ENDRA LIFE SCIENCES INC.
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No. )
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 Rule 14a-12
ENDRA LIFE SCIENCES
INC.
(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
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1)
Title of each
class of securities to which transaction applies:
N/A
(2)
Aggregate
number of securities to which transaction applies:
N/A
(3)
Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
N/A
(4)
Proposed maximum aggregate value of
transaction:
(5)
Total
fee paid: N/A
☐
Fee
paid previously with preliminary materials.
☐
Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
(1)
Amount
Previously Paid: N/A
(2)
Form, Schedule
or Registration Statement No.: N/A
(3)
Filing Party: N/A
(4)
Date Filed:
N/A
3600 Green Court, Suite 350
Ann Arbor, Michigan 48105
April
29, 2020
Dear
Stockholder:
You are
cordially invited to attend the annual meeting of stockholders of
ENDRA Life Sciences Inc. to be held at 10:00 a.m., Eastern Time, on
Tuesday, June 16, 2020. Due to concerns about the COVID-19 pandemic
and the related protocols implemented by federal, state and local
governments, this year’s annual meeting will be held via the
internet and will be a completely virtual meeting. You may attend
and submit questions during the annual meeting on the internet
at
https://www.issuerdirect.com/virtual-event/NDRA
. Prior
to the meeting, and during the meeting until polls are closed, you
may vote by logging into
https://www.iproxydirect.com/NDRA
using your shareholder information provided on the Notice of
Internet Availability of Proxy Materials described
below.
We are
using the “Notice and Access” method of providing proxy
materials to you via the internet. We believe that this process
should provide you with a convenient and quick way to access your
proxy materials and vote your shares, while allowing us to conserve
natural resources and reduce the costs of printing and distributing
the proxy materials. On or about April 29, 2020, we are mailing to
our stockholders a Notice of Internet Availability of Proxy
Materials (the “Notice”) containing instructions on how
to access our proxy statement and vote electronically via the
internet or by telephone. The Notice also contains instructions on
how to receive a paper copy of your proxy materials.
We look
forward to your participation in the annual meeting by attending
virtually or by submitting your proxy. Further details regarding
the matters to be acted upon at this meeting appear in the
accompanying Notice and Proxy Statement. Please give this material
your careful attention.
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Very
truly yours,
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David
Wells
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Chief Financial Officer and Secretary
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i
ENDRA Life Sciences Inc.
3600
Green Court, Suite 350
Ann Arbor, Michigan 48105
NOTICE OF 2020 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on
Tuesday, June 16, 2020
To the
Stockholders of ENDRA Life Sciences Inc.:
NOTICE
IS HEREBY GIVEN that the 2020 Annual Meeting of Stockholders of
ENDRA Life Sciences Inc., a Delaware corporation, will take place
on Tuesday, June 16, 2020 at 10:00 a.m., Eastern Time. The annual
meeting will be a virtual meeting, held on the internet at
www.issuerdirect.com/virtual-event/NDRA
,
for the following purposes:
1.
To elect the six
nominees to the Board of Directors nominated by the Board of
Directors.
2.
To approve an
amendment to the Company’s Certificate of Incorporation
increasing the number of authorized shares of common stock from
50,000,000 shares to 80,000,000 shares.
3.
To ratify the
appointment of RBSM LLP as our independent registered public
accounting firm for 2020.
4.
To transact such
other business as may properly come before the annual meeting and
any adjournments or postponements thereof.
Only
stockholders of record of our common stock and preferred stock at
the close of business on April 22, 2020, the record date fixed by
the Board of Directors, are entitled to notice of and to vote at
the annual meeting and any adjournment or postponement thereof.
Such stockholders may submit their votes on the internet at
https://www.iproxydirect.com/NDRA
or by phone by following the instructions provided in the Notice of
Internet Availability of Proxy Materials or the proxy card included
with a paper copy of the proxy statement. ENDRA’s warrants do
not have voting rights.
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By
Order of the Board of Directors,
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Francois
Michelon
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Chief Executive Officer and Chairman
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Ann
Arbor, Michigan
April
29, 2020
ii
PROXY STATEMENT
TABLE OF CONTENTS
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GENERAL
INFORMATION
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1
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SECURITIES
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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7
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PROPOSAL
1—ELECTION OF DIRECTORS
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10
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INFORMATION
CONCERNING DIRECTORS AND NOMINEES FOR DIRECTOR
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10
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INFORMATION
CONCERNING EXECUTIVE OFFICERS
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13
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CORPORATE
GOVERNANCE PRINCIPLES AND BOARD MATTERS
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14
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THE
BOARD OF DIRECTORS AND ITS COMMITTEES
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17
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REPORT
OF THE AUDIT COMMITTEE
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19
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COMPENSATION
AND OTHER INFORMATION CONCERNING DIRECTORS AND
OFFICERS
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20
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PROPOSAL
2—AMENDMENT TO CERTIFICATE OF INCORPORATION
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26
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PROPOSAL
3—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
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28
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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29
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DELINQUENT
SECTION 16(a) REPORTS
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30
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OTHER
BUSINESS
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30
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IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON JUNE 16, 2020
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30
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iii
ENDRA Life Sciences Inc.
3600
Green Court, Suite 350
Ann Arbor, Michigan
48105
PROXY STATEMENT
The
Board of Directors (the “Board”) of ENDRA Life Sciences
Inc. (the “Company,” “ENDRA,”
“we,” “us” or “our”) is
providing these materials to you in connection with ENDRA’s
2020 annual meeting of stockholders (the “2020 Annual
Meeting”). The 2020 Annual Meeting will take place on
Tuesday, June 16, 2020, 10:00 a.m., Eastern Time, and will be held
on the internet at
www.issuerdirect.com/virtual-event/NDRA
.
This proxy statement and the form of proxy are being made
available, and the Notice of Internet Availability of Proxy
Materials (the “Notice”) is being mailed, to
stockholders on or about April 29, 2020
.
GENERAL INFORMATION
Why am I receiving these materials?
You
have received these proxy materials because the Board is soliciting
your proxy to vote your shares at the 2020 Annual Meeting. This
proxy statement includes information that we are required to
provide to you under Securities and Exchange Commission
(“SEC”) rules and is designed to assist you in voting
your shares.
Pursuant to the “notice and access” rules adopted by
the SEC, we have elected to provide stockholders access to our
proxy materials over the internet. Accordingly, we sent the Notice
to all of our stockholders as of the record date. The Notice
includes instructions on how to access our proxy materials over the
internet and how to request a printed copy of these materials. In
addition, by following the instructions in the Notice, stockholders
may request to receive proxy materials in printed form by mail or
electronically by email on an ongoing basis.
What is a proxy?
The
Board is asking for your proxy. This means that you authorize
persons selected by us to vote your shares at the 2020 Annual
Meeting in the way that you instruct. We have designated two of our
executive officers to serve as proxy holders for the 2020 Annual
Meeting. All shares represented by valid proxies received before
the 2020 Annual Meeting will be voted in accordance with the
stockholder’s specific voting instructions.
What is included in these materials?
These
materials include:
●
this proxy
statement for the 2020 Annual Meeting;
●
a proxy card for
the 2020 Annual Meeting; and
●
our Annual Report
on Form 10-K for the year ended December 31, 2019.
1
What items will be voted on at the 2020 Annual
Meeting?
There
are three proposals scheduled to be voted on at the 2020 Annual
Meeting:
●
the election of the
nominees to the Board nominated by our Board of
Directors;
●
the approval of an
amendment to the Company’s Certificate of Incorporation
increasing the number of authorized shares of common stock from
50,000,000 shares to 80,000,000 shares; and
●
the ratification of
the Audit Committee’s appointment of RBSM LLP
(“RBSM”) as
the
Company’s
independent registered public accounting
firm for the fiscal year ending December 31, 2020.
The
Board is not aware of any other matters to be brought before the
meeting. If other matters are properly raised at the meeting, the
proxy holders may vote any shares represented by proxy in their
discretion.
What are the Board’s voting recommendations?
The
Board recommends that you vote your shares:
●
FOR
the nominees to the
Board;
●
FOR
the approval of an amendment to the
Company’s Certificate of Incorporation increasing the number
of authorized shares of common stock from 50,000,000 shares to
80,000,000 shares; and
●
FOR
the ratification of the Audit
Committee’s appointment of RBSM as the Company’s
independent registered public accounting firm for
2020.
Why is the 2020 Annual Meeting being held in a virtual-only
format?
Our
preference is to have held an in-person annual meeting of
stockholders. However, due to public health concerns resulting from
the coronavirus (COVID-19), and the related protocols that federal,
state, and local governments have implemented, the Board has
determined to hold the 2020 Annual Meeting solely by means of
remote communication via webcast. This is often referred to as a
“virtual annual meeting.” The webcast will allow all
shareholders to join the meeting, regardless of
location.
Who can attend and participate in the 2020 Annual
Meeting?
You may
view the 2020 Annual Meeting online at
https://www.issuerdirect.com/virtual-event/NDRA
.
While all stockholders will be permitted to listen online to the
2020 Annual Meeting, only stockholders of record and beneficial
owners as of the close of business on April 22, 2020 (the
“
record date”) may
vote and ask questions. As with an in-person meeting, a stockholder
as of the record date will be able to vote during the meeting by
logging onto
https://www.iproxydirect.com/NDRA
and entering the stockholder information provided on the Notice
previously mailed to him or her, and may submit questions for
consideration during the meeting online at
https://www.issuerdirect.com/virtual-event/NDRA
.
Beneficial owners who do not have a control number may gain access
to the meeting by following the instructions provided by their
broker, bank, or other nominee. Please allow time for online
check-in, which will begin at 9:45 a.m. Eastern Time on the day of
the 2020 Annual Meeting. If you have difficulties checking in or
during the 2020 Annual Meeting, please call Issuer Direct technical
support at 919-481-4000 or visit the help pages found at
https://www.webcaster4.com/Support
.
2
When is the record date and who is entitled to vote?
The
Board set April 22, 2020 as the record date. All record holders of
ENDRA common stock and preferred stock as of the close of business
on that date are entitled to vote. Each outstanding share of common
stock is entitled to one vote. Each outstanding share of Series A
Convertible Preferred Stock (“Series A Preferred
Stock”) entitles the holder thereof to a number of votes
equal to the number of shares of common stock into which each such
share of preferred stock could be converted based upon an issue
price of $1,000 per share, subject to adjustment for accrued
dividends, and a conversion price of $0.87 per share. Accordingly,
as of the record date, each share of Series A Preferred Stock is
entitled to approximately 1,175 votes. Each outstanding share of
Series B Convertible Preferred Stock (“Series B Preferred
Stock”) entitles the holder thereof to a number of votes
equal to the number of shares of common stock into which each such
share of preferred stock could be converted based upon an issue
price of $1,000 per share, subject to adjustment for accrued
dividends, and a conversion price of $0.99 per share. Accordingly,
as of the record date, each share of Series B Preferred Stock is
entitled to approximately 1,031 votes. As of the record date, there
were outstanding 13,754,021 shares of common stock entitled to
13,754,021 votes at the 2020 Annual Meeting, 2,267.118 shares of
Series A Preferred Stock entitled to approximately 2,663,864 votes
at the 2020 Annual Meeting, and 121.579 shares of Series B
Preferred Stock entitled to approximately 125,348 votes at the 2020
Annual Meeting.
ENDRA’s
warrants do not have voting rights.
What is a stockholder of record?
A
stockholder of record or registered stockholder is a stockholder
whose ownership of ENDRA common stock is reflected directly on the
books and records of our transfer agent, VStock Transfer, LLC, or
whose ownership of Series A Preferred Stock or Series B Preferred
Stock is reflected directly on the books and records kept by ENDRA.
If you hold stock through an account with a bank, broker or similar
organization, you are considered the beneficial owner of shares
held in “street name” and are not a stockholder of
record. For shares held in street name, the stockholder of record
is your bank, broker or similar organization. We only have access
to stock ownership information for registered stockholders. As
described below, if you are not a stockholder of record, you will
not be able to vote your shares unless you have a proxy from the
stockholder of record authorizing you to vote your
shares.
3
How do I vote?
You may
vote by any of the following methods:
●
Virtually during the 2020 Annual
Meeting
. You may vote by attending the 2020 Annual Meeting
online. Please log onto
https://www.iproxydirect.com/NDRA
and enter your stockholder information provided on the Notice
previously mailed to you.
●
By mail (if you received a
paper copy of the proxy materials by mail)
.
Stockholders of record
may vote by signing and returning the proxy card
provided.
●
By submitting your proxy by phone or via the
internet.
You may submit your voting instructions by proxy,
by phone or via the Internet by following the instructions provided
in the Notice or the proxy card included with a paper copy of the
proxy statement.
●
Beneficial owners of shares held in
“street name.”
You may vote by following the
voting instructions provided to you by your bank or
broker.
How can I change or revoke my vote?
If you
are a stockholder of record, you may change or revoke your proxy
any time before it is voted at the 2020 Annual Meeting
by:
●
timely delivering a
properly executed, later-dated proxy;
●
delivering a
written revocation of your proxy to our Secretary at our principal
executive offices; or
●
voting during the
2020 Annual Meeting.
If you
hold your shares beneficially in street name, you may change your
vote by submitting new voting instructions to your bank, broker or
nominee following the instructions they provide.
What happens if I do not give specific voting
instructions?
Stockholders of record.
If you are a
stockholder of record and you sign and return a proxy card without
giving specific voting instructions, then the proxy holders will
vote your shares in the manner recommended by the Board on all
matters presented in this proxy statement and as the proxy holders
may determine in their discretion for any other matters properly
presented for a vote at the meeting.
Beneficial owners of shares held in
“street name.”
If you are a beneficial owner of
shares held in street name and do not provide the organization that
holds your shares with specific voting instructions, the
organization that holds your shares may generally vote on routine
matters but cannot vote on non-routine matters. If the organization
that holds your shares does not receive instructions from you on
how to vote your shares on a non-routine matter, the organization
that holds your shares will inform the inspector of election that
it does not have the authority to vote on this matter with respect
to your shares. This is referred to as a “broker
non-vote.”
4
Which ballot measures are considered “routine” or
“non-routine”?
The
election of directors (“Proposal 1”) is considered to
be a non-routine matter under applicable rules. A broker or other
nominee cannot vote without instructions on non-routine matters,
and therefore there may be broker non-votes on Proposal
1.
The
approval of an amendment to our Certificate of Incorporation to
increase the number of authorized shares of common stock by
30,000,000 shares (“Proposal 2”) and the ratification
of the appointment of RBSM as our independent registered public
accounting firm for 2020 (“Proposal 3”) are considered
to be routine matters under applicable rules. A broker or other
nominee may generally vote on routine matters, and we do not expect
there to be any broker non-votes with respect to Proposal 2 or
Proposal 3.
What is the quorum for the 2020 Annual Meeting?
The
presence, in person or by proxy, of the holders of not less than
one-third in voting power of the outstanding shares of stock
entitled to vote at the meeting is necessary for the transaction of
business at the 2020 Annual Meeting. This is called a
quorum.
What is the voting requirement to approve each of the
proposals?
The
following are the voting requirements for each
proposal:
●
Proposal 1: Election of Directors
. The
six nominees receiving the highest number of votes will be elected
as directors.
●
Proposal 2: Amendment to Certificate of
Incorporation.
The amendment of the Certificate of
Incorporation to increase the number of authorized shares of common
stock from 50,000,000 to 80,000,000 will be approved if the holders
of a majority of the voting power of the stock of the Company
entitled to vote thereon vote in favor of the
proposal.
●
Proposal 3: Ratification of Appointment of
Independent Registered Public Accounting Firm
. The Audit
Committee’s appointment of RBSM as our independent registered
public accounting firm for 2020 will be ratified if a majority in
voting power of the shares of stock of the Company which are
present or represented by proxy and entitled to vote thereon votes
in favor of the proposal.
How are abstentions and broker non-votes treated?
Broker
non-votes and abstentions are counted for purposes of determining
whether a quorum is present at the 2020 Annual Meeting. However,
broker non-votes are not counted as votes cast for any non-routine
proposal considered at the 2020 Annual Meeting and, therefore, will
have no effect on the proposal regarding the election of directors.
We expect no broker non-votes on the routine proposals to approve
an amendment to the Certificate of Incorporation to increase the
number of authorized shares of common stock from 50,000,000 to
80,000,000 and to appoint RBSM as our independent registered public
accounting firm for 2020.
Abstentions will be
counted as votes present and entitled to vote on the proposals
considered at the 2020 Annual Meeting and, therefore, will be
counted as votes against the proposals to approve an amendment to
the Certificate of Incorporation to increase the number of
authorized shares of common stock from 50,000,000 to 80,000,000 and
to appoint RBSM as our independent registered public accounting
firm for 2020. Abstentions will have no effect on the proposal
regarding the election of directors.
5
Who pays for solicitation of proxies?
ENDRA
is paying the cost of soliciting proxies and will reimburse
brokerage firms and other custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses for sending proxy materials
to stockholders and obtaining their votes. In addition to
soliciting the proxies by mail, certain of our directors, officers
and regular employees, without compensation, may solicit proxies
personally or by telephone, facsimile and email.
Where can I find the voting results of the 2020 Annual
Meeting?
We will
announce voting results in a Current Report on Form 8-K filed with
the SEC within four business days following the
meeting.
How can I submit a proposal for the 2021 annual meeting of
stockholders?
Requirements for Stockholder Proposals to Be
Considered for Inclusion in the Company’s Proxy
Materials.
Stockholder proposals to be considered for
inclusion in the proxy statement and form of proxy relating to the
2021 annual meeting of stockholders must be received by December
30, 2020. In addition, all proposals will need to comply with Rule
14a-8 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), which lists the requirements for the
inclusion of stockholder proposals in company-sponsored proxy
materials. Stockholder proposals must be delivered to the
Company’s Secretary at 3600 Green Court, Suite 350, Ann
Arbor, Michigan 48105.
Requirements for Stockholder Proposals to Be
Brought Before the 2020 Annual Meeting of Stockholders.
Notice of any director nomination or other proposal that you intend
to present at the 2020 annual meeting of stockholders, but do not
intend to have included in the proxy statement and form of proxy
relating to the 2021 annual meeting of stockholders, must be
delivered to the Company’s Secretary at 3600 Green Court,
Suite 350, Ann Arbor, Michigan 48105, not earlier than the close of
business on February 16, 2021 and not later than the close of
business on March 18, 2021. In addition, your notice must set forth
the information required by our bylaws with respect to each
director nomination or other proposal that you intend to present at
the 2021 annual meeting of stockholders.
6
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following tables set forth certain information regarding beneficial
ownership of our voting stock as of April 22, 2020 by:
●
each person or
group of affiliated persons known by us to be the beneficial owner
of more than 5% of any class of our voting stock;
●
each executive
officer included in the Summary Compensation Table
below;
●
each of our
directors;
●
each person
nominated to become director; and
●
all executive
officers, directors and nominees as a group.
Unless
otherwise noted below, the address of each person listed in the
tables is c/o ENDRA Life Sciences Inc. at 3600 Green Court, Suite
350, Ann Arbor, Michigan 48105. To our knowledge, each person
listed below has sole voting and investment power over the shares
shown as beneficially owned except to the extent jointly owned with
spouses or otherwise noted below.
Beneficial
ownership is determined in accordance with the rules of the SEC.
The information does not necessarily indicate ownership for any
other purpose. Under these rules, shares of stock which a person
has the right to acquire (
i.e.
, by the exercise of any option or
warrant) within 60 days after April 22, 2020 are deemed to be
beneficially owned and outstanding for purposes of calculating the
number of shares and the percentage beneficially owned by that
person. However, these shares are not deemed to be beneficially
owned and outstanding for purposes of computing the percentage
beneficially owned by any other person. The applicable percentages
of stock outstanding as of April 22, 2020 is based upon 13,754,021
shares of common stock, 2,267.118 shares of Series A Preferred
Stock and 121.579 shares of Series B Preferred Stock outstanding on
that date.
7
Beneficial Ownership of Common Stock
|
Name of Beneficial Owner
|
Shares of Common Stock Beneficially Owned
|
Percentage of Common Stock Beneficially Owned
|
|
Directors and Executive Officers
|
|
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Francois
Michelon
|
348,485
(1)
|
2.5
%
|
|
Michael
Thornton
|
506,619
(2)
|
3.6
%
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|
David
Wells
|
121,588
(3)
|
*
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Louis
Basenese
|
7,481
(4)
|
*
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Anthony
DiGiandomenico
|
407,725
(5)
|
2.9
%
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|
Dr.
Sanjiv Sam Gambhir
|
39,824
(6)
|
*
|
|
Michael
Harsh
|
72,452
(7)
|
*
|
|
Alexander
Tokman
|
39,824
(8)
|
*
|
|
All
directors and executive officers as a group (9
persons)
|
1,536,516
|
10.3
%
|
|
|
|
|
|
5%
Stockholders
|
|
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|
Catalytic Opportunity LLC
(9)
|
1,511,262
(10)
|
10.0
%
|
|
David Dodd
(11)
|
1,298,672
(12)
|
9.6
%
|
__________
*
Less than one
percent.
(1)
Consists
of 32,497 shares of common stock, 303,346 shares of common stock
issuable upon the exercise of options that are presently
exercisable, 7,506 shares of common stock issuable upon the
exercise of restricted warrants and 5,136 shares of common stock
issuable upon the conversion of shares of Series A Preferred
Stock.
(2)
Consists
of 119,750 shares of common stock, 271,865 shares of common stock
issuable upon the exercise of options that are presently
exercisable, 63,652 shares of common stock issuable upon the
exercise of restricted warrants and 51,351 shares of common stock
issuable upon the conversion of shares of Series A Preferred
Stock.
(3)
Consists of 44,786
shares of common stock, 51,083 shares of common stock issuable upon
the exercise of options that are presently exercisable, 12,531
shares of common stock issuable upon
the exercise of restricted warrants and 10,271 shares of common
stock issuable upon the conversion of shares of Series A Preferred
Stock
.
(4)
Consists of shares
of common stock.
(5)
Consists
of 218,652 shares of common stock, 39,824 shares of common stock
issuable upon the exercise of options that are presently
exercisable and 149,249 shares of common stock issuable upon the
exercise of restricted warrants.
(6)
Consists
of 39,824 shares of common stock issuable upon the exercise of
options that are presently exercisable.
(7)
Consists
of 10,000 shares of common stock, 40,099 shares of common stock
issuable upon the exercise of options that are presently
exercisable, 11,056 shares of common stock issuable upon the
exercise of restricted warrants and 11,297 shares of common stock
issuable upon the conversion of shares of Series A Preferred
Stock.
(8)
Consists
of 39,824 shares of common stock issuable upon the exercise of
options that are presently exercisable.
(9)
Row
includes securities held by Catalytic Opportunity LLC Series A
(“Catalytic A”) and Catalytic Opportunity LLC Series
A-1 (“Catalytic A-1” and, together with Catalytic A,
“Catalytic”). Joseph Giamichael is the sole member of
each of Catalytic A and Catalytic A-1 and has voting and investment
power with respect to the securities owned by each such entity. Mr.
Giamichael disclaims beneficial ownership of the reported
securities except to the extent of his pecuniary interest
therein. The business address of Catalytic A and Catalytic A-1
is 203 Burkdale Court, New Hope, PA 18938.
(10)
Consists
of shares of common stock, shares of common stock issuable upon the
conversion of Series A Preferred Stock and upon the exercise of
warrants. 147,503 shares of common stock, 699.498 shares of Series
A Preferred Stock and warrants exercisable for 804,020 shares of
common stock are held by Catalytic A and 154,303 shares of common
stock, 918.091 shares of Series A Preferred Stock and warrants
exercisable for 1,055,277 shares of common stock are held by
Catalytic A-1. As a result of the application of a beneficial
ownership cap in the Series A Preferred Stock and the warrants
issued to Catalytic in our December 2019 private placement, the
table above does not include an aggregate of 2,951,800 shares of
common stock issuable upon the conversion of Series A Preferred
Stock and the exercise of warrants. Catalytic is not permitted to
convert the shares of Series A Preferred Stock or exercise the
warrants to the extent that such conversion or exercise would
result in Catalytic and its affiliates beneficially owning more
than 9.99% of the number of shares of our common stock outstanding
immediately after giving effect to such conversion or exercise, as
applicable.
(11)
Mr.
Dodd’s address is P.O. Box 611, Chelsea, AL
35043.
(12)
Consists
of 868,200 shares of common stock, 114,036 shares of common stock
issuable upon the conversion of Series B Preferred Stock and
316,437 shares of common stock issuable upon the exercise of
warrants.
8
Beneficial Ownership of Series A Preferred Stock
|
Name of Beneficial Owner
|
Shares of Series A Preferred Stock Beneficially Owned
|
Percentage of Series A Preferred Stock Beneficially
Owned
|
|
Directors and Executive Officers
|
|
|
|
Francois
Michelon
|
4.372
|
*
|
|
Michael
Thornton
|
43.719
|
2.0
%
|
|
David
Wells
|
8.744
|
*
|
|
Louis Basenese
|
-
|
*
|
|
Dr.
Sanjiv Sam Gambhir
|
-
|
*
|
|
Michael
Harsh
|
9.618
|
*
|
|
Alexander
Tokman
|
-
|
*
|
|
Anthony
DiGiandomenico
|
-
|
*
|
|
All
directors and executive officers as a group (9
persons)
|
66.453
|
3.0
%
|
|
|
|
|
|
5%
Stockholders
|
|
|
|
Catalytic Opportunity LLC
(1)
|
1,617.589
(2)
|
72.9
%
|
|
Erick
E. Richardson (3)
|
218.593
|
9.9
%
|
__________
*
Less than one
percent.
(1)
See footnote (8) to
the common stock beneficial ownership table for the address and
beneficial ownership information with respect to Catalytic
Opportunity LLC.
(2)
Consists
of 699.498 shares of Series A Preferred Stock held by Catalytic A
and 918.091 shares of Series A Preferred Stock held by Catalytic
A-1.
(3)
Mr.
Richardson’s address is 11290 Chalon Drive, Los Angeles, CA
90049.
Beneficial Ownership of Series B Preferred Stock
|
Name of Beneficial Owner
|
Shares of Series B Preferred Stock Beneficially Owned
|
Percentage of Series B Preferred Stock Beneficially
Owned
|
|
Directors and Executive Officers
|
|
|
|
Francois
Michelon
|
-
|
*
|
|
Michael
Thornton
|
-
|
*
|
|
David
Wells
|
-
|
*
|
|
Louis Basenese
|
-
|
*
|
|
Dr.
Sanjiv Sam Gambhir
|
-
|
*
|
|
Michael
Harsh
|
-
|
*
|
|
Alexander
Tokman
|
-
|
*
|
|
Anthony
DiGiandomenico
|
-
|
*
|
|
All
directors and executive officers as a group (9
persons)
|
-
|
*
|
|
|
|
|
|
5%
Stockholders
|
|
|
|
David Dodd
(1)
|
112.895
|
92.9
%
|
__________
*
Less than one
percent.
(1)
See
footnote (11) to the common stock beneficial ownership table for
the address and beneficial ownership information with respect to
Mr. Dodd. Row includes shares held indirectly through an
IRA.
9
PROPOSAL 1
—
ELECTION
OF DIRECTORS
The
Company’s Board of Directors currently consists of six
members. Upon the recommendation of the Corporate Governance and
Nominating Committee of our Board of Directors, the Board has
nominated the six current directors for election at the 2020 Annual
Meeting to hold office until the next annual meeting of
stockholders or until his successor is duly elected and
qualified.
Shares
represented by all proxies received by the Board and not marked so
as to withhold authority to vote for any individual nominee will be
voted
FOR
the election of
the nominees named below. The Board knows of no reason why any
nominee would be unable or unwilling to serve, but if such should
be the case, proxies may be voted for the election of some other
person nominated by the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR THE
NOMINEES LISTED BELOW
The
following table sets forth the nominees to be elected at the 2020
Annual Meeting, the year such director was first elected as a
director, and the positions currently held by each director with
ENDRA.
|
Nominee’s
or
Director’s
Name
|
|
Year First
Became Director
|
|
Position with
the Company
|
|
Francois
Michelon
|
|
2015
|
|
Chief
Executive Officer and Chairman of the Board
|
|
Louis
J. Basenese
|
|
2020
|
|
Director
|
|
Anthony
DiGiandomenico
|
|
2013
|
|
Director
|
|
Dr.
Sanjiv Sam Gambhir
|
|
2008
|
|
Director
|
|
Michael
Harsh
|
|
2015
|
|
Director
|
|
Alexander
Tokman
|
|
2008
|
|
Director
|
INFORMATION CONCERNING DIRECTORS AND NOMINEES FOR
DIRECTOR
Set
forth below is background information for each current director and
nominee for director, as well as information regarding additional
experience, qualifications, attributes or skills that led the Board
of Directors to conclude that such director or nominee should serve
on the Board.
Francois Michelon
, age 54, joined ENDRA
as Chief Executive Officer and Chairman of our board of directors
in 2015. He has over 20 years of healthcare technology experience
in general management, operations, strategy and marketing across
the diagnostic imaging, surgical instrument and dental
sectors.
From
2012 to 2014, Mr. Michelon served as Vice President of Global
Marketing for the 3i division of Biomet, Inc. (now Zimmer Biomet
Holdings, Inc.), a provider of oral reconstruction technologies,
where he was responsible for the upstream and downstream
development of the division’s global portfolio. From 2004 to
2011, Mr. Michelon served as Group Director of Global Services and
Visualization for Smith & Nephew plc’s Advanced Surgical
Devices division, where he led in the B2B service and capital
equipment sectors, and had responsibility over the financial
performance of these as well. From 1997 to 2004, Mr. Michelon
worked at GE Healthcare in a variety of global upstream and
downstream marketing roles.
10
Mr.
Michelon received an MBA from Carnegie-Mellon University and a BA
in Economics from the University of Chicago. He has also earned his
Six Sigma Black Belt certification.
Mr.
Michelon’s extensive industry and executive experience and
his intimate understanding of our business as our Chief Executive
Officer, position him well to serve as a member of our Board of
Directors.
Louis J. Basenese
, age 42, joined our
Board of Directors in April 2020. Mr. Basenese is the Founder and
Chief Analyst of Disruptive Tech Research, LLC, an independent
equity research and advisory firm focused exclusively on disruptive
technology companies that has served the investment management
community since June 2014. Since 2005, Mr. Basenese has also
managed The Basenese Group, LLC, a consulting business focused on
communications and business development for private and public
small and microcap businesses.
Mr.
Basenese holds an M.B.A. in Finance from the Crummer Graduate
School of Business at Rollins College and a Bachelor of Arts from
the University of Florida. He is also a former Series 7 and Series
66 license holder.
Mr.
Basenese’s experience with investor relations and business
development of technology-focused companies, as well as financing
and strategic planning, provides him with the qualifications and
skills necessary to serve as a member of our Board of
Directors.
Anthony DiGiandomenico
, age 53, joined
our Board of Directors in 2013. A co-founder of MDB Capital Group
LLC, Mr. DiGiandomenico focuses on corporate finance and capital
formation for growth-oriented companies. He has participated in all
areas of corporate finance including private capital, public
offerings, PIPEs, business consulting and strategic planning, and
mergers and acquisitions.
Mr.
DiGiandomenico has also worked on a wide range of transactions for
growth-oriented companies in biotechnology, nutritional
supplements, manufacturing and entertainment industries. Prior to
forming MDB Capital Group LLC in 1997, Mr. DiGiandomenico served as
President and CEO of the Digian Company, a real estate development
company. Mr. DiGiandomenico has also served on the board of
directors of Cue Biopharma, Inc., an immunotherapy company, and
currently serves on the board of directors of Provention Bio, Inc.,
a clinical-stage biopharmaceutical company.
Mr.
DiGiandomenico holds an MBA from the Haas School of Business at the
University of California, Berkeley and a BS in Finance from the
University of Colorado.
Mr.
DiGiandomenico’s financial expertise, general business acumen
and significant executive leadership experience position him well
to make valuable contributions to our Board of
Directors.
Dr. Sanjiv Sam Gambhir
, age 57, joined
our Board of Directors in 2008. He is the Virginia & D.K.
Ludwig Professor of Cancer Research and the Chair of Radiology at
Stanford University School of Medicine. He also heads the Canary
Center at Stanford for Cancer Early Detection and directs the
Molecular Imaging Program at Stanford (MIPS).
He
received an MD/PhD from the UCLA Medical Scientist Training
Program. He has many publications in the field and numerous patents
pending or granted. He has developed and clinically translated
several multimodality molecular imaging strategies including
imaging of gene and cell therapies. He has also pioneered imaging
areas such as Bioluminescence Resonance Energy Transfer (BRET),
split-reporter technology, Raman imaging in vivo, Molecular
Photoacoustic imaging, PET reporter genes, and novel in vitro and
in vivo strategies for the early detection of cancer.
11
Dr.
Gambhir serves on numerous academic advisory boards for
universities around the world and also served as a member of the
Board of Scientific Advisors of the National Cancer Institute from
2004 to 2012. He has also founded or co-founded several startups in
the diagnostics space. Among his many awards are the George Von
Hevesy Prize and the Paul C. Aebersold Award for outstanding
achievement in basic nuclear medicine science from the Society of
Nuclear Medicine, Outstanding Researcher Award from the
Radiological Society of Northern America, the Distinguished
Clinical Scientist Award from the Doris Duke Charitable Foundation,
the Holst Medal, the Tesla Medal, and the Hounsfield Medal from
Imperial College, London. He was elected to the Institute of
Medicine of the U.S. National Academies in 2008.
Dr.
Gambhir’s unique and extensive scientific and technical
expertise positions him well to serve on our Board of
Directors.
Michael Harsh
, age 65, joined our Board
of Directors in 2015. He has 39 years’ experience in
healthcare technology, focused on diagnostic imaging. Mr. Harsh was
most recently GE Healthcare’s Vice President and Chief
Technology Officer, leading its global science and technology
organization and research and development teams in diagnostics,
healthcare IT and life sciences.
In
2004, Mr. Harsh was named Global Technology Leader – Imaging
Technologies Lab at the GE Global Research Center, where he
led the research for imaging technologies across the company as
well as the research associated with computer visualization/image
analysis and superconducting systems. He led the Engineering
division for GE Industrial and Enterprise Solutions from 2006
to 2009. Mr. Harsh was named an officer of General Electric Company
in November 2006. Mr. Harsh is the co-founder of Terapede
Systems, a digital x-ray detector startup, a member of the boards
of directors of FloDesign Sonics, Imagion Biosystems, and EmOpti as
well as a member the Radiological Society of North America
("RSNA"), Research & Education Foundation Board of Trustees. He
is also a McKinsey Senior Advisor and a consultant in the medical
device industry.
Mr.
Harsh is a graduate of Marquette University, where he earned a
bachelor’s degree in Electrical Engineering. He holds
numerous U.S. patents in the field of medical imaging and
instrumentation. In 2008, Mr. Harsh was elected to the American
Institute for Medical and Biological Engineering College of
Fellows for his significant contributions to the medical and
biological engineering field.
Mr.
Harsh’s extensive industry, executive and board experience
position him well to serve on our Board of Directors.
Alexander Tokman
, age 58, joined our
Board of Directors in 2008. He has served as President, Chief
Executive Officer, and a director of Microvision, Inc., a publicly
traded laser beam scanning projection and imaging company, from
January 2006 to December 2017.
Previously, Mr.
Tokman completed a 10+ year tenure as an executive with GE
Healthcare, where he led several global businesses, most recently
as a General Manager of its Global Molecular Imaging and
Radiopharmacy multi-technology business unit from 2003 to
2005.
Between
1995 and 2003, Mr. Tokman served in various leadership roles at GE
Healthcare, where he led the definition and successful
commercialization of several product segments, including PET/CT,
which generated over $500 million of revenue within the first three
years of its launch.
Mr.
Tokman is a certified Six Sigma and Design for Six Sigma (DFSS)
Black Belt and Master Black Belt and as one of General Electric
Company’s Six Sigma pioneers, he drove the quality culture
change across GE Healthcare in the late 1990s. From 1989 to 1995,
Mr. Tokman served as development programs lead and a head of
Industry and Regional Development at Tracor Applied Sciences. Mr.
Tokman has both an MS and BS in Electrical Engineering from the
University of Massachusetts, Dartmouth.
Mr.
Tokman’s industry expertise and significant executive
leadership and director experience position him well to make
valuable contributions to our Board of Directors.
12
INFORMATION CONCERNING EXECUTIVE OFFICERS
Set
forth below is background information relating to our executive
officers:
|
Name
|
|
Age
|
|
Position
|
|
Francois
Michelon
|
|
54
|
|
Chief
Executive Officer and Chairman
|
|
Michael
Thornton
|
|
51
|
|
Chief
Technology Officer
|
|
David
Wells
|
|
57
|
|
Chief
Financial Officer
|
|
Renaud
Maloberti
|
|
51
|
|
Chief
Commercial Officer
|
Francois Michelon
is discussed above
under
Information Concerning
Directors and Nominees for Director.
Michael Thornton
joined ENDRA as Chief
Technology Officer in 2007. Prior to that, Mr. Thornton was a
founder and President of Enhanced Vision Systems Corp., or EVS, a
developer and supplier of medical imaging equipment to the
pharmaceutical, biotech, and academic sectors.
In
2002, EVS was acquired by General Electric Company and was
integrated into the Functional and Molecular Imaging business unit
of GE Medical Systems (now GE Healthcare, a subsidiary of General
Electric Company). Following the acquisition of EVS by GE Medical
Systems, Mr. Thornton held a number of positions at GE Healthcare,
including Sales Manager, Global Product Manager, and Site Leader.
He was a member of the leadership team that expanded the
pre-clinical imaging business to include: computed tomography,
optical, and positron emission tomography imaging technologies,
with global market reach. He is also a founder of Volumetrics
Medical Corp., a developer and manufacturer of quality assurance
devices for diagnostic imaging.
Prior
to founding EVS, Mr. Thornton developed medical imaging related
technologies at the Robarts Research Institute (London, Ontario,
Canada) for which he obtained an MSc in Electrical Engineering from
the University of Western Ontario. Mr. Thornton also holds a BASc
in Electrical Engineering from the University of Toronto and is a
member of the American Association of Physicists in
Medicine.
David Wells
became our Chief Financial
Officer on an interim basis in 2014 and on a continuing basis
in 2017. He possesses over 30 years of experience in finance,
operations and administrative positions. While mainly focused on
technology companies, Mr. Wells has also worked in the water
treatment, supply-chain management, manufacturing and professional
services industries.
Mr.
Wells is the founder of Wells Compliance Group, a technology-based
services firm supporting the financial reporting needs of publicly
traded companies and privately held firms whose investor or
shareholder base requires timely GAAP-compliant financial
reporting. Through StoryCorp Consulting (d/b/a/ Wells Compliance
Group), Mr. Wells consults with several emerging growth companies.
From 2009 to 2013, he was the President, CFO and a Director of
Sionix Corporation, a publicly traded water treatment
company.
Mr.
Wells holds an MBA from Pepperdine University and a BS in Finance
and Entrepreneurship from Seattle Pacific University.
Renaud Maloberti
joined ENDRA in May
2019 as our Chief Commercial Officer. He brings over 20 years of
global commercial experience in medical imaging, including 12 years
in ultrasound. Most recently, Mr. Maloberti was Chief Commercial
Officer of Bionik Laboratories, a company in the AI-enhanced
rehabilitation robotics market. From 2012 to 2018, Mr. Maloberti
held various positions at FujiFilm SonoSite Inc., most recently as
vice president and general manager of the SonoSite High Frequency
division, where he led the development and launch of the world's
first ultra-high frequency ultrasound and led the division through
double-digit revenue growth for six years.
Mr.
Maloberti previously served as general manager, Americas for BK
Medical Systems, the ultrasound subsidiary of Analogic Corporation
(Nasdaq: ALOG). Earlier in his career, Mr. Maloberti worked at
Draeger Medical Systems, a leader in patient monitoring and
healthcare IT systems. Mr. Maloberti also spent 10 years in sales
and marketing roles at GE Healthcare, a global leader in diagnostic
imaging, healthcare IT systems and services.
Maloberti holds an
M.B.A. in global marketing from Babson College and a
bachelor’s degree in International Finance from ESLSCA
Business School in Paris, France. He is fluent in English and
French.
13
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
Board
Independence
The
Board of Directors has determined that each of Mr. Basenese, Mr.
DiGiandomenico, Dr. Gambhir, Mr. Harsh and Mr. Tokman is an
independent director within the meaning of the director
independence standards of The Nasdaq Stock Market
(“Nasdaq”). Furthermore, the Board has determined that
all of the members of the Audit Committee, Compensation Committee
and Corporate Governance and Nominating Committee are independent
within the meaning of the director independence standards of Nasdaq
and the rules of the SEC applicable to each such
committee.
Board
Leadership Structure
We have
a Chairman of the Board who presides at all meetings of the Board.
Currently, Mr. Michelon serves as the Chairman of the Board and
Chief Executive Officer. ENDRA has no fixed policy with respect to
the separation of the offices of the Chairman of the Board and
Chief Executive Officer. Our bylaws permit these positions to be
held by the same person, and the Board believes that it is in the
best interests of the Company to retain flexibility in determining
whether to separate or combine the roles of Chairman and Chief
Executive Officer based on our circumstances. The Board has
determined that it is appropriate for Mr. Michelon to serve as both
Chairman and Chief Executive Officer because combining the roles of
Chairman and Chief Executive Officer: (1) enhances the alignment
between the Board and management in strategic planning and
execution as well as operational matters, (2) avoids the confusion
over roles, responsibilities and authority that can result from
separating the positions, and (3) streamlines board process in
order to conserve time for the consideration of the important
matters the Board needs to address. Further, four of our five
current Board members have been deemed to be independent by our
Board; therefore, we believe our Board structure provides
sufficient independent oversight of our management. The Board has
not named a lead independent director.
Communications
with the Board of Directors
Security holders
who wish to communicate directly with the Board, the independent
directors of the Board or any individual member of the Board may do
so by sending such communication by certified mail addressed to the
Chairman of the Board, the entire Board of Directors, to the
independent directors as a group or to the individual director or
directors, in each case, c/o Secretary, ENDRA Life Sciences Inc.,
3600 Green Court, Suite 350, Ann Arbor, Michigan 48105. The
Secretary reviews any such security holder communication and
forwards relevant communications to the addressee.
Policies
Regarding Director Nomination
s
The
Board has delegated to its Corporate Governance and Nominating
Committee responsibility for establishing membership criteria for
the Board, identifying individuals qualified to become directors
consistent with such criteria and recommending the director
nominees.
The
Corporate Governance and Nominating Committee is responsible for,
among other things: (1) recommending to the Board persons to serve
as members of the Board and as members of and chairpersons for the
committees of the Board, (2) considering the recommendation of
candidates to serve as directors submitted from the stockholders of
the Company, (3) assisting the Board in evaluating the
Board’s and its committees’ performance, (4) advising
the Board regarding the appropriate board leadership structure for
the Company, (5) reviewing and making recommendations to the Board
on corporate governance and (6) reviewing the size and composition
of the Board and recommending to the Board any changes it deems
advisable.
14
The
Board seeks members from diverse professional backgrounds who
combine a broad spectrum of relevant industry and strategic
experience and expertise that, in concert, offer us and our
stockholders diversity of opinion and insight in the areas most
important to us and our corporate mission. The Corporate Governance
and Nominating Committee has not set specific, minimum
qualifications that must be met by director candidates. Rather, in
determining candidates to recommend to the Board to serve as
members of the Board, the Corporate Governance and Nominating
Committee will consider, among other things, whether a candidate is
of the highest ethical character and shares the Company’s
values and whether the candidate’s reputation, both personal
and professional, in consistent with the image and reputation of
the Company. In addition, nominees for director are selected to
have complementary, rather than overlapping, skill sets. However,
the Corporate Governance and Nominating Committee does not have a
formal policy concerning the diversity of the Board.
Procedures for Recommendation of Director Nominees by
Stockholder
s
The
Corporate Governance and Nominating Committee considers individuals
properly recommended by stockholders in the same manner as it
considers director nominees identified by other means. To submit a
recommendation to the Corporate Governance and Nominating Committee
for director nominee candidates, a stockholder must make such
recommendation in writing and include:
●
as to the
stockholder making the recommendation and the beneficial owner, if
any, on whose behalf the nomination is made:
o
the name and
address of such stockholder, as they appear on the Company’s
books, and of such beneficial owner;
o
the class or series
and number of shares of capital stock of the Company which are
owned beneficially and of record by such stockholder and such
beneficial owner;
o
a description of
any agreement, arrangement or understanding with respect to the
nomination or proposal between or among such stockholder and/or
such beneficial owner, any of their respective affiliates or
associates, and any others acting in concert with any of the
foregoing, including, in the case of a nomination, the
nominee;
o
description of all
arrangements or understandings among the stockholder and the
candidate and any other person or persons pursuant to which the
recommendation is being made;
o
a representation
that the stockholder is a holder of record of stock of the Company
entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to propose such business or
nomination;
o
a representation
whether the stockholder or the beneficial owner, if any, intends or
is part of a group which intends (a) to deliver a proxy statement
and/or form of proxy to holders of at least the percentage of the
Company’s outstanding capital stock required to approve or
adopt the proposal or elect the nominee and/or (b) otherwise to
solicit proxies or votes from stockholders in support of such
proposal or nomination; and
o
any other
information relating to such stockholder and beneficial owner, if
any, required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies
for, as applicable, the proposal and/or for the election of
directors in an election contest pursuant to and in accordance with
Section 14(a) of the Exchange Act and the rules and regulations
promulgated thereunder; and
15
●
as to each person
whom the stockholder proposes to nominate for election as a
director:
o
full biographical
information concerning the director candidate, including a
statement about the candidate’s qualifications;
o
all other
information regarding each director candidate proposed by such
stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the
SEC;
o
a description of
all relationships between the candidate and any of the
Company’s competitors, customers, suppliers, labor unions or
other persons with special interests regarding the Company;
and
o
such person’s
written consent to being named in the proxy statement as a nominee
and to serving as a director if elected.
Recommendations
must be sent to the Chairperson of the Corporate Governance and
Nominating Committee, c/o Secretary, ENDRA Life Sciences Inc., 3600
Green Court, Suite 350, Ann Arbor, Michigan 48105. The Secretary
must receive any such recommendation for nomination not later than
the close of business on the 90th day nor earlier than the close of
business on the 120th day prior to the first anniversary of the
date of the preceding year’s annual meeting of stockholders;
provided, however, that with respect to a special meeting of
stockholders called by us for the purpose of electing directors to
the Board of Directors, the Secretary must receive any such
recommendation not earlier than the 120th day prior to such special
meeting nor later than the later of (1) the close of business on
the 90th day prior to such special meeting or (2) the close of
business on the 10th day following the day on which a public
announcement is first made regarding such special meeting. We will
promptly forward any such nominations to the Corporate Governance
and Nominating Committee. Once the Corporate Governance and
Nominating Committee receives a recommendation for a director
candidate, such candidate will be evaluated in the same manner as
other candidates and a recommendation with respect to such
candidate will be delivered to the Board of Directors.
Policy
Governing Director Attendance at Annual Meetings of
Stockholders
Each
director is encouraged to attend the 2020 Annual Meeting of
stockholders either in person or telephonically. Three of our five
directors on the Board at the time attended last year’s
annual meeting either in-person or telephonically.
Code
of Business Conduct and Ethics
We have
in place a Code of Business Conduct and Ethics (the “Code of
Ethics”) that applies to all of our directors, officers and
employees. The Code of Ethics is designed to deter wrongdoing and
to promote:
●
honest and ethical
conduct, including the ethical handling of actual or apparent
conflicts of interest between personal and professional
relationships;
●
full, fair,
accurate, timely and understandable disclosure in reports and
documents that we file with, or submit to, the SEC and in other
public communications that we make;
●
compliance with
applicable governmental laws, rules and
regulations;
●
the prompt internal
reporting of violations of the Code of Ethics to an appropriate
person identified in the Code of Ethics; and
●
accountability for
adherence to the Code of Ethics.
A
current copy of the Code of Ethics is available at
www.endrainc.com. A copy may also be obtained, free of charge, from
us upon a request directed to ENDRA Life Sciences, Inc., 3600 Green
Court, Suite 350, Ann Arbor, Michigan 48105, attention: Investor
Relations. We intend to disclose any amendments to or waivers of a
provision of the Code of Ethics required to be disclosed by
applicable SEC rules by posting such information on our website
available at www.endrainc.com and/or in our public filings with the
SEC.
16
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Board
of Directors
Our
bylaws state that the number of directors constituting the entire
Board of Directors shall be determined by resolution of the Board.
The Board has the authority to increase the number of directors,
fill any vacancies on the Board and to decrease the number of
directors. The number of directors currently fixed by our Board is
six.
Our
Board of Directors met four times during the year ended December
31, 2019. No director attended less than 75 percent of all meetings
of the Board and applicable committee meetings in 2019 held during
the period for which he was a director. The Board of Directors
currently has standing Audit, Compensation and Corporate Governance
and Nominating Committees. The Board and each standing committee
retains the authority to engage its own advisors and consultants.
Each standing committee has a charter that has been approved by the
Board of Directors. A copy of each committee charter is available
at www.endrainc.com. Each committee reviews the appropriateness of
its charter annually or at such other intervals as such committee
determines.
The
following table sets forth the current members of the Audit,
Compensation and Corporate Governance and Nominating Committees of
the Board:
|
Name
|
|
Audit
|
|
Compensation
|
|
Corporate Governance and Nominating
|
|
Louis
J. Basenese
|
|
|
|
|
|
|
|
Anthony
DiGiandomenico
|
|
Chair
|
|
X
|
|
|
|
Dr.
Sanjiv Sam Gambhir
|
|
|
|
|
|
X
|
|
Michael
Harsh
|
|
X
|
|
X
|
|
Chair
|
|
Francois
Michelon
|
|
|
|
|
|
|
|
Alexander
Tokman
|
|
X
|
|
Chair
|
|
X
|
Committees
Audit Committee
. Our Audit Committee
consists of Mr. DiGiandomenico, Mr. Harsh and Mr. Tokman. The Board
of Directors has determined that each member of the Audit Committee
is independent within the meaning of the Nasdaq director
independence standards and applicable rules of the SEC for audit
committee members. The Board of Directors has elected Mr.
DiGiandomenico as Chairperson of the Audit Committee and has
determined that he qualifies as an “audit committee financial
expert” under the rules of the SEC. The Audit Committee is
responsible for assisting the Board of Directors in fulfilling its
oversight responsibilities with respect to financial reports and
other financial information. The Audit Committee (1) reviews,
monitors and reports to the Board of Directors on the adequacy of
the Company’s financial reporting process and system of
internal controls over financial reporting, (2) has the ultimate
authority to select, evaluate and replace the independent auditor
and is the ultimate authority to which the independent auditors are
accountable, (3) in consultation with management, periodically
reviews the adequacy of the Company’s disclosure controls and
procedures and approves any significant changes thereto, (4)
provides the audit committee report for inclusion in our proxy
statement for our annual meeting of stockholders and (5)
recommends, establishes and monitors procedures for the receipt,
retention and treatment of complaints relating to accounting,
internal accounting controls or auditing matters and the receipt of
confidential, anonymous submissions by employees of concerns
regarding questionable accounting or auditing matters. The Audit
Committee met four times in 2019.
17
Compensation Committee
. Our
Compensation Committee presently consists of Mr. DiGiandomenico,
Mr. Harsh and Mr. Tokman, each of whom is a non-employee director
as defined in Rule 16b-3 of the Exchange Act. The Board has also
determined that each member of the Compensation Committee is also
an independent director within the meaning of NASDAQ’s
director independence standards. Mr. Tokman serves as Chairperson
of the Compensation Committee. The Compensation Committee (1)
discharges the responsibilities of the Board of Directors relating
to the compensation of our directors and executive officers, (2)
oversees the Company’s procedures for consideration and
determination of executive and director compensation, and reviews
and approves all executive compensation, and (3) administers and
implements the Company’s incentive compensation plans and
equity-based plans. The Compensation Committee met four times in
2019.
Corporate Governance and Nominating
Committee
. Our Corporate Governance and Nominating Committee
consists of Mr. Harsh, Mr. Tokman and Dr. Gambhir. The Board of
Directors has determined that each member of the Corporate
Governance and Nominating Committee is an independent director
within the meaning of the Nasdaq director independence standards
and applicable rules of the SEC. Mr. Harsh serves as Chairperson of
the Corporate Governance and Nominating Committee. The Corporate
Governance and Nominating Committee (1) recommends to the Board of
Directors persons to serve as members of the Board of Directors and
as members of and chairpersons for the committees of the Board of
Directors, (2) considers the recommendation of candidates to serve
as directors submitted from the stockholders of the Company, (3)
assists the Board of Directors in evaluating the performance of the
Board of Directors and the Board committees, (4) advises the Board
of Directors regarding the appropriate board leadership structure
for the Company, (5) reviews and makes recommendations to the Board
of Directors on corporate governance and (6) reviews the size and
composition of the Board of Directors and recommends to the Board
of Directors any changes it deems advisable. The Corporate
Governance and Nominating Committee did not meet separately from
the Board of Directors in 2019 but acted by written
consent.
Role
of the Board of Directors in Risk Oversight
Enterprise risks
are identified and prioritized by management and the Board receives
periodic reports from the Company’s head of compliance
regarding the most significant risks facing the Company. These
risks include, without limitation, the following:
●
risks and exposures
associated with strategic, financial and execution risks and other
current matters that may present material risk to our operations,
plans, prospects or reputation.
●
risks and exposures
associated with financial matters, particularly financial
reporting, tax, accounting, disclosure, internal control over
financial reporting, financial policies, investment guidelines and
credit and liquidity matters.
●
risks and exposures
relating to corporate governance, and management and director
succession planning. and
●
risks and exposures
associated with leadership assessment, and compensation programs
and arrangements, including incentive plans
.
18
REPORT OF THE AUDIT COMMITTEE
The
Audit Committee is comprised of Anthony DiGiandomenico, Michael
Harsh and Alexander Tokman. None of the current or former members
of the Audit Committee is an officer or employee of the Company,
and the Board has determined that each member of the Audit
Committee meets the independence requirements promulgated by The
Nasdaq Stock Market and the SEC, including Rule 10A-3(b)(1)
under the Exchange Act.
The
Audit Committee oversees the Company’s financial reporting
process on behalf of the Board of Directors. Management has the
primary responsibility for the financial statements and the
reporting process, including the systems of internal controls and
the certification of the integrity and reliability of the
Company’s internal controls procedures. In fulfilling its
oversight responsibilities, the Audit Committee has reviewed the
Company’s audited financial statements included in the Annual
Report on Form 10-K for the fiscal year ended December 31, 2019,
and has discussed them with both management and RBSM LLP
(“RBSM”), the Company’s independent registered
public accounting firm. The Audit Committee has also discussed with
the independent registered public accounting firm the matters
required to be discussed by the Auditing Standard No. 1301,
Communications with Audit
Committees
, as adopted by the Public Company Accounting
Oversight Board. The Audit Committee has reviewed permitted
services under rules of the SEC as currently in effect and
discussed with RBSM its independence from management and the
Company, including the matters in the written disclosures and the
letter from the independent registered public accounting firm
required by the applicable requirements of the Public Company
Accounting Oversight Board regarding the independent
accountant’s communications with the Audit Committee
concerning independence. The Audit Committee has also considered
and discussed the compatibility of non-audit services provided by
RBSM with that firm’s independence.
Based
on its review of the financial statements and the aforementioned
discussions, the Audit Committee concluded that it would be
reasonable to recommend, and on that basis did recommend, to the
Board of Directors that the audited financial statements be
included in the Company’s Annual Report.
Respectfully
submitted by the Audit Committee.
|
|
THE
AUDIT COMMITTEE:
Anthony
DiGiandomenico, Chair
Michael
Harsh
Alexander
Tokman
|
19
COMPENSATION AND OTHER INFORMATION CONCERNING DIRECTORS AND
OFFICERS
Our
compensation philosophy is to offer our executive officers
compensation and benefits that are competitive and meet our goals
of attracting, retaining and motivating highly skilled management,
which is necessary to achieve our financial and strategic
objectives and create long-term value for our stockholders. We
believe the levels of compensation we provide should be
competitive, reasonable and appropriate for our business needs and
circumstances. The principal elements of our executive compensation
program have to date included base salary and long-term equity
compensation in the form of stock options. We believe successful
long-term Company performance is more critical to enhancing
stockholder value than short-term results. For this reason and to
conserve cash and better align the interests of management and our
stockholders, we emphasize long-term performance-based equity
compensation over base annual salaries.
The
following table sets forth information concerning the compensation
earned by the individual that served as our Principal Executive
Officer during 2019 and our two most highly compensated executive
officers other than the individual who served as our Principal
Executive Officer during 2019 (collectively, the “named
executive officers”):
Summary Compensation Table
|
Name and
Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Option Awards
($)(1)
|
TOTAL ($)
|
|
Francois
Michelon
|
2019
|
352,763
(2)
|
111,395
|
514,618
|
978,776
|
|
Chief Executive Officer
|
2018
|
339,615
(3)
|
103,500
|
244,773
|
687,888
|
|
Michael
Thornton
|
2019
|
265,288
(4)
|
59,050
|
484,272
|
808,610
|
|
Chief Technology Officer
|
2018
|
256,250
(5)
|
54,600
|
244,773
|
555,623
|
|
David
Wells(6)
|
2019
|
183,514
(7)
|
48,300
|
189,935
|
421,749
|
|
Chief Financial Officer
|
2018
|
111,780
(8)
|
20,100
|
56,197
|
188,077
|
(1)
The amounts shown
in this column indicate the grant date fair value of option awards
granted in the subject year computed in accordance with FASB ASC
Topic 718. For additional information regarding the assumptions
made in calculating these amounts, see notes 2 and 8 to our audited
financial statements included in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2019.
(2)
As of March 25,
2019, Mr. Michelon’s annual salary was raised from $345,000
to $355,350.
(3)
As of April 1,
2018, Mr. Michelon’s annual salary was raised from $325,000
to $345,000.
(4)
As of March 25,
2019, Mr. Thornton’s annual salary was raised from $260,000
to $267,800.
(5)
As of April 1,
2018, Mr. Thornton’s annual salary was raised from $245,000
to $260,000.
(6)
Amounts paid in
2018, and in 2019 until we entered into an employment agreement
with Mr. Wells effective May 13, 2019, represent fees paid pursuant
to a consulting agreement with StoryCorp Consulting (d/b/a Wells
Compliance Group) (“StoryCorp”).
(7)
As of May 13, 2019,
Mr. Wells’ annual salary was established as
$230,000.
(8)
As of June 1, 2018,
StoryCorp’s monthly fee was increased from $9,000 to
$9,540.
20
Outstanding Equity Awards at 2019 Fiscal Year End
The
following table provides information regarding equity awards held
by the named executive officers as of December 31,
2019.
|
|
Option
Awards
|
|||
|
Name
|
Number of
Securities Underlying Unexercised Options (#)
Exercisable
|
Number of
Securities Underlying Unexercised Options (#)
Unexercisable
|
Option Exercise
Price ($)
|
Option
Expiration Date
|
|
Francois
Michelon
|
35,498
|
-
|
10.01
|
7/1/20
|
|
|
204,847
|
102,436
(1)
|
5.00
|
5/12/25
|
|
|
21,307
|
10,653
(1)
|
4.55
|
5/12/25
|
|
|
41,667
|
83,333
(2)
|
2.25
|
12/13/26
|
|
|
-
|
611,994
(3)
|
0.90
|
12/11/29
|
|
Michael
Thornton
|
208,892
|
104,446
(1)
|
5.00
|
5/12/25
|
|
|
21,307
|
10,653
(1)
|
4.55
|
5/12/25
|
|
|
41,667
|
83,333
(2)
|
2.25
|
12/13/26
|
|
|
-
|
575,906
(3)
|
0.90
|
12/11/29
|
|
David
Wells
|
12,500
|
2,500
(4)
|
5.00
|
5/12/21
|
|
|
7,000
|
-
|
5.00
|
5/12/22
|
|
|
11,667
|
23,333
(5)
|
2.25
|
12/13/22
|
|
|
-
|
56,000
(6)
|
1.38
|
5/13/29
|
|
|
-
|
138,375
(7)
|
0.90
|
12/11/29
|
(1)
Represents unvested
portion of stock option award which vests in three equal annual
installments beginning on May 12, 2018.
(2)
Represents unvested
portion of stock option award which vests in three equal annual
installments beginning on December 13, 2019.
(3)
Stock option award
vests in three equal annual installments beginning on December 11,
2020.
(4)
Represents unvested
portion of stock option award which vests in twelve equal quarterly
installments beginning on August 12, 2017.
(5)
Stock option award
vests in twelve equal quarterly installments beginning on March 13,
2019.
(6)
Stock option award
vests in three equal annual installments beginning on May 13,
2020.
(7)
Stock option award
vests in three equal annual installments beginning on December 11,
2020.
21
Equity Compensation Plan Table
The
following table presents information on the Company’s equity
compensation plans as of December 31, 2019. All outstanding awards
relate to our common stock.
|
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
(a))
(c)
|
|
Equity compensation
plans approved by security holders
|
3,449,319
(1)
|
$
2.32
|
—
(2)
|
|
Equity compensation
plans not approved by security holders
|
—
|
—
|
—
|
|
Total
|
3,449,319
|
$
2.32
|
—
|
(1)
Consists of
outstanding stock options exercisable for 3,449,319 shares of
common stock issued under our 2016 Omnibus Incentive Plan (the
“2016 Plan”), which amended and restated our Second
Amended and Restated 2013 Stock Incentive Plan.
(2)
On January 1, 2020,
as a result of an automatic increase to the pool of shares
available for issuance under the 2016 Plan on such date, the number
of shares available for future issuance under the 2016 Plan was
2,412,339 shares.
Employment Agreements and Change of Control
Arrangements
The
following is a summary of the employment arrangements with our
named executive officers.
Francois Michelon
.
Effective May 12, 2017, the Company entered into an amended and
restated employment agreement with Francois Michelon, our Chief
Executive Officer and Chairman of the Board of Directors, which
agreement was amended on December 27, 2019. Mr. Michelon’s
employment with the Company is “at will” and may be
terminated by him or the Company at any time and for any reason.
Pursuant to the employment agreement, Mr. Michelon receives an
annual base salary that is subject to adjustment at the Board of
Directors’ discretion. Effective March 25, 2019, the Board
approved an increase in Mr. Michelon’s salary to $355,350.
Mr. Michelon is also eligible for an annual cash bonus based upon
achievement of performance-based objectives established by the
Board of Directors.
Pursuant to the
employment agreement, upon the closing of our initial public
offering in May 2017, Mr. Michelon was granted options to purchase
307,310 shares of common stock (the “Michelon IPO
Award”). The Michelon IPO Award has an exercise price of
$5.00 per share of common stock and vests in three equal annual
installments beginning on May 12, 2018. Upon termination without
cause (as defined in the 2016 Plan) that is not the result of death
or disability, any portion of the Michelon IPO Award scheduled to
vest within 12 months will automatically vest, and upon termination
without cause that is not the result of death or disability within
12 months following a change of control, the entire unvested
portion of the Michelon IPO Award will automatically vest. Upon
termination for any other reason, the entire unvested portion of
the Michelon IPO Award will terminate.
22
If Mr.
Michelon’s employment is terminated by the Company without
cause (as defined in the 2016 Plan) or if Mr. Michelon resigns for
good reason (as defined in the employment agreement), Mr. Michelon
will be entitled to receive, subject to his execution of a standard
release agreement, 12 months’ continuation of his current
base salary and a lump sum payment equal to 12 months of continued
healthcare coverage (or 24 months’ continuation of his
current base salary and a lump sum payment equal to 24 months of
continued healthcare coverage if such termination occurs within one
year following a change in control).
Under
his employment agreement, Mr. Michelon is eligible to receive
benefits that are substantially similar to those of the
Company’s other senior executive officers.
Michael Thornton
.
Effective May 12, 2017, the Company entered into an amended and
restated employment agreement with Michael Thornton, our Chief
Technology Officer, which agreement was amended on December 27,
2019. The employment agreement provides that Mr. Thornton’s
employment with the Company is “at will” and may be
terminated by him or the Company at any time and for any reason.
Pursuant to the employment agreement, Mr. Thornton receives an
annual base salary that is subject to adjustment at the Board of
Directors’ discretion. Effective March 25, 2019, the Board
approved an increase in Mr. Thornton’s salary to $267,800.
Mr. Thornton is also eligible for an annual cash bonus based upon
achievement of performance-based objectives established by the
Board of Directors. Pursuant to the employment agreement, upon the
closing of our initial public offering in May 2017, Mr. Thornton
was granted options to purchase 313,338 shares of common stock (the
“Thornton IPO Award”). The Thornton IPO Award has an
exercise price of $5.00 per share of common stock and vests in
three equal annual installments beginning on May 12, 2018. Upon
termination without cause (as defined in the 2016 Plan) that is not
the result of death or disability, any portion of the Thornton IPO
Award scheduled to vest within 12 months will automatically vest,
and upon termination without cause that is not the result of death
or disability within 12 months following a change of control, the
entire unvested portion of the Thornton IPO Award will
automatically vest. Upon termination for any other reason, the
entire unvested portion of the Thornton IPO Award will
terminate.
If Mr.
Thornton’s employment is terminated by the Company without
cause (as defined in the 2016 Plan) or if Mr. Thornton resigns for
good reason (as defined in the employment agreement), Mr. Thornton
will be entitled to receive, subject to his execution of a standard
release agreement, 12 months’ continuation of his current
base salary and a lump sum payment equal to 12 months of continued
healthcare coverage (or 24 months’ continuation of his
current base salary and a lump sum payment equal to 24 months of
continued healthcare coverage if such termination occurs within one
year following a change in control).
Under
his employment agreement, Mr. Thornton is eligible to receive
benefits that are substantially similar to those of the
Company’s other senior executive officers.
David Wells
. On May
13, 2019, the Company entered into an employment agreement with
David Wells that provides for an annual base salary of $230,000 and
eligibility for an annual cash bonus to be paid based on attainment
of Company and individual performance objectives to be established
by the Board of Directors (in 2019, the amount of such cash bonus
if all goals were achieved would be 30% of the base salary plus
base fees paid to StoryCorp under the consulting agreement
described below). The employment agreement also provides for
eligibility to receive benefits substantially similar to those of
the Company’s other senior executive officers.
23
Pursuant to the
employment agreement, on May 13, 2019, Mr. Wells was granted stock
options to purchase 56,000 shares of the Company’s common
stock. The stock options have an exercise price of $1.38 per share,
and vest in three equal annual installments beginning on the first
anniversary of the grant date. Upon termination without cause (as
defined in the 2016 Plan) that is not the result of death or
disability, any portion of the award scheduled to vest within 12
months will automatically vest, and upon termination without cause
that is not the result of death or disability within 12 months
following a change of control, the entire unvested portion of the
award will automatically vest. Upon termination for any other
reason, the entire unvested portion of the award will
terminate.
Mr.
Wells’ employment agreement superseded a consulting agreement
between the Company and StoryCorp dated May 12, 2017, pursuant to
which Mr. Wells provided services to the Company as its Chief
Financial Officer. Pursuant to the consulting agreement, the
Company paid to StoryCorp a monthly fee of $9,000. In June 2018,
this monthly fee was increased to $9,540. Additionally, pursuant to
the consulting agreement, the Company granted to Mr. Wells a stock
option to purchase 15,000 shares of common stock in connection with
the closing of our initial public offering, having an exercise
price per share equal to $5.00 and vesting in twelve equal
quarterly installments, and, on the anniversary of the date of the
consulting agreement, granted to Mr. Wells a stock option to
purchase the same number of shares of common stock with the same
terms.
Director Compensation
Effective March 25,
2019, the Company adopted a non-employee director compensation
policy (the “Compensation Policy”) pursuant to which
each of our non-employee directors receives, upon his or her
initial election to the Board of Directors, a stock option
exercisable for 50,000 shares of common stock. To make up for the
fact that each of the Company’s non-employee directors as of
the effective date of the Compensation Policy did not receive such
a stock option upon joining the Board, each such non-employee
director received a stock option exercisable for 50,000 shares of
common stock on the effective date of the Compensation Policy. All
such stock options vest in three equal annual installments
beginning on the one-year anniversary of the grant date. Under the
policy, on the first trading day of each calendar year, each
non-employee director is awarded a stock option exercisable for
12,000 shares of common stock, which becomes exercisable on the
first anniversary of its grant date. Additionally, pursuant to the
policy, each non-employee director is paid an annual cash retainer
of $40,000, prorated for partial years of service and paid
quarterly in arrears.
The
Company’s non-employee director compensation policy in effect
prior to the Compensation Policy provided for our non-employee
directors to receive on an annual basis a $36,000 retainer paid in
cash and an annual equity award with a value of $30,000. The equity
award consisted of a stock option grant made on the first trading
day of the calendar year covering a number of shares of common
stock equal to $30,000 divided by the closing price of its common
stock on such date, which vests in full on the one-year anniversary
of the grant date.
On
December 11, 2019, Mr. Harsh was awarded a stock option exercisable
for 89,922 shares of common stock and Mr. DiGiandomenico, Dr.
Gambhir and Mr. Tokman were each awarded a stock option exercisable
for 89,585 shares of common stock, in each case at an exercise
price of $0.90 per share and vesting in three equal annual
installments beginning on the one-year anniversary of the grant
date. Such awards were granted in order to realign the incentive
nature of the option compensation with the valuation of
the total compensation arrangements with our non-employee
directors.
24
The
following table sets forth information with respect to compensation
earned by or awarded to each of our non-employee directors who
served on the Board of Directors during the fiscal year ended
December 31, 2019:
|
Name
|
Fees Earned or Paid in Cash ($)
|
Option Awards ($)(1)
|
Total ($)
|
|
Anthony
DiGiandomenico
|
40,000
|
219,131
|
259,131
|
|
Dr.
Sanjiv Sam Gambhir
|
40,000
|
219,131
|
259,131
|
|
Michael
Harsh
|
40,000
|
219,414
|
259,414
|
|
Alexander
Tokman
|
40,000
|
219,131
|
259,131
|
(1)
The amounts shown
in this column indicate the grant date fair value of option awards
granted in the subject year computed in accordance with FASB ASC
Topic 718. For additional information regarding the assumptions
made in calculating these amounts, see Note 8 to the audited
financial statements included in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2019. The following table shows
the number of shares subject to outstanding option awards held by
each non-employee director as of December 31, 2019:
|
Name
|
Shares Subject
to Outstanding Stock Option Awards (#)
|
|
Anthony
DiGiandomenico
|
162,742
|
|
Dr.
Sanjiv Sam Gambhir
|
162,742
|
|
Michael
Harsh
|
163,354
|
|
Alexander
Tokman
|
162,742
|
25
PROPOSAL 2
—
AMENDMENT
TO CERTIFICATE OF INCORPORATION
The
Board of Directors is seeking stockholder approval of an amendment
to our Certificate of Incorporation, which would increase the
number of authorized shares of common stock from 50,000,000 to
80,000,000. The proposed Certificate of Amendment to the
Certificate of Incorporation (the “Certificate of
Amendment”) is attached hereto as Appendix A.
The
newly authorized shares of common stock would have the same rights
as the currently outstanding shares of our common stock. As of
April 22, 2020:
●
13,754,021 shares
of our common stock were issued and outstanding;
●
1,932,000 shares of
our common stock were issuable upon the exercise of outstanding
warrants issued in our initial public offering listed on the Nasdaq
Capital Market;
●
11,519,823 shares
of our common stock were issuable upon the exercise of outstanding
unregistered warrants;
●
2,663,283 shares of
our common stock were issuable upon the conversion of outstanding
shares of Series A Convertible Preferred Stock, including shares
issuable in respect of accrued and unpaid dividends;
●
125,249 shares of
our common stock were issuable upon the conversion of outstanding
shares of Series B Convertible Preferred Stock, including
shares issuable in respect of accrued and unpaid
dividends;
●
3,579,737 shares of
our common stock were issuable upon the exercise of outstanding
stock options issued pursuant to the 2016 Plan;
●
2,281,921 shares of
our common stock were reserved for future issuance under the 2016
Plan; and
●
30,475 shares of
common stock were issuable upon the conversion our 10.0% Senior
Secured Convertible Notes due April 26, 2020, including an
estimated 2,113 shares that may be issued in respect of accrued and
unpaid interest upon conversion of such notes.
Accordingly,
35,888,622 of the 50,000,000 authorized shares of our common stock
are currently issued or reserved for issuance while 14,111,378 of
the authorized shares of our common stock otherwise remain
available for future issuance.
Reasons
for the Proposed Increase in Authorized Shares of Common
Stock
The
Board of Directors believes that the increase in authorized shares
of common stock would be beneficial for the following
reasons:
●
Ensuring that an adequate number of shares are
available for potential future corporate purposes
. An
increase in the number of authorized shares of our common stock
enables us to have a sufficient number of shares available for a
variety of possible future corporate purposes, including but not
limited to issuing stock under existing equity compensation plans,
stock dividends or stock splits and possible future acquisitions,
although we have no plans, arrangements, or understandings to issue
any of the newly issued authorized shares for any specific purpose
at this time.
●
Enabling equity transactions to raise
additional capital
. The availability of additional shares of
our common stock will permit us to raise capital through equity
transactions. Any such additional capital may be used for a variety
of purposes including general corporate and working capital
purposes. However, we have no plans, arrangements or understandings
for any such equity transactions at this time.
26
Implementation
of the Authorized Share Increase
Following
stockholder approval of this proposal, the increase in authorized
shares would be implemented by our filing the Certificate of
Amendment with the Secretary of State of the State of Delaware.
However, at any time prior to the effectiveness of the filing of
the Certificate of Amendment with the Secretary of State of the
State of Delaware, the Board of Directors reserves the right to
abandon this proposal and to not file the Certificate of Amendment,
even if approved by the stockholders of the Company, if the Board,
in its discretion, determines that such amendment is no longer in
the best interests of the Company or its stockholders.
Potential
Adverse Effects of the Certificate of Amendment
Future
issuances of common stock or securities convertible into common
stock could have a dilutive effect on the earnings per share, book
value per share, voting power and percentage interest of holdings
of current stockholders. In addition, the availability of
additional shares of common stock for issuance could, under certain
circumstances, discourage or make more difficult efforts to obtain
control of the Company. This proposal is not being presented with
the intent that it be used to prevent or discourage any acquisition
attempt, but nothing would prevent the Board of Directors from
taking any appropriate actions not inconsistent with its fiduciary
duties. For example, without further stockholder approval, the
Board could adopt a “poison pill” which would, under
certain circumstances related to an acquisition of common stock not
approved by the Board, give certain holders the right to acquire
additional shares of common stock at a low price, or the Board
could strategically sell shares of common stock in a private
transaction to purchasers who would oppose a takeover or favor the
current Board.
Vote
Required for Approval
The
affirmative vote of the holders of a majority of the voting power
of the stock of the Company entitled to vote thereon.
Board
Recommendation
The
Board of Directors unanimously recommends that the stockholders
vote
FOR
the approval and
adoption of the amendment to the Certificate of
Incorporation.
27
PROPOSAL 3
—
RATIFICATION OF APPOINTMENT OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit Committee of the Board of Directors has appointed RBSM LLP
(“RBSM”) as
our
independent registered public accounting firm for the fiscal year
ending December 31, 2020. We are presenting this selection to our
stockholders for ratification at the 2020 Annual
Meeting.
RBSM
audited our financial statements for 2019. A representative of RBSM
is expected to attend the 2020 Annual Meeting, have an opportunity
to make a statement if RBSM desires, and be able to respond to
appropriate questions submitted through
www.issuerdirect.com/virtual-event/NDRA
during the 2020 Annual Meeting.
The
following table sets forth the aggregate fees billed or expected to
be billed by RBSM for audit and non-audit services in 2019 and
2018, including “out-of-pocket” expenses incurred in
rendering these services. The nature of the services provided for
each category is described following the table.
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Fee
Category
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2019
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2018
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Audit Fees
(1)
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$
93,500
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$
123,318
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Audit-Related
Fees
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‒
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‒
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Tax Fees
(2)
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$
13,000
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$
6,000
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Total
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$
106,500
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$
129,318
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__________
(1)
Audit fees include
fees for professional services rendered for the audit of our annual
statements, quarterly reviews, consents and assistance with and
review of documents filed with the SEC.
(2)
Tax fees include
fees for professional services rendered for tax compliance, tax
advice and tax planning.
Pre-Approval Policies and Procedures
The
Audit Committee has adopted a policy that requires that all
services to be provided by the Company’s independent public
accounting firm, including audit services and permitted non-audit
services, to be pre-approved by the Audit Committee. All audit and
permitted non-audit services provided by RBSM during 2019 were
pre-approved by the Audit Committee.
Vote Required for Approval
Ratification of the
appointment of
our
independent
registered public accounting firm requires the affirmative vote of
the holders of a majority of the voting power of the shares of
stock of the Company present in person (or virtually) or
represented by proxy and entitled to vote thereon. If our
stockholders fail to ratify the selection of RBSM as the
independent registered public accounting firm for 2020, the Audit
Committee will reconsider whether to retain that firm. Even if the
selection is ratified, the Audit Committee may, in its discretion,
direct the appointment of a different independent registered public
accounting firm at any time during the year.
Board Recommendation
The
Board of Directors unanimously recommends that the stockholders
vote
FOR
ratification of the
appointment of RBSM as our independent registered public accounting
firm for 2020.
28
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Policy for Review of Related Person Transactions
The
Board of Directors has adopted a written policy with regard to
related person transactions, which sets forth our procedures and
standards for the review, approval or ratification of any
transaction required to be reported in our filings with the SEC or
in which one of our executive officers or directors has a direct or
indirect material financial interest, with limited exceptions. Our
policy is that the Corporate Governance and Nominating Committee
shall review the material facts of all related person transactions
(as defined in the related person transaction approval policy) and
either approve or disapprove of the entry into any related person
transaction. In the event that obtaining the advance approval of
the Corporate Governance and Nominating Committee is not feasible,
the Corporate Governance and Nominating Committee shall consider
the related person transaction and, if the Corporate Governance and
Nominating Committee determines it to be appropriate, may ratify
the related person transaction. In determining whether to approve
or ratify a related person transaction, the Corporate Governance
and Nominating Committee will take into account, among other
factors it deems appropriate, whether the related person
transaction is on terms comparable to those available from an
unaffiliated third-party under the same or similar circumstances
and the extent of the related person's interest in the
transaction.
Related Person Transactions
SEC
regulations define the related person transactions that require
disclosure to include any transaction, arrangement or relationship
in which the amount involved exceeds the lesser of (a) $120,000 or
(b) one percent of the average of the Company’s total assets
at year-end for the last two completed fiscal years in which it was
or is to be a participant and in which a related person had or will
have a direct or indirect material interest. A related person is:
(i) an executive officer, director or director nominee of the
Company, (ii) a beneficial owner of more than 5% of any class of
the Company’s voting securities, (iii) an immediate family
member of an executive officer, director or director nominee or
beneficial owner of more than 5% of any class of the
Company’s voting securities, or (iv) any entity that is owned
or controlled by any of the foregoing persons or in which any of
the foregoing persons has a substantial ownership interest or
control.
For the
period from January 1, 2018 through December 31, 2019, described
below are certain transactions or series of transactions between
the Company and certain related persons:
Pursuant to a
consulting agreement dated May 12, 2017 between the Company and
StoryCorp Consulting, a firm owned and operated by David Wells, our
Chief Financial Officer (the “Consulting Agreement”),
during the year ended December 31, 2018 the Company paid fees of
$131,880 and issued option awards with an aggregate grant date fair
value of $78,750 for services provided by Mr. Wells as the
Company’s Chief Financial Officer. During the year ended
December 31, 2019, pursuant to the Consulting Agreement, the
Company paid fees of $41,976. On May 13, 2019, the Company entered
into an employment agreement with Mr. Wells, which superseded the
Consulting Agreement.
On June
28, 2018, the Company conducted a private placement offering in
which it sold $1,077,000 aggregate amount of senior secured
convertible promissory notes, along with warrants exercisable for
an aggregate of 267,113 shares of common stock. Each promissory
note bore interest at a rate of 10% per annum until maturity or
conversion. Investors in the offering included (i) Mr.
DiGiandomenico, a director of the Company, for $100,000, (ii) Mr.
Michelon, a director and the Company’s Chief Executive
Officer, for $10,000, (iii) Mr. Thornton, the Company’s Chief
Technology Officer, for $50,000, and (iv) Mr. Wells, the
Company’s Chief Financial Officer, for $10,000. Upon the
completion of our November 2018 stock offering, the $1,027,000
aggregate principal amount of promissory notes then outstanding
automatically converted at a price of $1.68 per share into an
aggregate of 611,310 shares of common stock, of which 59,524 shares
were issued to Mr. DiGiandomenico, 5,953 shares were issued to Mr.
Michelon, 29,762 shares were issued to Mr. Thornton and 5,953
shares were issued to Mr. Wells.
On
December 11, 2019, the Company closed a private placement offering
in which it sold an aggregate of 6,338.490 shares of its Series A
Convertible Preferred Stock (“Series A Preferred
Stock”) and 0.9 million shares of common stock, along with
warrants exercisable for an aggregate of 8.2 million shares of
common stock. Investors in the offering included (i) Mr.
DiGiandomenico, a director of the Company, who purchased 100,503
shares of common stock and warrants exercisable for 1005,503 shares
of common stock for $100,000, (ii) Mr. Michelon, a director and the
Company’s Chief Executive Officer, who purchased 4.372 shares
of Series A Preferred Stock and warrants exercisable for 5,026
shares of common stock for $5,000, (iii) Mr. Thornton, the
Company’s Chief Technology Officer, who purchased 43.719
shares of Series A Preferred Stock and warrants exercisable for
50,252 shares of common stock for $50,000, and (iv) Mr. Wells, the
Company’s Chief Financial Officer, who purchased 8.744 shares
of Series A Preferred Stock and warrants exercisable for 10,051
shares of common stock for $10,000.
29
DELINQUENT SECTION 16(a) REPORTS
Section
16(a) of the Exchange Act requires our directors, executive
officers and persons who own more than ten percent of a registered
class of our equity securities to file reports of ownership and
changes in ownership with the SEC. Such persons are required by SEC
regulations to furnish us with copies of all such filings. Based
solely on our review of the copies of the reports that we received
and written representations that no other reports were required, we
believe that our executive officers, directors and greater than 10%
stockholders complied with all applicable filing requirements on a
timely basis during 2020, except that Michael Harsh failed to
timely file one Form 4 with respect to a purchase of shares of
common stock in the open market.
OTHER BUSINESS
The Board
knows of no business that will be presented for consideration at
the 2020 Annual Meeting other than those items stated above. If any
other business should properly come before the 2020 Annual Meeting,
votes may be cast pursuant to proxies in respect to any such
business in the best judgment of the person or persons acting under
the proxies.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE STOCKHOLDER MEETING TO BE HELD ON JUNE 16, 2020
The
proxy statement and annual report to stockholders are available at
http://investors.endrainc.com/NDRA/sec_filings.
A
copy of the Company’s Annual Report for the fiscal year ended
December 31, 2019 is available without charge upon written request
to: Secretary, ENDRA Life Sciences Inc., 3600 Green Court, Ste.
350, Ann Arbor, Michigan 48105.
30
APPENDIX A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ENDRA LIFE SCIENCES INC.
ENDRA LIFE SCIENCES INC., a corporation duly organized and existing
under the General Corporation Law of the State of Delaware (the
“Corporation”), does hereby certify that:
1.
The
Certificate of Incorporation of the Corporation is hereby amended
by deleting the first paragraph of ARTICLE FOURTH thereof in
its entirety and replacing it with the following:
“FOURTH:
The total number of shares of stock that the Corporation shall have
authority to issue shall be 90,000,000 shares, consisting of
80,000,000 shares of Common Stock, par value $0.0001 per share (the
“Common Stock”), and 10,000,000 shares of Preferred
Stock, par value $0.0001 per share (the “Preferred
Stock”). Subject to the rights of the holders of any series
of Preferred Stock then outstanding, the number of authorized
shares of the Common Stock or Preferred Stock may be increased or
decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority
in voting power of the stock of the Corporation entitled to vote
thereon, irrespective of the provisions of Section 242(b)(2) of the
DGCL, and no vote of the holders of any of the Common Stock or
Preferred Stock voting separately as a class shall be required
therefor.”
2.
The
foregoing amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, ENDRA LIFE SCIENCES INC. has caused this
Certificate to be executed by its duly authorized officer on this
___ day of ________________, 2020.
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By:
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Name:
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Francois
Michelon
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Title:
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Chief
Executive Officer
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A-1
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ENDRA LIFE SCIENCES INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
ANNUAL MEETING
OF STOCKHOLDERS – JUNE 16, 2020 AT 10:00 AM EASTERN
TIME
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CONTROL ID:
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REQUEST ID:
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The
undersigned stockholder of ENDRA LIFE SCIENCES INC., a Delaware
Corporation (the "Company"), hereby acknowledges receipt of the
Notice of Annual Meeting of Stockholders and Proxy Statement and
hereby appoints Francois Michelon, proxies and attorneys-in-fact,
with full power to each of substitution and revocation, on behalf
and in the name of the undersigned, to represent the undersigned at
the Annual Meeting of Stockholders of the Company to be held on
June 16, 2020, at 10:00 am Eastern time, at
https://www.issuerdirect.com/virtual-event/NDRA
or at any adjournment or postponement
thereof, and to vote, as designated below, all shares of capital
stock of the Company which the undersigned would be entitled to
vote if then and there personally present, on the matters set forth
below.
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(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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VOTING INSTRUCTIONS
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If you vote by phone, fax or internet, please DO NOT mail your
proxy card.
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MAIL:
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Please mark,
sign, date, and return this Proxy Card promptly using the enclosed
envelope.
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FAX:
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Complete the reverse portion of this Proxy Card
and Fax to
202-521-3464.
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INTERNET:
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https://www.iproxydirect.com/NDRA
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PHONE:
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1-866-752-VOTE(8683)
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ANNUAL MEETING OF THE STOCKHOLDERS OF
ENDRA LIFE SCIENCES INC.
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PLEASE COMPLETE, DATE, SIGN AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR
BLACK INK AS SHOWN HERE:
✍
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PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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Proposal 1
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FOR ALL
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AGAINST
ALL
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FOR ALL
EXCEPT
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Election of
Directors
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☐
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☐
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Francois
Michelon
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☐
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Louis J.
Basenese
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☐
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CONTROL ID:
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Anthony
DiGiandomenico
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☐
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REQUEST ID:
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Dr. Sanjiv Sam
Gambhir
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☐
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Michael
Harsh
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☐
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Alexander
Tokman
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☐
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Proposal 2
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FOR
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AGAINST
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ABSTAIN
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To approve an
amendment to the Company’s Certificate of Incorporation
increasing the number of authorized shares of common stock from
50,000,000 shares to 80,000,000 shares.
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☐
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☐
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☐
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Proposal 3
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FOR
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AGAINST
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ABSTAIN
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To ratify the
appointment of RBSM LLP as the Company’s independent
registered accounting firm for 2020.
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☐
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☐
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☐
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THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR ALL
PERSONS LISTED IN PROPOSAL 1 AND A VOTE FOR PROPOSALS 2 and
3.
THE
UNDERSIGNED HEREBY REVOKES ANY PROXY OR PROXIES HERETOFORE GIVEN TO
VOTE OR ACT WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY AND
HEREBY RATIFIES AND CONFIRMS ALL THAT THE PROXY, OR HIS
SUBSTITUTES, OR ANY OF THEM, MAY LAWFULLY DO BY VIRTUE
HEREOF.
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MARK
HERE FOR ADDRESS CHANGE
✍ New Address (if
applicable):
___________________________
___________________________
___________________________
IMPORTANT:
Please sign exactly as your name or names appear
on this Proxy. When shares are held jointly, each holder should
sign. When signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized
person.
Dated:
________________________, 2020
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(Print Name of
Stockholder and/or Joint Tenant)
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(Signature of
Stockholder)
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(Second
Signature if held jointly)
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TABLE OF CONTENTS