DEF 14A of Cyngn Inc.
Filed May 21, 2024 · FY20230001213900-24-045655
Nominees for Director
Nominees for Director
Colleen Cunningham
Colleen Cunningham Ms. Cunningham has served as a member of the Board since September 2021. Ms. Cunningham has served as a board member and the treasurer of Northstar Pet Rescue since 2017. From 2012 to 2018, Ms. Cunningham was the senior vice president and corporate controller of Zoetis, Inc. Prior to that, Ms. Cunningham was the global managing director of Resources Connection, Inc. from 2007 to 2012. From 2003 to 2007, Ms. Cunningham was the president and chief executive officer of Financial Executives International. From 2001 to 2003, Ms. Cunningham was the chief financial officer of Havas Advertising, North America. Ms. Cunningham was chief accountant at AT&T, Inc. from 1999 to 2001. Prior to that, Ms. Cunningham was a division manager of accounting policy and external reporting for AT&T, Inc. from 1995 to 1999. Ms. Cunningham was the assistant controller of AT&T Capital Corporation from 1988 to 1995. From 1984 to 1988, Ms. Cunningham was a senior auditor at Touche Ross/Coopers & Lybrand. Ms. Cunningham has also served on various committees. From 2015 to 2018, Ms. Cunningham served as a member of the US Chamber of Commerce Financial Reporting Committee. From 2012 to 2018, Ms. Cunningham served as a member of the FEI Committee on Corporate Reporting. From 2007 to 2012, Ms. Cunningham served as a member of the International Issues Conference Committee of AICPA. From 2005 to 2009, Ms. Cunningham served as a board member and the chair of the Ethics Resource Center Finance Committee. From 2005 to 2018, Ms. Cunningham served as a member of the advisory board to the accounting department of Pennsylvania State University. From 2003 to 2007, Ms. Cunningham served as a member of both the International Accounting Standards Board Standing Advisory Committee and the Financial Accounting Standards Board Advisory Committee. Ms. Cunningham holds a B.A. in economics from Rutgers University and an M.B.A. in management from New York University’s Stern School of Business. Ms. Cunningham’s prior management experience and expertise in corporate reporting, governance and accounting issues qualify her to serve on the Board.
Continuing Directors
Continuing Directors
The Audit Committee
The Audit Committee The Audit Committee has the responsibility for, among other things, (i) selecting, retaining and overseeing our independent registered public accounting firm, (ii) obtaining and reviewing a report by independent auditors that describe the accounting firm’s internal quality control, and any materials issues or relationships that may impact the auditors, (iii) reviewing and discussing with the independent auditors standards and responsibilities, strategy, scope and timing of audits, any significant risks, and results, (iv) ensuring the integrity of the Company’s financial statements, (v) reviewing and discussing with the Company’s independent auditors any other matters required to be discussed by PCAOB Auditing Standard No. 1301, (vi) reviewing, approving and overseeing any transaction between the Company and any related person and any other potential conflict of interest situations, (vii) reviewing, approving and overseeing related party transactions, and (viii) establishing and overseeing procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by Company employees of concerns regarding questionable accounting or auditing matters. The Audit Committee is comprised of three directors appointed by the Board. Each of the committee members who served during 2023, Ms. Macleod, Ms. Cunningham and Mr. McDonnell, satisfied the independence and financial management expertise requirements the Stock Market Rules. The Board has determined that Ms. Cunningham is an “audit committee financial expert” within the meaning of Section 407 of the Sarbanes-Oxley Act of 2002 and Item 407(d)(5) of Regulation S-K. For a description of Ms. Cunningham’s relevant experience, please see her biographical information contained in section titled “Board of Directors and Corporate Governance” of this proxy statement.
The Compensation Committee
The Compensation Committee The Compensation Committee is comprised of members who are “Non-Employee Directors” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and “outside directors” within the meaning of Section 162(m) of the Code. They are also “independent” directors within the meaning of Nasdaq Rule 5605(b)(1). The Compensation Committee has the responsibility for, among other things, (i) reviewing and approving the chief executive officer’s compensation based on an evaluation in light of corporate goals and objectives, (ii) reviewing and recommending to the Board the compensation of all other executive officers, (iii) reviewing and recommending to the Board incentive compensation plans and equity plans, (iv) reviewing and discussing with management the Company’s Compensation Discussion and Analysis and related information to be included in the annual report on Form 10-K and proxy statements, and (v) reviewing and recommending to the Board for approval procedures relating to Say on Pay Votes. Ms. Macleod serves as Chair of the Compensation Committee and is joined by Ms. Cunningham and Mr. McDonnell.
Nominating and Corporate Governance Committee
Nominating and Corporate Governance Committee The Nominating and Corporate Governance Committee is comprised of entirely “independent” directors within the meaning of Nasdaq Rule 5605(b)(1). The Nominating and Corporate Governance Committee has the responsibility relating to assisting the Board in, among other things, (i) identifying and screening individuals qualified to become members of our board of directors, consistent with criteria approved by our board of directors, (ii) recommending to the Board the approval of nominees for director, (ii) developing and recommending to our board of directors a set of corporate governance guidelines, and (iv) overseeing the evaluation of our board of director. Mr. McDonnell currently serves as the Chair of the Nominating and Corporate Governance Committee and is joined on the committee by Ms. Macleod and Ms. Cunningham. The Chair and members of each committee of the Board are summarized in the table below:
Nominating and Corporate Governance Committee
| Name | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | | Karen Macleod – (Independent) | Member | Chair | Member | | Colleen Cunningham – (Independent) | Chair | Member | Member | | James McDonnell – (Independent) | Member | Member | Chair |
Consideration of Director Nominees
Consideration of Director Nominees We seek directors with the highest standards of ethics and integrity, sound business judgment, and the willingness to make a strong commitment to the Company and its success. The Nominating and Corporate Governance Committee works with the Board on an annual basis to determine the appropriate and desirable mix of characteristics, skills, expertise, and experience for the full Board and each committee, taking into account both existing directors and all nominees for election as directors, as well as any diversity considerations and the membership criteria applied by the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee and the Board, which do not have a formal diversity policy, consider diversity in a broad sense when evaluating board composition and nominations; and they seek to include directors with a diversity of experience, professions, viewpoints, skills, and backgrounds that will enable them to make significant contributions to the Board and the Company, both as individuals and as part of a group of directors. The Board evaluates each individual in the context of the full Board, with the objective of recommending a group that can best contribute to the success of the business and represent stockholder interests through the exercise of sound judgment. In determining whether to recommend a director for re-election, the Nominating and Corporate Governance Committee also considers the director’s attendance at meetings and participation in and contributions to the activities of the Board and its committees. The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders, and its process for considering such recommendations is no different than its process for screening and evaluating candidates suggested by directors, management of the Company, or third parties. When considering director candidates, the Nominating and Corporate Governance Committee will evaluate multiple factors in assessing their qualification. A candidate must have extensive and relevant leadership experience including an understanding of the complex challenges of enterprise leadership. An appropriate candidate will have gained appropriate experience and education in some or all of the key areas below. • Relevant Sector Experience. Director candidates will have gained their leadership experience in sectors directly relevant to the Company’s business and/or served as the Chief Executive Officer, Chief Operating Officer or other major operating or staff officer of a public corporation, with a background in marketing, finance and/or business operations. • Corporate Governance Experience. Director candidates should have sufficient applicable experience to understand fully the legal and other responsibilities of an independent director of a U.S.-based public company. • Education. Generally, it is desirable that a Board candidate should hold an undergraduate degree from a respected college or university and in relevant fields of study. When further considering director candidates, personal attributes and characteristics will be considered. Specifically, these should include the following: • Personal. Director candidates should be of the highest moral and ethical character. Candidates must exhibit independence, objectivity and be capable of serving as representatives of the stockholders. The candidates should have demonstrated a personal commitment to areas aligned with the Company’s public interest commitments, such as education, the environment and welfare of the communities in which we operate. • Individual Characteristics. Director candidates should have the personal qualities to be able to make a substantial active contribution to Board deliberations. These qualities include intelligence, self-assuredness, a high ethical standard, inter-personal skills, independence, courage, a willingness to ask the difficult question, communication skills and commitment. In considering candidates for election to the board of directors, the Board should constantly be striving to achieve the diversity of the communities in which the Company operates. • Availability. Director candidates must be willing to commit, as well as have, sufficient time available to discharge the duties of Board membership. Generally, therefore, the candidate should not have more than three other corporate board memberships. • Compatibility. The Board candidate should be able to develop a good working relationship with other Board members and contribute to the Board’s working relationship with the senior management of the Company.
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS The Board is currently composed of five members. In accordance with our amended and restated certificate of incorporation, the Board is divided into three staggered classes of directors. At the Annual Meeting, one Class III director will be elected for a three-year term. Each director’s term continues until the election and qualification of their successor, or such director’s earlier death, resignation, or removal. The Nominating and Corporate Governance Committee and the Board seek, and the Board is comprised of, individuals whose characteristics, skills, expertise, and experience complement those of other Board members.
Compensation Discussion and Analysis
Compensation Discussion and Analysis Executive Compensation Objectives and Practices We designed our executive officer compensation program to attract, motivate and retain key executives who drive our success. We strive to have pay reflect our performance and align with the interests of long-term stockholders, which we achieve with compensation that: • Provides executives with competitive compensation that maintains a balance between cash and stock compensation, encouraging our executive officers to act as owners with an equity stake in our Company; • Enhances retention by having equity compensation subject to multi-year vesting; and • Does not encourage unnecessary and excessive risk taking. We evaluate both performance and compensation to ensure the Company maintains its ability to attract and retain superior employees in key positions and compensation provided to key employees remains competitive relative to the compensation paid to similarly situated executives of other companies our size. Elements of Executive Compensation Our compensation for senior executive officers generally consists of the following elements: base salary; long-term equity compensation in the form of stock options and restricted stock; and employee benefits that are generally available to all our employees. Base Salary The Company provides named executive officers and other employees with base salary to compensate them for services rendered during the fiscal year. It is our policy to set base salary levels taking into account a number of factors, such as annual revenue, the nature of the industry in which we operate, the structure of other comparable companies’ compensation programs and the availability of compensation information. When setting base salary levels, in a manner consistent with the objectives outlined above, the Board considers our performance, the individual’s breadth of knowledge and performance and levels of responsibility. Mr. Tal’s annual base salary in 2023 was $500,000. Mr. Alvarez’s annual base salary in 2023 was $300,000. Mr. Landen’s annual base salary in 2023 was $250,000. Long-Term Incentive Compensation — Equity Compensation Our executive officers are eligible for stock awards. We believe that stock awards give executives a significant, long-term interest in our success, help retain key executives in a competitive market, and align executive interests with stockholder interests and long-term performance of the Company. We have granted options as well as restricted stock under our 2021 Stock Incentive Plan. Stock awards also provide each individual with an added incentive to manage the Company from the perspective of an owner with an equity stake in the business. Moreover, the vesting schedule (which is generally three years, although this may vary at the discretion of the Compensation Committee) encourages a long-term commitment to the Company by our executive officers and other participants. Each year the Compensation Committee reviews the number of shares owned by, or subject to options held by, each executive officer, and additional awards are considered based upon the executive’s past performance, as well as anticipated future performance, of the executive officer. The Compensation Committee continues to believe that equity compensation should be an important element of the Company’s compensation package. Typically, grants may be made to our executives at the discretion of our compensation committee. Generally, options are priced at the closing price of the Company’s common stock on the date of each grant. We also have granted restricted stock units to members of the Board. We do not have a formal written policy relating to the timing of equity awards. We encourage, but we do not require, that our executive officers own stock in the Company.
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE The following table shows information concerning compensation of our named executive officers during the years ended December 31, 2023 and 2022:
Summary Compensation Table
Summary Compensation Table
Summary Compensation Table
| Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Award ($) | Non-Equity Incentive Plan Compensation | Non-Qualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | | Lior Tal | 2023 | $500,000 | $300,000 | | $228,456 | | | | $1,028,456 | | CEO | 2022 | 500,000 | $300,000 | $— | 1,152,831 | $— | $— | $— | 1,952,831 | | Donald Alvarez | 2023 | $300,000 | $60,000 | | 48,096 | | | | $408,096 | | CFO | 2022 | 300,000 | — | — | 300,096 | — | — | — | 600,096 | | Ben Landen | 2023 | $250,000 | $50,000 | | 24,800 | | | | $324,800 | | VP of Business Development | 2022 | 250,000 | — | — | 80,982 | — | — | | 330,982 |
Outstanding Equity Awards at Fiscal Year-End
Outstanding Equity Awards at Fiscal Year-End The following table discloses information regarding outstanding equity awards granted or accrued as of December 31, 2023, for our named executive officers.
Outstanding Equity Awards
Outstanding Equity Awards
Outstanding Equity Awards
| Outstanding Equity Awards | | | | | | | | | Option Awards | | | Stock Awards | | | | Name | Number of Securities Underlying Unexercised Options (#) Vested | Number of Securities Underlying Unexercised Options (#) Unvested | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that have not Vested (#) | Market Value of Shares or Units of Stock that have not Vested ($) | | Lior Tal (Chief Executive Officer) | 3,378,004 | — | $0.13 | 4/5/27;3/22/28 | — | — | | | 1,987,000 | — | $0.22 | 5/30/28 | — | — | | | 883,333 | 716,667 | $2.88 | 7/25/31 | — | — | | | 613,437 | 1,651,563 | $0.9775 | 11/7/32 | — | — | | | 19,000 | 893,000 | $0.2505 | 11/6/33 | | | | Donald Alvarez (Chief Financial Officer) | 250,000 | 150,000 | $2.88 | 7/25/31 | — | — | | | 128,645 | 346,355 | $0.9775 | 11/7/32 | | | | | 4,000 | 188,000 | $0.2505 | 11/6/33 | | | | Ben Landen (Vice President of Business Development) | 150,000 | — | $0.23 | 11/4/29 | — | — | | | 60,416 | 39,584 | $2.88 | 7/25/31 | | | | | 21,875 | 28,125 | $1.45 | 3/21/32 | | | | | 69,875 | 188,125 | $0.9775 | 11/7/32 | — | — | | | 2,062 | 96,937 | $0.2505 | 11/6/33 | | |
Pension Benefits
Pension Benefits Effective November 17, 2017, the Company established the Cyngn Inc. 401(k) Plan for the exclusive benefit of all eligible employees and their beneficiaries with the intention to provide a measure of retirement security for the future. This plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and qualifies under Section 401(k) of the Internal Revenue Code. Cyngn, Inc. did not offer and has not provided a company match for its 401(k) Plan.
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION Each of our independent directors receives annual cash compensation of $35,000. In addition, the chairperson of the Audit Committee, Compensation Committee and Nominating and Governance Committee receives an annual compensation of $20,000, $15,000 and $10,000, respectively; and the lead independent director receives an annual cash compensation of $15,000. Each independent director receives (i) an initial award of $270,000 in restricted stock units of the Company to which shall be awarded on May 1st of each fiscal year and which will vest monthly over three (3) years, and (ii) an annual award of $180,000 in restricted stock units of the Company, which shall be granted on May 1st of each fiscal year and which will vest in its entirety one (1) year from the grant date.
Director Compensation Table
Director Compensation Table The following table provides the total compensation for each person who served as a non-employee member of the Board during fiscal year 2023:
Director Compensation Table
| DIRECTOR COMPENSATION | | | | | | | | | Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | | Karen Macleod | 50,000 | 47,399 | — | — | — | — | 97,399 | | Colleen Cunningham | 55,000 | 47,399 | — | — | — | — | 102,399 | | James McDonnell | 60,000 | 47,399 | — | — | — | — | 107,399 |