Proxy Statement – Form DEF 14A
SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
| Filed by the Registrant | ☒ |
| Filed by a Party other than the Registrant | ☐ |
Check the appropriate box:
| ☐ | Preliminary Proxy Statement. |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)). |
| ☒ | Definitive Proxy Statement. |
| ☐ | Definitive Additional Materials. |
| ☐ | Soliciting Material Pursuant to §240.14a-12. |
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| ☐ | Fee paid previously with preliminary materials. |
| ☐ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 |
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On
You are hereby notified that the annual meeting of stockholders of
| 1. | To elect four directors to serve until the next annual meeting of stockholders and until their respective successors shall have been duly elected and qualified; |
| 2. | To consider and vote, on a non-binding, advisory basis, upon the compensation of those of our executive officers listed in the Summary Compensation Table appearing elsewhere in this proxy statement, or our named executive officers, as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K; |
| 3. | To ratify the selection of |
| 4. | To consider and vote upon a proposal to authorize, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares of our common stock, par value |
| 5. | To consider and vote upon a proposal to authorize, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares of our Common Stock pursuant to a certain settlement agreement dated |
| 6. | To consider and vote upon a proposal to authorize, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares of Common Stock pursuant to the exercise of common stock purchase warrants issued by us (including the issuance of shares of Common Stock upon the operation of anti-dilution and other adjustment provisions contained in such warrants) pursuant to the terms of that certain Securities Purchase Agreement, dated |
| 7. | To consider and vote upon a proposal to authorize, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares of our Common Stock upon (i) conversion of up to |
| 8. | To consider and vote upon a proposed amendment of the Company's certificate of incorporation to effect a reverse stock split of the Company's Common Stock at a ratio to be determined by our board of directors, in its discretion, but within the range of 1/2 and 1/15, if the minimum bid price of |
| 9. | To consider and act upon such other business as may properly come before the meeting or any adjournment or postponement thereof. |
All stockholders are cordially invited to attend the annual meeting. If your shares are registered in your name, please bring the admission ticket attached to your proxy card. If your shares are registered in the name of a broker, trust, bank or other nominee, you will need to bring a proxy or a letter from that broker, trust, bank or other nominee or your most recent brokerage account statement, that confirms that you are the beneficial owner of those shares. If you do not have either an admission ticket or proof that you own shares of the Company, you will not be admitted to the meeting. We intend to mail this proxy statement and the accompanying proxy card on or about
The Board of Directors has fixed the close of business on
Your vote is important regardless of the number of shares you own. The Company requests that you complete, sign, date and retuthe enclosed proxy card without delay in the enclosed postage-paid retuenvelope, even if you now plan to attend the annual meeting. You may revoke your proxy at any time prior to its exercise by delivering written notice or another duly executed proxy bearing a later date to the Secretary of the Company, or by attending the annual meeting and voting in person.
| Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held on The proxy statement, proxy card and Annual Report to stockholders for the year ended Stockholders may also obtain additional paper or e-mail copies of these materials at no cost by writing to |
IMPORTANT: If your shares are held in the name of a brokerage firm, bank, nominee or other institution, you should provide instructions to your broker, bank, nominee or other institution on how to vote your shares. Please contact the person responsible for your account and give instructions for a proxy to be completed for your shares.
By order of the Board of Directors,
| /s/ |
|
| Chief Executive Officer |
IMPORTANT: In order to secure a quorum and to avoid the expense of additional proxy solicitation, please either vote by internet or sign, date and retuyour proxy promptly in the enclosed envelope even if you plan to attend the meeting personally. Your cooperation is greatly appreciated.
100 S Ashley Dr, Suite 100
PROXY STATEMENT
INTRODUCTION
This proxy statement and the accompanying proxy are made available by
The Board has fixed
The Company's amended and restated bylaws provide that a quorum shall consist of the holders of at least one third of the shares of each class, and series of each class, to the extent applicable (unless more than one class and or series votes as a class, in which case a majority of the shares voting as a class) of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy at the Meeting. If such quorum shall not be present or represented at any meeting of the stockholders, the stockholders, entitled to vote thereat, present in person or represented by proxy, shall have the power to adjouthe meeting from time to time without notice (other than the announcement at the meeting) until a date and time that a quorum shall be present. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
The Company's amended and restated bylaws provide that directors are to be elected by a majority 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 four candidates receiving the highest number of affirmative votes at the Meeting will be elected as directors. Only shares that are voted in favor of a particular nominee will be counted toward that nominee's achievement of a majority. Shares present at the Meeting that are not voted for a particular nominee or shares present by proxy where the stockholder properly withheld authority to vote for such nominee will not be counted toward that nominee's achievement of a majority.
In all matters, like the election of directors, the affirmative vote by the holders of a majority of the shares voted on any matter shall be sufficient for the approval of the proposals in this proxy statement and any other business which may properly be brought before the Meeting or any adjournment or postponement thereof.
All shares of Common Stock represented in person or by valid proxies received by the Company prior to the date of, or at, the Meeting, and not revoked, will be voted as specified in the proxies or voting instructions. Votes that are left blank will be voted as recommended by the Board. With regard to other matters that may properly come before the Meeting, votes will be cast at the discretion of the proxies.
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Broker non-votes occur when a beneficial owner of shares held in "street name" does not give instructions to the broker or nominee holding the shares as to how to vote on matters deemed "non-routine." Generally, if shares are held in street name, the beneficial owner of the shares is entitled to give voting instructions to the broker or nominee holding the shares. If the beneficial owner does not provide voting instructions, the broker or nominee can still vote the shares with respect to matters that are considered to be "routine," but not with respect to "non-routine" matters.
In the event that a broker, bank, or other agent indicates on a proxy that it does not have discretionary authority to vote certain shares on a non-routine proposal, then those shares will be treated as broker non-votes. We believe that Proposal No. 1 relating to the election of directors, Proposal 2 relating to advisory vote on compensation, Proposals 4 through 7 relating to issuances equal to or more than 20% of our outstanding shares of Common Stock at prices below the Minimum Price, and Proposal 8 relating to the potential reverse split of our common stock are non-routine proposals, and that Proposal No. 3, with respect to the ratification of the selection of the independent registered public accounting firm, is a routine matter; therefore, your broker, bank or other agent will not be entitled to vote on Proposals No. 1, 2, and 4 through 8 at the Meeting without your instructions. Broker non-votes will be counted towards the quorum requirement. Other than for the purpose of establishing a quorum, as discussed above, broker non-votes will not be counted as entitled to be voted and will therefore not affect the outcome of the matters to be voted thereon.
Any stockholder who has submitted a proxy may revoke it at any time before it is voted, by written notice addressed to and received by our Chief Executive Officer, by submitting a duly executed proxy bearing a later date or by electing to vote in person at the Meeting. The mere presence at the Meeting of the person appointing a proxy does not, however, revoke the appointment.
IMPORTANT: If your shares are held in the name of a brokerage firm, bank, nominee or other institution, you should provide instructions to your broker, bank, nominee or other institution on how to vote your shares. Please contact the person responsible for your account and give instructions for a proxy to be completed for your shares.
Our website address is included several times in this proxy statement as a textual reference only and the information in our website is not incorporated by reference into this proxy statement.
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PROPOSAL NO. 1 - ELECTION OF DIRECTORS
At the Meeting, four directors are to be elected, which number shall constitute our entire Board, to hold office until the next annual meeting of stockholders and until their successors shall have been duly elected and qualified. Pursuant to our bylaws, as amended, directors are to be elected by a majority 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 four candidates receiving the highest number of affirmative votes at the Meeting will be elected as directors. Only shares that are voted in favor of a particular nominee will be counted toward that nominee's achievement of a majority. Proxies cannot be voted for a greater number of persons than the number of nominees named or for persons other than the named nominees.
Unless otherwise specified in the proxy, it is the intention of the persons named in the enclosed form of proxy to vote the stock represented thereby for the election as directors, of each of the nominees whose names and biographies appear below. All of the nominees whose names and biographies appear below are presently our directors. In the event any of the nominees should become unavailable or unable to serve as a director, it is intended that votes will be cast for a substitute nominee designated by the Board. The Board has no reason to believe that the nominees named will be unable to serve if elected. Each nominee has consented to being named in this proxy statement and to serve if elected.
Principal Employment and Experience of Director Nominees
The following information is furnished with respect to the persons nominated for election as directors. All of these nominees are current members of our Board:
| Age | Present Principal Employer and Prior Business Experience | |||
| 56 |
Prior to joining Primrose, |
|||
| * |
40 |
|
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| Age | Present Principal Employer and Prior Business Experience | |||
| * |
67 | |||
| * |
55 |
As Senior Vice President of Digital Supply Chain at |
| * | The Board has determined that this director or nominee is "independent" as defined by the rules of the |
Required Vote
Our Certificate of Incorporation, as amended, does not authorize cumulative voting. Our bylaws, as amended, provide that directors are to be elected by a majority 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 four candidates receiving the highest number of affirmative votes at the Meeting will be elected as directors. Only shares that are voted in favor of a particular nominee will be counted toward that nominee's achievement of a majority. Shares present at the Meeting that are not voted for a particular nominee or shares present by proxy where the stockholder properly withheld authority to vote for such nominee will not be counted toward that nominee's achievement of a majority. Broker non-votes will not impact the outcome of the vote on this proposal but will be counted for purposes of determining whether there is a quorum.
| The Board recommends a vote FOR the election of each of the director nominees named above. |
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PROPOSAL NO. 2 - ADVISORY VOTE ON THE COMPENSATION OF
OUR NAMED EXECUTIVE OFFICERS
In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, as amended, or the Exchange Act, (which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010) and related rules of the
The vote on this proposal is not intended to address any specific element of compensation; rather, the vote relates to the compensation of our named executive officers, as described in this proxy statement in accordance with the compensation disclosure rules of the
Based on the above, we request that you indicate your support for our executive compensation philosophy and practices, by voting in favor of the following resolution:
"RESOLVED, that the Company's stockholders approve, on a non-binding, advisory basis, the compensation of the Company's named executive officers as described in this proxy statement, including the "Compensation Discussion and Analysis" section, the compensation tables and the other narrative compensation disclosures."
The affirmative vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall be sufficient to approve this Proposal 2. The opportunity to vote on this Proposal 2 is required pursuant to Section 14A of the Exchange Act. However, as an advisory vote, the vote on Proposal 2 is not binding upon us and serves only as a recommendation to our Board. Nonetheless, the Compensation Committee, which is responsible for designing and administering our executive compensation program, and the Board value the opinions expressed by stockholders, and will consider the outcome of the vote when making future compensation decisions for our named executive officers.
| THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT. |
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PROPOSAL NO. 3 -
Our audit committee of our Board (the "Audit Committee") has selected
Neither our by-laws, our other governing documents, nor applicable law requires stockholder ratification of the selection of the Independent Auditors as our independent registered public accounting firm. However, the Audit Committee is submitting the selection of the Independent Auditors to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain the Independent Auditors. Even if the selection is ratified, the Audit Committee in its discretion may decide to appoint a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of the Company and its stockholders.
Required Vote
The affirmative vote of the holders of a majority of the votes cast at the Meeting is required for the ratification of the selection of the independent registered public accounting firm. Broker non-votes will not impact the outcome of the vote on this proposal but will be counted for purposes of determining whether there is a quorum.
| The Board recommends a vote "FOR" the ratification of the selection of |
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PROPOSAL NO. 4 - ISSUANCE PROPOSAL
Background and Description of Proposal
Securities Purchase Agreement
On
Rule 5635 of the Rules of the
Convertible Notes
Payment
The Convertible Notes will mature on the earlier of (i)
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Interest
The Convertible Notes will accrue compounding interest at the rate of 10.0% per annum, which will be payable in cash or shares of our common stock at the Company's option, in arrears quarterly in accordance with the terms of the Convertible Notes. Upon the occurrence and during the continuance of an Event of Default (as defined in the Convertible Notes), the Convertible Notes will accrue interest at the rate of 18.0% per annum. See "-Events of Default" below. Upon conversion, holders of the Convertible Notes are also entitled to receive an interest make-whole payment.
Conversion
Each Convertible Note was convertible, at the option of the applicable noteholder, into shares of our common stock at an initial fixed conversion price of
Warrants
The exercise price of the Series A Warrants is
The exercise price is subject to adjustment for stock splits, combinations or similar events, and, in such event, the number of shares issuable upon the exercise of the Warrant will also be adjusted such that the aggregate Warrant exercise price shall be the same immediately before and immediately after such adjustment. In addition, the Warrant exercise price is also subject to a "full ratchet" anti-dilution adjustment which, in the event that we issue or are deemed to have issued, certain securities at a price lower than the then applicable Warrant exercise price, immediately reduces Warrant exercise price to equal the price at which we issued or was deemed to have issued, our common stock.
If we sell or issue any options or convertible securities that are convertible into or exchangeable or exercisable for shares of our common stock at a price which varies or may vary with the market price of the shares of common stock, including by way of one or more reset(s) to a fixed price, but exclusive of such formulations reflecting customary anti-dilution provisions, the holder of a Warrant will have the right to substitute the variable price for the Warrant exercise price upon exercise of all or part the Warrant.
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The Series B Warrants are subject to a call option whereby provided that there is an effective Registration Statement that covers the resale of all of the Warrant Shares, the Company has the option to "call" the exercise of any or all of the Series B Warrants from time to time by providing written notice (the "Call Notice") to the Holder after any period of twenty (20) consecutive Trading Days (the "Measurement Period") during which, on each day of the Measurement Period, (i) the daily VWAP of the Common Stock is not less than 300% of the Exercise Price in effect, (ii) the total daily trading dollar volume of the Common Stock is at least
Registration Rights
The shares of common stock issuable upon conversion of the Convertible Notes (the "Conversion Shares") and the shares of common stock issuable upon exercise of the Warrants (the "Warrant Shares) have not been registered under the Securities Act of 1933, as amended (the "Securities Act"). In connection with the SPA, the Company, the Investors and the vendor referenced below entered into a Registration Rights Agreement, as amended by that certain Amendment and Consent dated
The foregoing is only a summary of the material terms of the SPA, the Convertible Notes, the Warrants, the Registration Rights Agreement, and the other transaction documents, and does not purport to be a complete description of the rights and obligations of the parties thereunder.
Effect of Issuance of Securities
In connection with the Offering, we agreed to seek approval by our stockholders for the issuance of the Common Stock upon conversion of the Convertible Notes at the Conversion Price(s)and exercise of the Warrants at the applicable Exercise Price. In the event that the Company in its sole discretion determines to make the amortization payments in shares of Common Stock and the Installment Conversion Price is less than the initial Conversion Price, or the Exercise Price is reduced due to the anti-dilution provisions of the Warrants, the number of shares of Common Stock to be issued would be greater than the number of shares into which the Convertible Notes or the Warrants were initially convertible or exercisable, respectively. The potential issuances of Common Stock would result in an increase in the number of shares of Common Stock outstanding, and our stockholders will incur dilution of their percentage ownership to the extent that the investors receive shares or exercise their Warrants. Because of potential adjustments to the number of shares of Common Stock issuable upon conversion of the Convertible Notes and upon exercise of the Warrants issued in connection with the Offering, the exact magnitude of the dilutive effect of the Notes and Warrants cannot be determined. However, the dilutive effect will be material to our current stockholders. We are seeking the approval of our stockholders because the issuance of shares of Common Stock pursuant to the Convertible Notes and the Warrants will be in an amount which may be equal to or in excess of 20% of our Common Stock outstanding before the issuance of such stock and at prices below the Minimum Price.
Proposal to Approve Offering
Nasdaq Listing Rule 5635(d) requires us to obtain stockholder approval prior to the issuance of securities in connection with a transaction other than a public offering involving (i) the sale, issuance or potential issuance by us of our Common Stock (or securities convertible into or exercisable for our Common Stock) at a price less than the Minimum Price. In the case of the Offering, the 20% threshold is determined based on the shares of our Common Stock outstanding immediately preceding the signing of the Purchase Agreement signed
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Immediately prior to the signing of the Purchase Agreement, we had 1,366,211 shares of Common Stock issued and outstanding. Therefore, the potential issuance of the shares of Common Stock underlying the Notes and Warrants would have constituted greater than 20% of the shares of Common Stock outstanding prior to giving effect to the Offering, at prices below the Minimum Price. In addition, if we elect to pay each monthly installment in the form of Conversion Shares, the effective Conversion Price, which is currently
Effectively, stockholder approval of this Issuance Proposal is one of the conditions for us to receive up to an additional approximately
We generally have no control over whether the Warrant holders exercise their Warrants. For this reason, we are unable to accurately forecast or predict with any certainty the total amount of shares of Common Stock that may be issued. Given the current circumstances, we will be required to issue more than 20% of our outstanding shares of Common Stock to Warrant holders under the terms of the Offering. Therefore, we are seeking stockholder approval under this proposal to issue more than 20% of our outstanding shares of Common Stock upon issuance of the Common Stock underlying the Convertible Notes and the Warrants.
Any transaction requiring approval by our stockholders under Nasdaq Listing Rule 5635(d) would likely result in a significant increase in the number of shares of our Common Stock outstanding, and, as a result, our current stockholders will own a smaller percentage of our outstanding shares of Common Stock.
Future issuances of securities in connection with the Offering, if any, may cause a significant reduction in the percentage interests of our current stockholders in the voting power, any liquidation value, our book and market value, and in any future earnings. Further, the issuance or resale of Common Stock issued pursuant to the Convertible Notes and Warrants could cause the market price of our Common Stock to decline. In addition to the foregoing, the increase in the number of issued shares of Common Stock in connection with the Offering may have an incidental anti-takeover effect in that additional shares could be used to dilute the stock ownership of parties seeking to obtain control of us. The increased number of issued shares could discourage the possibility of, or render more difficult, certain mergers, tender offers, proxy contests or other change of control or ownership transactions.
Under the Nasdaq Listing Rules, we are not permitted (without risk of delisting) to undertake a transaction that could result in a change in control of us without seeking and obtaining separate stockholder approval. We are not required to obtain stockholder approval for the Offering under Nasdaq Listing Rule 5635(b) because the Convertible Note holders and Warrant holders have agreed that, for so long as they hold any shares of our Common Stock, neither they nor any of their affiliates will acquire shares of our Common Stock which result in them and their affiliates, collectively, beneficially owning or controlling more than 9.99% (or, with respect to one holder, 4.99%) of the total outstanding shares of our Common Stock.
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Consequences of Not Approving this Proposal
After extensive efforts to raise capital on more favorable terms, we believed that the Offering was the only viable financing alternative available to us at the time. If our stockholders do not approve this proposal, we will not be able to issue 20% or more of our outstanding shares of Common Stock to the Convertible Note holders and Warrant holders in connection with the Offering at below the Minimum Price. As a result, we may be unable to make some of the amortization or interest payments due to the holders of the Convertible Notes in shares of our Common Stock or issue sufficient shares upon conversion of the Convertible Notes or exercise of the Warrants, which will, in lieu of those shares, require that we pay substantial cash amounts to the Convertible Note and Warrant holders.
Interests of Certain Persons
When you consider our Board's recommendation to vote in favor of this proposal, you should be aware that our directors and executive officers and existing stockholders may have interests that may be different from, or in addition to, the interests of other of our stockholders. In particular, one of our shareholders and its affiliate, which owns less than 10% of our voting securities, participated in the Offering. This shareholder and its affiliate may be unable to convert all of their shares under the Convertible Notes and exercise all of the Warrants issued to them in connection with the Offering if this proposal is not approved by our stockholders. Neither of these shareholders will, by virtue of the issuance of the Conversion Shares and Warrant Shares to which each is entitled upon conversion of their respective Convertible Notes and Warrants at the current Conversion Price and Exercise Prices, as applicable, acquire rights to a majority of the voting power of the Company, This is because the Convertible Note holders and Warrant holders have agreed that, for so long as they hold any shares of our Common Stock, neither they nor any of their affiliates will acquire shares of our Common Stock which result in them and their affiliates, collectively, beneficially owning or controlling more than 9.99% (or, with respect to one holder, 4.99%) of the total outstanding shares of our Common Stock.
Further Information
The terms of the Securities Purchase Agreement, the Registration Rights Agreement, and the Warrants are only briefly summarized above. For further information, please refer to the forms of the Securities Purchase Agreement, the Registration Rights Agreement, and the Warrants, which were filed with the
Vote Required and Board's Recommendation
Nasdaq Listing Rule 5635(d) generally requires us to obtain stockholder approval prior to issuing 20% or more of our outstanding shares of Common Stock in the Offering at prices below the Minimum Price. The approval of the Issuance Proposal requires the affirmative vote of the holders of a majority of the voting power of the shares present in person or by proxy at the special meeting and entitled to vote on the Issuance Proposal. Abstentions will have the effect of a vote against this proposal. Brokerage firms do not have authority to vote customers' unvoted shares held by the firms in street name on this proposal. As a result, any shares not voted by a customer will be treated as a broker non-vote. Such broker non-votes will have no effect on the vote for or against this proposal. Holders of Convertible Notes and Warrants, as such, are not entitled to vote the underlying shares of Common Stock on the Issuance Proposal.
| The Board recommends a vote "FOR" the issuance of shares of Common Stock upon conversion of the Convertible Notes and exercise of the Warrants, in an amount equal to or in excess of 20% of our Common Stock outstanding before the issuance of such Conversion Shares and Warrant Shares, at prices below the Minimum Price, in satisfaction of the Nasdaq Listing Rule 5635(D), including any amortization payments made to the holders of in the form of issuance of shares of Common Stock and upon the operation of anti-dilution provisions contained in such Convertible Notes and Warrants, and proxies solicited by the board will be voted in favor of the proposal unless a stockholder indicates otherwise in the proxy. |
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PROPOSAL NO. 5 - SETTLEMENT AGREEMENT
Background and Description of Proposal
As previously disclosed in the Company's periodic reports filed with the
Rule 5635 of the Rules of the
Registration Rights
The shares of common stock issuable under the Settlement Agreement have not been registered under the Securities Act of 1933, as amended (the "Securities Act"). In connection with the SPA listed above, the Company, the Investors and Core IR entered into a Registration Rights Agreement, as amended (the "Registration Rights Agreement"), pursuant to which the Company will be required to file a resale registration statement (the "Registration Statement") with the
The foregoing is only a summary of the material terms of the SPA, the Convertible Notes, the Warrants, the Security Agreement, the Registration Rights Agreement, the Settlement Agreement and the other transaction documents, and does not purport to be a complete description of the rights and obligations of the parties thereunder.
Effect of Issuance of Securities
The potential issuances of Common Stock under the Settlement Agreement would result in an increase in the number of shares of Common Stock outstanding, and our stockholders will incur dilution of their percentage ownership. Because of potential adjustments to the number of shares of Common Stock issuable under the Settlement Agreement, the exact magnitude of the dilutive effect of the Settlement Agreement cannot be conclusively determined. However, the dilutive effect will be material to our current stockholders.
Proposal to Approve Offering
Nasdaq Listing Rule 5635(d) requires us to obtain stockholder approval prior to the issuance of securities in connection with a transaction other than a public offering involving (i) the sale, issuance or potential issuance by us of our Common Stock (or securities convertible into or exercisable for our Common Stock) at a price less than the Minimum Price. In the case of the Offering, the 20% threshold is determined based on the shares of our Common Stock outstanding immediately preceding the signing of the Settlement Agreement signed
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Immediately prior to the signing of the Settlement Agreement, we had 1,366,211 shares of Common Stock issued and outstanding. Therefore, the number of shares of Common Stock potentially issuable under the Settlement Agreement may constitute greater than 20% of the shares of Common Stock outstanding prior to giving effect to the Settlement Agreement. We are seeking stockholder approval under Nasdaq Rule 5635(d) for the sale, issuance or potential issuance by us of our Common Stock in excess of 273,242 shares, which is 20% of the shares of Common Stock outstanding on the original date of entry into the Settlement Agreement. It is not possible to determine the total number of shares potentially issuable under the Settlement Agreement because that number is dependent upon the amount realized by Core IR from sales of our Common Stock.
Any transaction requiring approval by our stockholders under Nasdaq Listing Rule 5635(d) would likely result in a significant increase in the number of shares of our Common Stock outstanding, and, as a result, our current stockholders will own a smaller percentage of our outstanding shares of Common Stock.
Under the Nasdaq Listing Rules, we are not permitted (without risk of delisting) to undertake a transaction that could result in a change in control of us without seeking and obtaining separate stockholder approval. We are not required to obtain stockholder approval for the Offering under Nasdaq Listing Rule 5635(b) because the Settlement Agreement holder has agreed that, for so long as they hold any shares of our Common Stock, neither they nor any of their affiliates will acquire shares of our Common Stock which result in them and their affiliates, collectively, beneficially owning or controlling more than 9.99% (or, with respect to one holder, 4.99%) of the total outstanding shares of our Common Stock.
Consequences of Not Approving this Proposal
If our stockholders do not approve this proposal, we will not be able to issue 20% or more of our outstanding shares of Common Stock to the vendor to settle the Judgment. As a result, we may be unable to make some of the common stock payments due to the vendor which will, in lieu of those shares, require that we pay substantial cash amounts to the vendor.
Further Information
The terms of the Registration Rights Agreement, as amended, and the Settlement Agreement are only briefly summarized above. For further information, please refer to the Registration Rights Agreement and the Settlement Agreement , which were filed with the
Vote Required and Board's Recommendation
Nasdaq Listing Rule 5635(d) generally requires us to obtain stockholder approval prior to issuing 20% or more of our outstanding shares of Common Stock in the Offering. The approval of the Settlement Agreement issuances requires the affirmative vote of the holders of a majority of the voting power of the shares present in person or by proxy at the special meeting and entitled to vote on the Proposal. Abstentions will have the effect of a vote against this proposal. Brokerage firms do not have authority to vote customers' unvoted shares held by the firms in street name on this proposal. Such broker non-votes will have no effect on the vote for or against this proposal. Holders of Settlement Shares are not entitled to vote such shares on the Issuance Proposal. Core IR is not permitted to vote its shares on this proposal.
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The Board recommends a vote "FOR" the issuance of shares of our common stock , in an amount equal to or in excess of 20% of our common stock outstanding before the issuance of such Settlement Agreement shares, in satisfaction of the Nasdaq Listing Rule 5635(D), and proxies solicited by the board will be voted in favor of the proposal unless a stockholder indicates otherwise in the proxy. |
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PROPOSAL NO. 6 - PRIVATE INVESTMENT
Background and Description of Proposal
Securities Purchase Agreement
On
Rule 5635 of the Rules of the
Private Investment Warrants
The exercise price of the Private Investment Warrants is
If we sell or issue any options or convertible securities that are convertible into or exchangeable or exercisable for shares of our common stock at a price which varies or may vary with the market price of the shares of common stock, including by way of one or more reset(s) to a fixed price, but exclusive of such formulations reflecting customary anti-dilution provisions, the holder of a Private Investment Warrant will have the right to substitute the variable price for the Private Investment Warrant exercise price upon exercise of all or part the Private Investment Warrant.
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In addition, if at any time there occurs any stock split, stock dividend, stock combination, reverse stock split, recapitalization or other similar transaction involving the outstanding Common Stock (each, a "Stock Combination Event", and such date thereof, the "Stock Combination Event Date") and the Event Market Price (as defined below) is less than the Private Investment Warrant exercise price then in effect, then on the sixteenth Trading Day immediately following such Stock Combination Event, the exercise price then in effect on such sixteenth (16th) Trading Day shall be reduced (but in no event increased) to the Event Market Price. "Event Market Price" means, with respect to any Stock Combination Event Date, the lowest VWAP during the period commencing seven consecutive Trading Days immediately preceding and the seven consecutive Trading Days immediately following the Stock Combination Event Date All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.
Registration Rights
The Company, the Investors and Core IR agreed to amend the Registration Rights Agreement entered into in connection with the Offering to include the shares of Common Stock issuable upon exercise of the Private Investment Warrants as "
The foregoing is only a summary of the material terms of the
Effect of Issuance of Securities
In connection with the
Proposal to
Nasdaq Listing Rule 5635(d) requires us to obtain stockholder approval prior to the issuance of securities in connection with a transaction other than a public offering involving (i) the sale, issuance or potential issuance by us of our Common Stock (or securities convertible into or exercisable for our Common Stock) at a price less than the Minimum Price. In the case of the
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We generally have no control over whether the Private Investment Warrant holders exercise their Private Investment Warrants. For this reason, we are unable to accurately forecast or predict with any certainty the total amount of underlying shares that may be issued. Under certain circumstances, however, it is possible, that we may have to issue more than 20% of our outstanding shares of Common Stock to Private Investment Warrant holders under the terms of the
Any transaction requiring approval by our stockholders under Nasdaq Listing Rule 5635(d) would likely result in a significant increase in the number of shares of our Common Stock outstanding, and, as a result, our current stockholders will own a smaller percentage of our outstanding shares of Common Stock.
Future issuances of securities in connection with the
Under the Nasdaq Listing Rules, we are not permitted (without risk of delisting) to undertake a transaction that could result in a change in control of us without seeking and obtaining separate stockholder approval. We are not required to obtain stockholder approval for the
Consequences of Not Approving this Proposal
After extensive efforts to raise capital on more favorable terms, we believed that the
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Interests of Certain Persons
When you consider our Board's recommendation to vote in favor of this proposal, you should be aware that our directors and executive officers and existing stockholders may have interests that may be different from, or in addition to, the interests of other of our stockholders. In particular, one of the participants in the
Further Information
The terms of the Securities Purchase Agreement and the Private Investment Warrants are only briefly summarized above. For further information, please refer to the forms of the Securities Purchase Agreement and the Private Investment Warrants, which were filed with the
Vote Required and Board's Recommendation
Nasdaq Listing Rule 5635(d) generally requires us to obtain stockholder approval prior to issuing 20% or more of our outstanding shares of Common Stock to the Private Investment Warrant holders at a price below the Minimum Price . The approval of this Proposal requires the affirmative vote of the holders of a majority of the voting power of the shares present in person or by proxy at the special meeting and entitled to vote on the Private Investment Proposal. Abstentions will have the effect of a vote against this proposal. Brokerage firms do not have authority to vote customers' unvoted shares held by the firms in street name on this proposal. As a result, any shares not voted by a customer will be treated as a broker non-vote. Such broker non-votes will have no effect on the vote for or against this proposal. Holders of Convertible Notes and Warrants, as such, are not entitled to vote the underlying shares of common stock on this Proposal or on Proposal 4.
| The Board recommends a vote "FOR" the issuance of shares of Common Stock upon exercise of the Private Investment Warrants in an amount equal to or in excess of 20% of our common stock outstanding before the issuance of such Private Investment Warrants, at prices below the Minimum Price, in satisfaction of the Nasdaq Listing Rule 5635(D), including upon the operation of anti-dilution and other adjustment provisions contained in such Private Investment Warrants, and proxies solicited by the board will be voted in favor of the proposal unless a stockholder indicates otherwise in the proxy. |
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PROPOSAL NO. 7 - SECOND ISSUANCE PROPOSAL
Background and Description of Proposal
Second Notes Offering
On
The Company plans to enter into a securities purchase agreement with the same investors for the sale of a second tranche of convertible notes and warrants pursuant to the same terms as the Convertible Notes and Warrants described under the Issuance Proposal set forth in Proposal 4 above, except that the initial conversion price shall be equal to
Rule 5635 of the Rules of the
In order to be in a position to execute this Second Notes Offering within 60 days of the receipt of stockholder approval, we are seeking approval by our stockholders for the issuance of Common Stock pursuant to a new series of convertible notes and warrants that will entail the issuance of 20% or more of the Company's outstanding shares of Common Stock at prices below the Minimum Price.
Convertible Notes
We anticipate that the convertible notes in the Second Notes Offering will be issued with a face value ranging from
Warrants
The investors shall receive new Series A warrants, Series B warrants and Series C warrants, each exercisable for 100% of the number of shares of Common Stock that the new convertible notes are convertible into. The initial exercise price of the new Series A warrants, Series B warrants and Series C warrants shall be
Registration Rights
The shares of common stock issuable upon conversion of the new convertible notes and the shares of common stock issuable upon exercise of the new warrants (will be registered under the Securities Act pursuant to the Registration Rights Agreement
The foregoing is only a summary of the anticipated material terms of the Second Notes Offering, including the SPA, the Convertible Notes, the Warrants, and the related registration rights, and does not purport to be a complete description of the expected terms and conditions of the Second Notes Offering.
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Effect of Issuance of Securities
In connection with the Second Notes Offering, we are seeking pre-approval by our stockholders for the issuance of the shares of Common Stock in connection with the conversion of the Convertible Notes and exercise of the Warrants to be issued in the Second Notes Offering because we anticipate that these issuances will entail the issuance of 20% or more of the Company's outstanding shares of Common Stock at prices below the Minimum Price.
In the event that the Company in its sole discretion determines to make the amortization payments under the new convertible notes in shares of Common Stock and the Installment Conversion Price is less than the initial conversion price, or the exercise price of the new warrants is reduced due to the anti-dilution or other adjustment provisions of the new warrants, the number of shares of Common Stock to be issued would be greater than the number of shares of Common Stock into which the new convertible notes and the new warrants were initially convertible and exercisable, respectively. These issuances of shares of Common Stock would result in an increase in the number of shares of Common Stock outstanding, and our stockholders will incur dilution of their percentage ownership to the extent that the investors receive shares or exercise their warrants. Because of potential adjustments to the number of shares of Common Stock issuable and exercise of the new warrants issued in connection with the Second Notes Offering, the exact magnitude of the dilutive effect of the issuance of shares of Common Stock pursuant to the new convertible notes and new warrants cannot be conclusively determined. However, the dilutive effect is likely to be material to our current stockholders.
Proposal to Approve Second Notes Offering
Nasdaq Listing Rule 5635(d) requires us to obtain stockholder approval prior to the issuance of securities in connection with a transaction other than a public offering involving (i) the sale, issuance or potential issuance by us of our Common Stock (or securities convertible into or exercisable for our Common Stock) at a price less than the Minimum Price. In the case of the Second Notes Offering, the 20% threshold is determined based on the shares of our Common Stock outstanding immediately preceding the signing of the Purchase Agreement for the Notes Offering described in Proposal 4.
Effectively, stockholder approval of this Second Issuance Proposal is one of the conditions for us to receive additional sums of cash to implement our business plan. Loss of these potential funds could jeopardize our ability to execute our business plan.
We will generally have no control over whether the Warrant holders exercise their Warrants. We also cannot predict the price at which the Convertible Notes will be convertible, or the Warrants will be exercisable, but we anticipate that these prices could be below the Minimum Price. For this reason, we are unable to accurately forecast or predict with any certainty the total amount of underlying shares that may be issued. Under certain circumstances, however, it is likely that we may have to issue more than 20% of our outstanding shares of Common Stock to the Note Holders and the Warrant holders under the terms of the Second Notes Offering. Therefore, we are seeking stockholder approval under this proposal to issue more than 20% of our outstanding shares of Common Stock at prices below the Minimum Price.
The Second Notes Offering, for which we are seeking approval by our stockholders under Nasdaq Listing Rule 5635(d) would likely result in a significant increase in the number of shares of our Common Stock outstanding, and, as a result, our current stockholders will own a smaller percentage of our outstanding shares of Common Stock.
Future issuances of securities in connection with the Second Notes Offering, if any, may cause a significant reduction in the percentage interests of our current stockholders in the voting power, any liquidation value, our book and market value, and in any future earnings. Further, the issuance or resale of Common Stock issued for the Convertible Notes and Warrant holders could cause the market price of our Common Stock to decline. In addition to the foregoing, the increase in the number of issued shares of Common Stock in connection with the Second Notes Offering may have an incidental anti-takeover effect in that additional shares could be used to dilute the stock ownership of parties seeking to obtain control of us. The increased number of issued shares could discourage the possibility of, or render more difficult, certain mergers, tender offers, proxy contests or other change of control or ownership transactions.
Under the Nasdaq Listing Rules, we are not permitted (without risk of delisting) to undertake a transaction that could result in a change in control of us without seeking and obtaining separate stockholder approval. We are not required to obtain stockholder approval for the Second Notes Offering under Nasdaq Listing Rule 5635(b) because we expect that the Convertible Note holders and Warrant holders will agree that, for so long as they hold any shares of our Common Stock, neither they nor any of their affiliates will acquire shares of our Common Stock which result in them and their affiliates, collectively, beneficially owning or controlling more than 9.99% of the total outstanding shares of our Common Stock.
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Consequences of Not Approving this Proposal
After extensive efforts to raise capital on more favorable terms, we believe that the Second Notes Offering will be the only viable financing alternative available to us at that time. If our stockholders do not approve this proposal, we will not be able to issue 20% or more of our outstanding shares of Common Stock to the Convertible Note holders and Warrant holders in connection with the Second Notes Offering. As a result, we may be unable to fund our business activities.
Interests of Certain Persons
When you consider our Board's recommendation to vote in favor of this proposal, you should be aware that our directors and executive officers and existing stockholders may have interests that may be different from, or in addition to, the interests of other of our stockholders. In particular, one of our shareholders and its affiliate, which together beneficially own less than 10% of our voting securities, participated in the original Convertible Note offering and the Private Offering. We expect that these shareholders will participate in this Second Notes Offering. If either of these shareholders would, by virtue of the issuance of any Conversion Shares and Warrant Shares upon conversion of their respective future Convertible Notes and Warrants acquire rights to more than 19.99% of the voting power of the Company, the Company would seek further stockholder approval.
Further Information
The terms of the Securities Purchase Agreement, the Registration Rights Agreement, and the Warrants expected as part of the Second Notes Offering are only briefly summarized above. For further information, please refer to the forms of the previous Securities Purchase Agreement, the Registration Rights Agreement, and the Warrants, which were filed with the
Vote Required and Board's Recommendation
Nasdaq Listing Rule 5635(d) generally requires us to obtain stockholder approval prior to issuing 20% or more of our outstanding shares of Common Stock below the Minimum Price in the Second Notes Offering. The approval of this Proposal requires the affirmative vote of the holders of a majority of the voting power of the shares present in person or by proxy at the special meeting and entitled to vote on this Proposal. Abstentions will have the effect of a vote against this proposal. Brokerage firms do not have authority to vote customers' unvoted shares held by the firms in street name on this proposal. As a result, any shares not voted by a customer will be treated as a broker non-vote. Such broker non-votes will have no effect on the vote for or against this proposal. Holders of Convertible Notes and Warrants, as such, are not entitled to vote the underlying shares of common stock on this Proposal. Holders of the shares of Common Stock acquired in the
| The Board recommends a vote "FOR" the future issuance of shares of our common stock upon conversion of convertible notes and exercise of warrants, in an amount equal to or in excess of 20% of our common stock outstanding, at prices below the Minimum Price, in satisfaction of the Nasdaq Listing Rule 5635(D), including any amortization payments made to the holders of Notes in the form of issuance of shares of common stock and upon the operation of anti-dilution and other adjustment provisions contained in such Convertible Notes and Warrants to be issued in the Second Notes Offering, and proxies solicited by the board will be voted in favor of the proposal unless a stockholder indicates otherwise in the proxy. |
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PROPOSAL NO. 8 - APPROVE POTENTIAL AMENDMENT TO THE CERTIFICATE OF INCOPORATION OF SCWORX CORP. TO EFFECT REVERSE STOCK SPLIT ON AN "AS NEEDED" BASIS
We are asking shareholders to approve at the Annual Meeting a potential amendment to the Company's certificate of incorporation, if needed at a future date to maintain a minimum bid price of at least
Because the Board of Directors cannot predict with any certainty how the Company's stock price may react to a future reverse stock split, the Board anticipates setting a reverse split ratio at a level mathematically calculated to result in a stock price above the minimum requirement of
Stockholder approval of the Stock Split Proposal is required by the Delaware General Corporation Law. Upon the effectiveness of the amendment to the certificate of incorporation of the Company effecting the reverse stock split, the issued shares of the Company's common stock immediately prior to the split effective time will be reclassified into a smaller number of shares such that a Company shareholder will own that number of shares equal to the quotient of the number of shares of issued common stock held by that shareholder immediately prior to the split effective time, divided by the denominator of the reverse split ratio.
The Company's board of directors approved a proposed amendment to the certificate of incorporation of the Company affecting the reverse stock split for the following reason:
| ● | the board of directors believes effecting the reverse stock split would be an effective means to increase the per share price of the Company's common stock to a minimum of at least |
If a reverse stock split successfully increases the per share price of the Company's common stock, the Company's board of directors believes this increase may increase trading volume in its common stock and facilitate future financings.
A reverse stock split would affect all of the Company's shareholders uniformly and will not affect any stockholder's percentage ownership interests in the Company, except to the extent that the reverse stock split results in any of the Company's shareholders owning a fractional share. Common stock issued pursuant to the reverse stock split will remain fully paid and nonassessable. A reverse stock split would not affect the Company continuing to be subject to the periodic reporting requirements of the Exchange Act.
The Company's authorized capital stock currently consists of 45,000,000 shares of common stock, par value
The Company has no current plans, arrangements or understandings to issue shares that will be available and unreserved after the completion of the reverse stock split, other than to satisfy the Company's current obligations and any obligations that may arise in connection with the Second Notes Offering. In addition, the Company may from time to time seek to finance future cash needs through financings that may take the form of a public or private equity offering. Any such equity financing could occur at any time, including as soon as concurrently with or soon after completion of the reverse split.
The Board of Directors approved the following potential amendment to the Company's Certificate of Incorporation, as amended:
Effective at
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Procedure for Effecting Reverse Stock Split and Exchange of Stock Certificates
If the Company's shareholders approve the amendment to the certificate of incorporation of the Company effecting the reverse stock split, and if the Company's board of directors determines that effecting a reverse stock split is in the best interests of the Company and its stockholders, the Company will file the certificate of amendment to the certificate of incorporation with the Secretary of State of the
As soon as practicable after the split effective time, stockholders will be notified that the reverse stock split has been effected. the Company expects that the Company's transfer agent will act as exchange agent for purposes of implementing the exchange of stock certificates. Holders of pre-split shares will be asked to surrender to the exchange agent certificates representing pre-split shares in exchange for certificates representing post-split shares in accordance with the procedures to be set forth in a letter of transmittal to be sent by the Company's transfer agent. No new certificates will be issued to a stockholder until such stockholder has surrendered such stockholder's outstanding certificate(s) together with the properly completed and executed letter of transmittal to the exchange agent. Any pre-split shares submitted for transfer, whether pursuant to a sale or other disposition, or otherwise, will automatically be exchanged for post-split shares. Stockholders should not destroy any stock certificate(s) and should not submit any certificate(s) unless and until requested to do so.
Fractional Shares
No fractional shares of the Company's common stock will be issued in connection with the reverse stock split. Stockholders of record who otherwise would be entitled to receive fractional shares because they hold a number of pre-split shares not evenly divisible by the number of pre-split shares for which each post-split share is to be reclassified, will be entitled, upon surrender to the exchange agent of certificates representing such shares, to one additional share of the Company's common stock for each fractional share.
Effect of Approving the Stock Split Proposal
By approving an amendment to the Company's amended and restated certificate of incorporation effecting the reverse stock split, stockholders will be approving the combination of that number of shares of the Company's common stock into one share of the Company's common stock, sufficient in the judgment of the Board of Directors to cause the Company's stock price to be a minimum of at least
Required Vote
Approval of the Reverse Stock Split requires the affirmative vote of the holders of a majority of the issued and outstanding shares of the Company's common stock present and entitled to vote thereon as of the record date at the Annual Meeting of the Company's shareholders.
| The Board recommends a vote FOR the reverse stock split. |
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CORPORATE GOVERNANCE
Committees and Meetings of Our Board of Directors
The Board held eighteen meetings and took action by consent seven times during our fiscal year ended
Compensation Committee. The current members of our Compensation Committee are
The primary responsibilities of our Compensation Committee include:
| ● | Reviewing and recommending to our Board of the annual base compensation, the annual incentive bonus, equity compensation, employment agreements and any other benefits of our executive officers; |
| ● | Administering our equity-based plans and exercising all rights authority and functions of the Board under all of the Company's equity compensation plans, including without limitation, the authority to interpret the terms thereof, to grant options thereunder and to make stock awards thereunder; and |
| ● | Annually reviewing and making recommendations to our Board with respect to the compensation policy for such other officers as directed by our Board. |
The Compensation Committee meets, as often as it deems necessary, without the presence of any executive officer whose compensation it is then approving.
Our Compensation Committee held one meeting during 2023.
Audit Committee. The current members of our Audit Committee are
The primary responsibilities of our Audit Committee include:
| ● | Appointing, compensating and retaining our registered independent public accounting firm; |
| ● | Overseeing the work performed by any outside accounting firm; |
| ● | Assisting the Board in fulfilling its responsibilities by reviewing: (i) the financial reports provided by us to the |
| ● | Recommending, establishing and monitoring procedures designed to improve the quality and reliability of the disclosure of our financial condition and results of operations. |
Our Audit Committee held four meetings during 2023.
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Nominating and Corporate Governance Committee. The current members of our
| ● | Assisting the Board in, among other things, effecting Board organization, membership and function including identifying qualified Board nominees; effecting the organization, membership and function of Board committees including composition and recommendation of qualified candidates; establishment of and subsequent periodic evaluation of successor planning for the chief executive officer and other executive officers; development and evaluation of criteria for Board membership such as overall qualifications, term limits, age limits and independence; and oversight of compliance with applicable corporate governance guidelines; and |
| ● | Identifying and evaluating the qualifications of all candidates for nomination for election as directors. |
Our
Potential nominees will be identified by the Board based on the criteria, skills and qualifications determined by the
The Company has never received from stockholders proposed nominees for director. Pursuant to the Bylaws, any nominations for director made by stockholders must be received no later than 120 calendar days in advance of the first anniversary after the mailing of this proxy statement. In 2023, we did not pay a fee to any third party to identify or evaluate, or assist in identifying or evaluating, potential nominees for our Board. All of the nominees for election at the Meeting are current members of our Board, while one current member is stepping off the board.
Leadership Structure. In his position as Chairman of the Board,
Risk Oversight. The Board, including the
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The Board plays an active role, as a whole and at the committee level, in overseeing management of the Company's risks. Each of our Board committees is focused on specific risks within their areas of responsibility, but the Board believes that the overall enterprise risk management process is more properly overseen by all of the members of the Board. The Audit Committee is responsible for overseeing the management of financial and accounting risks. The Compensation Committee is responsible for overseeing the management of risks relating to executive compensation plans and arrangements.
The Board administers its risk oversight responsibilities through the Chief Executive Officer and the Chief Financial Officer, who, together with management representatives of the relevant functional areas review and assess the operations of the Company as well as operating management's identification, assessment and mitigation of the material risks affecting our operations.
The Board has not adopted any policies involving the ability of employees (including officers) or directors to pursue financial instruments or otherwise engage in transactions that hedge or offset (or are designed to hedge or offset) any decrease in the market value of the Company's Common Stock.
Board Diversity Matrix. The following chart summarizes certain self-identified characteristics of the directors of the Company utilizing the categories and terms set forth in applicable Nasdaq Rules and related guidance:
| Board Diversity Matrix (As of |
||
| Board Size: | ||
| Total Number of Directors | 4 |
| Female | Male | Non-Binary | Did not Disclose Gender |
|||||
| Gender: | ||||||||
| Directors | - | 4 | - | - | ||||
| Number of Directors who identify in Any of the Categories Below: | ||||||||
| - | - | - | - | |||||
| - | - | - | - | |||||
| Asian (other than South Asian) | - | - | - | - | ||||
| South Asian | - | - | - | - | ||||
| Hispanic or Latinx | - | - | - | - | ||||
| Native Hawaiian or Pacific Islander | - | - | - | - | ||||
| White | - | 4 | - | - | ||||
| Two or More Races or Ethnicities | - | - | - | - | ||||
| LGBTQ+ | - | |||||||
| Persons with Disabilities | - |
The Company has not actively solicited directors to be added to the Board who would broaden the diversity on the Board or otherwise due to the size of the Company and its current directorship needs.
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COMMUNICATING WITH OUR BOARD OF DIRECTORS
Our Board will give appropriate attention to written communications that are submitted by stockholders and will respond if and as appropriate.
Stockholders who wish to send communications on any topic to our Board should address such communications to:
ATTENDANCE AT STOCKHOLDER MEETINGS
We encourage our directors to attend our stockholders' meetings.
EXECUTIVE COMPENSATION
The following summary compensation table sets forth information concerning compensation for services rendered in all capacities during 2023 and 2022 awarded to, earned by or paid to our executive officers. The value attributable to any option awards and stock awards reflects the grant date fair values of stock awards calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718.
| Non-Equity | ||||||||||||||||||||||||||||||
| Stock | Option | Incentive Plan | All Other | |||||||||||||||||||||||||||
| Fiscal | Salary | Bonus | Awards | Awards | Compensation | Compensation | Total | |||||||||||||||||||||||
| Year | $ | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||||
| 2023 | 250,000 | - | - | - | - | 27,445 | 277,445 | |||||||||||||||||||||||
| President, Chief Executive Officer and Director | 2022 | 250,000 | - | - | - | - | 44,996 | 294,996 | ||||||||||||||||||||||
| 2023 | 108,000 | - | - | - | - | 4,000 | 112,000 | |||||||||||||||||||||||
| Chief Financial Officer | 2022 | 90,000 | - | - | - | - | - | 90,000 |
| (1) |
| (2) |
Employee Grants of Plan Based Awards and Outstanding Equity Awards at Fiscal Year-End
Prior to the completion of our initial public offering, our Board of Directors adopted the
As of
Employment Agreements
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COMPENSATION OF DIRECTORS
Directors' Compensation
The following summary compensation table sets forth information concerning compensation for services rendered in all capacities during 2023 and 2022 awarded to, earned by or paid to our directors. The value attributable to any stock option awards reflects the grant date fair values of stock awards calculated in accordance with ASC Topic 718.
| Fees | Non-Equity | |||||||||||||||||||||||||||||
| Earned or | Incentive | |||||||||||||||||||||||||||||
| Paid in | Stock | Option | Plan | All Other | ||||||||||||||||||||||||||
| Fiscal | Cash | Bonus | Awards | Awards | Compensation | Compensation | Total | |||||||||||||||||||||||
| Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||||
| 2023 | - | - | - | - | - | - | - | |||||||||||||||||||||||
| Chairman and Director | 2022 | - | - | - | - | - | - | - | ||||||||||||||||||||||
| 2023 | - | - | - | - | - | - | - | |||||||||||||||||||||||
| Director | 2022 | - | - | - | - | - | - | - | ||||||||||||||||||||||
| 2023 | - | - | - | - | - | - | - | |||||||||||||||||||||||
| Former Chairman and Director | 2022 | - | - | - | - | - | - | - | ||||||||||||||||||||||
| 2023 | - | - | - | - | - | - | - | |||||||||||||||||||||||
| Director | 2022 | - | - | - | - | - | - | - | ||||||||||||||||||||||
| 2023 | - | - | - | - | - | - | - | |||||||||||||||||||||||
| Former Director | 2022 | - | - | - | - | - | - | - | ||||||||||||||||||||||
| 2023 | - | - | 27,977 | - | - | - | 27,977 | |||||||||||||||||||||||
| Former Director | 2022 | - | - | 124,200 | - | - | - | 124,200 | ||||||||||||||||||||||
| 2023 | - | - | - | - | - | - | - | |||||||||||||||||||||||
| Former Director | 2022 | - | - | 110,400 | - | - | - | 110,400 |
| (1) |
| (2) |
| (3) |
| (3) |
| (5) |
| (6) |
| (7) |
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We do not have a formal plan for compensating our directors for their service in their capacity as directors. However, during 2023, our directors each received the following awards:
| ● | 70,000 Restricted Stock Units for Independent Directors serving on our Board |
| ● | 10,000 Restricted Stock Units for Independent Directors serving on a committee |
| ● | 10,000 Restricted Stock Units for Independent Directors chairing a committee |
| ● | 10,000 Restricted Stock Units for Independent Directors serving as Chairman |
In May of 2024, the board of directors each elected to retuall previously received share-based compensation to the Company
Currently, Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. The board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director. Other than indicated above, no director received and/or accrued any compensation for his or her services as a director, including committee participation and/or special assignments during 2023 or 2022.
Directors, Executive Officers and Corporate Governance
The current members of our Board and our executive officers, together with their respective ages and certain biographical information are set forth below. Directors hold office until the next annual meeting of our stockholders and until their successors have been duly elected and qualified. Our executive officers are elected by and serve at the designation and appointment of the board of directors.
| Age | Position | |||
| 54 | Chairman of the Board of Directors | |||
| Timothy A, Hannibal | 56 | Chief Executive Officer and Director | ||
| 71 | Director | |||
| 67 | Director | |||
| 44 | Chief Financial Officer |
| (1) | A member of the Audit Committee. |
| (2) | A member of the Compensation Committee. |
| (3) | A member of the |
The following is a summary of the business experience of each of our executive officers.
There are no family relationships between any of the director nominees or executive officers named in this proxy statement.
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Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our executive officers and directors and persons who beneficially own more than 10% of a registered class of our equity securities to file with the
Based solely on our review of the copies of such reports filed with the
REPORT OF THE AUDIT COMMITTEE
In the course of our oversight of the Company's financial reporting process, we have: (1) reviewed and discussed with management the audited financial statements the year ended
Based on the foregoing review and discussions, the Audit Committee recommended to the Board that the audited financial statements be included in the Company's Annual Report on Form 10-K for the year ended
By the Audit Committee of the Board of
Directors of
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INFORMATION CONCERNING OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has selected
BF Borgers CPA PC served as our independent registered public accounting firm from
During 2023 and 2022, fees for services provided by
| For the year ended |
||||||||
| 2023 | 2022 | |||||||
| Audit Fees | $ | - | $ | - | ||||
| Audit-Related Fees | - | - | ||||||
| Tax Fees | - | - | ||||||
| All Other Fees | - | - | ||||||
| Total | $ | - | $ | - |
During 2023 and 2022, fees for services provided by BF Borgers CPA PC were as follows:
| For the year ended |
||||||||
| 2023 | 2022 | |||||||
| Audit Fees | $ | 192,500 | $ | 179,400 | ||||
| Audit-Related Fees | - | - | ||||||
| Tax Fees | - | - | ||||||
| All Other Fees | - | - | ||||||
| Total | $ | 192,500 | $ | 179,400 |
Audit Fees
Audit fees for 2023 and 2022 include amounts related to the audit of our annual consolidated financial statements and quarterly review of the consolidated financial statements included in our Quarterly Reports on Form 10-Q.
Audit Related Fees
Audit Related Fees include amounts related to accounting consultations and services.
Tax Fees
Tax Fees include fees billed for tax compliance, tax advice and tax planning services.
30
All Other Fees
The Audit Committee pre-approves all audit and permissible non-audit services provided by our independent registered public accounting firm. These services may include audit services, audit-related services, tax and other services. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services. The 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, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.
Audit Committee Pre-Approval Policies and Procedures
Currently, the audit committee acts with respect to audit policy, choice of auditors, and approval of out of the ordinary financial transactions. The audit committee pre-approves all services provided by our independent registered public accounting firm. All of the above services and fees were reviewed and approved by the audit committee before the services were rendered.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our policy is to enter into transactions with related parties on terms that are on the whole no less favorable to us than those that would be available from unaffiliated parties at arm's length. Based on our experience in the business sectors in which we operate and the terms of our transactions with unaffiliated third parties, we believe that all of the transactions described below met this policy standard at the time they occurred.
At
During
Between
The above amounts and terms are not necessarily what third parties would agree to.
STOCKHOLDER PROPOSALS
We intend to mail this proxy statement, the accompanying proxy card and the 2023 annual report on or about
Stockholders who wish to present a proposal at our next annual meeting of stockholders without inclusion of such proposal in our proxy materials must advise our Secretary of such proposals in writing by August9, 2024.
If we do not receive notice of a stockholder proposal within this timeframe, our management will use its discretionary authority to vote the shares they represent, as the Board may recommend. We reserve the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with these requirements.
31
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of
| Named Executive Officers and Directors | Common Stock |
Preferred Stock |
Options/ Warrants |
Total | Percentage Ownership |
|||||||||||||||
| Current (as of |
||||||||||||||||||||
| 54,788 | - | - | 54,788 | 2.9 | % | |||||||||||||||
| 6,983 | - | - | 6,983 | * | ||||||||||||||||
| - | - | - | - | * | ||||||||||||||||
| - | - | - | - | * | ||||||||||||||||
| - | - | - | - | * | ||||||||||||||||
| Directors and Executive Officers as a Group (5 persons) | 61,771 | - | - | 61,771 | 2.9 | % | ||||||||||||||
| Former | ||||||||||||||||||||
| - | 5,000 | - | 5,000 | * | ||||||||||||||||
| - | - | - | - | * | ||||||||||||||||
| - | - | - | - | * | ||||||||||||||||
| - | - | - | - | * |
| * | Represents beneficial ownership of less than 1% of our outstanding stock. |
| (1) | In determining beneficial ownership of our common stock as of a given date, the number of shares shown includes shares of common stock that may be acquired upon the exercise of stock options within 60 days of |
MEETING MATERIALS
Some banks, brokers and other nominee record holders may be participating in the practice of "householding" proxy statements and annual reports. This means that only one copy of our proxy statement or annual report may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of either document to you if you call or write us at the address shown on the first page of this proxy statement. If you want to receive separate copies of the annual report and any proxy statement in the future or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holders, or you may contact us at the address shown on the first page of this proxy statement or by email at [email protected].
OTHER MATTERS
As of the date of this proxy statement, our management knows of no matter not specifically described above as to any action which is expected to be taken at the Meeting. The persons named in the enclosed proxy, or their substitutes, will vote the proxies, insofar as the same are not limited to the contrary, in their best judgment, with regard to such other matters and the transaction of such other business as may properly be brought at the Meeting.
IF YOU HAVE NOT VOTED BY INTERNET, PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN THE ENCLOSED RETURN ENVELOPE. A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED AS IT WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors
| /s/ |
|
| Chief Executive Officer and Director |
32
ANNUAL MEETING OF STOCKHOLDERS
PROXY CARD
THE FOLLOWING PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SCWORX CORP.
The undersigned stockholder of
THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST AS INSTRUCTED BELOW. IF THIS PROXY CARD IS EXECUTED BUT NO INSTRUCTION IS GIVEN WITH RESPECT TO ANY PROPOSAL SPECIFIED HEREIN, THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST "FOR" EACH NOMINEE IN PROPOSAL NO. 1, "FOR" PROPOSAL NO. 2, "FOR" PROPOSAL NO. 3, "FOR" PROPOSAL NO. 4, "FOR" PROPOSAL NO. 5, "FOR" PROPOSAL NO. 6, "FOR" PROPOSAL NO. 7, and "FOR" PROPOSAL NO. 8.
(Continued and to be signed on the reverse side)
ANNUAL MEETING OF STOCKHOLDERS OF
If you have not voted by internet, please sign, date and mail your proxy card in the envelope provided
as soon as possible.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF
THE DIRECTOR NOMINEES LISTED IN PROPOSAL 1 AND "FOR" PROPOSALS 2, 3, 4, 5, 6, 7 AND 8.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE ☐
| In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Stockholders Meeting. | ||||||||||
| 1. | Proposal No. 1 - To elect four directors to serve until the next annual meeting of stockholders and until their respective successors shall have been duly elected and qualified: | |||||||||
|
FOR ALL NOMINEES |
||||||||||
| ☐ | WITHHOLD AUTHORITY FOR ALL NOMINEES | |||||||||
| ☐ |
FOR ALL EXCEPT ☐ ☐ |
|||||||||
| 2. | Proposal No. 2 - To consider and vote, on a non-binding, advisory basis, upon the compensation of those of our executive officers listed in the Summary Compensation Table appearing elsewhere in this proxy statement, or our named executive officers, as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K | FOR ☐ |
AGAINST ☐ |
ABSTAIN ☐ | ||||||
| 3. | Proposal No. 3 - To ratify the selection of |
FOR ☐ |
AGAINST ☐ |
ABSTAIN ☐ | ||||||
| 4. | Proposal No. 4 - A proposal to authorize and approve, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares of our Common Stock upon conversion of convertible notes and exercise of warrants issued by us pursuant to the terms of that certain Securities Purchase Agreement, dated |
FOR ☐ |
AGAINST ☐ |
ABSTAIN ☐ |
| 5. | Proposal No. 5 - A proposal to authorize and approve, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares of our Common Stock, pursuant to a certain settlement agreement dated |
FOR ☐ |
AGAINST ☐ |
ABSTAIN ☐ | ||||||
| 6. | Proposal No. 6 - A proposal to authorize and approve, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares of common stock, including upon exercise of warrants issued by us pursuant to the terms of that certain Securities Purchase Agreement, dated |
FOR ☐ |
AGAINST ☐ |
ABSTAIN ☐ | ||||||
| 7. | Proposal No. 7 - A proposal to authorize, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares of our Common Stock upon conversion of convertible notes and exercise of warrants to be issued by us pursuant to the terms of Securities Purchase Agreement at a date within 60 days of approval (the "Second Issuance Proposal"), by and among the Company and the investors named therein in an amount equal to or in excess of 20% of our Common Stock outstanding at prices below the Minimum Price, but not below |
FOR ☐ |
AGAINST ☐ |
ABSTAIN ☐ | ||||||
| To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. | 8. | Proposal No. 8 - To consider and act upon a proposed amendment of the Company's certificate of incorporation to effect, at the discretion of our board of directors, a reverse stock split of the Company's Common Stock, in the range of 1 for 2 and 1 for 15, if the minimum bid price of |
FOR ☐ |
AGAINST ☐ |
ABSTAIN ☐ |
| Signature of stockholder | Date: | Signature of Stockholder | Date: |
Note:
Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
Attachments
Disclaimer
Proxy Statement – Form DEF 14A
SEC Approves 24 Exchange
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