TOMI ENVIRONMENTAL SOLUTIONS, INC.
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
Filed
by the Registrant ☑
Filed
by a Party other than the
Registrant ☐
Check
the appropriate box:
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☐
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Preliminary
Proxy Statement
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☐
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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☑
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Definitive
Proxy Statement
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☐
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Definitive
Additional Materials
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☐
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Soliciting
Material Pursuant to §240.14a-12
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TOMI ENVIRONMENTAL SOLUTIONS, INC.
(Name
of Registrant as Specified in Its Charter)
Not Applicable
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment
of Filing Fee (Check the appropriate box):
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☑
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No fee
required.
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☐
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate number of
securities to which transaction applies:
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(3)
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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):
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(4)
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Proposed maximum
aggregate value of transaction:
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(5)
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Total
fee paid:
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☐
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Fee
paid previously with preliminary materials.
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☐
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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.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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9454 Wilshire Blvd., Penthouse
Beverly Hills, CA 90212
September
19, 2019
Dear
Shareholder:
You are
cordially invited to attend the 2019 Annual Meeting of Shareholders
of TOMI Environmental Solutions, Inc. to be held on Wednesday,
October 30, 2019, at 10:00 a.m., Pacific Time, at the Residence Inn
by Marriott, 1177 S. Beverly Drive, Los Angeles, California 90035.
The formal Notice of Annual Meeting of Shareholders and Proxy
Statement accompanying this letter describe the business to be
acted upon at the Annual Meeting.
Your
vote is important to us and your shares should be represented at
the Annual Meeting whether or not you are personally able to
attend. Accordingly, I encourage you to mark, sign, date and return
the accompanying Proxy Card promptly using the postage-paid
envelope provided, or by using Internet voting as described in the
accompanying Proxy Statement.
On
behalf of the Board of Directors, thank you for your continued
support of TOMI.
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Sincerely,
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/s/
Halden S. Shane
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Halden
S. Shane
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Chairman
of the Board
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held at 10:00 a.m., Pacific Time, on Wednesday, October 30,
2019
The
2019 Annual Meeting of Shareholders of TOMI Environmental
Solutions, Inc., a Florida corporation (“
TOMI
,” the “
Company
” or “
we
”), will be held on Wednesday,
October 30, 2019, at 10:00 a.m., Pacific Time, at the Residence Inn
by Marriott, 1177 S. Beverly Drive, Los Angeles, California 90035,
for the purpose of considering and acting upon the
following:
1.
To
elect the Class II directors named in this Proxy Statement to hold
office until their respective successors are duly elected and
qualified or until their earlier resignation or
removal;
2.
To
ratify the appointment of Wolinetz, Lafazan & Company, P.C. as
our independent registered public accounting firm for the fiscal
year ending December 31, 2019;
3.
To
approve an amendment to our Restated Articles of Incorporation, as
amended, to increase the number of authorized shares of our Common
Stock from 200,000,000 to 250,000,000;
4.
To
approve an amendment to our Restated Articles of Incorporation, as
amended, to implement a reverse stock split of all the outstanding
shares of our common stock and Series A preferred stock, within a
range from 1-for-2 to 1-for-20, with the exact ratio of the reverse
stock split to be determined by the Board of Directors;
and
5.
To
consider and act upon other business which may properly come before
the Annual Meeting or any postponement or adjournment
thereof.
The
proposals referred to above are more fully described in the
accompanying Proxy Statement. An annual report to shareholders
outlining our operations during our 2018 fiscal year accompanies
this Notice of Annual Meeting and Proxy Statement.
Your
vote is important. You are entitled to vote only if you were a
shareholder at the close of business on Wednesday, September
18, 2019, the record date for the Annual Meeting. We hope that
you will attend the Annual Meeting, but if you cannot do so, please
complete, date, and sign the enclosed Proxy Card and return it in
the accompanying envelope as promptly as possible. The Proxy
Card also provides instructions on voting electronically over the
Internet. Returning the Proxy Card (or voting electronically) will
not affect your right to vote in person if you attend the annual
meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
“FOR” THE NOMINEE FOR CLASS
II
DIRECTORS LISTED IN PROPOSAL 1 AND
“FOR” PROPOSALS 2, 3 AND 4.
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Dated:
September 19, 2019
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BY
ORDER OF THE BOARD OF DIRECTORS,
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/s/
Halden S. Shane
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Halden
S. Shane
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Chairman of the Board
Beverly Hills, California
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TABLE OF CONTENTS
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Page
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General
Information
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1
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Proposal
1: Election of Class II Directors
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7
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Information
About the Class II Director Nominees
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7
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Continuing
Directors
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9
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Corporate
Governance
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10
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Report
of the Audit Committee
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14
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Director
Compensation
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15
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Information
Regarding Our Directors and Executive Officers
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16
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Security
Ownership of Certain Beneficial Owners and Management
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17
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Executive
Compensation
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19
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Certain
Relationships and Related Transactions
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23
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Equity
Compensation Plan Information
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24
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Proposal
2: Ratification of Independent Registered Public Accounting
Firm
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25
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Proposal
3: Approval of an Amendment to our Restated Articles of
Incorporation, as Amended, to Increase the Number of Authorized
Shares of our Common Stock from 200,000,000 to
250,000,000
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27
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Proposal
4: Approval of an Amendment to our Restated Articles of
Incorporation, as Amended, to Implement a Reverse Stock
Split
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29
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Other
Matters
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36
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Shareholder
Proposals for 2020 Annual Meeting
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36
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Delivery
of Documents to Security Holders Sharing an Address
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37
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TOMI ENVIRONMENTAL SOLUTIONS, INC.
9454 Wilshire Blvd., Penthouse
Beverly Hills, CA 90212
PROXY STATEMENT
2019 ANNUAL MEETING OF SHAREHOLDERS
To be held on Wednesday, October 30, 2019 at 10:00 a.m. (Pacific
Time)
The
enclosed proxy is solicited on behalf of the Board of Directors
(the “
Board
”) of
TOMI Environmental Solutions, Inc., a Florida corporation
(“
TOMI
,” the
“
Company
” or
“
we
”), for use
at the 2019 Annual Meeting of Shareholders to be held on Wednesday,
October 30, 2019, at 10:00 a.m., Pacific Time (the
“
Annual
Meeting
”), or at any postponement
or adjournment of the Annual Meeting, for the purposes set forth in
this Proxy Statement and in the accompanying Notice of Annual
Meeting of Shareholders. The Annual Meeting will be held at the
Residence Inn by Marriott, 1177 S. Beverly Drive, Los Angeles,
California 90035. We intend to commence mailing this Proxy
Statement, the accompanying Proxy Card and the Notice of Annual
Meeting of Shareholders on or about September 19, 2019 to all
shareholders entitled to vote at the Annual Meeting.
GENERAL INFORMATION
Why am I receiving these materials?
We sent
you this Proxy Statement because you held shares of our common
stock, $0.01 par value per share (the “
Common Stock
”), and/or Cumulative
Series A Preferred Stock, $0.01 par value per share
(“
Series A Preferred
Stock
and, together with the Common Stock, the
“
Voting Stock
”)
on
Wednesday, September
18, 2019 (the “
Record
Date
”) and are entitled to vote at the Annual Meeting.
The Board is soliciting your proxy to vote at the Annual Meeting.
This Proxy Statement summarizes the information you need to vote at
the Annual Meeting. You do not need to attend the Annual Meeting to
vote your shares of Voting Stock. This Proxy Statement, the
accompanying Proxy Card and our Annual Report on Form 10-K for the
fiscal year ended December 31, 2018, are being made available to
shareholders beginning on or about September 19, 2019. Please
read this Proxy Statement, as it contains important information you
need to know to vote at the Annual Meeting.
Who is entitled to vote at the Annual Meeting?
Only
shareholders of record at the close of business on the Record Date
are entitled to receive notice of and to vote at the Annual
Meeting. If you were a shareholder of record on the Record Date,
you will be entitled to vote all of the shares of Voting Stock that
you held on that date at the Annual Meeting or at any postponement
or adjournment of the Annual Meeting.
What proposals will be voted on at the Annual Meeting?
Shareholders will
vote on the following proposals (the “
Proposals
”) at the Annual
Meeting:
1.
To elect the Class
II directors named in this Proxy Statement to hold office until
their respective successors are duly elected and qualified or until
their earlier resignation or removal;
2.
To ratify the
appointment of Wolinetz, Lafazan & Company, P.C. as our
independent registered public accounting firm for the fiscal year
ending December 31, 2019;
3.
To approve an
amendment to our Restated Articles of Incorporation, as amended, to
increase the number of authorized shares of our Common Stock from
200,000,000 to 250,000,000;
4.
To approve an
amendment to our Restated Articles of Incorporation, as amended, to
implement a reverse stock split of all the outstanding shares of
Common Stock and Series A Preferred Stock, within a range from
1-for-2 to 1-for-20, with the exact ratio of the reverse stock
split to be determined by the Board;
1
5.
To consider and act
upon other business which may properly come before the Annual
Meeting or any postponement or adjournment thereof.
If any
other matter is properly brought before the Annual Meeting, your
signed Proxy Card would authorize Harold W. Paul (the
“
Proxy Holder
”)
to vote on such matters in his discretion.
How many votes do I have?
On each
matter to be voted upon, you will have one vote for each share of
Voting Stock that you owned on the Record Date. For a description
of the vote required to approval the Proposals, including whether
the holders of our Common Stock and Series A Preferred Stock will
vote as a separate class, please see “What vote is required
to approve the Proposals?” below.
How many votes can be cast by all shareholders?
We had
124,700,418 outstanding shares of Common Stock and 510,000 shares
of Series A Preferred Stock on the Record Date, and each of those
shares of Voting Stock is entitled to one vote. Shareholders are
not entitled to cumulate voting rights.
How many votes must be present to hold the Annual
Meeting?
To
conduct business at the Annual Meeting, a quorum must be present.
The presence in person or by proxy of shareholders entitled to cast
at least a majority of all votes entitled to be cast at the Annual
Meeting will constitute a quorum. We count proxies marked
“withhold authority” as to any director nominee or
“abstain” as to a particular proposal for purposes of
determining the presence or absence of a quorum at the Annual
Meeting for the transaction of business.
Abstentions and broker non-votes
will be treated as shares that are present and entitled to vote for
purposes of determining the presence of a quorum. If a quorum
should not be present, the Annual Meeting may be adjourned from
time to time until a quorum is obtained.
How do I vote my shares?
In
addition to voting in person at the Annual Meeting or any
postponement or adjournment thereof, you may vote by mail or
Internet. To vote your shares, please follow the instructions on
the Proxy Card.
Voting by Internet
.
If you are a registered shareholder (that is, if your stock is
registered in your name), you may use the Internet to vote your
proxy 24 hours a day, 7 days a week. Have your Proxy Card in hand
when you log on and follow the instructions included with your
Proxy Card. You are encouraged to vote electronically by Internet.
If you vote by Internet, you do not need to return your Proxy
Card.
If your shares are held in “street
name” (that is, if your stock is registered in the name of
your broker, bank or other nominee), please check your Proxy Card
or contact your broker, bank or other nominee to determine whether
you will be able to vote by Internet.
If your shares are held in “street
name” and you do not make arrangements with your broker to
vote your shares of Voting Stock, then your broker is not permitted
to exercise discretion and will not vote your shares on any
non-routine Proposal, which is called a “broker
non-vote.”
If you
need assistance in revoking your proxy or changing your vote,
please call us at (800) 525-1698.
Voting by Mail
. To
vote by mail, please sign, date and return to us as soon as
possible the enclosed Proxy Card. An envelope with postage paid, if
mailed in the United States, is provided for this purpose. Properly
executed proxies that are received in time and not subsequently
revoked will be voted as instructed on the proxies. If you vote by
Internet as described above, you need not also mail a proxy to
us.
Voting at the Annual
Meeting
. You may vote by ballot in person at the Annual
Meeting. If you want to vote by ballot, and you hold your shares in
street name (that is, through a bank or broker), you must obtain a
power of attorney or other proxy authority from that organization
and bring it to the Annual Meeting. Follow the instructions from
your bank, broker or other agent or nominee included with these
proxy materials, or contact your bank, broker or other agent or
nominee to request a power of attorney or other proxy authority.
Even if you plan to attend the Annual Meeting, you are encouraged
to submit a Proxy Card or vote by Internet to ensure that your vote
is received and counted. If you vote in person at the Annual
Meeting, you will revoke any prior proxy you may have
submitted
2
What vote is required to approve the Proposals?
Assuming the
presence of a quorum at the Annual Meeting:
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Proposal
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Vote Required
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Broker
Discretionary
Vote Allowed
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Proposal
1—Election of the Class II directors to the
Board
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Plurality
of the votes cast (the two director nominees receiving the most
“FOR” votes shall be elected)
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No
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Proposal
2—Ratification of the appointment of Wolinetz, Lafazan &
Company, P.C. as our independent registered public accounting firm
for the fiscal year ending December 31, 2019
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The
votes cast favoring the matter must exceed the votes cast opposing
the matter
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Yes
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Proposal
3—Approval of an amendment to our Restated Articles of
Incorporation, as amended, to increase the number of authorized
shares of our Common Stock from 200,000,000 to
250,000,000
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The
votes cast by the holders of the Common Stock and the Series A
Preferred Stock, each voting as a separate class, favoring the
matter must exceed the votes cast opposing the matter
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Yes
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Proposal
4—Approval of an amendment to our Restated Articles of
Incorporation, as amended, to implement a reverse stock split of
all our outstanding shares of Common Stock and Series A Preferred
Stock, within a range from 1-for-2 to 1-for-20, with the exact
ratio of the reverse stock split to be determined by the
Board
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The
votes cast by the holders of the Common Stock and the Series A
Preferred Stock, each voting as a separate class, favoring the
matter must exceed the votes cast opposing the matter
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Yes
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For
purposes of Proposals 1, 2, 3, and 4, broker non-votes are not
considered “votes cast” at the annual meeting and thus
will have no effect on the outcome of such Proposals. For purposes
of Proposals 2, 3 and 4, abstentions are not considered
“votes cast” at the Annual Meeting and thus will have
no effect on the outcome of such Proposals.
The
vote on Proposal 1 is a “non-discretionary” matter
under applicable stock exchange rules, meaning that if you are the
beneficial owner of your shares and do not instruct your broker how
to vote with respect to such Proposal, your broker is not permitted
to vote on such Proposal and your votes will be counted as broker
non-votes.
Are there any appraisal rights or dissenters’
rights?
Under
the Florida Business Corporation Act (the “
FBCA
”), our shareholders are not
entitled to dissenters’ rights or appraisal rights with
respect to any of the Proposals.
How does the Board recommend that I vote?
Our
Board recommends that you vote:
●
FOR
each of theClass II director nominees named in this
Proxy Statement in Proposal 1;
●
FOR
Proposal 2—Ratification of the appointment of
Wolinetz, Lafazan & Company, P.C. as our independent registered
public accounting firm; and
●
FOR
Proposal 3—Approval of an amendment to our
Restated Articles of Incorporation, as Amended, to increase the
number of authorized shares of our Common Stock from 200,000,000 to
250,000,000.
●
FOR
Proposal 4—Approval of an amendment to our
Restated Articles of Incorporation, as amended, to implement a
reverse stock split of all our outstanding shares of Common Stock
and Series A Preferred Stock, within a range from 1-for-2 to
1-for-20, with the exact ratio of the reverse stock split to be
determined by the Board.
3
If I give a proxy, how will my shares be voted?
Proxy
Cards received by us before the Annual Meeting that are properly
executed and dated will be voted at the Annual Meeting in
accordance with the instructions indicated on the
proxy.
If you
properly execute and date your Proxy Card but do not include voting
instructions, your Proxy Card will be voted in accordance with the
recommendation of the Board of Directors on all matters presented
in this Proxy Statement. Although management does not know of any
matter other than the proposals described herein to be acted upon
at the Annual Meeting, unless contrary instructions are given,
shares represented by valid proxies will be voted by the Proxy
Holder in accordance with his best judgment in respect of any other
matters that may properly be presented for a vote at the Annual
Meeting. Unsigned proxies will not be voted.
If you
vote using the website noted on the Proxy Card, you do not need to
return any Proxy Card.
If the
Annual Meeting is postponed or adjourned, a shareholder’s
proxy will remain valid and may be voted at the postponed or
adjourned meeting. A shareholder still will be able to revoke the
shareholder’s proxy until it is voted.
What if other matters are voted on at the Annual
Meeting?
With
respect to any other matter that properly comes before the Annual
Meeting, the Proxy Holder will vote the proxies in its discretion
in accordance with its best judgment and in the manner it believes
to be in our best interests. For example, if you do not give
instructions on your Proxy Card or by Internet, and a nominee for
director listed on the Proxy Card withdraws before the election
(which is not now anticipated), your shares will be voted by the
Proxy Holder for any substitute nominee as may be nominated by the
Board.
On the
date we filed this Proxy Statement with the Securities and Exchange
Commission (“
SEC
”), the Board did not know of
any other matter to be brought before the Annual
Meeting.
When will the next shareholder advisory votes on executive
compensation and on the frequency of the advisory vote on executive
compensation occur?
At our
2017 annual meeting of shareholders, our shareholders voted, on a
non-binding advisory basis, to hold an advisory vote on the
approval of the compensation of our named executive officers every
three years. As such, we anticipate that we will hold the next
advisory votes on executive compensation of our named executive
officers at our 2020 annual meeting of shareholders. Pursuant to
applicable SEC rules, we anticipate that the next vote on the
frequency of the advisory vote on executive compensation of our
named executive officers will be held at our 2023 annual meeting of
shareholders.
How will my shares be voted if I mark “Abstain” on my
Proxy Card?
We will
count a properly executed Proxy Card marked “Abstain”
as present for purposes of determining whether a quorum is present,
but the shares represented by that Proxy Card will not be voted at
the Annual Meeting for the proposals so marked.
Will my shares be voted if I do not provide instructions to my
broker or nominee?
When a
matter to be voted on at a shareholders meeting is the subject of a
contested solicitation, under NASDAQ Stock Market and New York
Stock Exchange rules, brokers no longer have discretion to vote
shares that they hold in their name on behalf of a third party.
Therefore, if you hold your shares in the name of your broker and
you do not provide your broker with specific instructions regarding
how to vote on any Proposal to be voted on at the Annual Meeting,
your broker will not be permitted to vote your shares on that
Proposal. This is called a “broker non-vote.” For
example, if you provide your broker instructions on Proposal 1 but
not on Proposal 2, the broker will vote on Proposal 1 as you direct
but will not vote your shares on Proposal 2
4
Please
remember to give your broker specific instructions when returning
your Proxy Card. If you previously returned a Proxy Card without
specific instructions regarding how your shares are to be voted,
please complete and return the enclosed Proxy Card to your broker
with specific voting instructions.
What does it mean if I receive more than one Proxy
Card?
If you
hold your shares of Voting Stock in more than one account, you will
receive a Proxy Card for each account. To ensure that all of your
shares are voted, please vote using each Proxy Card you receive or,
if you vote by Internet, you will need to enter each of your Proxy
Numbers. Remember, you may vote by Internet or by signing, dating
and returning the Proxy Card in the postage-paid envelope
provided.
Can I revoke a previously delivered proxy or change my vote after I
deliver my proxy?
Yes.
You may revoke a previously delivered proxy by delivering another
properly completed proxy with a later date (including via
Internet), or by delivering written notice of revocation of your
proxy to our Chief Executive Officer at our principal executive
offices, located at 9454 Wilshire Blvd., Penthouse, Beverly Hills,
CA 90212, in each case before the exercise of the previously
delivered proxy at the Annual Meeting. You may also revoke your
proxy by attending the Annual Meeting and voting in person,
although attendance at the Annual Meeting will not, in and of
itself, revoke a valid proxy that was previously delivered. If you
hold shares through a brokerage firm, bank, dealer or other similar
organization, you must contact that brokerage firm, bank, dealer or
other similar organization to revoke any prior voting instructions.
You may also revoke any prior voting instructions by voting in
person at the Annual Meeting if you obtain a legal proxy as
described in the paragraph under the heading “Who can attend
the Annual Meeting?” below.
Who can attend the Annual Meeting?
Any
person who was a shareholder on the Record Date may attend the
Annual Meeting. If you own shares in street name, you should ask
your brokerage firm, bank, dealer or other similar organization for
a legal proxy to bring with you to the Annual Meeting. If you do
not receive a legal proxy in time, you should bring your most
recent brokerage statement so that we can verify your ownership of
our stock and admit you to the Annual Meeting. You will not,
however, be able to vote your shares at the Annual Meeting without
a legal proxy.
How can I find out the results of the voting at the Annual
Meeting?
Preliminary voting
results will be announced at the Annual Meeting. Final voting
results will be published in a Current Report on Form 8-K, which we
will file with the SEC within four business days after the Annual
Meeting.
When are shareholder proposals due for the next Annual
Meeting?
Under
Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the
“
Exchange Act
”),
any shareholder desiring to include a proposal in our Proxy
Statement with respect to our 2020 annual meeting of shareholders
should arrange for such proposal to be delivered to us at our
corporate headquarters no later than May 22, 2020 in order to be
considered for inclusion in our proxy statement relating to such
annual meeting. Matters pertaining to such proposals, and the
eligibility of persons entitled to have such proposals included,
are regulated by the Exchange Act and the rules of the SEC.
Although the Board will consider shareholder proposals, we reserve
the right to omit from our proxy statement, or to recommend votes
against, shareholder proposals that we are not required to include
under Rule 14a-8 under the Exchange Act.
All
such notices should be submitted in writing to our Corporate
Secretary at our corporate headquarters at TOMI Environmental
Solutions, Inc., 9454 Wilshire Blvd., Penthouse, Beverly Hills, CA
90212.
5
Who is paying for this proxy solicitation?
We will
bear the entire cost of solicitation of proxies, including
preparation, assembly, printing, and mailing of this Proxy
Statement, the Proxy Card and any additional information furnished
to shareholders. Copies of solicitation materials will be furnished
to brokerage firms, banks, dealers and other similar organizations
holding in their names shares of Voting Stock beneficially owned by
others to forward to such beneficial owners. We may reimburse
persons representing beneficial owners of Voting Stock for their
costs of forwarding solicitation materials to such beneficial
owners. In addition to the mailing of this Proxy Statement, the
solicitation of proxies or votes may be supplemented by telephone,
electronic communication, or personal solicitation by directors,
officers or other regular employees of the Company. No additional
compensation will be paid to directors, officers or other regular
employees for such services.
How can I obtain additional information about the
Company?
Copies
of our Annual Report on Form 10-K are available on our website at
www.tomimist.com and will be furnished without charge to
shareholders upon written request. Exhibits to the Annual Report on
Form 10-K will be provided upon written request. All written
requests should be directed to: TOMI Environmental Solutions, Inc.,
Attention: Chief Executive Officer, 9454 Wilshire Blvd., Penthouse,
Beverly Hills, CA 90212.
We are
subject to the informational requirements of the Exchange Act,
which requires that we file reports, proxy statements and other
information with the SEC. The SEC maintains a website that contains
reports, proxy and information statements and other information
regarding companies, including our Company, that file
electronically with the SEC. The SEC’s website address is
www.sec.gov. In addition, our filings may be inspected and copied
at the public reference facilities of the SEC located at 100 F
Street, N.E. Washington, DC 20549. Copies of such filings may also
be obtained upon request and payment of the appropriate fee from
the Public Reference Section of the SEC located at 100 F Street,
N.E., Washington, District of Columbia 20549.
6
ELECTION OF CLASS II DIRECTORS
Our
Board currently consists of six directors divided into three
classes, with each class holding office for a three-year term. Each
director serves until such director’s successor is duly
elected and qualified or such director’s earlier resignation,
death or removal. Two Class II directors will be elected to the
Board at the Annual Meeting and, as such, the Board will consist of
five directors effective upon the election of the Class II
directors at the Annual Meeting
, as there is presently
a vacancy in Class I
.
Upon
the recommendation of our Nominating and Governance Committee, the
Board has nominated each of Walter C. Johnsen and Kelly J. Anderson
for re-election at the Annual Meeting for a three-year term that
will expire at our 2022 Annual Meeting of Shareholders. Messrs.
Johnsen and Anderson have consented to serve if elected. If one or
both becomes unavailable to serve as a director, our Board may
designate a substitute nominee. In that case, the proxy holders
will vote for the substitute nominee or nominees designated by our
Board. Our Board has no reason to believe that Messrs. Johnsen or
Anderson will be unable to serve. There are no agreements or
understandings pursuant to which Messrs. Johnsen or Anderson, or
any of our directors was selected to serve as a
director.
All of
our directors are expected to attend the Annual
Meeting.
INFORMATION ABOUT THE CLASS II DIRECTOR NOMINEES
The
following table provides information regarding the Class II
director nominees, including each nominee’s age, the year in
which such nominee became a director, such nominee’s
principal occupations or employment during the past five years,
directorships held with other public companies at any time during
the past five years, and other biographical data. Included in the
biography of each of our Class II director nominees is a
description of the particular experience, qualifications,
attributes or skills that led the Board to conclude that the
nominee should serve as a director.
|
Name
|
|
Age
|
|
Position
|
|
Walter
C. Johnsen
(1)
|
|
68
|
|
Director
|
|
Kelly
J. Anderson
(2)
|
|
51
|
|
Director
|
|
(1)
|
Chairperson
of the Compensation Committee.
|
|
(2)
|
Chairperson
of the Audit Committee.
|
Walter C. Johnsen, Director
Mr.
Johnsen has been one of our directors since January 2016. Since
January 1, 2007, Mr. Johnsen has served as Chairman of the Board
and Chief Executive Officer of Acme United Corporation, a leading
worldwide supplier of innovative branded cutting, measuring and
safety products in the school, home, office, hardware &
industrial markets. From November 30, 1995 to December 31, 2006, he
held the titles of President and Chief Executive Officer at Acme
United. Mr. Johnsen previously served as Vice Chairman and a
principal of Marshall Products, Inc., a medical supply distributor.
Mr. Johnsen holds a Bachelor of Science in Chemical Engineering and
a Master of Science in Chemical Engineering from Cornell
University, and a Master of Business Administration from Columbia
University. The Board concluded that Mr. Johnsen’s business
and operations experience made his nomination as one of our
directors appropriate.
7
Kelly J. Anderson, Director
Ms.
Anderson has been one of our directors since January 2016. Ms.
Anderson is a partner in C Suite Financial Partners, a financial
consulting services company dedicated to serving private, public,
private equity, entrepreneurial, family office and government-owned
firms in all industries. Between July 2014 and March 2015, Ms.
Anderson was CFO of Mavenlink, a SaaS company, between October 2012
and January 2014, Ms. Anderson was Chief Accounting Officer of
Fisker Automotive, between April 2010 and February 2012, Ms.
Anderson was the President and Chief Financial Officer of T3
Motion, Inc., (“
T3
”), an electric vehicle
technology company. Between March 2008 and April 2010, she served
as T3’s Executive Vice President and Chief Financial Officer,
and as a director from January 2009 until January 2010. From 2006
until 2008, Ms. Anderson was Vice President at Experian, a leading
credit reporting agency. From 2004 until 2006, Ms. Anderson was
Chief Accounting Officer for TripleNet Properties, G REIT, Inc., T
REIT, Inc., NNN 2002 Value Fund, LLC, and Chief Financial Officer
of NNN 2003 Value Fund, LLC and A REIT, Inc., all of which were
real estate investment funds managed by TripleNet Properties. From
1996 to 2004, Ms. Anderson held senior financial positions with The
First American Corp., a Fortune 500 title insurance company. Ms.
Anderson is an inactive California CPA and a 1989 graduate of the
College of Business and Economics at California State University,
Fullerton. The Board concluded that Ms. Anderson’s experience
in finance made her nomination as one of our directors
appropriate.
Vote Required
The two
Class II director nominees receiving the highest number of
affirmative votes of the vote represented by the shares in
attendance or represented by proxy at the Annual Meeting and
entitled to vote on this Proposal shall be elected. Abstentions and
broker non-votes will have no effect in determining the results of
the voting on the Class II directors at the Annual
Meeting.
Proxies
received in response to this solicitation will be voted
“FOR” the election of Messrs. Johnsen and Anderson to
our Board unless otherwise specified in the proxy. If a Class II
director nominee is unable to serve or will not serve as a
director, then the person designated as proxies on the Proxy Card
will vote for the substitute nominee or nominees designated by the
Board.
Board Recommendation
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION
OF EACH CLASS II DIRECTOR NOMINEE NAMED IN THIS PROXY
STATEMENT.
8
CONTINUING DIRECTORS
The
following section provides information regarding each of our
continuing directors, his or her age, the year in which each he or
she became a director, his or her principal occupation or
employment during the past five years, directorships held with
other public companies at any time during the past five years, and
other biographical data. Included in the biography of each director
is a description of the particular experience, qualifications,
attributes or skills that led the Board to conclude that such
individual should serve as one of our directors.
|
Name
|
|
Age
|
|
Class
(1)
|
|
Halden
S. Shane
|
|
74
|
|
Class
III
|
|
Harold
W. Paul
(2)
|
|
71
|
|
Class
III
|
|
Lim Boh
Soon
|
|
63
|
|
Class
I
|
|
(1)
|
The
term of the Class III directors will expire at our 2020 Annual
Meeting of Shareholders and the term of the Class I director will
expire at our 2021 Annual Meeting of Shareholders.
|
|
(2)
|
Chairperson
of the Nominating and Governance Committee.
|
Halden S.
Shane,
Chief Executive
Officer and Chairman of the Board
Dr.
Shane has been our Chief Executive Officer and Chairman of the
Board since October 2007, when we commenced our current operations.
Until 2009, Dr. Shane also served as President and CEO of Tiger
Management International, a private management company that deals
in business management of private and public companies. Dr. Shane
resigned all positions and closed Tiger Management International in
2009. Dr. Shane was founder and CEO of Integrated Healthcare
Alliance, Inc. and also founder and General Partner of Doctors
Hospital West Covina, California. Prior thereto, Dr. Shane
practiced Podiatric Surgery specializing in ankle arthroscopy. Dr.
Shane received his Bachelor of Science degree from the University
of Miami in 1969, his Bachelor of Medical Science degree from
California College of Podiatric Medicine in 1971, and his Doctor of
Podiatric Medicine Degree from the California College of Podiatric
Medicine in 1973. He is Board Certified by the American Board of
Podiatric Surgery, American Board of Orthopedics, and the American
Board of Quality Assurance and Review. The Board concluded that Dr.
Shane’s experience in in the medical and finance industries
made his nomination as one of our directors
appropriate.
Harold W. Paul, Director
Mr.
Paul has been one of our directors since June 2009. He has been
engaged in the private practice of law for more than thirty-five
years, primarily as a securities specialist. Mr. Paul has been
company counsel to public companies listed on the AMEX, NASDAQ and
OTC exchanges. He has served as a director for six public companies
in a variety of industries, including technology and financial
services. He holds a BA degree from SUNY at Stony Brook and a JD
from Brooklyn Law School and is admitted to practice in New York
and Connecticut. The Board concluded that Mr. Paul’s
experience as a director of public companies and with the United
States securities laws made his nomination as one of our directors
appropriate.
Dr. Lim Boh Soon, Director
Dr. Lim
has been one of our directors since January 2018. Dr. Lim has more
than 25 years of experience in the banking and finance industry.
For more than the past five years, he is a fellow of the Singapore
Institute of Directors, and is currently an independent
non-executive director on the board of two publicly-listed
companies on the Singapore Stock Exchange. Since October 2015, he
has been a director of Jumbo Group Limited and since June 2017, he
has been a director of OUE Commercial REIT Management Pte. Ltd. In
addition, Dr. Lim has worked in various senior management positions
for several regional and multi-national organizations, including
UBS Capital Asia Pacific Limited, The NatSteel Group, Rothschild
Ventures Asia Limited and The Singapore Technologies Group. Dr. Lim
was also a member of the Regional Investment Committee for UBS AG
in Asia. Dr. Lim graduated with a First-Class Honors in Mechanical
Engineering from The University of Strathclyde in the United
Kingdom (formerly The Royal College of Science & Technology) in
1981 and obtained his Doctor of Philosophy in Mechanical
Engineering from The University of Strathclyde in the United
Kingdom in 1985. The Board concluded that Dr. Lim’s
experience as a director of public companies and in the finance
industry made his nomination as one of our directors
appropriate.
9
CORPORATE GOVERNANCE
Under
our Bylaws, the number of directors of the Company shall be not
less than three or more than seven as fixed from time to time by
the shareholders or the Board. The Board has fixed the number of
directors at six and our Board currently consists of six directors
divided into three classes, with each class holding office for a
three-year term. Two Class II directors will be elected to the
Board at the Annual Meeting and, as such, the Board will consist of
five directors effective upon the election of the Class II
directors at the Annual Meeting
, as there is presently
a vacancy in Class I
. Our Bylaws provide that our directors
will hold office until their successors have been duly elected and
qualified. The Board is responsible for our business and affairs
and considers various matters that require its
approval.
Our
Common Stock is currently quoted on the OTCQB tier of the OTC
Market (“
OTCQB
”)
under the symbol “TOMZ.” The OTCQB does not require
issuers to comply with corporate governance listing standards with
which issuers listed on a national securities exchange, such as the
New York Stock Exchange and the NASDAQ Stock Market, are required
to comply. As a matter of corporate governance best practices, we
have taken actions to improve our corporate governance, including
establishing a board of directors with a majority of directors who
are “independent” for purposes of the OTC Governance
Guidelines and a standing Audit Committee, Compensation Committee
and Nominating and Governance Committee. We have also adopted a
Code of Ethics.
Independence of the Board
Based
upon information submitted by Messrs. Johnsen and Paul, Ms.
Anderson and Dr. Lim, the Board has determined that each of them is
“independent” for purposes of OTC Governance Guidelines
for directors. Dr. Shane is not an independent director for
purposes of OTC Governance Guidelines for directors. No director
will be considered “independent” unless the Board
affirmatively determines that the director has no direct or
indirect material relationship with us.
Meetings of the Board
During
the fiscal year ended December 31, 2018, the Board met 4 times and
took action by unanimous written consent 4 times. Each incumbent
director serving during the fiscal year ended December 31, 2018
attended at least 75% of the aggregate of all Board and applicable
committee meetings during the period that he or she served as a
director.
We make
every effort to schedule our annual meeting of shareholders at a
time and date to maximize attendance by directors, taking into
account our directors’ schedules. All directors are strongly
encouraged to make every effort to attend our annual meeting of
shareholders, absent an unavoidable and irreconcilable
conflict.
Information Regarding Committees of the Board
The
Board has three standing committees: the Audit Committee, the
Compensation Committee and the Nominating and Governance Committee.
Each of such committees operates under a charter that has been
approved by the Board. Below is a description of each committee as
it is presently constituted.
Audit Committee
Our
Audit Committee was established in June 2009 and currently is
comprised of Ms. Anderson, Mr. Paul and Dr. Lim. Ms. Anderson
serves as chairperson of the Audit Committee. We rely on the
exemption related to Mr. Paul’s lack of standing as a
financial expert, since a majority of the Audit Committee was
comprised of financial experts and does not believe the committee
composition materially affects its ability to act independently.
The Audit Committee operates under a written charter, which is
available at
http://investor.tomimist.com/TOMZ/audit_committee_charter/2140. The
purpose of the Audit Committee is to assist the Board in monitoring
the integrity of our annual, quarterly and other financial
statements, the independent auditor’s qualifications and
independence, the performance of our independent auditors and our
compliance with legal and regulatory requirements. The Audit
Committee also reviews and approves all related-party transactions.
Our Board has determined that Ms. Anderson is an “audit
committee financial expert” as defined by the regulations
promulgated by the SEC.
10
The
Audit Committee met 4 times and took action by unanimous written
consent 4 times during the fiscal year ended December 31,
2018.
Compensation Committee
The
Compensation Committee was established in February 2011 and
currently consists of Mr. Johnsen and Ms. Anderson. Mr. Johnsen
serves as chairperson of the Compensation Committee. The
Compensation Committee operates under a written charter, which is
available at
http://investor.tomimist.com/TOMZ/compensation_committee_charter/2142.
The purpose of the Compensation Committee is to assist the Board in
determining appropriate compensation levels for our executive
officers; evaluating officer and director compensation plans,
policies and programs; reviewing benefit plans for officers and
employees; and producing the report required by applicable rules
and regulations of the SEC and other applicable regulatory bodies
for inclusion in our annual proxy statement. In addition, the
Compensation Committee may exercise any other powers and carry out
any other responsibilities delegated to it by the Board from time
to time consistent with our Bylaws and applicable laws and
regulations.
The
Compensation Committee met 1 time and took action by unanimous
written consent 1 time during the fiscal year ended December 31,
2018.
For
additional information regarding the Compensation Committee’s
consideration and determination of executive officer and director
compensation, see the section entitled “Compensation
Discussion and Analysis” and “Director
Compensation” of this Proxy Statement.
Nominating and Governance Committee
The
Nominating and Governance Committee was established in January 2016
and currently consists of Messrs. Paul and Johnsen and Ms.
Anderson. Mr. Paul serves as chairperson of the Nominating and
Governance Committee. The Nominating and Governance Committee
operates under a written charter, which is available at
http://investor.tomimist.com/TOMZ/nominating_committee_charter/2141.
The purpose of the Nominating and Governance Committee is to
identify individuals qualified to become members of the Board and
to recommend such individuals to the Board to be Board nominees for
directors, as well as to develop and recommend to the Board
corporate governance principles, to recommend Board committee
membership and responsibilities, and to oversee the evaluation of
the Board, its committees and management. In addition to other
powers and responsibilities, the Nominating and Governance
Committee will (i) identify individuals whom it believes are
qualified to become Board members in accordance with applicable
criteria, and recommend that the Board select such individuals as
nominees to stand for election at each annual meeting of
shareholders; (ii) review and evaluate all persons properly
recommended by shareholders to be Board nominees; (iii) evaluate
the qualifications and performance of incumbent directors and
determine whether to recommend them for re-election to the Board;
(iv) in the case of a Board vacancy, recommend to the Board in
accordance with applicable criteria an individual to fill such
vacancy either through election by the Board or through election by
our shareholders; (v) review the independence of our directors;
(vi) review reports and disclosures of insider and affiliated party
transactions and make recommendations to the Board regarding such
transactions; (vii) evaluate periodically the desirability of,
and recommend to the Board, any changes in the size, composition,
organization and operational structure of the Board; (viii) review
annually membership and responsibilities of Board committees and
recommend to the Board any changes that may be appropriate; and
(ix) conduct an annual performance evaluation of the Nominating and
Governance Committee.
The
Nominating and Governance Committee identifies potential director
candidates through a variety of sources, including recommendations
made by members of our Board and members of our executive
management. When appropriate, the Nominating and Governance
Committee may retain a search firm to identify director
candidates.
11
The
Nominating and Governance Committee charter provides that the
committee will consider, among other things, the applicable
requirements for directors under the Exchange Act and the listing
standards of the NYSE MKT in evaluating potential director
candidates. Additionally, the Nominating and Governance Committee
may take into consideration such other factors and criteria as it
deems appropriate in evaluating a candidate,
including:
●
His or her
knowledge, expertise, skills, integrity, diversity, judgment,
business or other experience;
●
His or her
reputation in the business community;
●
The interplay of
the candidate’s experience with the experience of other Board
members; and
●
The extent to which
the candidate would be a desirable addition to the Board and any
committees.
The
Nominating and Governance Committee reviews and assesses at least
annually the skills and characteristics of Board members, as well
as the composition of the Board as a whole. The Nominating and
Governance Committee’s assessment includes a review of our
directors’ respective independence qualifications, skills and
experience in the context of the needs of the Board. Additionally,
the Nominating and Governance Committee considers diversity of the
Board members’ skill and experience in areas that are
relevant to our business and activities, including operations,
finance, marketing and sales. Our Board does not, however, have a
formal policy regarding racial/ethnic, gender or other diversity of
director candidates, but considers diversity as a factor in
evaluating such candidates.
In
assessing the composition of the Board, the Nominating and
Governance Committee considers the Board’s current and
anticipated needs, and seeks to maintain an appropriate balance of
different business backgrounds, skills and expertise based on the
nature and requirements of our business. In evaluating potential
director candidates, the Nominating and Governance Committee
considers all relevant information regarding such candidates,
including the membership criteria stated above, and whether such
candidates would meet the Nominating and Governance
Committee’s objectives for the overall composition of the
Board, as well as the candidates’ ability and willingness to
devote adequate time to Board responsibilities. When appropriate,
the Nominating and Governance Committee will recommend qualified
candidates for nomination by the entire Board.
The
Nominating and Governance Committee met 1 time and took action by
unanimous written consent 1 time during the fiscal year ended
December 31, 2018
Code of Ethics
The
Board adopted a Code of Ethics in 2008 applies to, among other
persons, Board members, officers including our Chief Executive
Officer, contractors, consultants and advisors. Our Code of Ethics,
which is available at
http://investor.tomimist.com/TOMZ/code_of_ethics/2139, sets forth
written standards designed to deter wrongdoing and to
promote:
1.
honest and ethical
conduct including the ethical handling of actual or apparent
conflicts of interest between personal and professional
relationships;
2.
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 made by us;
3.
compliance with
applicable governmental laws, rules and regulations;
4.
the prompt internal
reporting of violations of the Code of Ethics to an appropriate
person or persons identified in the Code of Ethics;
and
5.
accountability for
adherence to the Code of Ethics.
12
Board Leadership Structure and Role in Risk Oversight
Our
Board has not adopted a policy on whether the same individual
should serve as both the Chief Executive Officer and Chairman of
the Board or, if the roles are separate, whether the Chairman
should be selected from the non-employee directors or should be an
employee. The Board believes that it should maintain the
flexibility to make such determinations in the manner that it
believes best provides appropriate leadership for us at the
relevant time. The Board believes that its current leadership
structure, with Dr. Shane serving as both Chief Executive Officer
and Chairman of the Board, is appropriate for us at this time
because the combined role of the Chief Executive Officer and
Chairman provides a clear chain of command to execute our strategic
initiatives and business plans and allows such individual to serve
as a bridge between management and the Board, which facilitates the
regular flow of information.
Our
Board is responsible for the oversight of our risk management
processes and, either as a whole or through its committees,
regularly liaises with management to assess and manage our major
risk exposures, the potential impact of such risks on our business
and the steps we should take to mitigate or manage such risks. The
Board’s risk oversight process complements and supplements
management’s risk assessment and mitigation processes, which
include reviews of strategic and operational planning, executive
development and evaluation, regulatory and legal compliance, and
financial reporting and internal controls. The risk oversight
process also includes receiving reports from committees of our
Board and members of senior management to enable our Board to
understand our risk identification, management and mitigation
strategies with respect to areas of potential material
risk.
The
Audit Committee oversees our management of financial risks and
periodically reviews our policies with respect to risk assessment
and risk management. The Audit Committee’s risk management
process involves direct communication with our independent
registered public accounting firm and discussions with management
regarding significant risk exposures and the actions management has
taken to limit, monitor or control such exposures. The Nominating
and Governance Committee manages risks associated with the
independence of the Board, corporate disclosure practices and
potential conflicts of interest. While each of our committees is
responsible for evaluating certain risks and overseeing the
management of such risks, the entire Board is regularly informed
about such risks and matters involving significant risk are
considered by our Board as a whole.
Shareholder Communications with the Board
Shareholders
wishing to communicate with the Board or with an individual Board
member concerning the Company may do so by writing to the Board or
to the particular Board member, and mailing the correspondence to
our Chief Executive Officer at TOMI Environmental Solutions, Inc.,
9454 Wilshire Blvd., Penthouse, Beverly Hills, CA 90212. The
envelope should indicate that it contains a shareholder
communication.
All
correspondence received is opened and screened for security
purposes. Our Corporate Secretary reviews such correspondence and
provides the Board at each of its meetings with a summary of all
such correspondence and a copy of any correspondence that, in the
opinion of the Corporate Secretary, deals with the functions of the
Board or the standing committees of the Board or that otherwise
requires their attention. The Corporate Secretary will not forward
the communication if it is primarily commercial in nature or if it
relates to an improper or irrelevant topic. Correspondence relating
to accounting, internal controls or auditing matters will be
handled in accordance with procedures established by the Audit
Committee with respect to such matters.
13
REPORT OF THE AUDIT COMMITTEE
The
primary responsibility of the Audit Committee is to assist the
Board of Directors in discharging its oversight responsibilities
with respect to financial matters and compliance with laws and
regulations. The primary methods used by the Audit Committee to
fulfill its responsibility with respect to financial matters
are:
●
To appoint,
evaluate, and, as the Audit Committee may deem appropriate,
terminate and replace TOMI’s independent registered public
accountants;
●
To monitor the
independence of TOMI’s independent registered public
accountants;
●
To determine the
compensation of TOMI’s independent registered public
accountants;
●
To pre-approve any
audit services, and any non-audit services permitted under
applicable law, to be performed by TOMI’s independent
registered public accountants;
●
To review
TOMI’s risk exposures, the adequacy of related controls and
policies with respect to risk assessment and risk
management;
●
To monitor the
integrity of TOMI’s financial reporting processes and systems
of control regarding TOMI’s finance, accounting, legal
compliance and information systems; and
●
To facilitate and
maintain an open avenue of communication among the Board of
Directors, management and TOMI’s independent registered
public accountants.
In
discharging its responsibilities relating to internal controls,
accounting and financial reporting policies and auditing practices,
the Audit Committee discussed with TOMI’s independent
registered public accountants, Wolinetz, Lafazan & Company,
P.C., the overall scope and process for its audit. The Audit
Committee has met with Wolinetz, Lafazan & Company, P.C., with
and without management present, to discuss the results of its
examinations and the overall quality of TOMI’s financial
reporting.
The
Audit Committee has discussed with Wolinetz, Lafazan & Company,
P.C. its judgments about the quality, in addition to the
acceptability, of TOMI’s accounting principles as applied in
TOMI’s financial reporting, as required by applicable rules
adopted by the Public Company Accounting Oversight Board
(“
PCAOB
”).
The
Audit Committee also has received a letter from Wolinetz, Lafazan
& Company, P.C. that is required by applicable requirements of
the PCAOB regarding the independent accountant’s
communications with the audit committee concerning independence,
and has discussed with Wolinetz, Lafazan & Company, P.C. their
independence.
The
Audit Committee has met and held discussions with management. The
Audit Committee has reviewed and discussed with management
TOMI’s audited consolidated financial statements as of and
for the years ended December 31, 2018 and 2017.
Based
on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited
financial statements referred to above be included in TOMI’s
Annual Report for the year ended December 31, 2018.
Respectfully
submitted,
Kelly J. Anderson, Committee Chairperson
Harold W. Paul
Lim Boh Soon
14
DIRECTOR COMPENSATION
Each of
our non-employee directors receives cash fees and stock as
compensation for their service on the Board and the committees of
the Board on which they are a member, in each case under individual
director agreements that are described in the footnotes to the
table below. The table below sets forth cash and stock compensation
earned by each non-employee director during the fiscal year ended
December 31, 2018.
|
Name
|
Fees earned or
paid in cash
($)
|
Stock awards
($)
|
Option awards
($)
|
Other
Compensation
($)
|
Total
($)
|
|
Harold W. Paul
(1)
|
40,000
|
7,500
|
—
|
60,000
|
107,500
|
|
Walter Johnsen
(2)
|
40,000
|
7,500
|
—
|
—
|
47,500
|
|
Kelly Anderson
(3)
|
45,000
|
7,500
|
—
|
—
|
52,500
|
|
Lim Boh Soon
(4)
|
40,000
|
7,500
|
—
|
—
|
47,500
|
(1)
Mr. Paul also
received $60,000 in cash compensation in exchange for legal
services rendered during 2018.
(2)
Mr. Johnsen was
elected to the Board on January 29, 2016. The term of his
agreement as director commenced on February 1, 2016 for up to two
years and until a successor is elected, or resignation or
removal. Our agreement with Mr. Johnsen provides for an annual
fee in the amount of $40,000 paid on a quarterly basis and an
annual grant of shares of common stock. In February 2018, we
issued Mr. Johnsen 75,000 shares of common stock that were valued
at $7,500.
(3)
Ms. Anderson was
elected to the Board on January 29, 2016 and serves as the
chairperson of our Audit Committee. The term of her agreement
as director commenced on February 1, 2016 for up to two years and
until a successor is elected, or resignation or removal. Our
agreement with Ms. Anderson provides for an annual fee in the
amount of $45,000 paid on a quarterly basis and an annual grant of
shares of common stock. In February 2018, we issued Ms.
Anderson 75,000 shares of common stock that were valued at
$7,500.
(4)
Mr.
Lim was elected to the Board
on January 29, 2018. The term of his agreement as director
commenced on February 1, 2018 for up to three years and until a
successor is elected, or resignation or removal. Our agreement
with Mr. Lim provides for an annual fee in the amount of $40,000
paid on a quarterly basis and an annual grant of shares of common
stock. In February 2018, we issued Mr. Lim 75,000 shares of
common stock that were valued at $7,500.
15
INFORMATION REGARDING OUR DIRECTORS AND EXECUTIVE
OFFICERS
The
following table identifies our current executive officers, their
respective offices and positions and their respective dates of
appointment:
|
Name
|
|
Age
|
|
Positions
Held
|
|
Date of Election
or Appointment
|
|
Halden
S. Shane
|
|
74
|
|
Chief
Executive Officer and Chairman of the Board
|
|
October
15, 2007
|
|
Nick
Jennings
|
|
41
|
|
Chief
Financial Officer
|
|
October
1, 2014
|
|
Elissa
J. Shane
|
|
39
|
|
Chief
Operating Officer
|
|
January
1, 2018
|
Arrangements Involving Directors or Executive Officers
There
is no arrangement or understanding between any of our directors or
executive officers and any other person pursuant to which any
director or officer was or is to be selected as a director or
officer, and there is no arrangement, plan, or understanding as to
whether non-management shareholders will exercise their voting
rights to continue to elect the current Board. There are also
no arrangements, agreements, or understandings to our knowledge
between non-management shareholders that may directly or indirectly
participate in or influence the management of our
affairs.
Family Relationships
There
are no family relationships between or among any of the current
directors, executive officers or persons nominated or charged to
become directors or executive officers, except that Ms. Elissa J.
Shane, our Chief Operating Officer, is the daughter of Dr. Halden
Shane, our Chief Executive Officer and Chairman of the Board. There
are no family relationships among our officers and directors and
those of our subsidiaries and affiliated companies.
Business Experience
The
business experience of our directors, including executive officers
serving as directors, is provided under “
Information About the Class II Director
Nominees
” in Proposal 1 and “
Continuing Directors
”
above. The business experience of executive officers who are
not also directors is described below.
Nick Jennings, Chief Financial Officer
Mr.
Jennings has been our Chief Financial Officer since October 2014.
From July 2014 until his employment by the Company, Mr. Jennings
was self-employed and provided consulting, accounting and tax
compliance services to private-owned companies. From November 2006
until June 2014, Mr. Jennings was a senior manager at Richardson
Kontogouris Emerson LLP, where he worked with various public and
private companies providing services a variety of business areas
including tax compliance, tax consulting, general accounting, and
business assurance. He is a graduate of Loyola Marymount College
with a degree in accounting and is a member of the American
Institute of Certified Public Accountants.
Elissa J. Shane, Chief Operating Officer
Ms.
Shane has been our Chief Operating Officer since January 2018.
Previously, she served as our Chief Regulatory and Compliance
Officer from September 2015 to December 2017 and as our Corporate
Secretary since January 2016. From January 2014 to September 2015,
Ms. Shane served as a paralegal with Levi Lubarsky Feigenbaum &
Weiss LLP, where she worked with the firm’s managing partners
and staff attorneys and directed all operational aspects of the
litigation cycle from inception through appeal. From September 2009
to January 2014, she served as a paralegal with Olshan Frome
Wolosky LLP, where she managed all regulatory and compliance
issues, litigation procedures and advertising and promotional
matters. Ms. Shane received a B.A. in Psychology and Communications
with a minor in Economics from the University of Southern
California in 2001.
16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table sets forth certain information with respect to the
beneficial ownership of our Voting Stock as of September 5, 2019
for:
●
each person (or
group of affiliated persons) known to us to beneficially own more
than 5% of our outstanding shares of Common Stock or Series A
Preferred Stock;
●
each of our
directors and nominees for election to the Board;
●
each of our
executive officers named in the summary compensation table;
and
●
all of our
directors and executive officers as a group.
We have
determined beneficial ownership in accordance with the rules of the
SEC. Except as indicated by the footnotes below, we believe, based
on the information furnished to us, that the persons and entities
named in the following table have sole voting and investment power
with respect to all shares of Voting Stock that they beneficially
own, subject to applicable community property laws.
Applicable
percentage ownership is based on 124,700,418 shares of Common Stock
and 510,000 shares of Series A Preferred Stock outstanding at
September 5, 2019. In computing the number of shares of Voting
Stock beneficially owned by a person and the percentage ownership
of that person, we deemed to be outstanding all shares of Voting
Stock subject to options, warrants or other convertible securities
held by that person or entity that are currently exercisable or
releasable or that will become exercisable or releasable within 60
days of September 5, 2019. We did not deem these shares
outstanding, however, for the purpose of computing the percentage
ownership of any other person. Except as otherwise noted, the
address of each person or entity in the following table is c/o TOMI
Environmental Solutions, Inc., 9454 Wilshire Blvd., Penthouse,
Beverly Hills, California 90212.
|
|
|
Shares
Beneficially Owned
|
|
|
|
|
|||||||||
|
|
|
Common
Stock
|
|
|
Series A
Preferred Stock
|
|
|
|
|
||||||
|
|
|
Shares
|
|
|
% of
Class
|
|
|
Shares
|
|
|
% of
Class
|
|
|
% of Total
Voting Power(1)
|
|
|
Named
Executive Officers and Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Halden
S. Shane, CEO and Chairman of the Board
|
|
28,345,048
|
(2)
|
|
21.3
|
%
|
|
510,000
|
|
|
100
|
%
|
|
21.6
|
%
|
|
Elissa
J. Shane, Chief Operating Officer
|
|
2,241,310
|
(3)
|
|
1.7
|
%
|
|
—
|
|
|
—
|
|
|
1.7
|
%
|
|
Nick
Jennings, Chief Financial Officer
|
|
562,145
|
(4)
|
|
*
|
|
|
—
|
|
|
—
|
|
|
*
|
|
|
Harold
W. Paul, Secretary, Director
|
|
1,479,774
|
(5)
|
|
1.1
|
%
|
|
—
|
|
|
—
|
|
|
1.1
|
%
|
|
Walter
Johnsen, Director
|
|
250,000
|
(6)
|
|
*
|
|
|
—
|
|
|
—
|
|
|
*
|
|
|
Kelly
Anderson, Director
|
|
250,000
|
(7)
|
|
*
|
|
|
—
|
|
|
—
|
|
|
*
|
|
|
Lim Boh
Soon, Director
|
|
690,190
|
(8)
|
|
*
|
|
|
—
|
|
|
—
|
|
|
*
|
|
|
All
current directors and executive officers as a group (7
persons)
|
|
33,818,467
|
(9)
|
|
25.4
|
%
|
|
510,000
|
|
|
100
|
%
|
|
25.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5%
Beneficial Owners:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lau Sok
Huy
|
|
17,361,111
|
(10)
|
|
13.9
|
%
|
|
—
|
|
|
—
|
|
|
13.9
|
%
|
|
Ah Kee
Wee
|
|
11,666,669
|
(11)
|
|
9.4
|
%
|
|
—
|
|
|
—
|
|
|
9.4
|
%
|
*
Denotes ownership of less than 1%
17
|
(1)
|
Percentage of total voting power represents voting power with
respect to all shares of our common stock and Series A preferred
stock, as a single class. The holders of
common stock
and Series A preferred
stock are each entitled to one vote per share.
|
|
(2)
|
Consists
of (i) 18,845,048 shares of common stock held of record by Dr.
Shane, (ii) 1,500,000 shares of common stock held of record by the
Shane Family Trust, (iii) 1,000,000 shares of common stock held of
record by Belinha Shane and (iv) 8,000,000 shares of
common stock
issuable upon the
exercise of warrants to purchase common stock held by Dr. Shane
that are exercisable within 60 days of September 5, 2019. Dr.
Shane is a co-trustee of the Shane Family Trust and may be
deemed to share voting and investment power over the securities
held by the trust. Belinha Shane is Dr. Shane’s wife. Dr.
Shane disclaims ownership of such shares held by his wife, except
to the extent of his pecuniary interest.
|
|
(3)
|
Consists
of (i) 1,891,310 shares of common stock held of record by Ms. Shane
and (ii) 350,000 shares of
common stock
issuable upon the
exercise of options to purchase
common stock
held by Ms. Shane
that are exercisable within 60 days of September 5,
2019.
|
|
(4)
|
Consists
of (i) 112,145 shares of common stock held of record by Mr.
Jennings and (ii) 450,000 shares of
common stock
issuable upon the
exercise of warrants and options to purchase
common stock
held by Mr.
Jennings that are exercisable within 60 days of September 5,
2019.
|
|
(5)
|
Consists of (i) 1,414,774 shares of
common stock
held of record by Mr. Paul
and (ii) 65,000 shares of common stock issuable upon exercise of
stock options that are exercisable within 60 days of
September 5, 2019
.
|
|
(6)
|
Consists of (i) 225,000 shares of
common stock
held of record by Mr. Johnsen and (ii)
25,000 shares of common stock issuable upon exercise of stock
options that are exercisable within 60 days of
September 5,
2019
.
|
|
(7)
|
Consists of (i) 225,000 shares of
common stock
held of record by Ms. Anderson and (ii)
25,000 shares of common stock issuable upon exercise of stock
options that are exercisable within 60 days of
September 5,
2019
.
|
|
(8)
|
Consists of 690,190 shares of
common stock
held of record by Dr.
Lim.
|
|
(9)
|
Consists
of (i) 24,903,467 shares of common stock, (ii) 8,400,000 shares of
common stock
issuable upon the exercise of warrants to purchase common stock and
(iii) 515,000 shares of
common stock
issuable upon
exercise of stock options that are exercisable within 60 days of
September 5, 2019.
|
|
(10)
|
Based
on Form 3 filed with the SEC by Lau Sok Huy on January 24,
2018.
|
|
(11)
|
Based
on information reported by Mr. Wee to the Company. Consists of
(i) 8,666,669 shares of common stock and (ii) 3,000,000 shares of
common stock issuable upon the exercise of warrants to purchase
common stock held by Mr. Wee that are exercisable within 60 days of
September 5, 2019.
|
Change in Control
We are
unaware of any contract or other arrangement the operation of which
may at a subsequent date result in a change of control of our
Company.
Legal Proceedings
To our
knowledge, none of our directors, officers or affiliates, or any 5%
or greater shareholder, or any associate or any such directors,
officers or affiliates, is a party that is adverse to us in any
material legal proceeding.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section
16(a) of the Exchange Act requires our directors and executive
officers, and persons who own more than ten percent of our Voting
Stock, to file with the SEC initial reports of ownership and
reports of changes in ownership of our Voting Stock. Officers,
directors and greater than 10% shareholders are required by SEC
rules to furnish us with copies of all Section 16(a) forms they
file. To our knowledge, based solely on a review of the copies of
Section 16(a) reports furnished to us, or written representations
that no reports were required, we believe that during the fiscal
year ended December 31, 2018, our officers, directors and greater
than 10% shareholders complied with all Section 16(a) filing
requirements.
18
EXECUTIVE COMPENSATION
Summary Compensation Table
The
following table sets forth the total compensation paid to or earned
by our named executive officers for the years ended December 31,
2018 and 2017, respectively:
|
Name and
Principal Position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
(1)
|
|
|
Option/Warrant
Awards
($)
(1)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Halden
S. Shane
|
|
2018
|
|
360,000
|
|
|
40,000
|
|
|
—
|
|
|
17,932
|
(2)
|
|
—
|
|
|
417,932
|
|
|
Chairman
and CEO
(2)
|
|
2017
|
|
360,000
|
|
|
—
|
|
|
—
|
|
|
434,847
|
(3)
|
|
—
|
|
|
794,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elissa
J. Shane
(4)
|
|
2018
|
|
200,000
|
|
|
20,000
|
|
|
—
|
|
|
36,474
|
|
|
9,000
|
(4)
|
|
265,474
|
|
|
COO
|
|
2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nick
Jennings
|
|
2018
|
|
155,000
|
|
|
10,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
165,000
|
|
|
CFO
|
|
2017
|
|
144,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
144,000
|
|
|
(1)
|
The
amounts shown in this column represent the aggregate grant date
fair value of stock, option and/or warrant award, as applicable,
granted during the year computed in accordance with FASB ASC Topic
718. See Note 2 of the notes to our audited consolidated financial
statements contained in this Annual Report on Form 10-K for a
discussion of valuation assumptions made in determining the grant
date fair value of the awards.
|
|
|
|
|
(2)
|
During
the year ended December 31, 2018, we issued Dr. Shane five-year
warrants to purchase an aggregate of 250,000 shares of common stock
as executive compensation. The exercise price of the warrant was
$0.08 per share, based on the three-day trailing VWAP on the date
of issuance. Utilizing the Black-Scholes pricing model, we
determined the fair value of the warrants issued to Dr. Shane was
approximately $18,000, with the following assumptions: volatility,
142%; expected dividend yield, 0%; risk free interest rate, 2.95%;
and a life of 5 years. The grant date fair value of each share of
common stock underlying the warrants was $0.07. We recognized
equity-based compensation to Dr. Shane of approximately $18,000 on
the warrants during the year ended December 31, 2018. Please refer
to Item 11 Employment Agreements for additional details of Dr.
Shane’s annual compensation.
|
|
|
|
|
(3)
|
Pursuant
to his employment agreement, during the year ended December 31,
2017, we issued Dr. Shane five-year warrants to purchase an
aggregate of 3,750,000 shares of common stock as executive
compensation. The exercise prices of the warrants range from $0.10
to $0.12 per share, based on the three day trailing VWAP on the
date of issuance. Utilizing the Black-Scholes pricing model, we
determined the fair value of the warrants issued to Dr. Shane was
approximately $435,000, with the following assumptions: volatility,
145%–153%; expected dividend yield, 0%; risk free interest
rate, 1.90%–2.23%; and a life of 5 years. The grant date fair
value of each share of common stock underlying the warrants ranged
from $0.09–$0.12. We recognized equity-based compensation to
Dr. Shane of approximately $435,000 on the warrants during the year
ended December 31, 2017.
|
|
|
|
|
(4)
|
In
connection with the execution of Ms. Shane’s employment
agreement, on January 5, 2018, we issued her an option under the
2016 Plan to purchase 100,000 shares of common stock. The exercise
price of the option was $0.12 per share, based on the closing price
of our common stock on the date of issuance. Utilizing the
Black-Scholes pricing model, we determined the fair value of the
option issued to Ms. Shane was approximately $12,000, with the
following assumptions: volatility, 146%; expected dividend yield,
0%; risk free interest rate, 2.27%; and a life of 5 years. The
grant date fair value of each share of common stock underlying the
option was $0.12. In addition, pursuant to her employment
agreement, on January 3, 2019, we issued her an option under the
2016 Plan to purchase 250,000 shares of common stock. The exercise
price of the option was $0.11 per share, based on the closing price
of our common stock on the date of issuance. Utilizing the
Black-Scholes pricing model, we determined the fair value of the
option issued to Ms. Shane was approximately $25,000, with the
following assumptions: volatility, 144%; expected dividend yield,
0%; risk free interest rate, 2.47%; and a life of 5 years. The
grant date fair value of each share of common stock underlying the
option was $0.10. The option was accrued for as of December 31,
2018. We recognized total equity-based compensation to Ms. Shane of
approximately $37,000 on the options during the year ended December
31, 2018. The other compensation in the amount of $9,000 represents
an auto allowance pursuant to Ms. Shane’s employment
agreement. Please refer to Item11 Employment Agreements for
additional details of Ms. Shane’s annual
compensation.
|
19
Narrative Disclosure to Summary Compensation Table
Except
as described below, we currently have no employment agreements with
any of our executive officers, nor any compensatory plans or
arrangements providing for compensation as a result of the
resignation, retirement or any other termination of any of our
executive officers, from a change-in-control, or from a change in
any executive officer’s responsibilities following a
change-in-control.
Employment Agreements
We have
entered into employment agreements with each of the named executive
officers and generally include the named executive officer’s
initial base salary and an indication of equity compensation
opportunities.
Halden S. Shane
On January 15, 2016, we
entered into
an employment agreement
with Dr. Shane, effective January 1, 2016. The agreement
provides for a base annual salary of $360,000. The agreement
also provides for the quarterly issuance of an option to purchase
250,000 shares of
common
stock
in 2016 with an
exercise price equal to the three-day trailing volume weighted
average price of our
common stock. In the
event Dr. Shane is terminated for any reason or becomes disabled or
dies, any options he holds at such time will become cashless and
will be entitled to piggyback registration and exercise
immediately. Dr. Shane is also entitled to performance bonuses,
subject to the achievement of certain objectives, including (i) a
minimum semi-annual grant of stock options to purchase up to
250,000 shares of
common
stock
and (ii) a cash bonus,
determined in the sole discretion of the Board. The agreement also
provides that we will reimburse Dr. Shane for certain business and
entertainment expenses, including the use of an
automobile.
In the event Dr. Shane
is terminated as CEO as a result of a change in control, Dr. Shane
will be entitled to a lump sum payment of two years salary at the
time of such termination and will be granted an option to purchase
3,000,000 shares of
common
stock
that are cashless and,
when exercised, will have piggyback registration or demand
registration rights, and if applicable, any and all outstanding
stock grants will be accelerated and be fully
vested.
The Board may terminate Dr. Shane for cause by written notification
to Dr. Shane; provided, however, that no termination for cause will
be effective unless Dr. Shane has been provided with prior written
notice and opportunity for remedial action and fails to remedy
within 30 days thereof, in the event of a termination by the
Company (i) by reason of willful dishonesty towards, fraud upon, or
deliberate injury or attempted injury to, the Company, (ii) by
reason of material breach of his employment agreement and (iii) by
reason of gross negligence or intentional misconduct with respect
to the performance of duties under the agreement. Upon termination
for cause, Dr. Shane will be immediately paid an amount equal to
his gross salary. The Board may terminate Dr. Shane other than for
cause at any time upon giving notice to Dr. Shane. Upon such
termination, Dr. Shane will be immediately paid an amount equal to
his gross salary.
Elissa J. Shane
On
January 5, 2018, in connection with her appointment as our
Chief Operating Officer, we entered into an employment
agreement with Elissa J. Shane, effective January 1, 2018. Pursuant
to her employment agreement, Ms. Shane will receive an annual base
salary of at least $200,000, subject to annual review and
discretionary increase by the Compensation Committee of the Board.
Ms. Shane is eligible to receive an annual cash bonus and other
annual incentive compensation, and the agreement provides
that we will issue Ms. Shane annually an option to purchase at
least 250,000 shares of common stock pursuant to the 2016 Plan.
Additionally, in connection with the execution of her
employment agreement, on January 5, 2018, we issued Ms. Shane
an option under the 2016 Plan to purchase 100,000 shares
of common stock at an exercise price of $0.12 per share. Her
employment agreement also provides that we will reimburse Ms.
Shane for reasonable and necessary business and entertainment
expenses that she incurs in performing her duties. During the term
of her employment, Ms. Shane will also be entitled to up to four
weeks of paid vacation time annually, which will accrue up to six
weeks, and to participate in our benefit plans and programs,
including but not limited to all group health, life, disability and
retirement plans. Ms. Shane is also entitled to the sum of $750 per
month as a vehicle allowance. The initial term of her
employment agreement is three years, which may be automatically
extended for successive one-year terms, unless either party
provides the other with 120 days’ prior written notice of its
intent to terminate the agreement.
20
Nick Jennings
On
September 2, 2015, we entered into a new employment agreement with
Mr. Jennings, which superseded his prior agreement, pursuant to
which he continues to serve as our Chief Financial Officer. Mr.
Jennings’ annual salary is $132,000, which is reviewed
annually. On January 26, 2016, we issued Mr. Jennings a five-year
warrant to purchase up to 100,000 shares of common stock at an
exercise price of $0.55 per share. The agreement also provided for
the issuance of an additional five-year warrant to purchase 100,000
shares of common stock in 2016, however, this provision was
modified to grant a salary increase in lieu of the options. In
January 2018, Mr. Jennings’ annual salary was increased to
$155,000 per year. Mr. Jennings is also entitled to additional
equity compensation based upon superior performance of his
responsibilities, as determined by the Board in its sole
discretion. The agreement also provides that we will reimburse
Mr. Jennings for certain business and entertainment
expenses. In the event of a change in control of the Company
that results in his termination, Mr. Jennings will be entitled to a
lump sum payment of one year’s salary and all equity awards
will be accelerated and fully vested. In the event his employment
is terminated other than for cause, Mr. Jennings will receive an
amount equal to his annual salary as of such termination date after
the second employment anniversary.
21
Outstanding
Equity Awards at 2018 Fiscal Year-End
The
following table sets forth certain information with respect to
outstanding options to purchase Common Stock previously awarded to
our named executive officers as of December 31, 2018.
|
Name
|
|
Number of
Securities Underlying Unexercised
Warrants/Options
Exercisable
(#)
|
|
|
Number of
Securities Underlying Unexercised Warrants/Options
Unexercisable
(#)
|
|
|
Equity Incentive
Plan Awards: Number of Securities Underlying
Unexercised
Unearned
Warrants
(#)
|
|
|
Warrant Exercise Price
($)
|
|
|
Warrant
Expiration Date
|
|
|
|
Halden
S. Shane
|
|
3,000,000
|
(1)
|
|
—
|
|
|
—
|
|
|
$
|
$0.30
|
|
|
2/11/2019-2/11/2021
|
|
|
|
|
250,000
|
(2)
|
|
—
|
|
|
—
|
|
|
$
|
$0.50
|
|
|
3/31/2021
|
|
|
|
|
250,000
|
(3)
|
|
—
|
|
|
—
|
|
|
$
|
$0.42
|
|
|
6/30/2021
|
|
|
|
|
250,000
|
(4)
|
|
—
|
|
|
—
|
|
|
$
|
$0.32
|
|
|
9/30/2021
|
|
|
|
|
250,000
|
(5)
|
|
—
|
|
|
—
|
|
|
$
|
$0.27
|
|
|
12/30/2021
|
|
|
|
|
250,000
|
(8)
|
|
—
|
|
|
—
|
|
|
$
|
$0.10
|
|
|
7/17/2022
|
|
|
|
|
3,500,000
|
(9)
|
|
—
|
|
|
—
|
|
|
$
|
$0.12
|
|
|
12/22/2022
|
|
|
|
|
250,000
|
(11)
|
|
—
|
|
|
—
|
|
|
$
|
$0.08
|
|
|
11/19/2023
|
|
|
Elissa
J. Shane
|
|
100,000
|
(10)
|
|
—
|
|
|
—
|
|
|
$
|
$0.12
|
|
|
1/5/2023
|
|
|
Nick
Jennings
|
|
300,000
|
(6)
|
|
—
|
|
|
—
|
|
|
$
|
$0.30
|
|
|
10/1/2019-10/1/2021
|
|
|
|
|
100,000
|
(7)
|
|
—
|
|
|
—
|
|
|
$
|
$0.55
|
|
|
1/26/2021
|
|
(1)
Warrants vested in
increments of 1,000,000 on 2/11/2014, 2/11/2015 and 2/11/2016 and
have a term of 5 years
(2)
Warrants vested on
3/31/2016 and have a term of 5 years
(3)
Warrants vested on
6/30/2016 and have a term of 5 years
(4)
Warrants vested on
9/30/2016 and have a term of 5 years
(5)
Warrants vested on
12/30/2016 and have a term of 5 years
(6)
Warrants vested in
increments of 100,000 on 10/1/2014, 10/1/2015 and 10/1/2016 and
have a term of 5 years
(7)
Warrants vested on
1/26/2016 and have a term of 5 years
(8)
Warrants vested on
7/17/2017 and have a term of 5 years
(9)
Warrants vested on
12/22/2017 and have a term of 5 years
(10)
Options
vested on 1/5/2018 and have a term of 5 years
(11)
Warrants vested on
11/19/2018 and have a term of 5 years
22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Company Policies and Procedures
Although the Board
has not adopted a written policy or procedure for the review,
approval and ratification of related person transactions, the
charter of the Audit Committee provides that the Audit Committee is
responsible for reviewing and approving, on an ongoing basis, any
proposed transaction with any related person for which disclosure
and/or approval is required under applicable law, including
pursuant to rules promulgated by the SEC. Currently, this review
and approval requirement applies to any transaction to which we
will be a party, in which the amount involved exceeds the lesser of
$120,000 or one percent of the average of our total assets at year
end for the last two completed fiscal years, and in which any of
the following persons will have a direct or indirect material
interest: (a) any of our directors or executive officers; (b) any
director nominee; (c) any security holder who is known to us to
own, of record or beneficially, five percent or greater of any
class of our voting securities; or (d) any member of the immediate
family (as defined in Item 404 of Regulation S-K) of any of the
persons described in the foregoing clauses
(a)–(c).
In the
event that management becomes aware of any related party
transaction, management will present information regarding such
transaction to the Audit Committee for review and approval. In
addition, the Audit Committee periodically reviews and considers
with management the disclosure requirements relating to
transactions with related persons and the potential existence of
any such transaction.
Transactions with Related Persons
None.
23
EQUITY COMPENSATION
PLAN
INFORMATION
We
currently maintain one compensation plan: the 2016 Equity
Compensation Plan (the “
2016
Plan
”). The 2016 Plan was approved by the Board on
January 29, 2016 and received shareholder approval on July 12,
2017. The 2016 Plan authorizes the issuance of 5,000,000 shares of
Common Stock. On August 25, 2015, the Board terminated our 2008
Stock Option and Restricted Stock Plan (the “
2008 Plan
”), which we had
maintained previously and which our shareholders had approved.
Accordingly, we will issue future awards under the 2016
Plan.
The
following table provides information as of December 31, 2018 with
respect to compensation plans under which our equity securities are
authorized for issuance:
|
Plan
Category
|
|
Number of
securities to be issued upon exercise of outstanding options,
warrants and rights
|
|
|
Weighted-average
exercise price of outstanding options, warrants and
rights
|
|
|
Number of
securities remaining available for future issuance under equity
compensation plans(3)
|
|
|
|
Equity
compensation plans approved by security holders
|
|
320,000
|
(1)
|
|
$
|
0.52
|
|
|
4,180,000
|
|
|
Equity
compensation plans not approved by security
holders
|
|
15,425,000
|
(2)
|
|
$
|
0.36
|
|
|
—
|
|
|
Total
|
|
15,745,000
|
|
|
$
|
0.36
|
|
|
—
|
|
|
(1)
|
Prior
to August 25, 2015, we granted awards under the 2008
Plan.
|
|
(2)
|
Represents
shares of common stock issuable upon the exercise of warrants
issued to executive officers, employees and consultants in exchange
for services rendered.
|
|
(3)
|
On July
7, 2017, the 2016 Plan received shareholder approval, which permits
the grant up to 5,000,000 shares of common stock
|
24
PROPOSAL 2:
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The
Audit Committee has selected Wolinetz, Lafazan & Company, P.C.
as our independent registered public accounting firm for the fiscal
year ending December 31, 2019, and has further directed that
management submit the selection of the independent registered
public accounting firm for ratification by the shareholders at the
Annual Meeting. Wolinetz, Lafazan & Company, P.C. has served in
this capacity for each of the twelve years ended December 31, 2018.
During the twelve fiscal years ended December 31, 2018, there were
no disagreements between us and Wolinetz, Lafazan & Company,
P.C. on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure.
Representatives of
Wolinetz, Lafazan & Company, P.C. are expected to be present at
the Annual Meeting with the opportunity to make a statement if they
desire to do so and are expected to be available to respond to
appropriate questions.
Although
ratification is not required by our Bylaws or otherwise, the Board
is submitting the selection of Wolinetz, Lafazan & Company,
P.C. as our independent registered public accounting firm to our
shareholders for ratification as a matter of good corporate
practice. No determination has been made as to what action the
Board or the Audit Committee would take if shareholders do not
ratify the appointment. Even if the appointment is ratified,
however, the Audit Committee may, in its discretion, direct the
appointment of a different independent registered public accounting
firm at any time during the year if the Audit Committee determines
that such a change would be in our best interests and the best
interests of our shareholders.
Principal Accountant Fees and Services
The
following table shows the fees that were billed for audit and other
services provided by Wolinetz, Lafazan & Company, P.C. during
the 2018 and 2017 fiscal years:
|
|
For the Fiscal
Years Ended
December
31,
|
|
|
|
2018
|
2017
|
|
Audit
Fees
(1)
|
$
108,000
|
$
99,000
|
|
Audit-Related
Fees
(2)
|
—
|
—
|
|
Tax
Fees
(3)
|
—
|
—
|
|
All Other
Fees
(4)
|
—
|
—
|
|
Total
|
$
108,000
|
$
99,000
|
(1)
Audit Fees
—Audit fees represent the professional
services rendered for the audit of our annual financial statements
and the review of our financial statements included in quarterly
reports, along with services normally provided by the accounting
firm in connection with statutory and regulatory filings or
engagements.
(2)
Audit-Related Fees
—Audit-related fees represent
professional services rendered for assurance and related services
by Wolinetz, Lafazan & Company, P.C. that were reasonably
related to the performance of the audit or review of our financial
statements that are not reported under audit fees.
(3)
Tax Fees
—Tax fees represent professional services
rendered by the accounting firm for tax compliance, tax advice, and
tax planning.
(4)
All Other Fees
—All other fees represent fees billed
for products and services provided by Wolinetz, Lafazan &
Company, P.C. other than the services reported for the other
categories.
25
Pre-Approval Policies and Procedures of the Audit
Committee
Consistent with the
rules and regulations promulgated by the SEC, the Audit Committee
approves the engagement of our independent registered public
accounting firm and is also required to pre-approve all audit and
non-audit expenses. Prior to engaging its accountants to perform
particular services, the Audit Committee obtains an estimate for
the service to be performed. All of the services described above
were approved by the Audit Committee in accordance with its
procedure.
Vote Required
The
votes cast favoring the matter must exceed the votes cast at the
Annual Meeting opposing the matter in order to approve Proposal 2.
Abstentions will not be counted as either votes cast for or against
Proposal 2.
Board Recommendation
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE
RATIFICATION OF THE APPOINTMENT OF
WOLINETZ, LAFAZAN & COMPANY,
P.C.
AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM.
26
PROPOSAL 3:
APPROVAL OF AN AMENDMENT TO OUR RESTATED ARTICLES OF INCORPORATION,
AS AMENDED, TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF OUR
COMMON STOCK FROM 200,000,000 TO 250,000,000
Our
Board has adopted resolutions to authorize the Board, in its sole
direction, to amend our Restated Articles of Incorporation, as
amended, to increase the number of authorized shares of our Common
Stock from 200,000,000 to 250,000,000 (the “
Authorized Shares Increase
”), and
direct such proposal to be submitted to the holders of our Common
Stock and Series A Preferred Stock, each voting as a separate
class, for approval.
The
articles of amendment to our Restated Articles of Incorporation, as
amended, to effect the Authorized Shares Increase, if approved by
the shareholders, will be substantially in the form set forth on
Appendix A
to this
Proxy Statement (subject to any changes required by applicable law
or deemed necessary or advisable by the Board). If approved by the
holders of our Common Stock and Series A Preferred Stock, the
Authorized Shares Increase proposal would permit (but not require)
our Board to effect an increase in the number of authorized shares
of our Common Stock at any time prior to twelve months from the
date of shareholder approval.
Our
Board reserves the right to elect to abandon the Authorized Shares
Increase, if it determines, in its sole discretion, that the
Authorized Shares Increase is no longer in our best interests and
the best interests of our shareholders.
Background and Reasons for the Authorized Shares Increase;
Potential Consequences of the Authorized Shares
Increase
If this
Proposal 3 is approved, the additional shares of our Common Stock
which would be authorized by the Authorized Shares Increase would
provide additional shares that will be available for use by our
Board as it deems appropriate or necessary. The additional shares
could be used, among other things, for public or private financings
to raise additional capital, for the declaration of stock splits or
stock dividends, for acquisitions of other companies, for the
expansion of business operations, or for the issuance of shares of
Common Stock upon the potential exercise of our outstanding
warrants or other warrants to be granted in the future. However, we
have no specific plans or agreements at this time with respect to
any additional acquisitions or financing transactions and no
assurances can be given that an acquisition or financing
transaction or transactions will take place or will be available on
terms that are favorable to us. Other than as set forth herein,
there are currently no plans, agreements, arrangements, or
understanding, for the issuance of additional shares of our Common
Stock.
The
issuance of additional shares of our Common Stock may, among other
things, have a dilutive effect on the earnings per share and on the
equity and voting power of existing holders of our Common Stock and
may adversely affect the market price of our Common Stock. The
increase in the authorized number of shares of our Common Stock
could also have an anti-takeover effect as the availability for
issuance of additional shares of Common Stock could discourage, or
make more difficult, efforts to obtain control of the Company. For
example, without further shareholder approval, our Board could
strategically sell shares of our Common Stock in a private
transaction to purchasers who would oppose a takeover. In addition,
because shareholders do not have preemptive rights, the rights of
existing shareholders may (depending on the particular
circumstances in which the additional shares of Common Stock are
issued) be diluted by any such issuance and increase the potential
cost to acquire control of the Company. Although our Board was
motivated by business and financial considerations in approving the
Authorized Shares Increase, and not by the threat of any attempt to
accumulate shares or otherwise gain control of the Company,
shareholders should nevertheless be aware that approval of the
Authorized Shares Increase could facilitate our efforts to deter or
prevent changes of control in the future if the mergers are not
consummated. Our Board does not intend to issue any additional
shares of Common Stock except on terms that it deems to be in the
best interest of the Company and our shareholders.
Accordingly, for
the reasons discussed above, we believe that effecting the
Authorized Shares Increase is in our best interests and the best
interests of our shareholders.
27
Procedure and Board Discretion to Implement the Authorized Shares
Increase
The
Authorized Shares Increase, if approved by our shareholders, would
become effective upon the filing of an articles of amendment to our
Restated Articles of Incorporation, as amended, with the Department
of State of the State of Florida. The exact timing of the
filing of the articles of amendment that will effect the Authorized
Shares Increase will be determined by our Board based on its
evaluation as to when, if at all, such action will be the most
advantageous to us and our shareholders. In addition, our
Board reserves the right, notwithstanding shareholder approval and
without further action by the shareholders, to elect not to proceed
with the Authorized Shares Increase if, at any time prior to filing
the articles of amendment to our Restated Articles of
Incorporation, as amended, our Board, in its sole discretion,
determines that it is no longer in our best interest and the best
interests of our shareholders to proceed with the Authorized Shares
Increase. If the articles of amendment effecting the
Authorized Shares Increase have not been filed with the Department
of State of the State of Florida by the close of business twelve
months from the date of shareholder approval, our Board will
abandon the Authorized Shares Increase.
Vote Required
The
votes cast by the holders of the Common Stock and the Series A
Preferred Stock, each voting as a separate class, favoring the
matter must exceed the votes cast opposing the matter. Abstentions
will not be counted as either votes cast for or against Proposal
3.
If this
Proposal 3 is approved, the Authorized Shares Increase will become
effective upon the filing with the Department of State of the State
of Florida of articles of amendment to our Restated Articles of
Incorporation, as amended, substantially in the form set forth in
Appendix A
hereto.
The timing of such filing is subject to review and final approval
by our Board, and our Board reserves the right to not implement the
Authorized Shares Increase, even if Proposal 3 is approved by our
shareholders.
Board Recommendation
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL
OF THE AMENDMENT TO OUR RESTATED ARTICLES OF INCORPORATION, AS
AMENDED, TO IMPLEMENT THE AUTHORIZED SHARES INCREASE.
28
PROPOSAL 4:
APPROVAL OF AN AMENDMENT TO OUR RESTATED ARTICLES OF INCORPORATION,
AS AMENDED, TO IMPLEMENT A REVERSE STOCK SPLIT
Our
Board has adopted resolutions to authorize the Board, in its sole
direction, to amend our Restated Articles of Incorporation, as
amended, to effect a reverse stock split of our issued and
outstanding Common Stock, as well as our issued and outstanding
Series A Preferred Stock, each at a ratio of between 1-for-2 and
1-for-20 (the “
Reverse Stock
Split
”) to meet the minimum bid price required to list
our Common Stock on a national stock exchange, as described below,
and direct such proposal to be submitted to the holders of our
Common Stock and Series A Preferred Stock, each voting as a
separate class, for approval.
We
previously solicited and received shareholder approval at our 2018
Annual Meeting of Shareholders for an amendment to our Restated
Articles of Incorporation, as amended, to effect a reverse stock
split of our issued and outstanding Common Stock, as well as our
issued and outstanding Series A Preferred Stock, each at a ratio of
between 1-for-2 and 1-for-20 (the “
Prior
Proposal
”). The Prior Proposal
provided that our Board would have discretion to effect such a
reserve stock split at any time within twelve months from the date
of shareholder approval, which we received on September 18, 2018.
In its discretion, our Board opted not to implement such a reverse
stock split during such twelve-month period. Notwithstanding, our
Board believes that it is in our best interests and the best
interests of our shareholders to submit this Proposal 4 for the
Reverse Stock Split for approval by our shareholders, which is
substantially identical to the Prior Proposal.
The
articles of amendment to our Restated Articles of Incorporation, as
amended, to effect the Reverse Stock Split of our issued and
outstanding Common Stock and Series A Preferred Stock, if approved
by the shareholders, will be substantially in the form set forth on
Appendix B
to this
Proxy Statement (subject to any changes required by applicable law
or deemed necessary or advisable by the Board). If approved by the
holders of our Common Stock and Series A Preferred Stock, the
Reverse Stock Split proposal would permit (but not require) our
Board to effect a reverse stock split of our issued and outstanding
Common Stock and Series A Preferred Stock at any time prior to
twelve months from the date of shareholder approval at a ratio of
between 1-for-2 and 1-for-20, with the exact ratio to be set at a
whole number within this range as determined by our Board in its
sole discretion. We believe that enabling our Board to
implement the Reverse Stock Split and set the ratio within the
stated range will provide us with the flexibility to implement the
Reverse Stock Split in a manner designed to maximize the
anticipated benefits for our shareholders, including satisfying the
requirements to list our Common Stock on one of the national
securities exchanges. In determining whether to effect the
Reverse Stock Split following the receipt of shareholder approval,
our Board may consider, among other things, factors such
as:
●
the initial listing
requirements of various securities exchanges;
●
the historical
trading price and trading volume of our Common Stock;
●
the number of
shares of our Common Stock and Series A Preferred Stock
outstanding;
●
the then-prevailing
trading price and trading volume of our Common Stock and the
anticipated impact of the Reverse Stock Split on the trading market
for our Common Stock;
●
the anticipated
impact of the Reverse Stock Split ratio on our ability to reduce
administrative and transactional costs; and
●
prevailing general
market and economic conditions.
Our
Board reserves the right to elect to abandon the Reverse Stock
Split, if it determines, in its sole discretion, that the Reverse
Stock Split is no longer in our best interests and the best
interests of our shareholders.
29
Upon
effectiveness of the Reverse Stock Split, every twenty shares,
assuming the ratio is 1-for-20, of Common Stock and Series A
Preferred Stock will be combined into one share of Common Stock or
Series A Preferred Stock, respectively. Any fractional shares will
be rounded up to the next whole number. The actual number of
outstanding shares of our Common Stock and Series A Preferred Stock
after giving effect to the Reverse Stock Split, however, will
depend on the ratio that is ultimately determined by our
Board.
Background and Reasons for the Reverse Stock Split; Potential
Consequences of the Reverse Stock Split
Our
Board is submitting the Reverse Stock Split to our shareholders for
approval with the primary intent of increasing the market price of
our Common Stock to enhance our ability to meet the initial listing
requirements of a national securities exchange. We currently do not
have any plans, arrangements or understandings, written or oral, to
issue any of the authorized but unissued shares that would become
available as a result of the Reverse Stock Split. In addition
to increasing the market price of our Common Stock, the Reverse
Stock Split would also reduce certain of our costs, as discussed
below. Accordingly, for these and other reasons discussed
below, we believe that effecting the Reverse Stock Split is in our
best interests and the best interests of our
shareholders.
We
believe that the Reverse Stock Split will enable our ability to
obtain an initial listing on the NYSE MKT LLC or another national
securities exchange. The NYSE MKT LLC requires, among other
items, an initial bid price of least $3.00 per share under
applicable standards. Reducing the number of outstanding shares of
our Common Stock should, absent other factors, increase the
per share market price of our Common Stock, although we cannot
provide any assurance that our minimum bid price would remain above
the required threshold for the NYSE MKT or any other national
securities exchange following the Reverse Stock Split.
Additionally, we
believe that the Reverse Stock Split will make our Common Stock
more attractive to a broader range of institutional and other
investors, as we have been advised that the current market price of
our Common Stock may affect its acceptability to certain
institutional investors, professional investors and other members
of the investing public. Many brokerage houses and
institutional investors have internal policies and practices that
either prohibit them from investing in low-priced stocks or tend to
discourage individual brokers from recommending low-priced stocks
to their customers. In addition, some of those policies and
practices may function to make the processing of trades in
low-priced stocks economically unattractive to
brokers. Moreover, because brokers’ commissions on
low-priced stocks generally represent a higher percentage of the
stock price than commissions on higher-priced stocks, the current
average price per share of Common Stock can result in individual
shareholders paying transaction costs representing a higher
percentage of their total share value than would be the case if the
share price were substantially higher. We believe that the
Reverse Stock Split will make our Common Stock a more attractive
and cost effective investment for many investors, which will
enhance the liquidity of the holders of our Common
Stock.
Reducing the number
of outstanding shares of our Common Stock through the Reverse Stock
Split is intended, absent other factors, to increase the per share
market price of our Common Stock. However, other factors, such
as our financial results, market conditions and the market
perception of our business may adversely affect the market price of
our Common Stock. As a result, there can be no assurance that
the Reverse Stock Split, if completed, will result in the intended
benefits described above, that the market price of our Common Stock
will increase following the Reverse Stock Split or that the market
price of our Common Stock will not decrease in the
future. Additionally, we cannot assure you that the market
price per share of our Common Stock after a Reverse Stock Split
will increase in proportion to the reduction in the number of
shares of our Common Stock outstanding before the Reverse Stock
Split. Accordingly, the total market capitalization of our
Common Stock after the Reverse Stock Split may be lower than the
total market capitalization before the Reverse Stock
Split.
30
Procedure and Board Discretion to Implement the Reverse Stock
Split
The
Reverse Stock Split, if approved by our shareholders, would become
effective upon the filing (the “
Effective Time
”) of an articles of
amendment to our Restated Articles of Incorporation, as amended,
with the Department of State of the State of Florida. The
exact timing of the filing of the articles of amendment that will
effect the Reverse Stock Split will be determined by our Board
based on its evaluation as to when, if at all, such action will be
the most advantageous to us and our shareholders. In addition,
our Board reserves the right, notwithstanding shareholder approval
and without further action by the shareholders, to elect not to
proceed with the Reverse Stock Split if, at any time prior to
filing the articles of amendment to our Restated Articles of
Incorporation, as amended, our Board, in its sole discretion,
determines that it is no longer in our best interest and the best
interests of our shareholders to proceed with the Reverse Stock
Split. If the articles of amendment effecting the Reverse
Stock Split have not been filed with the Department of State of the
State of Florida by the close of business twelve months from the
date of shareholder approval, our Board will abandon the Reverse
Stock Split.
Effect of the Reverse Stock Split on Holders of Outstanding Common
Stock and Series A Preferred Stock
Assuming a Reverse
Stock Split ratio of 1-for-20, twenty shares of our Common Stock
will be combined into one share of Common Stock, twenty shares of
our Series A Preferred Stock will be combined into one share of
Series A Preferred Stock and any fractional shares of each will be
rounded up to the next whole number. The table below shows, as
of the Record Date, the number of shares of Common Stock
outstanding prior to the Reverse Stock Split and the number of
outstanding shares of Common Stock that would result from a (i)
1-for-2 ratio, (ii) 1-for-8 ratio, (iii) 1-for-12 ratio, (iv)
1-for-16 ratio and (v) 1-for-20 ratio, in each case without
giving effect to the treatment of fractional shares:
|
Reverse Stock Split Ratio
|
Number of Shares Authorized
(1)
|
Approximate Number of Shares Issued and
Outstanding
(2)
|
Percentage of
Authorized Common Stock
|
Number of Shares Reserved For Issuance
|
|
Current
shares
|
200,000,000
|
124,700,418
|
62.4
%
|
75,299,582
|
|
1-for-2
|
200,000,000
|
62,350,209
|
31.2
%
|
137,649,791
|
|
1-for-8
|
200,000,000
|
15,587,552
|
7.8
%
|
184,412,448
|
|
1-for-12
|
200,000,000
|
10,391,702
|
5.2
%
|
189,608,299
|
|
1-for-16
|
200,000,000
|
7,793,776
|
3.9
%
|
192,206,224
|
|
1-for-20
|
200,000,000
|
6,235,021
|
3.1
%
|
193,764,979
|
(1)
Based on the number of shares of common stock authorized as of
September 5, 2019.
(2)
Based on the number of shares of common stock outstanding as of
September 5, 2019.
The
table below shows, as of the Record Date, the number of shares of
Series A Preferred Stock outstanding prior to the Reverse Stock
Split and the number of outstanding shares of Series A Preferred
Stock that would result from a (i) 1-for-2 ratio, (ii) 1-for-8
ratio, (iii) 1-for-12 ratio, (iv) 1-for-16 ratio and
(v) 1-for-20 ratio, in each case without giving effect to the
treatment of fractional shares:
|
Reverse Stock Split Ratio
|
Number of Shares Authorized
|
Approximate Number of Shares Issued and
Outstanding
(1)
|
Percentage of
Authorized Series A Preferred Stock
|
Number of Shares Reserved For Issuance
|
|
Current
shares
|
1,000,000
|
510,000
|
51.0
%
|
490,000
|
|
1-for-2
|
1,000,000
|
255,000
|
25.5
%
|
745,000
|
|
1-for-8
|
1,000,000
|
63,750
|
6.4
%
|
936,250
|
|
1-for-12
|
1,000,000
|
42,500
|
4.3
%
|
957,500
|
|
1-for-16
|
1,000,000
|
31,875
|
3.2
%
|
968,125
|
|
1-for-20
|
1,000,000
|
25,500
|
2.6
%
|
974,500
|
(1)
Based on the number of shares of common stock outstanding as of
September 5, 2019.
31
The
Reverse Stock Split will affect all holders of our Common Stock and
Series A Preferred Stock uniformly and will not affect any
shareholder’s percentage ownership interest in the Company,
except that, as described below in “Fractional Shares,”
record holders of Common Stock and Series A Preferred Stock
otherwise entitled to a fractional share as a result of the Reverse
Stock Split will be rounded up to the next whole number. In
addition, the Reverse Stock Split will not affect any
shareholder’s proportionate voting power (subject to the
treatment of fractional shares). Additionally, the par value of our
Common Stock and Series A Preferred Stock will remain
unchanged.
The
Reverse Stock Split may result in some shareholders owning
“odd lots” of less than 100 shares of Common
Stock. Odd lot shares may be more difficult to sell, and
brokerage commissions and other costs of transactions in odd lots
are generally somewhat higher than the costs of transactions in
“round lots” of even multiples of 100
shares.
After
the Effective Time, our Common Stock will have a new Committee on
Uniform Securities Identification Procedures (“
CUSIP
”) number, which is a number
used to identify our equity securities, and stock certificates with
the older CUSIP numbers will need to be exchanged for stock
certificates with the new CUSIP numbers by following the procedures
described below. After the Reverse Stock Split, we will
continue to be subject to the periodic reporting and other
requirements of the Exchange Act. Our Common Stock will
continue to be listed on the OTCQX under the symbol
“TOMZ,” subject to any decision of our Board to list
our securities on a different OTC marketplace or a national
securities exchange. There is no assurance, however, that our
Common Stock will be approved for quotation or listing on any such
marketplace or exchange.
Beneficial Holders of Common Stock (i.e., shareholders who hold in
street name)
Upon
the implementation of the Reverse Stock Split, we intend to treat
shares held by shareholders through a bank, broker, custodian or
other nominee in the same manner as registered shareholders whose
shares are registered in their names. Banks, brokers, custodians or
other nominees will be instructed to effect the Reverse Stock Split
for their beneficial holders holding our Common Stock in street
name. However, these banks, brokers, custodians or other nominees
may have different procedures than registered shareholders for
processing the Reverse Stock Split. Shareholders who hold shares of
our Common Stock with a bank, broker, custodian or other nominee
and who have any questions in this regard are encouraged to contact
their banks, brokers, custodians or other nominees.
Registered “Book-Entry” Holders of Common Stock (i.e.
shareholders that are registered on the transfer agent’s
books and records but do not hold stock certificates)
Certain
of our registered holders of Common Stock may hold some or all of
their shares electronically in book-entry form with our transfer
agent. These shareholders do not have stock certificates
evidencing their ownership of the Common Stock. They are,
however, provided with a statement reflecting the number of shares
registered in their accounts.
Shareholders who
hold shares electronically in book-entry form with our transfer
agent will not need to take action (the exchange will be automatic)
to receive whole shares of Common Stock upon the Reverse Stock
Split, subject to adjustment for treatment of fractional
shares.
Holders of Certificated Shares of Common Stock
Shareholders
holding shares of our Common Stock in certificated form will be
sent a transmittal letter by our transfer agent after the Effective
Time. The letter of transmittal will contain instructions on
how a shareholder should surrender his, her or its
certificate(s) representing shares of our Common Stock (the
“
Old
Certificates
”) to the transfer agent in exchange for
certificates representing the appropriate number of whole shares of
post-Reverse Stock Split Common Stock (the “
New Certificates
”). No New
Certificates will be issued to a shareholder until such shareholder
has surrendered all Old Certificates, together with a properly
completed and executed letter of transmittal, to our transfer
agent. No shareholder will be required to pay a transfer or
other fee to exchange his, her or its Old
Certificates. Shareholders will then receive a New
Certificate(s) representing the number of whole shares of
Common Stock that they are entitled as a result of the Reverse
Stock Split, subject to the treatment of fractional shares
described below. Until surrendered, we will deem outstanding
Old Certificates held by shareholders to be cancelled and only to
represent the number of whole shares of post-Reverse Stock Split
Common Stock to which these shareholders are entitled, subject to
the treatment of fractional shares. Any Old Certificates
submitted for exchange, whether because of a sale, transfer or
other disposition of stock, will automatically be exchanged for New
Certificates. If an Old Certificate has a restrictive legend
on the back of the Old Certificate(s), the New Certificate will be
issued with the same restrictive legends that are on the back of
the Old Certificate(s).
32
SHAREHOLDERS
SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT
SUBMIT ANY STOCK CERTIFICATE(S) UNTIL REQUESTED TO DO
SO.
Fractional Shares
We do
not currently intend to issue fractional shares in connection with
the Reverse Stock Split. Therefore, we will not issue
certificates representing fractional shares. In lieu of
issuing fractions of shares, we will round up to the next whole
number.
No cash or other
consideration will be paid in connection with any fractional shares
that would otherwise have resulted from the Reverse Stock
Split.
Effect of the Reverse Stock Split on Employee Plans, Options,
Restricted Stock Awards and Units, Warrants, and Convertible or
Exchangeable Securities
Based
upon the Reverse Stock Split ratio determined by the Board,
proportionate adjustments are generally required to be made to the
per share exercise price and the number of shares issuable upon the
exercise or conversion of all outstanding options, warrants,
convertible or exchangeable securities entitling the holders to
purchase, exchange for, or convert into, shares of Common
Stock. This would result in approximately the same aggregate
price being required to be paid under such options, warrants,
convertible or exchangeable securities upon exercise, and
approximately the same value of shares of Common Stock being
delivered upon such exercise, exchange or conversion, immediately
following the Reverse Stock Split as was the case immediately
preceding the Reverse Stock Split. The number of shares
deliverable upon settlement or vesting of restricted stock awards
will be similarly adjusted, subject to our treatment of fractional
shares. The number of shares reserved for issuance pursuant to
these securities will be proportionately based upon the Reverse
Stock Split ratio, subject to our treatment of fractional
shares.
Accounting Consequences
The
proposed articles of amendment to our Restated Articles of
Incorporation, as amended, will not affect the par value per share
of our Common Stock, which will remain $0.01, or Series A Preferred
Stock, which will also remain $0.01. As a result, as of the
Effective Time, the stated capital attributable to Common Stock and
Series A Preferred Stock and the additional paid-in capital account
on our balance sheet will not change due to the Reverse Stock
Split. Reported per share net income or loss will be higher
because there will be fewer shares of Common Stock and Series A
Preferred Stock outstanding. The shares of Common Stock or Series A
Preferred Stock held in treasury, if any, will also be reduced
proportionately based on the ratio of the Reverse Stock Split. We
will reclassify prior period per share amounts and the Consolidated
Statement of Shareholders’ Equity (Deficiency) for the effect
of the Reverse Stock Split for any prior periods in our financial
statements and reports such that prior periods are comparable to
current period presentation. We do not anticipate that any other
accounting consequences would arise as a result of the Reverse
Stock Split.
Material U.S. Federal Income Tax Consequences
The
following discussion describes the anticipated material United
States Federal income tax consequences to “U.S.
holders” (as defined below) of our capital stock relating to
the Reverse Stock Split. This discussion is based upon the Code,
Treasury Regulations, judicial authorities, published positions of
the Internal Revenue Service (“
IRS
”), and other applicable
authorities, all as currently in effect and all of which are
subject to change or differing interpretations (possibly with
retroactive effect). We have not obtained a ruling from the IRS or
an opinion of legal or tax counsel with respect to the tax
consequences of the reverse stock split. The following discussion
is for information purposes only and is not intended as tax or
legal advice. Each holder should seek advice based on the
holder’s particular circumstances from an independent tax
advisor.
YOU
ARE URGED TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE
APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO YOUR
PARTICULAR SITUATION, AS WELL AS ANY TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING
UNDER THE UNITED STATES FEDERAL ESTATE OR GIFT TAX RULES, OR UNDER
THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING JURISDICTION
OR UNDER ANY APPLICABLE TREATY.
33
For
purposes of this discussion, the term “U.S. holder”
means a beneficial owner of our capital stock who is for United
States Federal income tax purposes:
(a)
an individual
citizen or resident of the United States;
(b)
a corporation (or
other entity treated as a corporation for U.S. Federal income tax
purposes) organized under the laws of the United States, any state,
or the District of Columbia;
(c)
an estate with
income subject to United States Federal income tax regardless of
its source; or
(d)
a trust that (i) is subject to
primary supervision by a United States court and for which United
States persons control all substantial decisions or (ii) has a
valid election in effect under applicable Treasury Regulations to
be treated as a United States person.
This
discussion assumes that our capital stock is held as a capital
asset within the meaning of Code Section 1221. This discussion
does not address all of the tax consequences that may be relevant
to a particular shareholder or to shareholders that are subject to
special treatment under United States Federal income tax laws
including, but not limited to, banks, financial institutions,
tax-exempt organizations, insurance companies, regulated investment
companies, real estate investment trusts, entities such as
partnerships or s-corporations that are treated as
“flow-through” entities, or entities that are
disregarded as separate from their owners for tax purposes, persons
that are broker-dealers, traders in securities who elect the
mark-to-market method of accounting for their securities, or
shareholders holding their shares of our capital stock as part of a
“straddle,” “hedge,” “conversion
transaction,” or other integrated transaction, U.S.
expatriates, persons subject to the alternative minimum tax, to
persons whose shares constitute “qualified small business
stock” for purposes of Code section 1202, or persons who hold
their capital stock through individual retirement or other
tax-deferred accounts. This discussion also does not address the
tax consequences to us, or to shareholders that own 5% or more of
our capital stock, are affiliates of the Company, or are not U.S.
holders. In addition, this discussion does not address other United
States Federal taxes (such as gift or estate taxes or alternative
minimum taxes), the tax consequences of the reverse stock split
under state, local, or foreign tax laws or certain tax reporting
requirements that may be applicable with respect to the reverse
stock split. No assurance can be given that the IRS would not
assert, or that a court would not sustain, a position contrary to
any of the tax consequences set forth below.
If a
partnership (or other entity treated as a partnership for United
States Federal income tax purposes) is a shareholder, the tax
treatment of a partner in the partnership, or any equity owner of
such other entity will generally depend upon the status of the
person and the activities of the partnership or other entity
treated as a partnership for United States Federal income tax
purposes.
We
believe that the reverse stock split will qualify as a
“reorganization” under Section 368(a)(1)(E) of the
Code. Accordingly, provided that the fair market value of the
post-reverse stock split shares is equal to the fair market value
of the pre-reverse stock split shares surrendered in the reverse
stock split:
●
A U.S. holder will
not recognize any gain or loss as a result of the reverse stock
split;
●
A U.S.
holder’s aggregate tax basis in his, her, or its post-reverse
stock split shares will be equal to the aggregate tax basis in the
pre-reverse stock split shares exchanged therefor;
●
A U.S.
holder’s holding period for the post-reverse stock split
shares will include the period during which such shareholder held
the pre-reverse stock split shares surrendered in the reverse stock
split; and
●
For purposes of the
above discussion of the basis and holding periods for shares of our
capital stock, and except as provided therein, holders who acquired
different blocks of our capital stock at different times for
different prices must calculate their basis and holding periods
separately for each identifiable block of such stock exchanged,
converted, canceled or received in the reverse stock
split.
34
Vote Required
The
votes cast by the holders of the Common Stock and the Series A
Preferred Stock, each voting as a separate class, favoring the
matter must exceed the votes cast opposing the matter. Abstentions
will not be counted as either votes cast for or against Proposal
4.
If this
Proposal 4 is approved, the reverse stock split will become
effective upon the filing with the Department of State of the State
of Florida of articles of amendment to our Articles of
Incorporation, as amended, substantially in the form set forth in
Appendix B
hereto.
The timing of such filing and the exact ratio of the Reverse Stock
Split are subject to review and final approval by our Board and our
Board reserves the right to not implement the Reverse Stock Split,
even if Proposal 4 is approved by our shareholders.
Board Recommendation
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL
OF THE AMENDMENT TO OUR RESTATED ARTICLES OF INCORPORATION, AS
AMENDED, TO IMPLEMENT A REVERSE STOCK SPLIT.
35
OTHER MATTERS
The Board and
management do not know of any other matters that will be presented
for consideration at the Annual Meeting. If any other matters are
properly brought before the Annual Meeting, the Proxy Holder will
vote on such matters in accordance with his best
judgment.
SHAREHOLDER PROPOSALS FOR 2020 ANNUAL MEETING
To be
considered for inclusion in next year’s Proxy Statement,
shareholder proposals must be received at our principal executive
offices no later than the close of business on Friday, May 22,
2020, in accordance with Rule 14a-8 promulgated under the Exchange
Act. However, if the date of the next annual meeting is changed by
more than 30 days from the anniversary of this year’s Annual
Meeting, then, to be considered for inclusion in the Proxy
Statement relating to next year’s annual meeting, notice of a
shareholder proposal will need to be received by us in a reasonable
amount of time before we begin to send our proxy materials for the
2020 annual meeting.
If a
shareholder wishes to present a shareholder proposal at our next
annual meeting that is not intended to be included in the Proxy
Statement, we must receive such proposal within a reasonable time
before we begin to print and send our proxy materials in connection
with such annual meeting. Under Rule 14a-4(c) under the Exchange
Act, which governs our use of discretionary proxy voting authority
with respect to shareholder proposals that are not included in our
proxy solicitation materials pursuant to Rule 14a-8 of the Exchange
Act, if we do not receive the shareholder’s notice of intent
to present such a proposal at our 2020 annual meeting within a
reasonable time before we begin to print and send our proxy
materials in connection with such annual meeting, then our
management proxies will have the right to exercise their
discretionary authority in connection with the matter submitted by
the shareholders, without discussion of the matter in the Proxy
Statement. However, if the date of our 2020 annual meeting is
changed by more than 30 days from the anniversary of this
year’s Annual Meeting, then notice will need to be received
by us not earlier than the close of business on the 90th day prior
to such annual meeting and not later than the close of business on
the later of the 60th day prior to such annual meeting or, in the
event public announcement of the date of such annual meeting is
first made by us fewer than 70 days prior to the date of such
annual meeting, the close of business on the 10th day following the
day on which we made the first public announcement of the date of
such meeting.
Any
proposal must comply with the requirements as to form and substance
established by the SEC for such proposal to be included in our
Proxy Statement. We reserve the right to exclude shareholder
proposals pursuant to SEC rules, or if untimely. If a shareholder
nominates a director candidate, in order for such nomination to be
valid and acceptable, all information required to be provided under
Regulation 14A under the Exchange Act and requested by the Board
concerning such candidate must be furnished within a reasonable
time prior to the above deadline for shareholder
proposals.
All
notices of intention to present a proposal at the 2020 annual
meeting should be addressed to our Chief Executive Officer at TOMI
Environmental Solutions, Inc., 9454 Wilshire Blvd., Penthouse,
Beverly Hills, CA 90212 and to ensure prompt receipt by us, such
notices should be sent to us via certified mail, return receipt
requested. We reserve the right to reject, rule out of order, or
take other appropriate action with respect to any proposal that
does not comply with these and other applicable requirements. Any
shareholder proposal for next year’s annual meeting submitted
after the deadlines described above will not be considered filed on
a timely basis. For proposals that are not timely filed, we retain
discretion to vote the proxies we receive. For proposals that are
timely filed, we retain discretion to vote the proxies we receive,
provided that (i) we include in our Proxy Statement advice on the
nature of the proposal and how we intend to exercise our voting
discretion and (ii) the proponent does not issue a Proxy
Statement.
36
DELIVERY OF DOCUMENTS TO SECURITY HOLDERS SHARING AN
ADDRESS
The SEC
has adopted rules that permit companies and intermediaries such as
brokers to satisfy delivery requirements for Proxy Statements with
respect to two or more shareholders sharing the same address by
delivering a single Proxy Statement addressed to those
shareholders. This process, which is commonly referred to as
“householding,” potentially provides extra convenience
for shareholders and cost savings for companies. We and some
brokers deliver a single Proxy Statement to multiple shareholders
sharing an address unless contrary instructions have been received
from the affected shareholders. Once you have received notice from
your broker or us that they are or we will be householding
materials to your address, householding will continue until you are
notified otherwise or until you revoke your consent. If, at any
time, you no longer wish to participate in householding and would
prefer to receive a separate Proxy Statement, or if you currently
receive multiple Proxy Statements and would prefer to participate
in householding, please notify your broker if your shares are held
in a brokerage account or us if you hold registered shares. You can
notify us by sending a written request to our Chief Executive
Officer at TOMI Environmental Solutions, Inc., 9454 Wilshire Blvd.,
Penthouse, Beverly Hills, CA 90212 or by calling us at
1-800-525-1698.
IMPORTANT
Your
vote at this year’s Annual Meeting is important, no matter
how many or how few shares of Voting Stock you own. Please sign and
date the enclosed Proxy Card and return it in the enclosed
postage-paid envelope promptly.
Only
your latest dated, signed Proxy Card will be counted. Any proxy may
be revoked at any time prior to its exercise at the Annual Meeting
as described in this Proxy Statement.
37
Appendix A
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
TOMI ENVIRONMENTAL SOLUTIONS, INC.
TOMI ENVIRONMENTAL SOLUTIONS, INC.
, a
Florida corporation (the “
Company
”), hereby adopts
the following Articles of Amendment to its Articles of
Incorporation, as amended on September 19, 2011, pursuant to the
provisions of the Florida Business Corporation Act:
1.
Amendment
. The
first sentence of Article IV is hereby deleted in its entirety and
replaced with the following (the “
Amendment
”):
“The company
is authorized to issue 250,000,000 shares of Common Stock (the
“
Common
Stock
”).”
2.
Approval of
Amendment
. The Amendment was approved and adopted by all of
the directors of Company by written consent on __________ __,
2019 and was approved and adopted by the required vote of the
shareholders of the Company on __________ __,
2019.
3.
Effective Time and Date of
Amendment
. The Amendment shall become effective as of the
close of business on __________ __, 201_.
IN
WITNESS WHEREOF, the undersigned has executed these Articles of
Amendment as of this ____ day of __________, 2019.
|
TOMI
ENVIRONMENTAL SOLUTIONS, INC.
|
||
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
Halden
S. Shane
|
|
Title:
|
|
Chief
Executive Officer
|
A-
1
Appendix B
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
TOMI ENVIRONMENTAL SOLUTIONS, INC.
TOMI ENVIRONMENTAL SOLUTIONS, INC.
, a
Florida corporation (the “
Company
”), hereby adopts
the following Articles of Amendment to its Articles of
Incorporation, as amended on September 19, 2011, pursuant to the
provisions of the Florida Business Corporation Act:
1.
Amendment
. The
provisions of Article IV immediately following the first sentence
are hereby deleted in their entirety and replaced with the
following (the “
Amendment
”):
“The par
value of the Common Stock remains $0.01 per share.
The
company is authorized to issue 1,000,000 shares of cumulative,
convertible $0.01 Preferred A Stock (the “
Series A Preferred
Stock
”). The Series A Preferred Stock (as adjusted in
connection with the Reverse Stock Split (as defined below) and any
reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Series A
Preferred Stock that occur after the date hereof) is convertible
into shares of Common Stock at a conversion ratio of one share of
Series A Preferred Stock for one share of Common Stock (as adjusted
in connection with the Reverse Stock Split (as defined below) and
any reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock
that occur after the date hereof). The Series A Preferred Stock has
no dividend attached.
The
company is authorized to issue 4,000 shares of Series B Preferred
Stock (the “
Series B
Preferred Stock
”). The Series B Preferred Stock shall
be convertible at an exchange rate of 200 shares of Common Stock
for each share of Series B Preferred Stock and have a stated value
per share of $1,000. The Series B Preferred Stock shall carry a
cumulative dividend of 7.5% per annum and shall be senior in
liquidation preference to the Common Stock and equal in liquidation
preference to all other authorized class of preferred stock. The
dividend is payable in kind, at the election of the
company.
On the
close of business on the date these Articles of Amendment are filed
with the Florida Secretary of State (the “
Effective Time
”), (i)
each ____ (__) shares of Common Stock issued and outstanding
or held by the company in treasury stock immediately prior to the
Effective Time shall, automatically and without any action on the
part of the respective holders thereof or the company, be combined
and converted into one (1) share of validly issued, fully paid
and non-assessable Common Stock, subject to the treatment of
fractional share interests as described below; and (ii) each ____
(__) shares of Series A Preferred Stock issued and outstanding
or held by the company in treasury stock immediately prior to the
Effective Time shall, automatically and without any action on the
part of the respective holders thereof or the company, be combined
and converted into one (1) share of validly issued, fully paid
and non-assessable Series A Preferred Stock, subject to the
treatment of fractional share interests as described below (the
“
Reverse Stock
Split
”). No fractional shares of Common Stock or
Series A Preferred Stock shall be issued in connection with the
Reverse Stock Split. Rather, fractional shares created as a result
of the Reverse Stock Split shall be rounded up to the next whole
number, such that, in lieu of fractional shares, each shareholder
who otherwise would be entitled to receive fractional shares of
Common Stock or Series A Preferred Stock as a result of the Reverse
Stock Split shall instead be entitled to receive the nearest larger
whole number of shares of Common Stock or Series A Preferred Stock,
respectively.”
2.
Approval of
Amendment
. The Amendment was approved and adopted by all of
the directors of Company by written consent on __________ __,
2019 and was approved and adopted by the required vote of the
shareholders of the Company on __________ __,
2019.
3. 3.
Effective Time and Date of
Amendment
. The Amendment shall become effective as of the
close of business on __________ __, 201_.
B-
1
IN
WITNESS WHEREOF, the undersigned has executed these Articles of
Amendment as of this ____ day of __________, 201_.
|
TOMI
ENVIRONMENTAL SOLUTIONS, INC.
|
||
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
Halden
S. Shane
|
|
Title:
|
|
Chief
Executive Officer
|
B-2
TABLE OF CONTENTS