TOMI ENVIRONMENTAL SOLUTIONS, INC.
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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:
☐
Preliminary Proxy
Statement
☐
Confidential, for
Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
☒
Definitive Proxy
Statement
☐
Definitive
Additional Materials
☐
Soliciting Material
Pursuant to §240.14a-12
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):
☒
No fee
required.
☐
Fee computed on
table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1)
Title of each class
of securities to which transaction applies:
(2)
Aggregate number of
securities to which transaction applies:
(3)
Per unit price or
other underlying value of transaction computed pursuant to Exchange
Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4)
Proposed maximum
aggregate value of transaction:
(5)
Total fee
paid:
☐
Fee paid previously
with preliminary materials.
☐
Check box if any
part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
(1)
Amount Previously
Paid:
(2)
Form, Schedule or
Registration Statement No.:
(3)
Filing
Party:
(4)
Date
Filed:
8430 Spires Way, Suite N
Frederick, Maryland 21701
November
17, 2021
Dear
Shareholder:
You are
cordially invited to attend the 2021 Annual Meeting of Shareholders
(the “Annual Meeting”) of TOMI Environmental Solutions,
Inc., which will be conducted in a virtual-only format on Tuesday,
December 21, 2021, at 10:00 a.m., Pacific Time. You may participate
in the annual meeting if you were a shareholder as of the close of
business on Friday, October 29, 2021 or you hold a valid proxy for
the meeting.
The
Annual Meeting will be conducted in a virtual-only format via live
webcast. Shareholders or their proxies can participate in, and vote
at, and ask questions during the annual meeting by visiting
https://www.cstproxy.com/tomimist/2021 and logging in with your
voter control number shown on the accompanying proxy
card.
We have
opted to hold the Annual Meeting virtually in an effort to make it
convenient and safe to attend.
You
will not be able to attend the Annual Meeting in person
. We
plan, however, to provide a brief overview of our business and
provide and update as to our recent development. We also look
forward to answering questions from shareholders at the end of the
meeting. Accompanying this letter is a notice of annual meeting of
shareholders and related proxy statement describing the business to
be conducted 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 able to virtually attend.
Accordingly, I encourage you to vote in advance of the meeting,
which you can do either by marking, signing, dating the
accompanying proxy card and returning it to us using the enclosed
postage-paid envelope, or by visiting the website shown on the
accompanying proxy card and voting via the Internet.
On
behalf of the Board of Directors, thank you for your continued
support of TOMI.
Sincerely,
/s/ Halden S.
Shane
Halden
S. Shane
Chairman of the
Board
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held Virtually at 10:00 a.m., Pacific Time, on Tuesday,
December 21, 2021
The
2021 Annual Meeting of Shareholders (the “Annual
Meeting”) of TOMI Environmental Solutions, Inc., a Florida
corporation (“TOMI,” the “Company” or
“we”), which will be conducted in a virtual-only format
on Tuesday, December 21, 2021, at 10:00 a.m., Pacific Time.
You will not be able to attend the
virtual Annual Meeting in person
. Shareholders of record and
beneficial owners of our common stock will be able to participate
in the meeting, vote, and submit questions during the meeting via
live webcast by visiting https://www.cstproxy.com/tomimist/2021. To
participate in the meeting, you must have your control number that
is shown on your proxy card. The Annual Meeting is being held on a
virtual-only basis for the purpose of considering and acting upon
the following:
1.
to elect the
director nominees named in the accompanying proxy statement to
serve on our board of directors as a Class I director for a
three-year term that will expire at our 2024 annual meeting of
shareholders; and
2.
to ratify the
selection of Rosenberg Rich Baker Berman & Co. as our
independent registered public accounting firm for the fiscal year
ending December 31, 2021.
To
consider and act upon other business that may properly come before
the Annual Meeting and any postponements or adjournments
thereof.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
“FOR” THE ELECTION OF EACH OF THE CLASS I DIRECTOR
NOMINEES LISTED IN PROPOSAL 1 AND “FOR” PROPOSAL
2.
The
board of directors has fixed the close of business on Friday,
October 29, 2021 as the record date for determining the holders of
our common stock and our cumulative $0.01 series A preferred stock
entitled to notice of and to vote at the Annual Meeting and any
postponements or adjournments thereof. Only shareholders of record
at the close of business on the record date are entitled to such
notice and to vote, virtually or by proxy, at the Annual
Meeting.
The
proposals referred to above are more fully described in the
accompanying proxy statement. An annual report to shareholders
outlining our operations during the fiscal year ended December 31,
2020, accompanies this notice of annual meeting and the
accompanying proxy statement.
Your
vote is important. Our goal for the virtual Annual Meeting is to
enable the largest number of our shareholders to participate in the
meeting at the lowest cost to them, while providing substantially
the same access to and exchange with our board of directors and
management as an in-person meeting. To that end, we intend to
observe best practices for virtual shareholder meetings, such as
providing a redundant phone line to listen to the Annual Meeting in
the case of technical difficulty and a toll-free technical support
“help line” that can be accessed by any shareholder who
requires technical or other assistance, ensuring that our
shareholders have substantially the same opportunities to
participate in the virtual Annual Meeting as they would have at an
in-person meeting, and posting a recording of the Annual Meeting
shortly after the meeting. Additional information on how you can
participate in the virtual Annual Meeting to the fullest extent is
set forth in the accompanying proxy statement in the section titled
“Questions and Answers About the Virtual Annual Meeting and
Voting,” beginning on page 2 thereof.
Regardless
of whether you expect to attend the meeting, your vote is important
to us and your shares should be represented at the Annual Meeting.
Accordingly, we encourage you to vote in advance of the meeting,
which you can do either by marking, signing, dating the
accompanying proxy card and returning it to us using the enclosed
postage-paid envelope, or by visiting the website shown on the
accompanying proxy card and voting via the Internet.
BY
ORDER OF THE BOARD OF DIRECTORS,
/s/ Halden S.
Shane
Halden
S. Shane
Chief Executive Officer and Chairman of the Board
Frederick,
Maryland
November 17,
2021
TABLE OF CONTENTS
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PROXY
STATEMENT
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1
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QUESTIONS
AND ANSWERS ABOUT THE VIRTUAL ANNUAL MEETING AND
VOTING
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2
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PROPOSAL
1: ELECTION OF CLASS I DIRECTORS
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8
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INFORMATION
ABOUT THE CLASS I DIRECTOR NOMINEES
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9
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CONTINUING
DIRECTORS
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10
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CORPORATE
GOVERNANCE
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11
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REPORT
OF THE AUDIT COMMITTEE
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15
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NON-EMPLOYEE
DIRECTOR COMPENSATION
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16
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INFORMATION
REGARDING OUR EXECUTIVE OFFICERS
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17
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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18
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EXECUTIVE
COMPENSATION
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20
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OUTSTANDING
EQUITY AWARDS AT 2020 FISCAL YEAR-END
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22
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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24
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EQUITY
COMPENSATION PLAN INFORMATION
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25
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PROPOSAL
2: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
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26
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INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM’S FEES REPORT
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27
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OTHER
MATTERS
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28
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SHAREHOLDER
PROPOSALS FOR 2022 ANNUAL MEETING
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29
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DELIVERY
OF DOCUMENTS TO SECURITY HOLDERS SHARING AN ADDRESS
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30
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IMPORTANT
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31
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TOMI ENVIRONMENTAL SOLUTIONS, INC.
PROXY STATEMENT
2021 ANNUAL MEETING OF SHAREHOLDERS
To Be Held Virtually at 10:00 a.m., Pacific Time, on Tuesday,
December 21, 2021
The
enclosed proxy is furnished in connection with the solicitation of
proxies by the board of directors (the “Board”) of TOMI
Environmental Solutions, Inc., a Florida corporation
(“TOMI,” the “Company,” “we,”
“us” or “our”), for use at the virtual 2021
annual meeting of shareholders (the “Annual Meeting”)
to be held virtually at 10:00 a.m., Pacific Time, on Tuesday,
December 21, 2021, or at any postponements or adjournments of the
Annual Meeting, for the purposes set forth in this proxy statement
(this “Proxy Statement”) and in the accompanying notice
of annual meeting of shareholders.
We are
providing these materials to holders of record of our common stock,
$0.01 par value per share (the “Common Stock”), and/or
our cumulative $0.01 series A preferred stock, $0.01 par value per
share (“Series A Preferred Stock” and, together with
the Common Stock, “Voting Stock”), at 5:00 p.m.,
Eastern Time, on October 29, 2021 (the “Record Date”)
and are first mailing the materials on or about November 17,
2021.
The
Annual Meeting will be conducted in a virtual-only format via live
webcast, which you can access by visiting
https://www.cstproxy.com/tomimist/2021 and logging in with your
voter control number shown on the accompanying proxy
card.
1
QUESTIONS AND ANSWERS ABOUT THE VIRTUAL ANNUAL MEETING AND
VOTING
The
following questions and answers are intended to briefly address
potential questions that our shareholders may have regarding this
Proxy Statement and the Annual Meeting. They are also intended to
provide our shareholders with certain information that is required
to be provided under the rules and regulations of the Securities
and Exchange Commission (the “SEC”). These questions
and answers may not address all of the questions that are important
to you as a shareholder. If you have additional questions about the
Proxy Statement or the Annual Meeting, please see the section
titled “Whom should I contact with other questions?”
below.
Why am I receiving these materials?
We are
providing this Proxy Statement and the accompanying materials in
connection with the solicitation by the Board of proxies to be
voted at the Annual Meeting. You received these materials because
you held shares of our Voting Stock on the Record Date and are
entitled to vote at the Annual Meeting. This Proxy Statement
contains important information for you to consider when deciding
how to vote on the matters brought before the Annual Meeting. You
are invited to attend the virtual Annual Meeting to vote on the
proposals described in this Proxy Statement. However, you do not
need to virtually attend the Annual Meeting to vote your shares of
Voting Stock. Instead, you may vote your shares using one of the
other voting methods described in this Proxy Statement. Regardless
of whether you expect to attend the Annual Meeting, please vote
your shares as soon as possible in order to ensure your
representation at the Annual Meeting.
What is the purpose of the Annual Meeting?
At the
Annual Meeting, our shareholders will be asked to consider and vote
upon the matters described in this Proxy Statement and any other
matters that properly come before the Annual Meeting.
When and where will the Annual Meeting be held?
The
Annual Meeting will be held in a virtual-only format via live
webcast at 10:00 a.m., Pacific Time on Tuesday, December 21, 2021.
Shareholders of record, and beneficial owners of our Voting Stock
who register for the meeting in advance, will be able to
participate in, and vote at, and ask questions during the annual
meeting by visiting https://www.cstproxy.com/tomimist/2021 and
logging in with your voter control number shown on the accompanying
proxy card.
Why is the Annual Meeting being held virtually?
The
Annual Meeting is being held in a virtual-only format in order to
enable participation by the broadest number of shareholders
possible, to save costs compared to a physical meeting, and to keep
everyone safe in light of the global COVID-19 pandemic. We also
believe that a virtual format will enable shareholders to
participate in the Annual Meeting more easily.
What if I have technical or other “IT” problems logging
into or participating during the Annual Meeting
webcast?
We have
established a toll-free technical support “help line”
that can be accessed by any shareholder who experiences any
problems logging into or participating during the Annual Meeting.
If you encounter any difficulties accessing the virtual Annual
Meeting during the check-in or meeting time, please call the
toll-free telephone number that will be shown on the login page for
the virtual Annual Meeting and a member of the technical support
team will assist you.
How can I participate and ask questions at the Annual
Meeting?
We are
committed to ensuring that our shareholders have substantially the
same opportunities to participate in the virtual Annual Meeting as
they would have at an in-person meeting. In order to submit a
question at the Annual Meeting, you will need to login to the
webcast using your control number that is printed on the proxy card
that you received in the mail. Once you are logged in, you may
submit questions online before and during the Annual Meeting. We
encourage you to submit any question that is relevant to the
business of the meeting. All appropriate questions asked during the
Annual Meeting will be read and addressed during the meeting.
Shareholders are encouraged to login to the webcast at least 15
minutes prior to the scheduled start time of the Annual Meeting to
test their internet connectivity.
2
How do I attend a Virtual Annual Meeting?
As a
registered shareholder, you received a notice and access
instruction form or proxy card from Continental Stock Transfer.
Both forms contain instructions on how to attend the virtual annual
meeting including the URL address, along with your control number.
You will need your control number for access. If you do not have
your control number, contact Continental Stock Transfer by phone at
(917) 262-2373, or email at
proxy@continentalstock.com.
You can
pre-register to attend the virtual meeting starting December 13,
2021 at 9:00 a.m. Eastern Time. To pre-register, enter
https://www.cstproxy.com/tomimist/2021 into your browser and enter
your control number, name and email address. Once you pre-register,
you can vote or enter questions in the chat box. At the start of
the meeting, you will need to re-login using your control
number.
Beneficial owners,
who own their investments through a bank or broker, will need to
contact Continental Stock Transfer to receive a control number. If
you plan to vote at the meeting, you will need to have a legal
proxy from your bank or broker, or if you would like to join and
not vote, Continental Stock Transfer will issue you a guest control
number with proof of ownership. In either case, you must contact
Continental Stock Transfer for specific instructions on how to
receive the control number. Continental Stock Transfer may be
contacted at the number or email address above. Please allow up to
72 hours prior to the meeting for processing your control
number.
If you
do not have internet capabilities, you can listen to the meeting by
dialing 1 (877) 770-3647, or outside the U.S. and Canada +1 (312)
780-0854 (standard rates apply), and, when prompted, entering the
pin number 42417960#. Calling this line will not allow you to vote
or enter questions during the meeting.
What is a “proxy”?
The
term “proxy,” when used with respect to a shareholder,
refers to either a person or persons legally authorized to act on
the shareholder’s behalf or a format that allows the
shareholder to vote without attending the virtual Annual Meeting.
Because it is important that as many shareholders as possible be
represented at the Annual Meeting, the Board is asking that you
review this Proxy Statement carefully and then vote by following
the instructions set forth on your proxy card. In voting prior to
the Annual Meeting, you will deliver your proxy to Elissa J. Shane
(the “Proxy Holder”), which means you will authorize
Ms. Shane, as the Proxy Holder, to vote your shares at the Annual
Meeting in the way you instruct. All shares represented by valid
proxies will be voted in accordance with the shareholder’s
specific instructions.
What proposals will be voted on at the Annual Meeting?
Shareholders will
vote on the following proposals at the Annual Meeting:
1.
to elect the
director nominees named in the accompanying proxy statement to
serve on the Board as a Class I director for a three-year term that
will expire at our 2024 annual meeting of shareholders (Proposal
1); and
2.
to ratify the
selection of Rosenberg Rich Baker Berman & Co. as our
independent registered public accounting firm for the fiscal year
ending December 31, 2021 (Proposal 2).
What if another matter is brought before the meeting?
The
Board knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matter is
properly brought before the Annual Meeting, your signed proxy card
will authorize the Proxy Holder to vote on such matters in
accordance with his best judgment.
Who is entitled to vote at the Annual Meeting?
Shareholders of
record at 5:00 p.m., Eastern Time, on the Record Date will be
entitled to vote at the Annual Meeting. As of the Record Date,
there were 19,680,955 shares of our Common Stock and 63,750 shares
of our Series A Preferred Stock outstanding, each of which is
entitled to one vote. Shareholders are not entitled to cumulative
voting rights in the election of directors. As a result, up to a
total of 19,744,705 votes can be cast on each matter presented for
consideration at the Annual Meeting.
3
What does it mean to be a “shareholder of
record”?
If, at
5:00 p.m., Eastern Time, on the Record Date, your shares were
registered directly in your name with our transfer agent,
Continental Stock Transfer & Trust Company, then you are a
“shareholder of record.” As a “shareholder of
record,” you may vote at the virtual Annual Meeting or vote
by proxy. Regardless of whether you plan to attend the Annual
Meeting, we urge you to vote your shares using one of the voting
methods described in this Proxy Statement and the accompanying
proxy card.
What does it mean to be a “beneficial owner” of shares
held in “street name”?
If, at
5:00 p.m., Eastern Time, on the Record Date, your shares of Voting
Stock were held in an account at a broker, bank, or other financial
institution (we refer to each of those organizations as a
“broker”), then you are the “beneficial
owner” of shares held in “street name” and these
proxy materials are being made available to you by that broker. The
broker holding your account is considered the shareholder of record
for purposes of voting at the Annual Meeting. You have the right to
direct your broker on how to vote the shares in your account by
following the instructions printed on the voting instruction form
received from the broker holding such shares.
How do I vote if my shares are held in “street
name”?
If your
shares of Voting Stock are held in “street name,” you
will need to contact Continental Stock Transfer to receive a
control number. You may contact Continental Stock Transfer by phone
at (917) 262-2373, or email at
proxy@continentalstock.com.
If I hold my shares in street name and fail to provide specific
voting instructions to the bank, broker or other institution
holding such shares on my behalf, will my shares still get
voted?
Not on
all matters. If you hold your shares of Voting Stock in street name
and want a vote to be cast on your behalf for all proposals
described in this Proxy Statement, you must submit your specific
voting instructions to the bank, broker or other institution
holding such shares on your behalf in response to the voting
instruction form you receive from such broker.
What is a “broker non-vote”?
A
“broker non-vote” occurs when shares held by a broker
in “street name” for a beneficial owner are not voted
with respect to a proposal because (i) the broker has not received
voting instructions from the stockholder who beneficially owns the
shares and (ii) the broker lacks the authority to vote the shares
at their discretion. Under applicable rules, brokers do not have
the authority to elect the director nominees to serve on the Board
as a Class I directors. As such, a broker may not vote your shares
with respect to such proposals, or any other non-discretionary
matters, without your instructions. If your shares are held of
record by a bank, broker or other nominee, we urge you to give
instructions to your bank, broker or other nominee as to how you
wish your shares to be voted so you may participate in the
shareholder voting on these important matters.
What is the quorum requirement?
A
quorum of shareholders is necessary to hold a valid meeting and
transact business. A quorum will be present at the Annual Meeting
if shareholders holding shares of Voting Stock representing a
majority of the votes entitled to be cast at the Annual Meeting are
present or represented by proxy at the Annual Meeting. On the
Record Date, there were 19,744,705 shares of our Voting Stock
outstanding, each of which is entitled to one vote. As such,
shareholders holding at least 9,872,353 shares of Voting Stock must
be present or represented by proxy at the Annual Meeting in order
to constitute a quorum.
We
count proxies marked “withhold authority,” as to any
director nominee or “abstain,” as to any other
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 is not present, the Annual
Meeting may be adjourned from time to time until a quorum is
obtained.
4
How do I vote my shares?
Shareholders of
record can vote by proxy or by attending the Annual Meeting and
voting, each of which method is further described below. If you
elect to vote by proxy, you can do so via the Internet or by mail,
and your shares will be voted by the Proxy Holder.
●
Voting by
Internet.
If you are a registered shareholder, 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 via the Internet. If you vote via the Internet,
you do not need to return your proxy card. If your shares are held
in “street name,” please follow the instructions
provided on the proxy card or the voting instruction card provided
to you by your broker, bank or other nominee, as applicable, to
determine whether you will be able to vote via the Internet. 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 by the Proxy Holder as instructed on such
proxies. If you vote via the Internet as described above, you need
not also mail a proxy to us.
●
Voting at the Annual
Meeting
. If you are a shareholder of record, you may attend
the Annual Meeting and vote and submit questions during the meeting
via the virtual meeting website located at
https://www.cstproxy.com/tomimist/2021. Instructions on how to
attend and participate via the Internet are included in this Proxy
Statement and the accompanying materials.
YOUR VOTE IS IMPORTANT
. We encourage you
to submit your proxy even if you plan to attend the Annual Meeting,
so that your vote will be counted in the event you later decide not
to attend the Annual Meeting. The method you use to vote will not
limit your right to vote at the Annual Meeting if you decide to
attend the virtual Annual Meeting. If you are the beneficial owner
of shares of Voting Stock held in “street name,” you
must obtain a legal proxy, executed in your favor by your broker,
bank or other nominee, in order to vote at the Annual Meeting, and
you should refer to the information provided by your broker to see
which voting options are available to you and to see what steps you
must follow if you choose to attend the virtual Annual Meeting to
vote your shares.
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 any
subsequent proxy delivered via the Internet) or by delivering
written notice of revocation of your proxy to TOMI Environmental
Solutions, Inc., 8430 Spires Way, Suite N, Frederick, Maryland
21701, Attention: Corporate Secretary, in each case, before the
exercise of the previously delivered proxy at the Annual Meeting.
You may also revoke your proxy by participating in and voting your
shares the virtual Annual Meeting. Attending the virtual Annual
Meeting will not by itself cause your previously granted proxy to
be revoked. If you are a beneficial owner of shares held in street
name, you should contact your bank, broker or other nominee for
instructions as to whether, and how, you can change or revoke your
proxy.
What vote is required to approve the Proposals?
Assuming the
presence of a quorum at the Annual Meeting:
|
Proposal
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Vote Required
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Broker Discretionary Voting Allowed?
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Proposal
1:
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Election
of Class I directors
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Each
Class I director will be elected by a plurality of the votes cast
“FOR” a director nominee’s election, such that
the two director nominees receiving the most “FOR”
votes will be elected as the two Class I directors.
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No
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Proposal
2:
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Ratification
of the appointment of Rosenberg Rich Baker Berman & Co. as our
independent registered public accounting firm
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The
votes cast “FOR” the matter must exceed the votes cast
“AGAINST” the matter.
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Yes
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5
For
purposes of Proposal 1, proxies marked “WITHHOLD
AUTHORITY” with respect to the election of one or more
directors will not be voted with respect to the director or
directors indicated and, as such, will not have an effect in
determining the election results. Similarly, abstentions will have
no effect on the outcome of this proposal.
Proposal 2 will
require the affirmative vote of a majority of the shares virtually
present or represented by proxy at the Annual Meeting and entitled
to vote on the matter. Abstentions will be counted toward the
tabulation of votes present or represented on this proposal, and
will have the same effect as votes against such
proposal.
Proposal 2 is a
“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
Proposal 2, your broker may use its discretion to vote your
uninstructed shares on Proposal 2. A failure by your broker to vote
your uninstructed shares on this Proposal will result in an
abstention, which will have the same effect as a vote against
Proposal 2.
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.
Broker non-votes will have no effect in determining the outcome of
such proposal.
Are there any appraisal rights or dissenters’
rights?
Under
the Florida Business Corporation Act (the “FBCA”), our
shareholders are not entitled to dissenters’ or appraisal
rights with respect to any of the proposals.
How does the Board recommend that I vote?
The
Board recommends that you vote:
●
“
FOR
” the election of each of the
director nominees named in this Proxy Statement to serve on the
Board as a Class I director for a three-year term that will expire
at our 2024 annual meeting of shareholders (Proposal 1);
and
●
“
FOR
” the ratification of the
selection of Rosenberg Rich Baker Berman & Co. as our
independent registered public accounting firm for the fiscal year
ending December 31, 2021 (Proposal 2).
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 thereon. If the Annual
Meeting is postponed or adjourned, your proxy will remain valid and
may be voted at the postponed or adjourned meeting, and you will be
able to revoke your proxy until it is voted at the postponed or
adjourned meeting.
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 on all matters presented in this Proxy
Statement. If you vote via the Internet using the website noted on
your proxy card, you do not need to return your proxy
card.
What if other matters are voted on at the Annual
Meeting?
With
respect to any other matter that properly comes before the Annual
Meeting, shares represented by valid proxies will be voted by the
Proxy Holder in accordance with the Proxy Holder’s best
judgment and in the manner the Proxy Holder 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 Annual Meeting (which is not
now anticipated), your shares will be voted by the Proxy Holder for
any substitute nominee nominated by the Board. On the date this
Proxy Statement was filed with the SEC, the Board did not know of
any other matter to be brought before the Annual
Meeting.
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.
6
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 via the Internet, you will need to enter each of the
voter control numbers shown on your proxy cards. Remember, you may
vote via the Internet or by signing, dating and returning the proxy
card in the postage-paid envelope provided.
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 date of
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 2022 annual
meeting of shareholders should arrange for such proposal to be
delivered to our corporate headquarters at TOMI Environmental
Solutions, Inc., 8430 Spires Way, Suite N, Frederick, Maryland
21701, Attention: Corporate Secretary, no later than July 18, 2022,
in order to be considered for inclusion therein. 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.
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 cards 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 employees of the Company. No additional
compensation will be paid to our directors, officers or other
employees for such services.
Whom should I contact with other questions?
If you
have additional questions about this Proxy Statement or the Annual
Meeting, please contact our investor relations department either by
telephone at (800) 525-1698 or by email to
info@tomimist.com
.
7
PROPOSAL 1:
ELECTION OF CLASS I DIRECTORS
The
Board currently consists of five directors and one vacancy divided
into three classes, with each class holding office for a three-year
term. Each director serves until his or her successor is duly
elected and qualified, or until his or her earlier resignation or
removal. Two Class I directors will be elected to the Board at the
Annual Meeting and, upon such election, there will be five
directors serving on the Board, as there is presently a vacancy on
the Board in a seat reserved for a Class III director.
Upon
the recommendation of the Nominating and Governance Committee of
the Board, the Board has nominated each of Dr. Lim Boh Soon and
Elissa J. Shane for re-election at the Annual Meeting, each to
serve for a three-year term that will expire at our 2024 annual
meeting of shareholders. Dr. Lim and Ms. Shane have consented to
serve if elected. If one or both individuals becomes unavailable to
serve as a director, the Board may designate a substitute nominee.
In that case, the Proxy Holder will vote for the substitute nominee
or nominees designated by the Board. The Board has no reason to
believe that Dr. Lim or Ms. Shane will be unable to serve. There
are no agreements or understandings pursuant to which Dr. Lim or
Ms. Shane, or any of our other directors, was selected to serve as
a director.
All of
our directors are expected to attend the virtual Annual
Meeting.
8
INFORMATION ABOUT THE CLASS I DIRECTOR NOMINEES
The
following section provides information regarding each of the Class
I director nominees, including his or her age, the month and year
in which each he or she first became one of our directors, the
class of our directors to which he or she has been elected, each
committee of the Board on which he or she serves, his or her
professional experience during the past five years, any
directorships with other public companies or registered investment
companies currently or at any time during the past five years held
by him or her, and a description of the particular experience,
qualifications, attributes or skills that led the Board to conclude
that he or she should serve as one of our directors.
|
Name
|
Age
|
Class
|
Serving
Since
|
|
Lim Boh
Soon
(1)(2)(3)
|
65
|
Class
I
|
January
2018
|
|
Elissa J.
Shane
|
42
|
Class
I
|
July
2021
|
____________________
(1)
Member of the Audit
Committee.
(2)
Member of the
Compensation Committee.
(3)
Member of the
Nominating and Governance Committee.
Dr. Lim Boh Soon
Dr. Lim
has served as a member of the Board 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 has been a fellow
of the Singapore Institute of Directors and is currently an
independent non-executive director on the board of one publicly
listed company on the Singapore Stock Exchange. Dr. Lim has served
in various directorship roles throughout the past including with
CSE Global Limited until April 2017, Across Asia Limited (Cayman
Islands) until August 2017, and OUE Commercial REIT Management
Private Limited until September 2019. In addition to his role with
Tomi Environmental Solutions Inc., Dr. Lim holds current
directorship positions with the following companies, Arise Asset
Management Pte, Ltd., Jumbo Group Limited, TPT Corporation (Cayman
Islands), Asri Asset Management Pte. Ltd., EpicQuant Pte. Ltd.,
Kairos Asia Outreach, and TML FinTech Pte. Ltd. Further, 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. We believe
that Dr. Lim’s experience as a director of public companies
and in the finance industry qualifies him to serve on the
Board.
Elissa J. Shane
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 in 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. We believe that Ms. Shane’s experience,
expertise and knowledge of our day-to-day business operations will
contribute significantly to the Board’s oversight functions
of our company.
Vote Required
The two
Class I director nominees receiving the highest number of votes
“FOR” their election at the Annual Meeting shall be
elected to the Board. Abstentions and broker non-votes will have no
effect in determining the results of the voting on the Class I
director nominees at the Annual Meeting.
Proxies
received in response to this solicitation will be voted
“FOR” the election of Dr. Lim and Ms. Shane to the
Board, unless otherwise specified in the proxy. If a Class I
director nominee is unable or refuses to serve as a director, then
the Proxy Holder will vote “FOR” the election of the
substitute nominee or nominees designated by the Board, unless
otherwise specified in the proxy.
Board Recommendation
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
“FOR” THE ELECTION OF EACH OF THE CLASS I DIRECTOR
NOMINEES NAMED IN THIS PROXY STATEMENT.
9
CONTINUING DIRECTORS
The
following section provides information regarding each of our
continuing directors, including his or her age, the month and year
in which each he or she first became one of our directors, the
class of our directors to which he or she has been elected, each
committee of the Board on which he or she serves as of November 17,
2021, his or her professional experience during the past five
years, any directorships with other public companies or registered
investment companies currently or at any time during the past five
years held by him or her, and a description of the particular
experience, qualifications, attributes or skills that led the Board
to conclude that he or she should serve as one of our
directors.
|
Name
|
Age
|
Class(1)
|
Serving Since
|
|
Halden
S. Shane
(6)
|
77
|
Class
III
|
January
2018
|
|
Walter
C. Johnsen
(1)(2)(3)(5)(6)
|
70
|
Class
II
|
January
2016
|
|
Kelly
J. Anderson
(2)(3)(4)(6)
|
54
|
Class
II
|
January
2016
|
(1)
Chairperson of the
Compensation Committee.
(2)
Member of the Audit
Committee.
(3)
Member of the
Nominating and Governance Committee.
(4)
Chairperson of the
Audit Committee.
(5)
Chairperson of
Nominating and Governance Committee.
(6)
The term of our
Class II directors will expire at our 2022 annual meeting of
shareholders and the terms of our Class III director will expire at
our 2023 annual meeting of shareholders.
Dr. Halden S. Shane
Dr.
Shane has been our Chief Executive Officer and Chairman of the
Board since October 15, 2007, when we commenced our current
operations. 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. Dr. Shane brings to our
Board experience in in the medical and finance
industries.
Walter C. Johnsen
Mr.
Johnsen has been one of our directors since January 29, 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 allows him to serve as one of our
directors.
Kelly J. Anderson
Ms.
Anderson has been one of our directors since January 29, 2016. Ms.
Anderson is the Chief Executive Officer of CXO Executive Solutions,
LLC, a provider of executive services. Between 2015 and July 2020,
Ms. Anderson served 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. 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
qualifies her to serve as one of our directors.
10
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 directors. The Board currently consists of five
directors and is divided into three classes, with each class
holding office for a three-year term. Two Class I directors will be
elected to the Board at the Annual Meeting and, upon such election,
there will be five directors serving on the Board, as there is
presently a vacancy on the Board in a seat reserved for a Class III
director. Our bylaws provide that our directors will hold office
until their successors have been duly elected and qualified, or
until their earlier resignation or removal. 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 Nasdaq Capital Market
(“Nasdaq”) under the symbol “TOMZ.” We are
required to comply with the applicable Nasdaq listing standards as
noted below.
On July
30, 2021, Mr. Paul notified the Company that he was resigning as a
director of the Company effective August 2, 2021.
Independence of the Board
As
required by the listing requirements and rules of Nasdaq, a
majority of the members of the Board must qualify as
“independent,” as affirmatively determined by the
Board. The Board annually reviews all relevant business
relationships that any director or director nominee may have with
us, our affiliates, and other companies. The Board also considers
significant non-business relationships disclosed to us. As a result
of its annual review and based upon information requested from and
provided by each director and director nominee concerning his or
her background, employment and affiliations, including family and
other relationships, the Board has affirmatively determined in 2021
that each of Messrs. Johnsen and Paul, Ms. Anderson, and Dr. Lim do
not have any relationships that would interfere with the exercise
of independent judgment in carrying out the responsibilities of a
director and that each of these directors is
“independent” as that term is defined under the
applicable the rules of the SEC and the listing standards of Nasdaq
and any other applicable laws or regulations, except that Mr. Paul
was not independent under Rule 10A-3 under the Exchange Act for
purposes of Audit Committee membership.
In
making these determinations, the Board considered the current and
prior relationships that each non-employee director and director
nominee, or any of his or her family members, has with us, our
management and our independent auditors, and all other facts and
circumstances deemed relevant in determining their independence,
including any relationships described under the heading
“Certain Relationships and Related
Transactions—Transactions with Related
Persons.”
Meetings of the Board
During
the fiscal year ended December 31, 2020, the Board met 5 times and
took action by unanimous written consent 1 time. Each incumbent
director serving during the fiscal year ended December 31, 2020
attended at least 75% 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.
All of our directors who were serving at the time of our 2020
annual meeting attended such meeting.
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 such committee operates under a charter that has been approved
by the Board. We intend to appoint persons to the Board and its
committees as required from time to time to satisfy the corporate
governance requirements of the Nasdaq listing rules. Below is a
description of each committee as of November 17, 2021.
Audit Committee
Our
Audit Committee was established in June 2009 and currently is
comprised of Ms. Anderson, Mr. Johnsen and Dr. Lim. Ms. Anderson
serves as chairperson of the Audit Committee. The Audit Committee
operates under a written charter, which can be found on the
corporate governance section of our investor relations website at
http://investor.tomimist.com/TOMZ. 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.
The
Board has determined that each of the members of our audit
committee satisfies the Nasdaq listing standards and the SEC
independence requirements. Further, the Board has determined that
Ms. Anderson qualifies as an audit committee financial expert
within the meaning of SEC regulations and meets Nasdaq’s
financial sophistication requirements. In making this
determination, the Board has considered Ms. Anderson’s
extensive financial experience and business
background.
The
Audit Committee met 4 times during the fiscal year ended December
31, 2020.
11
Compensation Committee
The
Compensation Committee was established in February 2011 and
currently consists of Mr. Johnsen, Ms. Anderson and Dr. Lim. Mr.
Johnsen serves as chairperson of the Compensation Committee. Mr.
Paul served on the Compensation Committee until his resignation.
The Compensation Committee operates under a written charter, which
can be found on the corporate governance section of our investor
relations website at http://investor.tomimist.com/TOMZ. 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
Board has determined that each of the members of our Compensation
Committee satisfies the Nasdaq listing standards and the SEC
independence requirements, and is a “non-employee
director” as defined in Rule 16b-3 promulgated under the
Exchange Act.
The
Compensation Committee met 3 times during the fiscal year ended
December 31, 2020.
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 Mr. Johnsen and Dr. Lim. Mr. Johnsen
serves as chairperson of the Nominating and Governance Committee.
Mr. Paul served on and as Chairman of the Nominating and Governance
Committee until his resignation. The Nominating and Governance
Committee operates under a written charter, which can be found on
the corporate governance section of our investor relations website
at http://investor.tomimist.com/TOMZ. 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
Board has determined that each of the members of our Nominating and
Governance Committee satisfies the Nasdaq listing standards and the
SEC independence requirements.
The
Nominating and Governance Committee identifies potential director
candidates through a variety of sources, including recommendations
made by members of the Board and members of our executive
management. When appropriate, the Nominating and Governance
Committee may retain a search firm to identify director
candidates.
The
Nominating and Governance Committee charter provides that the
committee will consider, among other things, the applicable
requirements for directors under the Exchange Act, the listing
standards of Nasdaq and applicable state law 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.
12
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. The 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 during the fiscal
year ended December 31, 2020.
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, sets forth
written standards designed to deter wrongdoing and to
promote:
●
honest and ethical
conduct including the ethical handling of actual or apparent
conflicts of interest between personal and professional
relationships;
●
full, fair,
accurate, timely and understandable disclosure in reports and
documents that we file with or submit to the SEC and in other
public communications made by us;
●
compliance with
applicable governmental laws, rules and regulations;
●
the prompt internal
reporting of violations of the Code of Ethics to an appropriate
person or persons identified in the Code of Ethics;
and
●
accountability for
adherence to the Code of Ethics.
Insider Trading and Confidentiality Policy
We have
adopted an insider trading and confidentiality policy that
prohibits our directors, officers, employees, contractors and
consultants from engaging in hedging or monetization transactions
involving our securities.
Board Leadership Structure and Role in Risk Oversight
The
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.
The
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 the
Board and members of senior management to enable the Board to
understand our risk identification, management and mitigation
strategies with respect to areas of potential material
risk.
13
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 the 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 TOMI
Environmental Solutions, Inc., 8430 Spires Way, Frederick, Maryland
21701, Attention: Chief Executive Officer. 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.
14
REPORT OF THE AUDIT COMMITTEE
The
primary responsibility of the Audit Committee is to assist the
Board 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 our independent registered public
accountants;
●
to monitor the
independence of our independent registered public
accountants;
●
to determine the
compensation of our independent registered public
accountants;
●
to pre-approve any
audit services, and any non-audit services permitted under
applicable law, to be performed by our independent registered
public accountants;
●
to review our risk
exposures, the adequacy of related controls and policies with
respect to risk assessment and risk management;
●
to monitor the
integrity of our financial reporting processes and systems of
control regarding our finance, accounting, legal compliance and
information systems; and
●
to facilitate and
maintain an open avenue of communication among the Board, our
management and our 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 our 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 our financial reporting.
The
Audit Committee has discussed with Wolinetz, Lafazan & Company,
P.C. its judgments about the quality, in addition to the
acceptability, of our accounting principles as applied in our
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 our
audited consolidated financial statements as of and for the years
ended December 31, 2020 and 2019.
Based
on the reviews and discussions referred to above, the Audit
Committee recommended to the Board that the audited financial
statements referred to above be included in our Annual Report on
Form 10-K for the year ended December 31, 2020.
Respectfully
submitted,
Kelly J. Anderson, Committee Chairperson
Harold W. Paul
Lim Boh Soon
15
NON-EMPLOYEE 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 the compensation earned by
each non-employee director during the fiscal year ended December
31, 2020. We qualify as a “smaller reporting company”
under the rules promulgated by the Securities and Exchange
Commission, and we have elected to comply with the Director
Compensation disclosure requirements applicable to smaller
reporting companies.
|
Name
|
Fees Earned
or
Paid in
Cash($)
|
Stock
Awards(1)($)
|
All
Other
Compensation($)
|
Total($)
|
|
Harold W.
Paul
(1)
|
40,000
|
12,000
|
78,000
(1)
|
130,000
|
|
Walter
Johnsen
(2)
|
40,000
|
12,000
|
—
|
52,000
|
|
Kelly
Anderson
(3)
|
45,000
|
12,000
|
—
|
57,000
|
|
Lim Boh
Soon
(4)
|
40,000
|
12,000
|
—
|
52,000
|
____________________
|
(1)
|
Mr.
Paul also received $78,000 in cash compensation in exchange for
legal services rendered during 2020. In January 2020, we issued Mr.
Paul 12,500 shares of common stock that were valued at $12,000. Mr.
Paul resigned from his position with the company on August 2,
2021.
|
|
(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. Mr. Johnsen was re-elected to the board for a 3-year term
at our 2019 annual meeting. 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 January
2020, we issued Mr. Johnsen 12,500 shares of common stock that were
valued at $12,000.
|
|
(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.
Ms. Anderson was re-elected to the board for a 3-year term at our
2019 annual meeting. 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 January 2020, we
issued Ms. Anderson 12,500 shares of common stock that were valued
at $12,000.
|
|
(4)
|
Mr. Lim
was elected to the Board on January 29, 2018. The term of his
agreement as director commenced on February 2, 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 January 2020, we issued Mr. Lim
12,500 shares of common stock that were valued at
$12,000.
|
Arrangement with Mr. Paul
Mr.
Paul provides advisory legal services to us pursuant to a legal
services agreement with Harold Paul, LLC, a limited liability
company of which Mr. Paul is the sole member. In exchange for Mr.
Paul’s services, we paid Harold Paul, LLC $78,750 in 2020,
$99,000 in 2021 and although Mr. Paul resigned his position in the
company on August 2, 2021, we anticipate paying Harold Paul, LLC
$99,000 in 2022.
16
INFORMATION REGARDING OUR 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
Appointment
|
|
Halden
S. Shane
|
77
|
Chief
Executive Officer and Chairman of the Board
|
October
15, 2007
|
|
Nick
Jennings
|
43
|
Chief
Financial Officer
|
October
1, 2014
|
|
Elissa
J. Shane
|
42
|
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 Elissa J.
Shane, our Chief Operating Officer and a director, is the daughter
of Halden S. 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 I 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.
17
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 October 29, 2021,
for:
●
each person (or
group of affiliated persons) known by us to be the beneficial owner
of 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 19,680,955 shares of Common Stock
and 63,750 shares of Series A Preferred Stock outstanding on
October 29, 2021. 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 October 29, 2021. 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., 8430 Spires Way, Suite N, Frederick, Maryland
21701.
|
|
Shares
Beneficially Owned
|
% of
Total
|
|||
|
|
Common
Stock
|
Series A
Preferred Stock
|
Voting
|
||
|
Name of
Beneficial Owner
|
Shares
|
% of
Class
|
Shares
|
% of
Class
|
Power
(1)
|
|
5%
Shareholders:
|
|
|
|
|
|
|
Lau Sok
Huy
(2)
|
2,170,139
|
11.0
%
|
—
|
—
|
12.9
%
|
|
Named
Executive Officers and Directors:
|
|||||
|
Halden S.
Shane
(3)
|
3,942,683
|
18.6
%
|
63,750
|
100.0
%
|
18.9
%
|
|
Elissa J.
Shane
(4)
|
442,664
|
2.14
%
|
—
|
—
|
2.14
%
|
|
Nick
Jennings
(5)
|
45,268
|
*
|
—
|
—
|
*
|
|
Walter
Johnsen
(6)
|
56,250
|
*
|
—
|
—
|
*
|
|
Kelly
Anderson
(7)
|
56,250
|
*
|
—
|
—
|
*
|
|
Lim Boh
Soon
(8)
|
111,274
|
*
|
—
|
—
|
*
|
|
Executive Officers
and Directors as a Group
(9)
|
4,654,369
|
22.0
%
|
—
|
—
|
22.29
%
|
____________________
* Denotes
ownership of less than 1%.
(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)
Based on Form 3
filed with the SEC by Lau Sok Huy on January 24, 2018.
(3)
Consists of: (i)
2,389,913 shares of Common Stock held of record by Dr. Shane; (ii)
187,500 shares of Common Stock held of record by the Shane Family
Trust; (iii) 125,000 shares of Common Stock held of record by
Belinha Shane; and (iv) 1,231,250 shares of Common Stock issuable
upon the exercise of warrants to purchase Common Stock held by Dr.
Shane that are exercisable or will become exercisable within 60
days of October 29, 2021. 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.
18
(4)
Consists of: (i)
236,414 shares of Common Stock held of record by Ms. Shane; and
(ii) 206,250 shares of Common Stock issuable upon the exercise of
warrants and options to purchase Common Stock held by Ms. Shane
that are exercisable or will become exercisable within 60 days of
October 29, 2021.
(5)
Consists of: (i)
26,519 shares of Common Stock held of record by Mr. Jennings; and
(ii) 18,750 shares of Common Stock issuable upon the exercise of
warrants and options to purchase Common Stock held by Mr. Jennings
that are exercisable or will become exercisable within 60 days of
October 29, 2021.
(6)
Consists of: (i)
53,125 shares of Common Stock held of record by Mr. Johnsen; and
(ii) 3,125 shares of Common Stock issuable upon exercise of stock
options that are exercisable or will become exercisable within 60
days of October 29, 2021.
(7)
Consists of: (i)
53,125 shares of Common Stock held of record by Ms. Anderson; and
(ii) 3,125 shares of Common Stock issuable upon exercise of stock
options that are exercisable or will become exercisable within 60
days of October 29, 2021.
(8)
Consists of 111,274
shares of Common Stock held of record by Dr. Lim.
(9)
Consists of: (i)
3,191,869 shares of Common Stock; (ii) 1,250,000 shares of Common
Stock issuable upon the exercise of warrants to purchase Common
Stock; and (iii) 212,500 shares of Common Stock issuable upon
exercise of stock options that are exercisable or will become
exercisable within 60 days of October 29, 2021.
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.
19
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,
2020 and 2019, respectively. We qualify as a “smaller
reporting company” under the rules promulgated by the
Securities and Exchange Commission, and we have elected to comply
with the disclosure requirements applicable to smaller reporting
companies.
|
Name and
Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock Awards
($)
(1)
|
Option / Warrant
Awards ($)
(1)
|
All Other
Compensation ($)
|
Total
($)
|
|
2020
|
400,833
|
—
|
—
|
2,835,090
(2)
|
—
|
3,235,923
|
|
|
Chief Executive
Officer and Chairman of the Board
(2)
|
2019
|
360,000
|
—
|
—
|
89,654
(3)
|
—
|
449,654
|
|
Elissa J. Shane
(4)
|
2020
|
226,083
|
40,000
(8)
|
—
|
226,950
(4)
|
13,500
(4)
|
506,533
|
|
Chief Operating
Officer
|
2019
|
200,000
|
7,500
(8)
|
—
|
23,595
(5)
|
9,000
(5)
|
240,095
|
|
Nick Jennings
(6)
|
2020
|
165,225
|
50,000
(8)
|
—
|
24,846
(6)
|
—
|
240,071
|
|
Chief Financial
Officer
|
2019
|
155,000
|
5,000
(8)
|
—
|
4,483
(7)
|
—
|
164,483
|
____________________
(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 our 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, 2020, we issued Dr. Shane five and ten-year
warrants to purchase an aggregate of 543,750 shares of common stock
as executive compensation. The exercise price of the warrants range
was $1.20-6.95 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 $2,835,000, with the following assumptions:
volatility, 136%-173%; expected dividend yield, 0%; risk free
interest rate, 0.67%-1.64%; and a life of 5-10 years. The grant
date fair value of each share of common stock underlying the
warrants range was $1.04-6.99. We recognized equity-based
compensation to Dr. Shane of approximately $2,835,000 on the
warrants during the year ended December 31, 2020 pursuant to an
employment agreement. Please refer to Item 11 Employment Agreements
for additional details of Dr. Shane’s annual compensation.
(3)During the year ended December 31, 2019, we issued Dr. Shane
five-year warrant to purchase an aggregate of 125,000 shares of
common stock as executive compensation. The exercise price of the
warrant was $0.80 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 $90,000, with the following assumptions:
volatility, 143%; expected dividend yield, 0%; risk free interest
rate, 2.58%; and a life of 5 years. The grant date fair value of
each share of common stock underlying the warrants was $0.72. We
recognized equity-based compensation to Dr. Shane of approximately
$90,000 on the warrants during the year ended December 31, 2019
pursuant to an employment agreement. Please refer to Item 11
Employment Agreements for additional details of Dr. Shane’s
annual compensation.
(4)
During the year
ended December 31, 2020, we issued Ms. Shane a ten-year warrant to
purchase an aggregate of 6,250 shares of common stock as executive
compensation. The exercise price of the warrant was $4.00 per
share. Utilizing the Black-Scholes pricing model, we determined the
fair value of the warrants issued to Ms. Shane was approximately
$25,000, with the following assumptions: volatility, 173%; expected
dividend yield, 0%; risk free interest rate, 0.68%; and a life of
10 years. The grant date fair value of each share of common stock
underlying the warrants was $4.00. During the year ended December
31, 2020, we issued Ms. Shane’s options to purchase an
aggregate of 31,250 shares of common stock as executive
compensation. The exercise price of the option was $7.06 per share.
Utilizing the Black-Scholes pricing model, we determined the fair
value of the option issued to Ms. Shane was approximately $202,000,
with the following assumptions: volatility, 154%; expected dividend
yield, 0%; risk free interest rate, 0.67%; and a life of 5 years.
The grant date fair value of each share of common stock underlying
the options was $6.47. In aggregate, we recognized equity-based
compensation to Ms. Shane of approximately $227,000 on the options
during the year ended December 31, 2020. The other compensation in
the amount of $13,500 represents an auto allowance pursuant to Ms.
Shane’s employment agreement. Please refer to Item 11
Employment Agreements for additional details of Ms. Shane’s
annual compensation.
(5)
During the year
ended December 31, 2019, we accrued the value of Ms. Shane’s
options to purchase an aggregate of 31,250 shares of common stock
as executive compensation. The exercise price of the option was
$0.80 and $0.96 per share. Utilizing the Black-Scholes pricing
model, we determined the fair value of the option issued to Ms.
Shane was approximately $24,000, with the following assumptions:
volatility, 135%; expected dividend yield, 0%; risk free interest
rate, 1.64%; and a life of 5 years. The grant date fair value of
each share of common stock underlying the options was $0.72 and
$0.80. We recognized equity-based compensation to Ms. Shane of
approximately $24,000 on the options during the year ended December
31, 2019. The other compensation in the amount of $9,000 represents
an auto allowance pursuant to Ms. Shane’s employment
agreement. Please refer to Item 11 Employment Agreements for
additional details of Ms. Shane’s annual
compensation.
(6)
During the year
ended December 31, 2020, we issued Mr. Jennings a ten-year warrant
to purchase an aggregate of 6,250 shares of common stock as
executive compensation. The exercise price of the warrant was $4.00
per share. Utilizing the Black-Scholes pricing model, we determined
the fair value of the warrants issued to Mr. Jennings was
approximately $25,000, with the following assumptions: volatility,
173%; expected dividend yield, 0%; risk free interest rate, 0.68%;
and a life of 10 years. The grant date fair value of each share of
common stock underlying the warrants was $4.00. We recognized
equity-based compensation to Mr. Jennings of approximately $25,000
on the options during the year ended December 31, 2020. Please
refer to Item 11 Employment Agreement for additional details of Mr.
Jennings’ annual compensation.
(7)
During the year
ended December 31, 2019, we issued Mr. Jennings options to purchase
an aggregate of 6,250 shares of common stock as executive
compensation. The exercise price of the option was $0.80 per share.
Utilizing the Black-Scholes pricing model, we determined the fair
value of the option issued to Mr. Jennings was approximately
$4,000, with the following assumptions: volatility, 143%; expected
dividend yield, 0%; risk free interest rate, 2.58%; and a life of 5
years. The grant date fair value of each share of common stock
underlying the options was $0.72. We recognized equity-based
compensation to Mr. Jennings of approximately $4,000 on the options
during the year ended December 31, 2019. Please refer to Item 11
Employment Agreement for additional details of Mr. Jennings’
annual compensation.
(8)
In December 2019,
the compensation committee approved cash bonuses to the COO and CFO
which were paid in 2019.
20
In May
and October 2020, the compensation committee approved cash bonuses
to the COO and CFO which were paid in 2020.
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
September 22, 2020, we entered into a three-year employment
agreement with Dr. Shane, effective October 1, 2020. The agreement
provides for a base annual salary of $500,000. The agreement also
provides for a signing bonus of 375,000 warrants. Dr. Shane is also
entitled to a cash performance bonus and an annual issuance of an
option to purchase 31,250 shares of common stock from the 2016 Plan
at the discretion of the Board. The agreement also provides that we
will reimburse Dr. Shane for the expenses associated with the use
of an automobile up to $750 a month. The term of the agreement is
three years.
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.
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
October 1, 2020, we entered into an employment agreement with
Elissa J. Shane, effective October 1, 2020. Pursuant to her
employment agreement, Ms. Shane will receive an annual base salary
of at least $270,000, 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. The agreement originally provided for a grant of
93,750 warrants. Additionally, in connection with the execution of
her employment agreement, on October 1, 2020, we issued Ms. Shane a
warrant to purchase 93,750 shares of Common Stock at an exercise
price of $6.17 per share. These provisions were subsequently
amended to provide for the issuance to Ms. Shane of 31,250 options
from the 2016 Equity Plan at the closing price of $7.06 on the date
of grant in lieu of the warrant grant and the 93,750 warrants were
cancelled. Ms. Shane acknowledged that the 31,250 options were in
full consideration of the amount she was entitled to under the
agreement. 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 $1,000 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.
In the
event Ms. Shane is terminated as COO as a result of a change in
control, Ms. Shane will be entitled to a lump sum payment of one
and a half years’ salary at the time of such
termination.
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 12,500 shares of common stock at an
exercise price of $4.40 per share. The agreement also provided for
the issuance of an additional five-year warrant to purchase 12,500
shares of common stock in 2016, however, this provision was
modified to grant a salary increase in lieu of the options. In
October 2020, Mr. Jennings’ annual salary was increased to
$175,000 per year. Mr. Jennings is also entitled to additional
equity compensation based upon superior performance of his
responsibilities, as determined by the Board in its sole
discretion. The agreement also provides that we will reimburse Mr.
Jennings for certain business and entertainment expenses. In the
event of a change in control of the Company that results in his
termination, Mr. Jennings will be entitled to a lump sum payment of
one year’s salary and all equity awards will be accelerated
and fully vested. In the event his employment is terminated other
than for cause, Mr. Jennings will receive an amount equal to his
annual salary as of such termination date after the second
employment anniversary.
21
OUTSTANDING EQUITY AWARDS AT 2020 FISCAL YEAR-END
The
following table sets forth certain information with respect to
outstanding warrants and options to purchase Common Stock
previously awarded to our named executive officers as of December
31, 2020.
|
Name
|
Number of
Securities Underlying Unexercised Warrants / Options
Exercisable
(1)
(#)
|
Number of
Securities Underlying Unexercised Warrants / Options Unexercisable
(#)
|
Equity Incentive
Plan Awards: Number of Securities Underlying Unexercised Unearned
Warrants (#)
|
Exercise
Price
(1)
($)
|
Expiration
Date
|
|
Halden S.
Shane
|
125,000
(2)
|
—
|
—
|
$
2.40
|
2/11/2021
|
|
|
31,250
(3)
|
—
|
—
|
$
4.00
|
3/31/2021
|
|
|
31,250
(4)
|
—
|
—
|
$
3.36
|
6/30/2021
|
|
|
31,250
(5)
|
—
|
—
|
$
2.56
|
9/30/2021
|
|
|
31,250
(6)
|
—
|
—
|
$
2.16
|
12/30/2021
|
|
|
31,250
(7)
|
—
|
—
|
$
0.80
|
7/17/2022
|
|
|
437,500
(8)
|
—
|
—
|
$
0.96
|
12/22/2022
|
|
|
31,250
(9)
|
—
|
—
|
$
0.64
|
11/19/2023
|
|
|
125,000
(10)
|
—
|
—
|
$
0.80
|
1/26/2024
|
|
|
156,250
(11)
|
—
|
—
|
$
1.20
|
1/31/2025
|
|
|
12,500
(12)
|
—
|
—
|
$
4.00
|
4/24/2030
|
|
|
375,000
(13)
|
—
|
—
|
$
6.95
|
10/01/2030
|
|
Elissa J.
Shane
|
12,500
(14)
|
—
|
—
|
$
0.96
|
1/5/2023
|
|
|
31,250
(15)
|
—
|
—
|
$
0.88
|
1/03/2024
|
|
|
12,500
(16)
|
—
|
—
|
$
0.96
|
1/03/2025
|
|
|
18,750
(17)
|
—
|
—
|
$
0.80
|
1/15/2025
|
|
|
6,250
(18)
|
—
|
—
|
$
4.00
|
4/24/2030
|
|
|
31,250
(19)
|
—
|
—
|
$
7.06
|
10/1/2025
|
|
Nick
Jennings
|
12,500
(20)
|
—
|
—
|
$
2.40
|
10/1/2021
|
|
|
12,500
(21)
|
—
|
—
|
$
4.40
|
1/26/2021
|
|
|
6,250
(22)
|
—
|
—
|
$
0.80
|
1/26/2025
|
|
|
6,250
(23)
|
—
|
—
|
$
4.00
|
4/24/2030
|
____________________
(1)
Reflects the
1-for-8 reverse stock split of our Common Stock and Series A
Preferred Stock effected on September 10, 2020.
(2)
Warrants vested in
increments of 12,500 on February 11, 2014, February 11, 2015, and
February 11, 2016 and have a term of five years.
(3)
Warrants vested on
March 31, 2016 and have a term of five years.
(4)
Warrants vested on
June 30, 2016 and have a term of five years.
(5)
Warrants vested on
September 30, 2016 and have a term of five years.
(6)
Warrants vested on
December 30, 2016 and have a term of five years.
(7)
Warrants vested on
July 17, 2017 and have a term of five years.
22
(8)
Warrants vested on
December 22, 2017 and have a term of five years.
(9)
Warrants vested on
November 19, 2018 and have a term of five years
(10)
Warrants vested on
January 26, 2019 and have a term of five years
(11)
Warrants vested on
January 31, 2020 and have a term of five years.
(12)
Warrants vested on
April 24, 2020 and have a term of ten years.
(13)
Warrants vested on
October 1, 2020 and have a term of ten years.
(14)
Options pursuant to
the 2016 Plan vested on January 5, 2018 and have a term of five
years.
(15)
Options pursuant to
the 2016 Plan vested on January 3, 2019 and have a term of five
years.
(16)
Options pursuant to
the 2016 Plan vested on January 3, 2020 and have a term of five
years.
(17)
Options pursuant to
the 2016 Plan vested on January 15, 2020 and have a term of five
years.
(18)
Warrants vested on
April 24, 2020 and have a term of ten years.
(19)
Options pursuant to
the 2016 Plan vested on October 1, 2020 and have a term of five
years.
(20)
Warrants vested on
October 1, 2016 and have a term of five years.
(21)
Warrants vested on
January 26, 2016 and have a term of five years.
(22)
Options pursuant to
the 2016 Plan vested on January 26, 2018 and have a term of five
years.
(23)
Warrants vested on
April 24, 2020 and have a term of ten years.
23
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.
Certain Relationships
Elissa
J. Shane is our Chief Operating Officer and a director. She is the
daughter of Halden S. Shane, our Chief Executive Officer and
Chairman of the Board.
Transactions with Related Persons
None.
24
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. On December 30, 2020, we received
shareholder approval to restate and amend the 2016 Equity Incentive
Plan to increase the maximum number of shares of common stock
authorized from issuance by 1,375,000, from 625,000 shares to
2,000,000.
The
following table provides information as of December 31, 2020 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
(1)
|
Weighted-average
exercise price of outstanding options, warrants and
rights
(1)
|
Number of
securities remaining available for future issuance under equity
compensation plans
(1)
|
|
Equity compensation
plans approved by security holders
|
132,500
(2)
|
$
2.72
|
1,659,500
(4)
|
|
Equity compensation
plans not approved by security holders
|
940,625
(3)
|
$
2.96
|
—
|
|
Total
|
1,073,125
|
$
2.88
|
—
|
____________________
(1)
Reflects the
1-for-8 reverse stock split of our Common Stock and Series A
Preferred Stock effected on September 10, 2020.
(2)
Prior to August 25,
2015, we granted awards under the 2008 Plan.
(3)
Represents shares
of common stock usable upon the exercise of warrants issued to
executive officers, employees, and consultants in exchange for
services rendered.
(4)
On July 7, 2017,
the 2016 Plan received shareholder approval, which permits the
grant up to 625,000 shares of common stock. On December 30, 2020,
we received shareholder approval to restate and amend the 2016
Equity Incentive Plan to increase the maximum number of shares of
common stock authorized from issuance by 1,375,000 from 625,000
shares to 2,000,000.
25
PROPOSAL 2:
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The
Audit Committee, which consists of entirely independent directors,
has selected Rosenberg Rich Baker Berman & Co.
(“RRBB”) as our independent registered public
accounting firm for the fiscal year ending December 31, 2021, 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. In August 2021, we
announced that our audit committee had approved the engagement of
RRBB as our independent registered public accounting firm,
replacing Wolinetz, Lafazan & Company, P.C., our prior
independent registered public accounting firm.
Representatives of
Rosenberg Rich Baker Berman & Co. 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 Rosenberg Rich Baker Berman &
Co. 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.
Change of Independent Public
Accountants:
As previously reported on the Company’s
Current Report on Form 8-K, dated September 1, 2021, the Audit
Committee conducted a comprehensive, competitive process to
determine the Company’s independent registered public
accounting firm for the Company’s fiscal year ending December
31, 2021. On August 30, 2021, the Audit Committee approved the
engagement of RRBB as our independent registered public accounting
firm for the Company’s fiscal year ending December 31, 2021,
and approved the dismissal of Wolinetz, Lafazan & Company,
P.C., which became effective on August 30, 2021.
The
reports of Wolinetz, Lafazan & Company, P.C. on the
Company’s consolidated financial statements as of and for the
fiscal years ended December 31, 2020 and 2019 did not contain an
adverse opinion or a disclaimer of opinion, and were not qualified
or modified as to uncertainty, audit scope or accounting
principle.
During
two fiscal years ended December 31, 2020 and the subsequent interim
period through August 30, 2021, there were no disagreements as
described under Item 304(a)(1)(iv) of Regulation S-K with Wolinetz,
Lafazan & Company, P.C. on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to Wolinetz,
Lafazan & Company, P.C.’s satisfaction, would have caused
Wolinetz, Lafazan & Company, P.C. to make reference to the
subject matter thereof in connection with its reports on the
financial statements of the Company for such years. In addition,
during the two fiscal years ended December 31, 2020 and the
subsequent interim period through August 30, 2021, there were no
reportable events as described under Item 304(a)(1)(v) of
Regulation S-K.
During
the years ended December 31, 2020 and December 31, 2019 and the
subsequent interim period through August 30, 2021, the Company did
not consult with RRBB with respect to (i) the application of
accounting principles to a specified transaction, either completed
or proposed, the type of audit opinion that might be rendered on
our financial statements, and neither a written report nor oral
advice was provided to us by RRBB that was an important factor
considered by us in reaching a decision as to any accounting,
auditing or financial reporting issue, or (ii) any other matter
that was the subject of a disagreement or a “reportable
event.”
Vote Required
The
affirmative vote of a majority of the shares virtually present or
represented by proxy at the Annual Meeting and entitled to vote on
this Proposal 2 is required for the approval thereof. Abstentions
will have the same effect as votes against this Proposal
2.
Board Recommendation
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE
RATIFICATION OF THE APPOINTMENT OF ROSENBERG RICH BAKER BERMAN
& CO. AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM.
26
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S FEES
REPORT
Fees Paid to Prior Independent Registered Public Accounting
Firm
The
following table shows the fees that were billed for audit and other
services provided by the Company’s previous registered public
accounting firm, Wolinetz, Lafazan & Company, P.C., during the
2020 and 2019 fiscal years:
|
|
For the Fiscal
Years EndedDecember 31,
|
|
|
|
2020
|
2019
|
|
Audit
Fees(1)
|
$
138,000
|
$
122,000
|
|
Audit-Related
Fees
(2)
|
—
|
—
|
|
Tax
Fees
(3)
|
—
|
—
|
|
All Other
Fees
(4)
|
—
|
—
|
|
Total
|
$
138,000
|
$
122,000
|
____________________
(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.
Pre-Approval Policies and Procedures of the Audit
Committee
Consistent with the
rules and regulations promulgated by the Securities and Exchange
Commission, 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. All of the
services described above were approved by the Audit Committee in
accordance with its procedure. We do not otherwise rely on
pre-approval policies and procedures.
27
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.
28
SHAREHOLDER PROPOSALS FOR 2022 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 Monday, July 4,
2022, 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
2022 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 2022 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 2022 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 2022 annual
meeting should be addressed TOMI Environmental Solutions, Inc.,
8430 Spires Way, Suite N, Frederick, Maryland 21701, Attention:
Chief Executive Officer, 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.
29
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 TOMI Environmental
Solutions, Inc., 8430 Spires Way, Suite N, Frederick, Maryland
21701, Attention: Chief Executive Officer, or by calling us at
1-800-525-1698.
30
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.
31
TABLE OF CONTENTS