DEF 14A of Cytosorbents Corp
Filed Apr 19, 2024 · FY20230001104659-24-049498
PROPOSAL NO. 1 – ELECTION OF DIRECTORS
PROPOSAL NO. 1 – ELECTION OF DIRECTORS Our bylaws provide that our Board shall consist of not less than three members. Each director serves for a one-year term, with each director being elected at each annual meeting of stockholders. Five directors are currently serving on the Board. The directorships expiring this year are currently filled by Phillip P. Chan, Edward R. Jones, Michael G. Bator, Alan D. Sobel and Jiny Kim. Following the recommendation of our Nominating and Corporate Governance Committee, our Board has nominated each of our current directors for election at the Annual Meeting. If each of the directors is reelected, the total number of directors comprising our Board will remain at five directors effective immediately following the Annual Meeting. If elected, each director’s term will expire in 2025. Our Board is authorized to increase or decrease the total number of directors within the limitations prescribed by our bylaws. The nominees for election at this Annual Meeting have informed us that they are willing to serve for the term to which they are nominated, if elected. If any nominee should become unavailable for election or is unable to serve as a director, the shares represented by proxies voted in favor of that nominee will be voted for any substitute nominee that may be named by the Board. Set forth in the table and paragraphs below is certain information about the nominees for election as directors, including each nominee’s age and length of service as a director of the Company, principal occupation and business experience for at least the past five years and the names of other publicly held companies on whose boards the director serves or has served in the past five years. There are no family relationships among any of our directors, nominees for director and executive officers, and there are no arrangements or understandings between a director and any other person pursuant to which such person was selected as a director or nominee.
PROPOSAL NO. 1 – ELECTION OF DIRECTORS
| Name | Age | Director Since | Position(s) with CytoSorbents | | Phillip P. Chan, MD, PhD | 53 | 2008 | Director and Chief Executive Officer | | Michael G. Bator | 60 | 2015 | Director and Chairman of the Board | | Edward R. Jones, MD, MBA | 75 | 2007 | Director | | Alan D. Sobel, CPA | 63 | 2014 | Director | | Jiny Kim, MBA | 47 | 2022 | Director |
Director Experience, Qualifications, Attributes and Skills
Director Experience, Qualifications, Attributes and Skills We believe that the backgrounds and qualifications of our directors and director nominees, considered as a group, provide a broad mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities. Our Nominating and Corporate Governance Committee does not have a specific policy with regard to the consideration of diversity in identifying director nominees. However, our Nominating and Corporate Governance Committee values diversity on our Board and considers the diversity of the professional experience, education and skills, as well as diversity of origin, in identifying director nominees. Our Board is composed of a diverse group of leaders in their respective fields. Many of the current directors have leadership experience at major domestic and international companies with operations inside and outside the United States, as well as experience serving on other companies’ boards, which provides an understanding of different business processes, challenges and strategies facing boards and other companies. Collectively, our directors have experience as chief executive officers, presidents, or general partners of medical-device companies, physician or other professional organizations, and investment companies which brings unique perspectives to the Board. Furthermore, our directors also have other experience that makes them valuable members, such as prior experience with financing transactions or mergers and acquisitions that provides insight into issues faced by companies. The following highlights the specific experience, qualification, attributes, and skills of our individual Board members that have led our Nominating and Corporate Governance Committee to conclude that these individuals should serve on our Board: Phillip P. Chan, MD, PhD became a director of CytoSorbents in 2008, and from January 2009 to April 2020 served as our President and Chief Executive Officer. With Mr. Capponi’s promotion to President in April 2020, Dr. Chan continues to serve as Chief Executive Officer. Prior to joining CytoSorbents, Dr. Chan led healthcare and life science investments for the NJTC Venture Fund from 2003 to 2008, most recently as a Partner. Dr. Chan is a co-founder and Vice Chairman of the Board of Directors of Medality Medical, Inc., fka Andrew Technologies, a medical device company that has received U.S. Food and Drug Administration (FDA) 510(k) clearance of its HydraSolve® lipoplasty system and is now in human clinical studies using the system to remove visceral mesenteric fat as a potential surgical treatment of Type 2 diabetes. He is an Internal Medicine physician with a strong background in clinical medicine and research. Dr. Chan received his MD and PhD from the Yale University School of Medicine, completed his Internal Medicine residency at the Beth Israel Deaconess Medical Center at Harvard Medical School and received his Board certification. He also holds a BS in cell and molecular biology from Cornell University. Michael G. Bator, MBA has been a director of CytoSorbents since July 2015. Mr. Bator is a founder and partner of Quartz Advisory Group, LLC, a capital markets investment bank. From April 2015 to December 2016, Mr. Bator was the Chief Financial Officer of Trek Therapeutics, a development stage pharmaceutical company. From January 2001 until February 2015, Mr. Bator held several positions with Jennison Associates, a United States mutual and pension fund management company, where he was most recently Managing Director, Healthcare Research. Prior to that time, he worked in management consulting with Cambridge Pharma Consultancy, Lexington Strategy, and The Boston Consulting Group. Since March 2015, Mr. Bator has served on the board of directors of 3DBio Corporation, a private company focused on bioprinted cartilage implants used in reconstructive and orthopedic surgery. Since 2018, Mr. Bator has served as a Director and Founder of Florence-Health, an online nursing portal. Mr. Bator received his MBA in Finance from Wharton Business School at the University of Pennsylvania, and his BA from Princeton University. Edward R. Jones, MD, MBA has been a director of the Company since April 2007. Dr. Jones retired from the clinic practice of nephrology in January 2020. Dr. Jones has been an attending physician at Albert Einstein Medical Center and Chestnut Hill Hospital as well as Clinical Professor of Medicine at Temple University Hospital since 1985. Dr. Jones has published or contributed to the -publishing of 30 chapters, articles, and abstracts on the subject of treating kidney-related illnesses. He has been a member of the Renal Physicians Association, the Philadelphia County Medical Society for 17 years, and is a past board member of the National Kidney Foundation of the Delaware Valley. From March 2009 to March 2011, Dr. Jones is past-President of, and past Counselor at, the Renal Physicians Association. Dr. Jones is past Chairman of Kidney Care Partners, and he is past President of Delaware Valley Nephrology and Hypertension Associates. He retired from that practice on June 30, 2018. Dr. Jones graduated from the Medical University of South Carolina and completed his Internal Medicine residency at Temple University Hospital (TUH). He later served as Chief Medical Resident at Temple University Hospital. He was a fellow in the Renal and Electrolyte Section of the University of Pennsylvania after which he joined the faculty of Temple where he ran the renal physiology laboratory while teaching and providing patient care. Dr. Jones received his MBA in healthcare management from St. Joseph’s University in Philadelphia. Alan D. Sobel, CPA has been a director of CytoSorbents since 2014. Mr. Sobel is the Managing Principal of New Jersey Offices of CLA (CliftonLarsonAllen, LLP). Previously, since 1996, Mr. Sobel has served as the Managing Member of Sobel & Co., LLC, a full-service accounting, auditing, taxation, and business consulting firm. He has provided corporate advisory and consulting services, including mergers and acquisitions, for clients in the real estate, manufacturing, pharmaceutical, and distribution businesses, among others. Mr. Sobel is a Certified Public Accountant and has served in various leadership roles including President of the New Jersey Society of Certified Public Accountants and Chairman of the Audit Committee of the New Jersey Society of Certified Public Accountants. Mr. Sobel received his BS in accounting from Bentley College and his MS in taxation from Fairleigh Dickenson University. Jiny Kim, MBA is currently a Senior Vice President at Solta Medical at Bausch Health. Previously, Ms. Kim was the Vice President at Zimmer Biomet, where she served as the general manager of the Smart Implants portfolio and was responsible for leading the end-to-end program and product management for Zimmer Biomet’s Smart Implants technology in the orthopedic field. Prior to Zimmer Biomet, Ms. Kim served as Vice President, Global Strategic Marketing and Chief of Staff for the General Manager, Neuromodulation and Depression at LivaNova from 2020 to 2021. Prior to LivaNova, from 2011 to 2020, Ms. Kim served in increasing roles of responsibility at Ethicon, Johnson & Johnson Medical Devices in U.S. Sales and Marketing, Business Development (Licensing and Acquisition), and Strategic Global Marketing. Ms. Kim received her MBA at the MIT Sloan School of Management, and she received a dual degree from the University of Pennsylvania with a B.S. in Economics from The Wharton School and a B.A. in Political Science from The College of Arts and Sciences.
Director Experience, Qualifications, Attributes and Skills
Each nominee for director will be elected to the Board if the votes cast “for” such nominee’s election exceed the votes cast “against” such nominee’s election. Accordingly, the receipt of a majority of the votes cast by stockholders entitled to vote in the election of directors is required for the election of the nominees listed above as directors of CytoSorbents. Cumulative voting for the election of directors is not permitted. The Board recommends that stockholders vote “FOR” the election of the five nominees to the Board each for a one-year term.
Evaluation and Indemnification of Director Nominees
Evaluation and Indemnification of Director Nominees The Nominating and Corporate Governance Committee considers a number of factors in identifying and evaluating director nominees. While all nominees should have the highest personal integrity, meet any required regulatory qualifications and have a record of exceptional ability and judgment, the Board relies on the judgment of members of the Nominating and Corporate Governance Committee, with input from our Chief Executive Officer, to assess the qualifications of potential Board nominees with a view to the contributions that they would make to the Board and to CytoSorbents. Because our Board believes that its members should ideally reflect a mix of experience and other qualifications, there is no rigid formula. The Nominating and Corporate Governance Committee charter includes a policy whereby diversity, including diversity of gender, origin and background, is a key consideration when identifying candidates for membership on the Board. In evaluating potential candidates, the Nominating and Corporate Governance Committee will consider, among others things, the degree to which a potential candidate fulfills a current Board need, such as the need for an audit committee financial expert, as well as the candidate’s ability and commitment to understand CytoSorbents and its industry and the candidate’s ability to devote the time necessary to fulfill the role of director (including, without limitation, regularly attending and participating in meetings of the Board and its Committees). In considering potential candidates, the Nominating and Corporate Governance Committee will consider the overall competency of the Board in the following areas:
Evaluation and Indemnification of Director Nominees
| • | industry knowledge; |
Evaluation and Indemnification of Director Nominees
| • | accounting and finance; |
Evaluation and Indemnification of Director Nominees
| • | business judgment; |
Evaluation and Indemnification of Director Nominees
| • | management; |
Evaluation and Indemnification of Director Nominees
| • | leadership; |
Evaluation and Indemnification of Director Nominees
| • | business strategy; |
Evaluation and Indemnification of Director Nominees
| • | diversity of gender, origin, and background; |
Evaluation and Indemnification of Director Nominees
| • | crisis management; and |
Evaluation and Indemnification of Director Nominees
| • | corporate governance. |
Evaluation and Indemnification of Director Nominees
In addition, the Nominating and Corporate Governance Committee may consider other factors, as appropriate in a particular case, including, without limitation, the candidate’s:
Evaluation and Indemnification of Director Nominees
| • | sound business and personal judgment; |
Evaluation and Indemnification of Director Nominees
| • | senior management experience and demonstrated leadership ability; |
Evaluation and Indemnification of Director Nominees
| • | accountability and integrity; |
Evaluation and Indemnification of Director Nominees
| • | financial literacy; |
Evaluation and Indemnification of Director Nominees
| • | industry or business knowledge, including science, technology, and marketing acumen; |
Evaluation and Indemnification of Director Nominees
| • | the extent, nature and quality of relationships and standing in the research and local communities; |
Evaluation and Indemnification of Director Nominees
| • | in connection with nominees to be designated as “independent” directors, “independence” under regulatory definitions, as well as in the judgment of the Nominating and Corporate Governance Committee; |
Evaluation and Indemnification of Director Nominees
| • | independence of thought and ideas; and |
Evaluation and Indemnification of Director Nominees
| • | other board appointments and service. |
Evaluation and Indemnification of Director Nominees
The Nominating and Corporate Governance Committee considers recommendations for nominations from a variety of sources, including members of the Board, business contacts, community leaders and members of management. As described below, the Nominating and Corporate Governance Committee will also consider stockholder recommendations for Board nominees. The Nominating and Corporate Governance Committee’s process for identifying and evaluating candidates is the same with respect to candidates recommended by members of the Board, management, stockholders or others.
Stockholder Director Nominee Recommendations
Stockholder Director Nominee Recommendations The Nominating and Corporate Governance Committee will consider director nominees recommended by stockholders. There are no differences in the manner in which the Nominating and Corporate Governance Committee evaluates nominees for director based on whether the nominee is recommended by a stockholder or by the Nominating and Corporate Governance Committee. Stockholders who wish their proposed nominee to be considered by the Nominating and Corporate Governance Committee for nomination at our next annual stockholders’ meeting should follow the procedures set forth in our bylaws as described in “Stockholder Proposals and Nomination of Director Candidates” in this Proxy Statement.
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION The following table shows for the fiscal year ended December 31, 2023 certain information with respect to the compensation of all non-employee directors of the Company.
DIRECTOR COMPENSATION
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($)(1) | Total ($) | | Michael G. Bator, MBA(2) | 68,074 | — | 93,628(2) | 161,702 | | Edward R. Jones, MD, MBA (3) | 55,120 | — | 46,814(3) | 101,934 | | Al W. Kraus (4) | 87,641 | — | 6,119(4) | 93,760 | | Alan D. Sobel, CPA (5) | 71,657 | — | 46,814(5) | 118,471 | | Jiny Kim, MBA (6) | 54,982 | — | 46,814(6) | 101,796 |
DIRECTOR COMPENSATION
| (1) The value of option awards granted to directors is based upon the grant date fair value of awards calculated in accordance with ASC Topic 718. The fair value of each stock option was estimated using the Black Scholes pricing model which takes into account as of the grant date the exercise price (ranging from $1.17 to $3.71 per share in 2023) and expected life of the stock option (6 years in 2023), the current price of the underlying stock and its expected volatility (ranging from 70.4 to 75.6 percent in 2023), expected dividends (-0- percent) on the stock and the risk free interest rate (3.50 to 4.76 percent) for the term of the stock option. In addition, we recognize forfeitures as they occur. |
DIRECTOR COMPENSATION
| (2) In connection with his service as a director in 2023, we issued Mr. Bator options to purchase 40,000 shares of our Common Stock at an exercise price of $3.53 per share, which were granted on July 7, 2023, and expire on July 7, 2033. These options shall vest in full on the first anniversary of the award date. |
DIRECTOR COMPENSATION
| (3) In connection with his service as a director in 2023 we issued Dr. Jones options to purchase 20,000 shares of our Common Stock at an exercise price of $3.53 per share, which were granted on July 7, 2023, and expire on July 7, 2033. These options shall vest in full on the first anniversary of the award date. |
DIRECTOR COMPENSATION
| (4) In connection with his service as a director through June 6, 2023, we issued Mr. Kraus options to purchase 3,000 shares of our Common Stock at an exercise price of $3.11 per share, which were granted on June 5, 2023, and expire on June 5, 2033. These options vested in full on the grant date of the award. |
DIRECTOR COMPENSATION
| (5) In connection with his service as a director in 2023 we issued Mr. Sobel options to purchase 20,000 shares of our Common Stock at an exercise price of $3.53 per share, which were granted on July 7, 2023, and expire on July 7, 2033. These options shall vest in full on the first anniversary of the award date. |
DIRECTOR COMPENSATION
| (6) In connection with her service as a director in 2023 we issued Ms. Kim options to purchase 20,000 shares of our common stock at an exercise price of $3.53 per share, which were granted on July 7, 2023 and expire on July 7, 2033. These options shall vest in full on the first anniversary of the award date. |
DIRECTOR COMPENSATION
In 2023, the Board approved a new fee schedule for its non-employee directors which became effective January 1, 2023. Pursuant to the revised fee schedule, the Chairman of the Board is entitled to an annual retainer of $77,168 and each non-employee Board member is entitled to an annual retainer of $38,584. Each member of the Audit Committee and Nominating and Corporate Governance Committee is entitled to an additional $13,229 per year, and each member of the Compensation Committee is entitled to an additional $13,229 per year. The Chairmen of the Audit Committee and the Nominating and Corporate Governance Committee are entitled to an additional $26,458 per year and the Chairman of the Compensation Committee is entitled to an additional $26,458 per year. In addition, each of our directors is eligible to receive reimbursement for actual out-of-pocket expenses incurred by them in connection with their attendance at meetings of the Board and Board committees and an annual equity grant. In July 2019, the Board commissioned Radford to evaluate compensation for both the Board and executive management and make recommendations to approximately align these two groups with the interests of stockholders. The Board continues to evaluate future Board and management compensation and continues to use Radford at its sole discretion regarding the evaluation of compensation matters. In 2023, the Compensation Committee elected to defer undertaking an analysis of Board and executive management compensation, however, the Compensation Committee did utilize Radford as a consultant on certain compensation matters.
Significant Executive Compensation Actions
| • | approved cash bonuses linked to the Company’s 2023 performance, which bonuses were approved. However, the timing of bonus payout deferred until further determination; to date, these bonuses have not been paid. |
Significant Executive Compensation Actions
| • | approved additional long-term incentive compensation in the form of a combination of restricted stock units and stock options, which were subject to vesting based upon time employed, to further align the incentives of the executives and stockholders, retain key executives and reward performance; and |
Significant Executive Compensation Actions
| • | approved additional long-term incentive compensation in the form of stock options, which will vest based upon achievement of certain long-term milestones before December 31, 2025. |
Use of Competitive Data
Use of Competitive Data To assess the competitiveness of our executive compensation program and compensation levels, our Compensation Committee examines the competitive compensation data for senior executives of other similar life science companies on the Nasdaq.
Compensation Program Design for 2023
Compensation Program Design for 2023 In designing our compensation program for 2023, we were cognizant of our need to motivate our named executive officers to meet our short-term goals and long-term strategic objectives. Thus, we emphasized the use of equity in the form of options to purchase shares of our Common Stock and restricted stock units to incent our named executive officers to focus on the growth of our overall enterprise value and, correspondingly, to create sustainable long-term value for our stockholders. We believe that stock options and restricted stock units offer our named executive officers a valuable long-term incentive that aligns their interests with the interests of our stockholders. The equity compensation awarded to our named executive officers in 2023 is discussed below under “Executive Compensation Program Components — Equity Compensation.” We also offer cash compensation to our named executive officers in the form of base salaries at levels that we believe help us provide competitive compensation packages. In 2023, the Compensation Committee recognized a need to review annual base salaries of our named executive officers. The Compensation Committee considered numerous factors, including but not limited to, Radford’s recommendations on compensation, 2022 performance, comparable company performance, competitiveness of the labor market for key executives, cash burn, and cost-of-living adjustments. Using this information as a reference and recognizing the need to remain competitive in our market, but with cash conservation a priority, our Compensation Committee decided to keep the 2022 base salaries of our named executive officers for 2023, except for our Chief Financial Officer, Ms. Bloch. However, the other named executive officers were awarded additional catch-up incentive stock options as more fully described below. We do not provide significant perquisites or other personal benefits to our executive officers. Our executive officers participate in broad-based company-sponsored health and benefit programs on substantially the same basis as our other salaried employees.
Annual Cash Bonuses
Annual Cash Bonuses Cash bonuses are solely discretionary based upon the approval of the Board. In determining whether to award cash bonuses, the Compensation Committee considers the operational performance of the Company relative to its operating plan, management’s ability to meet specified performance milestones including revenue growth, progress on clinical trials, business development achievements, and cost containment, as well as individual performance indicators. Prior to 2018, the Compensation Committee had not offered executives annual cash bonuses but instead awarded bonuses in the form of restricted stock units. However, beginning in 2018, following its review of the Company’s overall compensation philosophy, the Compensation Committee determined to award a mixture of cash bonuses and incentive equity awards to executives in recognition of the Company’s performance and the performance of each executive. Cash bonuses and incentive equity awards were awarded to executives for 2023, but in the interests of conserving cash, the executive team elected to accrue and delay the payment of these cash bonuses to be paid at a later date.
Equity Compensation
Equity Compensation We use equity awards to motivate and reward our named executive officers, to encourage long-term corporate performance based on the value of our Common Stock and to align the interests of our named executive officers with those of our stockholders. In order to better align the interests of our named executive officers with our stockholders and to retain key talent, in 2023, the Compensation Committee awarded executives a combination of incentive stock options that vest one half on the first year anniversary of the date of the grant, one fourth on the second year anniversary of the date of the grant, and one fourth on the third year anniversary of the date of the grant, and catch-up stock options that will vest one half on the first year anniversary of the date of the grant and one half on the second year anniversary of the date of the grant. Additionally, the Compensation Committee awarded executive officers restricted stock units that vest two third on the first anniversary date of grant and one third on the second anniversary date of grant, subject to the grantee’s continued service as of each applicable vesting date and approval of our Amended and Restated 2014 Long-term Incentive Plan.
Post-Employment Compensation Arrangements
Post-Employment Compensation Arrangements The employment agreements provide each of our named executive officers with certain protection in the event of his or her termination of employment under specified circumstances, including following a change of control of our Company. We believe that these protections serve our executive retention objectives by helping our named executive officers maintain continued focus and dedication to their responsibilities to maximize stockholder value, including in the event that there is a potential transaction that could involve a change in control of our Company. The terms of these agreements were determined after review by our Compensation Committee of our retention goals for each named executive officer and an analysis of competitive market data. For a summary of the material terms and conditions of these severance and change in control arrangements, see the sections entitled “Compensation of Named Executive Officers — Employment Agreements” and “Executive Compensation — Potential Payments upon Termination or Change of Control.”
Taxation of “Parachute” Payments and Deferred Compensation
Taxation of “Parachute” Payments and Deferred Compensation Sections 280G and 4999 of the Internal Revenue Code provide that named executive officers and directors who hold significant equity interests and certain other service providers may be subject to an excise tax if they receive payments or benefits in connection with a change of control of our Company that exceed certain prescribed limits, and that we (or a successor) may forfeit a deduction on the amounts subject to this additional tax. Section 409A of the Internal Revenue Code imposes significant additional taxes in the event that an employee, including a named executive officer, director, or service provider receives “nonqualified deferred compensation” that does not satisfy the conditions of Section 409A. We did not provide any named executive officer with a “gross-up” or other reimbursement payment for any tax liability that he or she might owe as a result of the application of Sections 280G, 4999 or 409A of the Internal Revenue Code during 2022. We have not agreed and are not otherwise obligated to provide any named executive officer with a “gross-up” or other reimbursement under Section 409A.
Summary Compensation Table
Summary Compensation Table The following table shows for the fiscal years ended December 31, 2023, 2022 and 2021, compensation awarded to or paid to, or earned by, our named executive officers.
Summary Compensation Table
| | | Salary | Bonus | Stock Awards(1) | Option Awards(2) | All Other | Total | | Name and Principal Position | Year | ($) | ($) | ($) | ($) | Compensation | ($) | | Phillip P. Chan, MD, PhD | 2023 | 482,851 | 156,927 | 307,110(5) | 374,514 | 12,000(3) | 1,333,402 | | Chief Executive Officer | 2022 | 482,851 | 47,078 | 154,050(6) | 410,633 | 12,000(3) | 1,106,612 | | | 2021 | 482,851 | 172,619 | 647,280(7) | 475,846 | 12,000(3) | 1,790,596 | | Vincent J. Capponi, MS | 2023 | 424,000 | 119,250 | 257,690(5) | 311,315 | — | 1,112,255 | | President and Chief Operating Officer | 2022 | 424,000 | 28,620 | 134,550(6) | 398,765 | — | 985,935 | | | 2021 | 424,000 | 115,292(4) | 559,313(7) | 387,616 | — | 1,486,221 | | Kathleen P. Bloch, MBA, CPA | 2023 | 258,638(8) | 143,438 | 89,100(9) | 139,067 | 185,841(10) | 816,084 | | Chief Financial Officer | 2022 | 370,428 | 25,004 | 108,225(6) | 344,172 | — | 847,829 | | | 2021 | 370,428 | 91,681 | 444,556(7) | 342,015 | — | 1,248,680 | | Efthymios N. Deliargyris, MD | 2023 | 408,100 | 164,778(11) | 194,150(5) | 276,204 | 12,500(12) | 1,055,732 | | Chief Medical Officer | 2022 | 408,100 | 42,547(13) | 101,400(6) | 443,863 | 12,500(12) | 1,008,410 | | | 2021 | 408,100 | 101,005 | 359,600(7) | 313,513 | 12,500(12) | 1,194,718 |
Summary Compensation Table
(1) Prior to 2019, Dr. Chan, Mr. Capponi and Ms. Bloch received grants of restricted stock units which will vest upon a “Change in Control” of the Company, as defined in the Company’s 2014 Long-Term Incentive Plan. The value of these grants has been calculated in accordance with ASC Topic 718. Because a “Change of Control” is not contemplated or probable at this time, there is no amount associated with these awards. (2) The value of option awards granted to our named executive officers is based upon the grant date fair value of awards calculated in accordance with ASC Topic 718. ASC 718 requires companies to calculate the grant date “fair value” of their stock-based awards using a variety of assumptions. This calculation is performed for accounting purposes and reported in the compensation tables that accompany this Compensation Discussion and Analysis, even though recipients may never realize any value from their awards. ASC 718 also requires companies to recognize the compensation cost of their stock-based awards in their statements of operations over the period that the recipient of the award is required to render service in exchange for the award. (3) In addition to his base salary, Dr. Chan is entitled to a $12,000 annual car allowance. (4) In addition to Mr. Capponi’s annual cash bonus of $104,940 for 2021. Mr. Capponi received an additional bonus of $10,352 for 2021 related to his onsite supervision during the COVID-19 pandemic. (5) On July 7, 2023, Dr. Chan, Mr. Capponi, and Dr. Deliargyris received restricted stock units which vest two third on the first anniversary date of grant and one third on the second anniversary date of grant. The amount shown represents the fair market value of the vested and unvested restricted stock units awarded on July 7, 2023. (6) On August 10, 2022, certain named executive officers received restricted stock units which vest one third on the date of the grant, one third on the first anniversary of the grant, and one third on the second anniversary of the grant. The amount shown represents the fair market value of the vested and unvested restricted stock units awarded on August 10, 2022. (7) On April 12, 2021, certain named executive officers received restricted stock units which vest one third on the date of the grant, one third on the first anniversary of the grant, and one third on the second anniversary of the grant. The amount shown represents the fair market value of the vested and unvested restricted stock units awarded on April 12, 2021. (8) Ms. Bloch’s annual salary was $370,428 from January 1, 2023 until her retirement effective March 31, 2023. During this period, she was paid $127,869 in wages and earned paid time off. Upon returning as our full time Chief Financial Officer on September 1, 2023, Ms. Bloch’s annual salary was $425,000, and she was paid $130,769 during the period September 1, 2023 to December 31, 2023. (9) In connection with Ms. Bloch’s reappointment to Chief Financial Officer, on September 18, 2023 she received restricted stock units which vest 25,000 on the grant date, 10,000 on the first anniversary of the grant date, and 10,000 on the second anniversary of the grant date. (10) Represents consulting fees paid to Ms. Bloch during the period April 1, 2023 to August 31, 2023 when she served as a consultant and/or Interim Chief Financial Officer. (11) In addition to Mr. Deliargyris’ annual cash bonus of $114,778 in 2023, Mr. Deliargyris received a bonus of $50,000, related to achievement of milestone for STAR-T clinical trial. (12) In addition to his base salary, Dr. Deliargyris receives a $12,000 annual car allowance. (13) In addition to Mr. Deliargyris’ annual cash bonus of $27,547 in 2022, Mr. Deliargyris received a bonus of $15,000, related to achievement of milestone for STAR-T clinical trial.
Pay vs. Performance
Pay vs. Performance In accordance with rules adopted by the Securities and Exchange Commission pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we provide the following disclosure, as it applies to smaller reporting companies, regarding executive compensation for our principal executive officer (“PEO”) and Non-PEO named executive officers (“NEOs”) and Company performance for the fiscal years listed below. The Compensation Committee did not consider the pay versus performance disclosure below in making its pay decisions for any of the years shown. As required by Item 402(v) of Regulation S-K, as adopted by the SEC, we are providing the following information regarding the relationship between executive compensation and our financial performance for each of the last two completed fiscal years. In determining the “compensation actually paid” to our NEOs, we are required to make various adjustments to amounts that have been previously reported in the Summary Compensation Table in previous years, as the SEC’s valuation methods for this section differ from those required in the Summary Compensation Table. The table below summarizes compensation values both previously reported in our Summary Compensation Table, as well as the adjusted values required in this section for the 2023 and 2022 fiscal years. Note that for our NEOs other than our PEO, compensation is reported as an average.
Pay vs. Performance
| Year | Summary Compensation Table Total for PEO($)(1) | Compensation Actually Paid to PEO($) (2) | Average Summary Compensation Table Total for Non-PEO Named Executive Officers($) | Average Compensation Actually Paid to Non-PEO Named Executive Officers($)(3) | Value of Initial Fixed $100 Investment Based On Total Shareholder Return($) | Net Income/(Loss) ($) | | 2023 | $1,333,401 | $729,761 | $994,690 | $734,380 | $20.37 | $(28,233,242) | | 2022 | $1,106,612 | $1,011,955 | $947,391 | $673,681 | $28.44 | $(32,812,583) |
Pay vs. Performance
| (1) For years 2023 and 2022, Dr. Phillip P. Chan has been our Principal Executive Officer. The averages for years 2023 and 2022 for our Non-PEO Named Executive Officers consists of Vincent J. Capponi, Kathleen P. Bloch, and Efthymios, N. Deliargyris. |
Pay vs. Performance
| (2) Adjustment to Compensation Actually Paid to PEO include deduction of “stock awards” and “options awards” for the year, which include a) add award granted in the year that remain outstanding and unvested at fair value as of end of the year, b) add award granted in the year that vested in the same year at fair value as of the vesting date, c) add or subtract (if negative) any award granted before the year and remain outstanding and unvested as of year-end at fair value, d) add or subtract (if negative) any award granted before the year but vested during the year at fair value as of the vesting date, e)subtract any award vested and forfeited at fair value as of end of the prior year, f)add unvested award on which dividends or other earnings were paid during the year not otherwise included in summary total compensation column. |
Pay vs. Performance
| | Adjustment to Determine Compensation “Actually Paid” to PEO | | | | 2023 | 2022 | | Deduction for Amounts Reported under the “Stock Awards” Column in the SCT | (307,110) | (154,050) | | Deduction for Amounts Reported under the “Option Awards” Column in the SCT | (374,514) | (410,633) | | Increase for Fair Value of Awards Granted During the Year that Remain Unvested as of Year-end | 188,015 | 451,693 | | Increase for Fair Value of Awards Granted During the Year that Vested During the Year | — | 82,800 | | Increase/(Decrease) for Change in Fair Value from Prior Year-end to Current Year-end of Awards Granted Prior to Year that were Outstanding and Unvested as of Year-end | (341,105) | (157,121) | | Increase/(Decrease) for Change in Fair Value from Prior Year-end to Vesting Date of Awards Granted Prior to Year that Vested During the Year | 231,073 | 92,654 | | Deduction of Fair Value of Awards Granted Prior to year that were Forfeited during year | — | — | | Increase based on Dividends or Other Earnings Paid during year Prior to Vesting Date of Award | — | — | | Total Adjustments | (603,641) | (94,657) |
Pay vs. Performance
| (3) Adjustment to Average Compensation Actually Paid to Non-PEO Named Executive Officers |
Pay vs. Performance
| | Adjustment to Determine Compensation “Actually Paid” to Non-PEO | | | | 2023 | 2022 | | Deduction for Amounts Reported under the “Stock Awards” Column in the SCT | (180,313) | (114,725) | | Deduction for Amounts Reported under the “Option Awards” Column in the SCT | (242,195) | (395,600) | | Increase/(Decrease) for Fair Value of Awards Granted During the Year that Remain Unvested as of Year-end | 130,704 | 243,834 | | Increase for Fair Value of Awards Granted During the Year that Vested During the Year | 20,886 | 61,482 | | Increase/(Decrease) for Change in Fair Value from Prior Year-end to Current Year-end of Awards Granted Prior to Year that were Outstanding and Unvested as of Year-end | (164,467) | (133,662) | | Increase/(Decrease) for Change in Fair Value from Prior Year-end to Vesting Date of Awards Granted Prior to Year that Vested During the Year | 175,076 | 64,961 | | Deduction of Fair Value of Awards Granted Prior to year that were Forfeited during year | — | — | | Increase based on Dividends or Other Earnings Paid during year Prior to Vesting Date of Award | — | — | | Total Adjustments | (260,309) | (273,710) |
Pay Versus Performance Graphic Description
Pay Versus Performance Graphic Description In accordance with Item 402(v) of Regulation S-K, we are providing the following graphic descriptions of the relationships between (i) compensation actually paid to the PEO and the NEOs other than the PEO, and total shareholder return (“TSR”); and (ii) compensation actually paid to the PEO and the NEOs other than the PEO, and net income (loss).
Grants of Plan-Based Awards
Grants of Plan-Based Awards The following table provides information regarding plan-based awards granted to our named executive officers in 2023:
Grants of Plan-Based Awards
| Name | Grant date | Number of Shares of Underlying Common Stock (#) | Exercise or base price of option awards ($/Sh) | Grant date fair value of stock and option awards ($)(1) | | Phillip P. Chan, MD, PhD | | | | | | RSUs(2) | 07/07/2023 | 87,000 | N/A | $307,110 | | Options(3) | 07/07/2023 | 112,000 | $3.53 | $262,160 | | Options(4) | 07/07/2023 | 48,000 | $3.53 | $112,354 | | Vincent J. Capponi, MS | | | | | | RSUs(2) | 07/07/2023 | 73,000 | N/A | $257,690 | | Options(3) | 07/07/2023 | 91,000 | $3.53 | $213,005 | | Options(4) | 07/07/2023 | 42,000 | $3.53 | $98,310 | | Kathleen P. Bloch, CPA | | | | | | RSUs(5) | 09/18/2023 | 45,000 | N/A | $89,100 | | Options(6) | 03/31/2023 | 20,000 | $3.37 | $43,965 | | Options(7) | 07/07/2023 | 20,000 | $3.53 | $46,814 | | Options(8) | 09/18/2023 | 30,000 | $1.98 | $39,478 | | Efthymios N. Deliargyris, MD | | | | | | RSUs(2) | 7/7/2023 | 55,000 | N/A | $194,150 | | Options(3) | 7/7/2023 | 78,000 | $3.53 | $182,575 | | Options(4) | 7/7/2023 | 40,000 | $3.53 | $93,628 |
Grants of Plan-Based Awards
| (1) The value of awards granted to our named executive officers is based upon the grant date fair value of awards calculated in accordance with ASC Topic 718. ASC 718 requires companies to calculate the grant date “fair value” of their stock-based awards using a variety of assumptions. This calculation is performed for accounting purposes and reported in the compensation tables that accompany this Compensation Discussion and Analysis, even though recipients may never realize any value from their awards. ASC 718 also requires companies to recognize the compensation cost of their stock-based awards in their statements of operations over the period that the recipient of the award is required to render service in exchange for the award. |
Grants of Plan-Based Awards
| (2) Vesting as to two-third of these restricted stock units shall occur on the first anniversary of the date of grant, and one-third on the second anniversary of the date of grant, subject to the grantee’s continued service as of each applicable vesting date. The grant date fair value represents the fair market value of the vested and unvested restricted stock units awarded on July 7, 2023. |
Grants of Plan-Based Awards
| (3) Represents stock options granted pursuant to the Company’s 2014 Long-Term Incentive Plan, which will vest as to one-half on the first anniversary of the date of grant, one-fourth on the second anniversary of the date of grant and one-fourth on the third anniversary of the date of grant, subject to the executive officer’s continued service with the Company as of the applicable vesting date. See “Compensation Discussion and Analysis — Equity Compensation “and approval of the Amended and Restated 2014 Long-Term Incentive Plan. |
Grants of Plan-Based Awards
| (4) Represents stock options granted pursuant to the Company’s 2014 Long-Term Incentive Plan, which will vest upon one-half on the first anniversary of the date of grant and one-half on the second anniversary of the date of grant, subject to the executive officer’s continued service with the Company as of the applicable vesting date. See “Compensation Discussion and Analysis — Equity Compensation” and approval of the Amended and Restated 2014 Long-Term Incentive Plan. |
Grants of Plan-Based Awards
| (5) 25,000 restricted stock units vested immediately on the date of grant, 10,000 units vesting on the first anniversary of the date of grant and remaining 10,000 units vesting on the second anniversary of the date of grant, subject to the grantee’s continued service as of each applicable vesting date. The grant date fair value represents the fair market value of the vested and unvested restricted stock units awarded on September 18, 2023. |
Grants of Plan-Based Awards
| (6) Represents stock options granted pursuant to the Company’s 2014 Long-Term Incentive Plan, which vested in full immediately on the date of grant, subject to the executive officer’s continued service with the Company as of the applicable vesting date. See “Compensation Discussion and Analysis — Equity Compensation.” |
Grants of Plan-Based Awards
| (7) Represents stock options granted pursuant to the Company’s 2014 Long-Term Incentive Plan, which will vest in full immediately on the first anniversary of date of grant, subject to the executive officer’s continued service with the Company as of the applicable vesting date. See “Compensation Discussion and Analysis — Equity Compensation.” |
Grants of Plan-Based Awards
| (8) Represents stock options granted pursuant to the Company’s 2014 Long-Term Incentive Plan, which will vest as to one-third on the date of grant, one-third on the first anniversary of date of grant, and one-third on the second anniversary of date of grant, subject to the executive officer’s continued service with the Company as of the applicable vesting date. See “Compensation Discussion and Analysis — Equity Compensation.” |
Outstanding Equity Awards at Fiscal Year-End
Outstanding Equity Awards at Fiscal Year-End The following table summarizes the equity awards we have made to our named executive officers that have not been exercised and remained outstanding as of December 31, 2023.
Outstanding Equity Awards at Fiscal Year-End
| | Option Awards | | | | Stock Awards | | | | Number of Securities Underlying Unexercised Options (#) | Equity incentive plan awards: number of securities underlying unexercised unearned options | Option Exercise Price | Option Expiration | Equity incentive plan awards: number of unearned shares, units or other rights that have not vested | Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested | | Name | Exercisable | (#) | ($) | Date | (#)(1) | ($)(2) | | Phillip P. Chan, MD, PhD | 66,500 | | 4.875 | 3/28/2024 | | | | | 7,000 | | 8.070 | 4/8/2025 | | | | | 77,600 | | 4.690 | 6/7/2026 | | | | | 95,200 | | 5.600 | 2/24/2027 | | | | | 70,650 | | 7.900 | 3/15/2028 | | | | | 80,000 | | 7.330 | 7/22/2029 | | | | | 80,000 | | 6.030 | 2/28/2030 | | | | | 72,000 | 24,000 | 8.990 | 4/12/2031 | | | | | 53,000 | 53,000 | 1.950 | 8/10/2032 | | | | | | 240,000 | 1.950 | 8/10/2032 | | | | | | 112,000 | 3.530 | 7/07/2033 | | | | | | 48,000 | 3.530 | 7/07/2033 | | | | | | | | | 329,334 | $365,561 | | Vincent J. Capponi, MS | 62,700 | | 4.875 | 3/28/2024 | | | | | 6,600 | | 8.070 | 4/8/2025 | | | | | 73,200 | | 4.690 | 6/7/2026 | | | | | 89,250 | | 5.600 | 2/24/2027 | | | | | 66,210 | | 7.900 | 3/15/2028 | | | | | 68,000 | | 7.330 | 7/22/2029 | | | | | 68,000 | | 6.030 | 2/28/2030 | | | | | 58,650 | 19,950 | 8.990 | 4/12/2031 | | | | | 43,000 | 43,000 | 1.950 | 8/10/2032 | | | | | | 250,000 | 1.950 | 8/10/2032 | | | | | | 91,000 | 3.530 | 7/07/2033 | | | | | | 42,000 | 3.530 | 7/07/2033 | | | | | | | | | 303,001 | $336,331 | | Kathleen P. Bloch, CPA | 53,200 | | 4.875 | 3/28/2024 | | | | | 5,600 | | 8.070 | 4/8/2025 | | | | | 47,793 | | 5.600 | 2/24/2027 | | | | | 56,100 | | 7.900 | 3/15/2028 | | | | | 60,000 | | 7.330 | 7/22/2029 | | | | | 60,000 | | 6.030 | 2/28/2030 | | | | | 51,750 | 17,250 | 8.990 | 4/12/2031 | | | | | 37,500 | 37,500 | 1.950 | 8/10/2032 | | | | | | 215,000 | 1.950 | 8/10/2032 | | | | | 20,000 | | 3.370 | 3/31/2033 | | | | | | 20,000 | 3.530 | 7/07/2033 | | | | | 10,000 | 20,000 | 1.980 | 9/18/2033 | | | | | | | | | 220,001 | $244,201 | | Efthymios N. Deliargyris, MD | 85,500 | | 6.590 | 4/09/2030 | | | | | 47,437 | 15,813 | 8.990 | 4/12/2031 | | | | | 37,000 | 37,000 | 1.950 | 8/10/2032 | | | | | | 300,000 | 1.950 | 8/10/2032 | | | | | | 78,000 | 3.530 | 7/07/2033 | | | | | | 40,000 | 3.530 | 7/07/2033 | | | | | | | | | 267,334 | $296,741 |
Outstanding Equity Awards at Fiscal Year-End
| (1) Amount includes (i) restricted stock units held by each of the named executive officers that will vest upon a “Change in Control” of the Company, as defined in the Company’s 2014 Long-Term Incentive Plan and (ii) the unvested portion of restricted stock units awarded on April 9, 2020, August 10, 2022, July 7, 2023, and September 18, 2023. |
Outstanding Equity Awards at Fiscal Year-End
| (2) Based on the $1.11 per share closing price of our Common Stock on December 31, 2023, as reported by Nasdaq. |
Option Exercises and Stock Vested
Option Exercises and Stock Vested The following table provides information regarding options that were exercised by our named executive officers and stock awards held by our named executive officers that vested, in each case, during 2023.
Option Exercises and Stock Vested
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | | Phillip P. Chan, MD, PhD | 30,500 | $17,995 | 50,334 | $158,419 | | Vincent J. Capponi, MS | 10,000 | $5,400 | 43,739 | $137,623 | | Kathleen P. Bloch, CPA | — | — | 59,984 | $159,542 | | Efthymios N. Deliargyris, MD | — | — | 30,667 | $96,095 |
Option Exercises and Stock Vested
| (1) Based upon the closing price of our Common Stock at the vesting date, as reported on Nasdaq. |
Potential Payments upon Termination or Change of Control
Potential Payments upon Termination or Change of Control In this section, we describe payments that may be made to our named executive officers upon several events of termination of employment, including termination in connection with a change of control. Termination Following a Change of Control. The existing employment agreements with Dr. Chan, Mr. Capponi, Ms. Bloch, and Dr. Deliargyris provide for benefits upon specified termination of employment events within twelve (12) months of a change of control and upon termination of employment events at any time for reasons unrelated to a change of control. Under the employment agreements, a “Change of Control” occurs if:
Potential Payments upon Termination or Change of Control
| • | one person acquires more ownership of more than 50% of the total fair market value or total voting power of the stock; |
Potential Payments upon Termination or Change of Control
| • | a majority of the members of the Board are replaced during any twelve (12)-month period by directors whose appointment or election is not endorsed by a majority of the Board before the date of appointment or election; or |
Potential Payments upon Termination or Change of Control
| • | in the event of the sale of all or substantially all of our assets. |
Potential Payments upon Termination or Change of Control
Upon the termination of a named executive officer’s employment within twelve (12) months following a Change of Control either without Cause (as defined in the applicable executive officer’s employment agreement) or for “Good Reason” by the named executive officer, the named executive officer will receive, following execution of a release:
Potential Payments upon Termination or Change of Control
| • | the Accrued Obligations (as defined in the applicable executive officer’s employment agreement); |
Potential Payments upon Termination or Change of Control
| • | a lump sum payment equal to eighteen (18) months’ base salary with respect Dr. Chan, Mr. Capponi, and Ms. Bloch and a lump sum payment equal to twelve (12) months’ base salary with respect to Dr. Deliargyris; and |
Potential Payments upon Termination or Change of Control
| • | full payment of COBRA premiums for the earlier of twelve (12) months or until the named executive officer becomes eligible to participate in another employer’s group health plan; and |
Potential Payments upon Termination or Change of Control
| • | any Bonus (as defined in the applicable executive officer’s employment agreement) or Target Bonus (as defined in the applicable executive officer’s employment agreement) due for the calendar year of such termination, pro-rated based on the number of days the named executive officer was actively employed by the Company during such year. |
Potential Payments upon Termination or Change of Control
In addition, any and all stock options and or restricted stock units or other equity or equity-based awards will vest upon a “Change of Control” as defined in the employment agreements, including for the avoidance of doubt, any restricted stock units which vest under their terms only upon a Change of Control as defined in the Company’s 2014 Long Term Incentive Plan. Definition of Good Reason. Under the employment agreements, “Good Reason” means the occurrence of any of the following events, without the named executive officer’s consent:
Potential Payments upon Termination or Change of Control
| • | a material reduction in the named executive officer’s base salary; |
Potential Payments upon Termination or Change of Control
| • | a relocation of the named executive officer’s principal place of employment by more than 30 miles, if it results in a longer commute for the named executive officer; |
Potential Payments upon Termination or Change of Control
| • | any material breach by the Company of any material provision of the named executive officer’s employment agreement; or |
Potential Payments upon Termination or Change of Control
| • | a material, adverse change in the named executive officer’s duties or responsibilities. |
Potential Payments upon Termination or Change of Control
Termination Without Cause or for Good Reason, or as a result of Death or Disability. Upon the termination of a named executive officer without Cause, upon the voluntary termination by the named executive officer for Good Reason, or as a result of death or Disability (as defined in the applicable executive officer’s employment agreement), the named executive officer is entitled to receive, following execution of a release:
Potential Payments upon Termination or Change of Control
| • | The Accrued Obligations (as defined in the applicable executive officer’s employment agreement); |
Potential Payments upon Termination or Change of Control
| • | an amount equal to (i) with respect to Dr. Chan, twelve (12) months of base salary, (ii) with respect to Mr. Capponi, fifteen (15) months of base salary and, (iii) with respect to Dr. Deliargyris, six (6) months of base salary plus three (3) weeks’ base salary for every full year of service to the Company, payable in accordance with our regular payroll practices; |
Potential Payments upon Termination or Change of Control
| • | full payment of COBRA premiums for the earlier of twelve (12) months or until the named executive officer becomes eligible to participate in another employer’s group health plan; and |
Potential Payments upon Termination or Change of Control
| • | with respect to Dr. Chan, Mr. Capponi, and Dr. Deliargyris any Target Bonus (as defined in the applicable executive officer’s employment agreement) due for the calendar year of such termination, pro-rated based on the number of days the named executive officer was actively employed by the Company during such year. |
Potential Payments upon Termination or Change of Control
In addition, any and all stock options and or restricted stock units or other equity or equity-based awards (excluding any such restricted stock units that vest only upon a “Change in Control” as defined in the employment agreements) shall become fully vested and exercisable on the termination date. Termination for Cause or Expiration of the Employment Agreement. If a named executive officer is terminated for Cause, or if a named executive officer’s employment agreement expires, the named executive would be entitled to any accrued but unpaid base salary, and any accrued but unused vacation, reimbursement for unreimbursed business expenses properly incurred through the termination date by the named executive officer, and any employee benefits to which the named executive officer may be entitled as of the date of termination.