principal Accountant Fees and Item 304(a)(1)(v), respectively, of Regulation S-K.
PRINCIPAL ACCOUNTANT FEES AND SERVICESServices
The following aretable represents the aggregate fees billed to us by BDO Canada LLPthe Company during the fiscal yearsyear ended MarchDecember 31, 2017 and the nine months ended December 31, 2016 and 2015:
Fiscal Year Ended | Fiscal Year Ended | ||||
March 31, 2016 | March 31, 2015 | ||||
Audit Fees | $ | 155,000 | 86,715 | ||
Audit-Related Fees | Nil | Nil | |||
Tax Fees | $ | 61,550 | 5,090 | ||
All Other Fees | - | Nil | |||
Total Fees | $ | 216,550 | 91,805 |
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Audit Fees
Audit fees consist of fees billed for professional services rendered for the audit of our consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by BDO CanadaUSA, LLP, the Company’s principal accountant (amounts in connection with statutory and regulatory filings, our registration statements and securities offerings.thousands).
| Fiscal Year | Nine |
Audit Fees (1) | $197 | $123 |
Tax Fees (2) | 28 | 29 |
Total Fees | $225 | $152 |
Tax Fees
Tax fees consist of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and tax compliance, customs and duties, mergers and acquisitions and tax planning.
(1) | Audit fees included amounts billed for professional services rendered in connection with the audit of our consolidated financial statements and review of our interim consolidated financial statements included in quarterly reports and services that are normally provided by our principal accountant in connection with statutory and regulatory filings and the review of registration statements. |
(2) | Tax fees included amounts billed for professional services for tax compliance, tax advice and tax planning. These services included assistance regarding federal, state and tax compliance. |
All Other Fees
This was zero for 2016.
A majority of our independent directors, or the independent director to whom such authority was delegatedfees described above were pre-approved by the independent directors, must pre-approve all services provided by the independent registered public accounting firm.Audit Committee.
Audit Committee Pre-Approval Policies and Procedures
Our Audit Committee has adopted policies and procedures for the pre-approval of audit services and permitted non-audit and tax services rendered by our independent registered public accounting firm. The policy generally pre-approves specified services in the defined categories of audit services, audit-related services and tax services up to specified amounts. Pre-approval may also be given as part of the Audit Committee and a majorityCommittee’s approval of our independent directors, orthe scope of the engagement of the independent director to whom such authority was delegated byauditor or on an individual, explicit, case-by-case basis before the independent directors,auditor is engaged to provide each service. The Audit Committee must pre-approve all services provided by the independent registered public accounting firm. All of the services provided by BDO described above were approved by our Audit Committee pursuant to our Audit Committee’s pre-approval policies.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTEFORTHE RATIFICATION OFTHE APPOINTMENT OF BDO AS INDEPENDENT AUDITORS FOR OUR FISCAL YEAR ENDEDMARCH 31, 2017.
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AUDIT COMMITTEE REPORT
The Audit Committee is comprised of three independent directors and operates under a written charter adopted by the Board, a copy of which is available on the Committee Charters page of the Investor Relations section of our website located at www.heliusmedical.com. The Board has determined that eachthe rendering of services other than audit services by BDO USA, LLP is compatible with maintaining the principal accountant’s independence.
The Board of Directors Recommends
A Vote In Favor of Proposal 2.
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Approval of the membersReincorporation of the Audit Committee, Messrs. Griffin, StrawCompany From the State of Wyoming to
the State of Delaware
What is the Reincorporation Proposal?
On May 15, 2018, our Board approved a proposal (this “Reincorporation Proposal”), to change the state of incorporation of our company from Wyoming to Delaware (the “Reincorporation”). The Board believes that the Reincorporation can improve corporate governance, reduce administrative costs and Walker,enhance long-term shareholder value.
The choice of state of domicile is independentimportant because state corporate law governs the internal affairs of a corporation. Management and boards of directors of corporations look to state law and judicial interpretations of state law to guide their decision-making on many key issues, including determining appropriate governance policies and procedures, ensuring that boards satisfy their fiduciary obligations to shareholders and evaluating key strategic alternatives for the corporation, including mergers, acquisitions, and divestitures. After careful consideration of these and other factors as independencediscussed more fully below, our Board believes that it is defined underin the applicable sectionbest interest of our company and our shareholders to complete the Reincorporation.
Where can I find information on the Reincorporation Proposal?
Shareholders are urged to read this proxy statement carefully for information regarding the Reincorporation Proposal, including the related appendices referenced below and attached to this proxy statement, before voting on the Reincorporation. The following discussion summarizes material provisions of the NYSE MKT rulesReincorporation. This summary is subject to and qualified in its entirety by the following reincorporation documents attached as appendices to this proxy statement: the Delaware Certificate of Incorporation to be effective after the Reincorporation, in the form attached hereto as Appendix A (the “Delaware Charter”), and the rulesDelaware Bylaws to be effective after the Reincorporation, in the form attached hereto as Appendix B (the “Delaware Bylaws”). Copies of the TSXour Amended and thatRestated Wyoming Articles of Incorporation, as amended (“Wyoming Charter”) and our Wyoming Amended and Restated Bylaws (the “Wyoming Bylaws”), each as currently in effect, are filed publicly as exhibits to our periodic reports and are also available for inspection at our principal office. Copies will be sent to shareholders free of Messrs. Griffin, Strawcharge upon written request to our Corporate Secretary at 642 Newtown Yardley Road, Suite 100, Newtown, Pennsylvania 18940.
In this Reincorporation Proposal, we refer to Helius, as it currently exists as a Wyoming corporation, as “Helius” and Walker is independentHelius, as independence is defined under Rule 10A-3(b)(1) under the Exchange Act. The Board has also determined that Mr. Griffin qualifiesit would exist as an “audit committee financial expert.a Delaware corporation, as “Helius Delaware.”
The primary purposes of the Audit Committee are to assistWhy did our Board with oversight of: (i)choose Delaware over other jurisdictions?
It is well established that the qualityState of Delaware has been a leader in adopting a comprehensive and integritycoherent set of our financial statements and its related internal controls over financial reporting, (ii) our compliance withcorporate laws that are responsive to the evolving legal and regulatory compliance, (iii)business needs of corporations. Our Board of Directors believes that the independent registeredmost important criterion in comparing jurisdictions is the existence of a highly developed and predictable corporate law that will guide management and our Board of Directors in addressing the complex and varied decisions faced by public accounting firm’s qualificationscompanies. We believe that no other jurisdiction in the United States satisfies this criterion to the same extent as Delaware. In particular, relative to our current domicile in Wyoming or a domicile in any other state, we believe Delaware will offer us greater predictability and independence,clarity due to characteristics that are unique to the state, which are further discussed below.
Predictability, Flexibility and (iv) the performanceResponsiveness of our independent registered public accounting firm. The audit committee’s primary functionDelaware Law
Delaware courts have established a jurisprudence that is to provide advicesignificantly more thorough and broadly applied with respect to principles of corporate governance than any other state’s courts, including the courts in Wyoming. As a result, corporations domiciled in Delaware have an advantage over companies organized under the laws of other states, because Delaware corporations can draw upon these firmly established and consistently interpreted principles when making business and legal decisions.
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We believe that Delaware is the preferred domicile for most major American corporations. According to the Delaware Secretary of State, over 50 percent of all public companies and approximately 64 percent of all Fortune 500 corporations are incorporated in Delaware.
Because of the large number of major corporations domiciled in Delaware, Delaware courts often take the lead in reviewing and deciding important new issues relating to corporate governance and rights and obligations of shareholders and corporations. As Delaware courts were among the first and most influential to address these issues, many corporations in Wyoming and other states have looked to Delaware laws for guidance on these issues. The Board believes that the clarity provided on these issues is ultimately beneficial to Helius and our financial mattersshareholders because it establishes more reliable guidance for corporate governance decisions.
Delaware’s court system also provides swift and efficient resolutions in corporate litigation. Delaware has a specialized Court of Chancery that reviews and decides corporate law cases, and appeals to Delaware’s Supreme Court can be decided quickly. In addition, Delaware has adopted the Delaware Rapid Arbitration Act, which provides a streamlined arbitration process that will allow for prompt, cost-effective resolution of business disputes.
We have identified the following key benefits of Delaware’s corporate legal framework that are available to Helius after the Reincorporation:
The Delaware General Corporate Law, as amended (the “DGCL”), is generally acknowledged to be the most advanced and flexible state corporate statute in the United States;
The Delaware Court of Chancery routinely handles cases involving complex corporate issues with a level of experience and a degree of sophistication and understanding unmatched by other courts in the country;
The Delaware Supreme Court is well regarded and is timely and highly responsive in cases involving complex corporate issues;
The well-established body of case law construing Delaware law has developed over the last century and provides businesses with a greater predictability on numerous issues than the case law of most, if not all, other jurisdictions, including, but not limited to, Wyoming;
The Delaware legislature each year considers and adopts statutory amendments in an effort to ensure that the Delaware corporate statute continues to be responsive to the changing needs of businesses;
Delaware has a user-friendly Office of Secretary of State that facilitates filings and interactions and reduces (as compared to other states) complications and delays that can arise in time sensitive transactions.
Ability to Have the Delaware Courts Serve as the Exclusive Forum for the Adjudication of Certain Legal Matters
To ensure that we get the full benefits of Delaware’s corporate legal framework, the Board has decided to include in the Delaware Charter a provision providing that the Delaware Courts are the exclusive forum for the adjudication of certain legal actions.
Under the exclusive forum provision contained in the Delaware Charter, the state courts of the State of Delaware (or if no state court has jurisdiction, the federal district court for the District of Delaware) will be the exclusive forum for certain actions involving us, unless we consent to an alternative forum. Based on the proposed language in the Delaware Charter, the Delaware courts would be the exclusive forum for (1) derivative actions or proceedings brought on behalf of us; (2) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee to us or our stockholders; (3) any action asserting a claim against us or any director or officer or other employee arising pursuant to any provision of the DGCL, the Delaware Charter or the Delaware Bylaws; and (4) any action asserting a claim against us or any director or officer or other employee governed by the internal affairs doctrine.
The exclusive forum provision contained in the Delaware Charter is intended to assist us in avoiding multiple lawsuits in multiple jurisdictions on matters relating to the corporate law of Delaware, which will be our Boardstate of incorporation if the Reincorporation Proposal is approved. We believe that the exclusive forum provision in fulfilling its oversight responsibilities regarding finance, accounting, and legal compliance.the Delaware Charter will reduce the risk that we could become subject to duplicative litigation in multiple forums, as well as the risk that
As noted above, 19
the Audit Committee assistsoutcome of cases in multiple forums could be inconsistent, even though each forum purports to follow Delaware law. Any of these could expose us to increased expenses or losses.
The exclusive forum provision contained in the Delaware Charter would only regulate the forum where our shareholders may file claims relating to the specified intra-corporate disputes. The exclusive forum provision does not contain any restrictions on the ability of our shareholders to bring such claims, nor the remedies available if such claims are ultimately successful; rather it attempts to prevent us from being forced to waste corporate assets defending against duplicative suits.
Although the Board in appointing our independent registered public accounting firm, BDO, which includes, among other things, reviewing and evaluatingof Directors believes that the performancedesignation of the lead audit partner responsibleDelaware Court of Chancery as the exclusive forum for intra-corporate disputes serves our audit, overseeingbest interests and our shareholders as a whole, the required rotationBoard of Directors also believes that we should retain the lead audit partnerability to consent to an alternative forum on a case-by-case basis. Specifically, where the Board of Directors determines that our interests and reviewing and consideringthose of our shareholders are best served by permitting a dispute to proceed in a forum other than the Delaware Court of Chancery, the exclusive forum provision in the Delaware Charter permits us to consent to the selection of such alternative forum.
The Board of Directors believes that our shareholders will benefit from having intra-corporate disputes litigated in the lead audit partner.Delaware Court of Chancery. Although some plaintiffs might prefer to litigate such matters in a forum outside of Delaware because they perceive another court as more convenient or more favorable to their claims (among other reasons), the Board of Directors believes that the substantial benefits to us and our shareholders as a whole from designating the Delaware Court of Chancery as the exclusive forum for intra-corporate disputes outweigh these concerns. The Delaware Court of Chancery is widely regarded as the preeminent court for the determination of disputes involving a corporation’s internal affairs in terms of precedent, experience and focus. The Court’s considerable expertise has led to the development of a substantial and influential body of case law interpreting Delaware’s corporate law. This provides us and our shareholders with more predictability regarding the outcome of intra-corporate disputes. In appointing BDO,addition, the Delaware Court of Chancery has developed streamlined procedures and processes that help provide decisions for litigating parties on a relatively expedited basis. This accelerated schedule can limit the time, cost, and uncertainty of litigation for all parties. Furthermore, there is a significant risk that allowing shareholders to bring such highly sophisticated matters in forums with little familiarity or experience in corporate governance leaves shareholders at risk that foreign jurisdictions may misapply Delaware law.
Without the exclusive forum provision in the Delaware Charter, we remain exposed to the possibility of plaintiffs using Helius’ more diverse operational base to bring claims against us in multiple jurisdictions or choosing a forum state for litigation that may not apply Delaware law to our internal affairs in the same manner as the Delaware courts would be expected to do so.
What are the consequences of the Reincorporation?
At the effective time of the Reincorporation, we will be governed by the Delaware Charter, the Delaware Bylaws and the lead audit partner,DGCL. Although the Audit Committee considered, among other things,Delaware Charter and the qualityDelaware Bylaws contain many similar provisions from our existing Wyoming Articles and efficiencyWyoming Bylaws, there are important differences that are discussed below. See “What are the material differences between Delaware law and Wyoming law?” below.
After the Reincorporation, our name will remain Helius Medical Technologies, Inc. Other than the change in corporate domicile (and certain related changes of a legal nature in our organizational documents, which are described in this proxy statement), the Reincorporation will not result in any change in our name, business operations, management, board composition, fiscal year, assets, liabilities or net worth or physical location, nor will it result in any change in location of our current employees, including management. Upon consummation of the services provided, includingReincorporation, our daily business operations will continue as they are presently conducted. In addition, the resultsReincorporation will not, we believe, significantly affect any of a global internal survey of BDO’s performance,our material contracts with any third parties and our rights and obligations under these contractual arrangements will continue and be assumed by us. In addition, upon the technical capabilitieseffectiveness of the engagement teams, external data concerning BDO’s audit quality, performance obtained from reportsReincorporation, the directors who are elected at the annual meeting, and the individuals serving as executive officers of Helius immediately prior to the Reincorporation, will continue to serve as our directors and executive officers, without a change in title or responsibilities.
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Upon consummation of the Public Company Accounting Oversight Board (“PCAOB”Reincorporation, our daily business operations will continue as they are presently conducted at our current principal executive office located at 642 Newtown Yardley Road, Suite 100, Newtown, Pennsylvania 18940.
What are the material differences between Delaware law and Wyoming law?
Because of differences between the Wyoming Business Corporation Act (the “WBCA”) and the engagement teams’ understandingDGCL, as well as differences between our Wyoming Charter and Bylaws before and after the Reincorporation, the Reincorporation will effect some changes to the rights of our company’s business. The Audit Committeeshareholders. Summarized below are the most significant differences between the rights of the shareholders of the Company before and after the Reincorporation, as a result of the differences among the WBCA and the DGCL, the Wyoming Charter and the Delaware Charter, and the Wyoming Bylaws and the Delaware Bylaws.
The summary below is not intended to be relied upon as an exhaustive list of all differences or a complete description of the differences between the DGCL and the Delaware Charter and Bylaws, on the one hand, and the WBCA and the Wyoming Charter and Bylaws on the other hand. The summary below is qualified in its entirety by reference to the WBCA, the Wyoming Charter, the Wyoming Bylaws, the DGCL, the Delaware Charter and the Delaware Bylaws.
Authorized Capital Stock
Delaware Provisions
The authorized capital stock pursuant to our Delaware charter will consist of 150,000,000 authorized shares of common stock, $0.001 par value per share, and 10,000,000 authorized shares of preferred stock, $0.001 par value per share.
Our shareholders of our common stock will continue to be entitled to one vote for each share on all matters voted on by shareholders, including the election of directors. The holders of our common stock will not have any cumulative voting, conversion, redemption or preemptive rights. The holders of our common stock will be entitled to such dividends as may be declared from time to time by the our Board believeof Directors from funds available therefor, and upon liquidation will be entitled to receive pro rata all assets of our company available for distribution to such holders.
Wyoming Provisions
The holders of our common stock are entitled to one vote for each share on all matters voted on by shareholders, including the election of directors. Our authorized capital stock consists of unlimited authorized shares of Class A common stock, no par value per share. The holders of the Company’s common stock do not have any cumulative voting, conversion, redemption or preemptive rights.
Number of Directors; Election; Removal; Filling Vacancies; Independent Directors
Delaware Provisions
The Delaware Charter and Delaware Bylaws will provide that the continued retentionnumber of BDOdirectors will be fixed from time to servetime by action of the Board of Directors.
The Delaware Charter and Bylaws provide that the stockholders may remove one or more directors with cause at a special meeting called for the purpose of removing the director, or at an annual meeting, upon the affirmative vote of the holders of at least 66-2/3% of the voting power of all then outstanding shares of capital stock of the corporation entitled to vote generally at an election of the directors. A vacancy on the Board of Directors, whether created as a result of the removal of a director or resulting from an enlargement of the Board of Directors, may only be filled by the affirmative vote of a majority of the directors then in office.
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Under the WBCA, the number of directors is established by the articles of incorporation or the bylaws. There is no difference between the Delaware Bylaws and Wyoming Bylaws with respect to the mechanism to determine the number of directors.
Under the WBCA and Wyoming Bylaws, shareholders may remove one or more directors with or without cause by a majority vote of the shareholders entitled to elect such director(s), unless the articles provide that directors may only be removed for cause. The WBCA and Wyoming Bylaws permit the removal of a director by shareholders only at a meeting called for that purpose, upon notice of the meeting which states that the purpose or one of the purposes thereof is the removal of the director.
The Wyoming Bylaws provide that vacancies may be filled at any meeting of the directors. The WBCA provides that, unless otherwise provided in the corporation’s articles of incorporation, vacancies on the board of directors and newly created directorships resulting from an increase in the authorized number of directors may be filled either by the directors or the shareholders. Under the WBCA, directors may fill a vacancy by majority vote, even if the directors remaining in office constitute less than a quorum. Like the DGCL, the WBCA specifically provides that if a vacant office was held by a director elected by holders of a specific class or series of stock, only such shareholders or directors also elected by holders of that class or series of stock, may fill the vacancy.
Cumulative Voting for Directors
Delaware Provisions
Delaware law permits cumulative voting if provided in the certificate of incorporation. The Delaware Charter does not provide for cumulative voting.
Wyoming Provisions
The WBCA provides that shareholders do not have a right to cumulate their votes for directors unless the articles of incorporation so provide. The Wyoming Charter does not provide for cumulative voting.
Business Combinations; Interested Transactions
Delaware Provisions
Section 203 of the DGCL provides that, subject to certain exceptions specified therein, a corporation shall not engage in any business combination with any “interested stockholder” for a three-year period following the date that such stockholder becomes an interested stockholder unless (1) prior to such date, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder, (2) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding shares held by directors who are also officers and employee stock purchase plans in which employee participants do not have the right to determine confidentially whether plan shares will be tendered in a tender or exchange offer), or (3) on or subsequent to such date, the business combination is approved by the board of directors of the corporation and by the affirmative vote at an annual or special meeting, and not by written consent, of at least 66-2/3% of the outstanding voting stock which is not owned by the interested stockholder. Except as specified in Section 203 of the DGCL, an interested stockholder is defined to include (a) any person that is the owner of 15% or more of the outstanding voting stock of the corporation or is an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation, at any time within three years immediately prior to the relevant date, and (b) the affiliates and associates of any such person.
Under certain circumstances, Section 203 of the DGCL may make it more difficult for a person who would be an “interested stockholder” to effect various business combinations with a corporation for a three-year period, although
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the corporation’s certificate of incorporation or stockholders may elect to exclude a corporation from the restrictions imposed thereunder. The Delaware Charter does not exclude us from the restrictions imposed under Section 203 of the DGCL. It is anticipated that the provisions of Section 203 of the DGCL may encourage companies interested in acquiring us to negotiate in advance with our Board of Directors, since the stockholder approval requirement would be avoided if a majority of the directors then in office approve either the business combination or the transaction which results in the stockholder becoming an interested stockholder.
Wyoming Provisions
There is no similar provision limiting business combinations with interested shareholders in the WBCA, but the WBCA requires the vote of a majority of the outstanding shares of each class of shares entitled to vote thereon to approve any re-incorporation or the sale, lease, exchange, or other disposition of all, or substantially all, of the assets of the corporation, unless the articles of incorporation contain a provision establishing a different proportion.
We are not aware of any specific effort by any party to assume control of us. Because the WBCA includes provisions affecting acquisitions and business combinations, the possibility that Section 203 of the DGCL may impede the accomplishment of mergers with, or the assumption of control of, us is not among the principal reasons for the Reincorporation.
Limitation of Liability of Directors
Delaware Provisions
The DGCL permits a corporation to include a provision in its certificate of incorporation eliminating or limiting the personal liability of a director to the corporation or its stockholders for damages for certain breaches of the director’s fiduciary duty. However, no such provision may eliminate or limit the liability of a director: (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) for declaration of unlawful dividends or illegal redemptions or stock repurchases; or (iv) for any transaction from which the director derived an improper personal benefit.
The Delaware Charter provides that the liability of the directors for monetary damages shall be eliminated to the fullest extent allowed under applicable law. While these provisions provide directors with protection from awards for monetary damages for breaches of their duty of care, they do not eliminate such duty. Accordingly, these provisions will have no effect on the availability of equitable remedies such as an injunction or rescission based on a director’s breach of his or her duty of care.
Wyoming Provisions
The WBCA provides that no director shall be personally liable to the Company or its shareholders for monetary damages for breaches of fiduciary duty except where such exculpation is expressly prohibited by law. Under the WBCA, a director may not be exculpated from liability for dealings relating to (i) actions taken which were not in good faith; (ii) decisions which the director did not reasonably believe to be in or at least not opposed to the best interests of the corporation or decisions that the director was not informed to a reasonable extent given the circumstances; (iii) for any breach of the director’s duty of loyalty to the corporation or its shareholders; (iv) a sustained failure by the director to devote attention to the affairs of the corporation; or (v) unauthorized distributions or from any transaction from which the director directly or indirectly received an improper personal benefit.
The Wyoming Charter provides that, to the fullest extent permitted by law, directors shall not be personally liable to the Company or to its shareholders for monetary damages for any breach of fiduciary duty as a director.
Indemnification of Officers and Directors
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Both the WBCA and the DGCL permit a corporation to indemnify officers, directors, employees and agents for actions taken in good faith and in a manner they reasonably believed to be in, or not opposed to, the best interests of the corporation, and with respect to any criminal action, which they had no reasonable cause to believe was unlawful. Both states’ laws provide that a corporation may advance expenses of defense (upon receipt of a written undertaking to reimburse the corporation if indemnification is not appropriate), and both states permit a corporation to purchase and maintain liability insurance for its directors and officers.
Delaware Provisions
The DGCL provides that indemnification may not be made for any matter as to which a person has been adjudged by a court of competent jurisdiction to be liable to the corporation, unless and only to the extent a court determines that the person is entitled to indemnity for such expenses as the Company’s independent auditorcourt deems proper.
The Delaware Bylaws provide that we shall indemnify directors, officers and agents to the fullest extent permitted by the DGCL or other applicable law and that we may purchase and maintain insurance on behalf of any person who is or was serving as a director, officer, employee or agent of the Company. The Delaware Charter provides that we are authorized to indemnify its directors, officers and agents to the maximum extent permitted by applicable law through bylaw provisions or agreements with such persons.
Wyoming Provisions
Like the DGCL, the WBCA generally permits indemnification of directors and officers for expenses incurred by them by reason of their position with the corporation, if the director or officer has acted in good faith and with the reasonable belief that his conduct was in the best interests of the corporation. The WBCA mandates that directors shall be indemnified for their reasonable expenses in the event that a director is successful in the defense of any proceeding in which the director was a party due to his status as director. Neither the DGCL nor the WBCA permit a corporation to indemnify persons against judgments in actions brought by or in the right of the corporation (although the DGCL does permit indemnification in such situations if approved by the Delaware Court of Chancery, and both permit indemnification for expenses of such actions). Under the WBCA, a corporation may not indemnify a director in connection with a proceeding, except for reasonable expenses incurred in connection with the proceeding, unless it is determined that the director has acted in good faith, with a reasonable belief that the director’s conduct is in the best interests of the Companycorporation and its stockholdersno reasonable cause to believe conduct was unlawful. Unlike the DGCL, the WBCA also permits indemnification of an officer, employee, fiduciary, or agent who is not a director, to a greater extent than the indemnification of a director, if not inconsistent with public policy, and have recommended that stockholders ratifyif provided for in the appointment of BDO as the Company’s independent auditor for the fiscal year ending March 31, 2017.
The Audit Committee discussed the auditors’ review of our quarterly financial information with the auditors prior to the release of such information and the filing of our quarterly reports with the SEC. The Audit Committee also met and held discussions with management and BDO with respect to our audited year-end financial statements.
Further, the Audit Committee discussed with BDO the matters required to be discussedbylaws, by Statement on Auditing Standards No. 16, as amended (Communications With Audit Committees), received the written disclosures and the letter from BDO required by applicable requirementsaction of the PCAOB regardingboard of directors or by contract.
Special Meetings of Shareholders
Delaware Provisions
Under the independent accountant’s communications withDGCL, a special meeting of stockholders may be called by the Audit Committee concerning independence and discussed withcorporation’s board of directors or by such persons as may be authorized by the auditorscorporation’s certificate of incorporation or bylaws. The Delaware Bylaws provide that a special meeting may be called at any time by (i) the auditors’ independence. In determining BDO’s independence, the Audit Committee considered whether BDO’s provision of non-audit services were compatible with the independenceChairman of the independent registered public accountants. The Audit Committee also discussed withBoard, (ii) the auditors and our financial management matters related to our internal control over financial reporting. Based on these discussions and the written disclosures received from BDO, the Audit Committee recommended that the Board include the audited financial statements in the Annual Report for the fiscal year ended March 31, 2016, for filing with the SEC. The Board has approved this recommendation.
This audit committee report is not deemed filed under the Securities Act or the Exchange Act, and is not incorporated by reference into any filings that we may make with the SEC.
AUDIT COMMITTEEThomas Griffin (Chairperson)Edward M. StrawBlane Walter
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EXECUTIVE OFFICERS
Our directors and executive officers and their respective ages as of the date of August 5, 2016 are as follows:
The biography for Messrs. Deschamps, Chiu, Peng, Tyler, Griffin, Straw and Walter is set forth above under “Election of Seven Directors (Proposal 1) – Nominees.” The following describes the business experience of each of our other executive officers, including other directorships held in reporting companies:
Joyce LaViscount,Chief Financial Officer and Chief Operating Officer
Ms. LaViscount has served as our Chief Financial Officer and Chief Operating Officer since October 19, 2015 and she previously served as one of our directors from March 2, 2015 until December 29, 2015. Ms. LaViscount was at MM Health Solutions (formerly MediMedia Health), a marketing services company, from July 2012 until August 2015 where she served as Chief Operating Officer and Chief Financial Officer. Concurrent with her role at MediMedia Health, Ms. LaViscount also served as the CFO for MediMedia Pharmaceutical Solutions from January 2014 until February 2015. Prior to joining MM Health Solutions, Ms. LaViscount was Executive Director/Group Controller North America for Aptalis Pharmaceuticals (2010 to 2012). From 2004 to 2009 Ms. LaViscount worked for Endo Pharmaceuticals in a variety of roles, including Chief Accounting Officer, VP-Investor Relations and Corporate Communications, and VP Finance Operations, as well as holding operational roles in Sales Operations, Training and Corporate Strategy Development. Ms. LaViscount’s pharmaceutical industry experience also includes more than 15 years in finance at Bristol-Myers Squibb and Pharmacia. Ms. LaViscount began her career with Ernst & Young and is a New Jersey Certified Public Accountant and has Bachelor of Arts in Business with a concentration in Accounting from Franklin and Marshall College.
Jonathan Sackier,Chief Medical Officer
Dr. Sackier joined the Company in December of 2014 as Chief Medical Officer and brings to his role extensive experience in new technologies and treatment methodologies gained over more than 30 years in the healthcare industry. Since 2014, Dr. Sackier has been a Visiting Professor of Surgery at the Nuffield Department of Surgical Sciences at Oxford University. From 2005 to 2014, Dr. Sackier was a Visiting Professor of Surgery at the University of Virginia and prior to that a served as a Clinical Professor at George Washington University in Washington, DC from 1995 to 1999. In 1995, while at George Washington University, Dr. Sackier founded and funded the Washington Institute of Surgical Endoscopy, a center for education, research, innovation and technology transfer. He is widely recognized as one of the leaders of the laparoscopic surgery revolution. In addition to his academic work, Dr. Sackier has helped build several companies including medical technology, research and product-design and medical contract sales organizations. He has also collaborated with pharmaceutical and medical device technology partners including ConvaTec, Pfizer, Karl Storz, Applied Medical, Stryker, Siemens, Bayer and Novartis. Dr. Sackier served as Chairman of Adenosine Therapeutics from 1992 to 1998, which became part of Clinical Data and then Forest Laboratories. Dr. Sackier also worked to develop and market the AESOP robot with
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Computer Motion from 1992 to 1998. He also founded Genethics in 1985, which patented and licensed amniotic stem cell technology.
Dr. Sackier sits on several boards of directors, he has served as a member of Kypha’s board since 2014, a director of Clinvue since 2010, and a director of Brandon Medical since 2009. Dr. Sackier was also director for Hemoshear from 2008 to 2015 and served as Chairman of Adenosine Therapeutics which became part of Clinical Data and then Forest Laboratories from 2002 to 2008. He is a Trustee of First Star and previously chaired The Larry King Cardiac Foundation Board of Governors. He has also served as a board member of The American College of Surgeons Foundation, The Surgical Fellowship Foundation and Rex Bionics. A keen pilot, Jonathan advises the Aircraft Owners & Pilots Association (AOPA) on medical issues germane to pilots and authors the “Fly Well” column in AOPA Pilot magazine.
Brian Bapty,Vice President, Strategy and Business Development
Dr. Bapty joined Helius as a consultant in July 2014, and full time as the Company’s Vice President, Strategy and Business Development in October 2015. His sixteen years of experience in capital markets and public companies began in 2000, when he Joined Raymond James as an equity analyst for Canadian healthcare companies. In 2008, still with Raymond James he moved to the London desk supporting institutional equity sales. Early in 2009, Dr. Bapty joined Northland Bancorp Private Equity as a partner and held management positions in investee companies. These positions included Director of Research at Galileo Equity Advisors (a small to midcap focused asset management company) and CEO of Northland Securities (in institutional focussed brokerage firm). In March 2012, Dr. Bapty left Northland Bancorp to join Confederation Minerals as President and Director where he served until November 2014.
Dr. Bapty has Ph.D. (Research Medicine, Nephrology) from the University of British Columbia (UBC), and B.Sc. (UBC) in Cell and Developmental Biology.
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EXECUTIVE COMPENSATION
During the fiscal year ended March 31, 2016, our named executive officers consisted of Philippe Deschamps, our Chief Executive Officer, Jonathan Sackier,or (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors.
Wyoming Provisions
The WBCA provides that special meetings of shareholders of a corporation may be called by the directors or by any other person authorized by the corporation’s bylaws or by resolution of the directors. The WBCA also provides that a special meeting shall be called if the corporation receives one or more written demands for a meeting, stating the purpose or purposes for which the meeting is to be held, signed and dated by shareholders representing at least 10% of all votes entitled to be cast on any issue proposed to be considered at the special meeting. The Wyoming Bylaws provide that a special meeting can be called by the President, Chairman of the Board, the Board of Directors, or by
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the shareholders holding at least 5% of the votes entitled to be cast on any issue proposed to be considered at the special meeting.
Amendment or Repeal of the Certificate of Incorporation
Delaware Provisions
Under the DGCL, unless the certificate of incorporation otherwise provides, amendments to the certificate of incorporation generally require the approval of the holders of a majority of the outstanding stock entitled to vote thereon, and if the amendment would increase or decrease the number of authorized shares of any class or series or the par value of such shares, or would adversely affect the rights, powers or preferences of such class or series, a majority of the outstanding stock of such class or series also would have to approve the amendment. The Delaware Charter provides that the affirmative vote of the holders of at least 66 2/3% of the voting power of all of the then-outstanding shares of capital stock of our Chief Medical Officer, and Joyce LaViscount, our Chief Financial Officer. Ms. LaViscount joined uscompany entitled to vote generally in the election of directors, voting as a director on February 27, 2015, and became our Chief Financial Officer on October 19, 2015.
Summary Compensation Table
Name and | All other | |||||||||||
principal | Fiscal | Option awards | Compensation ($) | |||||||||
position | Year | Salary ($) | ($) | Bonus ($) | Total ($) | |||||||
Philippe | 2016 | 400,000 | -(1) | 120,000 | 15,000 | 535,000 | ||||||
Deschamps | ||||||||||||
Chief Executive | 2015 | 360,417 | 432,198 | - | 5,000 | 797,615 | ||||||
Officer | ||||||||||||
Joyce | 2016 | 137,500 | 205,848(3) | - | 5,500 | 348,848 | ||||||
LaViscount | ||||||||||||
Chief Financial | ||||||||||||
Officer and | ||||||||||||
Chief Operating | ||||||||||||
Officer(2) | ||||||||||||
Jonathan | 2016 | 300,000 | -(4) | - | - | 300,000 | ||||||
Sackier | ||||||||||||
Chief Medical | 2015 | 100,000 | 449,797 | - | - | 549,797 | ||||||
Officer |
| |
| |
| |
|
Narrative Disclosuresingle class, is required to Summary Compensation Table
Employment Agreement with Philippe Deschamps
On June 13, 2014, we entered into an employment agreement with Philippe Deschamps to serve as our President and CEO. This employment agreement was amended on September 1, 2014. Pursuantamend certain provisions of the Delaware Charter, including those related to the employment agreement, Mr. Deschamps received a base salary at an annualized rateBoard, indemnification of $250,000 until investments reached a level of $5 million, or the Financing Threshold,directors and after such Financing Threshold was met, on August 14, 2014, the Board approved the increase of his base salary to $400,000. In addition to Mr. Deschamps’ base salary, he has the opportunity to receive a target annual bonus of 30%officers, forum selection, and amendment of the base salary, conditionalDelaware Charter.
Wyoming Provisions
Under the WBCA, amendments to the certificate of incorporation, other than ministerial amendments, which may be authorized by the directors without shareholder action, require the approval of the directors and the approval of the shareholders at a meeting at which a quorum exists, and, if any class or series of shares is entitled to vote as a separate group on the amendment, except as provided in W.S. 17-16-1004(c), the approval of each such separate voting group at a meeting at which a quorum of the voting group exists, unless the articles of incorporation or bylaws require a different proportion.
Amendment to Bylaws
Delaware Provisions
Under the DGCL, directors may amend the bylaws of a corporation only if such right is expressly conferred upon and subject to upward or downward adjustment based upon, achievements and individual goals tothe directors in its certificate of incorporation. The Delaware Bylaws provide that the Delaware Bylaws may be established in good faithamended by the Board of Directors or upon the affirmative vote of the holders of at least 66 2/3% of the voting power of all of the then-outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class.
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and Mr. Deschamps. ForWyoming Provisions
Under the fiscal year ended March 31, 2016, Mr. Deschamps was granted a cash bonusWBCA, shareholders may amend the bylaws. Unless otherwise specified in the corporation’s articles of $120,000. If Mr. Deschamps is terminated without causeincorporation, directors are also permitted to amend the bylaws, other than bylaws establishing greater quorums or if Mr. Deschamps resignsvoting requirements for good reason, we shall pay Mr. Deschamps an aggregate amount equalshareholders or directors, unless the bylaws prohibit the directors from doing so. An amendment to the sumarticles of his base salaryincorporation that adds, changes or deletes a quorum or voting requirement shall meet the same quorum requirement and be adopted by the earned portionsame vote and voting groups required to take action under the quorum and voting requirements then in effect or proposed to be adopted, whichever is greater.
To the extent permitted by law, the Wyoming Bylaws allow the board of directors to amend the bylaws by a majority vote of the annual bonus paid for the year preceding the yearboard of his termination of whichdirectors
Merger with Subsidiary
Delaware Provisions
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The DGCL provides that a parent corporation may merge into a subsidiary and a subsidiary may merge into its parent, without stockholder approval, where such amount is to be paid in equal monthly installments during the twelve month period following such termination of employment.
Employment Agreement with Joyce LaViscount
On October 19, 2015, we entered into an employment agreement with Joyce LaViscount to serve as our Chief Financial Officer and Chief Operating Officer. Pursuant to the employment agreement, Ms. LaViscount will receive a base salaryparent corporation owns at an annualized rate of $300,000 for her employment term, which is at-will. In addition to Ms. LaViscount’s base salary, she shall have the opportunity to receive a target annual bonus of 25%least 90% of the base salary, conditional upon, and subject to upward or downward adjustment based upon achievements and individual goals to be established in good faith by our CEO and Ms. LaViscount. If Ms. LaViscount is terminated without cause or if Ms. LaViscount resigns for good reason, we will pay Ms. LaViscount an aggregate amount equal to the sum of her base salary and the earned portion of the annual bonus paid for the year of her termination of which such amount is to be paid in equal monthly installments during the twelve month period following such termination of employment.
Employment Agreement with Jonathan Sackier, MD
On December 1, 2014, we entered into an employment agreement with Dr. Jonathan Sackier to serve as our Chief Medical Officer. Pursuant to the employment agreement, Dr. Sackier will receive a base salary at an annualized rate of $300,000 for his employment term, which is at-will. In addition to Dr. Sackier’s base salary, he shall have the opportunity to receive a target annual bonus of 25% of the base salary, conditional upon, and subject to upward or downward adjustment based on upon, achievements and individual goals to be established in good faith by our CEO and Dr. Sackier. If Dr. Sackier is terminated without cause, or if he resigns for good reason, we will pay Dr. Sackier an aggregate amount equal to the sum of his base salary and the earned portion of the annual bonus paid for the year of his termination of which such amount is to be paid in equal monthly installments during the twelve month period following such termination of employment.
Employment Agreement with Brian Bapty, PhD
On November 2, 2015, we entered into an employment agreement with Mr. Brian Bapty to serve as our Vice President of Strategy and Business Development. Pursuant to the employment agreement, Mr. Bapty will receive a base salary at an annualized rate of CAN $220,000 for his employment term, which is at-will. In addition to Mr. Bapty’s base salary, he shall have the opportunity to receive a target annual bonus of 25% of the base salary, conditional upon, and subject to upward or downward adjustment based on upon, achievements and individual goals to be established in good faith by our CEO and Mr. Bapty. If Mr. Bapty is terminated without cause, or if he resigns for good reason, we will pay Mr. Bapty an aggregate amount equal to the sum of his base salary of which such amount is to be paid in equal monthly installments during the twelve-month period following such termination of employment.
Option Grants during Fiscal Year 2016
During the fiscal year ended March 31, 2016, we granted 750,000 options to Joyce LaViscount. The grant was made pursuant to the June 2014 Stock Incentive Plan, which is further described below. Twenty five percent of Ms. LaViscount’s options vested upon grant, and the remaining seventy five percent will vest at a rate of twenty five percent annually from the grant date. Ms. LaViscount’s options have an exercise price of CAD$0.87 and expire on October 21, 2020.
Management Contract with V Baron Global Financial Canada Ltd.
Effective July 1, 2014, V Baron has been engaged as an advisor to provide corporate advisory and CFO services to the Company. V Baron was initially engaged for a period of 12 months ending on July 1, 2015. Once the 12 month period passed, V Baron continued to provide advisory services on a month-to-month basis. The corporate advisory services include advising on corporate governance, assisting in compliance with the standards and policies of stock exchanges and regulators, advising on continuous disclosure requirements, assisting in compilation of financial
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statements, liaising with legal counsel, auditors and the Company’s transfer agent, and assisting/advising on corporate finance related matters. During the duration of the agreement, each party may terminate the agreement by providing the other party with 60 days written notice. V Baron will receive CAD$12,500 per month for the services provided. Until her resignation in October of 2015, our CFO services were provided by Amanda Tseng, who is an employee of V Baron. On October 19, 2015, we appointed Joyce LaViscount to act as our Chief Financial Officer. During the fiscal year ended March 31, 2016, the Company incurred charges totaling CAD$150,000 (US$114,623) in respect of this agreement.
Savio Chiu, a member of our Board of Directors, is a Senior Manager, Corporate Finance of V Baron.
June 2014 Stock Incentive Plan
On June 18, 2014, our Board of Directors authorized and approved the adoption of the plan (the “June 2014 Plan”), effective June 18, 2014, under which an aggregate of 12,108,016 shares of Common Stock, representing 14.36% of the issued and outstanding shares of Common Stock aseach class of capital stock of its subsidiary.
Wyoming Provisions
Under the WBCA, a parent corporation that owns shares of a subsidiary corporation that carry at least 80% of the datevoting power of this proxy statement, may be issued. The purposeeach class and series of the June 2014 Plan is to enhance our long-term stockholder value by offering opportunities to our directors, officers, employees and eligible consultants to acquire and maintain stock ownership in order to give these persons the opportunity to participate in our growth and success, and to encourage them to remain in our service. Pursuant to the terms of the June 2014 Plan, we are authorized to grant stock options, as well as awards of stock appreciation rights, restricted stock, unrestricted stock, restricted stock units, deferred stock units and dividend equivalent rights.
Since the June 2014 Plan’s inception, 9,545,000 stock options have been granted, of which 155,360 have been cancelled and 94,640 have been exercised. Accordingly, as of the date of this proxy statement, 9,545,000 stock options are currently under grant, representing 11.32% of the issued and outstanding shares of Common Stock as ofa subsidiary that have voting power may merge the date of this proxy statement.
We may continue to grant awards undersubsidiary into itself or into another such subsidiary, or merge itself into the June 2014 Plan following stockholdersubsidiary, without approval of the 2016 Incentive Plan proposal.
Administration
The Board has appointed a plan administrator to administer the June 2014 Plan. The administrator is authorized to, among other things, grant awards toboard of directors officers, employees and eligible consultants (referred to as a “grantee”). The administrator shall determine the provisions, terms, and conditions of each award under the June 2014 Plan, including, but not limited to, the award vesting schedule, repurchase provisions, right of first refusal, forfeiture provisions, form of payment, payment contingencies, and satisfaction of performance criteria.
Type of Awards
Stock Options. The June 2014 Plan authorizes the plan administrator to grant stock options to directors, officers, employees and eligible consultants. The shares of Common Stock underlying such stock options may be in the form restricted stock or unrestricted stock. The grant shall be subject to an award agreement provided by the administrator to the grantee, which shall specify the date of grant, number of shares of Common Stock covered by the stock options, the exercise price and the terms and conditions for exerciseshareholders of the stock options.
The administrator shall determine whethersubsidiary, unless the articles of incorporation of any stock option shall be subject to vestingof the corporations otherwise provide, and the terms and conditions of such vesting. Stock options shall expire not later than ten years after the grant date or,unless, in the case of an incentive stock option whena foreign subsidiary, approval by the granteesubsidiary's board of directors or shareholders is a 10% stockholder, five years.required by the laws under which the subsidiary is organized.
Committees of the Board of Directors
Delaware Provisions
The exercise priceDGCL provides that the board of any stock optiondirectors may delegate certain of its duties to one or more committees elected by a majority of the board of directors. A Delaware corporation can delegate to a committee of the board of directors, among other things, the responsibility of nominating candidates for election to the office of director, to fill vacancies on the board of directors, to reduce earned or capital surplus, and to authorize the acquisition of the corporation’s own stock. Moreover, if the corporation’s certificate of incorporation or bylaws, or the resolution of the board of directors creating the committee so permits, a committee of the board of directors may declare dividends and authorize the issuance of stock.
Wyoming Provisions
Unless the articles or bylaws of the corporation provide otherwise, a board of directors may create committees to perform the functions of the board of directors. However, a committee may not, unless specifically authorized by the board of directors, authorize distributions, unless the amount of the distribution is prescribed by formula or within the limits set by the board of directors. Additionally, a committee may not approve or propose shareholder actions that require shareholder approval or fill vacancies on the board of directors. The creation of the committee and appointment of the committee members shall be determinedapproved by the administrator, provided that the exercise pricegreater of a majority of the stock option is not lessdirectors or the number of directors required in the articles of incorporation of bylaws. The Wyoming Bylaws allow for the creation and authority of committees consistent with the WBCA.
Mergers, Acquisitions and Transactions with Controlling Shareholder
Delaware Provisions
Under the DGCL, a merger, consolidation, sale of all or substantially all of a corporation’s assets other than 100%in the regular course of business or dissolution of a corporation must be approved by a majority of the “fair market value”outstanding shares entitled to vote. No vote of stockholders of a constituent corporation surviving a merger, however, is required (unless the corporation provides otherwise in its certificate of incorporation) if (1) the merger agreement does not amend the certificate of incorporation of the Common Stock on the datesurviving corporation; (2) each share of grant. The exercise price of any incentive stock option granted to a 10% stockholder must not be less than 110% of the fair market valuesurviving corporation outstanding before the merger is an identical outstanding or treasury share after the merger; and (3) the number of shares to be issued by the surviving corporation in the merger does not exceed twenty percent (20%) of the Common Stock on the grant date.
The “fair market value” of the Common Stock for the purposes of the June 2014 Plan means, as of any date, the value of the Common Stock determined in good faith by the administrator. A good faith determination by the
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administrator may be met through a number of methods, including, if the Common Stock is listed on an established stock exchange, the closing sales price for the Common Stock as quoted on that stock exchange or system for the date the value is to be determined, or, if the rules of the applicable stock exchange require, the volume-weighted average trading price for five daysshares outstanding immediately prior to the date the Board approves the grant of the award.
If a grantee terminates continuous servicemerger. The Delaware Charter does not make any provision with the Company for any reason other than disability or death, vested stock options held at the date of such termination may be exercised at any time within three months after the date of termination or during any greater or lesser period as specific by the award agreement or determined by the administrator. In case of death or disability of a grantee while rendering services to the Company or within three months thereafter, vested options may then be exercised by the grantee, the grantee’s personal representative, or by the person to whom the stock option is transferred by the laws of decent and distribution, within one year after termination due to disability or death or any lesser period specific in the applicable award agreement. In no event may the vested stock options be exercised after the earlier of the expiry date of the stock options as set forth in the award agreement and ten years from the date of grant (five years for a 10% stockholder if the stock option is an incentive stock option).
Restricted Stock Awards.The administrator is authorized to make awards of restricted stock to directors, officers, employees and eligible consultants in such amounts and subjectrespect to such terms and conditions as may be selected bymergers.
Wyoming Provisions
The WBCA provides that, unless the administrator. All such awards are evidenced by an award agreement. The restrictions may laps separatearticles of incorporation otherwise provide, the sale, lease, or in combination at such times, under such circumstances, in such instalments, time-based or upon the satisfactionexchange of performance goals or otherwise. Restricted stock may be issued in consideration for services rendered to the Company and/or a purchase price equal to not less than 100% of the fair market value of the Common Stock underlying the restricted stock on the date of issuance.
In case of forfeiture pursuant to an award agreement, any restricted stock that has not vested prior to the event of forfeiture shall automatically expire, and all of the rights, title and interest of the grantee thereunder shall be forfeited in its entity. The administrator may waive forfeiture conditions relating to restricted stock (provided such waiver is in accordance with applicable laws) or the administrator may provide in the award agreement that restrictions or forfeiture conditions may be waived under certain conditions.
Unrestricted Stock.The administrator may grant (or sell at not less than 100% of the fair market value) an award of unrestricted Common Stock to any grantee pursuant to which such grantee may receive Common Stock free of any restrictions under the June 2014 Plan.
Restricted Stock Units. The administrator is authorized to make awards of restricted stock units to any directors, officers, employees and eligible consultants in such amounts and subject to such terms and conditions as may be selected by the administrator. These restrictions may lapse separately or in combination at such times, under such circumstances, in such instalments, time-based or upon the satisfaction of performance goals or otherwise, as the administrator determines at the time of the grant of the award or thereafter. Restricted stock units may be issued in consideration for services rendered to the Company or a purchase price, equal to not less than 100% of the fair market value of the Common Stock underlying the restricted stock units. Each restricted stock unit shall be paid and settled by the issuance of restricted or unrestricted Common Stock in accordance with the award agreement.
Upon failure to satisfy any requirement for settlement as set for in the award agreement, including failure to satisfy any restriction period or performance objective, any restricted stock units held by the grantee shall automatically expire, and all of the rights, title and interest of the grantee thereunder shall be forfeited in their entity.
Deferred Stock Units. The administrator shall pay eligible remuneration to each director of the Company pursuant to an award agreement. Eligible remuneration means all amounts payable to an eligible director of the Company in Common Stock. A director of the Company is an “eligible director” if the administrator determines that such individual is eligible to elect to receive deferred stock units under the June 2014 Plan. The administrator may permit each eligible director to receive all or any portion of their eligible remuneration in each calendar yeara corporation’s assets in the formcorporation’s usual and regular course of deferredbusiness may be authorized by
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the corporation’s directors, without approval of the corporation’s shareholders. Sale, lease, or exchange of all or substantially all of a corporation’s assets that leave the corporation without a significant business activity, or a re-incorporation or consolidation of the corporation into any other corporation, requires approval of the directors and the vote of the holders of a majority of each class of outstanding stock units. entitled to vote thereon, although the corporation’s articles of incorporation or bylaws may require a higher vote.
Class Voting
Delaware Provisions
The Company will maintain aDGCL requires voting by separate account for each eligible directorclasses only with respect to which it will credit, on a quarterly basis, deferred stock units grantedamendments to director. Thethe certificate of incorporation that adversely affect the holders of those classes or that increase or decrease the aggregate number of deferred stock units to be credited is determined onauthorized shares or the date approved by the administrator by dividing the amount of eligible remuneration to be deferred into deferred stock units by the fair marketpar value of the Common shares of any of those classes.
Wyoming Provisions
Under the WBCA, unless the articles of incorporation provide otherwise, each outstanding share, regardless of class, is entitled to one (1) vote on each matter voted on at a shareholders’ meeting. An amendment to the articles of incorporation that adds, changes or deletes a quorum or voting requirement shall meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirements then in effect or proposed to be adopted, whichever is greater.
Preemptive Rights
Delaware Provisions
Under Delaware law, a stockholder does not have preemptive rights unless such rights are specifically granted in the certificate of incorporation. The Delaware Charter does not specifically grant any preemptive rights.
Wyoming Provisions
The WBCA does not afford shareholders preemptive rights.
Transactions with Officers and Directors
Delaware Provisions
The DGCL provides that contracts or transactions between a corporation and one or more of its officers or directors or an entity in which they have an interest are not void or voidable solely because of such interest or the participation of the director or officer in a meeting of the board of directors or a committee which authorizes the contract or transaction if (1) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board of directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of disinterested directors, even though the disinterested directors are less than a quorum; (2) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or (3) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified by the board of directors, a committee thereof or the stockholders.
Wyoming Provisions
The WBCA provides that a transaction between a corporation and one or more of its directors or officers or any entity in which one or more of its directors or officers are directors or officers or have a financial interest, is not void or
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voidable solely for that reason. In addition, no such transaction shall be void or voidable solely because the director or officer is present at, participates in, or votes at the meeting of the board of directors or committee which authorizes the transaction.
Stock Redemptions and Repurchases
Delaware Provisions
Under the DGCL, a Delaware corporation may purchase or redeem its own shares of capital stock, except when the capital of the corporation is impaired or when such purchase or redemption would cause any impairment of the capital of the corporation.
Wyoming Provisions
Under the WBCA, the payment of distributions, including the repurchase of stock, is generally permissible unless after giving effect to the dividend or distribution, the corporation would be unable to pay its debts as they became due in the usual course of business, or if the total assets of the corporation would be less than the sum of its total liabilities plus the amount that would be needed, if the corporation were dissolved at the time the dividend was paid, to satisfy the preferential rights of shareholders whose preferential rights upon dissolution of the corporation are greater than those of the shareholders receiving the dividend.
Proxies
Delaware Provisions
Under the DGCL, a proxy executed by a stockholder will remain valid for a period of three years unless the proxy provides for a longer period.
Wyoming Provisions
Under the WBCA, a proxy executed by a shareholder will remain valid for a period of eleven months unless the proxy appointment form provides for a longer period.
Consideration for Stock
Delaware Provisions
Under the DGCL, a corporation may accept as consideration for its stock a combination of cash, property or past services in an amount not less than the par value of the shares being issued, and a secured promissory note or other binding obligation executed by the subscriber for any balance, the total of which must equal at least the par value of the issued stock, as determined by the board of directors.
Wyoming Provisions
The WBCA allows for a corporation to exchange shares for any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts for services to be performed, or other securities of the corporation, provided that the board of directors determines that the consideration provided is adequate.
Shareholders Rights to Examine Books and Records
Delaware Provisions
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The DGCL provides that any stockholder of record may demand to examine the corporation’s books and records for any proper purpose. If management of the corporation refuses, the stockholder can compel release of the books by court order.
Wyoming Provisions
Under the WBCA, a corporation’s shareholders have the right to inspect, during regular business hours: the corporation’s articles or restated articles of incorporation and all amendments to them currently in effect, its bylaws or restated bylaws and all amendments to them currently in effect, the resolutions adopted by its board of directors creating one (1) or more classes or series of shares, and fixing their relative rights, preferences and limitations, if shares issued pursuant to those resolutions are outstanding, the minutes of all shareholders' meetings, and records of all action taken by shareholders without a meeting, for the past three (3) years, all written communications to shareholders generally within the past three (3) years, including the financial statements furnished for the past three (3) years under W.S. 17-16-1620, a list of the names and business addresses of the corporation’s current officers and directors, and its most recent annual report delivered to the secretary of state under W.S. 17-16-1630, upon written demand given at least five business days before the date upon which such shareholder wishes to inspect and copy such records. Pursuant to the WBCA, shareholders also may, upon written demand at least five (5) days prior to such inspection and during regular business hours, inspect and copy: excerpts from minutes of any meeting of the board of directors, records of any action of a committee of the board of directors while acting in place of the board of directors on behalf of the corporation, minutes of any meeting of the shareholders, and records of action taken by the shareholders or board of directors without a meeting, to the extent not subject to inspection under W.S. 17-16-1602(a), accounting records of the corporation, and the records of shareholders, provided that date.the shareholder meets the following conditions: (i) the demand for such inspection is made in good faith for a proper purpose, (ii) the shareholder has been a shareholder of the corporation for at least six (6) months immediately preceding the demand, or holds at least five percent of all outstanding shares of any class of stock, (iii) the purpose and the records which the shareholder wishes to inspect are described with reasonable particularity, and (iv) the records to be inspected are directly connected with the described purpose.
21Appraisal and Dissenters’ Rights
Delaware Provisions
Under the DGCL, stockholders have appraisal or dissenter’s rights, respectively, in the event of certain corporate actions such as a merger. These rights include the right to dissent from voting to approve such corporate action, and demand fair value for the shares of the dissenting shareholder. If a proposed corporate action creating dissenters’ rights is submitted to a vote at a shareholders meeting, a shareholder who wishes to assert dissenters’ rights must (i) deliver to the corporation, before the vote is taken, written notice of his intent to demand payment for his shares if the proposed action is effected, and (ii) not vote his shares in favor of the proposed action. If fair value is unsettled, the DGCL provides for the dissenter and the company to petition the Court of Chancery where a corporation’s principal office or registered office is located.
Wyoming Provisions
Under the WBCA, a properly dissenting shareholder is entitled to receive the appraised value of the shares owned by the shareholder in certain specified situations, including when the corporation votes (i) to sell, lease, or exchange all or substantially all of its property and assets other than in the regular course of the corporation’s business, (ii) to merge or consolidate with another corporation, or (iii) to participate in a share exchange.
Each deferredThe WBCA also provides that, unless otherwise provided in the corporation’s charter, no appraisal rights are available to holders of shares of any class of stock unitwhich is either: (a) listed on a national securities exchange or designated as a national market system security on an inter-dealer quotation system by the National Association of Securities Dealers, Inc. or (b) held of record by more than 2,000 shareholders. The above limitations do not apply if the shareholders are required by the terms of the re-incorporation to accept anything other than: (i) shares of stock of the surviving corporation; (ii) shares of stock of another corporation which are or will be paid and settledso listed on a national securities exchange or designated as a national market system security on an inter-dealer quotation system by the issuanceNasdaq or held of restricted or unrestricted stock in accordance with the award agreement. The Company will issue one share of Common Stock for each whole deferred stock unit credited to the eligible director’s account, net of any applicable withholding tax as provided for in the June 2014 Plan. The Company will pay to each eligible director
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record by more than 2,000 shareholders; (iii) cash in lieu of any fractional share of Common Stock.
Stock Appreciation Rights. A stock appreciation right is an award to receive a number of shares of Common Stock (whichsuch stock; or (iv) any combination thereof.
Dividends
Delaware Provisions
The DGCL provides that the corporation may consistpay dividends out of restricted stock),surplus, out of the corporation’s net profits for the preceding fiscal year, or cash, or Common Stock and cash, for services renderedboth, provided that there remains in the stated capital account an amount equal to the Company. Stock appreciation rights are measuredpar value represented by appreciationall shares of the corporation’s stock having a distribution preference.
Wyoming Provisions
Under the WBCA, the payment of dividends is generally permissible unless after giving effect to the dividend or distribution, the corporation would be unable to pay its debts as they became due in the valueusual course of Common Stock and maybusiness, or if the total assets of the corporation would be based on performance objectives. The termless than the sum of its total liabilities plus the amount that would be needed, if the corporation were dissolved at the time the dividend was paid, to satisfy the preferential rights of shareholders whose preferential rights upon dissolution of the corporation are greater than those of the shareholders receiving the dividend.
Corporate Action Without a stock appreciation right is set forth in the award agreement.Shareholder Meeting
Delaware Provisions
The numberDGCL permits corporate action without a meeting of shares of Common Stock that may be issued pursuant tostockholders upon the exercise of a stock appreciation right shall be determined by dividing (i) the total number of shares of Common Stock as to which the stock appreciation right is exercised, multiplied by the amount by which the fair market valuewritten consent of the Common stock on the exercise date exceeds the fair market valueholders of the Common Stock on the date of grant of the stock appreciation right; by (ii) the fair market value of the Common Stock on the exercise date. A cash adjustment shall be paid in lieu of a fractional share of Common Stock.
In lieu of issuing shares of Common Stock upon the exercise of a stock appreciation right, the administrator may elect to pay the cash equivalent of the fair market value of the Common Stock on the exercise date for any or all of the shares of Common Stock that would otherwise be issuable upon exercise of the stock appreciation right. In the case of an event of forfeiture pursuant to an award agreement, including failure to satisfy any restriction period or a performance objective, any stock appreciation right that has not vested prior to the date of termination shall automatically expire.
Dividend Equivalent Right. A dividend equivalent right is an award entitling the recipient to receive credits based on cash distributions that would have been paid on the Common Stock specified in the dividend equivalent right (or other award to which it relates) if such Common Stock had been issued to and held by the recipient. Dividend equivalent rights may be settled in cash or shares of Common Stock or a combination thereof, in a single instalment or instalments, all determined by the administrator.
Limitations on Awards
Unless and until the administrator determines that an award to a grantee is not designed to qualify as performance-based compensation, the following limits apply to grants of awards under the June 2014 Plan: (a) subject to adjustment in accordance with the terms of the June 2014 Plan, the maximum number of shares of Common Stock with respect to one or more stock options or stock appreciation rights that may be granted during any one calendar year under the June 2014 Plan to any one grantee is 2,421,500; and (b) the maximum aggregate grant with respect to awards of restricted stock, unrestricted stock, restricted stock units and deferred stock units (or used to provide a basis of measurement for or to determine the value of restricted stock units and deferred stock units) in any one calendar year to any one grantee (determined on the date of payment of settlement) is 2,421,500.
For so long as the Common Stock is listed on a stock exchange, and to the extent required by the rules of such stock exchange: (i) the number of securities issuable to insiders of the Company, at any time, under all of the Company’s security based compensation arrangements (whether entered into prior to or subsequent to such listing), cannot exceed 10% of the Company’s total issued and outstanding Common Stock, unless the Company obtains disinterested shareholder approval; and (ii) the number of securities issued to insiders of the Company, within any one year period, under all of the Company’s security based compensation arrangements (whether entered into prior to or subsequent to such listing), cannot exceed 10% of the issued and outstanding Common Stock, unless the Company obtains disinterested shareholder approval.
Transferability
No right or interest of a grantee in any unexercised or restricted award may be pledged, encumbered or hypothecated to or in favor of any party other than the Company or a related entity or an affiliate of the Company. No award shall be sold, assigned, transferred or disposed of by a grantee other than by the laws of decent and distribution. The administrator may permit other transfers, subject to certain conditions, including any such transfer being appropriate
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and desirable, taking into account any factors deemed relevant such as state or deferral tax or securities laws applicable to the transfer of awards.
Acceleration
The administrator may, in its sole discretion (but subject to certain tax related limitations), at any time (including, without limitation, prior to, coincident with or subsequent to a change of control of the Company) determine that (a) all or a portion of a grantee’s awards shall become fully or partially exercisable, and/or (b) all or a part of the restrictions on all or a portion of the outstanding awards shall lapse, in each case, as of such date as the Administrator may, in its sole discretion, declare.
Termination of Service
An award may not be exercised after the termination date of such award set forth in the award agreement and may be exercised following the termination of a grantee’s service to the Company only to the extent provided in the award agreement. Where the award agreement permits a grantee to exercise an award following the termination of the grantee’s service to the Company for a specified period, the award shall terminate to the extent not exercised on the last day of the specified period or the last day of the original term of the award, whichever occurs first.
In the event a grantee’s service to the Company has been terminated for “Cause”, such grantee shall immediately forfeit all rights to any and all awards outstanding.
Payment for Share Purchases
Payment for Common Stock purchased pursuant to the June 2014 Plan may be made by cash, surrender of shares of Common Stock owned by the grantee for more than six months (or a lesser period if permitted under applicable securities laws), deemed net-stock exercise, cashless exercise, broker-assisted or any combination thereof as shall be permitted by applicable corporate law and the policies of any stock exchange on which the Company may be listed from time to time.
If payment for Common Stock purchased pursuant to the June 2014 Plan is made through deemed net-stock exercise and such exercise is permitted by the policies of any stock exchange on which the Company may be listed, the grantee shall be required to accept that number of shares necessary to authorize the proposed corporate action being taken, unless the certificate of Common Stock determined in accordance with the following formula, rounded down to the nearest whole integer, where (“a”) is the net sharesincorporation or articles of Common Stock to be issued to the grantee; (“b”) is the number of awards being exercised; (“c”) is the fair market value of a share of Common Stock; and (“d”) is the exercise price of the award:
a = b x (c - d) (d)
If payment for Common Stock purchased pursuant to the June 2014 Plan is made through cashless exercise and such exercise is permitted by the policies of any stock exchange on which the Companyincorporation expressly provide otherwise. The Delaware Charter provides that no action may be listed, the Company shall issue to the grantee the number of shares of Common Stock determined according to the following formula, where (“a”) is the net shares of Common Stock to be issued; (“b”) is the number of awards being exercised; (“c”) is the average “closing sale price” of the Common Stock, as calculated pursuant to the terms of the June 2014 Plan; and (“d”) is the exercise price of the award:
a = b x (c - d) (d)
Adjustment upon Changes in Capitalization
Subject to any required actiontaken by the stockholders of the Company except at an annual or special meeting.
Wyoming Provisions
The WBCA provides that, unless the bylaws provide otherwise, any action required or permitted to be taken at a meeting of the board of directors or of a committee thereof may be taken without a meeting if a written consent thereto is signed by the requisite number of directors or sent by electronic transmission by the requisite number of directors. The Wyoming Charter specifies that any action required or permitted by the WBCA to be taken at a shareholders' meeting may be taken without a meeting, and without prior notice, if consents in writing setting forth the action so taken are signed by the holders of the outstanding shares having not less than the minimum number of votes that would be required to authorize or take the action at a meeting at which all shares entitled to vote on the action were present and voted.
Will I have dissenters’ rights as a result of the Reincorporation?
No, you will not have dissenters’ rights.
How will the Reincorporation be implemented?
The process for converting the Company to a Delaware corporation calls for the Delaware Certificate of Incorporation and the Delaware Certificate of Conversion to be filed with the Delaware Secretary of State and the application for the Wyoming Certificate of Transfer to be filed with the Secretary of State of Wyoming at approximately the time desired for the conversion to take effect.
If the proposal to approve the Reincorporation is approved at the annual meeting and the Company determines to proceed with the Reincorporation, the Company will convert into a Delaware corporation, with all of the assets, rights, privileges and powers of the Company, and all property owned by the Company, all debts due to the Company, as well as all other causes of action belonging to the Company, remaining vested in the Delaware-incorporated Company.
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The Company would remain as the same entity following the conversion, except that the Company will be domiciled in Delaware rather than in Wyoming. The directors and officers of the Company immediately prior to the conversion would be the directors and officers of the Delaware-incorporated Company and the subsidiaries of the Company would be the subsidiaries of the Delaware-incorporated Company.
If the Reincorporation is effected, shareholders do not have to exchange their existing Company stock certificates for stock certificates of the resulting Delaware-incorporated Company; however, after the Reincorporation, any shareholder desiring a new form of stock certificate may submit the existing stock certificate to the Company’s transfer agent for cancellation and obtain a new certificate.
What is the timing of the Reincorporation?
If shareholders approve the Reincorporation at the annual meeting, we intend to cause the Reincorporation to become effective as soon as practicable, subject to the completion of certain legal formalities. The Reincorporation will become effective upon the filing of the Delaware Certificate of Incorporation and the Delaware Certificate of Conversion to be filed with the Delaware Secretary of State and the application for the Wyoming Certificate of Transfer to be filed with the Secretary of State of Wyoming.
Does Helius have the right to abandon the Reincorporation?
The Board of Directors may abandon the Reincorporation at any time prior to its consummation if the Board of Directors determines that the Reincorporation is inadvisable for any reason. For example, Delaware or Wyoming law may be changed to reduce the benefits that we hope to achieve through the Reincorporation, or the costs of operating as a Delaware corporation may be increased, although we do not know of any such changes under consideration.
What will happen to my shares of common stock as a result of the Reincorporation?
There will be no changes to your outstanding shares of common stock as a result of the Reincorporation. Any stock certificate representing issued and outstanding shares of common stock will continue to represent the same number of shares of Common Stockcommon stock following the Reincorporation.
ANY SHARE CERTIFICATES CURRENTLY ISSUED FOR OUR SHARES WILL AUTOMATICALLY REPRESENT SHARES IN HELIUS DELAWARE UPON COMPLETION OF THE MERGER, AND SHAREHOLDERS WILL NOT BE REQUIRED TO SURRENDER OR EXCHANGE ANY SHARE CERTIFICATES AS A RESULT OF THE REINCORPORATION.
Will the common stock continue to be listed for trading after the Reincorporation?
Our common stock is listed for trading on the Nasdaq Capital Market under the ticker symbol “HSDT.” After the Reincorporation, our common stock would continue to be traded on the Nasdaq Capital Market without interruption, under the same symbol.
Will the reincorporation impact Helius’ registration statements with the SEC?
No. The Reincorporation will not affect the registration statements on file with the SEC.
What will be the impact of the Reincorporation on our Employee Benefit and Incentive Compensation Plans?
The Reincorporation will not impact our existing 2016 Omnibus Incentive Plan and our employee benefit plans.
Interest of Our Directors and Executive Officers in the Reincorporation
Our shareholders should be aware that certain of our directors and executive officers may have interests in the transaction that are different from, or in addition to, the interests of the shareholders generally. For example, the Reincorporation may be of benefit to our directors and officers by reducing their potential personal liability and increasing the scope of permitted indemnification, by strengthening directors’ ability to resist a takeover bid, and in
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other respects. The Board of Directors was aware of these interests and considered them, among other matters, in reaching its decision to approve the Reincorporation and to recommend that our shareholders vote in favor of this proposal.
Accounting Consequences Associated with the Reincorporation
The consolidated financial condition and results of operations of Helius Delaware immediately after consummation of the Reincorporation will be substantially identical as those immediately prior to the consummation of the Reincorporation. We believe that there will be no material accounting impact as a result of the Reincorporation.
Certain U.S. Federal Income Tax Consequences
The following discussion summarizes certain U.S. federal income tax consequences of the Reincorporation to holders of our common stock. The discussion is based on the Internal Revenue Code of 1986, as amended, or the Code, regulations promulgated under the Code by the U.S. Treasury Department (including proposed and temporary regulations), rulings, current administrative interpretations and official pronouncements of the Internal Revenue Service, or the IRS, and judicial decisions, all as currently in effect and all of which are subject to differing interpretations or to change, possibly with retroactive effect. Such change could materially and adversely affect the tax consequences described below. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described herein. No ruling from the IRS has been or will be sought with respect to any aspect of the transactions described herein.
This discussion is for general information only, and does not purport to discuss all potential tax effects of the Reincorporation. For example, it does not consider the effect of any applicable state, local, or non-U.S. tax laws, or any non-income tax laws (such as estate and gift tax laws). In addition, it does not address all aspects of U.S. federal income taxation that may affect particular holders in light of their particular investment or tax circumstances, including, without limitation, holders subject to special tax rules, such as partnerships, subchapter S corporations or other entities that are fiscally transparent for U.S. federal income tax purposes, banks, financial institutions, tax-exempt entities, insurance companies, regulated investment companies, real estate investment trusts, trusts and estates, dealers in stocks, securities or currencies, traders in securities that have elected to use the mark-to-market method of accounting for their securities, persons holding our common stock as part of an integrated transaction, including a “straddle,” “hedge,” “constructive sale,” or “conversion transaction,” persons whose functional currency for tax purposes is not the U.S. dollar, persons who acquired our common stock pursuant to the exercise of stock options or otherwise as compensation, persons whose common stock constitutes qualified business stock with the meaning of Section 1202 of the Code, and persons who are not “U.S. persons” as defined below. This summary also does not consider any alternative minimum or Medicare “net investment income” tax considerations. Furthermore, this discussion does not address the tax consequences of transactions occurring prior to or after the Reincorporation (whether or not such transactions are in connection with the Reincorporation).
This discussion is directed solely to holders that hold our common stock as capital assets within the meaning of Section 1221 of the Code, which generally means as property held for investment. In addition, the following discussion only addresses “U.S. persons” for U.S. federal income tax purposes, generally defined as beneficial owners of our common stock who are:
Individuals who are citizens or residents of the United States for U.S. federal income tax purposes;
Corporations (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or of any state of the United States or the District of Columbia;
Estates the income of which is subject to U.S. federal income taxation regardless of its source;
Trusts if a court within the United States is able to exercise primary supervision over the administration of any such trust and one or more U.S. persons have the authority to control all substantial decisions of such trust; or
Trusts in existence on August 20, 1996 that have valid elections in effect under applicable Treasury regulations to be treated as U.S. persons.
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Holders of our common stock who are not covered by each outstanding award,this summary, including partners of partnerships and owners of other pass-through entities holding our capital stock, should consult their own tax advisors.
This discussion does not purport to be a complete analysis of all of the Reincorporation’s tax consequences that may be relevant to holders. We urge you to consult your own tax advisor regarding your particular circumstances and the numberU.S. federal income and other federal tax consequences to you of shares of Common Stock which have been authorized for issuance under the June 2014 Plan but as to which no awards have yet been granted or which have been returned to the June 2014 Plan, the exercise or purchase price of each such outstanding award,Reincorporation, as well as any tax consequences arising under the laws of any state, local, foreign or other terms thattax jurisdiction and the administrator determines require adjustment shallpossible effects of changes in U.S. federal or other tax laws.
Subject to the caveats and qualifications noted above, we believe:
The Reincorporation will constitute a tax-free reorganization under Section 368(a) of the Code;
No gain or loss will be proportionately adjusted for (i) any increase or decreaserecognized by holders on the exchange of their Helius common stock on receipt of Helius Delaware common stock pursuant to the Reincorporation;
The aggregate tax basis of Helius Delaware common stock received by each holder will equal the aggregate tax basis of the Helius common stock surrendered by such holder in exchange therefor; and
The holding period of the Helius Delaware common stock received by each holder will include the period during which such holder held the Helius common stock surrendered in exchange therefor.
23The Board of Directors Recommends
A Vote In Favor of Proposal 3
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numberRatification of issued sharesthe Prior Stock Option Grant to Joyce LaViscount, the Company’s Chief Financial Officer and Chief Operations Officer, to Purchase 800,000 Shares of Common Stock resulting fromon a Pre-Reverse Stock Split Basis
The Helius Medical Technologies, Inc. 2016 Omnibus Incentive Plan (the “Plan”) was adopted by our Board of Directors on August 6, 2016, and our shareholders voted to approve the Plan on September 15, 2016. The Plan was subsequently amended by our Board of Directors in December 2016 to clarify that a holder of a restricted stock split, reverse stock split, stock dividend, combination or reclassificationaward has all of the Common Stock, or (ii) any other increase or decreaserights of a shareholder only in respect of the numbervested portion of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however that conversionrestricted stock award, and not in respect of any convertible securitiesunvested portion.
Under Section 4(b)(i) of the Plan, if the Compensation Committee of the Board of Directors (or if such a committee does not exist, the Board) provides that this section applies to a particular equity award, no employee or consultant of the Company shall notmay be deemedgranted any stock-based awards with respect to have been effected without receiptmore than 500,000 shares of consideration. The administrator shall make the appropriate adjustments to (i) the maximum number and/or class of securities issuablecommon stock during any fiscal year (the “500,000 Share Limit”). Thus, under the June 2014 Plan;terms of the Plan, the Compensation Committee or the Board have the authority and (ii)discretion to award stock-based awards that exceed the number and/or class500,000 Share Limit.
On April 17, 2017, pursuant to the Plan, the Board of securities andDirectors granted Ms. LaViscount an option to purchase up to 800,000 shares on a pre-reverse stock split basis of the Company’s common stock at an exercise price per share of Common Stock in effect under each outstanding award in order to prevent$1.63 (the “Option”), based on the dilution or enlargement of benefits thereunder.
Corporate Transactions
If the Company is involved in a “corporate transaction”, “change of control” or “related entity disposition” (as such terms are defined in the June 2014 Plan) in which the Company is not the surviving corporation, the administrator may cancel each outstanding award upon payment in cash to the grantee of: (i) the amount by which any cash and the fair market value of any other property which the grantee would have received as consideration for the Common Stock covered by the award if the award had been exercised before such corporate transaction, change in control or related entity disposition; exceeds (ii) the exerciseclosing price of the award, or to negotiate to have such award assumed bycommon stock on the surviving corporation.
In addition toTSX, translated into U.S. dollars from Canadian dollars based on the foregoing, in the event of a dissolution or liquidation of the Company, or a corporate transaction or related entity disposition in which the Company is not the surviving corporation, the administrator may accelerate the time within which each outstanding award may be exercised. The administrator shall also have the authority to release the awards from restrictions on transfer and repurchase or forfeiture rights of such awards on such terms and conditions as the administrator may specify; and to condition any such award’s vesting and exercisability or release from such limitations upon the subsequent termination of the grantee’s service to the Company within a specified period following the effective date of the corporate transaction, change in control or related entity disposition. Where the Company is not the surviving corporation, all awards not exercised by the grantee or assumed by the successor corporation shall terminate at the time of the corporate transaction, change of control or related entity disposition.
In the event of a corporate transaction, change in control or related entity disposition in which the Company is the surviving corporation, the administrator shall determine the appropriate adjustment of the number and kind of securities with respect to which outstanding awards may be exercised, and the exercise price at which outstanding awards may be exercised.
Notwithstanding the foregoing, if there is a change of control of the Company, all outstanding awards shall fully vest immediately upon the Company’s public announcement of such a change of control.
Amendment
The Board may amend, suspend or terminate the June 2014 Plan at any time and for any reason. To the extent necessary to comply with applicable laws, the Company shall obtain stockholder approval of any June 2014 Plan amendment in such a manner and to such a degree as required. Stockholder approval shall be required for the following types of amendments to the June 2014 Plan: (i) any change to those persons who are entitled to become participants under the June 2014 Plan which would have the potential of broadening or increasing insider participation; or (ii) the addition of any form of financial assistance or amendment to a financial assistance provision which is more favorable to grantees.
The administrator may amend or modify the June 2014 Plan: (i) to make amendments which are of a “housekeeping” or clerical nature; (ii) to change the vesting provisions of an award granted hereunder, as applicable; (iii) to change the termination provision of an award granted hereunder, as applicable, which does not entail an extension beyond the original expiry date of such award; and (iv) the addition of a cashless exercise feature, payable in cash or securities, which provides for a full deduction of the number of underlying securitiesbuying rate from the maximum numberBank of shares of Common Stock which may be issued under the June 2014 Plan.
Notwithstanding the foregoing, the administrator shall have broad authority to amend the June 2014 Plan or any outstanding award thereunder without approval of the grantee to the extent necessary or desirable: (i) to comply
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with, or take into account changes in, applicable tax laws, securities laws, accounting rules and other applicable laws, rules and regulations; or (ii) to ensure that an award is not subject to interest and penalties under the United StatesInternal Revenue Code of 1986.
Compliance with Applicable Law
An award issued under the June 2014 Plan shall not be effective unless such award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Common Stock may then be listed or quoted, as they are in effect ofCanada, on the date of grant (collectively, the “Option Grant”). The Option vests annually in equal installments over four years, beginning on April 17, 2017, and will expire on April 17, 2027. As of the award and on the dateMarch 31, 2018, no shares of exercise or other issuance.
2016 Incentive Plan Proposal
Please refercommon stock subject to the disclosure under Proposal 5Option have vested. The purchase price for a summaryshares of the material terms of the 2016 Incentive Plan which was approved by the Board on August 8, 2016.
Securities Authorized For Issuance Under Compensation Plans
The following table sets forth the securities to be issued under the 2014 Stock Option Plan as at March 31, 2016:
Number of securities | |||||
remaining available for | |||||
Number of securities to | Weighted-average exercise | future issuance under | |||
be | |||||
issued upon exercise of | price of outstanding | equity compensation plans | |||
outstanding options, | options, warrants and | (excluding securities | |||
warrants and rights | rights | reflected in column (a)) | |||
(a) | (b) | (c) | |||
Equity compensation plans approved by security holders | - | - | - | ||
| |||||
Equity compensation plans not approved by security holders(1) | 4,920,000 | $ 0.8989(2) | 7,188,016 | ||
Total | 4,920,000 | $ 0.8989(2) | 7,188,016 |
(1) Represents grants ofcommon stock options pursuantsubject to the Plan. See “Executive Compensation— June 2014 Stock Incentive Plan” for aOption must be paid in full at the time the Option is exercised. The description of the material features of the Plan.Option is subject to, and is qualified entirely by, the full text of the Option, which is attached hereto as Appendix C.
(2)On December 12, 2017, a shareholder of the Company sent a demand letter to the Company (the “Demand Letter”) challenging the Option as invalid under Section 4(b)(i) of the Plan and demanding that the Board of Directors rescind the portion of the Option that exceeds the 500,000 Share Limit—i.e., the 300,000 shares above 500,000 shares (the “Excess Shares”). Ms. LaViscount was the only individual to receive awards covering more than 500,000 shares of Common Stock in any fiscal year under the 2016 Plan; however, similar grants were awarded to other executive officers under the 2014 Plan which did not have a similar 500,000 Share Limit. In general, awards of this size are consistent with our past compensation practices.
The weighted-average exercise priceCompany has denied, and continues to deny, the shareholder’s claim and maintains that the Option was denominatedvalidly granted under the Plan. The 500,000 Share Limit was included in Canadian dollarsthe Plan to allow for awards that may be deductible by the Company under applicable United States tax law should the Company require such a tax deduction, and converted into U.S. dollars basedthe Plan permits grants outside the limit to the extent the grants are not intended to qualify for such tax treatment. Nonetheless, to eliminate the burden, expense, and uncertainty of any potential litigation that might arise from the Demand Letter, the Company has agreed to seek shareholder approval of the Excess Shares. The Company believes that shareholder approval of the Option Grant for the Excess Shares is not required and that the entire Option, including the Excess Shares, was validly and properly granted by the Board of Directors under the terms of the Plan and the Company’s bylaws and charter, and was in the best interest of the Company. Nonetheless, in order to respond fully to and resolve the Demand Letter, the Board of Directors has authorized the Company to submit this proposal to the Company’s shareholders.
If the shareholders do not ratify and approve the Option Grant for the Excess Shares, then the Excess Shares will be not be issuable and the Compensation Committee will explore measures to appropriately compensate Ms. LaViscount, which could include the grant of a new stock option, restricted stock units or restricted stock, or the payment of cash, or a combination of the foregoing. The Board of Directors believes that such alternative measures to appropriately compensate Ms. LaViscount could result in a compensation charge to the Company and less favorable accounting and tax treatment for the Company.
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The Board of Directors Recommends
A Vote In Favor of Proposal 4.
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Approval of the Company’s 2018 Equity Incentive Plan
We are asking our shareholders to approve the Helius Medical Technologies, Inc. 2018 Equity Incentive Plan, or the 2018 Plan, at the annual meeting. The 2018 Plan was approved by our Board of Directors, or Board, on May 15, 2018, subject to approval by our shareholders, in the form attached as Appendix D. The 2018 Plan is intended to be the successor to the Helius Medical Technologies, Inc. 2016 Omnibus Incentive Plan (the “2016 Plan”) and the Helius Medical Technologies, Inc. June 2014 Stock Incentive Plan (the “2014 Plan” and, together with the 2016 Plan, the “Prior Plans”).
To be approved, this Proposal 5 must receive “For” votes from the holders of a majority of shares held by disinterested persons present in person or represented by proxy and entitled to vote on the Bankmatter. Uninstructed proxies will not be voted and will have the same effect as “Against” votes. Broker non-votes will have the same effect as a vote “Against” Proposal 5. Also, shares held by interested persons (our directors and executive officers who are eligible to receive shares under the 2018 Plan) will not be eligible to vote on the proposal.
Proposal 5 must receive “For” votes from the holders of Canada nominal noon exchange ratea majority of shares held by disinterested persons because the 2018 Plan does not include a limit on March 31,the number of shares subject to awards that may be granted to certain insiders of the Company under the 2018 Plan (the “Insider Participation Limit”) as prescribed in the TSX Company Manual and that is included in the 2016 Plan, as further discussed below. Because the 2018 Plan does not contain the Insider Participation Limit, the TSX Company Manual requires approval by the holders of CAD$1.00 = USD $0.7710.a majority of shares held by disinterested persons, meaning shares held by interested persons (our directors and executive officers who are eligible to receive shares under the 2018 Plan) will not be eligible to vote on the proposal. As of May 15, 2018, our directors and executive officers who are eligible to receive shares under the 2018 Plan hold 2,879,608 shares, representing 12.4% of our total issued and outstanding shares.
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Why Are We Asking our Shareholders to Approve the 2018 Plan?
Currently, we maintain the 2016 Plan to grant stock options, restricted stock units and other stock awards in order to provide long-term incentives to our employees, consultants and directors. Our Board of Directors has decided to adopt and seek approval for the 2018 Plan as the successor to and continuation of the 2016 Plan and the 2014 Plan because it wanted to update the plan provisions to conform with current market practices and tax laws.
Approval of the 2018 Plan by our shareholders will allow us to continue to grant stock options, restricted stock awards and other stock-based awards, including restricted stock units, at levels determined appropriate by our Board or Compensation Committee. The 2018 Plan will also allow us to utilize a broad array of equity incentives in order to secure and retain the services of our employees, non-employee directors and consultants, and to provide long-term incentives that align the interests of our employees, directors and consultants with the interests of our shareholders.
Requested Shares
Subject to adjustment for certain changes in our capitalization, if this Proposal 5 is approved by our shareholders, the aggregate number of shares of our common stock that may be issued under the 2018 Plan will not exceed the sum of (i) the number of unallocated shares remaining available for the grant of new awards under the Prior Plans as of the effective date of the 2018 Plan (which is equal to 2,356,114 shares as of May 15, 2018), (ii) 3,000,000 new shares, and (iii) certain shares subject to outstanding awards granted under the Prior Plans that may become available for grant under the 2018 Plan as such shares become available from time to time (as further described below in “Summary of the 2018 Plan—Shares Available for Awards”). As of May 15, 2018, there were (i) 2,356,114 shares remaining available for grant under our Prior Plans and (ii) 2,748,072 shares subject to outstanding awards granted under the Prior Plans.
Based on historic grant practices, our Board has estimated that such aggregate number of shares should be sufficient to cover awards needed for our current employees and expected new hires.
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Outstanding Equity Awards Are an Integral Component of Our Compensation Program
Our Board and Compensation Committee believe that our future success depends, in large part, on our ability to maintain a competitive position in attracting, retaining and motivating key personnel, consultants and advisors. Equity awards have been historically and, we believe, will continue to be an integral component of our overall compensation program for our employees, consultants and directors. The issuance of equity awards better aligns the interests of our personnel, consultants and advisors with those of our shareholders. Our Board and Compensation Committee believe it is reasonable and prudent to maintain sufficient share reserves for equity incentive awards to allow us to attract, hire and retain high-quality talent with market-competitive incentives as we build out our infrastructure and drive commercialization. Approval of the 2018 Plan will allow us to continue to grant stock options and other equity awards at Fiscal Year-Endlevels we determine to be appropriate in order to attract new employees and directors, retain our existing employees and to provide incentives for such persons to exert maximum efforts for the Company’s success and ultimately increase shareholder value. The 2018 Plan allows the Company to utilize a broad array of equity incentives with flexibility in designing such incentives, including traditional option grants, stock appreciation rights, restricted stock awards, restricted stock unit awards and performance stock awards.
At May 15, 2018, stock awards covering an aggregate of 2,748,072 shares were outstanding under our Prior Plans collectively.
The following table provides certain additional information regarding our equity incentive program.
Number of | Number of | ||||||||
Securities | Securities | ||||||||
Underlying | Underlying | ||||||||
Unexercised | Unexercised | ||||||||
Options | Options | Option | |||||||
Option | |||||||||
(#) | (#) | Exercise Price | Expiration | ||||||
Name | Exercisable | Unexercisable | ($) | Date | |||||
Philippe Deschamps | 1,200,000 | 600,000 | (1) | 0.55 | (2) | 06/18/2019 | |||
Joyce LaViscount | 66,667 | 33,333 | (3) | 2.51 | (4) | 03/16/2020 | |||
250,000 | 500,000 | (5) | 0.66 | (6) | 10/21/2020 | ||||
Jonathan Sackier | 300,000 | 100,000 | (7) | 2.58 | (8) | 12/08/2019 |