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0001726711
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2021-12-31
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2021-06-30
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2022-03-29
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PART
III
Item 10.
Directors, Executive Officers and Corporate Governance
Executive
Officers and Directors
Set
forth below is certain information with respect to the individuals who are our directors and executive officers as of April 12, 2022:
Name |
|
Age |
|
Positions |
Amro Albanna |
|
52 |
|
Chief Executive Officer,
Director |
Corinne Pankovcin |
|
55 |
|
President |
Shahrokh Shabahang, D.D.S.,
MS, Ph.D. |
|
59 |
|
Chief Innovation Officer,
Director |
Rowena Albanna |
|
56 |
|
Chief Operating Officer |
Thomas J. Farley |
|
49 |
|
Chief Financial Officer |
Brian Brady |
|
43 |
|
Director |
Namvar Kiaie |
|
57 |
|
Director |
Jeffrey W. Runge, M.D. |
|
66 |
|
Director |
Amro
Albanna – Chief Executive Officer
Mr.
Albanna has been our Chief Executive Officer and a Director since we were formed in 2017. He also served as our President from our inception
through September 2021. In 2010, Mr. Albanna co-founded Innovation Economy Corporation (“IEC”), formed to license and commercialize
innovations and create a group of life and health subsidiaries. From 2010 until 2017, Mr. Albanna was Chief Executive Officer and a Director
of IEC and Olfactor Laboratories, Inc., a majority-owned subsidiary of IEC. From 2010 to August 2016, he was the Chief Executive Officer
and a Director of Nano Engineered Applications, Inc., another majority-owned subsidiary of IEC. In 2003, Mr. Albanna founded Qmotions,
Inc. (subsequently renamed Deal A Day Group Corp.). He served as its Chief Executive Officer and a Director until 2011. Qmotions used
3-D spatial tracking and pattern recognition technologies to develop motion-capturing video game controllers. In 2002, Mr. Albanna was
a co-founder of Digital Angel Corporation – a company formed via the merger of three private companies (one being TTC below) into
a fourth publicly traded company (American Stock Exchange) and was placed in charge of commercializing its GPS/wireless technologies.
Around that time, Mr. Albanna co-founded an incubator for startups at the University of California, Riverside Research Park which was
acquired in 2007. In 1997, he founded Timely Technology Corporation (“TTC”), which designed and developed e-commerce software
for education, retail and finance. TTC was acquired in 2000 by a Nasdaq-listed company. Mr. Albanna graduated from California State University
San Bernardino in 1991 with a B.S. in Business Administration with concentration in Computer Information Systems. He completed graduate
coursework in Computer Science and Engineering at California State University, Long Beach from 1992 to 1993. In 2019, Mr. Albanna completed
coursework in Immunology and Genetics at Harvard Medical School HMX online learning platform.
Corinne
Pankovcin – President
Ms.
Pankovcin has been our President since September 2021. Ms. Pankovcin served as our Chief Financial Officer from July 2020 through August
2021. From December 2015 to July 2019, Ms. Pankovcin was the Chief Financial Officer and Managing Director and Treasurer of Business
Development Corporation of America (“BDCA”), a business development company. Prior thereto, from January 2011 to August 2015,
Ms. Pankovcin was the Chief Financial Officer and Treasurer of Blackrock Capital Investment Corporation (NASDAQ: BKCC), and a Managing
Director of Finance at BlackRock Investment Management LLC. Prior to joining BlackRock, Ms. Pankovcin was a senior member of Finance
& Accounting of Alternative Investments and served as Chief Financial Officer for the Global Emerging Markets products group at AIG
Capital Partners. Ms. Pankovcin began her career with PricewaterhouseCoopers LLP, where she ultimately held the role of Senior Manager
of Business Assurance for Consumer Products, Manufacturing, and Middle Market industries from 1991 to 2001. Ms. Pankovcin earned her
B.S. in Accounting from Dowling College and her Master’s Degree in Business Administration from Hofstra University. She is a Certified
Public Accountant.
Shahrokh
Shabahang, D.D.S., MS, Ph.D. – Chief Innovation Officer
Dr.
Shabahang has been our Chief Innovation Officer and Director since our inception. In 2009, Dr. Shabahang co-founded Sekris Biomedical
Inc. to incubate immunotherapy technologies. He served as its Chairman of the board and Chief Executive Officer since its inception.
In 2004, Dr. Shabahang joined Genelux Corporation to lead its clinical development program and to serve as board secretary. Genelux developed
an oncolytic virus technology for treatment of cancer, co-invented by Dr. Shabahang. During his tenure from 2004-2007, Genelux raised
$20M+ and obtained regulatory approval to initiate First-In-Human clinical studies in Europe with patients who had not responded to chemotherapy.
In 2001, Dr. Shabahang became the Director of the Microbiology and Molecular Biology Lab at Loma Linda University (“LLU”).
He led the research and development of an antimicrobial therapeutic agent for treatment of dental infections, which was licensed and
marketed by one of the largest dental distribution companies. Dr. Shabahang attended the University of California, Santa Barbara from
1982 to 1984 and later received his DDS from the University of Pacific in 1987. He earned his PhD in Microbiology and Molecular Genetics
at LLU in 2001. During the same year, he established his laboratory at LLU to study infectious diseases and host immune responses.
Rowena
Albanna – Chief Operating Officer
Ms.
Albanna has been our Chief Operating Officer since July 2020. From 2017 to immediately prior to her appointment as Chief Operating Officer,
Ms. Albanna was an independent operations consultant for the Company. Prior thereto, from 2013 to 2017, Ms. Albanna was the Chief Operating
Officer of Innovation Economy Corporation (“IEC”), formed to license and commercialize innovations and create a group of
life and health subsidiaries. From 2010 to 2013, Ms. Albanna was Senior Vice President of IEC. From 2004 to 2009, Ms. Albanna was the
founder and principal of Weezies, an online-based business focused on building and operating e-commerce stores and affiliate marketing
sites. From 2003 to 2004, Ms. Albanna was the head of Product Development and Engineering of Qmotions Inc. Qmotions used 3-D spatial
tracking and pattern recognition technologies to develop motion-capturing video game controllers. In 2002, Ms. Albanna was VP of Product
Development at Digital Angel Systems where she led the development of devices which combined GPS, wireless, and biosensing. Prior to
that, Ms. Albanna held multiple product development roles with increasing responsibilities for various technology companies in the areas
of financial, medical, telecommunications, integrated circuit layout design, and defense. Ms. Albanna is a co-inventor of two patents
related to systems for localizing, monitoring, and sensing objects. Ms. Albanna received a Bachelor of Science degree in Computer Science
with a minor in Mathematics from California State University, San Bernardino in 1988. Ms. Albanna is the wife of Amro Albanna, our
Chief Executive Officer.
Thomas
J. Farley, CPA – Chief Financial Officer
Mr.
Farley has been the Chief Financial Officer since September 2021. Prior to this, Mr. Farley was the Principal Accounting Officer and
Controller from October of 2020 to September 2021. From December 2015 to June 2020, Mr. Farley was the Controller of Business Development
Corporation of America (“BDCA”), a publicly listed business development company. Prior thereto, from January 2011 to August
2015, Mr. Farley was the Senior Controller of Blackrock Capital Investment Corporation (NASDAQ: BKCC). Prior to joining BlackRock Capital
Investment Corporation, Mr. Farley was a Senior Controller for PineBridge Investments Emerging Markets practice. Mr. Farley was also
an Accounting Manager for Bessemer Venture Partners prior to his tenure at PineBridge. Mr. Farley began his career with PricewaterhouseCoopers
LLP, from 1996 to 2001. Mr. Farley earned his B.S. in Accounting from Long Island University and is a Certified Public Accountant.
Brian
Brady – Director
Mr.
Brady has served as a Director since December 1, 2018. Mr. Brady has also been the Director of Investments at a large hospital system
since March 2016, where he is responsible for the management of investment activity related to the organization and personal investments
of the family that owns that company. From December 2011 to March 2016, Mr. Brady was the Vice President/Portfolio Manager at a wealth
advisory firm, where he served in an investment advisory role, including asset and portfolio management. Mr. Brady graduated in 2001
with a Bachelor’s degree in Finance from the University of Illinois at Chicago and in 2014 with a Master of Business Administration
degree from the University of Chicago. We believe that Mr. Brady’s extensive experience with financial markets and management of
investment activities qualifies him to serve as a director of our Company.
Namvar
Kiaie – Director
Mr.
Kiaie has served as a director since July 2020. Mr. Kiaie has been associated with Abbott Diabetes Care since December 2005 (Director
of Engineering 2005-2007; R&D Director 2007-2010; and Senior Director of R&D 2010-present), where he is responsible for the development
of diabetes management related products and accessories, including blood glucose monitoring devices and data management software. Mr.
Kiaie graduated in 1985 with a Bachelor of Science degree in Electrical Engineering and in 1986 with a Master of Science degree in Electrical
Engineering, both from the University of California Santa Barbara. We believe that Mr. Kiaie’s extensive experience leading research
and development effforts in the biotech industry qualifies him to serve as a director of our Company.
Jeffrey
W. Runge, M.D – Director
Dr.
Runge has served as a director since July 2020. From 2008 to the present, Dr. Runge has been the President and founder of Biologue, Inc.,
which provides consulting in biodefense, medical preparedness and injury control. From 2001 through August of 2008, Dr. Runge served
in the Bush administration, first as the head of the National Highway Traffic Safety Administration, and, beginning in September 2005,
as the Department of Homeland Security’s (DHS) first Chief Medical Officer. Dr. Runge founded the DHS Office of Health Affairs
and was confirmed by the United States Senate as DHS’ first Assistant Secretary for Health Affairs in December of 2007. Dr. Runge
also served as Acting DHS Undersecretary for Science and Technology from February through August 2006. In his role at DHS, Dr. Runge
oversaw the operations of the department’s biodefense activities, medical preparedness and workforce health protection, as well
as fulfilling DHS’ responsibilities in medical countermeasure development. Prior to his government service, Dr. Runge was Assistant
Chairman and Director of Clinical Research in the Department of Emergency Medicine at Carolinas Medical Center in Charlotte, NC, from
1984 through 2001. Additionally, Dr. Runge is a Senior Advisor at The Chertoff Group, a firm providing advisory services in business
risk management, security and homeland defense. Since 2010, Dr. Runge has served on the boards of two public companies, including their
Audit and Compensation committees, both of which underwent strategic acquisitions. He has also served as President and CEO of a SEC-regulated
startup company in the health sector. Dr. Runge earned his medical degree from the Medical University of South Carolina and his undergraduate
degree from the University of the South. We believe that Dr. Runge’s experience in medicine, medical research, public service,
business and his prior service on public corporate boards qualifies him to serve as a director of our Company.
Board
Leadership Structure and Risk Oversight
The
Board oversees our business and considers the risks associated with our business strategy and decisions. The Board currently implements
its risk oversight function as a whole. Each of the Board committees, when established, will also provide risk oversight in respect of
its areas of concentration and reports material risks to the Board for further consideration.
Term
of Office
Officers
hold office until his or her successor is elected and qualified. Directors are appointed to serve for one year until the meeting of the
Board following the annual meeting of stockholders and until their successors have been elected and qualified.
Director
Independence
We
use the definition of “independence” of The Nasdaq Stock Exchange LLC (“Nasdaq”) listing rules to make this determination.
Nasdaq listing rules provide that an “independent director” is one who the board “affirmatively determines” has
no “material relationship” with the company “either directly or as a partner, shareholder or officer of an organization
that has a relationship with the Company. Nasdaq listing rules provide that a director cannot be considered independent if:
|
● |
the director is, or has
been within the last three (3) years, an employee of the Company or an immediate family member of director is, or has been within
the last three (3) years, an executive officer of the Company; |
|
|
|
|
● |
the director has received,
or has an immediate family member who is an executive officer of the Company and has received, during any twelve-month period within
the last three (3) years, more than $120,000 compensation directly from the Company (not including compensation received for director
service, pension plan payments or deferred compensation for prior service not contingent on continued service); |
|
|
|
|
● |
the director or an immediate
family member is a current partner of the Company’s internal or external auditor; the director is a current employee of the
auditor; an immediate family member is a current employee of the auditor and personally works on the Company’s audit; or the
director or an immediate family member was within the last three (3) years a partner or employee of the auditor and personally worked
on the Company’s audit within that time; |
|
|
|
|
● |
the director or an immediate
family member is, or has been within the last three (3) years, employed as an executive officer of another company where any of the
Company’s present executive officers at the same time serves or served on that company’s compensation committee; or |
|
|
|
|
● |
the director is a current
employee, or an immediate family member is a current executive officer, of an organization that has made to or received from the
Company payments for property or services in an amount which, in any of the last three fiscal (3) years, exceeds greater of 2% of
such other company’s consolidated gross revenues or $1 million. Charitable contributions not considered “payments”
for purposes of this prohibition but contributions meeting these thresholds must be disclosed on the Company’s website or in
its annual proxy statement or its Annual Report on Form 10-K. |
Under
such definitions, we consider Mr. Kiaie, Mr. Brady, and Dr. Runge to be “independent.” Nasdaq listing rules permits a phase-in
period of up to one year for an issuer registering securities in an initial public offering to comply with its requirement that a majority
of the board of directors be made up of independent directors. However, our common stock is not currently quoted or listed on any national
exchange or interdealer quotation system with a requirement that a majority of our Board be independent and, therefore, the Company is
not subject to any director independence requirements. We are subject to Nasdaq’s director independence requirements and are required
to structure our board of directors accordingly.
Committees
of the Board
Our
board of directors has established three standing committees: Audit, Compensation, and Nominating and Corporate Governance. Each of these
standing committees operate pursuant to its respective charter. The committee charters are reviewed annually by the Nominating and Corporate
Governance Committee. If appropriate, and in consultation with the chairs of the other committees, the Nominating and Corporate Governance
Committee may propose revisions to the charters. The responsibilities of each committee are described in more detail below.
Nasdaq
listing rules permits a phase-in period for an issuer registering securities in an initial public offering to meet the Audit Committee,
Compensation Committee and Nominating and Corporate Governance Committee independence requirements. Under the initial public offering
phase-in period, only one member of each committee is required to satisfy the heightened independence requirements at the time our registration
statement becomes effective, a majority of the members of each committee must satisfy the heightened independence requirements within
90 days following the effectiveness of our registration statement, and all members of each committee must satisfy the heightened independence
requirements within one year from the effectiveness of our registration statement.
The
composition and functions of each committee are described below.
Name |
|
Independent |
|
Audit |
|
Compensation |
|
Nominating
and
Corporate
Governance |
Amro Albanna |
|
|
|
|
|
|
|
|
Shahrokh Shabahang, D.D.S., MS, Ph.D. |
|
|
|
|
|
|
|
|
Brian Brady |
|
X |
|
X* |
|
X |
|
X |
Namvar Kiaie |
|
X |
|
X |
|
X* |
|
X |
Jeffrey Runge, M.D. |
|
X |
|
X |
|
X |
|
X* |
*
Chairman of the committee
Audit
Committee
The
Audit Committee, among other things, is responsible for:
|
● |
appointing; approving the
compensation of; overseeing the work of; and assessing the independence, qualifications, and performance of the independent auditor; |
|
|
|
|
● |
reviewing the internal
audit function, including its independence, plans, and budget; |
|
|
|
|
● |
approving, in advance,
audit and any permissible non-audit services performed by our independent auditor; |
|
● |
reviewing our internal
controls with the independent auditor, the internal auditor, and management; |
|
|
|
|
● |
reviewing the adequacy
of our accounting and financial controls as reported by the independent auditor, the internal auditor, and management; |
|
|
|
|
● |
overseeing our financial
compliance system; and |
|
|
|
|
● |
overseeing our major risk
exposures regarding the Company’s accounting and financial reporting policies, the activities of our internal audit function,
and information technology. |
The
Board has affirmatively determined that each member of the Audit Committee meets the additional independence criteria applicable to audit
committee members under SEC rules and Nasdaq listing rules. The Board has adopted a written charter setting forth the authority and responsibilities
of the Audit Committee. The Board has affirmatively determined that each member of the Audit Committee is financially literate, and that
Mr. Brady meets the qualifications of an Audit Committee financial expert.
The
Audit Committee consists of Mr. Brady, Mr. Kiaie, and Dr. Runge. Mr. Brady chairs the Audit Committee.
Compensation
Committee
The
Compensation Committee is responsible for:
|
● |
reviewing and making recommendations
to the Board with respect to the compensation of our officers and directors, including the CEO; |
|
|
|
|
● |
overseeing and administering
the Company’s executive compensation plans, including equity-based awards; |
|
|
|
|
● |
negotiating and overseeing
employment agreements with officers and directors; and |
|
|
|
|
● |
overseeing how the Company’s
compensation policies and practices may affect the Company’s risk management practices and/or risk-taking incentives. |
The
Board has adopted a written charter setting forth the authority and responsibilities of the Compensation Committee.
The
Compensation Committee consists of Mr. Brady, Mr. Kiaie, and Dr. Runge. Mr. Kiaie serves as chairman of the Compensation Committee. The
Board has affirmatively determined that each member of the Compensation Committee meets the independence criteria applicable to compensation
committee members under SEC rules and Nasdaq listing rules.
Nominating
and Corporate Governance Committee
The
Nominating and Corporate Governance Committee, among other things, is responsible for:
|
● |
reviewing and assessing
the development of the executive officers and considering and making recommendations to the Board regarding promotion and succession
issues; |
|
|
|
|
● |
evaluating and reporting
to the Board on the performance and effectiveness of the directors, committees and the Board as a whole; |
|
|
|
|
● |
working with the Board
to determine the appropriate and desirable mix of characteristics, skills, expertise and experience, including diversity considerations,
for the full Board and each committee; |
|
|
|
|
● |
annually presenting to
the Board a list of individuals recommended to be nominated for election to the Board; |
|
|
|
|
● |
reviewing, evaluating,
and recommending changes to the Company’s Corporate Governance Principles and Committee Charters; |
|
|
|
|
● |
recommending to the Board
individuals to be elected to fill vacancies and newly created directorships; |
|
|
|
|
● |
overseeing the Company’s
compliance program, including the Code of Conduct; and |
|
|
|
|
● |
overseeing and evaluating
how the Company’s corporate governance and legal and regulatory compliance policies and practices, including leadership, structure,
and succession planning, may affect the Company’s major risk exposures. |
The
Board of Directors has adopted a written charter setting forth the authority and responsibilities of the Nominating and Corporate Governance
Committee.
The
Nominating and Corporate Governance Committee consists of Dr. Runge, Mr. Brady, and Mr. Kiaie. Dr. Runge serves as chairman of the Nominating
and Corporate Governance Committee. The Company’s Board of Directors has determined that each member of the Nominating and Corporate
Governance Committee is independent within the meaning of the independent director guidelines of Nasdaq listing rules.
Compensation
Committee Interlocks and Insider Participation
None
of the Company’s executive officers serves, or in the past has served, as a member of the board of directors or compensation committee,
or other committee serving an equivalent function, of any entity that has one or more executive officers who serve as members of the
Company’s board of directors or its compensation committee. None of the members of the Company’s compensation committee is,
or has ever been, an officer or employee of the Company.
Code
of Business Conduct and Ethics
The
Company’s board of directors adopted a code of business conduct and ethics applicable to its employees, directors and officers,
in accordance with applicable U.S. federal securities laws and the corporate governance rules of the Nasdaq Capital Market. The code
of business conduct and ethics is publicly available on the Company’s website. Any substantive amendments or waivers of the code
of business conduct and ethics or code of ethics for senior financial officers may be made only by the Company’s board of directors
and will be promptly disclosed as required by applicable U.S. federal securities laws and the corporate governance rules of the Nasdaq
Capital Market.
Corporate
Governance Guidelines
The
Company’s board of directors has adopted corporate governance guidelines in accordance with the corporate governance rules of the
Nasdaq Capital Market.
Involvement
in Certain Legal Proceedings
To
our knowledge, none of our current directors or executive officers has, during the past ten years:
|
● |
been convicted in a criminal
proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
|
|
|
|
● |
had any bankruptcy petition
filed by or against the business or property of the person, or of any partnership, corporation or business association of which he
or she was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that
time; |
|
|
|
|
● |
been subject to any order,
judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state
authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business,
securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons
engaged in any such activity; |
|
|
|
|
● |
been found by a court of
competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or
state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
|
|
|
|
● |
been the subject of, or
a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended
or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any
federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance
companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty
or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire
fraud or fraud in connection with any business entity; or |
|
|
|
|
● |
been the subject of, or
a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined
in Section 3(a)(26) of the Securities Exchange Act of 1934, as amended (the Exchange Act)), any registered entity (as defined in
Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary
authority over its members or persons associated with a member. |
Except
as set forth above and in our discussion below in “Certain Relationships and Related Transactions,” none of our directors
or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates
which are required to be disclosed pursuant to the rules and regulations of the SEC.
Other
than as set forth below, we are not currently a party to any legal proceedings, the adverse outcome of which, individually or in the
aggregate, we believe will have a material adverse effect on our business, financial condition or operating results.
The
Company, Amro Albanna, our Chief Executive Officer, and Dr. Shahrokh Shabahang, our Chief Innovation Officer, have been named as cross-defendants
in a counterclaim filed by Christopher Sechrist in an action entitled Shahrokh Shabahang v. Christopher Sechrist, San Bernardino County
Superior Court Case No. CIVDS1831323. In a cross-complaint, Mr. Sechrist contends that he was a partner in a dental practice with Dr.
Shabahang, and that disputes arose as between those partners. Neither the Company nor Mr. Albanna were partners in, or otherwise have
an interest in, the dental practice. Notwithstanding, and seemingly based solely on the fact that Dr. Shabahang became the Chief Innovation
Officer for the Company, Mr. Sechrist has brought claims against the Company and Mr. Albanna. Both the Company and Mr. Albanna believe
that the Counterclaims filed by Mr. Sechrist have no factual or legal merit, and they intend to vigorously defend themselves in the action
and to seek a dismissal of the case as against them as soon as possible. On May 26, 2020, Mr. Sechrist filed a request for dismissal
as to the Company and Mr. Albanna with the Superior Court of California, County of San Bernardino, San Bernardino District. The clerk
of the court entered the dismissal with prejudice on May 26, 2020.
Our
Chief Executive Officer, Amro Albanna, is a party to litigation matters unrelated to the Company or any of its properties. Such
litigations relate to Innovation Economy Corporation (IEC), a company in which Mr. Albanna served as the CEO and a Director from 2010
until 2017, and its wholly-owned subsidiaries (Innovation Economy Corporation d/b/a ieCrowd). The first litigation (ieCrowd v. Kim, et.
al, Superior Court, Riverside County) was originally commenced by IEC and its subsidiary after Mr. Albanna was no longer affiliated with
IEC, against certain third-party defendants based upon claims related to their misconduct and mismanagement. Such defendants subsequently
brought a countersuit against IEC and its subsidiary, in which they named Mr. Albanna and others as defendants, alleging that they were
misled to invest in IEC and its subsidiary based upon misrepresentations by, among others, Mr. Albanna. The cases have now been
consolidated. Mr. Albanna believes that the counteraction commenced by the third parties against him is without merit and intends to defend
himself. The second matter (Calabria v. ieCrowd) was commenced by Calabria Ventures (the “Calabria Action”) more
than 2 years after Mr. Albanna was no longer affiliated with IEC, related to uncollected rent. Mr. Albanna believes that the
action commenced against him is without merit and intends to defend himself. IEC (either directly or through its Director and
officer insurance policy) has covered all related legal costs to date. On August 5, 2020, the plaintiff in the Calabria Action filed
a request for dismissal as to Mr. Albanna with the Superior Court of California, County of Riverside. The clerk of the court entered
the dismissal without prejudice on August 5, 2020.
Item 11.
Executive Compensation
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table represents information regarding the total compensation for the named executive officers of the Company as of December
31, 2021 and 2020:
Name and Principal Position | |
Year | | |
Salary ($) | | |
Bonus ($) | | |
Stock Awards ($) | | |
Option Awards ($) | | |
Restricted Stock Units ($) | | |
All Other Compensation ($) | | |
Total ($) | |
Amro Albanna | |
| 2021 | | |
| 280,000 | | |
| 470,000 | | |
| 938,250 | | |
| - | | |
| - | | |
| - | | |
| 1,688,250 | |
President, and Director, Former President(1) | |
| 2020 | | |
| 252,000 | | |
| -- | | |
| -- | | |
| -- | | |
| | | |
| -- | | |
| 252,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Shahrokh Shabahang, D.D.S., MS, Ph.D. | |
| 2021 | | |
| 210,000 | | |
| 245,000 | | |
| - | | |
| - | | |
| 210,100 | | |
| | | |
| 665,100 | |
Chief Innovation Officer | |
| 2020 | | |
| 210,000 | | |
| -- | | |
| -- | | |
| 16,287 | (2) | |
| | | |
| -- | | |
| 226,287 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Corinne Pankovcin | |
| 2021 | | |
| 250,000 | | |
| 333,250 | | |
| 505,450 | | |
| - | | |
| - | | |
| - | | |
| 1,088,700 | |
President, Former Chief Financial Officer(3) | |
| 2020 | | |
| 225,000 | | |
| -- | | |
| -- | | |
| 225,400 | (4) | |
| | | |
| | | |
| 450,400 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Thomas J. Farley | |
| 2021 | | |
| 225,000 | | |
| 297,000 | | |
| - | | |
| - | | |
| 304,850 | | |
| | | |
| 826,850 | |
Chief Financial Officer(5) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Option awards represent granted options at the fair
market value as of the date of grant. Restricted stock units represent granted restricted stock units at the fair market value as of the
date of grant.
(1) |
Mr. Albanna served as our
President through September 25, 2021 |
|
|
(2) |
$16,287 represents the
option expense for 110,000 options that were granted on November 2, 2020, at an exercise price of$1.92 and an expiration date of
November 2, 2030. These options fully vest by September 30, 2022. |
|
|
(3) |
Ms. Pankovcin served as
our Chief Financial Officer from July 2020 through September 25, 2021. She was appointed as our President on September 25, 2021. |
|
|
(4) |
$225,400 represents the option expense for the following
granted options: 165,000 options were granted on March 20, 2020 which will be fully vested by March 30, 2023, at an exercise price of
$4.02 and an expiration date of March 20, 2025, 7,500 options were granted on March 30, 2020 which vested on grant, at an exercise price
of $11.00, and expiration date of October 5, 2027, 15,000 options were granted on November 2, 2020 which vested on grant, an exercise
price of $1.92 and an expiration date of November 2, 2030, and 165,000 options were granted on November 2, 2020 which will be fully vested
by September 30, 2022, an exercise price of $1.92 and an expiration date of November 2, 2030. |
|
|
(5) |
Mr. Farley was appointed
as our Chief Financial Officer on September 25, 2021. |
Employment
Agreements
Amro
Albanna, Chief Executive Officer
On
November 14, 2021, the Company entered into an Amended and Restated Employment Agreement with Mr. Amro Albanna, the Chief Executive Officer
of the Company (the “Amro Employment Agreement”). Pursuant to the Amro Employment Agreement, Mr. Albanna will receive (i)
a base salary at the annual rate of $280,000 for the remainder of calendar year 2021, and effective January 1, 2022, $500,000 (prorated
for any partial year) payable in bimonthly installments (ii) the opportunity to earn an annual bonus of 2% of the Company’s earnings
before interest, taxes, depreciation, and amortization (EBITDA) with respect to an applicable year for which the bonus is payable, provided
that such bonus will not exceed two (2) times Mr. Albanna’s base salary, and (iii) eligible to earn an annual discretionary bonus
as determined by the Board or its Compensation Committee in their sole discretion. In addition, for calendar year 2021, Mr. Albanna will
be eligible to earn an additional discretionary bonus as determined by the Company.
The
term of Mr. Albanna’s engagement under the Amro Employment Agreement commences as of the Effective Date (as defined in the Amro
Employment Agreement) and continues until November 14, 2023, unless earlier terminated in accordance with the terms of the Amro Employment
Agreement. The term of Mr. Albanna’s Employment Agreement is automatically renewed for successive one (1) year periods until terminated
by Mr. Albanna or the Company.
Under
the Amro Employment Agreement, termination of Mr. Albanna by the Company for “Cause,” “Death,” or “Disability,”
(as such terms are defined in the Amro Employment Agreement), or resignation by Mr. Albanna without “Good Reason” (as defined
in the Amro Employment Agreement), will not require the Company to pay severance to Mr. Albanna. Upon any such termination, Mr. Albanna
will be entitled to receive any Accrued Compensation (as defined in the Amro Employment Agreement), which in the case of termination
by the Company for Cause or resignation by Mr. Albanna for Good Reason will not include payment of pro rata bonus; provided, however,
if termination of Mr. Albanna by the Company without “Cause” or resignation by Mr. Albanna for “Good Reason,”
then under the Amro Employment Agreement will require the Company to pay severance to Mr. Albanna. Upon any such termination, Mr. Albanna
will be entitled to receive any Accrued Compensation and, subject to Mr. Albanna’s execution of an irrevocable release, receive
(i) on the sixtieth day (60th) day following termination, a lump sum amount equal to twelve (12) months base salary then in effect as
of the date of termination, less applicable taxes and withholdings; (ii) provide reimbursement to Mr. Albanna’s medical insurance
premiums for a period of twelve (12) months following the date of termination; and (iii) cause any equity awards granted prior to the
Effective Date (as defined in the Amro Employment Agreement), that are then outstanding and unvested to immediately vest and, with respect
to all options and stock appreciation rights, to become fully exercisable.
Notwithstanding
the foregoing, under the Amro Employment Agreement, termination of Mr. Albanna by the Company without Cause or resignation by Mr. Albanna
for Good Reason and a Change of Control (as defined in the Amro Employment Agreement) of the Company occurs within six (6) months after
such termination, or within twenty-four (24) months prior to such termination, the Company will pay severance to Mr. Albanna in connection
to such termination. Upon such termination, Mr. Albanna will be entitled to receive any Accrued Compensation, and subject to Mr. Albanna’s
execution of an irrevocable release, receive (i) on the sixtieth (60th) day of termination, a lump sum cash-payment equal to the product
of three times Mr. Albanna’s salary then in effect as of the date of termination, less applicable taxes and withholdings; (ii)
provide reimbursement to Mr. Albanna’s medical insurance premiums for a period of twenty-four (24) months following the date of
termination; and (iii) notwithstanding any provision of any stock incentive plan, stock option agreement, realization bonus, restricted
stock agreement or other agreement relating to capital stock of the Company, cause any equity awards granted prior to the that are then
outstanding and unvested to immediately vest and, with respect to all options and stock appreciation rights, to become fully exercisable
for twenty-four (24) months (but not later than when the award would otherwise expire).
The
Amro Employment Agreement also contains customary non-solicitation and non-competition covenants, which covenants remain in effect for
twelve (12) months following any cessation of employment with respect to Mr. Albanna. To the extent any of the payments or benefits provided
for under the Amro Employment Agreement or any other agreement or arrangement between Mr. Albanna and the Company (collectively, the
“Payments”), (a) constitute an “excess parachute payment” within the meaning of Section 280G (“Section
280G”) of the Internal Revenue Code of 1986, as amended and restated (the “Code”), and (b) would otherwise be subject
to the excise tax imposed by Section 4999 of the Code (“Section 4999”), then the Company will pay or provide the greater
(whichever gives Mr. Albanna the highest net after-tax amount) of (i) all of the Payments or (ii) the portion of Payments not in excess
of the greatest amount of Payments that can be paid that would not result in the imposition of the excise tax under Section 4999.
Corinne
Pankovcin, President
On
November 14, 2021, Aditxt, Inc. (the “Company”) entered into a new employment agreement (the “Pankovcin Employment
Agreement”) with the Company’s President, Corinne Pankovcin, pursuant to which Ms. Pankovcin will continue to serve as the
Company’s President and Secretary until the date upon which Ms. Pankovcin’s employment may be terminated in accordance with
the terms of the Pankovcin Employment Agreement.
The
term of Ms. Pankovcin’s engagement under the Pankovcin Employment Agreement commences as of the Effective Date (as defined in the
Pankovcin Employment Agreement) and continues until November 14, 2023, unless earlier terminated in accordance with the terms of the
Pankovcin Employment Agreement. The term of Ms. Pankovcin’s Employment Agreement is automatically renewed for successive one (1)
year periods until terminated by Ms. Pankovcin or the Company.
Pursuant
to the Pankovcin Employment Agreement, Ms. Pankovcin will receive: (i) a base salary at the annual rate of $250,000 for the remainder
of calendar year 2021, and effective January 1, 2022, $385,000 (prorated for any partial year) payable in bimonthly installments and
(ii) eligible to earn an annual discretionary bonus with a target amount of 45% of Base Compensation, which is based on the achievement
of performance objectives, which will be determined by the Board and Compensation Committee. In addition, for calendar year 2021, Ms.
Pankovcin shall be eligible to earn an additional discretionary bonus as determined by the Company.
Under
the Pankovcin Employment Agreement, termination of Ms. Pankovcin by the Company for “Cause,” “Death,” or “Disability,”
(as such terms are defined in the Pankovcin Employment Agreement), or resignation by Ms. Pankovcin for “Good Reason” (as
defined in the Pankovcin Employment Agreement), will not require the Company to pay severance to Ms. Pankovcin. Upon any such termination,
Ms. Pankovcin will be entitled to receive any Accrued Compensation (as defined in the Pankovcin Employment Agreement), which in the case
of termination by the Company for Cause or resignation by Ms. Pankovcin for Good Reason will not include payment of pro rata bonus; provided, however,
if termination of Ms. Pankovcin by the Company without “Cause” or resignation by Ms. Pankovcin for “Good Reason,”
then under the Pankovcin Employment Agreement will require the Company to pay severance to Ms. Pankovcin. Upon any such termination,
Ms. Pankovcin will be entitled to receive any Accrued Compensation and, subject to Ms. Pankovcin’s execution of an irrevocable
release, receive: (i) on the sixtieth day (60th) day following termination, a lump sum amount equal to twelve (12) months base salary
then in effect as of the date of termination, less applicable taxes and withholdings; (ii) provide reimbursement to Ms. Pankovcin’s
medical insurance premiums for a period of twelve (12) months following the date of termination; and (iii) cause any equity awards granted
prior to the Effective Date (as defined in the Pankovcin Employment Agreement), that are then outstanding and unvested to immediately
vest and, with respect to all options and stock appreciation rights, to become fully exercisable.
Notwithstanding
the foregoing, under the Pankovcin Employment Agreement, termination of Ms. Pankovcin by the Company without Cause or resignation by
Ms. Pankovcin for Good Reason and a Change of Control (as defined in the Pankovcin Employment Agreement) of the Company occurs within
six (6) months after such termination, or within twenty-four (24) months prior to such termination, the Company will pay severance to
Ms. Pankovcin in connection to such termination. Upon such termination, Ms. Pankovcin will be entitled to receive any Accrued Compensation,
and subject to Ms. Pankovcin’s execution of an irrevocable release, receive (i) on the sixtieth (60th) day of termination, a lump
sum cash-payment equal to the sum of (A) the product of two times Ms. Pankovcin’s salary then in effect as of the date of termination,
less applicable taxes and withholdings, and (B) the product of two times Ms. Pankovcin’s Target Bonus; (ii) provide reimbursement
to Ms. Pankovcin’s medical insurance premiums for a period of twenty-four (24) months following the date of termination; and (iii)
notwithstanding any provision of any stock incentive plan, stock option agreement, realization bonus, restricted stock agreement or other
agreement relating to capital stock of the Company, cause any equity awards granted prior to the that are then outstanding and unvested
to immediately vest and, with respect to all options and stock appreciation rights, to become fully exercisable for twenty-four (24)
months (but not later than when the award would otherwise expire).
The
Pankovcin Employment Agreement also contains customary non-solicitation and non-competition covenants, which covenants remain in effect
for twelve (12) months following any cessation of employment with respect to Ms. Pankovcin. To the extent any of the payments or benefits
provided for under the Pankovcin Employment Agreement or any other agreement or arrangement between Ms. Pankovcin and the Company (collectively,
the “Payments”), (a) constitute an “excess parachute payment” within the meaning of Section 280G (“Section
280G”) of the Internal Revenue Code of 1986, as amended and restated (the “Code”), and (b) would otherwise be subject
to the excise tax imposed by Section 4999 of the Code (“Section 4999”), then the Company will pay or provide the greater
(whichever gives Ms. Pankovcin the highest net after-tax amount) of (i) all of the Payments or (ii) the portion of Payments not in excess
of the greatest amount of Payments that can be paid that would not result in the imposition of the excise tax under Section 4999.
Thomas
J. Farley, Chief Financial Officer
On
November 14, 2021, Aditxt, Inc. (the “Company”) entered into a new employment agreement (the “Farley Employment Agreement”)
with the Company’s Chief Financial Officer, Thomas Farley, pursuant to which Mr. Farley will continue to serve as the Company’s
Chief Financial Officer until the date upon which Mr. Farley’s employment may be terminated in accordance with the terms of the
Farley Employment Agreement.
The
term of Mr. Farley’s engagement under the Farley Employment Agreement commences as of the Effective Date (as defined in the Farley
Employment Agreement) and continues until November 14, 2023, unless earlier terminated in accordance with the terms of the Farley Employment
Agreement. The term of Mr. Farley’s Employment Agreement is automatically renewed for successive one (1) year periods until terminated
by Mr. Farley or the Company.
Pursuant
to the Farley Employment Agreement, Mr. Farley will receive: (i) a base salary at the annual rate of $225,000 for the remainder of calendar
year 2021, and effective January 1, 2022, $355,000 (prorated for any partial year) payable in bimonthly installments and, (ii) eligible
to earn an annual discretionary bonus with a target amount of 40% of Base Compensation, which is based on the achievement of performance
objectives, which will be determined by the Board and Compensation Committee. In addition, for calendar year 2021, Mr. Farley will be
eligible to earn an additional discretionary bonus as determined by the Company.
Under
the Farley Employment Agreement, termination of Mr. Farley by the Company for “Cause,” “Death,” or “Disability,”
(as such terms are defined in the Farley Employment Agreement), or resignation by Mr. Farley without “Good Reason” (as defined
in the Farley Employment Agreement), will not require the Company to pay severance to Mr. Farley. Upon any such termination, Mr. Farley
will be entitled to receive any Accrued Compensation (as defined in the Farley Employment Agreement which in the case of termination
by the Company for Cause or resignation by Mr. Farley for Good Reason will not include payment of pro rata bonus; provided, however,
if termination of Mr. Farley by the Company without “Cause” or resignation by Mr. Farley for “Good Reason,” then
under the Farley Employment Agreement will require the Company to pay severance to Mr. Farley. Upon any such termination, Mr. Farley
will be entitled to receive any Accrued Compensation and, subject to Mr. Farley’s execution of an irrevocable release, receive
(i) on the sixtieth day (60th) day following termination, a lump sum cash-payment equal to the sum of (A) the product of two times Mr.
Farley’s salary then in effect as of the date of termination, less applicable taxes and withholdings, and (B) the product of two
times Mr. Farley’s Target Bonus (as defined in the Farley Employment Agreement); (ii) provide reimbursement to Mr. Farley’s
medical insurance premiums for a period of twelve (12) months following the date of termination; and (iii) cause any equity awards granted
prior to the Effective Date (as defined in the Farley Employment Agreement), that are then outstanding and unvested to immediately vest
and, with respect to all options and stock appreciation rights, to become fully exercisable.
Notwithstanding
the foregoing, under the Farley Employment Agreement, termination of Mr. Farley by the Company without Cause or resignation by Mr. Farley
for Good Reason and a Change of Control (as defined in the Farley Employment Agreement) of the Company occurs within six (6) months after
such termination, or within twenty-four (24) months prior to such termination, the Company will pay severance to Mr. Farley in connection
to such termination. Upon such termination, Mr. Farley will be entitled to receive any Accrued Compensation, and subject to Mr. Farley’s
execution of an irrevocable release, receive (i) on the sixtieth (60th) day of termination, a lump sum cash-payment equal to the product
of two times Mr. Farley’s salary then in effect as of the date of termination, less applicable taxes and withholdings; (ii) provide
reimbursement to Mr. Farley’s medical insurance premiums for a period of twelve (12) months following the date of termination;
and (iii) notwithstanding any provision of any stock incentive plan, stock option agreement, realization bonus, restricted stock agreement
or other agreement relating to capital stock of the Company, cause any equity awards granted prior to the that are then outstanding and
unvested to immediately vest and, with respect to all options and stock appreciation rights, to become fully exercisable (but not later
than when the award would otherwise expire).
The
Farley Employment Agreement also contains customary non-solicitation and non-competition covenants, which covenants remain in effect
for twelve (12) months following any cessation of employment with respect to Mr. Farley. To the extent any of the payments or benefits
provided for under the Farley Employment Agreement or any other agreement or arrangement between Mr. Farley and the Company (collectively,
the “Payments”), (a) constitute an “excess parachute payment” within the meaning of Section 280G (“Section
280G”) of the Internal Revenue Code of 1986, as amended and restated (the “Code”), and (b) would otherwise be subject
to the excise tax imposed by Section 4999 of the Code (“Section 4999”), then the Company will pay or provide the greater
(whichever gives Mr. Farley the highest net after-tax amount) of (i) all of the Payments or (ii) the portion of Payments not in excess
of the greatest amount of Payments that can be paid that would not result in the imposition of the excise tax under Section 4999.
Shahrokh
Shabahang, Chief Innovation Officer
On
November 14, 2021, Aditxt, Inc. (the “Company”) entered into a new employment agreement (the “Shabahang Employment
Agreement”) with the Company’s Chief Innovation Officer, Shahrokh Shabahang, pursuant to which Mr. Shabahang will continue
to serve as the Company’s Chief Innovation Officer until the date upon which Mr. Shabahang’s employment may be terminated
in accordance with the terms of the Shabahang Employment Agreement.
The
term of Mr. Shabahang’s engagement under the Shabahang Employment Agreement commences as of the Effective Date (as defined in the
Shabahang Employment Agreement) and continues until November 14, 2023, unless earlier terminated in accordance with the terms of the
Shabahang Employment Agreement. The term of Mr. Shabahang’s Employment Agreement is automatically renewed for successive one (1)
year periods until terminated by Mr. Shabahang or the Company.
Pursuant
to the Shabahang Employment Agreement, Mr. Shabahang will receive: (i) a base salary at the annual rate of $210,000 for the remainder
of calendar year 2021, and effective January 1, 2022, $325,000 (prorated for any partial year) payable in bimonthly installments, and
(ii) eligible to earn an annual discretionary bonus with a target amount of 40% of Base Compensation, which is based on the achievement
of performance objectives, which will be determined by the Board and Compensation Committee. In addition, for calendar year 2021, Mr.
Shabahang will be eligible to earn an additional discretionary bonus as determined by the Company.
Under
the Shabahang Employment Agreement, termination of Mr. Shabahang by the Company for “Cause,” “Death,” or “Disability,”
(as such terms are defined in the Shabahang Employment Agreement), or resignation by Mr. Shabahang without “Good Reason”
(as defined in the Shabahang Employment Agreement), will not require the Company to pay severance to Mr. Shabahang. Upon any such termination,
Mr. Shabahang will be entitled to receive any Accrued Compensation (as defined in the Shabahang Employment Agreement), which in the case
of termination by the Company for Cause or resignation by Mr. Shabahang for Good Reason will not include payment of pro rata bonus; provided, however,
if termination of Mr. Shabahang by the Company without “Cause” or resignation by Mr. Shabahang for “Good Reason,”
then under the Shabahang Employment Agreement will require the Company to pay severance to Mr. Shabahang. Upon any such termination,
Mr. Shabahang will be entitled to receive any Accrued Compensation and, subject to Mr. Shabahang’s execution of an irrevocable
release, receive: (i) on the sixtieth day (60th) day following termination, a lump sum cash-payment equal to the sum of (A) the product
of two times Mr. Shabahangs’s salary then in effect as of the date of termination, less applicable taxes and withholdings, and
(B) the product of two times Mr. Shabahang’s Target Bonus (as defined in the Shabahang Employment Agreement); (ii) provide reimbursement
to Mr. Shabahang’s medical insurance premiums for a period of twelve (12) months following the date of termination; and (iii) cause
any equity awards granted prior to the Effective Date (as defined in the Shabahang Employment Agreement), that are then outstanding and
unvested to immediately vest and, with respect to all options and stock appreciation rights, to become fully exercisable.
Notwithstanding
the foregoing, under the Shabahang Employment Agreement, termination of Mr. Shabahang by the Company for without Cause or resignation
by Mr. Shabahang for Good Reason and a Change of Control (as defined in the Shabahang Employment Agreement) of the Company occurs within
six (6) months after such termination, or within twenty-four (24) months prior to such termination, the Company will pay severance to
Mr. Shabahang in connection to such termination. Upon such termination, Mr. Shabahang will be entitled to receive any Accrued Compensation,
and subject to Mr. Shabahang’s execution of an irrevocable release, receive: (i) on the sixtieth (60th) day of termination, a lump
sum cash-payment equal to the product of two times Mr. Shabahang’s salary then in effect as of the date of termination, less applicable
taxes and withholdings; (ii) provide reimbursement to Mr. Shabahang’s medical insurance premiums for a period of twenty-four (24)
months following the date of termination; and (iii) notwithstanding any provision of any stock incentive plan, stock option agreement,
realization bonus, restricted stock agreement or other agreement relating to capital stock of the Company, cause any equity awards granted
prior to the that are then outstanding and unvested to immediately vest and, with respect to all options and stock appreciation rights,
to become fully exercisable for twenty-four (24) months (but not later than when the award would otherwise expire).
The
Shabahang Employment Agreement also contains customary non-solicitation and non-competition covenants, which covenants remain in effect
for twelve (12) months following any cessation of employment with respect to Mr. Shabahang. To the extent any of the payments or benefits
provided for under the Shabahang Employment Agreement or any other agreement or arrangement between Mr. Shabahang and the Company (collectively,
the “Payments”), (a) constitute an “excess parachute payment” within the meaning of Section 280G (“Section
280G”) of the Internal Revenue Code of 1986, as amended and restated (the “Code”), and (b) would otherwise be subject
to the excise tax imposed by Section 4999 of the Code (“Section 4999”), then the Company will pay or provide the greater
(whichever gives Mr. Shabahang the highest net after-tax amount) of (i) all of the Payments or (ii) the portion of Payments not in excess
of the greatest amount of Payments that can be paid that would not result in the imposition of the excise tax under Section 4999.
Rowena
Albanna, Chief Operating Officer
On
November 14, 2021, Aditxt, Inc. (the “Company”) entered into a new employment agreement (the “Rowena Employment Agreement”)
with the Company’s Chief Operating Officer, Rowena Albanna, pursuant to which Ms. Albanna will continue to serve as the Company’s
Chief Operating Officer until the date upon which Ms. Albanna’s employment may be terminated in accordance with the terms of the
Rowena Employment Agreement.
The
term of Ms. Albanna’s engagement under the Rowena Employment Agreement commences as of the Effective Date (as defined in the Rowena
Employment Agreement) and continues until November 14, 2023, unless earlier terminated in accordance with the terms of the Rowena Employment
Agreement. The term of Ms. Albanna’s Employment Agreement is automatically renewed for successive one (1) year periods until terminated
by Ms. Albanna or the Company.
Pursuant
to the Rowena Employment Agreement, Ms. Albanna will receive: (i) a base salary at the annual rate of $210,000 for the remainder of calendar
year 2021 and effective January 1, 2022, $325,000 (prorated for any partial year) payable in bimonthly installments, and (ii) eligible
to earn an annual discretionary bonus with a target amount of 40% of Base Compensation, which is based on the achievement of performance
objectives, which will be determined by the Board and Compensation Committee. In addition, for calendar year 2021, Ms. Albanna will be
eligible to earn an additional discretionary bonus as determined by the Company.
Under
the Rowena Employment Agreement, termination of Ms. Albanna by the Company for “Cause,” “Death,” or “Disability,”
(as such terms are defined in the Rowena Employment Agreement), or resignation by Ms. Albanna for “Good Reason” (as defined
in the Rowena Employment Agreement), will not require the Company to pay severance to Ms. Albanna. Upon any such termination, Ms. Albanna
will be entitled to receive any Accrued Compensation (as defined in the Rowena Employment Agreement), which in the case of termination
by the Company for Cause or resignation by Ms. Albanna for Good Reason will not include payment of pro rata bonus; provided, however,
if termination of Ms. Albanna by the Company without “Cause” or resignation by Ms. Albanna for “Good Reason”
(as such terms are defined in the Rowena Employment Agreement), then under the Rowena Employment Agreement will require the Company to
pay severance to Ms. Albanna. Upon any such termination, Ms. Albanna will be entitled to receive any Accrued Compensation and, subject
to Ms. Albanna’s execution of an irrevocable release, receive: (i) on the sixtieth day (60th) day following termination, a lump
sum amount equal to twelve (12) months base salary then in effect as of the date of termination, less applicable taxes and withholdings;
(ii) provide reimbursement to Ms. Albanna’s medical insurance premiums for a period of twelve (12) months following the date of
termination; and (iii) cause any equity awards granted prior to the Effective Date (as defined in the Rowena Employment Agreement), that
are then outstanding and unvested to immediately vest and, with respect to all options and stock appreciation rights, to become fully
exercisable.
Notwithstanding
the foregoing, under the Rowena Employment Agreement, termination of Ms. Albanna by the Company without Cause or resignation by Ms. Albanna
for Good Reason and a Change of Control (as defined in the Rowena Employment Agreement) of the Company occurs within six (6) months after
such termination, or within twenty-four (24) months prior to such termination, the Company will pay severance to Ms. Albanna in connection
to such termination. Upon such termination, Ms. Albanna will be entitled to receive any Accrued Compensation, and subject to Ms. Albanna’s
execution of an irrevocable release, receive: (i) on the sixtieth (60th) day of termination, a lump sum cash-payment equal to the sum
of (A) the product of two times Ms. Albanna’s salary then in effect as of the date of termination, less applicable taxes and withholdings,
and (B) the product of two times Ms. Albanna’s Target Bonus; (ii) provide reimbursement to Ms. Albanna’s medical insurance
premiums for a period of twenty-four (24) months following the date of termination; and (iii) notwithstanding any provision of any stock
incentive plan, stock option agreement, realization bonus, restricted stock agreement or other agreement relating to capital stock of
the Company, cause any equity awards granted prior to the that are then outstanding and unvested to immediately vest and, with respect
to all options and stock appreciation rights, to become fully exercisable for twenty-four (24) months (but not later than when the award
would otherwise expire).
The
Rowena Employment Agreement also contains customary non-solicitation and non-competition covenants, which covenants remain in effect
for twelve (12) months following any cessation of employment with respect to Ms. Albanna. To the extent any of the payments or benefits
provided for under the Rowena Employment Agreement or any other agreement or arrangement between Ms. Albanna and the Company (collectively,
the “Payments”), (a) constitute an “excess parachute payment” within the meaning of Section 280G (“Section
280G”) of the Internal Revenue Code of 1986, as amended and restated (the “Code”), and (b) would otherwise be subject
to the excise tax imposed by Section 4999 of the Code (“Section 4999”), then
the Company will pay or provide the greater (whichever gives Ms. Albanna the highest net after-tax amount) of (i) all of the Payments
or (ii) the portion of Payments not in excess of the greatest amount of Payments that can be paid that would not result in the imposition
of the excise tax under Section 4999.
Matthew
Shatzkes, Chief Legal Officer and General Counsel
On
January 28, 2022, Aditxt, Inc. (the “Company”) entered into an employment agreement (the “Employment Agreement”)
with Matthew Shatzkes, the Chief Legal Officer and General Counsel of the Company. Pursuant to the Employment Agreement, Mr. Shatzkes
will (i) receive a base salary at the annual rate of $385,000 (the “Base Compensation”) payable in bimonthly installments,
(ii) receive a one-time sign-on bonus (the “Sign-on Bonus”), (iii) a minimum 2022 quarterly bonus (the “Minimum 2022
Bonus”), and (iv) will be entitled to earn an annual discretionary bonus beginning in fiscal year 2022.
Following
the first anniversary of the Employment Agreement (the “Anniversary Date”), in addition to Mr. Shatzkes’ Base Compensation,
Mr. Shatzkes will be entitled to a minimum quarterly bonus (the “Subsequent Year Minimum Bonus”). Following the Anniversary
Date, in addition to Mr. Shatzkes’ Base Compensation and Subsequent Year Minimum Bonus, Mr. Shatzkes will also be eligible to earn
an annual discretionary bonus.
Under
the Employment Agreement, Mr. Shatzkes will also receive (i) a restricted stock unit award that will entitle Mr. Shatzkes to receive
150,000 shares of the Company’s common stock which shall vest immediately, and (ii) a restricted stock unit award of an additional
330,000 shares of the Company’s common stock, which shall vest ratably over eight successive equal quarterly installments over
a two-year period commencing on March 1, 2022 and ending on December 1, 2023.
The
term of Mr. Shatzkes engagement under the Employment Agreement commences on the Effective Date (as defined in the Employment Agreement)
and continues until January 16, 2024, unless earlier terminated in accordance with the terms of
the Employment Agreement. The term of Mr. Shatzkes’ Employment Agreement is automatically renewed for successive one-year periods
until terminated by Mr. Shatzkes or the Company.
Under
the Employment Agreement, termination of Mr. Shatzkes by the Company for “Cause,” “Death,” or “Disability,”
(as such terms are defined in the Employment Agreement), or resignation by Mr. Shatzkes without “Good Reason” (as defined
in the Employment Agreement), will not require the Company to pay severance to Mr. Shatzkes. Upon any such termination, Mr. Shatzkes
will be entitled to receive any Accrued Compensation (as defined in the Employment Agreement), which in the case of termination by the
Company for Cause or resignation by Mr. Shatzkes for Good Reason will not include payment of pro rata bonus. If, however, termination
of Mr. Shatzkes by the Company without “Cause”, resignation by Mr. Shatzkes for “Good Reason” or and a Change
of Control (as defined in the Employment Agreement) event occurs, then the Employment Agreement will require the Company to pay severance
to Mr. Shatzkes. Upon any such termination, Mr. Shatzkes will be entitled to receive any Accrued Compensation and, subject to Mr. Shatzkes’
execution of an irrevocable release, (i) on the sixtieth day following termination, a lump sum amount equal (a) twelve months of his
Base Compensation, Sign-on Bonus and Minimum 2022 Bonus if his Employment Agreement is terminated prior to December 31, 2022, or (b)
his Base Compensation and Subsequent Year Minimum Bonus if his Employment Agreement is terminated after December 31, 2022; (ii) provide
reimbursement to Mr. Shatzkes’ medical insurance premiums for a period of twelve months following the date of termination; and
(iii) notwithstanding any provision of any stock incentive plan, stock option agreement, realization bonus, restricted stock agreement
or other agreement relating to capital stock of the Company, cause any equity awards granted prior to that termination that are then
outstanding and unvested to immediately vest and, with respect to all options and stock appreciation rights, to become fully exercisable.
To
the extent any of the payments or benefits provided for under the Employment Agreement or any other agreement or arrangement between
Mr. Shatzkes and the Company (collectively, the “Payments”), (a) constitute an “excess parachute payment” within
the meaning of Section 280G (“Section 280G”) of the Internal Revenue Code of 1986, as amended and restated (the “Code”),
and (b) would otherwise be subject to the excise tax imposed by Section 4999 of the Code (“Section 4999”), then the Company
will pay or provide the greater (whichever gives Mr. Shatzkes the highest net after-tax amount) of (i) all of the Payments or (ii) the
portion of Payments not in excess of the greatest amount of Payments that can be paid that would not result in the imposition of the
excise tax under Section 4999.
Director
Compensation
The
Company accrued or paid compensation to its directors for serving in such capacity, as shown in the table below.
Director | |
Year | | |
Option Awards | | |
Restricted Stock Unit Awards | | |
Fees Earned or Paid in Cash | | |
Total | |
Amro Albanna | |
| 2021 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
Shahrokh Shabahang, D.D.S., MS, Ph.D. | |
| 2021 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
Brian Brady | |
| 2021 | | |
$ | - | | |
$ | 19,435 | | |
$ | 15,000 | | |
$ | 34,435 | |
Namvar Kiaie | |
| 2021 | | |
$ | - | | |
$ | 19,435 | | |
$ | 15,000 | | |
$ | 34,435 | |
Jeffrey Runge, M.D. | |
| 2021 | | |
$ | - | | |
$ | 19,435 | | |
$ | 11,000 | | |
$ | 30,435 | |
Option awards represent granted
options at the fair market value as of the date of grant. Restricted stock unit awards represent granted restricted stock awards at the
fair market value as of the grant date.
On
September 18, 2021, the Board of Directors adopted a director compensation program for the Company’s independent directors consisting
of both cash and equity compensation, beginning in October 2021. The program consists of the following compensation for directors:
Cash
Compensation (payable quarterly)
|
● |
Board service - $11,000
per year |
|
|
|
|
● |
Chairperson of the Audit
Committee – additional $4,000 per year |
|
|
|
|
● |
Chairperson of the Compensation
Committee – additional $4,000 per year |
|
|
|
|
● |
Chairperson of the Nominating
and Corporate Governance Committee – additional $4,000 per year |
Equity
Compensation (payable quarterly)
|
● |
Board service – 5,000
options and 5,750 restricted stock units |
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The
following table sets forth certain information regarding beneficial ownership of shares of our common stock as of April 12, 2022, based
on 44,714,213 shares issued and outstanding by (i) each person known to beneficially own more than 5% of our outstanding common stock,
(ii) each of our directors, (iii) our executive officers and (iv) all directors and executive officers as a group. Shares are beneficially
owned when an individual has voting and/or investment power over the shares or could obtain voting and/or investment power over the shares
within 60 days of April 12, 2022. Except as otherwise indicated, the persons named in the table have sole voting and investment power
with respect to all shares beneficially owned, subject to community property laws, where applicable. Unless otherwise indicated, the
address of each beneficial owner listed below is c/o Aditxt, Inc., 737 N. Fifth Street, Suite 200, Richmond, VA 23219.
| |
Number of shares of Common
Stock Beneficially Owned | | |
Percentage |
| |
Directors and Officers: | |
| | | |
| |
| |
Amro Albanna (1) | |
| 1,393,565 | | |
| 3.05 |
% | |
Shahrokh Shabahang, D.D.S., MS, Ph.D. (2) | |
| 1,358,909 | | |
| 3.02 |
% | |
Corinne Pankovcin (3) | |
| 397,970 | | |
| * |
% | |
Rowena Albanna (4) | |
| 419,165 | | |
| * |
% | |
Brian Brady (5) | |
| 31,125 | | |
| * |
% | |
Namvar Kiaie (6) | |
| 21,958 | | |
| * |
% | |
Jeffrey Runge, M.D. (7) | |
| 21,125 | | |
| * |
% | |
Thomas J. Farley (8) | |
| 92,500 | | |
| * |
% | |
Matthew Shatzkes (9) | |
| 232,500 | | |
| * |
% | |
All directors and executive officers as a group (9 persons) | |
| 3,968,817 | | |
| 8.77 |
% | |
* |
Less than 1% |
|
|
(1) |
Includes (i) 600,000 shares issuable pursuant to options that are fully vested or will vest within 60 days of April 12, 2022; (ii) 400,000 shares beneficially owned by the Albanna Family Trust, of which Mr. Albanna is the Trustee; (iii) 355,510 shares directly owned by Mr. Albanna; and (iv) 38,055 Series A Warrants issued as part of the conversion of outstanding accrued compensation through March 31, 2020. Mr. Albanna may be deemed to beneficially own the securities held by his wife Rowena Albanna, the Company’s Chief Operating Officer. |
|
|
(2) |
Includes (i) 1,015,006 beneficially owned by Shabahang-Hatami Family Trust, of which Shahrokh Shabahang, D.D.S., MS, Ph.D. is the Trustee; (ii) warrants to purchase 220,153 shares, including 47,222 Series A Warrants issued as part of the conversion of outstanding accrued compensation through March 31, 2020, and 172,931 warrants beneficially owned by the Shabahang-Hatami Family Trust; (iii) 82,500 shares issuable pursuant to options that are fully vested or will vest within 60 days of April 12, 2022; (iv) 34,375 shares directly owned by Mr. Shabahang; and (v) and 6,875 restricted stock units that will vest within 60 days of April 12, 2022 |
|
|
(3) |
Includes (i) 169,220 shares held directly by Ms. Pankovcin; and (ii) 228,750 shares issuable pursuant to options that are fully vested or will vest within 60 days of April 12, 2022. |
|
|
(4) |
Includes (i) 102,360 shares held directly by Ms. Albanna; (ii) 6,250 restricted stock units that will vest within 60 days of April 12, 2022; (iii) 275,000 shares issuable pursuant to options that are fully vested or will vest within 60 days of April 12, 2022; and (iv) 35,555 Series A Warrants issued as part of the conversion of outstanding accrued compensation through March 31, 2020. Ms. Albanna may be deemed to beneficially own the securities held by her husband Amro Albanna, the Company’s Chief Executive Officer. |
|
|
(5) |
Includes (i) 21,125 shares held directly by Mr. Brady; and (ii) 10,000 shares issuable pursuant to options that have vested or will vest within 60 days of April 12, 2022. |
|
|
(6) |
Includes (i) 10,847 shares held directly by Mr. Kiaie; (ii) 1,111 shares issuable upon exercise of Series A Warrants; and (iii) 10,000 shares issuable pursuant to options that have vested or will vest within 60 days of April 12, 2022. |
|
|
(7) |
Includes (i) 2,500 shares held by Biologue, Inc., over which Dr. Runge has voting and dispositive control; (ii) 8,625 shares held directly by Dr. Runge; and (iii) 10,000 shares issuable pursuant to options and restricted stock units that have vested or will vest within 60 days of April 12, 2022. |
|
|
(8) |
Includes (i) 40,000 shares held directly by Mr. Farley; (ii) 7,500 restricted stock units that will vest within 60 days of April 12, 2022; and (iii) 45,000 shares issuable pursuant to options that have vested or will vest within 60 days of April 12, 2022. |
|
|
(9) |
Includes (i) 191,250 shares held directly by Mr. Shatzkes; and (ii) 41,250 restricted stock units that will vest within 60 days of April 12, 2022. |
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Except
as described below and except for employment arrangements which are described under “executive compensation,” since January
1, 2018, there has not been, nor is there currently proposed, any transaction in which we are or were a participant, the amount involved
exceeds the lesser of $120,000 or 1% of the average of the total assets at December 31, 2021 and 2020, and any of our directors, executive
officers, holders of more than 5% of our common stock or any immediate family member of any of the foregoing had or will have a direct
or indirect material interest.
During
the years ended December 31, 2019 and 2018, Rowena Albanna, the wife of Amro Albanna, our Chief Executive Officer, provided the Company
with operations consulting services. In July 2020, Ms. Albanna joined the Company as its Chief Operating Officer. As of December 31,
2018, $112,000 was accrued as compensation. An additional $180,000 was expensed as compensation during the year ended December 31, 2019,
and $17,000 was paid on the accrued balance. As of December 31, 2019, $275,000 remained accrued and outstanding.
On
January 22, 2018, the Company issued an unsecured promissory note to Sekris for $40,000 that accrued interest of 4% annually. The note
was due on the earlier of July 22, 2018 or in the event of default, as defined in the agreement. This note has been repaid as of December
31, 2019.
On
February 12, 2018, the Company issued an unsecured promissory note to Sekris for $50,000 that accrued interest of 4% annually. The note
was due on the earlier of August 12, 2018 or in the event of default, as defined in the agreement. This note has been repaid as of December
31, 2019.
On
March 2, 2018, the Company issued an unsecured promissory note to Sekris for $10,000 that accrued interest of 4% annually. The note was
due on the earlier of September 2, 2018 or in the event of default, as defined in the agreement. This note has been repaid as of December
31, 2019.
On
March 8, 2018, we entered into an Assignment Agreement (the “Assignment Agreement”) with Sekris. See “Summary—Overview—License
Agreement with Loma Linda University.” Dr. Shabahang, our Chief Innovative Officer, was the Chief Executive Officer of Sekris.
Sekris was subsequently dissolved in 2019.
On
March 8, 2018, we issued a warrant to purchase up to 500,000 shares of our common stock to Sekris. On March 2, 2018, we issued a 4% unsecured
promissory note to Sekris in the principal amount of $10,000. Principal and interest was due on September 2, 2018 or immediately upon
an event of default. On February 12, 2018, we issued a 4% unsecured promissory note to Sekris in the principal amount of $50,000. Principal
and interest was due on August 12, 2018 or immediately upon an event of default. On January 22, 2018, we issued a 4% unsecured promissory
note to Sekris in the principal amount of $40,000. Principal and interest was due on July 22, 2018 or immediately upon an event of default.
On
June 18, 2018, the Company issued an unsecured promissory note to Sekris for $17,502 that accrued interest of 4% annually. The note was
due on the earlier of December 18, 2018 or in the event of default, as defined in the agreement. This note has been repaid as of December
31, 2019.
On
January 1, 2019, we entered into a consulting agreement with Rowena Albanna, the wife of Amro Albanna, our Chief Executive Officer, to
perform operations consulting services. As part of this agreement, we pay Ms. Albanna $15,000 per month for her services. This agreement
terminated on June 30, 2020. In July 2020, Ms. Albanna joined the Company as its Chief Operating Officer.
On
March 21, 2019, we issued a promissory note to Dr. Shabahang, our Chief Innovative Officer. The note has a principal amount of $10,000,
was due on September 21, 2019, and bears an interest rate of 4% per year. This note remains outstanding.
During
the year ended December 31, 2019, we assumed an aggregate of $189,625 of liabilities from Sekris in exchange for the return of 94,813
shares of our common stock.
On
January 20, 2020, we issued a promissory note to Brian Brady, a member of our board of directors. The note has a principal amount of
$50,000, was due on the earlier of April 19, 2020 or within 10 days of the closing of our initial public offering. This note carried
an original issue discount of $25,000. The note was amended on April 23, 2020 to extend the maturity date to the earlier of June 30,
2020 or within 10 days of the closing of our initial public offering. This note was repaid in July 2020.
In
July 2020, we issued units of securities to the related parties listed below in conversion of their outstanding accrued compensation
through March 31, 2020. The units were the same type and form of the units offered in the IPO.
|
● |
38,055 units to Amro Albanna,
our Chairman and Chief Executive Officer, in conversion of $342,500 in accrued compensation through March 31, 2020; |
|
|
|
|
● |
47,222 units to Shahrokh
Shabahang, D.D.S., MS, Ph.D., our Chief Innovation Officer and Director, in conversion of $425,000 in accrued compensation through
March 31, 2020; and |
|
|
|
|
● |
35,555 units to Rowena
Albanna, the wife of our Chief Executive Officer and an independent contractor providing services to the Company, in conversion of
$320,000 in accrued compensation through March 31, 2020. In July 2020, Ms. Albanna joined the Company as its Chief Operating Officer. |
Review,
Approval and Ratification of Related Party Transactions
Given
our small size and limited financial resources, we have not adopted formal policies and procedures for the review, approval or ratification
of transactions, such as those described above, with our executive officer(s), Director(s) and significant stockholders. We intend to
establish formal policies and procedures in the future, once we have sufficient resources and have appointed additional Directors, so
that such transactions will be subject to the review, approval or ratification of our Board of Directors, or an appropriate committee
thereof. On a moving forward basis, our Directors will continue to approve any related party transaction.
Item 14.
Principal Accounting Fees and Services
dbbmckennon
acted as the Company’s independent registered public accounting firm for the years ended December 31, 2021 and 2020 and for
the interim periods in such fiscal years. The following table shows the fees that were incurred by the Company for audit and other services
provided by dbbmckennon for the years ended December 31, 2021 and 2020.
| |
Year Ended December 31, | |
| |
2021 | | |
2020 | |
Audit Fees (a) | |
$ | 99,065 | | |
$ | 76,076 | |
Tax Fees (b) | |
$ | - | | |
$ | - | |
Other Fees (c) | |
$ | 35,518 | | |
$ | 55,104 | |
Total | |
$ | 134,583 | | |
$ | 131,180 | |
(a) |
Audit
fees represent fees for professional services provided in connection with the audit of the Company’s annual financial statements
and the review of its financial statements included in the Company’s Quarterly Reports on Form 10-Q and services that are normally
provided in connection with statutory or regulatory filings. |
|
|
(b) |
Tax fees represent fees
for professional services related to tax compliance, tax advice and tax planning. |
|
|
(c) |
Other fees represent fees
related to our filing of certain Registration Statements. |
Pre-Approval
Policies and Procedures
All
audit related services, tax services and other services rendered by dbbmckennon were pre-approved by the Company’s Board
of Directors. Commencing in 2020, the Audit Committee was charged with all pre-approval activities with respect to the Company’s
independent registered public accounting firm. The Audit Committee has adopted a pre-approval policy that provides for the pre-approval
of all services performed for the Company by its independent registered public accounting firm. Our independent registered public accounting
firm and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent
registered public accounting firm in accordance with this pre-approval policy, and the fees for the services performed to date.