UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to
Section
14(a) of the Securities Exchange Act of 1934
Filed
by the Registrant [X]
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Filed
by a Party other than the Registrant ☐
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Check
the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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[X]
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Definitive
Proxy Statement
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☐
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Definitive
Additional Materials
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☐
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Soliciting
Material Pursuant to §240.14a-12
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Hancock
Jaffe Laboratories, Inc.
(Name
of Registrant as Specified in Its Charter)
N/A
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
[X]
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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of each class of securities to which transaction applies:
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number of securities to which transaction applies:
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Per
unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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Proposed
maximum aggregate value of transaction:
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Total
fee paid:
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Fee
paid previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date
of its filing.
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1)
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Amount
Previously Paid:
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October
25, 2019
Dear
Hancock Jaffe Shareholders:
When
I wrote to you last year, I recounted several personnel and infrastructure changes that were being implemented to better position
the company for future success. Those changes included a new Chief Financial Officer and accounting department, new tissue suppliers,
changes and additions to our senior management team, and changes to the Board of Directors. Those changes continued to be implemented
over the course of 2019 and have led to significant progress for our company, and with both of our co-lead products, the VenoValve®,
and the CoreoGraft®.
In
December of 2018, we received approval to begin our VenoValve first-in-man trial in Bogota, Colombia from INVIMA, the Colombian
equivalent of the United States Food and Drug Administration (“FDA”). In February of 2019, we implanted our first
VenoValve in a human patient, and implanted seven additional patients over the course of the next seven-month period. The VenoValve
was designed to alleviate the symptoms and potentially cure a debilitating condition called chronic venous insufficiency or CVI.
CVI occurs when the valves in the veins of the leg malfunction, resulting in the backwards flow of blood (reflux). Severe CVI
leads to swelling, discoloration, intense pain, and open sores (venous ulcers). Approximately 2.4 million people in the U.S. suffer
from CVI of the deep venous system, and there are currently no effective treatments for the disease. Patients with venous ulcers
spend an average of $30,000 a year on wound care alone, and even in those instances where venous ulcers heal, there is a 20% to
40% recurrence rate within the first 12 months.
In
July of 2019, we released 90 day data on the first five VenoValve patients, which indicated that in four patients, reflux,
the primary end-point for the first-in-man Bogota study, had been reduced an average of 68% and to levels seen in healthy patients
without CVI. Disease manifestations and pain also showed significant improvements of 49% and 39% respectively. The fifth VenoValve
patient was not compliant with her post-surgery anti-coagulation instructions, which resulted in blood clotting and damage to
her VenoValve. Despite the damaged VenoValve, 90 days post VenoValve surgery, that patient showed modest improvement compared
to pre-surgery levels. Six-month data on these patients as well as updates on patients six through eight are scheduled to be released
at the end of October.
With
an addressable U.S. market of 2.4 million patients, the VenoValve represents an opportunity with the potential for recurring revenue
of hundreds of millions of dollars per year even with modest market penetration in the early years. In the past, Hancock Jaffe
has licensed or sold our products to the large medical device companies, and that is the current plan for the VenoValve. We have
already begun to have conversations with potential strategic partners and strategic investors, and we will continue and expand
that process once we have the six-month data for the VenoValve.
With
the six month data in hand, our medical team and product development team, led by our Senior Vice President and Chief Medical
Officer, Dr. Marc Glickman, will evaluate every aspect of the six-month VenoValve results, to determine any changes that may be
appropriate to the device, the surgical procedure to implant the device, the drug regimen used prior to, during, or after the
VenoValve implantation procedures, the post-operative care regimen for the VenoValve patients, and any other areas that may impact
the success of a U.S. pivotal trial. Once any changes to the device are implemented, a series of FDA mandated testing will begin
on the finalized VenoValve design in preparation for the filing of an investigational device exemption (IDE) application for the
U.S. pivotal trial. During this period, we will re-engage with the FDA to discuss the six-month data and the fulfillment of all
IDE requirements.
In
August of 2019, we released very encouraging ninety-day results on our second lead product, the CoreoGraft. The CoreoGraft is
a bovine-based conduit with the potential to be used to revascularize the heart during coronary artery bypass graft (CABG) surgeries.
The CoreoGraft is currently undergoing a six-month, sheep feasibility study, which will end in November, and at which time the
CoreoGraft specimens and surrounding tissue and organs will undergo extensive pathology examination. The results from the six-month
CoreoGraft study, including the pathology, are scheduled to be released during the first half of December 2019.
CABG
surgery (otherwise known as heart bypass surgery) is performed when blood flow to and from the heart becomes restricted due to
blockages in arteries around the heart, which are caused by the accumulation of plaque. Grafts are used to literally “bypass”
the blocked areas in order to increase blood flow. Approximately 200,000 CABG surgeries are performed each year in the U.S. and
approximately 91% of those surgeries involve venous grafting. The most common venous graft used in the U.S. is the saphenous vein,
which is harvested from the patient’s leg.
The
saphenous vein harvest procedure is invasive, painful, and can lead to post surgery complications at the site of the harvest.
In addition, saphenous vein grafts are known to have a 10% to 40% failure rate within the first year after bypass surgery, with
even higher failure rates eight to ten years after bypass surgery. When a saphenous vein graft fails, the heart is deprived of
blood and the patient can experience the same symptoms that necessitated the bypass surgery.
At
ninety-days post-surgery, all CoreoGrafts in the sheep feasibility study were functioning very well, and showed no signs of cellular
degeneration, thrombus, changes in the lumen, or other problems that are known to plague saphenous vein grafts, or attempts to
create substitute small caliber grafts. Depending upon the six-month CoreoGraft results, we will either conduct a GLP animal study
under FDA guidance, or will seek to initiate human testing outside of the U.S.
An
aggregate of $15 to $25 billion is spent each year on CABG surgeries in the U.S. and there are currently no approved consumable
medical devices that are part of the current standard of care. If we can demonstrate that the CoreoGraft is a viable alternative
for patients with no suitable veins to harvest, and that the performance of the CoreoGrafts equals or exceeds saphenous vein grafts,
the CoreoGraft could become a staple for all CABG surgeries, with the additional potential to be used in other parts of the body
in need of small caliber replacement grafts.
So
far this year, our team of medical experts has presented data at five top medical conferences, and we are scheduled to present
at three additional conferences between now and the end of the year. Our work is being recognized by key opinion leaders in our
respective areas of practice, and we will continue to present at leading medical conferences, and will seek to publish both our
VenoValve and our CoreoGraft data in well-respected journals.
In
September of 2019, we announced the addition of Matthew Jenusaitis and Bob Gray to our Board of Directors. Matthew is currently
the Chief of Staff and Chief of Innovation and Transformation for the UC San Diego Health System. During his 30 years as a healthcare
executive, Matthew has been associated with four successful vascular product exits, and is also the former President of the Vascular
Division of Boston Scientific. Bob Gray enjoyed a 20 year career as the CFO at Highmark, Inc., one of America’s leading
health insurance organizations. With the additions of Matthew and Bob to the Hancock Jaffe Board of Directors, our Board consists
of individuals with world class talent in areas of key importance to the company: medical device development; insurance reimbursement;
strategic partnerships; and alternative sources of capital. We intend to fully utilize the expertise of our directors throughout
2020 as we seek to enter into strategic partnerships, broaden our investor base, mitigate our product risk, and ensure that we
are in the best position to capitalize on the potential of our products, and to create value for our shareholders.
We
look forward to seeing you at our upcoming annual meeting, which is scheduled for December 6, 2019. Thank you.
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Sincerely,
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Robert
A. Berman,
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Chief
Executive Officer
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Hancock
Jaffe Laboratories, Inc.
70
Doppler Irvine, California 92618
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
be held on Friday, December 6, 2019
The
2019 Annual Meeting of Stockholders (the “Meeting”) of Hancock Jaffe Laboratories, Inc. (the “Company”)
will be held at the Company’s principal executive offices at 70 Doppler, Irvine, California 92618 on Friday, December 6,
2019, at 10:00 AM PDT, for the following purposes:
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1.
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To
elect Mr. Matthew M. Jenusaitis and Mr. Robert A. Berman as Class II directors of the Company, each to serve for a three-year
term that expires at the 2022 Annual Meeting of Stockholders, or until his successor is elected and qualified or until his
earlier death, incapacity, removal or resignation;
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2.
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To
ratify the appointment by the Audit Committee of the Board of Marcum LLP as the Company’s registered public accounting
firm for the fiscal year ending December 31, 2019; and
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3.
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To
transact, in the discretion of the Company’s board of directors, such other business as may properly come before the
Meeting or any adjournment thereof.
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Stockholders
are cordially invited to attend the Meeting in person. However, to assure your representation at the Meeting, please vote by
proxy by completing and signing the enclosed proxy card and returning it promptly or voting on the internet. Even if you have
previously submitted a proxy card, you may choose to vote in person at the Meeting. Whether or not you expect to attend the Meeting,
please read the attached Proxy Statement and then promptly complete, date, sign and return the enclosed proxy card or vote on
the internet in order to ensure your representation at the Meeting. If you desire to vote on the internet and hold your shares
through a brokerage firm, you may cast your vote by visiting www.proxyvote.com. If you desire to vote on the internet
and are a registered stockholder, you may cast your vote by visiting www.vstocktransfer.com/proxy. You may also
have access to the materials for the Meeting by visiting the website http://www.hancockjaffe.com.
The
Board of Directors unanimously recommends a vote “FOR” the approval of each of the proposals to be submitted at the
Meeting.
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BY
ORDER OF THE BOARD OF DIRECTORS,
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Robert
A. Berman,
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Chief
Executive Officer
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October
25, 2019
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TABLE
OF CONTENTS
Hancock
Jaffe Laboratories, Inc.
70
Doppler Irvine, California 92618
(949)
261-2900
PROXY
STATEMENT
ANNUAL
MEETING OF STOCKHOLDERS
to
be held on Friday, December 6, 2019, 10:00 a.m., Pacific Time
Hancock
Jaffe Laboratories, Inc.
70
Doppler Irvine, California 92618
QUESTIONS
AND ANSWERS ABOUT THESE PROXY MATERIALS
Why
am I receiving this Proxy Statement?
This
Proxy Statement describes the proposals on which our Board of Directors (the “Board”) would like you, as a
stockholder, to vote on at our 2019 Annual Meeting of the Stockholders (the “Meeting”), which will take place
on Friday, December 6, 2019 at Hancock Jaffe Laboratories, Inc.’s principal executive offices at 70 Doppler, Irvine, California
92618.
This
Proxy Statement also gives you information on these proposals so that you can make an informed decision. We intend to mail this
Proxy Statement and accompanying proxy card on or about November 1, 2019, to all stockholders of record entitled to vote
at the Meeting.
In
this Proxy Statement, we refer to Hancock Jaffe Laboratories, Inc. as the “Company,” “we,” “us”
or “our” or similar terminology.
Who
can vote at the annual meeting of stockholders?
Stockholders
who owned shares of our common stock, par value $0.00001 per share (“Common Stock”), on October 14, 2019 (the
“Record Date”) may attend and vote at the Meeting. Each share is entitled to one vote. There were 17,922,129
shares of Common Stock outstanding on the Record Date. All shares of Common Stock shall have one vote per share and vote together
as a single class. Information about the stockholdings of our directors and executive officers is contained in the section of
this Proxy Statement entitled “Beneficial Ownership of Principal Stockholders, Officers and Directors”.
What
is the proxy card?
The
proxy card enables you to appoint Robert A. Berman, our Chief Executive Officer, and Robert Rankin, our Chief Financial Officer,
as your representative at the Meeting. By completing and returning the proxy card or voting online as described herein, you are
authorizing either of these persons to vote your shares at the Meeting in accordance with your instructions on the proxy card.
This way, your shares will be voted whether or not you attend the Meeting. Even if you plan to attend the Meeting, we think that
it is a good idea to complete and return your proxy card before the Meeting date just in case your plans change. If a proposal
comes up for vote at the Meeting that is not on the proxy card, the proxies will vote your shares, under your proxy, according
to their best judgment.
What
am I voting on?
You
are being asked to vote on the following proposals:
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1.
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To
elect Mr. Matthew M. Jenusaitis and Mr. Robert A. Berman as Class II directors of the Company, each to serve for a three-year
term that expires at the 2022 Annual Meeting of Stockholders, or until his successor is elected and qualified or until his
earlier death, incapacity, removal or resignation;
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2.
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To
ratify the appointment by the Audit Committee of the Board of Marcum LLP as the Company’s registered public accounting
firm for the fiscal year ending December 31, 2019; and
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3.
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To
transact such other business as may properly come before the Meeting or any adjournment thereof.
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How
does the Board recommend that I vote?
Our
Board unanimously recommends that the stockholders vote “FOR” all proposals being put before our stockholders at the
Meeting.
What
is the difference between holding shares as a stockholder of record and as a beneficial owner?
Most
of our stockholders hold their shares in an account at a brokerage firm, bank or other nominee holder, rather than holding share
certificates in their own name. As summarized below, there are some distinctions between shares held of record and those owned
beneficially.
Stockholder
of Record
If,
on the Record Date, your shares were registered directly in your name with our transfer agent, VStock Transfer, LLC, you are a
“stockholder of record” who may vote at the Meeting, and we are sending these proxy materials directly to you. As
the stockholder of record, you have the right to direct the voting of your shares by returning the enclosed proxy card to us,
voting online or voting in person at the Meeting. Whether or not you plan to attend the Meeting, please complete, date and sign
the enclosed proxy card or vote online to ensure that your vote is counted.
Beneficial
Owner
If,
on the Record Date, your shares were held in an account at a brokerage firm or at a bank or other nominee holder, you are considered
the beneficial owner of shares held “in street name,” and these proxy materials are being forwarded to you by your
broker or nominee who is considered the stockholder of record for purposes of voting at the Meeting. As the beneficial owner,
you have the right to direct your broker on how to vote your shares and to attend the Meeting. However, since you are not the
stockholder of record, you may not vote these shares in person at the Meeting unless you receive a valid proxy from your brokerage
firm, bank or other nominee holder. To obtain a valid proxy, you must make a special request of your brokerage firm, bank or other
nominee holder. If you do not make this request, you can still vote by using the voting instruction card enclosed with this proxy
statement; however, you will not be able to vote in person at the Meeting.
How
do I vote?
(1)
You may vote by mail. You may vote by mail by completing, signing and dating your proxy card and returning it in the enclosed,
postage-paid and addressed envelope. If we receive your proxy card prior to the Meeting and if you mark your voting instructions
on the proxy card, your shares will be voted:
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as
you instruct, and
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according
to the best judgment of the proxies if a proposal comes up for a vote at the Meeting that is not on the proxy card.
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If
you return a signed card, but do not provide voting instructions, your shares will be voted:
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for
Mr. Matthew M. Jenusaitis and Mr. Robert A. Berman as the Class II directors of our Board;
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to
ratify the appointment of Marcum LLP as our independent registered public accounting firm for the fiscal year ending December
31, 2019;
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According
to the best judgment of either Mr. Berman or Mr. Rankin, if a proposal comes up for a vote at the Meeting that is not on the
proxy card.
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If
you hold your shares in street name, you should follow the instructions provided by your brokerage firm, bank, broker-dealer or
other similar organization that holds your shares to vote by mail.
(2)
You may vote online. If you desire to vote on the internet and hold your shares through a brokerage firm, you may cast your
vote by visiting www.proxyvote.com. If you desire to vote on the internet and are a registered stockholder, you
may cast your vote by visiting www.vstocktransfer.com/proxy.
(3)
You may vote in person at the Meeting. We will pass out written ballots to anyone who wants to vote at the Meeting. However,
if you hold your shares in street name, you must bring to the Meeting a valid proxy from the broker, bank or other nominee holding
your shares that confirms your beneficial ownership of the shares and gives you the right to vote your shares. Holding shares
in street name means you hold them through a brokerage firm, bank or other nominee, and therefore the shares are not held in your
individual name. We encourage you to examine your proxy card closely to make sure you are voting all of your shares in the Company.
What
does it mean if I receive more than one proxy card?
You
may have multiple accounts at the transfer agent and/or with brokerage firms. Please sign and return all proxy cards to ensure
that all of your shares are voted.
What
if I change my mind after I return my proxy?
You
may revoke your proxy and change your vote at any time before the polls close at the Meeting. You may do this by:
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sending
a written notice to the Chief Financial Officer of the Company stating that you would like to revoke your proxy of a particular
date;
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signing
another proxy card with a later date and returning it before the polls close at the Meeting or voting online again at a later
date; or
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attending
the Meeting and voting in person.
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Please
note, however, that if your shares are held of record by a brokerage firm, bank or other nominee, you must instruct your broker,
bank or other nominee that you wish to change your vote by following the procedures on the voting form provided to you by the
broker, bank or other nominee. If your shares are held in street name, and you wish to attend and vote at the Meeting, you must
bring to the Meeting a legal proxy from the broker, bank or other nominee holding your shares, confirming your beneficial ownership
of the shares and giving you the right to vote your shares.
Will
my shares be voted if I do not sign and return my proxy card?
If
your shares are held in your name and you do not sign and return your proxy card or vote online, your shares will not be voted
unless you vote in person at the Meeting. If you hold your shares in the name of a broker, bank or other nominee, your nominee
may determine to vote your shares at its own discretion on the ratification of the Company’s independent public accountant
since such matter is a routine matter, absent instructions from you. However, due to voting rules that may prevent your bank or
broker from voting your uninstructed shares on a discretionary basis in the election of directors and other non-routine matters,
it is important that you cast your vote.
How
may I vote with respect to each proposal and how are votes counted?
Your
voting options will be dependent on the particular proposal for which you wish to cast a vote. With respect to proposal 1 (the
election of directors), you may vote “for” all of the director nominees or “withhold” authority to vote
for one or both of the director nominees. With respect to proposal 2 (ratification of the Company’s independent public accountant),
you may vote “for” or “against” the proposal or you may “abstain” from casting a vote on such
proposal. Abstentions, votes marked “withheld” and broker non-votes will be counted for the purpose of determining
whether a quorum is present at the Meeting.
Broker
non-votes occur on a matter when a broker is not permitted to vote on that matter without instructions from the beneficial owner
and instructions are not given. These matters are referred to as “non-routine” matters. The election of the directors
is “non-routine.” Thus, in tabulating the voting result for this proposal, shares that constitute broker non-votes
are not considered votes cast on that proposal. The ratification of the appointment of the Company’s independent public
accountant is a “routine” matter and therefore a broker may vote on this matter without instructions from the beneficial
owner as long as instructions are not given.
How
many votes are required to elect each Mr. Matthew M. Jenusaitis and Mr. Robert A. Berman as a Class II directors?
Our
amended and restated bylaws, provides that directors are to be elected by a plurality of the votes of the shares present in person
or represented by proxy at the Meeting and entitled to vote on the election of directors. This means that the two (2) candidates
receiving the highest number of affirmative votes at the Meeting will be elected as Class II directors. Only shares that are voted
in favor of a particular nominee will be counted toward that nominee’s achievement of a plurality. Shares present at the
Meeting that are not voted for a particular nominee or shares present by proxy where the shareholder properly withheld authority
to vote for such nominee will not be counted toward that nominee’s achievement of a plurality.
How
many votes are required to ratify the Company’s independent public accountants?
The
affirmative vote of a majority of the votes cast at the Meeting by the holders of shares of Common Stock entitled to vote is required
to ratify Marcum LLP as our independent registered public accounting firm for the year ending December 31, 2019. Abstentions will
have no direct effect on the outcome of this proposal, but since this is a routine matter, brokers may vote at the Meeting on
this proposal provided that they have not received instructions from a beneficial owner.
What
happens if I don’t indicate how to vote my proxy?
If
you just sign your proxy card without providing further instructions, your shares will be counted as a “for” vote
for each of the director nominees, the ratification of Marcum LLP as our independent registered public accounting firm for the
year ending December 31, 2019 and all of the other proposals that may be placed before our stockholders at the Meeting.
Is
my vote kept confidential?
Proxies,
ballots and voting tabulations identifying stockholders are kept confidential and will not be disclosed except as may be necessary
to meet legal requirements.
Where
do I find the voting results of the Meeting?
We
will announce voting results at the Meeting and file a Current Report on Form 8-K announcing the voting results of the Meeting.
Who
can help answer my questions?
You
can contact our Chief Financial Officer, Mr. Rankin, at (949) 261-2900 or by sending a letter to Mr. Rankin at offices of the
Company at 70 Doppler Irvine, California 92618, with any questions about proposals described in this Proxy Statement or how to
execute your vote.
Hancock
Jaffe Laboratories, Inc.
70
Doppler Irvine, California 92618
(949)
261-2900
PROXY
STATEMENT
INTRODUCTION
2019
Annual Meeting of Stockholders
This
Proxy Statement is being furnished to the holders of our Common Stock in connection with the solicitation of proxies for use at
the 2019 Annual Meeting of Stockholders of the Company. The Meeting is to be held at Hancock Jaffe Laboratories, Inc.’s
principal executive offices at 70 Doppler, Irvine, California 92618 on Friday, December 6, 2019 at 10:00 a.m., Pacific Time, and
at any adjournment or adjournments thereof.
Record
Date; Mailing Date
The
Board has fixed the close of business on October 14, 2019 as the Record Date for the determination of stockholders entitled to
notice of, and to vote and act at, the Meeting. Only stockholders of record at the close of business on that date are entitled
to notice of, and to vote and act at, the Meeting. The Proxy Statement is first being mailed to stockholders of the Company on
or about November 1, 2019.
Proposals
to be Submitted at the Meeting
At
the Meeting, stockholders will be acting upon the following proposals:
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1.
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To
elect Mr. Matthew M. Jenusaitis and Mr. Robert A. Berman as Class II directors of the Company, each to serve for a three-year
term that expires at the 2022 Annual Meeting of Stockholders, or until his successor is elected and qualified or until his
earlier death, incapacity, removal or resignation;
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2.
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To
ratify the appointment by the Audit Committee of the Board of Marcum LLP as the Company’s registered public accounting
firm for the fiscal year ending December 31, 2019; and
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3.
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To
transact such other business as may properly come before the Meeting or any adjournment thereof.
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Principal
Offices
The
principal executive offices of the Company are located at 70 Doppler Irvine, California 92618. The Company’s telephone number
at such address is (949) 261-2900.
Information
Concerning Solicitation and Voting
As
of the Record Date, there were 17,922,129 outstanding shares of Common Stock, each share entitled to one vote on each matter to
be voted on at the Meeting. Only holders of shares of Common Stock on the Record Date will be entitled to vote at the Meeting.
The holders of Common Stock are entitled to one vote on all matters presented at the Meeting for each share held of record. The
presence in person or by proxy of holders of record of a majority of the shares outstanding and entitled to vote as of the Record
Date shall be required for a quorum to transact business at the Meeting. If a quorum should not be present, the Meeting may be
adjourned until a quorum is obtained.
For
purposes of Proposal 1, the two (2) candidates receiving the highest number of affirmative votes at the Meeting will be elected
as Class II directors. Only shares that are voted in favor of a particular nominee will be counted toward that nominee’s
achievement of a plurality. Shares present at the Meeting that are not voted for a particular nominee or shares present by proxy
where the shareholder properly withheld authority to vote for such nominee will not be counted toward that nominee’s achievement
of a plurality.
For
purposes of Proposal 2, the affirmative vote of a majority of the votes cast at the Meeting by the holders of shares of Common
Stock entitled to vote is required to ratify Marcum LLP as our independent registered public accounting firm for the year ending
December 31, 2019. Abstentions will have no direct effect on the outcome of this proposal, but since this is a routine matter,
brokers may vote at the Meeting on this proposal provided that they have not received instructions from a beneficial owner.
Expenses
The
expense of preparing, printing and mailing this Proxy Statement, exhibits and the proxies solicited hereby will be borne by the
Company. In addition to the use of the mails, proxies may be solicited by officers, directors and regular employees of the Company,
without additional remuneration, by personal interviews, telephone, email or facsimile transmission. The Company will also request
brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners of shares of Common
Stock held of record and will provide reimbursements for the cost of forwarding the material in accordance with customary charges.
Revocability
of proxies
Proxies
given by stockholders of record for use at the Meeting may be revoked at any time prior to the exercise of the powers conferred.
In addition to revocation in any other manner permitted by law, stockholders of record giving a proxy may revoke the proxy by
an instrument in writing, executed by the stockholder or his attorney authorized in writing or, if the stockholder is a corporation,
under its corporate seal, by an officer or attorney thereof duly authorized, and deposited either at the corporate headquarters
of the Company at any time up to and including the last business day preceding the day of the Meeting, or any adjournments thereof,
at which the proxy is to be used, or with the chairman of such Meeting on the day of the Meeting or adjournments thereof, and
upon either of such deposits the proxy is revoked.
ALL
PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF A PROPOSAL
IF NO CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF THE PERSONS NAMED IN THE PROXY
WITH RESPECT TO ANY OTHER BUSINESS THAT MAY COME BEFORE THE MEETING.
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF EACH OF THE PROPOSALS TO BE SUBMITTED AT THE MEETING.
PROPOSAL
1
ELECTION
OF CLASS II DIRECTORS
Introduction
The
Board currently consists of three classes of directors, as follows:
Director(s)
|
|
Class
|
|
Term
Expires
|
Francis
Duhay, M.D.
|
|
Class
I
|
|
2021
|
Dr.
Sanjay Shrivastava
|
|
Class
I
|
|
2021
|
Matthew
M. Jenusaitis
|
|
Class
II
|
|
Nominee
in 2019 for term ending 2022
|
Robert
A. Berman
|
|
Class
II
|
|
Nominee
in 2019 for term ending 2022
|
Robert
C. Gray
|
|
Class
III
|
|
2020
|
At
the Meeting, stockholders will be asked to elect each of Mr. Matthew M. Jenusaitis and Mr. Robert A. Berman as a Class II director,
each to hold office until the 2022 Annual Meeting of Stockholders or until his successor is elected and qualified or until his
earlier death, incapacity, removal or resignation. The Board has nominated Mr. Jenusaitis and Mr. Berman to stand for election
at the Meeting.
The
enclosed proxy, if returned, and unless indicated to the contrary, will be voted for the election of Mr. Jenusaitis and Mr. Berman.
Proxies cannot be voted for a greater number of persons than the number of nominees named.
We
have been advised by each of Mr. Jenusaitis and Mr. Berman that they are willing to be named as nominees and each are willing
to serve as a director if elected. If some unexpected occurrence should make necessary, in the discretion of the Board, the substitution
of some other person for the nominees, it is the intention of the persons named in the proxy to vote for the election of such
other person as may be designated by the Board.
Directors
and Executive Officers
Listed
below are the names of the directors and executive officers of the Company, their ages as of the Record Date, their positions
held and the year they commenced service with the Company
Name
|
|
Age
|
|
Position(s)
Held
|
|
Year
of Service Commencement
|
Robert
A. Berman
|
|
56
|
|
Director,
Chief Executive Officer
|
|
2018
|
Francis
Duhay, M.D.
|
|
59
|
|
Director
|
|
2018
|
Dr.
Sanjay Shrivastava
|
|
52
|
|
Director
|
|
2018
|
Matthew
M. Jenusaitis
|
|
58
|
|
Director
|
|
2019
|
Robert
C. Gray
|
|
72
|
|
Director
|
|
2019
|
Marc
H. Glickman, M.D.
|
|
70
|
|
Senior
Vice President and Chief Medical Officer
|
|
2016
|
Robert
Rankin
|
|
67
|
|
Chief
Financial Officer
|
|
2018
|
There
are no arrangements between our directors and any other person pursuant to which our directors were nominated or elected for their
positions. There are no family relationships between any of our directors or executive officers.
Robert
A. Berman has served as our Chief Executive Officer and a member of our board of directors since April 2018. From September
2017 to March 2018, Mr. Berman worked as an independent strategic business consultant. From September 2012 to July 2017, he served
as the President, Chief Executive Officer, and a member of the board of directors of ITUS Corporation (now called Anixa Biosciences),
a Nasdaq listed company, that develops a liquid biopsy technology for early cancer detection. Prior to ITUS Corporation, Mr. Berman
was the Chief Executive Officer of VIZ Technologies, a start-up company which developed and licensed a beverage dispensing cap,
and he was the founder of IP Dispute Resolution Corporation, a company focused on intellectual property licensing. From 2000 to
March 2007, Mr. Berman was the Chief Operating Officer and General Counsel of Acacia Research Corporation, which was a publicly
traded company engaged in the licensing and enforcement of patented technologies. Mr. Berman was a Director of Business Development
at QVC where he developed and selected products for on-air sales and distribution. Mr. Berman started his career at the law firm
of Blank Rome LLP. He has a Bachelor of Science in Entrepreneurial Management from the Wharton School of the University of Pennsylvania
and holds a Juris Doctorate degree from the Northwestern University Pritzker School of Law, where he serves as an adjunct faculty
member. We believe Mr. Berman is qualified to serve as a member of our board of directors because of his experience in broad variety
of areas including healthcare, finance, acquisitions, marketing, compliance, turnarounds, and the development and licensing of
emerging technologies.
Dr.
Francis Duhay has served as member of our board of directors since October 2018. A trained cardiac and thoracic surgeon,
has served the President and Chief Operating officer of Aegis Surgical Inc. and Atrius Inc., makers of cardiac accessory devices,
since 2016, and as a Partner in K5_Ventures, an early stage venture fund since 2017. Dr. Duhay is the former Chief Medical Officer
at Edwards Life Sciences, a world leader in heart valve products, where he led medical and clinical affairs for transcatheter
and surgical heart valves. During his tenure at Edwards Life Sciences, from 2008 to 2016, Dr. Duhay led the preparation and submission,
and ultimate regulatory approval, of two FDA Premarket Approval (PMA) applications for transcatheter and surgical heart valve
therapies and was responsible for the design and execution of the applicable clinical trials. Dr. Duhay was also the Vice President
and General Manager of the Ascendra™ transcatheter heart valve business unit at Edwards, where he grew the unit from sixteen
to eighty employees and contributed to annual growth in sales from $3 million to $250 million. From 1998 to 2003, Dr. Duhay served
as the Chief of the Department of Cardiothoracic Surgery and Cardiology at Kaiser Permanente. Dr. Duhay has also served as an
industry representative and clinical expert, and a member of the working group for ISO 5840, the international quality standard
for the design, development, and testing of heart valves. Dr. Duhay received his MBA from the University of Hawaii - Shidler College
of Business and received his board certification for Cardiothoracic Surgery and General Surgery from the Duke University School
of Medicine and from the University of California, San Francisco, respectively. We believe that Dr. Duhay is qualified to serve
as a member of our board of directors because he is a trained cardiac and thoracic surgeon and former Chief Medical Officer at
Edwards Life Sciences.
Dr.
Sanjay Shrivastava has served as a member of our board of directors since October 2018. He has been involved in developing,
commercializing, evaluating, and acquiring medical devices for more than 18 years, including serving in Chief Executive Officer
and board of director positions at several medical device start-ups, and leadership positions in research and development, business
development, and marketing at BTG (from 2017 to 2018), Medtronic (2007 to 2017), Abbott Vascular (2003 to 2007), and Edwards Life
Sciences (2000 to 2003). He is presently the Vice President of Marketing and Business Development at U.S. Vascular, LLC and a
co-founder and board member of BlackSwan Vascular, Inc. While working as a vice president, upstream marketing and strategy at
BTG, a medical device and specialty pharmaceutical company with annual revenue of about $800 million, Dr. Shrivastava worked on
several acquisition and investment deals. At Medtronic, Dr. Shrivastava was the Director of Global Marketing for the Cardiac and
Vascular Group where he helped build the embolization business, from its initiation to a substantial revenue with a very high
CAGR over a period of six years. Dr. Shrivastava was a Manager of Research and Development for the peripheral vascular business
at Abbott Vascular and a Principal Research and Development Engineer for Trans-Catheter heart valves at Edwards Life Sciences.
Dr. Shrivastava received his Bachelor of Science in engineering at the Indian Institute of Technology, and his Doctorate of Philosophy
in materials science and engineering from the University of Florida. We believe that Dr. Shrivastava is qualified to serve as
a member of our board of directors because of having served in Chief Executive Officer and board of director positions at several
medical device start-ups, and leadership positions in research and development, business development, and marketing at BTG, Medtronic,
Abbott Vascular, and Edwards Life Sciences.
Matthew
M. Jenusaitis has served as a member of our board of directors since September 2019. He has over 30 years of health care
experience with an emphasis on building and selling companies that develop medical devices to treat vascular diseases. Since March
2015, Mr. Jenusaitis has been the Chief of Staff and Chief of Innovation and Transformation
for the UC San Diego Health System. From June 2009 to March 2015, Mr. Jenusaitis was President and CEO of OCTANe Foundation for
Innovation, a non-profit focused on the development of innovation in Orange County, CA. Over the course of his career, Mr. Jenusaitis
has been on the board of directors of Pulsar Vascular (2008-2017), which was sold to Johnson and Johnson, Creagh Medical (2008-2015),
which was sold to SurModics, and Precision Wire Components (2009-2014), which was sold to Creganna Medical. Mr. Jenusaitis
was also a Senior Vice President at ev3 (April 2006 to July 2008), which was sold to Covidian and later purchased by Medtronics.
In addition, Mr. Jenusaitis was the President of the Peripheral Division at Boston Scientific (July 2003 to August 2005) and was
an Executive in Residence at Warburg Pincus (September 2005 to March 2006). Mr. Jenusaitis has an MBA from the University of California,
Irvine, a Masters Degree in Biomedical Engineering from Arizona State University, and a Bachelors Degree in Chemical Engineering
from Cornell University. We believe that Mr. Jenusaitis is qualified to serve as a member of our board of directors because of
over 30 years of health care experience with an emphasis on building and selling companies that develop medical devices to treat
vascular diseases and his prior board experiences.
Robert
C. Gray has served as a member of our board of directors since September 2019. He had a 20-year career at Highmark, Inc.,
one of America’s largest health insurance organizations, which serves over 20 million
subscribers, and includes Highmark Blue Cross Blue Shield Pennsylvania, Highmark Blue Cross Blue Shield Delaware, and Highmark
Blue Cross Blue Shield West Virginia, which he retired from in 2008. While at Highmark, Mr. Gray helped increase revenues to $12.3
billion from $6.9 billion, and helped generate an operating gain of $375 million from an operating loss of $91 million. In addition
to being the board chairman, Chief Executive Officer, and President of several of Highmark’s subsidiaries and affiliated
companies, Mr. Gray was the Chief Financial Officer of Highmark’s parent company and was the primary contact to Highmark’s
board of directors for Highmark’s audit, investment and compensation (incentive plans) committees. His many responsibilities
at Highmark included rate setting and reimbursement negotiations. Following Highmark, Mr. Gray co-founded U.S. Holdings LLC (U.S.
Implants LLC.), a national distributor of orthopedic implants, and has served as Vice President since 2009. Since 2011, Mr. Gray
has also been self-employed as a strategy and financial consultant. Mr. Gray engaged in Postgraduate Studies at the University
of North Carolina–Chapel Hill and has an undergraduate degree from Bucknell University. We believe that Mr. Gray
is qualified to serve as a member of our board of directors because of his financial and medical reimbursement expertise having
served as the Chief Financial Officer at Highmark, Inc., one of America’s largest health insurance organization.
Marc
H. Glickman, M.D. has served as our Senior Vice President and Chief Medical Officer since May 2016 and served as member
of our board of directors from July 2016 to August 2017. In 1981, Dr. Glickman started a vascular practice in Norfolk, Virginia.
He established the first Vein Center in Virginia and also created a dialysis access center. He was employed by Sentara Health
Care as director of Vascular Services until he retired in 2014. Dr. Glickman is a board certified vascular surgeon. Dr. Glickman
received his Doctor of Medicine from Case Western Reserve, in Cleveland, Ohio and completed his residency at the University of
Washington, Seattle. He is board certified in Vascular Surgery and was the past president of the Vascular Society of the Americas.
He has served on the advisory boards of Possis Medical, Cohesion Technologies, Thoratec, GraftCath, Inc., TVA medical, Austin,
Texas.
Robert
Rankin has served as our Chief Financial Officer since July 2018. Mr. Rankin has more than twenty years of relevant experience
helping to shape the operations and financial health of companies across multiple industries. Prior to joining our company, from
November 2015 to December 2017, Mr. Rankin was the Chief Financial Officer of Horsburgh & Scott, a privately held company
focused on the design, engineering, manufacturing and repair of heavy duty quality gears and gearboxes. From November 2009 to
December 2014, Mr. Rankin was Chief Financial Officer, Chief Operating Officer and Secretary of Process Fab, Inc., a privately
held engineering, design and manufacturing firm that provides flight hardware, ground support equipment and tooling to the spaceflight,
aerospace and defense markets. Mr. Rankin also served as Vice President of Finance of TBGA LLC, the post-acquisition parent company
of Process Fab, Inc., from December 2014 to August 2015. Prior to Process Fab, Inc., from 2004 to 2008, Mr. Rankin served as Chief
Financial Officer, Chief Operating Officer and Director of the House of Taylor Jewelry, Inc. and Chief Financial Officer of Small
World Kids, Inc., both publicly traded companies. Other experience as Chief Financial Officer for publicly traded companies included
serving as Chief Financial Officer from 1992 to 1998 of DeCrane Aircraft Holdings, Inc. Mr. Rankin holds a Masters of Science
degree in Industrial Administration from the Tepper School of Business at Carnegie Mellon University and a Bachelors of Science
degree in Mechanical Engineering from Carnegie Mellon University.
Family
Relationships
There
are no family relationships between or among any of the current directors or executive officers. There are no family relationships
among our officers and directors and those of our subsidiaries and affiliated companies.
Certain
Legal Proceedings
None
of the Company’s directors or executive officers have been involved, in the past ten years and in a manner material to an
evaluation of such director’s or officer’s ability or integrity to serve as a director or executive officer, in any
of those “Certain Legal Proceedings” more fully detailed in Item 401(f) of Regulation S-K, which include but are not
limited to, bankruptcies, criminal convictions and an adjudication finding that an individual violated federal or state securities
laws.
Board
Composition
Our
business and affairs are organized under the direction of our board of directors, which currently consists of five members. Our
directors hold office until the earlier of their death, incapacity, removal or resignation, or until their successors have been
elected and qualified. Our board of directors does not have a formal policy on whether the roles of a Chief Executive Officer
and Chairman of our board of directors should be separate. The primary responsibilities of our board of directors are to provide
oversight, strategic guidance, counseling and direction to our management. Our board of directors meets on a regular basis. Our
bylaws provide that the authorized number of directors may be changed only by resolution of the board of directors.
We
have no formal policy regarding board diversity. Our priority in selection of board members is identification of members who will
further the interests of our stockholders through his or her established record of professional accomplishment, the ability to
contribute positively to the collaborative culture among board members, knowledge of our business and understanding of the competitive
landscape.
Our
amended and restated certificate of incorporation divides our board of directors into three classes, with staggered three-year
terms, as follows:
Class
I Directors (serving until the 2021 Annual Meeting of Stockholders, or until their earlier death, disability, resignation or removal):
Dr.
Francis Duhay* and Dr. Sanjay Shrivastava*
Class
II Directors (serving until the 2019 Annual Meeting of Stockholders, or until their earlier death, disability, resignation or
removal):
Matthew
M. Jenusaitis*, Robert A. Berman
Class
III Director (serving until the 2020 Annual Meeting of Stockholders, or until his earlier death, disability, resignation or removal):
Robert
C. Gray*
(*)
Independent Director.
At
each annual meeting of stockholders to be held after the initial classification, the successors to directors whose terms then
expire will serve until the third annual meeting following their election and until their successors are duly elected and qualified.
The authorized size of our board of directors is currently five members. The authorized number of directors may be changed only
by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will
be distributed between the three classes so that, as nearly as possible, each class will consist of one-third of the directors.
This classification of the board of directors may have the effect of delaying or preventing changes in our control or management.
Our directors may be removed for cause by the affirmative vote of the holders of at least 66 2/3% of our voting stock.
Director
Independence
The
Nasdaq Marketplace Rules require a majority of a listed company’s board of directors to be comprised of independent directors
within one year of listing. In addition, the Nasdaq Marketplace Rules require that, subject to specified exceptions, each member
of a listed company’s audit, compensation and nominating and corporate governance committees be independent and that audit
committee members also satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act.
Under
Rule 5605(a)(2) of the Nasdaq Marketplace Rules, a director will only qualify as an “independent director” if, in
the opinion of our board of directors, that person does not have a relationship that would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3
of the Exchange Act, a member of an audit committee of a listed company may not, other than in his or her capacity as a member
of the audit committee, the board of directors, or any other board committee, accept, directly or indirectly, any consulting,
advisory, or other compensatory fee from the listed company or any of its subsidiaries or otherwise be an affiliated person of
the listed company or any of its subsidiaries.
Our
board of directors has reviewed the composition of our board of directors and its committees and the independence of each director.
Based upon information requested from and provided by each director concerning his background, employment and affiliations, including
family relationships, our board of directors has determined that each of Dr. Duhay, Mr. Gray, Mr. Jenusaitis and Dr. Shrivastava
is an “independent director” as defined under Rule 5605(a)(2) of the Nasdaq Marketplace Rules. Our board of directors
also determined that Mr. Gray, Mr. Jenusaitis and Dr. Shrivastava will serve on our audit committee, Mr. Gray and Mr. Jenusaitis
and Dr. Shrivastava will serve on our compensation committee, and Dr. Duhay, Mr. Jenusaitis and Dr. Shrivastava will serve on
our nominating and corporate governance committee, and that each of the committees satisfy the independence standards for such
committees established by the SEC and the Nasdaq Marketplace Rules, as applicable. In making such determinations, our board of
directors considered the relationships that each such non-employee director has with our company and all other facts and circumstances
our board of directors deemed relevant in determining independence, including the beneficial ownership of our capital stock by
each non-employee director.
Meetings
of the Board and Stockholders
Our
board of directors met in person and telephonically six times during 2018 and also acted by unanimous written consent. Only one
member of our board of directors was not present at least 75% of the aggregate of the board of directors and committee meetings
held, which was Mr. Yury Zhivilo, who retired in May 2019. There were four Audit Committee meetings during 2018 and no Compensation
or Nominating or Corporate Governance meetings held in 2018. Our board of directors had 100% attendance for the Annual Meeting
that convened on November 27, 2018 but since there was insufficient number of shares present or represented by proxy to reach
a valid quorum, the meeting was adjourned and reconvened on December 21, 2018, where a quorum was achieved. Neither our Chairman
nor our independent directors attended the reconvened meeting on December 21, 2018. It is our policy that all directors must attend
all stockholder meetings, barring extenuating circumstances.
Board
Committees
Our
board of directors has established three standing committees—audit, compensation, and nominating and corporate governance—each
of which operates under a charter that has been approved by our board of directors. Prior to the completion of this offering,
copies of each committee’s charter will be posted on the Investors section of our website, which is located at www.hancockjaffe.com.
Each committee has the composition and responsibilities described below. Our board of directors may from time to time establish
other committees.
Audit
Committee
Our
audit committee consists of Mr. Gray, who is the chair of the committee, Mr. Jenusaitis and Dr. Shrivastava. Our board of directors
has determined that each of the members of our audit committee satisfies the Nasdaq Marketplace Rules and SEC independence requirements.
The functions of this committee include, among other things:
|
●
|
evaluating
the performance, independence and qualifications of our independent auditors and determining whether to retain our existing
independent auditors or engage new independent auditors;
|
|
|
|
|
●
|
reviewing
and approving the engagement of our independent auditors to perform audit services and any permissible non-audit services;
|
|
|
|
|
●
|
reviewing
our annual and quarterly financial statements and reports, including the disclosures contained under the caption “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” and discussing the statements and reports
with our independent auditors and management;
|
|
●
|
reviewing
with our independent auditors and management significant issues that arise regarding accounting principles and financial statement
presentation and matters concerning the scope, adequacy and effectiveness of our financial controls;
|
|
|
|
|
●
|
reviewing
our major financial risk exposures, including the guidelines and policies to govern the process by which risk assessment and
risk management is implemented; and
|
|
|
|
|
●
|
reviewing
and evaluating on an annual basis the performance of the audit committee, including compliance of the audit committee with
its charter.
|
Our
board of directors has determined that Mr. Gray qualifies as an “audit committee financial expert” within the meaning
of applicable SEC regulations and meets the financial sophistication requirements of the Nasdaq Marketplace Rules. Both our independent
registered public accounting firm and management periodically meet privately with our audit committee.
Compensation
Committee
Our
compensation committee consists of Dr. Shrivastava, who is the chair of the committee, Mr. Gray and Mr. Jenusaitis. Our board
of directors has determined that each of the members of our compensation committee is an outside director, as defined pursuant
to Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, and satisfies the Nasdaq Marketplace Rules independence
requirements. The functions of this committee include, among other things:
|
●
|
reviewing,
modifying and approving (or if it deems appropriate, making recommendations to the full board of directors regarding) our
overall compensation strategy and policies;
|
|
|
|
|
●
|
reviewing
and approving the compensation, the performance goals and objectives relevant to the compensation, and other terms of employment
of our Chief Executive Officers and our other executive officers;
|
|
|
|
|
●
|
reviewing
and approving (or if it deems appropriate, making recommendations to the full board of directors regarding) the equity incentive
plans, compensation plans and similar programs advisable for us, as well as modifying, amending or terminating existing plans
and programs;
|
|
|
|
|
●
|
reviewing
and approving the terms of any employment agreements, severance arrangements, change in control protections and any other
compensatory arrangements for our executive officers;
|
|
|
|
|
●
|
reviewing
with management and approving our disclosures under the caption “Compensation Discussion and Analysis” in our
periodic reports or proxy statements to be filed with the SEC; and
|
|
|
|
|
●
|
preparing
the report that the SEC requires in our annual proxy statement.
|
Nominating
and Corporate Governance Committee
Our
nominating and corporate governance committee consists of Dr. Duhay, who is the chair of the committee, Mr. Jenusaitis and Dr.
Shrivastava. Our board of directors has determined that each of the members of this committee satisfies the Nasdaq Marketplace
Rules independence requirements. The functions of this committee include, among other things:
|
●
|
identifying,
reviewing and evaluating candidates to serve on our board of directors consistent with criteria approved by our board of directors;
|
|
|
|
|
●
|
evaluating
director performance on our board of directors and applicable committees of our board of directors and determining whether
continued service on our board of directors is appropriate;
|
|
|
|
|
●
|
evaluating,
nominating and recommending individuals for membership on our board of directors; and
|
|
|
|
|
●
|
evaluating
nominations by stockholders of candidates for election to our board of directors.
|
Code
of Conduct
Our
board of directors has adopted a written code of conduct that applies to our directors, officers and employees, including our
principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar
functions. We have posted on our website a current copy of the code and all disclosures that are required by law or Nasdaq Marketplace
Rules concerning any amendments to, or waivers from, any provision of the code.
Board
Leadership Structure
Our
board of directors is free to select the Chairman of the board of directors and a Chief Executive Officer in a manner that it
considers to be in the best interests of our company at the time of selection. Currently, Robert A. Berman serves as our Chief
Executive Officer. The office of the Chairman of the board of directors remains vacant since the voluntary resignation of Mr.
Yury Zhivilo in May 2019. We currently believe that this leadership structure is in our best interests and strikes an appropriate
balance between our Chief Executive Officer’s responsibility for the day-to-day management of our company and the Chairman
of the board of directors’ responsibility to provide oversight, including setting the board of directors’ meeting
agendas and presiding at executive sessions of the independent directors. Additionally, four of our five members of our board
of directors have been deemed to be “independent” by the board of directors, which we believe provides sufficient
independent oversight of our management. Our board of directors has not designated a lead independent director.
Our
board of directors, as a whole and also at the committee level, plays an active role overseeing the overall management of our
risks. Our Audit Committee reviews risks related to financial and operational items with our management and our independent registered
public accounting firm. Our board of directors is in regular contact with our Chief Executive Officer and Chief Financial Officer,
who report directly to our board of directors and who supervise day-to-day risk management.
Role
of Board in Risk Oversight Process
Our
board of directors believes that risk management is an important part of establishing, updating and executing on our business
strategy. Our board of directors has oversight responsibility relating to risks that could affect the corporate strategy, business
objectives, compliance, operations, and the financial condition and performance of our company. Our board of directors focuses
its oversight on the most significant risks facing us and on our processes to identify, prioritize, assess, manage and mitigate
those risks. Our board of directors receives regular reports from members of our senior management on areas of material risk to
us, including strategic, operational, financial, legal and regulatory risks. While our board of directors has an oversight role,
management is principally tasked with direct responsibility for management and assessment of risks and the implementation of processes
and controls to mitigate their effects on us.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires that our directors and executive officers and persons who beneficially
own more than 10% of our common stock (referred to herein as the “reporting persons”) file with the SEC various reports
as to their ownership of and activities relating to our common stock. Such reporting persons are required by the SEC regulations
to furnish us with copies of all Section 16(a) reports they file.
Based
solely upon a review of copies of Section 16(a) reports and representations received by us from reporting persons, and without
conducting any independent investigation of our own, in fiscal year 2018, all Forms 3, 4 and 5 were timely filed with the SEC
by such reporting persons.
THE
BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF
MR. MATTHEW M. JENUSAITIS AND MR. ROBERT A. BERMAN TO EACH SERVE AS CLASS II DIRECTORS ON THE COMPANY’S BOARD, TO HOLD OFFICE
UNTIL THE 2022 ANNUAL MEETING OF STOCKHOLDERS OR UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED OR UNTIL THEIR EARLIER RESIGNATION
OR REMOVAL.
EXECUTIVE
COMPENSATION
The
following table sets forth total compensation paid to our named executive officers for the years ended December 31, 2018 and 2017.
Individuals we refer to as our “named executive officers” include our current Chief Executive Officer and both of
our previous Co-Chief Executive Officers, our current and previous Chief Financial Officer and our two other most highly compensated
executive officers whose salary and bonus for services rendered in all capacities exceeded $100,000 during the fiscal year ended
December 31, 2018.
Name and
Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Option
Awards ($)
|
|
|
Non-Equity
Incentive Plan Compensation ($)
|
|
|
Nonqualified
Deferred Compensation Earnings
($)
|
|
|
All
Other Compensation ($)
|
|
|
Total
($)
|
|
Robert A. Berman
|
|
|
2018
|
|
|
|
293,308
|
(1)
|
|
|
|
|
|
|
507,697
|
(8)
|
|
|
|
|
|
|
|
|
|
|
7,692
|
(10)
|
|
|
808,697
|
|
Chief Executive Officer
|
|
|
2017
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Benedict Broennimann, M.D.
|
|
|
2018
|
|
|
|
120,000
|
(2)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
120,000
|
(2)
|
|
|
240,000
|
|
Former Co-Chief Executive Officer
|
|
|
2017
|
|
|
|
360,000
|
(2)
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
360,000
|
|
Steven A. Cantor
|
|
|
2018
|
|
|
|
71,539
|
(3)
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4892
|
(11)
|
|
|
76,431
|
|
Former Co-Chief Executive Officer
|
|
|
2017
|
|
|
|
300,000
|
(3)
|
|
|
300,000
|
(4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
274,816
|
(12)
|
|
|
874,816
|
|
Robert A. Rankin
|
|
|
2018
|
|
|
|
110,577
|
(5)
|
|
|
|
|
|
|
165,000
|
(9)
|
|
|
|
|
|
|
|
|
|
|
17,297
|
(13)
|
|
|
292,874
|
|
Chief Financial Officer, Secretary and Treasurer
|
|
|
2017
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
William R. Abbott
|
|
|
2018
|
|
|
|
173,077
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,991
|
(14)
|
|
|
324,068
|
|
Former Chief Financial Officer
|
|
|
2017
|
|
|
|
267,445
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,101
|
(15)
|
|
|
305,546
|
|
Marc H. Glickman, M.D.
|
|
|
2018
|
|
|
|
300,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
62,640
|
(16)
|
|
|
362,640
|
|
Chief Medical Officer and Senior Vice President
|
|
|
2017
|
|
|
|
300,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
41,717
|
(17)
|
|
|
341,717
|
|
Susan Montoya
|
|
|
2018
|
|
|
|
301,638
|
(7)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37,827
|
(18)
|
|
|
339,465
|
|
Former Vice President Operations,
|
|
|
2017
|
|
|
|
295,192
|
(7)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
43,539
|
(19)
|
|
|
338,731
|
|
Quality Assurance/Regulatory Affairs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Beginning
March 30, 2018, Mr. Berman’s annual base salary rate under his employment agreement was $400,000. Amounts in this column
for Mr. Berman reflect his base salary earned for 2018.
|
|
|
(2)
|
Beginning
August 30, 2016, Dr. Broennimann’s annual base salary rate under his employment agreement was $360,000. Dr. Broennimann
received $90,000 in base salary in 2017. He orally agreed to defer certain amounts of base salary until such time as the Company
and Dr. Broennimann agree. As a result, the Company owed Dr. Broennimann $410,000 in base salary as of December 31, 2017.
On April 30, 2018, Dr. Broennimann assigned $200,000 of his compensation to Rosewall, which agreed to accept 44,444 shares
of our common stock in satisfaction of the deferred compensation. Dr. Broennimann is not a U.S. taxpayer and is not, therefore,
subject to U.S. tax laws governing deferred compensation. On May 1, 2018, Dr. Broennimann entered into a Service Agreement
to perform the role of Chief Medical Officer (Out of US) for a fee of $15,000 monthly.
|
|
|
(3)
|
Mr.
Cantor’s employment with the Company was terminated on March 20, 2018. Amounts in this column for Mr. Cantor reflect
base salary earned for 2018 and 2017.
|
|
|
(4)
|
Mr.
Cantor received a $300,000 incentive payment in 2017 for achieving certain capital raising milestones in accordance with his
employment agreement.
|
|
|
(5)
|
Beginning
July 16, 2018, Mr. Rankin’s annual base salary rate under his employment agreement was $250,000. Amounts in this column
for Mr. Rankin reflect his base salary earned for 2018.
|
|
|
(6)
|
Mr.
Abbott’s annual base salary rate under his employment agreement was amended on June 1, 2017, where his annual base salary
was increased to $300,000 from $225,000. Mr. Abbott’s employment with the Company was terminated on July 20, 2018. Amounts
in this column for Mr. Abbott reflect base salary earned for 2018 and 2017.
|
|
|
(7)
|
Ms.
Montoya resigned her employment with the Company effective November 15, 2018. Amounts in this column for Ms. Montoya reflect
base salary earned for 2018 and 2017.
|
|
|
(8)
|
Represents
the grant date fair value of 1,080,207 stock options granted on September 24, 2018 pursuant to the terms of his Employment
Agreement dated March 30, 2018, computed in accordance with FASB ASC Topic 718. The options vested 20% on the date of his
Employment Agreement and the remaining 80% vests ratably on a monthly basis over the 24 months following the date of his Employment
Agreement.
|
|
|
(9)
|
Represents
the grant date fair value of 150,000 stock options granted on July 16, 2018, computed in accordance with FASB ASC Topic 718.
50,000 options vest on the first anniversary of Mr. Rankin’s employment with the Company and the remaining 100,000 vest
on a quarterly basis over the following two-year period.
|
|
|
(10)
|
Includes
company paid 401(k) match of $7,692.
|
|
|
(11)
|
Includes
company paid healthcare of $4,892.
|
(12)
|
Includes
(i) federal and state income tax payments of $125,180 and $23,149, respectively, made by us on behalf of Mr. Cantor to gross
up his $300,000 incentive payment received in 2017 in accordance with his employment agreement, (ii) $12,497 from company
paid healthcare, and (iii) relocation and temporary living expenses of $38,408 and the associated federal and state tax payments
made by us on Mr. Cantor’s behalf of $19,186 and $4,980, respectively, and (iv) $51,415 paid to Mr. Cantor in 2017 under
the terms of a retention award that we entered into with him in September 2013.
|
|
|
(13)
|
Includes
company paid healthcare of $12,490 and 401(k) match of $4,808.
|
|
|
(14)
|
Includes
severance of $126,923 and company paid healthcare of $16,567 and 401(k) match of $7,500.
|
|
|
(15)
|
Includes
company paid healthcare of $25,883 and 401(k) match of $12,218.
|
|
|
(16)
|
Includes
company paid healthcare of $35,043, 401(k) match of $15,000 and relocation expense reimbursement of $12,597.
|
|
|
(17)
|
Includes
company paid healthcare of $27,831 and 401(k) match of $13,846
|
|
|
(18)
|
Includes
company paid healthcare of $24,779 and 401(k) match of $13,048.
|
|
|
(19)
|
Includes
company paid healthcare of $28,779 and 401(k) match of $14,760.
|
Employment
Agreements
We
have entered into various employment agreements with certain of our executive officers. Set forth below is a summary of many of
the material provisions of such agreements, which summaries do not purport to contain all of the material terms and conditions
of each such agreement. For purposes of the following employment agreements:
●
|
“Cause”
generally means the executive’s (i) willful misconduct or gross negligence in the performance of his or her duties to
us; (ii) willful failure to perform his or her duties to us or to follow the lawful directives of the Chief Executive Officer
(other than as a result of death or disability); (iii) indictment for, conviction of or pleading of guilty or nolo contendere
to, a felony or any crime involving moral turpitude: (iv) repeated failure to cooperate in any audit or investigation of our
business or financial practices; (v) performance of any material act of theft, embezzlement, fraud, malfeasance, dishonesty
or misappropriation of our property; or (vi) material breach of his or her employment agreement or any other material agreement
with us or a material violation of our code of conduct or other written policy.
|
●
|
“Good
reason” generally means, subject to certain notice requirements and cure rights, without the executive’s consent,
(i) material diminution in his or her base salary or annual bonus opportunity; (ii) material diminution in his or her authority
or duties (although a change in title will not constitute “good reason”), other than temporarily while physically
or mentally incapacitated, as required by applicable law; (iii) relocation of his or her primary work location by more than
25 miles from its then current location; or (iv) a material breach by us of a material term of the employment agreement.
|
●
|
“Change
of control” generally means (i) the acquisition, other than from us, by any individual, entity or group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), other than us or any subsidiary, affiliate (within the
meaning of Rule 144 promulgated under the Securities Act) or employee benefit plan of ours, of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the combined voting power of our then outstanding
voting securities entitled to vote generally in the election of directors; (ii) a reorganization, merger, consolidation or
recapitalization of us, other than a transaction in which more than 50% of the combined voting power of the outstanding voting
securities of the surviving or resulting entity immediately following such transaction is held by the persons who, immediately
prior to the transaction, were the holders of our voting securities; or (iii) a complete liquidation or dissolution of us,
or a sale of all or substantially all of our assets.
|
Robert
A. Berman
On
March 30, 2018, we entered into an employment agreement with Robert A. Berman, our current Chief Executive Officer and director.
Pursuant to the terms of his employment agreement, Mr. Berman’s base salary is $400,000, subject to annual review and adjustment
at the discretion of our compensation committee, and he will be eligible for an annual year-end discretionary bonus of up to 50%
of his base salary, subject to the achievement of key performance indicators, as determined by our compensation committee. The
initial term of Mr. Berman’s employment agreement may be terminated at anytime with or without cause and with or without
notice or for good reason thereunder.
Mr.
Berman is entitled to participate in our employee benefit, pension and/or profit sharing plans, and we will pay certain health
and dental premiums on his behalf. Mr. Berman’s employment agreement prohibits him from inducing, soliciting or entertaining
any of our employees to leave our employ during the term of the agreement and for 12 months thereafter.
Pursuant
to the terms of his employment agreement, Mr. Berman is entitled to severance in the event of certain terminations of employment.
In the event Mr. Berman’s employment is terminated by us without cause and other than by reason of disability or he resigns
for good reason, subject to his timely executing a release of claims in our favor and in addition to certain other accrued benefits,
he is entitled to receive 6 month of base salary if termination occurred prior to the second anniversary of his employment or
12 months of continued base salary on and after the second anniversary of his employment (or 24 months if such termination occurs
within 24 months following a change of control).
Benedict
Broennimann, M.D.
On
August 30, 2016, we entered into an employment agreement with Benedict Broennimann, M.D., one of our previous Co-Chief Executive
Officers. Pursuant to the terms of his employment agreement, Dr. Broennimann’s initial base salary is $360,000, subject
to annual review and adjustment at the discretion of our board of directors. Dr. Broennimann has orally agreed to defer certain
amounts of cash compensation until such time as we and Dr. Broennimann agree. As a result, we owe Dr. Broennimann $410,000 as
of December 31, 2017. On April 30, 2018, Dr. Broennimann assigned $200,000 of his compensation to Rosewall, which agreed to accept
44,444 shares of our common stock in satisfaction of the deferred compensation. Dr. Broennimann is not a U.S. taxpayer and is
not, therefore, subject to U.S. tax laws governing deferred compensation.
In
connection with his employment, Dr. Broennimann received an initial equity grant of an option to purchase up to 146,500 shares
of our common stock with 20% of the shares vesting immediately and 80% vesting on a monthly basis over 24 months thereafter. Dr.
Broennimann is an at-will employee and has a full-time commitment. Further, Dr. Broennimann’s employment agreement prohibits
him from inducing, soliciting or entertaining any of our employees to leave our employ during the term of the agreement and for
12 months thereafter.
In
April 2018, we entered into an amendment to Dr. Broennimann’s employment agreement to appoint him as our Chief Medical Officer,
OUS. Other than Dr. Broennimann’s title and duties, the remaining terms of his employment agreement were unchanged.
On
May 1, 2018, the Company entered into Service Agreement with Rosewall Ventures Ltd (“Rosewall”), which Dr. Broennimann
is Chairman and principal owner, for Dr. Broennimann to contract his services through Rosewall as Chief Medical Officer, OUS for
a $15,000 fixed fee per month.
On
August 23, 2019, Dr. Broennimann entered into an agreement (“MAB Agreement”) to join our Medical Advisory Board (“MAB”)
with a term of two (2) years and this MAB Agreement supersedes and terminates the Service Agreement. As compensation for entering
the MAB Agreement, Dr. Broennimann is entitled to receive twenty thousand (20,000) options to purchase shares of the Company’s
common stock with an exercise price of $2.00 that vest monthly in twenty-four (24) equal installments for each month he remains
a member of the MAB. In addition, Dr. Broennimann will be paid an hourly and daily rate of $400/hr. and $3,500/day, respectively
for activities and services beyond the services provided as a member of the MAB.
Steven
A. Cantor
On
July 1, 2016, we entered into an employment agreement with Mr. Cantor, who prior to December 1, 2016, was our business development
manager and commencing on December 1, 2016 became our Chief Business Development Officer. The employment agreement was amended
on December 1, 2016, and again on June 12, 2017. Pursuant to the terms of his employment agreement, as amended to date, Mr. Cantor’s
base salary was $300,000 and was subjected to annual review and adjustment at the discretion of our board of directors, and in
no event was Mr. Cantor’s annual salary reduced from the preceding year without his consent. Mr. Cantor was entitled to
receive a bonus of $250,000 upon the earlier of (i) a commercial sale of one of our product candidates, or (ii) the entry into
a definitive agreement for the distribution or license of one of our product candidates. We also agreed to pay Mr. Cantor’s
relocation expenses in connection with Mr. Cantor’s move to Orange County, California, and, after June 12, 2018 or at such
time he no longer spends a substantial portion of his daily working day working on matters that reasonably can be determined at
Mr. Cantor’s sole discretion to be in Orange County, California, to move Mr. Cantor back to New York when requested by him.
In addition, so long as Mr. Cantor was living in Orange County, California, we agreed to pay or reimburse Mr. Cantor for all payments
relating to (i) a furnished residence in Orange County, California and (ii) an automobile selected by Mr. Cantor, provided, however,
that the amount of payments or reimbursements pursuant to (i) and (ii) would not exceed $5,000 per month. We further agreed to
pay Mr. Cantor an amount equal to the aggregate federal, state and local income and employment taxes imposed on Mr. Cantor as
a direct result of such payments or reimbursements in advance.
We
also agreed to a net of withholdings and deductions lump sum payment to Mr. Cantor in the amount of twelve months’ gross
salary, which was subjected to claw back if Mr. Cantor’s relocation was for less than twelve months. Such lump sum payment
and withholdings and deductions were to be paid if we raised at least $3.0 million in one or more financings. We have raised at
least $3.0 million since June 12, 2017 through the issuance of the 2017 Notes and the 2018 Notes. As a result, we paid Mr. Cantor
$300,000 accordingly.
In
connection with his employment, Mr. Cantor received 299,400 shares of our common stock, which we issued to replace shares of our
common stock previously earned under Mr. Cantor’s prior employment agreement and we ratified the issuance to Mr. Cantor
of a warrant to purchase 416,667 shares of our common stock at an exercise price of $12.00 per share. As of December 31, 2017,
Mr. Cantor returned to us 250,000 of such warrants and transferred the balance of 166,667 warrants to others.
Mr.
Cantor’s employment agreement prohibited him from inducing, soliciting or entertaining any of our employees to leave our
employ during the term of the agreement and for 12 months thereafter.
Pursuant
to the terms of his employment agreement, Mr. Cantor was entitled to severance in the event of certain terminations of employment.
In the event Mr. Cantor’s employment was terminated by us without cause and other than by reason of disability or he resigned
for good reason, subjected to his timely executing a release of claims in our favor and in addition to certain other accrued benefits,
he was entitled to receive 12 months of continued base salary (or 24 months if such termination occurred within 24 months following
a change of control).
On
March 20, 2018, we terminated Mr. Cantor’s employment with our company.
Robert
A Rankin
On
July 16, 2018, the Company entered into an employment agreement with Mr. Rankin which provides for an annual base salary of $250,000
as well as standard employee insurance and other benefits. Pursuant to this agreement, Mr. Rankin is eligible for annual salary
increases at the discretion of our board of directors as well as an annual year-end discretionary bonus of up to 30% of his base
salary, subject to the achievement of key performance indicators, as determined by the board and the Chief Executive Officer of
the Company in their sole discretion.
Mr.
Rankin’s employment agreement provides for severance payments in the event of termination without Cause or he resigns for
Good Reason (as defined in the agreement), equal to three months of base salary for each year that he has been employed by the
Company at the time of termination, up to a total of one year of his base salary, provided, that if such termination results from
a Change of Control (as defined in the agreement), Mr. Rankin’s severance will not be less than six months of his base salary
Mr.
Rankin’s employment with the Company is “at-will”, and may be terminated at any time, with or without cause
and with or without notice by either Mr. Rankin or the Company.
William
Abbott
On
July 22, 2016, we entered into an employment agreement with William Abbott, our Senior Vice President, Chief Financial Officer,
Secretary and Treasurer. Pursuant to the terms of his employment agreement, Mr. Abbott’s base salary is $225,000, subject
to annual review and adjustment at the discretion of our board of directors, and he will be eligible for an annual year-end discretionary
bonus of up to 50% of his base salary, subject to the achievement of key performance indicators, as determined by our board of
directors. On June 1, 2017, Mr. Abbott’s employment agreement was amended to change his base salary to $300,000. In connection
with his employment, Mr. Abbott received an initial equity grant of an option to purchase up to 293,000 shares of our common stock
with 20% of the shares vesting immediately and 80% vesting on a monthly basis over 24 months thereafter. The initial term of Mr.
Abbott’s
employment agreement ends on December 31, 2018 and will be automatically extended for additional three-year terms, unless either
party gives written notice to the other to terminate the agreement or unless sooner terminated under its terms. If we elect not
to renew Mr. Abbott’s employment agreement, our non-renewal will be deemed a termination without cause or for good reason
thereunder.
Mr.
Abbott is entitled to participate in our employee benefit, pension and/or profit sharing plans, and we will pay certain health
and dental premiums on his behalf. Mr. Abbott’s employment agreement prohibits him from inducing, soliciting or entertaining
any of our employees to leave our employ during the term of the agreement and for 12 months thereafter.
Pursuant
to the terms of his employment agreement, Mr. Abbott is entitled to severance in the event of certain terminations of employment.
In the event Mr. Abbott’s employment is terminated by us without cause and other than by reason of disability or he resigns
for good reason, subject to his timely executing a release of claims in our favor and in addition to certain other accrued benefits,
he is entitled to receive 12 months of continued base salary (or 24 months if such termination occurs within 24 months following
a change of control).
On
July 20, 2018, Mr. Abbott services with the Company were terminated.
Marc
H. Glickman, M.D.
On
July 22, 2016, we entered into an employment agreement with Marc H. Glickman, M.D., our Senior Vice President and Chief Medical
Officer (the “Pre-existing Employment Agreement”). Pursuant to the terms of his Pre-existing Employment Agreement,
Dr. Glickman’s base salary is $300,000, subject to annual review and adjustment at the discretion of our board of directors,
and he will be eligible for an annual year-end discretionary bonus of up to 50% of his base salary, subject to the achievement
of key performance indicators, as determined by our board of directors. In connection with his Pre-existing Employment Agreement,
Dr. Glickman received an initial equity grant of an option to purchase up to 184,500 shares of our common stock with 20% of the
shares vesting immediately and 80% vesting on a monthly basis over 24 months thereafter. The initial term of Dr. Glickman’s
Pre-existing Employment Agreement ended on December 31, 2018 and was be automatically extended for additional three-year terms.
On
July 26, 2019, we entered an employment agreement with Dr. Glickman (the “New Employment Agreement”) that shall supersede
the terms of the Pre-existing Employment Agreement. Pursuant to the terms of the New Employment Agreement, Dr. Glickman’s
base salary is $350,000 per year, subject to annual review and adjustment at the discretion of the Board. In connection with entering
into the New Employment Agreement, Dr. Glickman’s existing one hundred and eighty four thousand five hundred (184,500) options
(“Existing Options”) to purchase Company common stock at ten dollars ($10.00) per share until October 1, 2026, were
repriced to two dollars ($2.00) per share. Additionally, Dr. Glickman, in connection to the New Employment Agreement shall be
granted stock options (“New Options”) for the right to purchase one hundred and eighty thousand (180,000) common stock
at a price equal to two dollars ($2.00) per share exercisable until July 26, 2029, which shall vest quarterly over a three (3)
year period.
Pursuant
to the terms of the New Employment Agreement, Dr. Glickman is an at-will employee and is entitled to severance in the event of
certain terminations of his employment. In the event that Dr. Glickman’s employment is terminated by the Company without
Cause (as defined in the New Employment Agreement), other than by reason of Disability (as defined in the New Employment Agreement),
or he resigns for Good Reason (as defined in the New Employment Agreement), subject to his timely executing a release of claims
in favor of the Company and in addition to certain other accrued benefits, Dr. Glickman is entitled to receive three months of
his base salary for each year that he has been employed by the Company at the time of termination, up to a total of one year of
his base salary.
Susan
Montoya
On
July 22, 2016, we entered into an employment agreement with Susan Montoya, our Senior Vice President of Operations and Quality
Assurance/Regulatory Affairs. Pursuant to the terms of her employment agreement, Ms. Montoya’s base salary is $295,000,
subject to annual review and adjustment at the discretion of our board of directors, and she will be eligible for an annual year-end
discretionary bonus of up to 50% of her base salary, subject to the achievement of key performance indicators, as determined by
our board of directors. In connection with her employment, Ms. Montoya received an initial equity grant of an option to purchase
up to 818,500 shares of our common stock with 20% of the shares vesting immediately and 80% vesting on a monthly basis over 24
months thereafter. The initial term of Ms. Montoya’s employment agreement ends on December 31, 2018 and will be automatically
extended for additional three-year terms, unless either party gives written notice to the other to terminate the agreement or
unless sooner terminated under its terms. If we elect not to renew Ms. Montoya’s employment agreement, our non-renewal will
be deemed a termination without cause or for good reason thereunder.
Ms.
Montoya is entitled to participate in our employee benefit, pension and/or profit sharing plans, and we will pay certain health
and dental premiums on her behalf. Ms. Montoya’s employment agreement prohibits her from inducing, soliciting or entertaining
any of our employees to leave our employ during the term of the agreement and for 12 months thereafter.
Pursuant
to the terms of her employment agreement, Ms. Montoya is entitled to severance in the event of certain terminations of employment.
In the event Ms. Montoya’s employment is terminated by us without cause and other than by reason of disability or she resigns
for good reason, subject to her timely executing a release of claims in our favor and in addition to certain other accrued benefits,
she is entitled to receive 12 months of continued base salary (or 24 months if such termination occurs within 24 months following
a change of control).
On
November 15, 2018, Ms. Montoya resigned from the Company.
Potential
Payments Upon Termination or Change-in-Control
Pursuant
to the terms of the employment agreements discussed above, we will pay severance in the event of certain terminations of employment.
In the event employment is terminated by us without cause and other than by reason of disability or if the executive resigns for
good reason, subject to his or her timely executing a release of claims in our favor and in addition to certain other accrued
benefits, he or she is entitled to receive severance pursuant to the terms of his or her employment agreements discussed above.
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth information regarding equity awards held by our named executive officers as of December 31, 2018.
Name
|
|
|
|
Number of securities underlying unexercised options
(#)
exercisable
|
|
|
Number of securities
underlying
unexercised
options
(#) unexercisable
|
|
|
Equity
incentive
plan awards: Number of
securities
underlying
unexercised
unearned
options
(#)
|
|
Option exercise price
($)
|
|
|
Option
expiration date
|
Robert A Berman
|
|
2018
|
|
|
540,104
|
(1)
|
|
|
540,103
|
(1)
|
|
N/A
|
|
$
|
4.99
|
|
|
September 23, 2028
|
Chief Executive Officer
|
|
2017
|
|
|
-
|
|
|
|
-
|
|
|
N/A
|
|
|
-
|
|
|
-
|
Benedict Broennimann, M.D.
|
|
2018
|
|
|
146,500
|
(2)
|
|
|
-
|
|
|
N/A
|
|
$
|
10.00
|
|
|
October 1, 2026
|
Former Co-Chief Executive Officer
|
|
2017
|
|
|
97,669
|
(2)
|
|
|
48,831
|
(2)
|
|
N/A
|
|
$
|
10.00
|
|
|
October 1, 2026
|
Steven A. Cantor
|
|
2018
|
|
|
-
|
|
|
|
-
|
|
|
N/A
|
|
|
-
|
|
|
-
|
Former Co-Chief Executive Officer
|
|
2017
|
|
|
-
|
|
|
|
-
|
|
|
N/A
|
|
|
-
|
|
|
-
|
Robert A. Rankin
|
|
2018
|
|
|
-
|
|
|
|
150,000
|
(3)
|
|
N/A
|
|
$
|
2.98
|
|
|
July 15, 2028
|
Chief Financial Officer, Secretary and Treasurer
|
|
2017
|
|
|
-
|
|
|
|
-
|
|
|
N/A
|
|
|
-
|
|
|
-
|
William R. Abbott
|
|
2018
|
|
|
-
|
(4)
|
|
|
-
|
|
|
N/A
|
|
|
-
|
|
|
-
|
Former Chief Financial Officer
|
|
2017
|
|
|
97,669
|
(2)
|
|
|
48,831
|
(2)
|
|
N/A
|
|
$
|
10.00
|
|
|
October 1,2026
|
Marc H. Glickman, M.D.
|
|
2018
|
|
|
184,500
|
(2)
|
|
|
-
|
|
|
N/A
|
|
$
|
10.00
|
|
|
October 1, 2026
|
Chief Medical Officer and Senior Vice President
|
|
2017
|
|
|
123,000
|
(2)
|
|
|
61,500
|
(2)
|
|
N/A
|
|
$
|
10.00
|
|
|
October 1, 2026
|
Susan Montoya
Former Vice President
|
|
2018
|
|
|
818,500
|
(5)
|
|
|
-
|
|
|
N/A
|
|
$
|
10.00
|
|
|
October 1, 2026
|
Operations, Quality Assurance/Regulatory Affair
|
|
2017
|
|
|
545,669
|
(2)
|
|
|
272,831
|
(2)
|
|
N/A
|
|
$
|
10.00
|
|
|
October 1, 2026
|
|
(1)
|
Options
were granted on September 24, 2018, and vested 20% on the date of his Employment Agreement, March 30, 2018, and the remaining
80% vests ratably on a monthly basis over the 24 months following the date of his Employment Agreement.
|
|
(2)
|
Options
were granted on October 1, 2016, and 20% of the shares subject to these options vested immediately upon grant, with the remaining
shares subject to these options vesting monthly over twenty-four months.
|
|
(3)
|
Options
were granted on July 16, 2018, and 50,000 options vest on the first anniversary of Mr. Rankin’s employment, July 16,
2019, with the Company and the remaining 100,000 vest on a quarterly basis over the following two-year period.
|
|
(4)
|
Mr.
Abbott’s service with the Company terminated July 20, 2018 and per the Amended and Restated 2016 Omnibus Incentive Plan,
he had 90 days to exercise his options after his termination date, which he failed to exercise forfeiting his options.
|
|
(5)
|
Ms.
Montoya resigned her employment with the Company effective November 15, 2018. Per the Amended and Restated 2016 Omnibus Incentive
Plan, she had 90 days to exercise her options after her termination date or until February 13, 2019, which she failed to exercise
forfeiting her options.
|
Employee
Benefit Plans
Amended
and Restated 2016 Omnibus Incentive Plan
On
October 1, 2016, our board of directors and our stockholders adopted and approved the Hancock Jaffe Laboratories, Inc. 2016 Omnibus
Incentive Plan, and, subsequently on April 26, 2018, our board of directors and our stockholders adopted and approved the Amended
and Restated 2016 Omnibus Incentive Plan, or the 2016 plan. The principal features of the 2016 plan are summarized below. This
summary is qualified in its entirety by reference to the text of the 2016 plan, which is filed as an exhibit to the registration
statement of which this prospectus is a part.
Share
Reserve
We
have reserved 4,500,000 shares of our common stock for issuance under the 2016 plan, plus an annual increase on each anniversary
of April 26, 2018 equal to 3% of the total issued and outstanding shares of our common stock as of such anniversary (or such lesser
number of shares as may be determined by our board of directors), all of which may be granted as incentive stock options under
Code Section 422. The shares of common stock issuable under the 2016 plan will consist of authorized and unissued shares, treasury
shares or shares purchased on the open market or otherwise, all as determined by our company from time to time.
If
any award is canceled, terminates, expires or lapses for any reason prior to the issuance of shares or if shares are issued under
the 2016 plan and thereafter are forfeited to us, the shares subject to such awards and the forfeited shares will not count against
the aggregate number of shares of common stock available for grant under the 2016 plan. In addition, the following items will
not count against the aggregate number of shares of common stock available for grant under the 2016 plan: (1) shares issued under
the 2016 Plan repurchased or surrendered at no more than cost or pursuant to an option exchange program, (2) any award that is
settled in cash rather than by issuance of shares of common stock, (3) shares surrendered or tendered in payment of the option
price or purchase price of an award or any taxes required to be withheld in respect of an award or (4) awards granted in assumption
of or in substitution for awards previously granted by an acquired company.
Administration
The
2016 plan may be administered by our board of directors or our compensation committee. Our compensation committee, in its discretion,
selects the individuals to whom awards may be granted, the time or times at which such awards are granted and the terms and conditions
of such awards. Our board of directors also has the authority, subject to the terms of the 2016 plan, to amend existing options
(including to reduce the option’s exercise price), to institute an exchange program by which outstanding options may be
surrendered in exchange for options that may have different exercise prices and terms, restricted stock, and/or cash or other
property.
Eligibility
Awards
may be granted under the 2016 plan to officers, employees, directors, consultants and advisors of us and our affiliates. Incentive
stock options may be granted only to employees of us or our subsidiaries.
Awards
The
2016 plan permits the granting of any or all of the following types of awards:
|
●
|
Stock
Options. Stock options entitle the holder to purchase a specified number of shares of common stock at a specified price
(the exercise price), subject to the terms and conditions of the stock option grant. Our compensation committee may grant
either incentive stock options, which must comply with Code Section 422, or nonqualified stock options. Our compensation committee
sets exercise prices and terms and conditions, except that stock options must be granted with an exercise price not less than
100% of the fair market value of our common stock on the date of grant (excluding stock options granted in connection with
assuming or substituting stock options in acquisition transactions). Unless our compensation committee determines otherwise,
fair market value means, as of a given date, the closing price of our common stock. At the time of grant, our compensation
committee determines the terms and conditions of stock options, including the quantity, exercise price, vesting periods, term
(which cannot exceed 10 years) and other conditions on exercise.
|
|
●
|
Stock
Appreciation Rights. Our compensation committee may grant SARs, as a right in tandem with the number of shares underlying
stock options granted under the 2016 plan or as a freestanding award. Upon exercise, SARs entitle the holder to receive payment
per share in stock or cash, or in a combination of stock and cash, equal to the excess of the share’s fair market value
on the date of exercise over the grant price of the SAR. The grant price of a tandem SAR is equal to the exercise price of
the related stock option and the grant price for a freestanding SAR is determined by our compensation committee in accordance
with the procedures described above for stock options. Exercise of a SAR issued in tandem with a stock option will reduce
the number of shares underlying the related stock option to the extent of the SAR exercised. The term of a freestanding SAR
cannot exceed 10 years, and the term of a tandem SAR cannot exceed the term of the related stock option.
|
|
|
|
|
●
|
Restricted
Stock, Restricted Stock Units and Other Stock-Based Awards. Our compensation committee may grant awards of restricted
stock, which are shares of common stock subject to specified restrictions, and restricted stock units, or RSUs, which represent
the right to receive shares of our common stock in the future. These awards may be made subject to repurchase, forfeiture
or vesting restrictions at our compensation committee’s discretion. The restrictions may be based on continuous service
with us or the attainment of specified performance goals, as determined by our compensation committee. Stock units may be
paid in stock or cash or a combination of stock and cash, as determined by our compensation committee. Our compensation committee
may also grant other types of equity or equity-based awards subject to the terms and conditions of the 2016 plan and any other
terms and conditions determined by our compensation committee.
|
|
●
|
Performance
Awards. Our compensation committee may grant performance awards, which entitle participants to receive a payment from
us, the amount of which is based on the attainment of performance goals established by our compensation committee over a specified
award period. Performance awards may be denominated in shares of common stock or in cash, and may be paid in stock or cash
or a combination of stock and cash, as determined by our compensation committee. Cash-based performance awards include annual
incentive awards.
|
Clawback
All
cash and equity awards granted under the 2016 plan will be subject to all applicable laws regarding the recovery of erroneously
awarded compensation, any implementing rules and regulations under such laws, any policies we adopted to implement such requirements
and any other compensation recovery policies as we may adopt from time to time.
Change
in Control
Under
the 2016 plan, in the event of a change in control (as defined in the 2016 plan), outstanding awards will be treated in accordance
with the applicable transaction agreement. If no treatment is provided for in the transaction agreement, each award holder will
be entitled to receive the same consideration that stockholders receive in the change in control for each share of stock subject
to the award holder’s awards, upon the exercise, payment or transfer of the awards, but the awards will remain subject to
the same terms, conditions and performance criteria applicable to the awards before the change in control, unless otherwise determined
by our compensation committee. In connection with a change in control, outstanding stock options and SARs can be cancelled in
exchange for the excess of the per share consideration paid to stockholders in the transaction, minus the option or SARs exercise
price.
Subject
to the terms and conditions of the applicable award agreements, awards granted to non-employee directors will fully vest on an
accelerated basis, and any performance goals will be deemed to be satisfied at target. For awards granted to all other service
providers, vesting of awards will depend on whether the awards are assumed, converted or replaced by the resulting entity.
|
●
|
For
awards that are not assumed, converted or replaced, the awards will vest upon the change in control. For performance awards,
the amount vesting will be based on the greater of (1) achievement of all performance goals at the “target” level
or (2) the actual level of achievement of performance goals as of our fiscal quarter end preceding the change in control,
and will be prorated based on the portion of the performance period that had been completed through the date of the change
in control.
|
|
|
|
|
●
|
For
awards that are assumed, converted or replaced by the resulting entity, no automatic vesting will occur upon the change in
control. Instead, the awards, as adjusted in connection with the transaction, will continue to vest in accordance with their
terms and conditions. In addition, the awards will vest if the award recipient has a separation from service within two years
after a change in control by us other than for “cause” or by the award recipient for “good reason”
(each as defined in the applicable award agreement). For performance awards, the amount vesting will be based on the greater
of (1) achievement of all performance goals at the “target” level or (2) the actual level of achievement of performance
goals as of our fiscal quarter end preceding the change in control, and will be prorated based on the portion of the performance
period that had been completed through the date of the separation from service.
|
Amendment
and Termination of the 2016 plan
Unless
earlier terminated by our board of directors, the 2016 plan will terminate, and no further awards may be granted, 10 years after
the date on which it was approved by our stockholders. Our board of directors may amend, suspend or terminate the 2016 plan at
any time, except that, if required by applicable law, regulation or stock exchange rule, stockholder approval will be required
for any amendment. The amendment, suspension or termination of the 2016 plan or the amendment of an outstanding award generally
may not, without a participant’s consent, materially impair the participant’s rights under an outstanding award.
Limitation
of Liability and Indemnification Matters
Our
amended and restated certificate of incorporation, which became effective upon the completion of our initial public offering,
will limit the liability of our directors for monetary damages for breach of their fiduciary duties, except for liability that
cannot be eliminated under the DGCL. Consequently, our directors will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for any of the following:
|
●
|
any
breach of their duty of loyalty to us or our stockholders;
|
|
|
|
|
●
|
acts
or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
|
|
|
|
|
●
|
unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or
|
|
|
|
|
●
|
any
transaction from which the director derived an improper personal benefit.
|
Our
amended and restated bylaws will also provide that we will indemnify our directors and executive officers and may indemnify our
other officers and employees and other agents to the fullest extent permitted by law. Our amended and restated bylaws also permit
us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her
actions in this capacity, regardless of whether our amended and restated bylaws would permit indemnification. We have obtained
directors’ and officers’ liability insurance.
We
have entered into separate indemnification agreements with our directors and executive officers, in addition to indemnification
provided for in our amended and restated bylaws. These agreements, among other things, provide for indemnification of our directors
and executive officers for expenses, judgments, fines and settlement amounts incurred by this person in any action or proceeding
arising out of this person’s services as a director or executive officer or at our request. We believe that these provisions
and agreements are necessary to attract and retain qualified persons as directors and executive officers.
The
above description of the indemnification provisions of our amended and restated bylaws and our indemnification agreements is not
complete and is qualified in its entirety by reference to these documents, each of which is incorporated by reference as an exhibit
to the registration statement to which this prospectus forms a part.
The
limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and
restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They
may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful,
might benefit us and our stockholders. A stockholder’s investment may be harmed to the extent we pay the costs of settlement
and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as indemnification for
liabilities under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing
provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and may be unenforceable. There is no pending litigation or proceeding naming any of our directors or officers
as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims
for indemnification by any director or officer.
Director
Compensation
The
Board determines the form and amount of director compensation after its review of recommendations made by the Compensation Committee.
A substantial portion of each director’s annual retainer is in the form of equity. Under the Company’s nonemployee
director compensation program members of the Board who are not also Company employees (“Non-Employee
Directors”) are granted twenty thousand (20,000) options and restricted stock units (“RSUs”) worth up to twenty-five
thousand dollars ($25,000) per annum (the “Annual Award”). A Non-Employee Director who is newly appointed to the Board
other than in connection with an annual meeting of stockholders will generally also receive a grant of sixty-thousand (60,000)
options and RSUs worth up to seventy-five thousand dollars ($75,000) upon appointment (an “Initial Award”), which
covers their compensation for their first three years of service. The Initial Award and Annual Award to Non-Employee Directors
will vest as long as they remain directors in equal annual portions over three years
following the date in which the award is granted.
The
table below shows the compensation paid to our non-employee directors during 2018 and 2017.
Name
|
|
|
|
Fees earned or paid in cash
|
|
|
Stock awards ($)
|
|
|
Option awards ($)
|
|
|
Non-equity incentive plan compensation ($)
|
|
|
Nonqualified deferred compensation earnings
($)
|
|
|
All other compensation
($)
|
|
|
Total
($)
|
|
Yury Zhivilo (6)
|
|
2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2017
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Francis Duhay, M.D.
|
|
2018
|
|
|
|
|
|
$
|
57,491
|
(1)
|
|
$
|
33,600
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
91,091
|
|
Marcus W. Robins (7)
|
|
2018
|
|
|
|
|
|
$
|
57,491
|
(1)
|
|
$
|
33,600
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
91,091
|
|
Dr. Sanjay Shrivastava
|
|
2018
|
|
|
|
|
|
$
|
57,491
|
(1)
|
|
$
|
33,600
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
91,091
|
|
Robert A. Anderson, Former Director
|
|
2018
|
|
|
-
|
|
|
|
-
|
|
|
$
|
9,960
|
(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
9,960
|
|
|
|
2017
|
|
|
-
|
|
|
|
-
|
|
|
$
|
86,860
|
(4)
|
|
|
-
|
|
|
|
-
|
|
|
$
|
1,000
|
(5)
|
|
$
|
87,860
|
|
Robert W. Doyle, Former Director
|
|
2018
|
|
|
-
|
|
|
|
-
|
|
|
$
|
9,960
|
(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
9,960
|
|
|
|
2017
|
|
|
-
|
|
|
|
-
|
|
|
$
|
86,860
|
(4)
|
|
|
-
|
|
|
|
-
|
|
|
$
|
1,000
|
(5)
|
|
$
|
87,860
|
|
Steven Girgenti, Former Director
|
|
2018
|
|
|
-
|
|
|
|
-
|
|
|
$
|
9,000
|
(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
9,000
|
|
|
|
2017
|
|
|
-
|
|
|
|
-
|
|
|
$
|
78,400
|
(4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
78,400
|
|
|
(1)
|
Under
the Company’s nonemployee director
compensation program, Dr. Francis Duhay, Mr. Marcus Robins and Dr. Sanjay Shrivastava in connection with their appointment
to the BOD on October 2, 2018 were each granted 29,183 Restricted Stock units on November 27, 2018, which based on the Company’s
closing stock price on the grant date were valued at $1.97 per unit. These units vest in equal annual portions on the 10/2/2019,
10/2/2020 and 10/2/2021.
|
|
(2)
|
Under
the Company’s nonemployee director
compensation program, Dr. Francis Duhay, Mr. Marcus Robins and Dr. Sanjay Shrivastava in connection with their appointment
to the BOD on October 2, 2018 were each granted 60,000 options to purchase shares of our common stock on November 27, 2018
at an exercise price of $2.57 per share. The options were valued at $.56 per share as of the date of the grant. All of these
options vest in equal quarterly portions over a 3 year period starting from October 2, 2018 and valued in accordance with
FASB ASC Topic 718.
|
|
(3)
|
Messrs.
Anderson, Doyle and Girgenti resigned as Directors on Oct 1, 2018. Effective upon their resignation, each resigning director
received a grant of 10,000 options to purchase shares of our common stock at an exercise price of $2.90, the closing price
of our common stock on October 1, 2018. The options were valued at $.50 per share as of the date of the grant. All of these
options were vested in full as of the date of grant and valued in accordance with FASB ASC Topic 718. Per the Amended and
Restated 2016 Omnibus Incentive Plan, the options that were awarded in prior years to the resigning directors and vested,
would have to be exercised within 90 days of their resignation date or be forfeited As part of their resignation agreement,
all options granted to the Directors before their resignation date were modified such that they can be exercised by the resigning
directors for a 10 year period from their issuance dates. These options are treated as a modification and valued in accordance
with FASB ASC Topic 718. The 40,000 options to purchase shares of our common stock issued to each of our former directors
Robert Doyle, Robert Anderson, and Steven Girgenti in 2017 at an exercise price of $12.00 per share were valued at $.10 per
share as of the date of the modification. The 3,000 options to purchase shares of our common stock issued to each of our former
directors Robert Doyle and Robert Anderson in 2017 at an exercise price of $7.00 per share were valued at $.32 per share as
of the date of the modification.
|
|
(4)
|
During
2017, we issued options to purchase shares of our common stock to our former directors Robert Doyle, Robert Anderson, and
Steven Girgenti each exercisable for of 40,000 shares of our common stock, at an exercise price of $12.00 per share. The options
were valued at $1.96 per share as of the date of the grant. In addition, we issued to each Robert Doyle and Robert Anderson
options exercisable to purchase 3,000 shares of our common stock, at an exercise price of $7.00 per share. The options were
valued at $2.82 per share as of the date of the grant. All of these options were vested in full as of the date of grant and
valued in accordance with FASB ASC Topic 718. These amounts do not reflect actual compensation earned or to be earned by our
non-employee directors.
|
|
(5)
|
Robert
Doyle and Robert Anderson each received $1,000 from us for attending a two day meeting at our headquarters.
|
|
(6)
|
On
May 23, 2019, Mr. Zhivilo resigned.
|
|
(7)
|
In
April 2019, Mr. Robins passed away.
|
AUDIT
COMMITTEE REPORT
The
following Report of the Audit Committee (the “Audit Report”) does not constitute soliciting material and should not
be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent the Company specifically incorporates this Audit Report by reference therein.
Role
of the Audit Committee
The
Audit Committee’s primary responsibilities fall into three broad categories:
First,
the Audit Committee is charged with monitoring the preparation of quarterly and annual financial reports by the Company’s
management, including discussions with management and the Company’s outside auditors about draft annual financial statements
and key accounting and reporting matters.
Second,
the Audit Committee is responsible for matters concerning the relationship between the Company and its outside auditors, including
recommending their appointment or removal; reviewing the scope of their audit services and related fees, as well as any other
services being provided to the Company; and determining whether the outside auditors are independent (based in part on the annual
letter provided to the Company pursuant to Independence Standards Board Standard No. 1).
Third,
the Audit Committee reviews financial reporting, policies, procedures and internal controls of the Company. The Audit Committee
has implemented procedures to ensure that during the course of each fiscal year it devotes the attention that it deems necessary
or appropriate to each of the matters assigned to it under the Audit Committee’s charter. In overseeing the preparation
of the Company’s financial statements, the Audit Committee met with management and the Company’s outside auditors,
including meetings with the Company’s outside auditors without management present, to review and discuss all financial statements
prior to their issuance and to discuss significant accounting issues. Management advised the Audit Committee that all financial
statements were prepared in accordance with generally accepted accounting principles, and the Audit Committee discussed the statements
with both management and the outside auditors. The Audit Committee’s review included discussion with the outside auditors
of matters required to be discussed pursuant to Statement on Auditing Standards No. 61 (Communication with Audit Committees).
With
respect to the Company’s outside auditors, the Audit Committee, among other things, discussed with Marcum LLP matters relating
to its independence, including the disclosures made to the Audit Committee as required by the Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees).
Recommendations
of the Audit Committee. In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the
Board that the Board approve the inclusion of the Company’s audited financial statements in the Company’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2018, for filing with the SEC.
/s/
Robert Gray
/s/
Matthew Jenusaitis
/s/
Dr. Sanjay Shrivastava
PROPOSAL
2
RATIFICATION
OF THE APPOINTMENT OF THE
COMPANY’S
REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2019
On
October 24, 2019, the Audit Committee of the Board appointed the firm of Marcum LLP (“Marcum”) to serve
as our registered public accounting firm for our fiscal year ended December 31, 2019. The independent accountant’s report
of Marcum on our consolidated financial statements for the year ended December 31, 2018 contained no adverse opinion or disclaimer
of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. A representative of Marcum
is not expected to attend the Meeting.
Audit
Fees. The aggregate fees billed by Marcum for professional services rendered for the audit of our annual financial statements,
review of the financial information included in our Forms 10-Q for the respective periods and other required filings with the
SEC for the years ended December 31, 2018 and 2017 totaled $103,195 and $126,655, respectively. The above amounts include interim
procedures and audit fees, as well as attendance at audit committee meetings.
Audit-Related
Fees. The aggregate fees billed by Marcum for audit-related fees for the years ended December 31, 2018 and 2017 were $184,432
and $204,104, respectively. The fees were provided in consideration of services consisting of review and update procedures associated
with registration statements and other SEC filings.
Tax
Fees. The aggregate fees billed by Berman, Romeri & Associates, LLP for professional services rendered for tax compliance
for the years ended December 31, 2018 and 2017 were $4,000 and $11,000, respectively. The fees were provided in consideration
of services consisting of preparation of tax returns and related tax advice.
All
Other Fees. None.
The
Audit Committee of our board of directors has established its pre-approval policies and procedures, pursuant to which the Audit
Committee approved the foregoing audit and non-audit services provided by Marcum in 2018. Consistent with the Audit Committee’s
responsibility for engaging our independent auditors, all audit and permitted non-audit services require pre-approval by the Audit
Committee. The full Audit Committee approves proposed services and fee estimates for these services. The Audit Committee chairperson
has been designated by the Audit Committee to approve any audit-related services arising during the year that were not pre-approved
by the Audit Committee. Any non-audit service must be approved by the full Audit Committee. Services approved by the Audit Committee
chairperson are communicated to the full Audit Committee at its next regular meeting and the Audit Committee reviews services
and fees for the fiscal year at each such meeting. Pursuant to these procedures, the Audit Committee approved the foregoing services
provided by Marcum.
Changes
In and Disagreements with Accountants on Accounting and Financial Disclosure. None.
THE
BOARD RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE AUDIT
COMMITTEE’S
APPROVAL OF THE APPOINTMENT OF MARCUM LLP AS THE
COMPANY’S
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDED
DECEMBER
31, 2019.
PRINCIPAL
STOCKHOLDERS
The
following table sets forth certain information concerning the ownership of our common stock as of the Record Date, with respect
to: (i) each person known to us to be the beneficial owner of more than five percent of our common stock; (ii) all directors;
(iii) all named executive officers; and (iv) all directors and executive officers as a group. Beneficial ownership is determined
in accordance with the rules of the SEC that deem shares to be beneficially owned by any person who has voting or investment power
with respect to such shares. Shares of common stock subject to options or warrants that are exercisable as of the date of the
Record Date or are exercisable within 60 days of such date are deemed to be outstanding and to be beneficially owned by the person
holding such options for the purpose of calculating the percentage ownership of such person but are not treated as outstanding
for the purpose of calculating the percentage ownership of any other person. Applicable percentage ownership is based on 17,922,129
shares of common stock outstanding as of the Record Date.
|
|
Beneficial Ownership
|
|
Name and Address of Beneficial Owner(1)
|
|
Number of
Shares
|
|
|
Percentage
|
|
5% Stockholders
|
|
|
|
|
|
|
|
|
Biodyne Holding, S.A. (2)
|
|
|
3,837,043
|
|
|
|
21.4
|
%
|
Yury Zhivilo (2)
|
|
|
3,872,055
|
|
|
|
21.6
|
%
|
Named Executive Officers and Directors
|
|
|
|
|
|
|
|
|
Robert A. Berman (3)
|
|
|
954,561
|
|
|
|
5.1
|
%
|
Marc Glickman, M.D. (4)
|
|
|
199,500
|
|
|
|
1.1
|
%
|
Francis Duhay, M.D. (5)
|
|
|
29,728
|
|
|
|
*
|
|
Dr. Sanjay Shrivastava (6)
|
|
|
29,728
|
|
|
|
*
|
|
Robert Gray (7)
|
|
|
5,000
|
|
|
|
*
|
|
Matthew Jenusaitis (8)
|
|
|
5,000
|
|
|
|
*
|
|
All directors and executive officers as a group (6 persons)
|
|
|
1,223,516
|
|
|
|
6.4
|
%
|
*
Represents beneficial ownership of less than 1%.
(1)
|
Except
as otherwise noted below, the address for each person or entity listed in the table is c/o Hancock Jaffe Laboratories, Inc.,
70 Doppler, Irvine, California 92618.
|
(2)
|
Mr.
Zhivilo is the controlling shareholder, President and director of Biodyne Holding, S.A., or Biodyne, and Leman Cardiovascular
S.A., or Leman. Accordingly, Mr. Zhivilo is deemed to be the beneficial owner of the shares of common stock owned by Biodyne
(3,837,043 shares) and Leman (35,012 shares). He has voting and dispositive power over the shares held by Biodyne and Leman.
The principal business address of Biodyne is 13 Rue de la Gare, 1100 Morges, Switzerland.
|
(3)
|
Includes
936,179 shares of common stock issuable upon exercise of options that are currently exercisable or exercisable within 60 days
of the Record Date.
|
(4)
|
Includes
199,500 shares of common stock issuable upon exercise of options that are currently exercisable or exercisable within 60 days
of the Record Date.
|
(5)
|
Includes
20,000 shares of common stock issuable upon exercise of options that are currently exercisable or exercisable within 60 days
of the Record Date and 9,728 restricted stock units that are currently exercisable or exercisable within 60 days of the
Record Date and will be settled in either cash or shares of common stock.
|
(6)
|
Includes
20,000 shares of common stock issuable upon exercise of options that are currently exercisable or exercisable within 60 days
of the Record Date and 9,728 restricted stock units that are currently exercisable or exercisable within 60 days of the Record
Date and will be settled in either cash or shares of common stock.
|
(7)
|
Includes
5,000 shares of common stock issuable upon exercise of options that are currently exercisable or exercisable within 60 days
of the Record Date.
|
(8)
|
Includes
5,000 shares of common stock issuable upon exercise of options that are currently exercisable or exercisable within 60 days
of the Record Date.
|
OTHER
INFORMATION
Proxy
Solicitation
All
costs of solicitation of proxies will be borne by us. In addition to solicitation by mail, our officers and regular employees
may solicit proxies personally or by telephone. We do not intend to utilize a paid solicitation agent.
Proxies
A
stockholder may revoke his, her or its proxy at any time prior to its use by giving written notice to our Chief Financial Officer,
by executing a revised proxy at a later date or by attending the Meeting and voting in person. Proxies in the form enclosed, unless
previously revoked, will be voted at the Meeting in accordance with the specifications made thereon or, in the absence of such
specifications in accordance with the recommendations of our Board.
Securities
Outstanding; Votes Required
As
of the close of business on the Record Date there were 17,922,129 shares of Common Stock outstanding. Shares of the Common Stock
represented by executed proxies received by the Company will be counted for purposes of establishing a quorum at the Meeting,
regardless of how or whether such shares are voted on any specific proposal.
For
purposes of Proposal 1, the two (2) candidates receiving the highest number of affirmative votes at the Meeting will be elected
as Class II directors. Only shares that are voted in favor of a particular nominee will be counted toward that nominee’s
achievement of a plurality. Shares present at the Meeting that are not voted for a particular nominee or shares present by proxy
where the shareholder properly withheld authority to vote for such nominee will not be counted toward that nominee’s achievement
of a plurality.
For
purposes of Proposal 2, the affirmative vote of a majority of the votes cast at the Meeting by the holders of shares of Common
Stock entitled to vote is required to ratify Marcum LLP as our independent registered public accounting firm for the year ending
December 31, 2019. Abstentions will have no direct effect on the outcome of this proposal, but since this is a routine matter,
brokers may vote at the Meeting on this proposal provided that they have not received instructions from a beneficial owner.
Other
Business
Our
Board knows of no other matter to be presented at the Meeting. If any additional matter should properly come before the Meeting,
it is the intention of the persons named in the enclosed proxy to vote such proxy in accordance with their judgment on any such
matters.
Legal
Proceedings
There
are no material proceedings in which any of the Company’s directors, officers or affiliates, or any associate of any such
director, officer, affiliate of the Company, is a party adverse to the Company or any of its subsidiaries or has a material interest
adverse to the Company or any of its subsidiaries.
Future
Stockholders Proposals
The
Board has not yet determined the date on which the next Annual Meeting of stockholders will be held. Stockholders may submit proposals
on matters appropriate for stockholder action at annual meetings in accordance with the rules and regulations adopted by the Securities
and Exchange Commission. Any proposal which an eligible stockholder desires to have included in our proxy statement and presented
at the next Annual Meeting of Stockholders will be included in our proxy statement and related proxy card if it is received by
us a reasonable time before we begin to print and send our proxy materials and if it complies with Securities and Exchange Commission
rules regarding inclusion of proposals in proxy statements. In order to avoid controversy as to the date on which we receive a
proposal, it is suggested that any stockholder who wishes to submit a proposal submit such proposal by certified mail, return
receipt requested.
Other
deadlines apply to the submission of stockholder proposals for the next Annual Meeting that are not required to be included in
our proxy statement under Securities and Exchange Commission rules. With respect to these stockholder proposals for the next Annual
Meeting, a stockholder’s notice must be timely. To be timely, a stockholder’s notice shall be delivered to the Chief
Financial Officer at the principal executive offices of the corporation not later than the close of business on the ninetieth
(90th) day, nor earlier than the close of business on the one hundred twentieth (120th) day, prior to the first anniversary of
the preceding year’s annual meeting. The form of proxy distributed by the Board of Directors for such meeting will confer
discretionary authority to vote on any such proposal not received by such date. If any such proposal is received by such date,
the proxy statement for the meeting will provide advice on the nature of the matter and how we intend to exercise our discretion
to vote on each such matter if it is presented at that meeting.
Stockholder
Communications
Stockholders
wishing to communicate with the Board may direct such communications to the Board c/o the Company, Attn: Robert Rankin. Mr. Rankin
will present a summary of all stockholder communications to the Board at subsequent Board meetings. The directors will have the
opportunity to review the actual communications at their discretion.
Householding
of Proxy Materials
The
SEC has adopted rules that permit companies and intermediaries (such as banks and brokers) to satisfy the delivery requirements
for notices of annual meetings, proxy statements and annual reports with respect to two or more stockholders sharing the same
address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as
“householding,” potentially means extra convenience for stockholders and cost savings for companies. This year, a
single notice of the annual meeting of stockholders, or copy of the proxy statement and annual report, will be delivered to multiple
stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have
received notice from your bank or broker that it will be householding communications 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 and annual report, please notify your bank or broker, and direct your written
request to Robert Rankin, Chief Financial Officer of the Company, at (949) 261-2900 or at offices of the Company at 70 Doppler
Irvine, California 92618. Stockholders who currently receive multiple copies of the proxy statement at their address and would
like to request householding of their communications should contact their bank or broker.
Additional
Information
We
are subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended, and in accordance
therewith, we file periodic reports, documents and other information with the SEC relating to our business, financial statements
and other matters. Such reports and other information may be inspected and are available for copying at the offices of the SEC,
100 F Street, N.E., Washington, D.C. 20549 or may be accessed at www.sec.gov. Information regarding the operation of the
public reference rooms may be obtained by calling the SEC at 1-800-SEC-0330
Hancock
Jaffe Laboratories, Inc.
70
Doppler Irvine, California 92618
(949)
261-2900
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE
UNDERSIGNED HEREBY APPOINTS ROBERT A. BERMAN AND ROBERT RANKIN, AND EACH OF THEM, AS PROXIES OF THE UNDERSIGNED, WITH FULL POWER
OF SUBSTITUTION, TO VOTE ALL THE SHARES OF COMMON STOCK OF HANCOCK JAFFE LABORATORIES, INC. HELD OF RECORD BY THE UNDERSIGNED
ON OCTOBER 14, 2019, AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON FRIDAY, DECEMBER 6, 2019, OR ANY ADJOURNMENT THEREOF.
1.
Election of Mr. Matthew M. Jenusaitis and Mr. Robert A. Berman as Class II directors,
to hold office until the 2022 Annual Meeting of Stockholders or until their successors are elected and qualified or until their
earlier death, incapacity, removal or resignation.
|
[ ] FOR NOMINEE
|
(i)
Mr. Matthew M. Jenusaitis
|
|
|
[ ] WITHHOLD AUTHORITY FOR NOMINEE
|
|
|
|
[ ] FOR NOMINEE
|
(i)
Mr. Robert A. Berman
|
|
|
[ ] WITHHOLD AUTHORITY FOR NOMINEE
|
2.
To ratify the appointment by the Audit Committee of the Company’s Board of Directors of Marcum LLP as the Company’s
registered public accounting firm for the fiscal year ending December 31, 2019;
|
[ ] FOR
|
[ ] AGAINST
|
[ ] ABSTAIN
|
The
shares represented by this proxy, when properly executed, will be voted as specified by the undersigned stockholder(s). If this
card contains no specific voting instructions, the shares will be voted FOR each of the proposals described on this card.
In
their discretion, the proxies are authorized to vote upon such other business as may properly come before the Meeting.
|
|
|
Signature
of Stockholder(s)
|
|
|
|
|
|
Date
|
Please
sign exactly as the name appears below. When shares are held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a corporation, please sign the corporate name by the president
or other authorized officer. If a partnership, please sign in the partnership name by an authorized person.
VOTE
BY INTERNET—www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time
the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain
your records and to create an electronic voting instruction form.
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