INVO Fertility, Inc DEF 14A, filed Jun 4, 2025
INVO Fertility, Inc. (IVF)
About this DEF 14A
INVO Fertility, Inc filed this DEF 14A on June 4, 2025.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
| Filed by the Registrant ☒ | Filed by a Party other than the Registrant ☐ |
Check the appropriate box:
| ☐ | 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 |
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| ☒ | No fee required. |
| ☐ | Fee paid previously with preliminary materials. |
| ☐ | Fee computed on table in exhibit required by Item 2(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
INVO Fertility, Inc.
5582 Broadcast Court
Sarasota, Florida 34240
NOTICE OF 2025 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 25, 2025
To the Stockholders of INVO Fertility, Inc.:
The 2025 Annual Meeting of Stockholders (the “Annual Meeting”) of INVO Fertility, Inc., a Nevada corporation (the “Company,” “IVF,” “we,” “us,” or “our”), will be held virtually on June 25, 2025 at 12:00 p.m. Eastern Time. The Annual Meeting will be held virtually at www.virtualshareholdermeeting.com/INVO2025. At the Annual Meeting, the holders of our outstanding common stock will act on the following matters:
| 1. | To elect five directors to the Board of Directors (the “Board”) of the Company (the “Director Election Proposal”); | |
| 2. | The ratification of the appointment of M&K CPAS, PLLC as our independent registered public accounting firm for the fiscal year ended December 31, 2025 (the “Auditor Ratification Proposal”); | |
| 3. | The approval of an amendment to our Amended and Restated Articles of Incorporation to increase the number of authorized shares of our common stock from 4,166,666 to 50,000,000 (the “Common Stock Increase Proposal”); | |
| 4. | The issuance, in accordance with Nasdaq Listing Rule 5635, of (a) our common stock, upon conversion of our outstanding Series C-2 Non-Voting Convertible Preferred Stock (the “Series C-2 Preferred”), (b) any additional shares of our common stock, upon conversion of our Series C-2 Preferred issued under the Additional Investment Right (as defined below), and (c) any additional shares of our common stock due to an adjustment event pursuant to the terms of the Series C-2 Preferred (the “Series C-2 Preferred Conversion Proposal”);
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5
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The issuance, in accordance with Nasdaq Listing Rule 5635, of (a) our common stock, upon conversion of an outstanding 7.0% Senior Secured Convertible Debenture in the principal balance of $4,803,175 due February 11, 2026 (the “Amended and Restated Debenture”), and (b) any additional shares of our common stock due to an adjustment event pursuant to the terms of the Amended and Restated Debenture (the “Amended and Restated Debenture Conversion Proposal”); | |
| 6. | The issuance, in accordance with Nasdaq Listing Rule 5635, of (a) our common stock, upon conversion of outstanding warrants issued pursuant to an inducement letter agreement dated April 30, 2025 (the “Inducement Warrants”), and (b) any additional shares of our common stock due to an adjustment event pursuant to the terms of the Inducement Warrants (the “Inducement Warrant Exercise Proposal”); | |
7. |
The approval of a third amendment and restatement of our 2019 Stock Incentive Plan to increase the number of shares of our common stock available for issuance thereunder to a total amount of 1,200,000, equal to approximately 10% of the total of our total issued and outstanding stock on a fully-diluted basis (the “Plan Amendment Proposal”); | |
8.
9. |
The approval, by non-binding advisory vote, of the resolution approving named executive officer compensation (the “Say on Pay Proposal”); and
To conduct any other business properly brought before the Annual Meeting or any continuation, postponement, or adjournment thereof. | |
These items of business are more fully described in the Proxy Statement accompanying this Notice. The Annual Meeting will be a completely virtual meeting of stockholders, which will be conducted exclusively on the Internet. The record date for the Annual Meeting is May 21, 2025. Only stockholders of record at the close of business on that date are entitled to notice of and to vote at the meeting or any adjournment thereof.
Important Notice Regarding the Availability of Proxy Materials for the Stockholders’ Meeting
to Be Held Virtually on June 25, 2025 at 12:00 p.m. (ET) virtually via the Internet at www.virtualshareholdermeeting.com/INVO2025.
The
proxy statement and Annual Report on Form 10-K
are available at www.proxyvote.com.
| By Order of the Board of Directors, | |
| /s/ Steven Shum | |
| Steven Shum | |
| Chief Executive Officer and Director | |
| Sarasota, Florida | |
| June 4, 2025 |
You are cordially invited to attend the meeting virtually via the Internet. Whether or not you expect to attend the meeting, please complete, date, sign and return the enclosed proxy, or vote by phone or online as instructed in these materials, as promptly as possible in order to ensure your representation at the meeting. A return envelope (which is postage prepaid if mailed in the United States) has been provided for your convenience. Even if you have voted by proxy, you may still vote via the Internet at the meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.
TABLE OF CONTENTS
| i |
5582 Broadcast Court
Sarasota, Florida 34240
(978) 878-9505
PROXY STATEMENT
2025 ANNUAL MEETING OF STOCKHOLDERS
To Be Held Virtually on June 25, 2025
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
| Q. | Why did I receive these proxy materials? |
| A. | We are sending you these proxy materials because our board of directors (the “Board”) is soliciting your proxy to vote at the Annual Meeting. You are invited to attend the Annual Meeting virtually via the Internet to vote on the proposals described in this proxy statement. However, you do not need to attend the Annual Meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card, or follow the instructions below to submit your proxy by phone or online. We intend to begin mailing this proxy statement, the attached notice of Annual Meeting, and the enclosed proxy card, on or about June 4, 2025 to all stockholders of record entitled to vote at the Annual Meeting. Only stockholders who owned our common stock on May 21, 2025 are entitled to vote at the Annual Meeting. |
| Q. | How do I attend the Annual Meeting? |
| A. | The Annual Meeting will be held on June 25, 2025 at 12:00 p.m. (ET) virtually via the Internet. The Annual Meeting will be a completely virtual meeting of stockholders, which will be conducted exclusively online at www.virtualshareholdermeeting.com/INVO2025. Information on how to vote at the Annual Meeting is discussed below. |
| Q. | Who can vote at the Annual Meeting? |
| A. | Only stockholders of record as of the close of business on May 21, 2025 (the “Record Date”) will be entitled to notice of, and to vote at, the Annual Meeting. The holders of Series C-1 and C-2 Preferred Stock are not entitled to vote on the matters being considered at the annual meeting. A list of stockholders eligible to vote at the Annual Meeting is available for inspection at any time up to the Annual Meeting. If you would like to inspect the list, please call our Corporate Secretary at (978) 878-9505 to arrange a visit to our offices. |
Stockholder of Record: Shares Registered in Your Name
If on May 21, 2025 your shares were registered directly in your name without Transfer Online, Inc. (“Transfer Online”), then you are a stockholder of record. As a stockholder of record, you may vote via the Internet at the Annual Meeting or vote by proxy. Whether or not you plan to attend the Annual Meeting, we urge you to fill out and return the enclosed proxy card or vote by proxy by phone or online as instructed below to ensure your vote is counted.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
If, on May 21, 2025, your shares were not held in your name, but rather in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. You may vote via the Internet at the Annual Meeting or vote by proxy. Whether or not you plan to attend the Annual Meeting, we urge you to fill out and return the enclosed proxy card or vote by proxy by phone or online as instructed below to ensure your vote is counted.
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| Q. | What is the purpose of the annual meeting? |
| A. | At the annual meeting, stockholders will consider and vote on the following matters: |
| 1. | To elect five directors to the Board of Directors (the “Board”) of the Company (the “Board Election Proposal”); | |
| 2. | The ratification of the appointment of M&K CPAS, PLLC as our independent registered public accounting firm for the fiscal year ended December 31, 2025 (the “ Auditor Ratification Proposal”); | |
| 3. | The approval of an amendment to our Amended and Restated Articles of Incorporation to increase the number of authorized shares of our common stock from 4,166,666 to 50,000,000 (the “Common Stock Increase Proposal”); | |
| 4. | The issuance, in accordance with Nasdaq Listing Rule 5635, of (a) our common stock, upon conversion of our outstanding Series C-2 Non-Voting Convertible Preferred Stock (the “Series C-2 Preferred”), (b) any additional shares of our common stock, upon conversion of our Series C-2 Preferred issued under the Additional Investment Right (as defined below), and (c) any additional shares of our common stock due to an adjustment event pursuant to the terms of the Series C-2 Preferred (the “Series C-2 Preferred Conversion Proposal”); | |
5. |
The issuance, in accordance with Nasdaq Listing Rule 5635, of (a) our common stock, upon conversion of an outstanding 7.0% Senior Secured Convertible Debenture in the principal balance of $4,803,175 due February 11, 2026 (the “Amended and Restated Debenture”), and (b) any additional shares of our common stock due to an adjustment event pursuant to the terms of the Amended and Restated Debenture (the “Amended and Restated Debenture Conversion Proposal”); | |
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6. |
The issuance, in accordance with Nasdaq Listing Rule 5635, of (a) our common stock, upon exercise of outstanding warrants issued pursuant to an inducement letter agreement dated April 30, 2025 (the “Inducement Warrants”), and (b) any additional shares of our common stock due to an adjustment event pursuant to the terms of the Inducement Warrants (the “Inducement Warrant Exercise Proposal”); | |
| 7. | The approval of a third amendment and restatement of our 2019 Stock Incentive Plan (the “Plan”) to increase the number of shares of our common stock available for issuance thereunder to a total amount of 1,200,000, equal to approximately 10% of the total of our total issued and outstanding stock on a fully-diluted basis (the “Plan Amendment Proposal”); | |
| 8. | The approval, by non-binding advisory vote, of the resolution approving named executive officer compensation (the “Say on Pay Proposal”); and
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| 9. | To conduct any other business properly brought before the Annual Meeting or any continuation, postponement or adjournment thereof. |
As of the date of this proxy statement, we are not aware of any business to come before the meeting other than the items noted above.
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| Q. | What if another matter is properly brought before the Annual Meeting? |
| A. | Our Board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the Annual Meeting, the person named as proxy in the proxy card intends to vote the proxies (which confer discretionary authority to vote on such matters) in accordance with his judgment on the matter. |
| Q. | How do I vote? |
| A. | The procedures for voting are: |
The answer depends on whether you own your shares of common stock directly (that is, you hold shares that show your name as the registered stockholder) or if your shares are held in a brokerage account or by another nominee holder.
| Q. | If you own your shares directly (i.e., you are a “registered stockholder”): |
| A. | Your proxy is being solicited directly by us, and you can (1) vote via the Internet at the Annual Meeting, (2) vote by proxy using the enclosed proxy card, (3) vote by proxy online or (4) vote by proxy by phone. Whether or not you plan to attend the Annual Meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the Annual Meeting and vote via the Internet even if you have already voted by proxy |
If you wish to vote by mail, please do the following: (i) sign and date the proxy card, (ii) mark the boxes indicating how you wish to vote, and (iii) return the proxy card in the prepaid envelope provided. If you sign your proxy card but do not indicate how you wish to vote, the proxy will vote your shares “FOR ALL” of the five nominees for director, “FOR” the ratification of M&K CPAS, PLLC as independent auditors for the year ending December 31, 2025, “FOR” increasing the number of authorized shares, “FOR” the issuance of our common stock upon conversion of our outstanding Series C-2 Preferred, any additional shares of our common stock, upon conversion of our Series C-2 Preferred issued under the Additional Investment Right (as defined below), and any additional shares of our common stock due to an adjustment event pursuant to the terms of the Series C-2 Preferred, “FOR” the issuance of our common stock upon conversion of the Amended and Restated Debenture, and any additional shares of our common stock due to an adjustment event pursuant to the terms of the Amended and Restated Debenture, “FOR” the issuance of our common stock upon conversion of the Inducement Warrants, and any additional shares of our common stock due to an adjustment event pursuant to the terms of the Inducement Warrants, “FOR” increasing the number of shares of common stock available for issuance under the Plan, “FOR” The Say on Pay Proposal and in his discretion on any other matter that properly comes before the Annual Meeting. Unsigned proxy cards will not be counted.
If you wish to vote over the Internet, go to www.proxyvote.com. Use the Internet to transmit your voting instructions until 11:59 p.m. Eastern Time on June 24, 2025. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. There may be costs associated with electronic access, such as usage charges from Internet access providers that must be paid by the stockholder. The Internet voting procedures are designed to authenticate a stockholder’s identity to allow a stockholder to vote his, her or its shares and confirm that his, her or its instructions have been properly recorded. Voting over the Internet authorizes the named proxy to vote your shares in the same manner as if you had submitted a validly executed proxy card.
If you wish to vote by telephone, you may vote by calling 1-800-690-6903.
If you wish to vote at the Annual Meeting, go to www.virtualshareholdermeeting.com/INVO2025 and enter the 16-digit control number provided with your proxy materials. Just prior to the start of the meeting you will need to log back into the meeting site using your control number. Pre-registration is recommended but is not required to attend.
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| Q. | If you hold your shares through a broker, bank, or other nominee: |
| A. | If you are the beneficial owner of shares held in street name through a bank, broker or other nominee, you may not vote your shares at the Annual Meeting unless you obtain a “legal proxy” from the bank, broker or nominee that holds your shares, giving you the right to vote the shares at the Annual Meeting. A voting instruction card has been provided to you by your broker, bank or other nominee describing how to vote your shares. If you receive a voting instruction card, you can vote by completing and returning the voting instruction card. Please be sure to mark your voting choices on your voting instruction card before you return it. You may also be able to vote via the Internet or by telephone. Please refer to the instructions provided with your voting instruction card for information about voting. See also “Will my shares be voted if I do not return my proxy?” below. |
| Q. | How many votes do I have? |
| A. | On each matter to be voted upon, you have one vote for each common share you own as of May 21, 2025. |
| Q. | Will my shares be voted if I do not return my proxy? |
| A. | If your shares are registered directly in your name, your shares may not be voted if you do not vote by returning your proxy by mail, over the phone or over the Internet before the Annual Meeting or in person at the Annual Meeting. |
If your shares are held in “street name,” your brokerage firm, bank or other nominee may, under certain circumstances, vote your shares if you do not timely return your voting instructions. Brokers, banks or other nominees can vote their customers’ unvoted shares on discretionary matters but cannot vote such shares on non-discretionary matters. If you do not timely return voting instructions to your brokerage firm, bank or other nominee to vote your shares, your brokerage firm, bank or other nominee may, on discretionary matters, either vote your shares or leave your shares unvoted.
| Q. | Who is paying for this proxy solicitation? |
| A. | We will pay for the entire cost of soliciting proxies. We will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and other materials to our stockholders. Our officers and other employees may solicit proxies in person or by telephone but will receive no special compensation for doing so. |
| Q. | What does it mean if I receive more than one set of proxy materials? |
| A. | 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. |
| Q. | What if I want to change my vote or revoke my proxy? |
| A. | If your shares are registered directly in your name, you may revoke your proxy and change your vote at any time before the Annual Meeting. To do so, you must do one of the following: |
| 1. | Vote over the Internet as instructed above. Only your latest Internet vote is counted. You may not revoke or change your vote over the Internet after 11:59 p.m. Eastern Time on June 24, 2025. | |
| 2. | Sign a new proxy and submit it by mail to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717 who must receive the proxy card no later than June 24, 2025. Only your latest dated proxy will be counted. | |
| 3. | You may attend the Annual Meeting and vote via the Internet. Simply attending the Annual Meeting will not, by itself, revoke your proxy. | |
| 4. | Give our Corporate Secretary written notice before or at the Annual Meeting that you want to revoke your proxy. |
If your shares are held in “street name,” you may submit new voting instructions with a later date by contacting your bank, brokerage firm, or other nominee. You may also vote electronically at the Annual Meeting, which will have the effect of revoking any previously submitted voting instructions, if you obtain a broker’s legal proxy as described in the answer to the question “How do I vote my shares?” above.
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| Q. | When are stockholder proposals and director nominations due for the 2026 Annual Meeting? |
| A. | To be considered for inclusion in next year’s proxy materials, stockholder proposals must be submitted in writing in accordance with the procedures in Rule 14a-18 of the Exchange Act to our Corporate Secretary at 5582 Broadcast Court, Sarasota, FL 34240. Since the date of the 2026 annual meeting of stockholders will change by more than 30 days from the anniversary of our 2025 annual meeting, such proposals must be received by us by a reasonable time before we begin to print and send our proxy materials. Upon receipt of any such proposal, we will determine whether or not to include such proposal in the proxy statement and proxy card in accordance with regulations governing the solicitation of proxies. If you wish to nominate an individual for election at, or bring business other than through a stockholder proposal before the 2026 Annual Meeting, you must deliver your notice to our Corporate Secretary at the address above between or mailed and received at the principal executive offices of the corporation not later than the close of business on the sixtieth (60th) day nor earlier than the close of business on the ninetieth (90th) day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than thirty (30) days from the date contemplated at the time of the previous year’s proxy statement, notice by the stockholder to be timely must be so received not earlier than the close of business on the ninetieth (90th) day prior to such annual meeting and not later than the close of business on the later of the sixtieth (60th) day prior to such annual meeting or, in the event public announcement of the date of such annual meeting is first made by the corporation fewer than seventy (70) days prior to the date of such annual meeting, the close of business on the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the corporation. Your notice to the Corporate Secretary must set forth information specified in our bylaws, including your name and address and the class and number of our common shares that you beneficially own. If you propose to bring business before an annual meeting other than a director nomination, your notice must also include, as to each matter proposed, the following: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) your name and address, (iii) the class and number of shares of the corporation which you beneficially own, (iv) any material interest that you have in your proposal, and (v) any other information that you are required to be provided pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). If you propose to nominate an individual for election as a director, your notice must also include, as to each proposed nominee: (i) her or his name, age, business address and residence address, (ii) her or his principal occupation or employment, (iii) the class and number of shares of our share capital that are owned of record or beneficially by her or him, (iv) the date or dates on which the shares were acquired and the investment intent of the acquisition, and (v) any other information concerning the proposed nominee as would be required to be disclosed in a proxy statement soliciting proxies for the election of such proposed nominee in a contested election (even if a contested election is not involved), or that is otherwise required to be disclosed pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated under the Exchange Act, including the proposed nominee’s written consent to being named as a nominee and to serving as a director if elected. We may require any proposed nominee to furnish other information as we may reasonably require to determine the eligibility of the proposed nominee to serve as an independent director or that could be material to a reasonable stockholder’s understanding of the independence, or lack of independence, of the proposed nominee. |
The Board strives in its membership profile to have a mix of backgrounds and expertise that enhances the ability of the directors collectively to understand the issues facing the Company and to fulfill the responsibilities of the Board and its committees. It is the policy of the Board that nominees reflect the following characteristics:
| ● | Each director must at all times exhibit high standards of integrity, commitment, and independence of thought and judgment. |
| ● | The Board as a whole will contain a range of talent, skill, and expertise sufficient to provide sound and prudent guidance with respect to all of the Company’s operations and interests, which may include experience at senior levels in public companies, leadership positions in the life sciences, healthcare or public-health fields, science or technology backgrounds and financial expertise. |
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| ● | Each director should exhibit confidence and a willingness to express ideas and engage in constructive discussion with other Board members, Company management, and all relevant persons. | |
| ● | Each director should be willing and able to devote sufficient time, energy, and attention to the affairs of the Company. | |
| ● | Each director should actively participate in the decision-making process, be willing to make difficult decisions in the best interest of the Company and its stockholders, and demonstrate diligence and faithfulness in attending Board and committee meetings. | |
| ● | Each director should be free of any conflict of interest that would impair the director’s ability to fulfill the responsibilities of a Member of the Board. | |
| ● | No director shall be employed by, or serve on the board of, any present or potential competitor of the Company. |
The Board is committed to having diverse individuals from different backgrounds with varying perspectives, professional experience, education and skills serving as members of the Board. The Board believes that a diverse membership with a variety of perspectives and experiences is an important feature of a well-functioning board.
| Q. | How are votes counted? |
| A. | Votes will be counted by the inspector of election appointed for the Annual Meeting, who will separately count votes, broker non-votes and any abstentions for each of the proposals. |
| Q. | What is a Broker Non-Vote? |
| A. | A “broker non-vote” occurs when shares held by a broker in “street name” for a beneficial owner are not voted with respect to a proposal because (1) the broker has not received voting instructions from the stockholder who beneficially owns the shares and (2) the broker lacks the authority to vote the shares at their discretion. Broker non-votes will not be included in the tabulation of the voting results of any of the “non-discretionary” proposals and, therefore, will have no effect on such proposals. |
| Q. | What is a quorum? |
| A. | The holders of one-third of the 2,161,131 shares of common stock outstanding as of the Record Date, either present or represented by proxy, constitute a quorum. A quorum is necessary in order to conduct the Annual Meeting. 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 Annual Meeting. If you choose to have your shares represented by proxy at the Annual Meeting, you will be considered part of the quorum. Broker non-votes and abstentions will be counted as present for the purpose of establishing a quorum. If a quorum is not present by attendance at the Annual Meeting or represented by proxy, the stockholders present by attendance at the meeting or by proxy may adjourn the Annual Meeting until a quorum is present. |
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| Q. | How many shares do the affiliates, directors, and officers of the Company beneficially own, and how do they plan to vote their shares? |
| A. | Directors and executive officers, who, as of the Record Date, had beneficial ownership (or had the right to acquire beneficial ownership within sixty days following the Record Date) of approximately 1.1% of our outstanding voting capital and are expected to vote in favor of all five directors to the Board, to vote in favor of, the Auditor Ratification Proposal, in favor of the Common Stock Increase Proposal, in favor of the Series C-2 Preferred Conversion Proposal, in favor of the Amended and Restated Debenture Conversion Proposal, in favor of the Inducement Warrant Exercise Proposal, in favor of the Plan Amendment Proposal, in favor of the Say on Pay Proposal, and to approve the adjournment of the Annual Meeting to a later date or time, if necessary, to permit further solicitation and vote of proxies if necessary. |
| Q. | How can I find out the results of the voting at the Annual Meeting? |
| A. | Preliminary voting results will be announced at the Annual Meeting. In addition, final voting results will be announced 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 Annual Meeting, we intend to file a Form 8-K to announce preliminary results and, within four business days after the final results are known to us, file an additional Form 8-K to announce the final results. |
| Q. | What proxy materials are available on the internet? |
| A. | The proxy statement and our Annual Report on Form 10-K are available at www.proxyvote.com, in the “Important Materials” section. |
| Q. | What vote is required to approve each matter, and how are votes counted? |
Proposal 1 – Board Election Proposal
Directors are elected by a plurality of the votes of the shares present in person or represented by proxy and entitled to vote on the election of directors, and which did not abstain. Accordingly, for Proposal 1, the nominees receiving the highest number of votes cast for the number of positions to be filled are elected. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of each of the five nominees named below Broker non-votes will have no effect on the voting on Proposal 1.
You may:
| ● | vote FOR all nominees; | |
| ● | vote FOR one or more nominees and WITHHOLD your vote from the other nominee or nominees; or | |
| ● | WITHHOLD your vote from all nominees. |
Votes that are withheld will not be included in the vote tally for the election of directors and will not affect the vote results.
Proposal 2 — Auditor Ratification Proposal
The affirmative vote of the stockholders representing a majority of the votes cast at the Annual Meeting on the matter is required ratify M&K CPAS, PLLC as our independent registered public accounting firm for the year ended December 31, 2025. If your shares are held by a bank, broker, or other nominee and you do not timely provide voting instructions with respect to your shares, we expect that your bank, broker, or other nominee will have the authority to vote your shares on Proposal 2. If you vote to ABSTAIN on Proposal 2, your shares will not be voted FOR or AGAINST the proposal. As a result, voting to ABSTAIN will have no effect on the voting on Proposal 2.
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Proposal 3 – Common Stock Increase Proposal
The affirmative vote of the stockholders representing a majority of the outstanding shares of our common stock entitled to vote on the matter is required to approve Proposal 3. If your shares are held by a bank, broker, or other nominee and you do not timely provide voting instructions with respect to your shares, we expect that your bank, broker, or other nominee will not have the authority to vote your shares on Proposal 3. Because Proposal 3 requires the affirmative vote of the stockholders representing a majority of the outstanding shares of our common stock entitled to vote on the matter, voting to ABSTAIN will have the same effect as a vote AGAINST Proposal 3.
Proposal 4 — Series C-2 Preferred Conversion Proposal
The affirmative vote of the stockholders representing a majority of the votes cast on the matter is required to approve Proposal 4. Shares held in street name by a bank, broker, or other nominee who indicate on their proxies that they do not have authority to vote the shares on Proposal 4 will not be counted as votes FOR or AGAINST Proposal 4 and will be treated as broker non-votes. Broker non-votes will have no effect on the voting on Proposal 4. If you vote to ABSTAIN on Proposal 4, your shares will not be voted FOR or AGAINST the proposal and will also not be counted as votes cast of shares voting on Proposal 4. As a result, voting to ABSTAIN will have no effect on the voting on Proposal 4.
Of the shares of our common stock outstanding entitled to vote at the annual meeting, 22 shares of common stock were issued in the Company’s acquisition of NAYA Therapeutics, Inc. (f/k/a NAYA Biosciences, Inc.; “NAYA TX”) will not count as votes in favor of Proposal 4 pursuant to the listing rules of the Nasdaq Stock Market.
Proposal 5 — Amended and Restated Debenture Conversion Proposal
The affirmative vote of the stockholders representing a majority of the votes cast on the matter is required to approve Proposal 5. Shares held in street name by a bank, broker, or other nominee who indicate on their proxies that they do not have authority to vote the shares on Proposal 5 will not be counted as votes FOR or AGAINST Proposal 5 and will be treated as broker non-votes. Broker non-votes will have no effect on the voting on Proposal 5. If you vote to ABSTAIN on Proposal 5, your shares will not be voted FOR or AGAINST the proposal and will also not be counted as votes cast of shares voting on Proposal 5. As a result, voting to ABSTAIN will have no effect on the voting on Proposal 5.
Of the shares of our common stock outstanding entitled to vote at the annual meeting, 22 shares of common stock were issued in the Company’s acquisition of NAYA TX will not count as votes in favor of Proposal 5 pursuant to the listing rules of the Nasdaq Stock Market.
Proposal 6 — Inducement Warrant Exercise Proposal
The affirmative vote of the stockholders representing a majority of the votes cast on the matter is required to approve Proposal 6. Shares held in street name by a bank, broker, or other nominee who indicate on their proxies that they do not have authority to vote the shares on Proposal 6 will not be counted as votes FOR or AGAINST Proposal 6 and will be treated as broker non-votes. Broker non-votes will have no effect on the voting on Proposal 6. If you vote to ABSTAIN on Proposal 6, your shares will not be voted FOR or AGAINST the proposal and will also not be counted as votes cast of shares voting on Proposal 6. As a result, voting to ABSTAIN will have no effect on the voting on Proposal 6.
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Proposal 7 — Plan Amendment Proposal
The affirmative vote of the stockholders representing a majority of the votes cast on the matter is required to approve Proposal 7. Shares held in street name by a bank, broker, or other nominee who indicate on their proxies that they do not have authority to vote the shares on Proposal 7 will not be counted as votes FOR or AGAINST Proposal 7 and will be treated as broker non-votes. Broker non-votes will have no effect on the voting on Proposal 7. If you vote to ABSTAIN on Proposal 7, your shares will not be voted FOR or AGAINST the proposal and will also not be counted as votes cast of shares voting on Proposal 7. As a result, voting to ABSTAIN will have no effect on the voting on Proposal 7.
Proposal 8 — Say on Pay Proposal
The affirmative vote of the stockholders representing a majority of the votes cast on the matter is required to approve Proposal 8. Shares held in street name by a bank, broker, or other nominee who indicate on their proxies that they do not have authority to vote the shares on Proposal 8 will not be counted as votes FOR or AGAINST Proposal 8 and will be treated as broker non-votes. Broker non-votes will have no effect on the voting on Proposal 8. If you vote to ABSTAIN on Proposal 8, your shares will not be voted FOR or AGAINST the proposal and will also not be counted as votes cast of shares voting on Proposal 8. As a result, voting to ABSTAIN will have no effect on the voting on Proposal 8.
| Q. | Who will count the vote? |
| A. | The votes will be counted, tabulated, and certified by Transfer Online, Inc. |
| Q. | How does the board of directors recommend that I vote on the proposals? |
| A. | Our board of directors recommends that you vote: |
FOR the election of all nominees to serve as directors;
FOR the ratification of the appointment of M&K CPAS, PLLC as our independent registered public accounting firm for the fiscal year ended December 31, 2025;
FOR increasing the number of authorized shares;
FOR the issuance of our common stock upon conversion of our outstanding Series C-2 Preferred, any additional shares of our common stock, upon conversion of our Series C-2 Preferred issued under the Additional Investment Right (as defined below), and any additional shares of our common stock due to an adjustment event pursuant to the terms of the Series C-2 Preferred;
FOR the issuance of our common stock upon conversion of the Amended and Restated Debenture and any additional shares of our common stock due to an adjustment event pursuant to the terms of the Amended and Restated Debenture;
FOR the issuance of our common stock upon conversion of the Inducement Warrants and any additional shares of our common stock due to an adjustment event pursuant to the terms of the Inducement Warrants;
FOR increasing the number of shares of common stock available for issuance under the Plan; and
FOR the resolution approving named executive officer compensation.
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| Q. | Are there other matters to be voted on at the annual meeting? |
| A. | We do not know of any matters that may come before the annual meeting other than Proposals 1, 2, 3, 4, and 5. If any other matters are properly presented at the annual meeting, the persons named in the accompanying proxy intend to vote or otherwise act in accordance with their judgment on the matter. |
| Q. | What are the costs of soliciting these proxies? |
| A. | We will bear the cost of soliciting proxies. We have retained Okapi Partners LLC to assist us in the solicitation of proxies for an aggregate fee of approximately $25,000 to $30,000. In addition to solicitation by mail, our directors, officers, and employees may solicit proxies by telephone, e-mail, facsimile, and in person without additional compensation. We may reimburse brokers or persons holding stock in their names, or in the names of their nominees, for their expenses in sending proxies and proxy material to beneficial owners. |
Implications of Being a Smaller Reporting Company
We are a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates is less than $700.0 million and our annual revenue was less than $100.0 million during our most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue was less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. As a smaller reporting company, we may rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and smaller reporting companies have reduced disclosure obligations regarding executive compensation.
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MATTERS TO BE VOTED ON
Proposal 1: Election of Directors
Our Board currently has five members, whose terms of office expire at the Annual Meeting. The Board has nominated Mr. Steven Shum, Mr. Trent Davis, Mr. Matthew Szot, Ms. Barbara Ryan, and Ms. Rebecca Messina for election, each of whom is presently a director. If re-elected at the Annual Meeting, each of these nominees will serve until the next annual meeting and until her or his successor has been duly elected and qualified, or, if sooner, until her or his death, resignation or removal. It is the Company’s policy to invite and encourage directors and director nominees to attend the Annual Meeting.
Directors are elected by a plurality of the votes of the shares present in person or represented by proxy and entitled to vote on the election of directors, and which did not abstain. Accordingly, for Proposal 1, the nominees receiving the highest number of votes cast for the number of positions to be filled are elected. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of each of the five nominees named below.
If any of the nominees become unavailable for election as a result of an unexpected occurrence, shares that would have been voted for such nominee will instead be voted for the election of a substitute nominee that the Board proposes. Each person nominated for election has agreed to serve if elected. We have no reason to believe that any of the nominees will be unable to serve.
NOMINEES FOR DIRECTORS
Our directors seek 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 has 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 Board views as critical to its effective functioning. 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 he or she should continue to serve on the Board. However, each of the members of the Board may have a variety of reasons why he or she believes a particular person would be an appropriate nominee for the Board, and these views may differ from the views of other members.
On the recommendation of the nominating and governance committee, our Board has nominated Mr. Steven Shum, Mr. Trent Davis, Mr. Matthew Szot, Ms. Barbara Ryan, and Ms. Rebecca Messina for election, each of whom is presently a director. Our Board believes that the election or reelection of each director nominee identified above is advisable and in the best interests of the Company and our stockholders.
Steven M. Shum. Mr. Shum, 54, is our Chief Executive Officer, a position he has held since October 10, 2019 and is also a director, a position he has held since October 11, 2017. Previously, Mr. Shum was Interim Chief Executive Officer (from May 2019 to October 7, 2019) and Chief Financial Officer of Eastside Distilling (Nasdaq: ESDI) (from October 2015 to August 2019). Prior to joining Eastside, Mr. Shum served as an Officer and Director of XZERES Corp, a publicly traded global renewable energy company, from October 2008 until April 2015 in various officer roles, including Chief Operating Officer from September 2014 until April 2015, Chief Financial Officer, Principal Accounting Officer and Secretary from April 2010 until September 2014 (under former name, Cascade Wind Corp) and Chief Executive Officer and President from October 2008 to August 2010. Mr. Shum also serves as the managing principal of Core Fund Management, LP and the Fund Manager of Core Fund, LP. He was a founder of Revere Data LLC (now part of Factset Research Systems, Inc.) and served as its Executive Vice President for four years, heading up the product development efforts and contributing to operations, business development, and sales. He spent six years as an investment research analyst and portfolio manager of D.N.B. Capital Management, Inc. His previous employers include Red Chip Review and Laughlin Group of Companies. He earned a B.S. in Finance and a B.S. in General Management from Portland State University in 1992. Mr. Shum currently serves as a director of Expion360 (Nasdaq XPON) and CalEthos Inc. (OTC: GEDC). We believe that Mr. Shum is qualified to serve as a member of our board of directors because of his experience and knowledge of corporate finance, mergers and acquisitions, corporate governance, as well as other operational, financial and accounting matters gained as our current chief executive officer and past chief executive officer and chief financial officer and director of other public and private companies.
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Matthew Szot. Mr. Szot, 50, has been a member of our Board since September 13, 2020, and Chairman of the Audit Committee, a position he has held since September 14, 2020. Mr. Szot is currently the Chief Financial Officer of Cadrenal Therapeutics, Inc. (Nasdaq: CKVD), a late-stage biopharmaceutical company, where he has served since May 2022. From March 2010 to November 2021, Mr. Szot served as the Executive Vice President and Chief Financial Officer of S&W Seed Company (Nasdaq: SANW), an agricultural biotechnology company. Mr. Szot is also currently a director and serves as Vice Chairman of the board, Chairman of the Audit Committee and a member of both the Compensation Committee and Nominating and Governance Committees of SenesTech (Nasdaq: SNES), a publicly traded life science company with next generation technologies for managing animal pest populations through fertility control. From June 2018 to August 2019, Mr. Szot served on the board of directors and as Chairman of the Audit Committee of Eastside Distilling, Inc. (Nasdaq; EAST), a publicly traded company in the craft spirits industry. From February 2007 until October 2011, Mr. Szot served as the Chief Financial Officer for Cardiff Partners, LLC, a strategic consulting company that provided executive financial services to various publicly traded and privately held companies. Prior thereto, from 2003 to December 2006, Mr. Szot served as Chief Financial Officer and Secretary of Rip Curl, Inc., a market leader in wetsuit and action sports apparel products. From 1996 to 2003, Mr. Szot was a Certified Public Accountant with KPMG in the San Diego and Chicago offices and served as an Audit Manager for various publicly traded companies. Mr. Szot graduated with High Honors from the University of Illinois, Champaign-Urbana with a Bachelor of Science degree in Agricultural Economics/Accountancy. Mr. Szot is a Certified Public Accountant in the State of California. We believe that Mr. Szot is qualified to serve as a member of our board of directors because of his experience and knowledge of corporate finance, mergers and acquisitions, corporate governance, as well as other operational, financial and accounting matters gained as a past and present chief financial officer and director of other public and private companies.
Trent Davis. Mr. Davis, 56, has been a member of our Board since December 2019 Mr. Davis also serves as the Chairman of our Nominating and Corporate Governance Committee, a position he has held since November 2020. In addition, Mr. Davis is currently CEO of Paulson Investment Company, LLC, a boutique investment firm that specializes in private equity offerings of small and mid-cap companies. From December 2014 to December 2018, Mr. Davis was President and Chief Operating Officer of Whitestone Investment Network, Inc., which provides executive advisory services and also restructures, recapitalizes and makes strategic investments in small to midsize companies. Since March 2018, Mr. Davis served as a director of Senmiao Technology Limited (Nasdaq: AIHS), an online lending platform in China. From August 2016 to August 2019, Mr. Davis served as director of Eastside Distilling, Inc. (Nasdaq: EAST), and from July 2015 to April 2017, he served as director of Dataram Corporation (Nasdaq: DRAM). Mr. Davis helped to successfully complete the reverse merger between Dataram and U.S. Gold Corp (Nasdaq: USAU), a gold exploration and development company. From December 2014 to July 2015, Mr. Davis served as Chairman of the Board of Majesco Entertainment Company (Nasdaq: COOL). Mr. Davis also served as director and President of Paulson Capital Corp. (Nasdaq: PLCC) from November 2013 to July 2014, when Paulson Capital Corp. completed a reverse merger with VBI Vaccine (Nasdaq: VBIV). Mr. Davis continued to serve on the board and the audit committee of VBI until May 2016. Prior to serving on the board of Paulson Capital Corp., Mr. Davis served as the Chief Executive Officer of its subsidiary, Paulson Investment Company, LLC, where he oversaw he syndication of approximately $600 million of investment in over 50 client companies in both public and private transactions. In 2003, Mr. Davis served as Chairman of the Board of the National Investment Banking Association. Mr. Davis holds a B.S. in Business and Economics from Linfield College and an M.B.A. from the University of Portland. Mr. Davis is qualified to serve on the Board because of his deep knowledge of finance and public company issues, capital market, advisory and entrepreneurial experiences, and extensive expertise in operational and executive management. We believe that Mr. Davis is qualified to serve as a member of our board of directors because of his experience and knowledge of corporate finance, mergers and acquisitions, corporate governance, as well as other operational, financial and accounting matters gained as a past and present executive officer and/or director of other public and private companies.
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Barbara Ryan. Ms. Ryan, 65, has been a member of our Board, a member of the audit committee and nominating and governance committee since September 2020 and the Chairwoman of the compensation committee since May 2024. Ms. Ryan founded Barbara Ryan Advisors, a capital markets and communications firm, in 2012 following a more than 30-year career on Wall Street as a sell-side research analyst covering the US Large Cap Pharmaceutical Industry. Ms. Ryan has deep experience in equity and debt financings, M&A, valuation, SEC reporting, financial analysis and corporate strategy across a broad range of life sciences companies. Barbara worked on several of the industry’s largest M&A transactions; Shire’s defense versus a hostile takeover attempt by Abbvie, Shire’s takeover of Baxalta, Allergan’s defense against Valeant and Perrigo’s defense versus Mylan. Barbara served as an executive team member and on the disclosure committee for Radius Health from January 2014 to December 2017 and played a critical role in the Company’s IPO and subsequent follow on offerings which raised over $1 billion. Previously, Ms. Ryan was a Managing Director at Deutsche Bank/Alex Brown and Head of the company’s Pharmaceutical Research Team for 19 years and began her research career covering the pharmaceutical industry at Bear Stearns in 1982. Ms. Ryan also covered the drug wholesalers and PBMs and was the lead analyst on many high-profile IPO’s including Express Scripts, PSSI, and Henry Schein. Ms. Ryan currently serves as a director on the Board of MiNK Therapeutics where she Chairs the Audit Committee, Safecor Heatlh, OcuTerra Therapeutics, and The Red Door Community (formerly Gilda’s Club NYC), a non-profit organization. Barbara is the Founder of Fabulous Pharma Females, a non-profit whose mission is to advance women in the biopharma industry, is a member of the Editorial Advisory Board of Pharmaceutical Executive Magazine, a Faculty member of the GLG Institute and a member of the Prix Galien Executive Advisory Board. We believe that Ms. Ryan is qualified to serve as a member of our board of directors because of her experience and knowledge of corporate finance, mergers and acquisitions, corporate governance, as well as other operational, financial and accounting matters gained as a past and present executive officer and/or director of other public and private companies.
Rebecca Messina. Ms. Messina, 52, has been a member of our Board since April 2021. Ms. Messina also serves as the Chairman of our Marketing Committee, a position she has held since May 2021 and as a member of our audit committee, a position she has held since August 2022. Ms. Messina is currently a senior advisor at McKinsey & Company, a position she has held since 2019. From 2018-2019, Ms. Messina served as Global Chief Marketing Officer for Uber and from 2016-2018, Ms. Messina served as Senior Vice President, Global Chief Marketing Officer for Beam Suntory. Prior to that, Ms. Messina spent 22 years with The Coca-Cola Company in various roles of increasing responsibility, serving as Senior Vice President, Marketing & Innovation, Ventures & emerging Brands from 2014-2016. Ms. Messina is currently a director for each of Vive Organics, Archer Boose, Make-A-Wish Foundation Bartesian, Outdoor Voices and Mobile Marketing Association, all private companies. Ms. Messina received her Bachelor of Arts from Miami University of Ohio in 1994. We believe that Ms. Messing is qualified to serve as a member of our board of directors because of her experience and knowledge of corporate finance, mergers and acquisitions, corporate governance, as well as other operational, financial and accounting matters gained as a past and present executive officer and/or director of other public and private companies.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE “FOR ALL” NOMINEES IN PROPOSAL NO. 1.
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Proposal 2: Ratification of the Appointment of Independent Registered Public Accounting Firm
The audit committee of the Board has selected M&K CPAS, PLLC as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2025 and has further directed that management submit the selection of its independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. M&K CPAS, PLLC has audited the Company’s financial statements since September 2019.
Neither the Company’s bylaws nor other governing documents or law require stockholder ratification of the selection of M&K CPAS, PLLC as the Company’s independent registered public accounting firm. However, the Board is submitting the selection of M&K CPAS, PLLC to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the audit committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the audit committee in its discretion may direct the appointment of different independent auditors at any time during the year if they determine that such a change would be in the best interests of the Company and its stockholders.
Required Vote
The affirmative vote of a majority of the votes cast at the Annual Meeting is required to approve Proposal No. 2.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” APPROVAL OF PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table represents aggregate fees billed to the Company by M&K.
Fiscal
Year Ended | Fiscal
Year Ended | |||||||
| Audit Fees | $ | 109,950 | $ | 71,350 | ||||
| Audit Related Fees | $ | 26,500 | $ | 44,350 | ||||
| Tax Fees | $ | - | $ | - | ||||
| All Other Fees | $ | - | $ | - | ||||
Audit Fees includes fees billed for the fiscal year shown for professional services for the audit of the Company’s annual financial statements, the reviews of the consolidated quarterly financial statements included in each of our quarterly reports on Form 10-Q, and other audit services.
Audit-Related Fees include fees for assurance and related services performed to comply with generally accepted auditing standards and including audit of target acquisition companies and comfort and consent letters in connection with SEC filings and financing transactions.
PRE-APPROVAL POLICIES AND PROCEDURES
Our Board has adopted a procedure for pre-approval of all fees charged by our independent auditors. Under the procedure, the Board approves the engagement letter with respect to audit and review services. Other fees are subject to pre-approval by the Board, or, in the period between meetings, by a designated member of the Board. Any such approval by the designated member is disclosed to the entire Board at the next meeting. The audit fees paid to the auditors with respect to fiscal years 2024 and 2023 were pre-approved by the entire Board.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF M&K CPAS, PLLC AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDED DECEMBER 31, 2025.
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Proposal 3: Approval of an Amendment to our Amended and Restated Articles of Incorporation, as Amended, to Increase the Number of Authorized Shares of our Common Stock from 4,166,666 to 50,000,000.
Background
We are asking our stockholders to approve an amendment to our Amended and Restated Articles of Incorporation, as amended, to increase the number of authorized shares of our common stock. Our authorized capital stock presently consists of 4,166,666 shares of common stock, $0.00001 par value per share (“common stock”), 30,375 shares of which are designated as Series C-1 Convertible Preferred Stock, par value $0.0001 per share, and 20,000 shares of which are designated as Series C-2 Convertible Preferred Stock, par value $0.0001 per share and 99,949,625 of which are designated as preferred stock, par value $0.0001 per share.
As of June 3, 2025, 2,161,131 shares of our common stock were issued and outstanding. In addition, as of June 3, 2025, there were:
| ● | 1,644,908 shares of common stock issuable upon exercise of outstanding warrants and unit purchase options with a weighted average exercise price of $4.13 per share, of which 698,760 may not be converted until stockholder approval; |
| ● | 8,192 shares of common stock issuable upon exercise of outstanding options with a weighted average exercise price of $422.05 per share. | |
| ● | 3,069,550 shares of common stock issuable upon conversion of outstanding convertible notes with a weighted average conversion price of $1.58 per share, of which 2,983,339 may not be converted until stockholder approval; | |
| ● | 4,837,888 shares of common stock issuable upon conversion of outstanding series C-2 preferred stock which may not be converted until stockholder approval; | |
| ● | 5,574 shares of common stock reserved for future issuance under the 2019 Stock Incentive Plan. |
Except as otherwise indicated herein, all information in this proxy reflects or assumes that none of the securities above were converted or exercised.
Accordingly, as of June 3, 2025, out of the 4,166,666 shares of common stock presently authorized, 3,207,256 shares are issued and outstanding or reserved for issuance and 959,410 shares of common stock remain available for future issuance.
The approval of this Proposal 3 is necessary for (a) the conversion of the Series C-2 Preferred Stock into our shares of common stock, the issuance any additional shares of our common stock, upon conversion of our Series C-2 Preferred issued under the Additional Investment Right (as defined below), the issuance of any additional shares of our common stock due to an adjustment event pursuant to Proposal 4, (b) the conversion of the Amended and Restated Debenture into our shares of common stock and the issuance of any additional shares of our common stock due to an adjustment event pursuant to Proposal 5, (c) the conversion of the Inducement Warrants into our shares of common stock and the issuance of any additional shares of our common stock due to an adjustment event pursuant to Proposal 6, (d) the reservation of 1,200,000 shares of common stock for future issuance under the Second Amended and Restated 2019 Plan as described in Proposal 7, and (e) to enable the Company to raise equity capital in pursuit of its business and operating objectives, primary amongst which are additional acquisition of in vitro fertilization clinics to reach cash flow breakeven as soon as possible.
Overview of the Proposed Amendment
A copy of the amendment to our Amended and Restated Articles of Incorporation, as amended, is attached as Annex A to this proxy statement. The proposed amendment provides that the section (a) of the Article thereof numbered “IV” of our Amended and Restated Articles of incorporation, as amended, be deleted in its entirety, and replaced with the following:
“(a) The total number of shares of all classes of stock of which the Corporation shall have the authority to issue is 150,000,000 shares, consisting of (i) 50,000,000 shares of Common Stock, $0.00001 par value per share (“Common Stock”), and (ii) 100,000,000 shares of Preferred Stock, $0.00001 par value per share (“Preferred Stock”).”
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The proposed amendment, if approved by our stockholders, would become effective upon the filing of a certificate of amendment of our restated Articles of Incorporation, as amended, with the Secretary of State of the State of Nevada. Our board of directors reserves the right, notwithstanding stockholder approval and without further action by our stockholders, to elect not to proceed with the proposed amendment if the board of directors determines that the proposed amendment is no longer in our best interests and the best interests of our stockholders.
If our stockholders approve the proposed amendment, subject to the discretion of the Board, we intend to file the certificate of amendment of our restated Articles of Incorporation, as amended, with the Secretary of State of the State of Nevada as soon as practicable after the Annual Meeting.
Rationale for the Proposed Amendment
Over the past several years, we have used shares of our common stock to, among other things, engage in financings, incentivize and compensate employees and other service providers, and for other general corporate purposes. Our Board believes that it is in the best interests of our Company to increase the number of authorized shares of our common stock in order to give us greater flexibility in considering and planning for potential business needs. The increase in the number of authorized but unissued shares of common stock would enable us, without the expense and delay of seeking stockholder approval, to issue shares from time to time as may be required for proper business purposes.
We anticipate that we may issue additional shares of common stock in the future in connection with one or more of the following:
| ● | financing transactions, such as public or private offerings of common stock or convertible securities; | |
| ● | strategic investments, mergers, acquisitions, and other transactions; | |
| ● | licenses, partnerships, collaborations, and other similar transactions; | |
| ● | our equity incentive plans; and | |
| ● | other corporate purposes that have not yet been identified. |
At this time, we do not have any plans, proposals, or arrangements, written or oral, to issue any of the proposed additional authorized shares of our common stock for general corporate or any other purposes. However, the Board believes that the availability of additional authorized shares of our common stock will afford us needed flexibility in acting upon financing transactions to strengthen our financial position and/or engaging in strategic activities without using cash. Unless required by applicable law or stock exchange rules, no further vote of the holders of common stock will be required with respect to any such transaction.
Potential Effects of the Proposed Amendment
The additional shares of common stock for which authorization is sought would be identical in powers, privileges and rights to the shares of common stock that are now authorized. Holders of common stock do not have preemptive rights to subscribe to additional securities that we may issue.
The issuance of additional shares of common stock may, among other things, have a dilutive effect on earnings per share and on stockholders’ equity and voting rights. Further, future sales of substantial amounts of our common stock, or the perception that these sales might occur, could adversely affect the prevailing market price of our common stock or limit our ability to raise additional capital. Stockholders should recognize that, as a result of this proposal, they will own a smaller percentage of shares relative to the total authorized shares of the company than they presently own.
Our Board has not proposed the increase in amount of authorized shares with the intention of discouraging tender offers or takeover attempts. However, the availability of additional authorized shares for issuance may have the effect of discouraging a merger, tender offer, proxy contest, or other attempt to obtain control.
Required Vote
The affirmative vote of the stockholders representing a majority of the outstanding shares of our common stock entitled to vote on the matter is required to approve Proposal 3.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” APPROVAL OF THE AMENDMENT TO OUR RESTATED ARTICLES OF INCORPORATION, AS AMENDED, TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF OUR COMMON STOCK FROM 4,166,666 TO 50,000,000 AFTER THE REVERSE SPLIT APPROVED BY THE BOARD OF DIRECTORS.
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Proposal 4: To Approve the Issuance, in accordance with Nasdaq Listing Rule 5635, of (a) Our Common Stock, Upon Conversion of Our Outstanding Series C-2 Preferred Stock, (b) Any Additional Shares of Our Common Stock, Upon Conversion of Our Series C-2 Preferred Issued under the Additional Investment Right (as defined below), and (c) Any Additional Shares of Our Common Stock Due to an Adjustment Event Pursuant to the Terms of the Series C-2 Preferred.
We are seeking approval of our stockholders to issue shares of our common stock upon conversion of our outstanding Series C-2 Convertible Preferred Stock (the “Series C-2 Preferred”) and upon conversion of any additional shares of Series C-2 Preferred that we may issue under an “Additional Investment Right” (defined below) we have granted to Five Narrow Lane LP (“FNL”), including any additional shares of our common stock that may result pursuant to an adjustment event pursuant to the terms of the Series C-2 Preferred.
Background
Acquisition of NAYA TX
On October 11, 2024, we entered into an Amended and Restated Agreement and Plan of Merger (the “A&R Merger Agreement”) with NAYA TX and our wholly-owned subsidiary, INVO Merger Sub (“Merger Sub”) and consummated and the transactions contemplated thereby. Upon the terms and subject to the conditions set forth in the A&R Merger Agreement, Merger Sub merged with and into NAYA TX, with Legacy TX continuing as the surviving corporation and our wholly owned subsidiary (the “Merger”). As a result of the Merger:
| ● | Each share of Class A common stock, par value $0.000001 per share, and Class B common stock, par value $0.000001 per share, of NAYA TX outstanding immediately prior to the effective time of the Merger, other than certain excluded shares held by NAYA TX as treasury stock or owned by us or Merger Sub, automatically converted into the right to receive 9,486 shares of our common stock and 30,375 shares of our newly-designated Series C-1 Convertible Preferred Stock (the “Series C-1 Preferred”). |
| ● | Certain outstanding debt obligations of NAYA TX, including a portion of an amended and restated senior secured convertible debenture issued to FNL, with a combined principal balance of $8,575,833 converted into the right to receive 55,793 shares of our common stock and 8,576 shares of our newly-designated Series C-2 Preferred. We thereafter agreed to issue to FNL a pre-funded common stock purchase warrant to purchase up to 38,293 shares of our common stock in lieu of 38,293 shares of the aforementioned common stock. |
| ● | The remaining balance of the amended and restated senior secured convertible debenture issued to FNL in the amount of $3,934,146 was exchanged for a 7.0% Senior Secured Convertible Debenture in the principal balance of $3,934,146 due December 11, 2025 (the “Original Debenture”). |
| ● | NAYA TX stock options were be converted into options to acquire a number of shares of our common stock equal to the number of shares of NAYA TX common stock subject to such NAYA TX options multiplied by 0.74267 (the “Exchange Ratio”) (rounded up to the nearest whole share) at an exercise price per share of such NAYA TX stock option divided by the Exchange Ratio, and NAYA TX restricted stock units were converted into our restricted stock units representing the right to receive a number of shares of our common stock equal to the number of shares of NAYA TX common stock subject to such NAYA TX restricted stock unit multiplied by the Exchange Ratio. |
Description of Preferred Stock Issued Pursuant to the Merger
Series C-1 Preferred
On October 14, 2024, we filed with the Nevada Secretary of State a Certificate of Designation of Series C-1 Convertible Preferred Stock (the “Series C-1 Certificate of Designation”) which sets forth the rights, preferences, and privileges of the Series C-1 Preferred. (On May 28, 2025, we amended the Initial Series C-2 Certificate of Designation as described below, see “Amended Series C-1 Certificate of Designation” on page 21 of this proxy statement). Thirty thousand three hundred seventy five (30,375) shares of Series C-1 Preferred with a stated value of $1,000.00 per share were authorized under the Series C-1 Certificate of Designation.
Each share of Series C-1 Preferred has a stated value of $1,000.00, which is convertible into shares of our common stock at a conversion price equal to $12.345 (after giving to 1-for-12 reverse stock split effected by the Company on March 18, 2025 (the “Reverse Stock Split”)), subject to adjustments set forth in the Series C-1 Certificate of Designation. The Series C-1 Preferred may not be converted into shares of our common stock unless and until our stockholders approve the issuance of common stock upon conversion of the Series C-1 Preferred. Each share of Series C-1 Preferred shall automatically convert into our common stock if our stockholders approve the issuance, except that we may not effect such conversion if, after giving effect to the conversion or issuance, the holder, together with its affiliates, would beneficially own in excess of 19.99% of our outstanding common stock.
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Commencing on the ninety-first (91st) day after the first issuance of any Series C-1 Preferred, the holders of Series C-1 Preferred shall be entitled to receive dividends on the stated value at the rate of two percent (2%) per annum, payable in shares of our common stock at the conversion price. Such dividends shall continue to accrue until paid. Such dividends will not be paid in shares of our common stock unless and until our stockholders approve the issuance of common stock upon conversion of the Series C-1 Preferred. The holders of Series C-1 Preferred shall also be entitled to receive a pro-rata portion, on an as-if convertible basis, of any dividends payable on our common stock.
The Series C-1 Preferred ranks senior to our common stock and junior to the Series C-2 Preferred. Subject to the rights of the holders of any senior securities, in the event of any voluntary or involuntary liquidation, dissolution, or winding up, or sale of our company, each holder of Series C-1 Preferred shall be entitled to receive its pro rata portion of an aggregate payment equal to the amount as would be paid on our common stock issuable upon conversion of the Series C-1 Preferred, determined on an as-converted basis, without regard to any beneficial ownership limitation.
Other than those rights provided by law, the Series C-1 Preferred has no voting rights. The Series C-1 Preferred is not redeemable.
The foregoing summary of the Series C-1 Certificate of Designation is not complete and is qualified in its entirety by reference to the Series C-1 Certificate of Designation, a copy of which was filed as Exhibit 3.2 to a Current Report on Form 8-K filed on October 15, 2024 and is incorporated herein by reference.
Series C-2 Preferred
On October 14, 2024, we filed with the Nevada Secretary of State a Certificate of Designation of Series C-2 Convertible Preferred Stock (the “Initial Series C-2 Certificate of Designation”) which sets forth the rights, preferences, and privileges of the Series C-2 Preferred. (On May 23, 2025, we amended the Initial Series C-2 Certificate of Designation as described below, see “Amended Series C-2 Certificate of Designation” on page 19 of this proxy statement). Eight thousand five hundred seventy six (8,576) shares of Series C-2 Preferred with a stated value of $1,000.00 per share were authorized under the Initial Series C-2 Certificate of Designation.
Each share of Series C-2 Preferred has a stated value of $1,000.00, which, along with any additional amounts accrued thereon pursuant to the terms of the Initial Series C-2 Certificate of Designation (collectively, the “Conversion Amount”) is convertible into shares of our common stock. The initial conversion price of the Series C-2 Preferred was equal to $8.2716 per share (as adjusted for the Reverse Stock Split), subject to adjustments set forth in the Initial Series C-2 Certificate of Designation, including customary adjustments for stock dividends, stock splits, reclassifications and the like, and price-based adjustment in the event of any issuances of Common Shares, or securities convertible, exercisable or exchangeable for Common Shares, at a price below the then applicable conversion price (subject to certain exceptions). Pursuant to the foregoing adjustment provisions in the Initial Series C-2 Certificate of Designation, the conversion price of the Series C-2 Preferred was adjusted to $1.61 per share on May 1, 2025.
The Series C-2 Preferred may not be converted into shares of our common stock unless and until our stockholders approve the issuance of common stock upon conversion of the Series C-2 Preferred. Each share of Series C-2 Preferred shall become convertible into our common stock at the option of the holder of such Series C-2 Preferred shares if the our stockholders approve the issuance of common stock upon conversion of the Series C-2 Preferred, except that we may not effect such conversion if, after giving effect to the conversion or issuance, the holder, together with its affiliates, would beneficially own in excess of 9.99% of our outstanding common stock.
Pursuant to the Initial Series C-2 Certificate of Designation, commencing on the ninety-first (91st) day after the first issuance of any Series C-2 Preferred, the holders of Series C-2 Preferred were entitled to receive dividends on the stated value at the rate of ten percent (10%) per annum, payable in shares of our common stock, with each payment of a dividend payable in shares of our common stock at a conversion price of eighty-five percent (85%) of the average of the volume weighted average price of our common stock for the five (5) trading days before the applicable dividend date. Such dividends continued to accrue until paid. Such dividends were not paid in shares of our common stock unless and until our stockholders approved the issuance of common stock upon conversion of the Series C-2 Preferred. The holders of Series C-2 Preferred were also entitled to receive a pro-rata portion, on an as-if convertible basis, of any dividends payable on our common stock. (For a description of the amendment to the dividend provisions, see “May 23, 2025 FNL Agreements” on page 19 of this proxy statement).
The Series C-2 Preferred ranks senior to our common stock and to our Series C-1 Preferred. Subject to the rights of the holders of any senior securities, in the event of any voluntary or involuntary liquidation, dissolution, or winding up, or sale of our company, each holder of Series C-2 Preferred shall be entitled to receive its pro rata portion of an aggregate payment equal to the greater of (a) 125% of the Conversion Amount with respect to such shares, and (b) the amount as would be paid on our common stock issuable upon conversion of the Series C-2 Preferred, determined on an as-converted basis, without regard to any beneficial ownership limitation.
Other than those rights provided by law, the Series C-2 Preferred has no voting rights. The Series C-2 Preferred is only redeemable upon a “Bankruptcy Triggering Event” or a “Change of Control” that occurs 210 days after the closing date of the Merger.
The foregoing summary of the Initial Series C-2 Certificate of Designation is not complete and is qualified in its entirety by reference to the Initial Series C-2 Certificate of Designation, a copy of which was filed as Exhibit 3.3 to the Current Report on Form 8-K filed on October 15, 2024 and is incorporated herein by reference.
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Partial Redemption of Series C-2 Preferred
On January 13, 2025, we entered into a Class C-2 Preferred Stock Redemption Agreement (the “Redemption Agreement”) with FNL, pursuant to which we purchased and acquired from FNL 4,000 shares of Series C-2 Preferred for $4,000,000. Accrued dividends of $104,444.44, plus any other accrued payments under Series C-2 Certificate of Designation, remain outstanding.
2024 Annual Meeting
On February 11, 2025, we filed a definitive proxy statement (the “February Proxy”) in connection with our annual meeting of stockholders (the “2024 ASM”). The 2024 ASM was scheduled for March 10, 2025, at 12 pm Eastern Time, and had a record date of January 24, 2025.
The February Proxy included standard proposals (the “Standard Proposals”) for stockholders (i) to elect five new directors (the “New Board Slate”) to our board of directors (the “Board”) and (i) to ratify the appointment of M&K CPAS, PLLC as our independent registered public accounting firm for the fiscal year ended December 31, 2024. The Standard Proposals customarily would have been voted on at a stockholder meeting in calendar year 2024. We opted to delay holding our 2024 annual stockholder meeting until 2025 to hold a single meeting that would cover both the Standard Proposals and a number of special proposals (the “Special Proposals”) requesting that the stockholders approve (i) the issuance, in accordance with Nasdaq Listing Rule 5635(a), of Common Stock, upon conversion of our outstanding Series C-1 and C-2 Non-Voting Convertible Preferred Stock, upon conversion of an outstanding 7.0% Senior Secured Convertible Debenture in the principal balance of $3,934,146 due December 11, 2025 (the “Debenture”), and upon settlement of restricted stock units and exercise of stock options issued in exchange for restricted stock units and stock options that were previously granted to certain directors, employees, and consultants of the NAYA Therapeutics, (ii) an amendment to our Second Amended and Restated 2019 Stock Incentive Plan to increase the number of shares of Common Stock available for issuance thereunder to an amount of 8,200,000 (pre-reverse split), equal to approximately 15% of the total of the total issued and outstanding stock, including shares issued upon conversion of our Series C-1 and C-2 Non-Voting Convertible Preferred Stock, and (iii) an amendment to our Amended and Restated Articles of Incorporation to increase the number of authorized shares of Common Stock from 50,000,000 to 100,000,000 after a reverse split of our Common Stock approved by the Board at a ratio ranging from any whole number between 1-for-2 and 1-for-20, as determined by the Board in its discretion, subject to the Board’s authority to abandon such reverse stock split.
While the Standard Proposals received sufficient votes for approval, not all of the several Special Proposals garnered the necessary votes required for approval. Upon advice of counsel and our proxy solicitation firm, the Board approved the postponement of the 2024 ASM to April 9, 2025, the fixing of a new record date on March 10, 2025, and the filing of a new definitive proxy statement (the “March Proxy”).
As a result of this postponement and of the new record date, all votes cast by stockholders with respect to the proposals included in the February Proxy became null and void. The March Proxy was delivered with a new proxy card pursuant to which stockholders were asked to vote again on the Standard Proposals. On April 9, 2025, the Company’s stockholders approved the Standard Proposals at the Company’s 2024 annual meeting of stockholders.
May 23, 2025 FNL Agreements
Amendment and Exchange Agreement
On May 23, 2025, the Company and FNL entered into an agreement (the “Amendment and Exchange Agreement”) pursuant to which the parties agreed concurrently to (a) exchange outstanding shares of Series C-1 Preferred for shares of Series C-2 Preferred, (b) amend the Series C-2 Certificate of Designation pursuant to a certificate of amendment (the “Certificate of Amendment to the Series C-2 Certificate of Designation”), (c) exchange the Original Debenture for an Amended and Restated Senior Secured Convertible Debenture Due February 11, 2026 (the “Amended and Restated Debenture”) and (d), amend that certain Securities Purchase Agreement, dated as of January 3, 2024, between FNL and NAYA TX (the “Securities Purchase Agreement”) to provide that, for so long as the Amended and Restated Debenture or shares of Series C-2 Preferred are outstanding, FNL shall have the right (the “Additional Investment Right”), exercisable at any time and from time to time, beginning on or after May 23, 2025, to purchase up to $10,000,000 of aggregate stated value of additional shares of Series C-2 Preferred (the “AIR Preferred Shares”), provided that any Additional Investment Right may only be exercised in a minimum amount of $500,000 of AIR Preferred Shares. The AIR Preferred Shares shall have the same terms as the Series C-2 Preferred then outstanding, provided that, upon issuance of AIR Preferred Shares, the conversion price in the AIR Preferred Shares and Series C-2 Preferred shall be deemed to be the lowest of (i) the conversion price as in effect on the date that the Holder exercises such Additional Investment Right, and (ii) the greater of (x) the Floor Price (as defined in the Certificate of Amendment to the Series C-2 Certificate of Designations) and (y) 85% of the arithmetic average of the three (3) lowest VWAPs during the ten (10) trading days prior to the date FNL Purchaser exercises its Additional Investment Right. In consideration of the foregoing, the Company agreed to issue an additional 1,029 shares of Series C-2 Preferred to FNL.
The foregoing summary of the Amendment and Exchange Agreement Amendment is not complete and is qualified in its entirety by reference to the Amendment and Exchange Agreement Amendment, a copy of which was filed as Exhibit 10.8 to the Current Report on Form 8-K filed on May 30, 2025 and is incorporated herein by reference.
Amended Series C-2 Certificate of Designation
On May 23, 2025, we filed with the Nevada Secretary of State a Certificate of Amendment to the Series C-2 Certificate of Designations increasing the authorized number of shares of Series C-2 Preferred we may issue to 20,000 shares. Pursuant to the Certificate of Amendment to the Series C-2 Certificate of Designations, among other things, holders of Series C-2 Preferred will be entitled to receive dividends payable in Series C-2 Preferred, subject to meeting certain conditions (the “Equity Conditions”).
The foregoing summary of the Certificate of Amendment to the Series C-2 Certificate of Designations is not complete and is qualified in its entirety by reference to the Certificate of Amendment to the Series C-2 Certificate of Designations a copy of which was filed as Exhibit 4.2 to the Current Report on Form 8-K filed on May 30, 2025 and is incorporated herein by reference.
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GreenBlock Exchange Agreement
Effective as of May 28, 2025, we and GreenBlock Capital, LLC (“GreenBlock”) entered into an agreement (the “GreenBlock Exchange Agreement”) pursuant to which we and GreenBlock agreed to exchange all outstanding shares of our Series C-1 Preferred owned by GreenBlock in exchange for such number of shares of our Series C-2 Preferred with the aggregate Stated Value (as defined in the Series C-2 Certificate of Designation) equal to the aggregate Stated Value (as defined in the Series C-1 Certificate of Designation) of all outstanding shares of the Series C-1 Preferred owned by GreenBlock, plus any accrued and unpaid dividends thereon.
The foregoing summary of the GreenBlock Exchange Agreement is not complete and is qualified in its entirety by reference to the GreenBlock Exchange Agreement, a copy of which was filed as Exhibit 4.2 to the Current Report on Form 8-K filed on May 30, 2025 and is incorporated herein by reference.
NAYA TX Separation
In April 2025, we elected to re-focus exclusively on our fertility business, changed our name to “INVO Fertility, Inc.”, changed our ticker symbol “IVF”. On May 28, 2025, we entered into definitive agreements to divest a majority of our holdings in NAYA TX.
NAYA TX Exchange Agreement
Effective as of May 28, 2025, we and NAYA TX entered into an agreement (the “NAYA TX Exchange Agreement”) pursuant to which the parties agreed to exchange 801,196 shares of Class A Common Stock of NAYA TX held by us, representing 19.9% of the outstanding common shares of NAYA TX, for 6,300 shares of Series A Preferred Stock of NAYA TX. Immediately prior to the execution of the NAYA TX Exchange Agreement, we held 4,029,729 shares of Class A Common Stock of NAYA TX.
Each share of NAYA TX Series A Preferred Stock has a stated value of $1,000, which, along with any additional amounts accrued thereon (collectively, the “Conversion Amount”) is convertible into shares of NAYA TX’s Class A Common Stock at any time after the earlier of (a) the NAYA TX Class A Common Stock being listed for trading on the Nasdaq Stock Market or the New York Stock Exchange (a “Qualified Exchange”), and (b) the seventh (7th) anniversary of the issuance of the NAYA TX Series A Preferred Stock. The initial conversion price of the NAYA TX Series A Preferred Stock is equal to $7.86 per share, subject to adjustments, including customary adjustments for stock dividends or other distributions payable in securities, stock splits, reclassifications, mergers, reorganizations and the like.
Each share of NAYA TX Series A Preferred Stock will automatically convert into shares of NAYA TX Class A Common Stock upon the earlier of (a) the closing of the sale of shares of Class A Common Stock to the public at a price of at least $10.00 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the NAYA TX Class A Common Stock), in a best efforts or firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $10,000,000 of gross proceeds to NAYA TX and in connection with such offering the shares of NAYA TX Class A Common Stock are listed for trading on a Qualified Exchange (a “Qualified IPO”) at a conversion price equal to the price per share at which NAYA TX issues shares of Class A Common Stock to the public in the Qualified IPO, if, and only if, the offer, sale, and resale of NAYA TX Class A Common Stock issuable to a holder of NAYA TX Series A Preferred Stock upon conversion of such NAYA TX Series A Preferred Stock are covered by an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”) and (b) immediately prior to the closing of either a transaction or series of related transactions in which a person, or a group of related persons, acquires from stockholders of NAYA TX shares representing more than fifty percent (50%) of the outstanding voting power of NAYA TX or a transaction that qualifies as a “deemed liquidation event” under the terms of the NAYA TX Series A Preferred Stock (a “Sale of NAYA TX”), and the NAYA TX Common Stock is converted into, exchanged for, or acquired for securities that are listed for trading on a Qualified Exchange (“Qualified Securities”) at a conversion price equal to the closing sale price per Qualified Security on the date of the closing of the Sale of NAYA TX, so long as the offer, sale, and resale of the Qualified Securities issuable to a holder of NAYA TX Series A Preferred Stock upon conversion of such NAYA TX Series A Preferred Stock and closing of a Sale of NAYA TX are covered by an effective registration statement under the Securities Act.
No conversion of NAYA TX Series A Preferred Stock may be effected if, after giving effect to the conversion or issuance, we, together with our affiliates, would beneficially own in excess of 19.99% of NAYA TX’s outstanding common stock. Shares of Series A Preferred Stock of NAYA TX have no dividend preference, but NAYA TX cannot issue a dividend to holders of its common stock unless the holders of the NAYA TX Series A Preferred Stock receive a pro rata portion, on an as-if converted basis, of any dividends payable on NAYA TX common stock.
The NAYA TX Series A Preferred Stock ranks senior to NAYA TX common stock. Other than those rights provided by law, the holders of NAYA TX Series Preferred A Stock have no voting rights. The NAYA TX Series A Preferred Stock is redeemable at the option of NAYA TX.
The foregoing summary of the NAYA TX Exchange Agreement is not complete and is qualified in its entirety by reference to the NAYA TX Exchange Agreement, a copy of which was filed as Exhibit 10.1 to the Current Report on Form 8-K filed on May 30, 2025 and is incorporated herein by reference.
NAYA TX Secured Convertible Promissory Note
On May 28 2025, NAYA TX issued a secured convertible promissory note in the principal amount of $4,803,175 (the “NAYA TX Note”) to us. The NAYA TX Note carries an interest rate of seven percent (7%) per annum. The maturity date of the NAYA TX Note is November 28, 2026, at which point the outstanding principal amount, together with any accrued and unpaid interest and other fees, will become due and payable to the holder of the NAYA TX Note.
The NAYA TX Note shall automatically be converted upon the occurrence of a Qualified IPO or a Sale Transaction (both as defined in the Note), whichever occurs earliest. The NAYA TX Note cannot be converted, and shares of NAYA TX’s Class A Common Stock cannot be issued upon conversion of the Note, if, after giving effect to the conversion or issuance, we, together with our affiliates, would beneficially own in excess of 19.99% of the outstanding common stock of NAYA TX.
NAYA TX has the right to prepay the NAYA TX Note, provided NAYA TX gives us not less than five (5) nor more than ninety (90) days prior written notice.
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The NAYA TX Note contains events representations, warranties, covenants, and events of default that are customary for similar transactions. Upon an event of default, the NAYA TX Note becomes immediately due and payable, and NAYA TX is subject to a default rate of the lesser of (i) of 12% per annum and (ii) the maximum rate permitted by applicable law.
The foregoing description of the NAYA TX Note does not purport to be complete and is qualified in its entirety by reference to the NAYA TX Note, a copy of which was filed as Exhibit 10.2 to the Current Report on Form 8-K filed on May 30, 2025 and is incorporated herein by reference.
The NAYA TX Security Agreement
Effective as of May 28, 2025, we and NAYA TX entered into a security agreement (the “NAYA TX Security Agreement”) pursuant to which, among other things, NAYA TX agreed to grant a Security Interest (as defined in the NAYA TX Security Agreement) to us as an inducement to acquire the NAYA TX Note from NAYA TX.
The NAYA TX Security Agreement contains representations, warranties, covenants, and agreements that are customary for similar transactions.
The foregoing description of the NAYA TX Security Agreement does not purport to be complete and is qualified in its entirety by reference to the NAYA TX Security Agreement, a copy of which was filed as Exhibit 10.3 to the Current Report on Form 8-K filed on May 30, 2025 and is incorporated herein by reference.
The Side Letter Agreement
Effective as of May 28, 2025, we and NAYA TX entered into an agreement (the “Side Letter Agreement”) pursuant to which the parties agreed that (i) if NAYA TX reasonably determines that the existence of the NAYA TX Security Agreement or the Security Interest (as defined therein) will materially impede or prevent the completion of a Qualified IPO or Qualified Financing (as such terms are defined in the Third Amended and Restated Certificate of Incorporation of NAYA TX), NAYA TX shall provide written notice to us, and (ii) if NAYA TX has given notice of such Qualified IPO or Qualified Financing and such Qualified IPO or Qualified Financing is consummated, NAYA TX will provide us with written notice of such consummation and the NAYA TX Security Agreement and Security Interest (as defined therein) will automatically terminate without any further action of NAYA TX or us.
The foregoing description of the Side Letter Agreement does not purport to be complete and is qualified in its entirety by reference to the Side Letter Agreement, a copy of which was filed as Exhibit 10.4 to the Current Report on Form 8-K filed on May 30, 2025 and is incorporated herein by reference.
Decathlon Consent and Release Agreement
Effective as of May 28, 2025, we, NAYA TX, and Decathlon Alpha V L.P. (“Decathlon”), entered into an agreement (the “Decathlon Consent and Release Agreement”) pursuant to which, among other things, (i) Decathlon agreed to release any security interests relating to the assets of and any claims against NAYA TX, and (ii) NAYA TX agreed to issue the NAYA TX Note to us.
The foregoing summary of the Decathlon Consent and Release Agreement is not complete and is qualified in its entirety by reference to the Decathlon Consent and Release Agreement, a copy of which was filed as Exhibit 10.6 to the Current Report on Form 8-K filed on May 30, 2025 and is incorporated herein by reference.
FNL Consent and Release Agreement
Effective as of May 28, 2025, we, NAYA TX, and FNL entered into an agreement (the “FNL Consent and Release Agreement”) pursuant to which, among other things, (i) FNL agreed to release any security interests relating to the assets of and any claims against NAYA TX and (ii) NAYA TX agreed to issue the NAYA TX Note to us.
The foregoing summary of the FNL Consent and Release Agreement is not complete and is qualified in its entirety by reference to the FNL Consent and Release Agreement, a copy of which was filed as Exhibit 10.7 to the Current Report on Form 8-K filed on May 30, 2025 and is incorporated herein by reference.
Amended Series C-1 Certificate of Designation
On May 28, 2025, we filed with the Nevada Secretary of State a certificate of amendment to the Series C-1 Certificate of Designation (the “Certificate of Amendment to the Series C-1 Certificate of Designation”) pursuant to which we are is entitled to redeem, at our option, at any time or from time to time upon not less than 2 calendar days written notice to the holders prior to the date fixed for redemption thereof, at a redemption price of 113.855837742504 shares of Class A Common Stock of NAYA TX for each share of Series C-1 Preferred being redeemed.
The foregoing summary of the Certificate of Amendment to the Series C-1 Certificate of Designation is not complete and is qualified in its entirety by reference to the Certificate of Amendment to the Series C-1 Certificate of Designation, a copy of which was filed as Exhibit 4.1 to the Current Report on Form 8-K filed on May 30, 2025 and is incorporated herein by reference.
Series C-1 Redemption
On May 28, 2025, the Company gave notice to the holders of the Series C-1 Preferred that the Company elected to redeem all of the issued and outstanding shares of its Series C-1 Preferred (including any accrued but unpaid dividends) at a redemption price of 113.855837742504 shares of Class A Common Stock of NAYA TX for each share of C-1 Preferred being redeemed. The redemption of the Series C-1 Preferred became effective on May 31, 2025.
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Shares Issuable Upon Conversion
Set forth below is a table summarizing the number of shares of common stock that are issuable upon conversion of the Series C-2 Preferred, without taking into account certain beneficial ownership limitations or the exchange of Series C-1 Preferred for Series C-2 Preferred, and assuming no adjustment events have occurred that would result in the issuance of additional shares of common stock or changes to the exercise price of the Series C-2 Preferred pursuant to the terms of such security. The sale into the public market of the underlying common stock could materially and adversely affect the market price of our common stock. See “Risk Factors— Risks Related to Our Common Stock” in our Annual Report on Form 10-K for the year ended December 31, 2024.
| Outstanding
Series C-2 |
Common
Stock |
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| Series C-2 | 7,789 | 4,837,888 | ||||||
In addition, additional shares of our common stock are issuable pursuant to certain adjustment events as set forth in the Series C-2 Certificate of Designation, including (1) payments of dividends payable in Series C-2 Preferred, (2) upon occurrence of certain events as set forth in the C-2 Series Preferred Designation (the “Triggering Events”), (3) any time the Company grants, issues or sells any options, convertible securities, or rights to purchase stock, warrants, securities or other property pro rata to all or substantially all of the record holders of our common shares, (4) undertaking a dilutive issuance, (5) a subdivision or combination of our common shares, and (6) the issuance of securities exercisable, exchangeable or convertible at a price which varies or may vary with the market price of our common shares. Additional shares of our common stock may also become issuable upon conversion of the Series C-2 Preferred if FNL purchases additional shares of Series C-2 Preferred pursuant to the Additional Investment Right, at a conversion price equal to the lowest of (i) the conversion price as in effect on the date that the Holder exercises such Additional Investment Right, and (ii) the greater of (x) the Floor Price (as defined in the Certificate of Amendment to the Series C-2 Certificate of Designations Designations) and (y) 85% of the arithmetic average of the three (3) lowest VWAPs during the ten (10) Trading Days prior to the date the Purchaser exercises its Additional Investment Right.
Reasons for Stockholder Approval
Our common stock is listed on the Nasdaq Capital Market, and, as such, we are subject to the applicable rules of the Nasdaq Stock Market LLC, including Nasdaq Listing Rule 5635(a), which requires stockholder approval in connection with the acquisition of another company if the Nasdaq-listed company will issue 20% or more of its common stock, and Nasdaq Listing Rule 5635(d), which requires stockholder approval in connection with a transaction, other than a public offering, involving the potential issuance of common stock (or securities convertible into or exercisable for common stock) which equals 20% or more of the common stock or voting power outstanding before the issuance. Thus, in order to permit the issuance of common stock upon conversion of the Series C-2 Preferred and the issuance of any additional shares of common stock due to an adjustment event pursuant to the terms of the Series C-2 Preferred, we must first obtain stockholder approval of these issuances. Pursuant to the terms of the A&R Merger Agreement, we agreed to seek stockholder approval of the issuance of shares of common stock issuable upon conversion of the Series C-2 Preferred in accordance with the listing rules of the Nasdaq Capital Market.
Beneficial Ownership Limitations
We are not seeking stockholder approval of a potential “change in control” under Nasdaq Listing Rule 5635(b), which generally prohibits Nasdaq-listed companies from issuing common stock to a stockholder in a transaction that would cause the holder to beneficially own 20% or more of the then-outstanding common stock (subject to certain exceptions). Assuming that Proposal 3 is approved, the Series C-2 Preferred Stock will continue to have a beneficial ownership conversion limit that would prevent a stockholder from converting such stockholder’s shares if, as a result of such conversion, such stockholder would beneficially own a number of shares above such stockholder’s applicable conversion blocker (which cannot exceed 19.9% of our outstanding common stock).
Vote Required and Board of Directors Recommendation
Stockholder approval of this Proposal 4 requires a “FOR” vote from the stockholders representing a majority of the votes cast on the matter.
Of the shares of our common stock outstanding entitled to vote at the annual meeting, 22 shares of common stock were issued in our acquisition of NAYA TX, and any votes in favor of Proposal 4 with respect to shares will not count as votes in favor of Proposal 4 pursuant to the listing rules of the Nasdaq Stock Market.
OUR
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR”
THE APPROVAL OF THE SERIES C-2 PREFERRED CONVERSION PROPOSAL.
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Proposal 5: To Approve the Issuance, in accordance with Nasdaq Listing Rule 5635, of (a) Our Common Stock, Upon Conversion of the Amended and Restated Debenture, and (b) Any Additional Shares of Our Common Stock Due to an Adjustment Event Pursuant to the Terms of the Amended and Restated Debenture.
We are seeking approval of our stockholders to issue shares of our common stock upon conversion of an Amended and Restated 7% Senior Secured Convertible Debenture (the “Amended and Restated Debenture”), including any additional shares of our common stock that may result pursuant to an adjustment event pursuant to the terms of the Amended and Restated Debenture.
Overview
The Original Debenture
The Original Debenture carried an interest rate of seven percent (7%) per annum, payable on the first business day of each calendar month commencing November 1, 2024. The maturity date of the Original Debenture was December 11, 2025 (the “Original Maturity Date”), at which point the outstanding principal amount, together with any accrued and unpaid interest and other fees, would become due and payable to the holder of the Original Debenture.
At any time after our stockholders approve the issuance of any common stock upon conversion of the Original Debenture, the holder of the Original Debenture would be entitled to convert any portion of the outstanding and unpaid principal amount and accrued interest into shares our common stock at a conversion price of $11.1666 per share, subject to adjustment as described therein. The Original Debenture could not be converted, and shares of our common stock could not be issued upon conversion of the Original Debenture, if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of our outstanding common stock. Pursuant to the adjustment provisions in the Original Debenture, the conversion price of the Original Debenture was reset to $1.61 per share.
We could not prepay the Original Debenture without the prior written consent of FNL.
Commencing March 14, 2025 and on the 14th of each month thereafter until the Original Maturity Date, we were required to redeem $437,127.24, plus accrued but unpaid interest and other fees, of the principal amount of the Original Debenture.
While any portion of the Original Debenture was outstanding, if we received gross proceeds of more than $3,000,000 from any equity or debt financings (other than a public offering as described herein), we were required to, at the option of the holder, apply one-third (1/3) of such gross proceeds to the redemption of the principal amount of the Original Debenture, except that if such equity or debt financing was a public offering of our securities pursuant to a registration statement on Form S-1, we were was required to, at the option of the holder, apply one hundred percent (100%) of such gross proceeds, not to exceed $500,000, to the redemption of the principal amount of the Original Debenture. We also agreed that, if it received gross proceeds of more than $2,000,000 from any equity or debt financing, it would, at the option of the holder, apply $500,000 of such gross proceeds to the redemption of the principal amount of the Original Debenture.
The Original Debenture contained events representations, warranties, covenants, and events of default that are customary for similar transactions. Upon an event of default, the Original Debenture became immediately due and payable, and we were subject to a default rate of interest of 15% per annum and a default sum as stipulated.
The foregoing description of the Original Debenture does not purport to be complete and is qualified in its entirety by reference to the Original Debenture, which is attached hereto as Exhibit 4.1 to the Current Report on Form 8-K filed on October 15, 2024 and is incorporated herein by reference.
Amended and Restated Debenture
On May 23, 2025, we agreed to exchange the Original Debenture for the Amended and Restated Debenture. The Amended and Restated Debenture carries an interest rate of seven percent (7%) per annum, payable on the fifteenth (15th) day of each calendar month commencing August 15, 2025, and the principal sum is $4,803,175. The maturity date of the Amended and Restated Debenture is February 11, 2026 (the “Amended Maturity Date”), at which point the outstanding principal amount, together with any accrued and unpaid interest and other fees, shall be due and payable to the holder of the Amended and Restated Debenture.
At any time after our stockholders approve the issuance of common stock upon conversion of the Amended and Restated Debenture, the holder of the Amended and Restated Debenture will be entitled to convert any portion of the outstanding and unpaid principal amount and accrued interest into shares of our common stock at a conversion price of $1.61 per share, subject to adjustment as described therein. The Amended and Restated Debenture may not be converted, and shares of our common stock may not be issued upon conversion of the Amended and Restated Debenture, if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 4.99% of our outstanding common stock .
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We may not prepay the Amended and Restated Debenture without the prior written consent of FNL.
Commencing August 15, 2025 and on the 15th of each month thereafter until the Amended Maturity Date, we are required to redeem $686,167.91, plus accrued but unpaid interest and other fees, of the principal amount of the Amended and Restated Debenture.
While any portion of the Amended and Restated Debenture is outstanding, if we receive gross proceeds of more than $3,000,000 from any equity or debt financings (other than a public offering as described herein), we shall, at the option of the holder, apply one-third (1/3) of such gross proceeds to the redemption of the principal amount of the Amended and Restated Debenture.
The Amended and Restated Debenture contains events representations, warranties, covenants, and events of default that are customary for similar transactions. Upon an event of default, the Amended and Restated Debenture becomes immediately due and payable, and we are subject to a default rate of interest of 15% per annum and a default sum as stipulated.
The foregoing description of the Amended and Restated Debenture does not purport to be complete and is qualified in its entirety by reference to the Amended and Restated Debenture, a copy of which was filed as Exhibit 4.3 to the Current Report on Form 8-K filed on May 30, 2025 and is incorporated herein by reference.
Shares Issuable Upon Conversion
Set forth below is a table summarizing the number of shares of common stock that are issuable upon conversion of the principal amount of the Amended and Restated Debenture, without taking into account certain beneficial ownership limitations and assuming no adjustment events have occurred that would result in the issuance of additional shares of common stock or changes to the conversion price of the Amended and Restated Debenture pursuant to the terms of such security. The sale into the public market of the underlying common stock could materially and adversely affect the market price of our common stock. See “Risk Factors— Risks Related to Our Common Stock” in our Annual Report on Form 10-K for the year ended December 31, 2024.
| Amended and Restated Debenture | Common Stock (as converted) | |||||||
| Amended and Restated Debenture (Principal Only) | $ | 4,803,175 | 2,983,339 | |||||
In addition, additional shares of our common stock are issuable pursuant to certain adjustment events as set forth in the Amended and Restated Debenture, including (1) any time the Company grants, issues or sells any options, convertible securities, or rights to purchase stock, warrants, securities or other property pro rata to all or substantially all of the record holders of our common shares, and (2) any time the Company declares or makes any dividend or other distribution of its assets to holders of shares of common stock, by way of return of capital or otherwise.
Reasons for Stockholder Approval
Our common stock is listed on the Nasdaq Capital Market, and, as such, we are subject to the applicable rules of the Nasdaq Stock Market LLC, including Nasdaq Listing Rule 5635(a), which requires stockholder approval in connection with the acquisition of another company if the Nasdaq-listed company will issue 20% or more of its common stock. Thus, in order to permit the issuance of common stock upon conversion of the Amended and Restated Debenture and the issuance of any additional shares of common stock due to an adjustment event pursuant to the terms of the Amended and Restated Debenture, we must first obtain stockholder approval of these issuances.
Pursuant to the terms of Amended and Restated Debenture, we agreed to seek stockholder approval of the conversion of the Amended and Restated Debenture into Common Shares in accordance with the listing rules of the Nasdaq Capital Market, as set forth in the Section 6.6 of the A&R Merger Agreement, provided that the date of such stockholder approval shall not, in any event, be later than June 30, 2025.
Beneficial Ownership Limitations
We are not seeking stockholder approval of a potential “change in control” under Nasdaq Listing Rule 5635(b), which generally prohibits Nasdaq-listed companies from issuing common stock to a stockholder in a transaction that would cause the holder to beneficially own 20% or more of the then-outstanding common stock (subject to certain exceptions). Assuming that Proposal 3 is approved, the Amended and Restated Debenture will continue to have a beneficial ownership conversion limit that would prevent the holder from converting the Amended and Restated Debenture if, as a result of such conversion, such holder would beneficially own a number of shares above such holder’s conversion blocker (which cannot exceed 19.9% of our outstanding common stock).
Vote Required and Board of Directors Recommendation
Stockholder approval of this Proposal 5 requires a “FOR” vote from the stockholders representing a majority of the votes cast on the matter.
Of the shares of our common stock outstanding entitled to vote at the annual meeting, 22 shares of common stock were issued in our acquisition of NAYA TX, and any votes in favor of Proposal 5 with respect to shares will not count as votes in favor of Proposal 5 pursuant to the listing rules of the Nasdaq Stock Market.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE “FOR”
THE APPROVAL OF THE AMENDED AND RESTATED DEBENTURE CONVERSION PROPOSAL.
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Proposal 6: To Approve the Issuance, in accordance with Nasdaq Listing Rule 563), of (a) Our Common Stock, Upon Exercise of the Inducement Warrants, and (b) Any Additional Shares of Our Common Stock Due to an Adjustment Event Pursuant to the Terms of the Inducement Warrants.
We are seeking approval of our stockholders to issue shares of our common stock upon exercise of an inducement warrant (the “Inducement Warrant”), including any additional shares of our common stock that may result pursuant to an adjustment event pursuant to the terms of the Inducement Warrant.
Overview
On April 30, 2025, we entered into an inducement letter agreement (the “Inducement Letter Agreement”) with an institutional investor and existing holder (the “Holder”) of certain warrants (the “Exercised Warrants”) to purchase up to 465,840 shares of our common stock. The Exercised Warrants were originally issued on January 14, 2025, with an exercise price of $8.40 per share.
The issuance of the shares of our common stock upon exercise of the Exercised Warrants was registered pursuant to a registration statement on Form S-1 (File No. 333-283872), which was declared effective by the Securities and Exchange Commission (the “SEC”) on January 14, 2025.
Pursuant to the Inducement Letter Agreement, the Holder agreed to exercise the Exercised Warrants for cash at the exercise price of $1.61 per share in consideration for our agreement to issue new unregistered warrants to purchase up to an aggregate of 698,760 shares of our common stock at an exercise price of $1.61 per share (the “Inducement Warrant”). The Inducement Warrants will be exercisable upon receipt of such approval as may be required by the applicable rules and regulations of the Nasdaq Capital Market (or any successor entity) from the stockholders of the Company with respect to issuance of all of the Inducement Warrants and the shares of common stock upon the exercise thereof (Stockholder Approval, and such date, the “Stockholder Approval Date”) and have a term of five years from the Stockholder Approval Date.
We have agreed to file a registration statement on Form S-3 (or other appropriate form if it is not eligible to utilize Form S-3) providing for the resale of the shares of common stock issuable upon the exercise of the Inducement Warrant (the “Resale Registration Statement”) within 30 calendar days following the Stockholder Approval Date, and to use commercially reasonable best efforts to cause the Resale Registration Statement to become effective within sixty (60) calendar days following the date Stockholder Approval is received (or within ninety (90) calendar days following the date Stockholder Approval is received in case of “full review” of such registration statement by the Commission).
Pursuant to the Inducement Letter Agreement, we agreed to hold our 2025 annual meeting of stockholders or special meeting of stockholders on or prior to the date that is ninety (90) days following the closing date of the inducement for the purpose of obtaining stockholder approval of the issuance of shares of our common stock upon exercise of the Inducement Warrant, with the recommendation of our Board that such proposals are approved, and that we shall solicit proxies from its stockholders in connection therewith in the same manner as all other management proposals in such proxy statement and all management-appointed proxyholders shall vote their proxies in favor of such proposals. If we do not obtain this stockholder approval at the 2025 annual meeting of stockholders, we shall call a meeting every ninety (90) days thereafter to seek such stockholder approval until the earlier of the date on which such stockholder approval is obtained or the Inducement Warrant is no longer outstanding.
The transaction constituted a dilutive issuance pursuant to certain outstanding convertible instruments of the Company, including, but not limited to, pursuant to Section 5 of the Original Debenture and pursuant to Section 8 of the Initial Series C-2 Certificate of Designation.
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The Inducement Warrant was sold, and the shares of our common stock issuable thereunder will be issued, without registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as transactions not involving a public offering and/or Rule 506 promulgated under the Securities Act.
The foregoing is only a summary of the Inducement Warrant and the Inducement Letter Agreement and does not purport to be a complete description thereof.
Such descriptions are qualified in their entirety by reference to the Form of New Warrant and the Form of Inducement Letter Agreement, copies of which are incorporated by reference as Exhibits 4.1 and 10.1, respectively, to the Current Report on Form 8-K/A filed on May 2, 2025 and are incorporated by reference herein.
Shares Issuable Upon Exercise
Set forth below is a table summarizing the number of shares of common stock that are issuable upon exercise of the Inducement Warrant, without taking into account certain beneficial ownership limitations and assuming no adjustment events have occurred that would result in the issuance of additional shares of common stock or changes to the exercise price of the Inducement Warrant pursuant to the terms of such security. The sale into the public market of the underlying common stock could materially and adversely affect the market price of our common stock. See “Risk Factors— Risks Related to Our Common Stock” in our Annual Report on Form 10-K for the year ended December 31, 2024.
| Common Stock Issuable Upon Exercise | ||||
| Inducement Warrant | 698,760 | |||
In addition, additional shares of our common stock are issuable pursuant to certain adjustment events as set forth in Section of the Inducement Warrant, including (1) subdivides or combines outstanding shares of our common stock, (2) any time the Company grants, issues or sells any options, convertible securities, or rights to purchase stock, warrants, securities or other property pro rata to all or substantially all of the record holders of our common shares, (3) any time the Company declares or makes any dividend or other distribution of its assets to holders of shares of common stock, by way of return of capital or otherwise, and (4) if we issue any shares of common stock, or securities convertible, exercisable or exchangeable for shares of common stock, at a price below the then applicable exercise price (subject to certain exceptions). In addition, if there is any share split, share dividend, share combination recapitalization or other similar transaction involving our common stock (each, a “Share Combination Event”, and such date thereof, the “Share Combination Event Date”) and the lowest VWAP during the 5 consecutive trading days commencing on the Share Combination Event Date (the “Event Market Price”) (provided if the Share Combination Event is effective after close of trading on the primary trading market for our common stock, then commencing on the next trading day which period shall be the “Share Combination Adjustment Period”) is less than the exercise price then in effect (after giving effect to the adjustment described above), then at the close of trading on the primary trading market on the last day of the Share Combination Adjustment Period, the Exercise Price then in effect on such 5th trading day shall be reduced (but in no event increased) to the Event Market Price and the number of warrant shares issuable under the Inducement Warrant shall be increased such that the aggregate exercise price payable under the Inducement, after taking into account the decrease in the exercise price, shall be equal to the aggregate exercise price on the date on which the Inducement Warrant was issued.
Reasons for Stockholder Approval
Our common stock is listed on the Nasdaq Capital Market, and, as such, we are subject to the applicable rules of the Nasdaq Stock Market LLC, including Nasdaq Listing Rule 5635(d), which requires stockholder approval for issuances of a Nasdaq-listed company’s common stock that constitute 20% or more of the Nasdaq-listed company’s outstanding stock or voting power pre-issuance. Thus, in order to permit the issuance of common stock upon the exercise of the Inducement Warrant and the issuance of any additional shares of common stock due to an adjustment event pursuant to the terms of the Inducement Warrant, we must first obtain stockholder approval of these issuances.
Pursuant to the terms of Inducement Letter Agreement, we agreed to hold this stockholder meeting and seek stockholder approval of the issuance of our common stock upon the exercise of the Inducement Warrant in accordance with the listing rules of the Nasdaq Capital Market.
Beneficial Ownership Limitations
We are not seeking stockholder approval of a potential “change in control” under Nasdaq Listing Rule 5635(b), which generally prohibits Nasdaq-listed companies from issuing common stock to a stockholder in a transaction that would cause the holder to beneficially own 20% or more of the then-outstanding common stock (subject to certain exceptions). Assuming that Proposal 3 is approved, the Inducement Warrant will continue to have a beneficial ownership exercise limit that would prevent the holder from exercising such holder’s Inducement Warrant if, as a result of such exercise, such holder would beneficially own a number of shares above such holder’s applicable exercise blocker (which cannot exceed 19.9% of our outstanding common stock).
Vote Required and Board of Directors Recommendation
Stockholder approval of this Proposal 6 requires a “FOR” vote from the stockholders representing a majority of the votes cast on the matter.
OUR
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR”
THE APPROVAL OF THE INDUCEMENT WARRANT EXERCISE PROPOSAL.
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Proposal 7: Approval of a Third Amendment and Restatement of our 2019 Stock Incentive Plan to Increase the Number of Shares of our Common Stock Available for Issuance Thereunder to a total of 1,200,000, or approximately 10%, of the total of our Total Issued and Outstanding Common Stock on a Fully-Diluted Basis.
Why We Are Requesting Stockholder Approval of a Third Amendment and Restatement of our 2019 Stock Incentive Plan
Stockholders are being asked to approve a third amendment and restatement of our 2019 Stock Incentive Plan (the “Plan”) to increase the amount of authorized shares of our common stock issuable under the Plan to a total of 1,200,000 shares of common stock, or approximately 10%, of our total issued and outstanding stock on a fully-diluted basis.
The Plan was originally adopted by our Board on November 14, 2019 and approved by our stockholders on December 16, 2019. The Plan was amended and restated on October 12, 2022 by the Second Amended and Restated 2019 Stock Incentive Plan.
The purpose of the Plan is to further align the interests of employees, directors, and non-employee consultants with those of the stockholders by providing incentive compensation opportunities tied to the performance of the common stock and by promoting increased ownership of the common stock by such individuals.
Our Board has approved the increase in the number of shares of common stock authorized for issuance under the Plan as described above.
If stockholder approval of this Proposal 7 is obtained, and subject to adjustment for certain changes in our capitalization, the aggregate number of shares of our common stock that may be issued under the Plan will not exceed 1,200,000 shares.
Vote Required
The stockholders are being asked to approve the increase of shares available for issuance under the Plan. The increase will be approved if more votes are cast in favor of this proposal than are cast against it. Abstentions and broker non-votes on this proposal will have no effect on the outcome.
Description of the Plan
A description of the material terms of the Plan, as amended and restated, is set forth below. The statements made in this Proposal No. 7 concerning the terms and provisions of the Plan are summaries and do not purport to be a complete recitation of the Plan provisions. These statements are qualified in their entirety by express reference to the full text of the Plan, a copy of which is attached to this proxy statement as Annex B and is incorporated by reference herein.
General Purpose
The purpose of the Plan is to further align the interests of employees, directors, and non-employee consultants with those of the stockholders by providing incentive compensation opportunities tied to the performance of the common stock and by promoting increased ownership of the common stock by such individuals. The Plan is also intended to advance the interests of us and our stockholders by attracting, retaining and motivating key personnel upon whose judgment, initiative and effort the successful conduct of our business is largely dependent. We are permitted to grant awards of stock options, stock awards, and restricted stock awards under the Plan. Each type of award is discussed in greater detail below.
ERISA
The Plan is not an “employee pension benefit plan” as defined in Section 3(2) of the U.S. Employee Retirement Income Security Act and is not qualified as a profit sharing plan as described in Section 401 of the Internal Revenue Code.
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Shares Available
The initial maximum aggregate number of shares of common stock that may be issued and sold under all awards granted under the Plan will be 1,200,000 shares. Shares of common stock issued and sold under the Plan may be either authorized but unissued shares or shares held in our treasury. The number of shares may be increased each year in the discretion of the Plan administrator (described below) through 2029. The annual increase, if any, determined by the Plan administrator for each year will be 6% of the total number of shares of outstanding common stock as of the end of the preceding year.
To the extent that any award involving the issuance of shares of common stock is forfeited, cancelled, returned to us for failure to satisfy vesting requirements or other conditions of the award, or otherwise terminates without an issuance of shares of common stock being made thereunder, the shares of common stock covered thereby will no longer be counted against the foregoing maximum share limitations and may again be made subject to awards under the Plan pursuant to such limitations. Any awards or portions thereof which are settled in cash and not in shares of common stock shall not be counted against the foregoing maximum share limitations.
If there shall occur any change with respect to the outstanding shares of our common stock by reason of any recapitalization, reclassification, stock dividend, extraordinary dividend, stock split, reverse stock split or other distribution with respect to the shares of our common stock, or any merger, reorganization, consolidation, combination, spin-off or other similar corporate change, or any other change affecting our common stock, we may, in the manner and to the extent that it deems appropriate and equitable to the participants in the plan and consistent with the terms of the plan, cause an adjustment to be made in (i) the maximum number of shares available for issuance under the Plan, (ii) the number and kind of shares of common stock, or other rights subject to then outstanding awards, (iii) the exercise or base price for each share or other right subject to then outstanding awards, and (iv) any other terms of an award that are affected by the event. However, in the case of incentive stock options, any such adjustments shall, to the extent practicable, be made in a manner consistent with the requirements of Section 424(a) of the Internal Revenue Code.
Administration
The Plan shall be administered by a committee comprised of one or more members of our Board, or if no such committee exists, the entire Board.
The committee shall have such powers and authority as may be necessary or appropriate for the committee to carry out its functions as described in the plan. Subject to the express limitations of the Plan, the committee shall have authority in its discretion to determine the eligible persons to whom, and the time or times at which, awards may be granted, the number of shares or other rights subject to each award, the exercise, base or purchase price of an award (if any), the time or times at which an award will become vested, exercisable or payable, the performance goals and other conditions of an award, the duration of the award, and all other terms of the award. Subject to the terms of the plan, the committee shall have the authority to amend the terms of an award in any manner that is not inconsistent with the Plan, provided that no such action shall adversely affect the rights of a participant with respect to an outstanding award without the participant’s consent. The committee shall also have discretionary authority to interpret the Plan, to make factual determinations under the plan, and to make all other determinations necessary or advisable for Plan administration, including, without limitation, to correct any defect, to supply any omission or to reconcile any inconsistency in the Plan or any award agreement hereunder.
The committee shall have the right, from time to time, to delegate to one or more of our officers the authority of the committee to grant and determine the terms and conditions of awards granted under the Plan, subject to the requirements of state law and such other limitations as the committee shall determine. In no event shall any such delegation of authority be permitted with respect to awards to any members of the board or to any eligible person who is subject to Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or Section 162(m) of the Internal Revenue Code.
Eligibility
Participation in the plan is limited to any person which is an employee of ours or any affiliate of ours, or any person to whom an offer of employment with us or one of our affiliates is extended, as determined by the committee, or any person who is a non-employee director, or any person who is consultant to us. The determination of eligibility shall be made by the committee in its sole discretion.
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Grant of Stock Awards
A stock award may be granted to any eligible person selected by the committee. The number of shares and other terms of the stock award are specified in each award agreement. The stock award may be granted for past services, in lieu of bonus or other cash compensation, as directors’ compensation or for any other valid purpose as determined by the committee. A stock award granted to an eligible person represents shares of common stock that are issued without restrictions on transfer and other incidents of ownership and free of forfeiture conditions, except as otherwise provided in the Plan and the award agreement. The deemed issuance price of shares of common stock subject to each stock award shall not be less than 85 percent of the fair market value of the common stock on the date of the grant. In the case of any person who owns securities possessing more than ten percent of the combined voting power of all classes of securities of the issuer or its parent or subsidiaries possessing voting power, the deemed issuance price of shares of common stock subject to each stock award shall be at least 100 percent of the fair market value of the common stock on the date of the grant. The committee may, in connection with any stock award, require the payment of a specified purchase price. Subject to the foregoing provisions and the applicable award agreement, upon the issuance of the common stock under a stock award, the participant shall have all rights of a stockholder with respect to the shares of common stock, including the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto. The Plan does not specify any maximum or minimum amount of shares which may be granted to any person under a stock award.
Grant of Restricted Stock Awards
A restricted stock award may be granted to any eligible person selected by the committee. The number of shares and other terms of the stock award are specified in each award agreement. The deemed issuance price of shares of common stock subject to each restricted stock award shall not be less than 85 percent of the fair market value of the common stock on the date of the grant. In the case of any person who owns securities possessing more than ten percent of the combined voting power of all classes of securities of the issuer or its parent or subsidiaries possessing voting power, the deemed issuance price of shares of common stock subject to each restricted stock award shall be at least 100 percent of the fair market value of the common stock on the date of the grant. The committee may require the payment by the participant of a specified purchase price in connection with any restricted stock award.
The restrictions imposed on shares granted under a restricted stock award shall lapse in accordance with the vesting requirements specified by the committee in the award agreement, provided that the committee may accelerate the vesting of a restricted stock award at any time. Such vesting requirements may be based on the continued service of the participant with the company or its affiliates for a specified time period (or periods) or on the attainment of specified performance goals established by the committee in its discretion. If the vesting requirements of a restricted stock award shall not be satisfied, the award shall be forfeited and the shares of common stock subject to the award shall be returned to the company.
Subject to the foregoing provisions and the applicable award agreement, the participant shall have all rights of a stockholder with respect to the shares granted to the participant under a restricted stock award, including the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto. The committee may provide in an award agreement for the payment of dividends and distributions to the participant at such times as paid to stockholders generally or at the times of vesting or other payment of the restricted stock award.
Grant of Options
A stock option may be granted to any eligible person selected by the committee. Each stock option shall be designated as an incentive stock option or as a nonqualified stock option. An incentive stock option may only be granted to an eligible person who is considered an employee for purposes of Treasury Regulation §1.421-7(h) with respect to us or any of our affiliates that qualifies as a “subsidiary corporation” with respect to us for purposes of Section 424(f) of the Internal Revenue Code.
The exercise price per share of a stock option shall not be less than 20 percent of the fair market value of the shares of common stock on the date of grant, except that the exercise price per shares of an incentive stock option shall not be less than 100 percent of the fair market value of the shares of common stock on the date of grant, and that the exercise price per shares of an incentive stock option shall not be less than 110 percent of the fair market value in the case of any person who owns securities possessing more than 10 percent of the total combined voting power of all classes of our securities.
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The committee shall prescribe the time or times at which, or the conditions upon which, a stock option or portion thereof shall become vested and/or exercisable, and may accelerate the vesting or exercisability of any stock option at any time, provided, however, that any stock option shall vest at the rate of at least twenty percent per year over five years from the date the stock option is granted, subject to reasonable conditions as may be provided for in the award agreement. However, in the case of a stock option granted to officers, non-employee directors, managers or consultants, the stock option may become fully exercisable, subject to reasonable conditions, at any time or during any period established by us. The requirements for vesting and exercisability of a stock option may be based on the continued service of the participant with us or one of our affiliates for a specified time period (or periods) or on the attainment of specified performance goals established by the committee in its discretion.
The committee shall prescribe in an award agreement the period during which a vested stock option may be exercised, provided that the maximum term of a stock option shall be ten years from the date of grant. Except as otherwise provided in the plan or as otherwise may be provided by the committee, no stock option issued to an employee or a non-employee director may be exercised at any time during the term thereof unless the employee or a non-employee director is then in our service or the service of one of our affiliates.
Exercise of Options
Subject to such terms and conditions as shall be specified in an award agreement, a stock option may be exercised in whole or in part at any time during the term thereof by notice in the form required by us, together with payment of the aggregate exercise price therefor and applicable withholding tax. Payment of the exercise price shall be made in the manner set forth in the award agreement, which, unless otherwise provided by the committee, shall be as follows: (i) in cash or by cash equivalent acceptable to the committee, (ii) by payment in shares of our common stock that have been held by the participant for at least six months (or such period as the committee may deem appropriate) valued at the fair market value of such shares on the date of exercise, (iii) through an open-market, broker-assisted sales transaction pursuant to which we are promptly delivered the amount of proceeds necessary to satisfy the exercise price, (iv) by a combination of the methods described above, or (v) by such other method as may be approved by the committee and set forth in the award agreement. In addition to and at the time of payment of the exercise price, the participant shall pay to us the full amount of any and all applicable income tax, employment tax, and other amounts required to be withheld in connection with such exercise, payable under such of the methods described above for the payment of the exercise price as may be approved by the committee and set forth in the award agreement.
Nontransferability
Nonqualified Stock Options. Nonqualified stock options shall be nontransferable except (i) upon the participant’s death, or (ii) for the transfer of all or part of the stock option to a participant’s “family member” (as defined for purposes of the Form S-8 registration statement under the Securities Act of 1933), as may be approved by the committee in its discretion at the time of proposed transfer. The transfer of a nonqualified stock option may be subject to such terms and conditions as the committee may in its discretion impose from time to time. Subsequent transfers of a nonqualified stock option shall be prohibited other than in accordance with the terms set forth herein.
Incentive Stock Options. Incentive stock options shall be nontransferable other than by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of a participant only by such participant.
Termination of Employment
The stock option of any participant whose service with us or one of our affiliates is terminated for any reason shall terminate on the earlier of (A) the date that the stock option expires in accordance with its terms or (B) unless otherwise provided in an award agreement, and except for termination for cause, the expiration of the applicable time period following termination of service, in accordance with the following: (1) twelve months if service ceased due to disability, (2) eighteen months if service ceased at a time when the participant is eligible to elect immediate commencement of retirement benefits at a specified retirement age under a pension plan to which we or any of our affiliates had made contributions, (3) eighteen months if the participant died while in the service of us or any of our affiliates, or (4) three months if service ceased for any other reason. During the foregoing applicable period, except as otherwise specified in the award agreement or in the event service was terminated by the death of the participant, the stock option may be exercised by such participant in respect of the same number of shares of common stock, in the same manner, and to the same extent as if he or she had remained in the continued service of us or any affiliate during the first three months of such period; provided that no additional rights shall vest after such three months. The committee shall have authority to determine in each case whether an authorized leave of absence shall be deemed a termination of service for purposes hereof, as well as the effect of a leave of absence on the vesting and exercisability of a stock option. Unless otherwise provided by the committee, if an entity ceases to be an affiliate of the company or otherwise ceases to be qualified under the plan or if all or substantially all of the assets of an affiliate of the company are conveyed (other than by encumbrance), such cessation or action, as the case may be, shall be deemed for purposes hereof to be a termination of the service.
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An award of an incentive stock option may provide that such stock option may be exercised not later than 3 months following termination of employment of the participant with us and all subsidiaries, or not later than one year following a permanent and total disability within the meaning of Section 22(e)(3) of the Internal Revenue Code, as and to the extent determined by the committee to comply with the requirements of Section 422 of the Internal Revenue Code.
Amendment and Termination
The Board may at any time and from time to time and in any respect, amend or modify the plan. The Board may seek the approval of any amendment or modification by our stockholders to the extent it deems necessary or advisable in its discretion for purposes of compliance with Section 162(m) or Section 422 of the Internal Revenue Code, or exchange or securities market or for any other purpose. No amendment or modification of the Plan shall adversely affect any award theretofore granted without the consent of the participant or the permitted transferee of the award. The Plan shall terminate on the tenth anniversary of the date of its adoption by the Board. The Board may, in its discretion and at any earlier date, terminate the Plan. Notwithstanding the foregoing, no termination of the Plan shall adversely affect any award theretofore granted without the consent of the participant or the permitted transferee of the award.
New Plan Benefits
The following New Plan Benefits Table sets forth the amounts that, as of the date hereof, will be received by each of the following under the Plan.
NEW PLAN BENEFITS TABLE(1)
| Name and Position | Dollar value ($) | Number of units | ||||||
| Steven Shum, Chief Executive Officer | 0 | 0 | ||||||
| Andrea Goren, Chief Financial Officer | 0 | 0 | ||||||
| Dr. Daniel Teper, Former President | 0 | 0 | ||||||
| Michael Campbell, Former Chief Operating Officer; Vice President, Business Development | 0 | 0 | ||||||
| Executive Group | 0 | 0 | ||||||
| Non-Executive Director Group | 0 | 0 | ||||||
| Non-Executive Officer Employee Group | 0 | 0 | ||||||
(1) Subject to the express limitations of the Plan, the committee shall have authority in its discretion to determine the eligible persons to whom, and the time or times at which, awards may be granted, and all terms of the award.
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RESTRICTIONS ON RESALE
Persons ordinarily may publicly resell the shares of common stock issued pursuant to an award granted under the Plan without registration under the federal securities laws. However, our affiliates who acquire shares of our common stock pursuant to an award under the plan described herein must ensure that the resale of their shares complies with an available exemption from the registration provisions of the Federal securities law, such as Rule 144 under the Securities Act of 1933, as amended.
Shares granted under any restricted stock award may not be transferred, assigned or subject to any encumbrance, pledge, or charge until all applicable restrictions are removed or have expired, unless otherwise allowed by the committee. Failure to satisfy any applicable restrictions shall result in the subject shares of the restricted stock award being forfeited and returned to us. The committee may require in an award agreement that certificates representing the shares granted under a restricted stock award bear a legend making appropriate reference to the restrictions imposed, and that certificates representing the shares granted or sold under a restricted stock award will remain in the physical custody of an escrow holder until all restrictions are removed or have expired.
We are subject to Section 16(b) of the Securities Exchange Act of 1934, as amended. Section 16(b) allows us to recover any profit realized by any of our officers, directors or 10% stockholders from any purchase and sale, or sale and purchase, of shares of our common stock within any period of less than six months.
FEDERAL INCOME TAX CONSEQUENCES
This section contains a discussion regarding the income tax consequences of the Plan under federal income tax law. This discussion is intended only as a broad discussion of the general rules under income tax laws applicable to the issuance of common stock as compensation. Specific situations may be subject to different rules and may result in different tax consequences. You are strongly urged to consult your own personal tax advisor with specific reference to your own tax situation regarding all federal, state and local tax matters in conjunction with the Plan and the grant, exercise and ultimate sale of any shares received upon the exercise of options granted pursuant to the Plan.
Stock Awards
A recipient of a stock award under the plan will have compensation income upon the receipt of the shares in an amount equal to the fair market value of the shares on the date of the issuance.
Restricted Stock Awards
Unless a recipient files a Section 83(b) election with the Internal Revenue Service within 30 days following the date of grant of a restricted stock award, a recipient of a restricted stock award will not have any taxable income until the award vests. Upon the vesting of the award and receipt by recipient of the not-restricted shares, recipient will have compensation income in an amount equal to the fair market value of the shares on the date of vesting.
If a participant makes an election pursuant to Section 83(b) of the Internal Revenue Code with respect to a restricted stock award, the participant shall file, within 30 days following the date of grant, a copy of such election with us and with the Internal Revenue Service, in accordance with the regulations under Section 83 of the Internal Revenue Code. If a recipient files such a Section 83(b) election, the participant of the restricted stock award will have compensation income on the date of grant in an amount equal to the fair market value of the shares on the date of grant. The committee may provide in an award agreement that the restricted stock award is conditioned upon the participant’s making or refraining from making an election with respect to the award under Section 83(b) of the Internal Revenue Code.
Incentive Stock Options
Grant and Exercise of Incentive Stock Options. In general, a participant realizes no income upon the grant of Plan incentive stock options assuming these options qualified as “incentive stock options” under the Internal Revenue Code when they were granted or upon the exercise of incentive stock options. But see, “Alternative Minimum Tax,” below. The amount paid by the participant for the shares of common stock received pursuant to the exercise of incentive stock options will generally constitute his or her basis or cost for tax purposes. The holding period for such common stock generally begins on the date the participant exercises incentive stock options. See below for a discussion of the exceptions to these general rules when the participant uses previously acquired stock of the company to exercise incentive stock options.
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Alternative Minimum Tax. Although no current taxable income is realized upon the exercise of incentive stock options, Section 56(b)(3) of the Internal Revenue Code provides that the excess of the fair market value on the date of exercise of the common stock acquired pursuant to such exercise over the option price is an item of tax adjustment. As such, the exercise of incentive stock options may result in the participant being subject to the alternative minimum tax for the year incentive stock options are exercised. The alternative minimum tax is calculated on a taxpayer’s adjusted gross income, subject to special adjustments, plus specified items of tax preference minus specified itemized deductions. The resulting amount is the alternative minimum taxable income.
If the shares are disposed of in a “disqualifying disposition” that is, within one year of exercise or two years from the date of the option grant — in the year in which the incentive stock option is exercised, the maximum amount that will be included as alternative minimum tax income is the gain on the disposition of the incentive stock option stock. In the event there is a disqualifying disposition in a year other than the year of exercise, the income on the disqualifying disposition will not be considered income for alternative minimum tax purposes. In addition, the basis of the incentive stock option stock for determining gain or loss for alternative minimum tax purposes will be the exercise price for the incentive stock option stock increased by the amount that alternative minimum tax income was increased due to the earlier exercise of the incentive stock option. Alternative minimum tax incurred by reason of the exercise of the incentive stock option does not result, for regular income tax purposes, in an increase in basis of the shares acquired upon exercise. The alternative minimum tax attributable to the exercise of an incentive stock option may be applied as a credit against regular tax liability in a subsequent year, subject to certain limitations. The gain recognized upon a sale or exchange of shares acquired through the exercise of the incentive stock options will be limited to the excess of the amount received in the sale or exchange over the fair market value of the shares at the time the incentive stock option was exercised.
The application of the alternative minimum tax for each participant will depend on such participant’s total income and deductions for the year of exercise. As such, the extent to which, if any, the tax adjustment item generated by the exercise of incentive stock options in conjunction with any other tax adjustment items or alternative minimum tax adjustments may result in an alternative minimum tax liability for any participant cannot be determined. Accordingly, each participant should consult his or her own tax counsel to determine the potential impact of the alternative minimum tax on his or her exercise of incentive stock options.
Employment and Holding Requirements of Incentive Stock Options. The Internal Revenue Code requires that the participant remain an employee of ours or one of our subsidiaries at all times during the period beginning on the date that the incentive stock options are granted and ending on the day three months (or one year in the case of permanent and total disability or death) before the date that each incentive stock option is exercised.
In order for an participant exercising incentive stock options to qualify for the income tax free treatment set forth in the preceding section such participant must not dispose of the shares of common stock acquired pursuant to the exercise of incentive stock options within two years from the date the incentive stock options were granted, nor within one year after the exercise of the incentive stock options. If the participant meets these employment and holding requirements, any future gain or loss realized and recognized from the sale or exchange of the common stock should be long term capital gain or loss, if the stock is held as a capital asset. If the participant disposes of the shares of common stock acquired upon exercise of an incentive stock option within two years from the granting of options or one year after the exercise of options, any gain will constitute, in the year of disposition, ordinary compensation income to the extent of the excess of the fair market value of the common stock on its acquisition date over the price paid for it by the participant. Any additional gain will be treated as capital gain. If the participant disposes of the shares of common stock issued upon exercise of an incentive stock option at a loss, such loss will be a capital loss.
For purposes of this section, the transfer of shares of common stock previously acquired by a participant after the participant’s death does not constitute a “disposition.” In addition, the transferee of the shares of common stock is not subject to the holding and employment requirements.
If the recipient disposes of options instead of exercising them, the incentive stock option rules discussed herein have no application. The recipient transferor will recognize either long or short term capital gain or loss and the purchaser will not be subject to any of these rules.
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Nonqualified Stock Options
In general, a participant who receives a nonqualified stock option realizes income either at the date of grant or at the date of exercise, but not at both. Unless the nonqualified stock option has a “readily ascertainable fair market value” at the date of grant, the participant recognizes no income on the date of grant and the compensatory aspects are held open until the nonqualified stock option is exercised. In this case, upon exercise, the participant will have compensation income to the extent of the difference between the fair market value of the stock at the time of exercise and the exercise price paid by the participant.
An nonqualified stock option is deemed to have a readily ascertainable fair market value if (a) the nonqualified stock options are actively traded on an established market or (b) the fair market value can be measured with reasonable accuracy, which means that (i) the nonqualified stock options are transferable, (ii) the nonqualified stock options are exercisable immediately in full, (iii) the nonqualified stock options and underlying stock are not subject to restrictions which have a significant effect on the nonqualified stock option’s value and (iv) the fair market value of the option privilege is readily ascertainable.
Exercise of Options Through Use of Previously Acquired Common Stock of the Company
Under the Plan, in some circumstances a participant may be allowed to use previously acquired shares of common stock to exercise stock options. Such previously acquired shares of common stock may include common stock acquired pursuant to an earlier partial exercise of options. Generally, the Internal Revenue Service recognizes that an exchange of common stock for other common stock does not constitute a taxable disposition of any shares of common stock. The IRS treats such exchanges as two transactions. First, to the extent of the number of previously acquired shares of common stock, a share for share exchange occurs with each new share of common stock succeeding to the cost basis and holding period of the old shares of common stock. Second, the remaining new shares of common stock are deemed acquired at a zero cost with their holding period commencing on the date of acquisition.
The foregoing rules generally apply to the use of previously acquired shares of common stock to acquire shares of common stock under the Plan. A participant may use shares of common stock owned at the date options are exercised to acquire shares of common stock upon exercise of the options. However, despite a “carryover” holding period, all of the new shares of common stock are still subject to the holding requirements discussed above. If participant disposes of such common stock acquired pursuant to the exercises of incentive stock options before the later of two years from the granting or one year from exercise, an early disposition occurs first to the extent of the non-carryover shares and then to the extent of the carryover shares.
In addition, if a participant uses shares of common stock acquired through a previous partial exercise of options to acquire new shares of common stock through an exercise of options before the first stock has met the above holding requirements, the first stock will be treated as having been disposed of in an early disposition. Therefore, the participant will have to recognize ordinary compensation to the excess of the fair market value of the first stock on its acquisition dates over its price paid. Despite the early disposition, any excess gain is not recognized, but is deferred and carried over to the second stock. If the first stock is used to acquire other shares of common stock which are not subject to the Plan, no early disposition will generally occur and the tax free exchange rules may apply.
Again, you should consult your own tax advisor with regard to the tax treatment applicable in your own tax situation.
Interests of Officers and Directors in this Proposal
Members of our Board and our executive officers are eligible to receive awards under the terms of the Plan, including through certain outstanding employment agreements and grants, and they therefore have a substantial interest in Proposal 7.
Required Vote
The affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy at the Annual Meeting is required to approve Proposal 7.
OUR BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” APPROVAL OF THE PLAN AMENDMENT PROPOSAL
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Proposal 8: The Say on Pay Proposal
In accordance with Section 14A of the Exchange Act and the related rules of the SEC, we are is asking our stockholders to vote to approve, on an advisory (non-binding) basis, the compensation of our named executive officers as disclosed in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on the compensation of our named executive officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the principles, policies and practices described in this proxy statement. Accordingly, the following advisory resolution is submitted for stockholder vote at the annual meeting:
RESOLVED, that the stockholders of INVO Fertility, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed in this proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation tables regarding named executive officer compensation and the narrative disclosures that accompany the compensation tables.
Although the “say-on-pay” vote is non-binding, the Board and the compensation committee will carefully review and consider the voting results when evaluating our named executive officer compensation program.
Required Vote
The affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy at the Annual Meeting is required to approve Proposal 8.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” APPROVAL OF THE SAY ON PAY PROPOSAL
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
INDEPENDENCE OF THE BOARD OF DIRECTORS
The listing rules of Nasdaq require us to maintain a Board comprised of a majority of independent directors, as determined affirmatively by our Board. In addition, the Nasdaq listing rules require that, subject to specified exceptions, each member of our audit, compensation and nominating and governance committees must be independent. Audit committee members and compensation committee members must also satisfy the independence criteria set forth in Rule 10A-3 and Rule 10C-1, respectively, under the Exchange Act. Under the Nasdaq listing rules, a director will only qualify as an “independent director” if, in the opinion of our Board, the director does not have a relationship that would interfere with the exercise of independent judgment in carrying out his or her responsibilities.
Our Board has undertaken a review of the independence of our directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our Board has determined that none of Trent Davis, Mathew Szot, Barbara Ryan, and Rebecca Messina, representing four of our five current directors, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that they each are an “independent director” as that term is defined under the Nasdaq listing rules. Mr. Shum is not considered independent due to his position as our Chief Executive Officer.
BOARD LEADERSHIP STRUCTURE
The Board does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board. The Board believes it is in stockholders’ best interest that such determination be made based on the position and direction of the Company and the membership of the Board.
There are no family relationships among any of our directors and executive officers.
ROLE OF THE BOARD IN RISK OVERSIGHT
One of the key functions of our Board is informed oversight of our risk management process. The Board does not have a standing risk management committee, but rather administers this oversight function directly through the Board as a whole, as well as through various standing committees of our Board that address risks inherent in their respective areas of oversight. In particular, our Board is responsible for monitoring and assessing strategic risk exposure and our audit committee is responsible for considering and discussing our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The Board monitors compliance with legal and regulatory requirements and the effectiveness of our corporate governance practices, including whether they are successful in preventing illegal or improper liability-creating conduct. Our Board is responsible for overseeing our risk management efforts generally, including (i) the allocation of risk management functions among our Board and its committees, and (ii) assessing and monitoring whether any of our compensation policies and programs has the potential to encourage excessive risk-taking. Our Board periodically reviews its general process for the oversight of risk management.
MEETINGS OF THE BOARD OF DIRECTORS
During 2024, our Board held 11 meetings. The Board acted by unanimous written consent on 11 occasions in 2024.
Each Board member attended 100% of the meetings in 2024 and 2025.
INFORMATION REGARDING COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee
Our audit committee is currently comprised of Matthew Szot (Chairman), Rebecca Messina, and Barbara Ryan. Each of the members of our audit committee is an independent director under the Nasdaq listing rules, satisfies the additional independence criteria for audit committee members and satisfies the requirements for financial literacy under the Nasdaq listing rules and Rule 10A-3 of the Exchange Act, as applicable.
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Our Board has also determined that Mr. Szot qualifies as an “audit committee financial expert” within the meaning of the applicable rules and regulations of the SEC and satisfies the financial sophistication requirements of the Nasdaq listing rules.
Our audit committee oversees our corporate accounting and financial reporting process and assists our Board in monitoring our financial systems and our legal and regulatory compliance. Our audit committee also:
| ● | oversees the work of our independent auditors; | |
| ● | approves the engagement, discharge and compensation of our independent auditors; | |
| ● | approves engagements of the independent auditors to render any audit or permissible non-audit services; | |
| ● | reviews the qualifications, independence and performance of the independent auditors; | |
| ● | reviews our financial statements and our critical accounting policies and estimates; | |
| ● | reviews the adequacy and effectiveness of our internal controls; | |
| ● | reviews our policies with respect to risk assessment and risk management; | |
| ● | reviews and monitors our policies and procedures relating to related person transactions; and | |
| ● | reviews and discusses with management and the independent auditors the results of our annual audit, our quarterly financial statements and our publicly filed reports. |
Our audit committee operates under a written charter approved by our Board that satisfies the applicable rules and regulations of the SEC and the listing requirements of Nasdaq. The charter is available on the corporate governance section of our website, which is located at www.invofertility.com. This committee held six meetings in 2024.
Report of the Audit Committee of the Board of Directors
The audit committee reviewed, and discussed with management and M&K CPAS, PLLC, our independent registered public accounting firm, our audited consolidated financial statements for the fiscal year ended December 31, 2024. The audit committee received, reviewed and discussed (i) the written disclosures and communications from M&K CPAS, PLLC regarding relationships, if any, which might impair M&K’s independence from management and the Company, and (ii) all required communications pertaining to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management. Based on the foregoing, the audit committee recommended to the Board that the audited financial statements be included in the our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and filed with the Securities and Exchange Commission on April 30, 2025. The report of the audit committee was delivered on April 29, 2025.
The material in this audit committee report is not “soliciting material,” is not deemed “filed” with the Commission and is not to be incorporated by reference in any filing of ours under the Securities Act 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
Our compensation committee is currently comprised of Ms. Ryan (Chairman), Mr. Davis, and Mr. Szot.
The compensation committee oversees our compensation policies, plans and programs, and reviews and determine the compensation to be paid to our executive officers and directors. In addition, the compensation committee has the authority to act on behalf of the Board in fulfilling the Board’s responsibilities with respect to compensation-based and related disclosures in filings as required by the SEC. Our compensation committee operates under a written charter approved by our Board that satisfies the applicable rules and regulations of the SEC and the listing requirements of Nasdaq. The charter is available on the corporate governance section of our website, which is located at www.invofertility.com. This committee held two meetings during 2024.
Nominating and Governance Committee
Our nominating and governance committee is currently comprised of Mr. Davis (Chairman), Ms. Messina, and Ms. Ryan.
The nominating and governance committee (i) oversees our corporate governance functions on behalf of the Board; (ii) makes recommendations to the Board regarding corporate governance issues; (iii) identifies and evaluates candidates to serve as our directors consistent with the criteria approved by the Board and reviews and evaluates the performance of the Board; (iv) serves as a focal point for communication between director candidates, non-committee directors and management; (v) selects, or recommends to the Board for selection, director candidates and nominees; and (vi) makes other recommendations to the Board regarding matters relating to our directors. Our nominating and governance committee operates under a written charter approved by our Board that satisfies the applicable rules and regulations of the SEC and the listing requirements of Nasdaq. The charter is available on the corporate governance section of our website, which is located at www.invofertility.com. This committee held one meeting during 2023 and one meeting in 2024.
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The nominating and governance committee believes that candidates for director should have certain minimum qualifications, which are discussed above in “Questions and Answers About These Proxy Materials and Voting.” The nominating and governance committee also takes these minimum qualifications into account in identifying and evaluating director nominees, including nominees recommended by stockholders. In identifying director nominees, the nominating and governance committee strives for a diverse mix of backgrounds and expertise that enhances the ability of the directors collectively to understand the issues facing the Company and to fulfill the responsibilities of the Board and its committees.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Any interested party may communicate in writing with any particular director, any committee of the Board, or the directors as a group, by sending such written communication to our Corporate Secretary at our principal executive offices at 5582 Broadcast Court, Sarasota, FL 34240. Copies of written communications received at such address will be provided to the Board or the relevant director unless such communications are considered, in the reasonable judgment of our Corporate Secretary, to be of a purely marketing nature or inappropriate for submission to the intended recipient(s). The Corporate Secretary or his designee may analyze and prepare a response to the information contained in communications received and may deliver a copy of the communication to other Company staff members or agents who are responsible for analyzing or responding to complaints or requests. Communications concerning potential director nominees submitted by any of our stockholders will be forwarded to the chairman of the nominating and governance committee.
COMPENSATION RECOVERY AND CLAWBACK POLICIES
On
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Our Compensation Committee conducted a recovery analysis under the Clawback Policy and determined that, due to the limited impact of the accounting error, the compensation received by our executives during the lookback period would have been the same as if it had calculated based on the restated financial statements. As stated above, the Previous Financial Statements were restated to correct the discount rates for the valuation of our right of use asset and corresponding lease liability. The impact of the restatement was limited to our assets and liabilities, and the restatement did not impact our revenue, results of operation, earnings (loss) per share, or net equity.
CODE OF CONDUCT AND ETHICS FOR EMPLOYEES, EXECUTIVE OFFICERS, AND DIRECTORS
We have adopted a Code of Business Conduct and Ethics (“Code of Conduct”) applicable to all our employees, executive officers and directors. The Code of Conduct is available on our website at www.invofertility.com, under the “Corporate Governance” heading of the “Investors” section. The nominating and governance committee of our Board is responsible for overseeing the Code of Conduct and must approve any waivers of the Code of Conduct for employees, executive officers and directors. We expect that any amendments to the Code of Conduct, or any waivers of its requirements, will be disclosed on our website.
INSIDER ADOPTION OR TERMINATION OF TRADING ARRANGEMENTS
During
the fiscal quarter ended December 31, 2024, none of our directors or officers informed us of the
INSIDER TRADING POLICY
We
have
GRANTS MADE CLOSE IN TIME TO THE RELEASE OF MATERIAL NONPUBLIC INFORMATION
DELINQUENT SECTION 16(a) REPORTS
Section 16(a) of the Exchange Act requires our officers and directors to file with the SEC reports of ownership on Form 3 and changes in ownership on Form 4 and Form 5. Officers and directors are required by Commission regulations to furnish to us copies of all Section 16(a) forms they file. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, to our knowledge all Section 16(a) filing requirements applicable to our officers and directors were timely filed during the fiscal year ended December 31, 2024, except that Daniel Teper and Lyn Falconio did not file Form 3s.
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EXECUTIVE OFFICERS
The following table sets forth information concerning our executive officers:
| NAME | AGE | POSITION | ||
| Mr. Steven Shum | 54 | Director, Chief Executive Officer | ||
| Mr. Andrea Goren | 57 | Chief Financial Officer |
Information with respect to Mr. Shum is set forth above in “Nominees for Directors.”
Andrea Goren. Mr. Goren is our Chief Financial Officer, a position he has held since June 2021, and has been advising our Chief Executive Officer on financial, legal and strategic matters since June 2020. In his 30+ year career, Mr. Goren has accumulated extensive experience in numerous financial functions, including service as a public company CFO, company director, capital raising activities as well as mergers and acquisition experience. Mr. Goren has served as managing director and CFO of Phoenix Group, a New York City-based private equity firm specializing in micro-cap and nano-cap public companies. In that capacity, Mr. Goren served from 2011 to 2021 as CFO of iSign Solutions Inc., an electronic signature software company, and on the board of Xplore Technologies Corp. (ticker: XPLR), a leading provider of rugged Tablet PCs that was acquired by Zebra Technologies in 2018. He served as vice president of Shamrock Group, the Roy Disney family private investment firm in London; and was a director at New York City-based Madison Capital Group, a corporate advisory firm focused on U.S. / European Union cross border transactions. Mr. Goren holds a Bachelor of Arts degree from Connecticut College in New London, Connecticut, and an MBA from the Columbia Business School in New York City.
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EXECUTIVE AND DIRECTOR COMPENSATION
Summary Compensation Table
The following Summary Compensation Table sets forth, for the years indicated, all cash compensation paid, distributed or accrued for services, including salary and bonus amounts, rendered in all capacities by our “named executive officers” for SEC reporting purposes.
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | All other Compensation ($) | Total ($) | |||||||||||||||||||
| Steven Shum | 2024 | 260,000 | (2) | - | - | - | - | 260,000 | ||||||||||||||||||
| Chief Executive Officer (1) | 2023 | 201,875 | - | - | 30,800 | (3) | - | 232,675 | ||||||||||||||||||
| Andrea Goren | 2024 | 215,000 | (4) | - | - | - | - | 215,000 | ||||||||||||||||||
| Chief Financial Officer | 2023 | 173,750 | - | - | 24,948 | (5) | - | 198,698 | ||||||||||||||||||
| Dr. Daniel Teper | 2024 | 137,548 | (7) | - | - | - | - | 137,548 | ||||||||||||||||||
| Former President (6) | ||||||||||||||||||||||||||
| Michael Campbell | 2024 | 192,500 | (9) | - | - | - | - | 192,500 | ||||||||||||||||||
| Former Chief Operating Officer | 2023 | 220,000 | - | - | 55,002 | (10) | - | 275,002 | ||||||||||||||||||
| Vice President, Business Development (8) | ||||||||||||||||||||||||||
| (1) | Mr. Shum did not receive any additional compensation for being a member of the board. |
| (2) | As of December 31, 2024, Mr. Shum deferred $69,540 of his salary. |
| (3) | Amounts reflect the aggregate grant date fair value of the 5,000 shares of common stock underlying the stock option on the date of grant without regards to forfeitures, computed in accordance with ASC 718. This amount does not reflect the actual economic value realized by Mr. Shum. The options issued to Mr. Shum provide for equal quarterly vesting over a 3-year period based on continued employment during that time. |
| (4) | As of December 31, 2024, Mr. Goren deferred $51,948 of his salary. |
| (5) | Amounts reflect the aggregate grant date fair value of the 4,050 shares of common stock underlying the stock option on the date of grant without regards to forfeitures, computed in accordance with ASC 718. This amount does not reflect the actual economic value realized by Mr. Goren. The options issued to Mr. Goren provide for equal quarterly vesting based on continued employment during that time. |
| (6) | Dr. Teper became president of the Company effective October 11, 2024. All amounts for 2024 are from October 11, 2024, through December 31, 2024. |
| (7) | As of December 31, 2024, Dr. Teper deferred $85,548 of his salary. |
| (8) | Effective November 15, 2024, Mr. Campbell retired from the Company, and Mr. Campbell and the Company mutually agreed to terminate his employment agreement. |
| (9) | As of December 31, 2024, Mr. Campbell deferred $194,323 of his salary. |
| (10) | Amounts reflect the aggregate grant date fair value of the 4,150 shares of common stock underlying the stock option on the date of grant without regards to forfeitures, computed in accordance with ASC 718. This amount does not reflect the actual economic value realized by Mr. Campbell. The options issued to Mr. Campbell provide for equal quarterly vesting over a 3-year period based on continued employment during that time. |
Narrative Disclosure to Summary Compensation Table
Except as otherwise described below, there are no compensatory plans or arrangements, including payments to be received from us with respect to any named executive officer, that would result in payments to such person because of his resignation, retirement, or other termination of employment with us, or our subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control of the Company.
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OUTSTANDING EQUITY AWARDS AT END OF 2024
The following table provides information about outstanding stock options issued by us held by each of our NEOs as of December 31, 2024. None of our NEOs held any other equity awards from us as of December 31, 2024.
| Option Awards | Stock Awards | |||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares of Stock That Has Not Yet Vested | Market Value of Stock that has not Yet Vested | ||||||||||||||||||
| Steve Shum | 15,260 | 1,746 | 7.36-161.39 | 12/05/30-05/17/33 | - | - | ||||||||||||||||||
| Andrea Goren | 15,103 | 1,457 | 7.36-115.20 | 08/10/30-05/17/33 | - | - | ||||||||||||||||||
| Dr. Daniel Teper | - | - | - | - | - | - | ||||||||||||||||||
| Michael Campbell | 18,322 | 1,409 | 7.36-161.39 | 01/17/30-05/17/33 | - | - | ||||||||||||||||||
Employment Agreements
Steven Shum
On October 16, 2019, we entered into an employment agreement with Steven Shum (the “Shum Employment Agreement”), pursuant to which Mr. Shum serves as chief executive officer on an at-will basis at an annual base salary of $260,000. The Shum Employment Agreement provided for a performance bonus of $75,000 upon a successful up-listing to the Nasdaq Stock Market, with all other bonuses to be determined by the Board in its sole discretion. In addition to his base salary and performance bonus, Mr. Shum was granted: (i) 625 shares of our common stock and (ii) a three-year option to purchase 10,130 shares of our common stock at an exercise price of $163.20 per share. This option vested monthly over its 3-year term. Pursuant to the Shum Employment Agreement, Mr. Shum is also entitled to customary benefits, including health insurance and participation in employee benefit plans. The Shum Employment Agreement provides that if Mr. Shum is terminated without cause (as defined in the Shum Employment Agreement) or he resigns his employment due to a constructive termination (as defined in the Shum Employment Agreement) then he will be entitled to receive, as severance, (a) 12 month’s base salary continuation, (b) 6 months reimbursement of payments for continuing health coverage, pursuant to COBRA, and (c) continued vesting of his shares for a period of 6 months following such employment termination.
On August 10, 2023, Mr. Shum, voluntarily agreed to temporarily reduce the annual base salary under his employment agreement from $260,000 to $105,000 until further notice, which reduction took effect on August 16, 2023. As of January 1, 2024, the salary for Mr. Shum reverted to the amount reflected in the Shum Employment Agreement.
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Andrea Goren
On June 14, 2021, we entered into an employment agreement with Andrea Goren (the “Goren Employment Agreement”), pursuant to which Mr. Goren was hired as our chief financial officer. The Goren Employment Agreement provides for an annual base salary of $215,000 and a target annual incentive bonus of up to 50% of base salary if we achieve goals and objectives determined by the Board. In connection with the Goren Employment Agreement, on June 14, 2021 we granted Mr. Goren a stock option under the 2019 Plan to purchase 3,625 shares of our common stock (the “Goren Option”). The Goren Option vests in equal monthly installments over a 3-year period, has a term of 10 years and can be exercised at a price of $104.10 per share. Also, in connection with the Goren Employment Agreement, as of July 1, 2021, Mr. Goren was granted a restricted stock award for 250 share of our common stock (the “Goren RSA”). The Goren RSA vested in equal monthly installments over a 12-month period. Mr. Goren is also entitled to customary benefits, including health insurance and participation in employee benefit plans. The Goren Employment Agreement provides that if Mr. Goren terminates the Goren Employment Agreement for “cause” (as defined in the Goren Employment Agreement) or the Company terminates the Goren Employment Agreement without “cause,” then he will continue to receive his base salary for three months after termination and certain insurance benefits for twelve months after termination. The Company may terminate the Goren Employment Agreement without “cause” on 30 days’ notice.
On August 10, 2023, Mr. Goren, voluntarily agreed to temporarily reduce the annual base salary under his employment agreement from $215,000 to $105,000 until further notice, which reduction took effect on August 16, 2023. As of January 1, 2024, the salary for Mr. Goren reverted to the amount reflected in the Goren Employment Agreement.
Michael Campbell
On January 15, 2020, we entered into an employment agreement (the “Campbell Employment Agreement”) with Michael Campbell to serve as our chief operating officer and vice president of business development. The Campbell Employment Agreement provides for an annual base salary of $220,000, and a target annual incentive bonus of up to 50% of base salary if we achieve goals and objectives determined by the Board. In connection with the Campbell Employment Agreement, on January 17, 2020, we granted Mr. Campbell 1,563 shares of our common stock, and an option to purchase 6,250 shares of our common stock (the “Campbell Option”) at an exercise price of $136.8192 per share. One quarter of the Campbell Option vested upon grant, and the remainder vested in monthly increments over a period of two years from the date of grant. Mr. Campbell is also entitled to customary benefits, including health insurance and participation in employee benefit plans. The Campbell Employment Agreement provides that if Mr. Campbell terminates the Campbell Employment Agreement for “cause” (as defined in the Campbell Employment Agreement) or the Company terminates the Campbell Employment Agreement without “cause,” then he will continue to receive his base salary and certain insurance benefits for three months after termination. We may terminate the Campbell Employment Agreement without “cause” on 60 days’ notice.
Effective November 15, 2024, Mr. Campbell retired from the Company, and we and Mr. Campbell mutually agreed to terminate his employment agreement.
Daniel Teper
Effective as of August 1, 2023, NAYA TX entered into an employment agreement with Dr. Daniel Teper (the “Teper Employment Agreement”), pursuant to which Dr. Teper serves as chief executive officer of NAYA TX for a period of three years at an initial annual base salary of $624,000, which salary shall be increased annually by an amount equal to the percentage increase of the Consumer Price Index. In addition, NAYA TX’s compensation committee shall review Dr. Teper’s salary annually and may further increase the salary following such review in its sole discretion. The Teper Employment Agreement provides for Dr. Teper to be eligible for an annual bonus of up to seventy-five percent of his then applicable salary, which bonus shall be payable in cash and up to 50% in shares of NAYA TX common stock at Dr. Teper’s discretion. The salary payable to Dr. Teper may be deferred according to the resources of NAYA TX until it closes a round of financing with gross proceeds of at least $10 million. In addition to his base salary and performance bonus, Dr. Teper was granted 500,000 shares of NAYA TX’s Class B common stock, and he is eligible to participate in NAYA TX’s stock option plan. Pursuant to the Teper Employment Agreement, Dr. Teper is also entitled to customary benefits, including health insurance, participation in employee benefit plans, vacation, and sick time. The Teper Employment Agreement provides that if Dr. Teper is terminated other than for cause (as defined in the Teper Employment Agreement) or he resigns his employment due to a good reason (as defined in the Teper Employment Agreement) then he will be entitled to receive, as severance, (a) the greater of (i) 12 month’s salary for the year in which termination occurred or (ii) the number of months remaining in the term of the agreement plus the amount of the actual bonus earned by Dr. Teper for year prior to his termination and, if the termination occurs in the first year of the term, 100% of the first year target bonus, (b) up to 12 months reimbursement of payments for continuing health coverage, pursuant to COBRA, and (c) immediate vesting of any unvested restricted stock or stock options held by Dr. Teper. The Teper Employment Agreement further provides that, if Dr. Teper’s employment is terminated in connection with a change of control (as defined in the Teper Employment Agreement), he will be entitled to receive (a) an amount equal to two (2) times the sum of (i) his annual salary in effect on the day preceding the change in control termination, plus (ii) an amount equal to the aggregate bonus received by Dr. Teper for the year immediately preceding the change in control termination and, if the termination occurs in the first year of the term, 100% of the first year target bonus, (b) up to 18 months reimbursement of payments for continuing health coverage, pursuant to COBRA, and (c) immediate vesting of any unvested restricted stock or stock options held by Dr. Teper.
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On May 28, 2025, we entered into definitive agreements to divest a majority of our holdings in NAYA TX, and on May 31, 2025, we redeemed all outstanding shares of our Series C-1 Preferred. In connection therewith, Dr. Teper resigned as our President.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
If Mr. Shum is involuntarily terminated without cause or constructively terminated (in each case, as defined in the Shum Employment Agreement), then he is entitled to 12 months’ severance and continued vesting of his shares for a period of 6-months following termination.
If (i) Mr. Goren terminates his employment agreement for cause, (ii) the Company provides notice not to renew his employment agreement on any anniversary date, or (iii) the Company terminates his employment agreement without cause, then he is entitled to three months’ severance and insurance benefits.
If Dr. Teper’s employment with NAYA TX is terminated in connection with a change of control (as defined in the Teper Employment Agreement), he will be entitled to receive (a) an amount equal to two (2) times the sum of (i) his annual salary in effect on the day preceding the change in control termination, plus (ii) an amount equal to the aggregate bonus received by Dr. Teper for the year immediately preceding the change in control termination
The following table sets forth quantitative information with respect to potential payments to be made to either Mr. Shum, Mr. Goren, and Dr. Teper upon termination in various circumstances. The potential payments are based on the terms of each of the employment agreements discussed above. For a more detailed description of the employment agreements, see the “Employment Agreements” section above.
| Name | Potential Payment Upon Termination | |||||||
| ($) | Option Awards (#) | |||||||
| Steven Shum | $ | 260,000 | (1) | 1,746 | (2) | |||
| Andrea Goren | $ | 53,750 | (3) | 1,457 | (4) | |||
| Daniel Teper | $ | 1,248,000 | (5) | - | ||||
| (1) | Mr. Shum is entitled to twelve months’ severance at the then applicable base salary rate. Mr. Shum’s current base salary is $260,000 per annum. |
| (2) | Represents the number of unvested options at December 31, 2024. Mr. Shum’s options vest equally over a 36-month period. At December 31, 2024, there were 12 months remaining in his vesting schedule. The potential payment of shares subject to Mr. Shum’s unvested options will reduce every month as his options vest and the value of his unvested options will be based on our market price at such time. |
| (3) | Mr. Goren is entitled to three months’ severance at the then applicable base salary rate. Mr. Goren’s current base salary is $215,000 per annum. |
| (4) | Represents the number of unvested options at December 31, 2024. Mr. Goren’s options vest equally over a 36-month period. At December 31, 2024, there were 12 months remaining in his vesting schedule. The potential payment of shares subject to Mr. Goren’s unvested options will reduce every month as his options vest and the value of his unvested options will be based on our market price at such time. |
| (5) | Dr. Teper is entitled to two times his annual salary at the then applicable base salary rate. Dr. Teper’s current base salary with NAYA TX is $624,000 per annum. |
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Disclosure of Equity Awards Based on Material Nonpublic Information: None
Pay Versus Performance
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation and certain financial performance metrics. The disclosure included in this section is prescribed by SEC rules and does not necessarily align with how we or the compensation committee view the link between financial performance and the compensation actually received or realized by our named executive officers. All information provided above under the “Pay Versus Performance” heading will not be deemed to be incorporated by reference into any filing of ours 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, except to the extent we specifically incorporates such information by reference.
The table below presents information on the compensation of our Chief Executive Officer and other named executive officers in comparison to certain performance metrics for 2024, 2023, and 2022. These metrics are not those that the Compensation Committee uses when setting executive compensation. The use of the term Compensation Actually Paid (“CAP”) is required by the rules and regulations of the SEC, and under such rules, CAP was calculated by adjusting the Summary Compensation Table (“SCT”) Total values for the applicable year as described in the footnotes to the table.
| Year | Summary Compensation Table Total for PEO (1)(2) | Compensation Actually Paid to PEO (3) | Average Summary Compensation Table Total for Non-PEO NEOs (1)(2) | Average Compensation Actually Paid to Non-PEO NEOs (3) | Value of Initial Fixed $100 Investment Based On Total Stockholder Return | Net Income | ||||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | ||||||||||||||||||
| 2024 | ( | ) | ||||||||||||||||||||||
| 2023 | ( | ) | ||||||||||||||||||||||
| 2022 | ( | ) | ( | ) | ||||||||||||||||||||
| (1) |
| (2) |
| (3) |
| (1) | The
Principal Executive Officer (“PEO”) information reflected in columns (b) and (c) relates to our CEO, |
| (2) | The amounts shown in this column are the amounts of total compensation reported for Steven Shum or the average total compensation reported for the non-PEO NEOs, as applicable, for each corresponding year in the “Total” column of the Summary Compensation. Please refer to “Executive Compensation—Compensation Tables—Summary Compensation Table.” |
| (3) | The amounts shown have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually realized or received by the Company’s PEO and non-PEO NEOs. In accordance with the requirements of Item 402(v) of Regulation S-K, adjustments were made to Mr. Shum’s total compensation, or the average total compensation of the non-PEO NEOs, as applicable, as described in the tables below. |
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PEO SCT Total to CAP Reconciliation
| Year | Summary Compensation Total | Less Stock Awards | Less Option Awards | Fair Value Adjustments to SCT Total | CAP | |||||||||||||||
| 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| 2023 | ||||||||||||||||||||
| 2022 | ( | ) | ||||||||||||||||||
Average Non-PEO NEOs SCT Total to CAP Reconciliation
| Year | Summary Compensation Total | Less Stock Awards |
Less Option Awards |
Fair Value Adjustments to SCT Total |
CAP | |||||||||||||||
| 2024 | $ | $ | $ | $ | ( |
) | $ | |||||||||||||
| 2023 | ||||||||||||||||||||
| 2022 | ( |
) | ( |
) | ||||||||||||||||
PEO Equity Component of CAP
| Year | Fair Value of Current Year Equity Awards at December 31, |
Change in Fair Value of Prior Years’ Awards Unvested at December 31, |
Change in Fair Value of Current Years’ Awards Vested through the Year Ended December 31, |
Change in Fair Value of Prior Years’ Awards Vested through the Year Ended |
Equity Value Included in CAP |
|||||||||||||||
| (a) | (b) | (c) | (d) | (e) = (a)+(b)+(c)+(d) | ||||||||||||||||
| 2024 | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||||||||
| 2023 | ( |
) | ( |
) | ||||||||||||||||
| 2022 | ( |
) | ( |
) | ( |
) | ||||||||||||||
Average Non-PEO NEOs Equity Component of CAP
| Year | Fair Value of Current Year Equity Awards at December 31, |
Change in Fair Value of Prior Years’ Awards Unvested at December 31, |
Change in Fair Value of Current Years’ Awards Vested through the Year Ended December 31, |
Change in Fair Value of Prior Years’ Awards Vested through the Year Ended |
Equity Value Included in CAP |
|||||||||||||||
| (a) | (b) | (c) | (d) | (e) = (a)+(b)+(c)+(d) | ||||||||||||||||
| 2024 | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||||||||
| 2023 | ( |
) | ( |
) | ||||||||||||||||
| 2022 | ( |
) | ( |
) | ( |
) | ||||||||||||||
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Compensation of Directors
DIRECTOR COMPENSATION TABLE
| Name | Year | Fees earned or paid in cash ($) | Stock awards ($) | Option awards ($) | All other compensation ($) | Total ($) | ||||||||||||||||
| Trent Davis | 2024 | 42,500 | (1) | - | - | - | 42,500 | |||||||||||||||
| 2023 | 42,500 | (1) | - | 24,820 | - | 67,320 | ||||||||||||||||
| Barbara Ryan | 2024 | 52,500 | (2) | - | - | - | 52,500 | |||||||||||||||
| 2023 | 49,375 | (2) | - | 24,820 | - | 74,195 | ||||||||||||||||
| Matthew Szot | 2024 | 47,500 | (3) | - | - | - | 47,500 | |||||||||||||||
| 2023 | 49,375 | (3) | - | 24,820 | - | 74,195 | ||||||||||||||||
| Rebecca Messina | 2024 | 42,500 | (4) | - | - | - | 42,500 | |||||||||||||||
| 2023 | 41,250 | (4) | - | 24,820 | - | 66,070 | ||||||||||||||||
| Jeffrey Segal | 2024 | - | - | - | - | - | ||||||||||||||||
| Former Director | 2023 | 8,750 | - | - | - | 8,750 | ||||||||||||||||
| (1) | As of December 31, 2024, Mr. Davis deferred a cumulative total $66,825 of fees earned. |
| (2) | As of December 31, 2024, Ms. Ryan deferred a cumulative total $91,675 of fees earned. |
| (3) | As of December 31, 2024, Mr. Szot deferred a cumulative total $92,325 of fees earned. |
| (4) | As of December 31, 2024, Ms. Messina deferred a cumulative total $74,000 of fees earned. |
Director Compensation Program
Our current director compensation program is designed to align our director compensation program with the long-term interests of our stockholders by implementing a program comprised of cash and equity compensation.
In setting director compensation, we consider the amount of time that directors expend in fulfilling their duties to us as well as the skill level and experience required by our board of directors. We also consider board compensation practices at similarly situated companies, while keeping in mind the compensation philosophy of us and the stockholders’ interests. The directors also receive reimbursement for expenses, including reasonable travel expenses to attend board and committee meetings, reasonable outside seminar expenses, and other special board related expenses.
Limitations on Liability and Indemnification
We are a Nevada corporation and generally governed by the Nevada Private Corporations Code, Title 78 of the Nevada Revised Statutes (the “NRS”).
Section 78.138 of the NRS provides that, unless the corporation’s articles of incorporation provide otherwise, a director or officer will not be individually liable unless it is proven that (i) the director’s or officer’s acts or omissions constituted a breach of his or her fiduciary duties, and (ii) such breach involved intentional misconduct, fraud, or a knowing violation of the law. Our articles of incorporation provide the personal liability of our directors is eliminated to the fullest extent permitted under the NRS.
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Section 78.7502 of the NRS permits a company to indemnify its directors and officers against expenses, judgments, fines, and amounts paid in settlement actually and reasonably incurred in connection with a threatened, pending, or completed action, suit, or proceeding, if the officer or director (i) is not liable pursuant to NRS 78.138, or (ii) acted in good faith and in a manner the officer or director reasonably believed to be in or not opposed to the best interests of the corporation and, if a criminal action or proceeding, had no reasonable cause to believe the conduct of the officer or director was unlawful. Section 78.7502 of the NRS requires a corporation to indemnify a director or officer that has been successful on the merits or otherwise in defense of any action or suit. Section 78.7502 of the NRS precludes indemnification by the corporation if the officer or director has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court determines that in view of all the circumstances, the person is fairly and reasonably entitled to indemnity for such expenses and requires a corporation to indemnify its officers and directors if they have been successful on the merits or otherwise in defense of any claim, issue, or matter resulting from their service as a director or officer.
Section 78.751 of the NRS permits a Nevada company to indemnify its officers and directors against expenses incurred by them in defending a civil or criminal action, suit, or proceeding as they are incurred and in advance of final disposition thereof, upon determination by the stockholders, the disinterested board members, or by independent legal counsel. If so provided in the corporation’s articles of incorporation, bylaws, or other agreement, Section 78.751 of the NRS requires a corporation to advance expenses as incurred upon receipt of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court of competent jurisdiction that such officer or director is not entitled to be indemnified by the company. Section 78.751 of the NRS further permits the company to grant its directors and officers’ additional rights of indemnification under its articles of incorporation, bylaws, or other agreement.
Section 78.752 of the NRS provides that a Nevada company may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee, or agent of the company, or is or was serving at the request of the company as a director, officer, employee, or agent of another company, partnership, joint venture, trust, or other enterprise, for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee, or agent, or arising out of his status as such, whether or not the company has the authority to indemnify him against such liability and expenses.
Our articles of incorporation provide for indemnification of our officers and directors to the fullest extent permissible under Nevada General Corporation Law, in accordance with the Company’s Bylaws. Our Bylaws provide for indemnification of our officers and directors to the fullest extent not prohibited by the Nevada; provided however, that the Company may modify the extent of such indemnification by individual contracts with its directors and officers; and provided, further, that the Company shall not be required to indemnify any director or officer in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law; (ii) the proceeding was authorized by the board of directors; (iii) such indemnification is provided by the Company, in its sole discretion, pursuant to the powers vested in the corporation under the Nevada General Corporation Law or; (iv) such indemnification is a result of the enforcement of a contractual right.
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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table shows information regarding our equity compensation plans as of December 31, 2024.
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (c) | |||||||||
| Equity compensation plans approved by security holders (1) | 98,289 | (2) | $ | 41.90 | 164,312 | |||||||
| Equity compensation plans not approved by security holders | - | - | - | |||||||||
| Total | 98,289 | $ | 41.90 | 164,312 | ||||||||
(1) 2019 Stock Incentive Plan. On October 3, 2019, our Board adopted the 2019 Stock Incentive Plan (as amended, the “Plan”). The purpose of our Plan is to advance the best interests of the company by providing those persons who have a substantial responsibility for our management and growth with additional incentive and by increasing their proprietary interest in the success of the company, thereby encouraging them to maintain their relationships with us. Further, the availability and offering of stock options and common stock under the plan supports and increases our ability to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability which we depend. As of December 31, 2024 the total number of shares available for the grant of either stock options or compensation stock under the plan, including 20,640 shares approved at our stockholders meeting on October 12, 2022, is 311,049 shares, subject to annual increases of six percent (6%) of the total number of shares of outstanding Common Stock on December 31st of the preceding calendar year.
(2) We granted no shares subject to restricted stock grants under the Plan in the year ended December 31, 2024.
Our Board administers our plan and has full power to grant stock options and common stock, construe and interpret the plan, establish rules and regulations and perform all other acts, including the delegation of administrative responsibilities, it believes reasonable and proper. Any decision made, or action taken, by our Board arising out of or in connection with the interpretation and administration of the plan is final and conclusive.
The Board, in its absolute discretion, may award common stock to employees of, consultants to, and directors of the company, and such other persons as the Board or compensation committee may select, and permit holders of common stock options to exercise such options prior to full vesting therein and hold the common stock issued upon exercise of the option as common stock. Stock options may also be granted by our Board or compensation committee to non-employee directors of the company or other persons who are performing or who have been engaged to perform services of special importance to the management, operation or development of the company.
In the event that our outstanding common stock is changed into or exchanged for a different number or kind of shares or other securities of the company by reason of merger, consolidation, other reorganization, recapitalization, combination of shares, stock split-up or stock dividend, prompt, proportionate, equitable, lawful and adequate adjustment shall be made of the aggregate number and kind of shares subject to stock options which may be granted under the plan.
Our Board may at any time, and from time to time, suspend or terminate the plan in whole or in part or amend it from time to time in such respects as our Board may deem appropriate and in our best interest.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes set forth the beneficial ownership of our common stock as of June 3, 2025, by each person who was known by us to beneficially own more than 5% of the common stock, by each director and named executive officer, and by all directors and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or dispositive power with respect to the securities. Unless otherwise indicated below, to our knowledge, all persons listed below have sole voting and dispositive power with respect to their shares of our common stock, except to the extent authority is shared by spouses under applicable law. Unless otherwise noted, the address of all of the individuals and entities named below is care of INVO Fertility, Inc., 5582 Broadcast Court Sarasota, Florida, 34240.
The following table sets forth the beneficial ownership of our common shares as of June 3, 2025 for:
| ● | each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our common shares; | |
| ● | each of our named executive officers; | |
| ● | each of our directors; and | |
| ● | all of our current executive officers and directors as a group. |
The percentage ownership information is based upon 2,161,131 common shares outstanding as of June 3, 2025. We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.
| Name and Address of Beneficial Owner (1) | Number of Shares | Percentage of Common Stock | ||||||
| 5% Stockholders: | ||||||||
| Five Narrow Lane LP (3) | 215,897 | (2) | 9.99 | % | ||||
| Officers and Directors: | ||||||||
| Dr. Daniel Teper | 4,515 | (4) | 0.21 | % | ||||
| Andrea Goren | 1,962 | (5) | 0.09 | % | ||||
| Steve Shum | 3,370 | (6) | 0.16 | % | ||||
| Matthew Szot | 649 | (7) | 0.03 | % | ||||
| Trent Davis | 613 | (8) | 0.03 | % | ||||
| Barbara Ryan | 599 | (9) | 0.03 | % | ||||
| Rebecca Messina | 521 | (10) | 0.02 | % | ||||
| All directors, director nominees and executive officers as a group (7 persons) | 12,228 | 0.57 | % | |||||
| (1) | Unless otherwise indicated, the business address of each current director or executive officer is INVO Fertility, Inc. 5582 Broadcast Court Sarasota, Florida 34240. |
(2)
|
215,897 represents the maximum amount of shares that Five Narrow Lane LP can beneficially control under a contractually stipulated 9.99% ownership restriction. The full conversion and/or exercise of Five Narrow Lane LP’s securities would exceed this restriction. |
| (3) | Unless otherwise indicated, the business address of Five Narrow Lane LP is 510 Madison Avenue, Suite 1400, New York, New York 10022. |
| (4) | Includes 2,183 shares held by Cytovia Therapeutics Holdings, Inc., of which Dr. Teper is an officer, director, and stockholder. Dr. Teper disclaims beneficial ownership of all such shares held by Cytovia except to the extent of his pecuniary interest therein. |
| (5) | Includes: 1,327 shares of common stock under options (either presently exercisable or exercisable within 60 days of June 3, 2025). |
| (6) | Includes: 1,349 shares of common stock under options (either presently exercisable or exercisable within 60 days of June 3, 2025). |
| (7) | Includes: 485 shares of common stock under options (either presently exercisable or exercisable within 60 days of June 3, 2025). |
| (8) | Includes: 472 shares of common stock under options (either presently exercisable or exercisable within 60 days of June 3, 2025). |
| (9) | Includes: 466 shares of common stock under options (either presently exercisable or exercisable within 60 days of June 3, 2025). |
| (10) | Includes: 424 shares of common stock under options (either presently exercisable or exercisable within 60 days of June 3, 2025). |
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Related Party Transactions Policy and Procedures
We have adopted a written policy with respect to the review, approval, and ratification of related party transactions. Under the policy, any transactions where the amount involved exceeds the lesser of $120,000 or one percent (1%) of the average of our total assets at year-end for the last two completed fiscal years and in which any related person has or will have a direct or indirect material interest, other than equity and other compensation, termination and other arrangements which are described under the headings “Compensation of Directors” and “Executive and Director Compensation,” is defined as a related party transaction. Any such related party transactions are reviewed and must be approved by the Company’s board of directors.
Certain Related Party Transactions
In the fourth quarter of 2022, the Company issued a series of demand promissory notes in the aggregate principal amount of $550,000 to a related party, JAG, a company in which the Company’s Chief Financial Officer is a beneficiary but does not have any control over its investment decisions with respect to the Company, for an aggregate purchase price of $500,000. The JAG Notes accrue 10% annual interest from their respective dates of issuance. At maturity, the Company agreed to pay outstanding principal, a 10% financing fee and accrued interest. On July 10, 2023, the Company issued an additional demand promissory note in the principal amount of $110,000 to JAG for a purchase price of $100,000.
In consideration for subscribing to the JAG Note for $100,000 dated December 29, 2022, and for agreeing to extend the date on which the other JAG Notes are callable to March 31, 2023, the Company issued JAG a warrant to purchase 1,459 shares of common stock. The warrant may be exercised for a period of five (5) years from issuance at a price of $120.00 per share. On July 10, 2023, JAG agreed to extend the date on which the JAG Notes are callable to September 30, 2023.
In the fourth quarter of 2022, the Company issued demand promissory notes in the aggregate principal amount of $220,000 for an aggregate purchase price of $200,000, of which (1) $100,000 was received from its Chief Executive Officer ($60,000 on November 29, 2022, $15,000 on December 2, 2022, and $25,000 on December 13, 2022) and (2) $100,000 was received from an entity controlled by its Chief Financial Officer ($75,000 on November 29, 2022 and $25,000 on December 13, 2022). These notes accrue 10% annual interest accrues from the date of issuance. These notes are callable with 10 days prior written notice. At maturity, the Company agreed to pay outstanding principal, a 10% financing fee, and accrued interest.
For the year ending December 31, 2024, the Company incurred $81,333 in interest related to these demand notes and as of December 31, 2024 the total outstanding balance, including principal and accrued interest, was $1,044,786.
As of December 31, 2024, the Company owed accounts payable to related parties totaling $292,338, primarily related to unpaid employee expense reimbursements and unpaid board fees, and accrued compensation of $2,123,340, primarily related to deferred wages and accrued paid time off.
NAYA TX Related Party Transactions
NAYA TX and Cytovia, entered into a loan agreement on August 1, 2023, pursuant to which Cytovia made available to NAYA TX a term loan for up to $1,000,000, bearing interest at a rate of 5% per annum. On June 17, 2024, the loan agreement was amended to state that all principal and interest outstanding under the Loan shall be due and payable in full on the date NAYA TX receives its next funding.
On October 18, 2023, NAYA TX entered into an asset purchase agreement with Cytovia Therapeutics Holdings, Inc. and Cytovia Therapeutics, LLC (collectively, “Cytovia”) to acquire the rights to the two bifunctional antibodies CYT303 and CYT338 (now known as NY-303 and NY-338). The fixed purchase price consists of 818,182 shares of common stock of NAYA TX (valued by the parties at approximately $30 million) and a promissory note in the principal amount of $6 million, payable in monthly installments of $1 million per month. In addition, NAYA TX agreed to pay an additional $2 million per product if the first patient has begun phase II. These amounts are payable in cash or shares of our common stock at NAYA TX’s election, and if the amount is paid in shares, then each share shall be valued at $8.00 per share. NAYA TX also agreed to pay an additional $8 million per product at the phase II/IIa data read-out for such product. These amounts are payable in cash or shares of our common stock at NAYA TX’s election, and if the amount is paid in shares, then each share shall be valued at $8.00 per share. NAYA TX also agreed to assume $2.689 million of liabilities from Cytovia. The parties agreed to enter into an intercompany service agreement, a technology license agreement, and a trademark license agreement for the trademark Flex-NK (TM), detailing sponsored research for which NAYA TX would pay Cytovia $6 million, payable over 12 months in the monthly amount of $500,000. The start date of these payments will be mutually agreed between NAYA TX and Cytovia. NAYA TX and Cytovia closed the transaction contemplated by the asset purchase agreement on October 20, 2023, except that NAYA TX issued 1,363,642 shares if its common stock as the stock consideration portion of the purchase price.
On May 17, 2024, NAYA TX and Cytovia entered into an amendment to the asset purchase agreement. Pursuant to this amendment, the parties agreed that NAYA TX would not assume any liabilities of Cytovia. The parties further agreed that the purchase price would consist of 1,609,098 shares of common stock of NAYA TX (valued by the parties at approximately $30 million) and cash of $1.7 million which NAYA TX had previously paid in January 2024. The parties also agreed to eliminate the requirement to enter into an intercompany service agreement, a technology license agreement, and a trademark license agreement and further agreed to enter into a sponsored research agreement detailing the sponsored research to be performed by NAYA TX and Cytovia, to be mutually agreed on a case-by-case basis. In addition, Cytovia agreed not to develop other bispecific antibodies technologies using the sequence of GPC3 and CD38 and granted to NAYA TX the option to sublicense or acquire and develop cell therapy therapeutics. The parties agreed to agree and discuss in good faith appropriate terms for each new indication developed for NY-303 and NY-338 and for each new modality developed for GPC3 or CD37 therapeutics.
On May 28, 2025, we entered into definitive agreements to divest a majority of our holdings in NAYA TX, and on May 31, 2025, we redeemed all outstanding shares of our Series C-1 Preferred, as described above, see “NAYA TX Separation” on page 20 of this proxy statement).
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OTHER MATTERS
As of the date of this proxy statement, we know of no matter not specifically referred to above as to which any action is expected to be taken at the annual meeting. The persons named as proxies will vote the proxies, insofar as they are not otherwise instructed, regarding such other matters and the transaction of such other business as may be properly brought before the meeting, as seems to them to be in the best interest of our company and our stockholders.
Stockholder Proposals for our 2026 Annual Meeting
While we expect that the date of the 2026 annual meeting of stockholders will change by more than 30 days from the anniversary of our 2025 annual meeting, as of the date of this proxy statement, our board of directors has not determined the date of our 2026 annual meeting. We intend to file a Current Report on Form 8-K disclosing the date of our 2026 annual meeting, and the specific deadlines for timely submission of any stockholder proposal or stockholder director nominations, following our board of directors’ determination of such date. The general qualification requirements and deadlines for stockholder proposals relating to the 2026 annual meeting are set forth below.
Stockholder Proposals Included in Proxy Statement
In order to be considered for inclusion in our proxy statement and proxy card relating to our 2026 annual meeting of stockholders, stockholder proposals must be submitted in accordance with the procedures in Rule 14a-18 of the Exchange Act. Since the date of the 2026 annual meeting of stockholders will change by more than 30 days from the anniversary of our 2025 annual meeting, such proposals must be received by us by a reasonable time before we begin to print and send our proxy materials. Upon receipt of any such proposal, we will determine whether or not to include such proposal in the proxy statement and proxy card in accordance with regulations governing the solicitation of proxies.
Stockholder Proposals Not Included in Proxy Statement
In addition, our by-laws establish an advance notice procedure for nominations for election to our board of directors and other matters that stockholders wish to present for action at an annual meeting other than those to be included in our proxy statement. Since the date of the 2026 annual meeting is more than 30 days before or more than 60 days after the anniversary date of the immediately preceding annual meeting, we must receive other proposals of stockholders (including director nominations) intended to be presented at the 2026 annual meeting of stockholders but not included in the proxy statement no earlier than the close of business 120 calendar days prior to such annual meeting and no later than the close of business on the later of 90 days prior to such annual meeting and 10 days following the day on which notice of the date of such annual meeting was mailed or public announcement of the date of such annual meeting was first made. Stockholders are advised to review our by-laws which also specify requirements as to the form and content of a stockholder’s notice.
In addition to satisfying the advance notice procedure in our by-laws relating to nominations of director candidates, including the earlier notice deadlines set out above, to comply with the SEC’s universal proxy rule, stockholders who intend to solicit proxies in support of director nominees other than the company’s nominees in compliance with Rule 14a-19 under the Exchange Act must also provide notice that sets forth the information required by Rule 14a-19. Since the date of the 2026 annual meeting of stockholder will change by more than 30 calendar days from the date of the annual meeting, the notice required under Rule 14a-19 under the Exchange Act must be provided by the later of 60 calendar days prior to the date of the 2026 annual meeting of stockholders or the 10th calendar day following public announcement by the company of the date of the 2026 annual meeting of stockholders.
Any proposals, notices, or information about proposed director candidates should be sent to INVO Fertility, Inc., Attention: Nominating and Corporate Governance Committee, 5582 Broadcast Court, Sarasota, FL 34240.
HEDGING POLICY
We do not permit directors, officers or employees to purchase financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) that are designed to hedge or offset any decrease in the market value of our securities.
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for annual meeting materials with respect to two or more stockholders sharing the same address by delivering a single set of annual meeting materials addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
This year, a number of brokers with account holders who are our stockholders will be “householding” our proxy materials. A single set of Annual Meeting materials will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate set of Annual Meeting materials, please notify your broker or us. Direct your written request to INVO Fertility, Inc., Attn: Corporate Secretary, 5582 Broadcast Court, Sarasota, FL 34240. Stockholders who currently receive multiple copies of the Annual Meeting materials at their addresses and would like to request “householding” of their communications should contact their brokers.
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INVO FERTILITY, INC.
ARTICLES OF AMENDMENT
ANNEX A
Article IV, Section (a) is hereby amended to read in its entirety as follow:
“(a) The total number of shares of all classes of stock of which the Corporation shall have the authority to issue is 150,000,000 shares, consisting of (i) 50,000,000 shares of Common Stock, $0.00001 par value per share (“Common Stock”), and (ii) 100,000,000 shares of Preferred Stock, $0.00001 par value per share (“Preferred Stock”).”
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INVO FERTILITY, INC.
SECOND AMENDED AND RESTATED 2019 STOCK INCENTIVE PLAN
1. Purpose. The purpose of the Second Amended and Restated 2019 Stock Incentive Plan of INVO Fertility, Inc. is to further align the interests of employees, directors and non-employee Consultants with those of the stockholders by providing incentive compensation opportunities tied to the performance of the Common Stock and by promoting increased ownership of the Common Stock by such individuals. The Plan is also intended to advance the interests of the Company and its stockholders by attracting, retaining and motivating key personnel upon whose judgment, initiative and effort the successful conduct of the Company’s business is largely dependent.
2. Definitions. Wherever the following capitalized terms are used in the Plan, they shall have the meanings specified below:
“Affiliate” means (i) any entity that would be treated as an “affiliate” of the Company for purposes of Rule 12b-2 under the Exchange Act and (ii) any joint venture or other entity in which the Company has a direct or indirect beneficial ownership interest representing at least one-third (1/3) of the aggregate voting power of the equity interests of such entity or one-third (1/3) of the aggregate fair market value of the equity interests of such entity, as determined by the Committee.
“Award” means an award of a Stock Option, Stock Award, or Restricted Stock Award granted under the Plan.
“Award Agreement” means a written or electronic agreement entered into between the Company and a Participant setting forth the terms and conditions of an Award granted to a Participant.
“Board” means the Board of Directors of the Company.
“Code” means the Internal Revenue Code of 1986, as amended.
“Committee” means the Compensation Committee of the Board, or such other committee of the Board appointed by the Board to administer the Plan, or if no such committee exists, the Board.
“Common Stock” means the Company’s common stock, $0.0001 par value per share.
“Company” means INVO Fertility, Inc., a Nevada corporation.
“Consultant” means any person which is a consultant or advisor to the Company and which is a natural person and who provides bona fide services to the Company which are not in connection with the offer or sale of securities in a capital-raising transaction for the Company, and do not directly or indirectly promote or maintain a market for the Company’s securities.
“Date of Grant” means the date on which an Award under the Plan is made by the Committee, or such later date as the Committee may specify to be the effective date of an Award.
“Disability” means a Participant being considered “disabled” within the meaning of Section 409A(a)(2)(C) of the Code, unless otherwise provided in an Award Agreement.
“Eligible Person” means any person who is an employee of the Company or any Affiliate or any person to whom an offer of employment with the Company or any Affiliate is extended, as determined by the Committee, or any person who is a Non- Employee Director, or any person who is Consultant to the Company.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
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“Fair Market Value” means the mean between the highest and lowest reported sales prices of the Common Stock on the New York Stock Exchange Composite Tape or, if not listed on such exchange, on any other national securities exchange on which the Company’s common stock is listed or on The Nasdaq Stock Market, or, if not so listed on any other national securities exchange or The Nasdaq Stock Market, then the average of the bid price of the Company’s common stock during the last five trading days on the OTC Bulletin Board immediately preceding the last trading day prior to the date with respect to which the Fair Market Value is to be determined. If the Company’s common stock is not then publicly traded, then the Fair Market Value of the Common Stock shall be the book value of the Company per share as determined on the last day of March, June, September, or December in any year closest to the date when the determination is to be made. For the purpose of determining book value hereunder, book value shall be determined by adding as of the applicable date called for herein the capital, surplus, and undivided profits of the Company, and after having deducted any reserves theretofore established; the sum of these items shall be divided by the number of shares of the Company’s common stock outstanding as of said date, and the quotient thus obtained shall represent the book value of each share of the Company’s common stock.
“Incentive Stock Option” means a Stock Option granted under Section 6 hereof that is intended to meet the requirements of Section 422 of the Code and the regulations thereunder.
“Non-Employee Director” means any member of the Board who is not an employee of the Company.
“Nonqualified Stock Option” means a Stock Option granted under Section 6 hereof that is not an Incentive Stock Option.
“Participant” means any Eligible Person who holds an outstanding Award under the Plan.
“Plan” means the Second Amended and Restated 2019 Stock Incentive Plan of INVO Fertility, Inc. as set forth herein, as amended from time to time.
“Restricted Stock Award” means a grant of shares of Common Stock to an Eligible Person under Section 8 hereof that is issued subject to such vesting and transfer restrictions as the Committee shall determine and set forth in an Award Agreement.
“Service” means a Participant’s employment with the Company or any Affiliate or a Participant’s service as a Non- Employee Director with the Company, as applicable.
“Stock Award” means a grant of shares of Common Stock to an Eligible Person under Section 7 hereof that are issued free of transfer restrictions and forfeiture conditions.
“Stock Option” means a contractual right granted to an Eligible Person under Section 6 hereof to purchase shares of Common Stock at such time and price, and subject to such conditions, as are set forth in the Plan and the applicable Award Agreement.
3. Administration.
3.1 Committee Members. The Plan shall be administered by a Committee comprised of one or more members of the Board, or if no such committee exists, the Board.
3.2 Committee Authority. The Committee shall have such powers and authority as may be necessary or appropriate for the Committee to carry out its functions as described in the Plan. Subject to the express limitations of the Plan, the Committee shall have authority in its discretion to determine the Eligible Persons to whom, and the time or times at which, Awards may be granted, the number of shares, units or other rights subject to each Award, the exercise, base or purchase price of an Award (if any), the time or times at which an Award will become vested, exercisable or payable, the performance goals and other conditions of an Award, the duration of the Award, and all other terms of the Award. Subject to the terms of the Plan, the Committee shall have the authority to amend the terms of an Award in any manner that is not inconsistent with the Plan, provided that no such action shall adversely affect the rights of a Participant with respect to an outstanding Award without the Participant’s consent. The Committee shall also have discretionary authority to interpret the Plan, to make factual determinations under the Plan, and to make all other determinations necessary or advisable for Plan administration, including, without limitation, to correct any defect, to supply any omission or to reconcile any inconsistency in the Plan or any Award Agreement hereunder. The Committee may prescribe, amend, and rescind rules and regulations relating to the Plan. The Committee’s determinations under the Plan need not be uniform and may be made by the Committee selectively among Participants and Eligible Persons, whether or not such persons are similarly situated. The Committee shall, in its discretion, consider such factors as it deems relevant in making its interpretations, determinations and actions under the Plan including, without limitation, the recommendations or advice of any officer or employee of the Company or such attorneys, consultants, accountants or other advisors as it may select. All interpretations, determinations and actions by the Committee shall be final, conclusive, and binding upon all parties.
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3.3 Delegation of Authority. The Committee shall have the right, from time to time, to delegate to one or more officers of the Company the authority of the Committee to grant and determine the terms and conditions of Awards granted under the Plan, subject to the requirements of state law and such other limitations as the Committee shall determine. In no event shall any such delegation of authority be permitted with respect to Awards to any members of the Board or to any Eligible Person who is subject to Rule 16b-3 under the Exchange Act or Section 162(m) of the Code. The Committee shall also be permitted to delegate, to any appropriate officer or employee of the Company, responsibility for performing certain ministerial functions under the Plan. In the event that the Committee’s authority is delegated to officers or employees in accordance with the foregoing, all provisions of the Plan relating to the Committee shall be interpreted in a manner consistent with the foregoing by treating any such reference as a reference to such officer or employee for such purpose. Any action undertaken in accordance with the Committee’s delegation of authority hereunder shall have the same force and effect as if such action was undertaken directly by the Committee and shall be deemed for all purposes of the Plan to have been taken by the Committee.
4. Shares Subject to the Plan.
4.1 Maximum Share Limitations. Subject to Section 4.2 hereof, the maximum aggregate number of shares of Common Stock that may be issued and sold under all Awards granted under the Plan shall be one million, two hundred thousand (1,200,000) shares. Shares of Common Stock issued and sold under the Plan may be either authorized but unissued shares or shares held in the Company’s treasury. To the extent that any Award involving the issuance of shares of Common Stock is forfeited, cancelled, returned to the Company for failure to satisfy vesting requirements or other conditions of the Award, or otherwise terminates without an issuance of shares of Common Stock being made thereunder, the shares of Common Stock covered thereby will no longer be counted against the foregoing maximum share limitations and may again be made subject to Awards under the Plan pursuant to such limitations. Any Awards or portions thereof that are settled in cash and not in shares of Common Stock shall not be counted against the foregoing maximum share limitations.
4.2 Annual Increase. The aggregate number of shares of Common Stock reserved for Awards under the Plan will automatically increase on January 1st of each year, for a period of not more than ten (10) years, commencing on January 1st of the year following the year in which the Effective Date occurs and ending on (and including) January 1, 2029, in an amount equal to six percent (6%) of the total number of shares of outstanding Common Stock on December 31st of the preceding calendar year. Notwithstanding the foregoing, the Board or the Committee may act prior to January 1st of a given year to provide that there will be no January 1st increase for such year or that the increase for such year will be a lesser number of shares of Common Stock than provided herein.
4.3 Adjustments. In the event of changes in the outstanding Common Stock or in the capital structure of the Company by reason of any stock or extraordinary cash dividend, stock split, reverse stock split, an extraordinary corporate transaction such as any recapitalization, reorganization, merger, consolidation, combination, exchange, or other relevant change in capitalization occurring after the Date of Grant of any Award, Awards granted under the Plan and any Award Agreements, the exercise price of Stock Options, the maximum number of shares of Common Stock subject to all Awards stated in Section 4 hereof will be equitably adjusted or substituted, as to the number, price or kind of consideration. In the case of adjustments made pursuant to this Section 4.3, the Committee shall, in the case of Incentive Stock Options, ensure that any adjustments under this Section 4.3 will not constitute a modification, extension or renewal of the Incentive Stock Options within the meaning of Section 424(h)(3) of the Code and in the case of Nonqualified Stock Options, ensure that any adjustments under this Section 4.3 will not constitute a modification of such Nonqualified Stock Options within the meaning of Section 409A of the Code. Any adjustments made under this Section 4.3 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. Further, with respect to Awards intended to qualify as “performance-based compensation” under Section 162(m) of the Code, any adjustments or substitutions will not cause the Company to be denied a tax deduction on account of Section 162(m) of the Code. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.
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5. Participation and Awards.
5.1 Designations of Participants. All Eligible Persons are eligible to be designated by the Committee to receive Awards and become Participants under the Plan. The Committee has the authority, in its discretion, to determine and designate from time to time those Eligible Persons who are to be granted Awards, the types of Awards to be granted and the number of shares of Common Stock or units subject to Awards granted under the Plan. In selecting Eligible Persons to be Participants and in determining the type and amount of Awards to be granted under the Plan, the Committee shall consider any and all factors that it deems relevant or appropriate.
5.2 Determination of Awards. The Committee shall determine the terms and conditions of all Awards granted to Participants in accordance with its authority under Section 3.2 hereof. An Award may consist of one type of right or benefit hereunder or of two or more such rights or benefits granted in tandem or in the alternative. In the case of any fractional share or unit resulting from the grant, vesting, payment or crediting of dividends or dividend equivalents under an Award, the Committee shall have the discretionary authority to (i) disregard such fractional share or unit, (ii) round such fractional share or unit to the nearest lower or higher whole share or unit, or (iii) convert such fractional share or unit into a right to receive a cash payment. To the extent deemed necessary by the Committee, an Award shall be evidenced by an Award Agreement as described in Section 11.1 hereof.
6. Stock Options.
6.1 Grant of Stock Options. A Stock Option may be granted to any Eligible Person selected by the Committee. Subject to the provisions of Section 6.8 hereof and Section 422 of the Code, each Stock Option shall be designated, in the discretion of the Committee, as an Incentive Stock Option or as a Nonqualified Stock Option.
6.2 Exercise Price. The exercise price per share of a Stock Option shall not be less than 85 percent of the Fair Market Value of the shares of Common Stock on the Date of Grant, provided that the Committee may in its discretion specify for any Stock Option an exercise price per share that is higher than the Fair Market Value on the Date of Grant, except that the price shall not be less than 110 percent of the Fair Market Value in the case of any person who owns securities possessing more than 10 percent of the total combined voting power of all classes of securities of the Company.
6.3 Vesting of Stock Options. The Committee shall in its discretion prescribe the time or times at which, or the conditions upon which, a Stock Option or portion thereof shall become vested and/or exercisable, and may accelerate the vesting or exercisability of any Stock Option at any time, provided, however, that any Stock Option shall vest at the rate of at least twenty percent (20%) per year over five (5) years from the date the Stock Option is granted, subject to reasonable conditions as may be provided for in the Award Agreement. However, in the case of a Stock Option granted to officers, Non-employee Directors, managers or Consultants of the Company, the Stock Option may become fully exercisable, subject to reasonable conditions, at any time or during any period established by the Company. The requirements for vesting and exercisability of a Stock Option may be based on the continued Service of the Participant with the Company or its Affiliates for a specified time period (or periods) or on the attainment of specified performance goals established by the Committee in its discretion.
6.4 Term of Stock Options. The Committee shall in its discretion prescribe in an Award Agreement the period during which a vested Stock Option may be exercised, provided that the maximum term of a Stock Option shall be ten years from the Date of Grant. Except as otherwise provided in this Section 6 or as otherwise may be provided by the Committee, no Stock Option issued to an employee or a Non-Employee Director of the Company may be exercised at any time during the term thereof unless the employee or a Non-Employee Director Participant is then in the Service of the Company or one of its Affiliates.
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6.5 Termination of Service. Subject to Section 6.8 hereof with respect to Incentive Stock Options, the Stock Option of any Participant whose Service with the Company or one of its Affiliates is terminated for any reason shall terminate on the earlier of (A) the date that the Stock Option expires in accordance with its terms or (B) unless otherwise provided in an Award Agreement, and except for termination for cause (as described in Section 10.2 hereof), the expiration of the applicable time period following termination of Service, in accordance with the following: (1) twelve months if Service ceased due to Disability, (2) eighteen months if Service ceased at a time when the Participant is eligible to elect immediate commencement of retirement benefits at a specified retirement age under a pension plan to which the Company or any of its Affiliates had made contributions, (3) eighteen months if the Participant died while in the Service of the Company or any of its Affiliates, or (iv) three months if Service ceased for any other reason. During the foregoing applicable period, except as otherwise specified in the Award Agreement or in the event Service was terminated by the death of the Participant, the Stock Option may be exercised by such Participant in respect of the same number of shares of Common Stock, in the same manner, and to the same extent as if he or she had remained in the continued Service of the Company or any Affiliate during the first three months of such period; provided that no additional rights shall vest after such three months. The Committee shall have authority to determine in each case whether an authorized leave of absence shall be deemed a termination of Service for purposes hereof, as well as the effect of a leave of absence on the vesting and exercisability of a Stock Option. Unless otherwise provided by the Committee, if an entity ceases to be an Affiliate of the Company or otherwise ceases to be qualified under the Plan or if all or substantially all of the assets of an Affiliate of the Company are conveyed (other than by encumbrance), such cessation or action, as the case may be, shall be deemed for purposes hereof to be a termination of the Service.
6.6 Stock Option Exercise; Tax Withholding. Subject to such terms and conditions as shall be specified in an Award Agreement, a Stock Option may be exercised in whole or in part at any time during the term thereof by notice in the form required by the Company, together with payment of the aggregate exercise price therefor and applicable withholding tax. Payment of the exercise price shall be made in the manner set forth in the Award Agreement, unless otherwise provided by the Committee: (i) in cash or by cash equivalent acceptable to the Committee, (ii) by payment in shares of Common Stock that have been held by the Participant for at least six months (or such period as the Committee may deem appropriate, for accounting purposes or otherwise) valued at the Fair Market Value of such shares on the date of exercise, (iii) through an open-market, broker-assisted sales transaction pursuant to which the Company is promptly delivered the amount of proceeds necessary to satisfy the exercise price, (iv) by a combination of the methods described above or (v) by such other method as may be approved by the Committee and set forth in the Award Agreement. In addition to and at the time of payment of the exercise price, the Participant shall pay to the Company the full amount of any and all applicable income tax, employment tax and other amounts required to be withheld in connection with such exercise, payable under such of the methods described above for the payment of the exercise price as may be approved by the Committee and set forth in the Award Agreement.
6.7 Limited Transferability of Nonqualified Stock Options. All Stock Options shall be nontransferable except (i) upon the Participant’s death, in accordance with Section 11.2 hereof or (ii) in the case of Nonqualified Stock Options only, for the transfer of all or part of the Stock Option to a Participant’s “family member” (as defined for purposes of the Form S-8 registration statement under the Securities Act of 1933), as may be approved by the Committee in its discretion at the time of proposed transfer. The transfer of a Nonqualified Stock Option may be subject to such terms and conditions as the Committee may in its discretion impose from time to time. Subsequent transfers of a Nonqualified Stock Option shall be prohibited other than in accordance with Section 11.2 hereof.
6.8 Additional Rules for Incentive Stock Options.
(a) Eligibility. An Incentive Stock Option may only be granted to an Eligible Person who is considered an employee for purposes of Treasury Regulation §1.421-7(h) with respect to the Company or any Affiliate that qualifies as a “subsidiary corporation” with respect to the Company for purposes of Section 424(f) of the Code.
(b) Termination of Employment. An Award of an Incentive Stock Option may provide that such Stock Option may be exercised not later than 3 months following termination of employment of the Participant with the Company and all subsidiaries, or not later than one year following a permanent and total disability within the meaning of Section 22(e)(3) of the Code, as and to the extent determined by the Committee to comply with the requirements of Section 422 of the Code.
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(c) Other Terms and Conditions; Nontransferability. Any Incentive Stock Option granted hereunder shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as are deemed necessary or desirable by the Committee, which terms, together with the terms of the Plan, shall be intended and interpreted to cause such Incentive Stock Option to qualify as an “incentive stock option” under Section 422 of the Code. An Award Agreement for an Incentive Stock Option may provide that such Stock Option shall be treated as a Nonqualified Stock Option to the extent that certain requirements applicable to “incentive stock options” under the Code shall not be satisfied. An Incentive Stock Option shall by its terms be nontransferable other than by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of a Participant only by such Participant.
(d) Disqualifying Dispositions. If shares of Common Stock acquired by exercise of an Incentive Stock Option are disposed of within two years following the Date of Grant or one year following the transfer of such shares to the Participant upon exercise, the Participant shall, promptly following such disposition, notify the Company in writing of the date and terms of such disposition and provide such other information regarding the disposition as the Company may reasonably require.
6.9 Repricing Prohibited. Subject to the adjustment provisions contained in Section 4.2 hereof, without the prior approval of the Company’s stockholders, evidenced by a majority of votes cast, neither the Committee nor the Board shall cause the cancellation, substitution or amendment of a Stock Option that would have the effect of reducing the exercise price of such a Stock Option previously granted under the Plan, or otherwise approve any modification to such a Stock Option that would be treated as a “repricing” under the then applicable rules, regulations or listing requirements.
7. Stock Awards.
7.1 Grant of Stock Awards. A Stock Award may be granted to any Eligible Person selected by the Committee. A Stock Award may be granted for past services, in lieu of bonus or other cash compensation, as directors’ compensation or for any other valid purpose as determined by the Committee. A Stock Award granted to an Eligible Person represents shares of Common Stock that are issued without restrictions on transfer and other incidents of ownership and free of forfeiture conditions, except as otherwise provided in the Plan and the Award Agreement. The deemed issuance price of shares of Common Stock subject to each Stock Award shall not be less than 85 percent of the Fair Market Value of the Common Stock on the date of the grant. In the case of any person who owns securities possessing more than ten percent of the combined voting power of all classes of securities of the issuer or its parent or subsidiaries possessing voting power, the deemed issuance price of shares of Common Stock subject to each Stock Award shall be at least 100 percent of the Fair Market Value of the Common Stock on the date of the grant. The Committee may, in connection with any Stock Award, require the payment of a specified purchase price.
7.2 Rights as Stockholder. Subject to the foregoing provisions of this Section 7 and the applicable Award Agreement, upon the issuance of the Common Stock under a Stock Award the Participant shall have all rights of a stockholder with respect to the shares of Common Stock, including the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto.
8. Restricted Stock Awards.
8.1 Grant of Restricted Stock Awards. A Restricted Stock Award may be granted to any Eligible Person selected by the Committee. The deemed issuance price of shares of Common Stock subject to each Restricted Stock Award shall not be less than 85 percent of the Fair Market Value of the Common Stock on the date of the grant. In the case of any person who owns securities possessing more than ten percent of the combined voting power of all classes of securities of the issuer or its parent or subsidiaries possessing voting power, the deemed issuance price of shares of Common Stock subject to each Restricted Stock Award shall be at least 100 percent of the Fair Market Value of the Common Stock on the date of the grant. The Committee may require the payment by the Participant of a specified purchase price in connection with any Restricted Stock Award.
8.2 Vesting Requirements. The restrictions imposed on shares granted under a Restricted Stock Award shall lapse in accordance with the vesting requirements specified by the Committee in the Award Agreement, provided that the Committee may accelerate the vesting of a Restricted Stock Award at any time. Such vesting requirements may be based on the continued Service of the Participant with the Company or its Affiliates for a specified time period (or periods) or on the attainment of specified performance goals established by the Committee in its discretion. If the vesting requirements of a Restricted Stock Award shall not be satisfied, the Award shall be forfeited and the shares of Common Stock subject to the Award shall be returned to the Company.
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8.3 Restrictions. Shares granted under any Restricted Stock Award may not be transferred, assigned or subject to any encumbrance, pledge, or charge until all applicable restrictions are removed or have expired, unless otherwise allowed by the Committee. Failure to satisfy any applicable restrictions shall result in the subject shares of the Restricted Stock Award being forfeited and returned to the Company. The Committee may require in an Award Agreement that certificates representing the shares granted under a Restricted Stock Award bear a legend making appropriate reference to the restrictions imposed, and that certificates representing the shares granted or sold under a Restricted Stock Award will remain in the physical custody of an escrow holder until all restrictions are removed or have expired.
8.4 Rights as Stockholder. Subject to the foregoing provisions of this Section 8 and the applicable Award Agreement, the Participant shall have all rights of a stockholder with respect to the shares granted to the Participant under a Restricted Stock Award, including the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto. The Committee may provide in an Award Agreement for the payment of dividends and distributions to the Participant at such times as paid to stockholders generally or at the times of vesting or other payment of the Restricted Stock Award.
8.5 Section 83(b) Election. If a Participant makes an election pursuant to Section 83(b) of the Code with respect to a Restricted Stock Award, the Participant shall file, within 30 days following the Date of Grant, a copy of such election with the Company and with the Internal Revenue Service, in accordance with the regulations under Section 83 of the Code. The Committee may provide in an Award Agreement that the Restricted Stock Award is conditioned upon the Participant’s making or refraining from making an election with respect to the Award under Section 83(b) of the Code.
9. Change in Control.
9.1 Effect of Change in Control. Except to the extent an Award Agreement provides for a different result (in which case the Award Agreement will govern and this Section 9 of the Plan shall not be applicable), notwithstanding anything elsewhere in the Plan or any rules adopted by the Committee pursuant to the Plan to the contrary, if a Triggering Event shall occur within the 12-month period beginning with a Change in Control of the Company, then, effective immediately prior to such Triggering Event, each outstanding Stock Option, to the extent that it shall not otherwise have become vested and exercisable, shall automatically become fully and immediately vested and exercisable, without regard to any otherwise applicable vesting requirement.
9.2 Definitions
(a) Cause. For purposes of this Section 9, the term “Cause” shall mean a determination by the Committee that a Participant (i) has been convicted of, or entered a plea of nolo contendere to, a crime that constitutes a felony under Federal or state law, (ii) has engaged in willful gross misconduct in the performance of the Participant’s duties to the Company or an Affiliate or (iii) has committed a material breach of any written agreement with the Company or any Affiliate with respect to confidentiality, noncompetition, nonsolicitation or similar restrictive covenant. Subject to the first sentence of Section 9.1 hereof, in the event that a Participant is a party to an employment agreement with the Company or any Affiliate that defines a termination on account of “Cause” (or a term having similar meaning), such definition shall apply as the definition of a termination on account of “Cause” for purposes hereof, but only to the extent that such definition provides the Participant with greater rights. A termination on account of Cause shall be communicated by written notice to the Participant, and shall be deemed to occur on the date such notice is delivered to the Participant.
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(b) Change in Control. For purposes of this Section 9, a “Change in Control” shall be deemed to have occurred upon:
(i) the occurrence of an acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of a percentage of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Company Voting Securities”) (but excluding (1) any acquisition directly from the Company (other than an acquisition by virtue of the exercise of a conversion privilege of a security that was not acquired directly from the Company), (2) any acquisition by the Company or an Affiliate and (3) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate) (an “Acquisition”) that is thirty percent (30%) or more of the Company Voting Securities;
(ii) at any time during a period of two (2) consecutive years or less, individuals who at the beginning of such period constitute the Board (and any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was so approved) cease for any reason (except for death, Disability or voluntary retirement) to constitute a majority thereof;
(iii) an Acquisition that is fifty percent (50%) or more of the Company Voting Securities;
(iv) the consummation of a merger, consolidation, reorganization or similar corporate transaction, whether or not the Company is the surviving company in such transaction, other than a merger, consolidation, or reorganization that would result in the Persons who are beneficial owners of the Company Voting Securities outstanding immediately prior thereto continuing to beneficially own, directly or indirectly, in substantially the same proportions, at least fifty percent (50%) of the combined voting power of the Company Voting Securities (or the voting securities of the surviving entity) outstanding immediately after such merger, consolidation or reorganization;
(v) the sale or other disposition of all or substantially all of the assets of the Company;
(vi) the approval by the stockholders of the Company of a complete liquidation or dissolution of the Company; or
(vii) the occurrence of any transaction or event, or series of transactions or events, designated by the Board in a duly adopted resolution as representing a change in the effective control of the business and affairs of the Company, effective as of the date specified in any such resolution.
(c) Constructive Termination. For purposes of this Section 9, a “Constructive Termination” shall mean a termination of employment by a Participant within sixty (60) days following the occurrence of any one or more of the following events without the Participant’s written consent (i) any reduction in position, title (for Vice Presidents or above), overall responsibilities, level of authority, level of reporting (for Vice Presidents or above), base compensation, annual incentive compensation opportunity, aggregate employee benefits or (ii) a request that the Participant’s location of employment be relocated by more than fifty (50) miles. Subject to the first sentence of Section 9.1 hereof, in the event that a Participant is a party to an employment agreement with the Company or any Affiliate (or a successor entity) that defines a termination on account of “Constructive Termination,” “Good Reason” or “Breach of Agreement” (or a term having a similar meaning), such definition shall apply as the definition of “Constructive Termination” for purposes hereof in lieu of the foregoing, but only to the extent that such definition provides the Participant with greater rights. A Constructive Termination shall be communicated by written notice to the Committee, and shall be deemed to occur on the date such notice is delivered to the Committee, unless the circumstances giving rise to the Constructive Termination are cured within five (5) days of such notice.
(d) Triggering Event. For purposes of this Section 9, a “Triggering Event” shall mean (i) the termination of Service of a Participant by the Company or an Affiliate (or any successor thereof) other than on account of death, Disability or Cause, (ii) the occurrence of a Constructive Termination or (iii) any failure by the Company (or a successor entity) to assume, replace, convert or otherwise continue any Award in connection with the Change in Control (or another corporate transaction or other change effecting the Common Stock) on the same terms and conditions as applied immediately prior to such transaction, except for equitable adjustments to reflect changes in the Common Stock pursuant to Section 4.2 hereof.
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9.3 Excise Tax Limit. In the event that the vesting of Awards together with all other payments and the value of any benefit received or to be received by a Participant would result in all or a portion of such payment being subject to the excise tax under Section 4999 of the Code, then the Participant’s payment shall be either (i) the full payment or (ii) such lesser amount that would result in no portion of the payment being subject to excise tax under Section 4999 of the Code (the “Excise Tax”), whichever of the foregoing amounts, taking into account the applicable Federal, state, and local employment taxes, income taxes, and the Excise Tax, results in the receipt by the Participant, on an after-tax basis, of the greatest amount of the payment notwithstanding that all or some portion of the payment may be taxable under Section 4999 of the Code. All determinations required to be made under this Section 9 shall be made by M&K CPAS, PLLC. or any other accounting firm which is the Company’s outside auditor immediately prior to the event triggering the payments that are subject to the Excise Tax (the “Accounting Firm”). The Company shall cause the Accounting Firm to provide detailed supporting calculations of its determinations to the Company and the Participant. All fees and expenses of the Accounting Firm shall be borne solely by the Company. The Accounting Firm’s determinations must be made with substantial authority (within the meaning of Section 6662 of the Code). For the purposes of all calculations under Section 280G of the Code and the application of this Section 9.3, all determinations as to present value shall be made using 120 percent of the applicable Federal rate (determined under Section 1274(d) of the Code) compounded semiannually.
10. Forfeiture Events.
10.1 General. The Committee may specify in an Award Agreement at the time of the Award that the Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events shall include, but shall not be limited to, termination of Service for cause, violation of material Company policies, breach of noncompetition, confidentiality or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company.
10.2 Termination for Cause. Unless otherwise provided by the Committee and set forth in an Award Agreement, if a Participant’s employment with the Company or any Affiliate shall be terminated for cause, the Company may, in its sole discretion, immediately terminate such Participant’s right to any further payments, vesting or exercisability with respect to any Award in its entirety. In the event a Participant is party to an employment (or similar) agreement with the Company or any Affiliate that defines the term “cause,” such definition shall apply for purposes of the Plan. The Company shall have the power to determine whether the Participant has been terminated for cause and the date upon which such termination for cause occurs. Any such determination shall be final, conclusive and binding upon the Participant. In addition, if the Company shall reasonably determine that a Participant has committed or may have committed any act which could constitute the basis for a termination of such Participant’s employment for cause, the Company may suspend the Participant’s rights to exercise any option, receive any payment or vest in any right with respect to any Award pending a determination by the Company of whether an act has been committed which could constitute the basis for a termination for “cause” as provided in this Section 10.2.
11. General Provisions.
11.1 Award Agreement. To the extent deemed necessary by the Committee, an Award under the Plan shall be evidenced by an Award Agreement in a written or electronic form approved by the Committee setting forth the number of shares of Common Stock or units subject to the Award, the exercise price, base price, or purchase price of the Award, the time or times at which an Award will become vested, exercisable or payable and the term of the Award. The Award Agreement may also set forth the effect on an Award of termination of Service under certain circumstances. The Award Agreement shall be subject to and incorporate, by reference or otherwise, all of the applicable terms and conditions of the Plan, and may also set forth other terms and conditions applicable to the Award as determined by the Committee consistent with the limitations of the Plan. Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code. The grant of an Award under the Plan shall not confer any rights upon the Participant holding such Award other than such terms, and subject to such conditions, as are specified in the Plan as being applicable to such type of Award (or to all Awards) or as are expressly set forth in the Award Agreement. The Committee need not require the execution of an Award Agreement by a Participant, in which case, acceptance of the Award by the Participant shall constitute agreement by the Participant to the terms, conditions, restrictions and limitations set forth in the Plan and the Award Agreement as well as the administrative guidelines of the Company in effect from time to time.
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11.2 No Assignment or Transfer; Beneficiaries. Except as provided in Section 6.7 hereof, Awards under the Plan shall not be assignable or transferable by the Participant, except by will or by the laws of descent and distribution, and shall not be subject in any manner to assignment, alienation, pledge, encumbrance or charge. Notwithstanding the foregoing, the Committee may provide in the terms of an Award Agreement that the Participant shall have the right to designate a beneficiary or beneficiaries who shall be entitled to any rights, payments or other benefits specified under an Award following the Participant’s death. During the lifetime of a Participant, an Award shall be exercised only by such Participant or such Participant’s guardian or legal representative. In the event of a Participant’s death, an Award may to the extent permitted by the Award Agreement be exercised by the Participant’s beneficiary as designated by the Participant in the manner prescribed by the Committee or, in the absence of an authorized beneficiary designation, by the legatee of such Award under the Participant’s will or by the Participant’s estate in accordance with the Participant’s will or the laws of descent and distribution, in each case in the same manner and to the same extent that such Award was exercisable by the Participant on the date of the Participant’s death.
11.3 Deferrals of Payment. The Committee may in its discretion permit a Participant to defer the receipt of payment of cash or delivery of shares of Common Stock that would otherwise be due to the Participant by virtue of the exercise of a right or the satisfaction of vesting or other conditions with respect to an Award. If any such deferral is to be permitted by the Committee, the Committee shall establish rules and procedures relating to such deferral in a manner intended to comply with the requirements of Section 409A of the Code, including, without limitation, the time when an election to defer may be made, the time period of the deferral and the events that would result in payment of the deferred amount, the interest or other earnings attributable to the deferral and the method of funding, if any, attributable to the deferred amount.
11.4 Rights as Stockholder. A Participant shall have no rights as a holder of shares of Common Stock with respect to any unissued securities covered by an Award until the date the Participant becomes the holder of record of such securities. Except as provided in Section 4.2 hereof, no adjustment or other provision shall be made for dividends or other stockholder rights, except to the extent that the Award Agreement provides for dividend payments or dividend equivalent rights.
11.5 Employment or Service. Nothing in the Plan, in the grant of any Award or in any Award Agreement shall confer upon any Eligible Person any right to continue in the Service of the Company or any of its Affiliates, or interfere in any way with the right of the Company or any of its Affiliates to terminate the Participant’s employment or other service relationship for any reason at any time.
11.6 Securities Laws. No shares of Common Stock will be issued or transferred pursuant to an Award unless and until all then applicable requirements imposed by Federal and state securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any exchanges upon which the shares of Common Stock may be listed, have been fully met. As a condition precedent to the issuance of shares pursuant to the grant or exercise of an Award, the Company may require the Participant to take any reasonable action to meet such requirements. The Committee may impose such conditions on any shares of Common Stock issuable under the Plan as it may deem advisable, including, without limitation, restrictions under the Securities Act of 1933, as amended, under the requirements of any exchange upon which such shares of the same class are then listed, and under any blue sky or other securities laws applicable to such shares. The Committee may also require the Participant to represent and warrant at the time of issuance or transfer that the shares of Common Stock are being acquired only for investment purposes and without any current intention to sell or distribute such shares.
11.7 Tax Withholding. The Participant shall be responsible for payment of any taxes or similar charges required by law to be withheld from an Award or an amount paid in satisfaction of an Award, which shall be paid by the Participant on or prior to the payment or other event that results in taxable income in respect of an Award. The Award Agreement may specify the manner in which the withholding obligation shall be satisfied with respect to the particular type of Award.
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11.8 Unfunded Plan. The adoption of the Plan and any reservation of shares of Common Stock or cash amounts by the Company to discharge its obligations hereunder shall not be deemed to create a trust or other funded arrangement. Except upon the issuance of Common Stock pursuant to an Award, any rights of a Participant under the Plan shall be those of a general unsecured creditor of the Company, and neither a Participant nor the Participant’s permitted transferees or estate shall have any other interest in any assets of the Company by virtue of the Plan. Notwithstanding the foregoing, the Company shall have the right to implement or set aside funds in a grantor trust, subject to the claims of the Company’s creditors or otherwise, to discharge its obligations under the Plan.
11.9 Other Compensation and Benefit Plans. The adoption of the Plan shall not affect any other share incentive or other compensation plans in effect for the Company or any Affiliate, nor shall the Plan preclude the Company from establishing any other forms of share incentive or other compensation or benefit program for employees of the Company or any Affiliate. The amount of any compensation deemed to be received by a Participant pursuant to an Award shall not constitute includable compensation for purposes of determining the amount of benefits to which a Participant is entitled under any other compensation or benefit plan or program of the Company or an Affiliate, including, without limitation, under any pension or severance benefits plan, except to the extent specifically provided by the terms of any such plan.
11.10 Plan Binding on Transferees. The Plan shall be binding upon the Company, its transferees and assigns, and the Participant, the Participant’s executor, administrator and permitted transferees and beneficiaries.
11.11 Severability. If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.
11.12 Foreign Jurisdictions. The Committee may adopt, amend and terminate such arrangements and grant such Awards, not inconsistent with the intent of the Plan, as it may deem necessary or desirable to comply with any tax, securities, regulatory or other laws of other jurisdictions with respect to Awards that may be subject to such laws. The terms and conditions of such Awards may vary from the terms and conditions that would otherwise be required by the Plan solely to the extent the Committee deems necessary for such purpose. Moreover, the Board may approve such supplements to or amendments, restatements or alternative versions of the Plan, not inconsistent with the intent of the Plan, as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of the Plan as in effect for any other purpose.
11.13 Substitute Awards in Corporate Transactions. Nothing contained in the Plan shall be construed to limit the right of the Committee to grant Awards under the Plan in connection with the acquisition, whether by purchase, merger, consolidation or other corporate transaction, of the business or assets of any corporation or other entity. Without limiting the foregoing, the Committee may grant Awards under the Plan to an employee or director of another corporation who becomes an Eligible Person by reason of any such corporate transaction in substitution for awards previously granted by such corporation or entity to such person. The terms and conditions of the substitute Awards may vary from the terms and conditions that would otherwise be required by the Plan solely to the extent the Committee deems necessary for such purpose.
11.14 Governing Law. The Plan and all rights hereunder shall be subject to and interpreted in accordance with the laws of the State of Nevada, without reference to the principles of conflicts of laws, and to applicable Federal securities laws.
11.15 Financial Statements. All Participants shall receive the financial statements of the Company at least annually.
11.16 Performance Based Awards. For purposes of Stock Awards and Restricted Stock Awards granted under the Plan that are intended to qualify as “performance-based” compensation under Section 162(m) of the Code, such Awards shall be granted to the extent necessary to satisfy the requirements of Section 162(m) of the Code.
11.17 Stockholder Approval. The Plan must be approved by the stockholders by a majority of all shares entitled to vote within twelve (12) months after the date the Plan was adopted by the Board. Any Incentive Stock Options granted before stockholder approval is obtained shall be converted into Nonqualified Stock Options if stockholder approval is not obtained within twelve (12) months before or after the Plan was adopted.
12. Effective Date; Amendment and Termination.
12.1 Effective Date. The Plan shall become effective following its adoption by the Board (such date, the “Effective Date”). The term of the Plan shall be ten (10) years from the date of adoption by the Board, subject to Section 12.3 hereof.
12.2 Amendment. The Board may at any time and from time to time and in any respect, amend or modify the Plan. The Board may seek the approval of any amendment or modification by the Company’s stockholders to the extent it deems necessary or advisable in its discretion for purposes of compliance with Section 162(m) or Section 422 of the Code, or exchange or securities market or for any other purpose. No amendment or modification of the Plan shall adversely affect any Award theretofore granted without the consent of the Participant or the permitted transferee of the Award.
12.3 Termination. The Plan shall terminate on the tenth anniversary of the date of its adoption by the Board. The Board may, in its discretion and at any earlier date, terminate the Plan. Notwithstanding the foregoing, no termination of the Plan shall adversely affect any Award theretofore granted without the consent of the Participant or the permitted transferee of the Award.
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