UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment
No. )
Filed
by the Registrant ☒
Filed
by a Party other than the Registrant ☐
Check
the appropriate box:
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Preliminary
Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material under §240.14a-12
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Edesa
Biotech, Inc.
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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No fee
required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was
determined):
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(4)
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maximum aggregate value of transaction:
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fee paid:
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Fee
paid previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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Date
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Edesa Biotech, Inc.
100 Spy Court
Markham, ON L3R 5H6 Canada
NOTICE OF 2021 ANNUAL GENERAL MEETING OF SHAREHOLDERS
To be held Thursday, April 22, 2021
To the
Shareholders of Edesa Biotech, Inc.:
Notice
is hereby given that the 2021 Annual General Meeting of
Shareholders (the “Annual
Meeting”) of Edesa Biotech, Inc. (the
“Company” or
“Edesa”) will be
held at 10:30 a.m. (local time) on Thursday, April 22, 2021, at the
Edesa Biotech Corporate Offices, located at 100 Spy Court, Markham,
ON L3R 5H6. If you wish to attend the Annual Meeting in person, you
will need to RSVP at least 48 hours prior to the Annual Meeting (or
by 10:30 a.m. EDT on April 20, 2021) to investors@edesabiotech.com
and please include your name in the subject line of the e-mail.*
The following summarizes the matters to be considered and acted
upon:
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1.
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the
election of seven (7) directors, nominated by the Company’s
Board of Directors, to serve until the Company’s annual
meeting of shareholders to be held in 2022 or until their
successors are duly elected and qualified;
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2.
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the
appointment of MNP LLP as the Company’s auditors and
independent registered public accounting firm for the ensuing
year;
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3.
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the
amendment to the Company’s 2019 Equity Incentive Compensation
Plan (the “2019
Plan”) to increase the number of shares available for
issuance under the 2019 Plan by 1,497,000 shares and
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such
other business as may properly come before the Annual Meeting or
any adjournments or postponements thereof.
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Only
shareholders of record at the close of business on February 24,
2021, are entitled to receive notice of, and to vote at, the Annual
Meeting and any adjournments or postponements thereof.
Your
vote is important. To assure your representation at the Annual
Meeting, you are urged to sign, date and return the proxy as soon
as possible, or follow the instructions contained in the Notice of
Internet Availability of Proxy Materials to vote by telephone or on
the Internet. You may vote in person at the Annual Meeting even if
you have previously returned a proxy.
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By
Order of the Board of Directors,
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/s/ Pardeep Nijhawan
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Pardeep
Nijhawan, MD
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Director,
Chief Executive Officer and Corporate Secretary
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(Principal
Executive Officer)
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Markham,
ON, Canada
March
3, 2021
*COVID-19
Information: To ensure the
health and safety of all attendees, Edesa reserves the right to
take any additional cautionary measure deemed to be appropriate,
necessary or advisable in relation to the Annual Meeting in
response to further developments in the COVID-19 pandemic,
including limiting the number of persons who may be allowed in a
single room for the Annual Meeting to allow for required social
distancing, or any other measures that may be recommended by public
health authorities in connection with gatherings of
persons.
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING TO BE HELD ON APRIL 22, 2021. This Proxy
Statement, along with our Annual Report on Form 10-K for the year
ended September 30, 2020, is available at:
http://www.proxyvote.com/.
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TABLE OF CONTENTS
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Page Number
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Shareholder Proposals
f
or 2022 Annual
Meeting
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Edesa Biotech, Inc.
100 Spy Court
Markham, ON L3R 5H6 Canada
PROXY STATEMENT
This
proxy statement is being furnished to you in connection with the
solicitation by the Board of Directors (the “Board”) of Edesa Biotech, Inc., a
British Columbia corporation (“we”, “us”, “Edesa”, or the “Company”), of proxies in the
accompanying form to be used at the 2021 Annual General Meeting of
Shareholders of the Company to be held at the Edesa Biotech
Corporate Offices, located at 100 Spy Court, Markham, ON L3R 5H6 at
10:30 a.m. (local time) on Thursday, April 22, 2021, and at any
adjournments or postponements thereof (the “Annual Meeting”).
As a
British Columbia corporation subject to the reporting requirements
of the U.S Securities and Exchange Commission, our proxy disclosure
has been prepared to comply with U.S. proxy disclosure requirements
as allowed under National Instrument 51-102F6.
Our
Board of Directors has fixed February 24, 2021 as the record date
for determining those shareholders entitled to receive notice of,
and to vote at, the Annual Meeting. Only shareholders of record at
the close of business on February 24, 2021 will be entitled to vote
at the Annual Meeting. These materials are first being sent or
given to the shareholders on or about March 11, 2021. This proxy
statement gives you information on the proposals to be presented at
the Annual Meeting so that you can make an informed
decision.
What is included in these materials?
These
materials include:
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This
Proxy Statement for the Annual Meeting; and
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The
Company’s Annual Report on Form 10-K for the year ended
September 30, 2020, as filed with the Securities and Exchange
Commission (the “SEC”) on December 7, 2020 (the
“Annual
Report”).
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If you
requested printed versions of these proxy materials by mail, these
materials also include the proxy card or voting instruction form
for the Annual Meeting.
Why did I receive a one-page notice in the mail regarding the
Internet availability of proxy materials instead of a full set of
proxy materials?
Pursuant
to rules adopted by the SEC, the Company has elected to provide
access to its proxy materials via the Internet instead of mailing
printed copies. Accordingly, the Company is sending a Notice of
Internet Availability of Proxy Materials (the “Internet Availability Notice”) to
the Company’s shareholders. Canadian shareholders will
receive printed copies of the proxy materials unless they elected
to receive proxy materials by email. Most other shareholders will
not receive printed copies of the proxy materials unless they
request them. Instead, instructions on how to access the proxy
materials over the Internet or to request a printed copy may be
found in the Internet Availability Notice. All shareholders will
have the ability to access the proxy materials on the Website
referred to in the Internet Availability Notice or request to
receive a printed or electronic set of the proxy materials.
Shareholders may request to receive proxy materials in printed form
or electronically by email, by telephone, mail or by logging on to
http://www.proxyvote.com/. The Company encourages shareholders to
take advantage of the availability of proxy materials on the
Internet to help reduce the environmental impact of our annual
meetings.
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How can I get electronic access to the proxy
materials?
The
Internet Availability Notice will provide you with instructions
regarding how to:
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View
the Company’s proxy materials for the Annual Meeting on the
Internet; and
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Instruct
the Company to send future proxy materials to you electronically by
email.
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Choosing
to receive future proxy materials by email will reduce the
Company’s costs of printing and mailing documents to you,
which will favorably impact the environment. If you choose to
receive future proxy materials by email, you will receive an email
message next year with instructions containing a link to those
materials. Your election to receive proxy materials by email will
remain in effect until you terminate it.
What proposals will be voted on at the Annual Meeting?
The
following three proposals will be voted on at the Annual
Meeting:
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The
election of seven (7) directors, nominated by our Board, to serve
until our annual meeting of shareholders to be held in 2022 or
until their successors are duly elected and qualified;
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The
appointment of MNP LLP as our auditors and independent registered
public accounting firm for the ensuing year; and
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The
amendment to the Company’s 2019 Equity Incentive Compensation
Plan (the “2019
Plan”) to increase the number of shares available for
issuance under the 2019 Plan by 1,497,000
shares.
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How does the Board recommend that I vote on the
proposals?
Our
Board of Directors unanimously recommends that the shareholders
vote “FOR” each of the nominees for Director,
“FOR” the appointment of MNP LLP as our auditors and
independent registered public accounting firm for the ensuing year
and “FOR” the amendment to our 2019 Equity Incentive
Compensation Plan to increase the number of shares available for
issuance under the 2019 Plan.
Will there be any other items of business on the
agenda?
At
present, management knows of no additional business to be presented
at the Annual Meeting, but if other business is presented, the
persons named in the proxy card and acting under the proxy card as
proxy holders will vote or refrain from voting in accordance with
their best judgment pursuant to the discretionary authority
conferred by the proxy.
Who is entitled to vote at the Annual Meeting?
Only
shareholders of record at the close of business on February 24,
2021 may vote at the Annual Meeting. As of the close of business on
February 24, 2021, there were 11,615,942 common shares outstanding,
all of which are entitled to vote at the Annual
Meeting.
How many votes am I entitled to per share?
Each
shareholder is entitled to one (1) vote for each common share held
as of the record date on all matters properly brought before the
Annual Meeting.
What is the difference between holding shares as a shareholder of
record and as a beneficial owner?
Shareholder of Record. If your shares are registered
directly in your name with our transfer agent, Computershare
Investor Services, Inc., you are considered, with respect to those
shares, the shareholder of record. As a shareholder of record, the
Internet Availability Notice was sent directly to you by the
Company. If you request printed copies of the proxy materials by
mail, you will receive a proxy card.
Beneficial Owner. If your shares are held in a brokerage
account or by a bank or other nominee, you are considered the
beneficial owner of shares held in street name, and the Internet
Availability Notice was forwarded to you by that organization. The
organization holding your account is considered the shareholder of
record for purposes of voting at the Annual Meeting. As the
beneficial owner, you have the right to instruct that organization
on how to vote the shares held in your account. Those instructions
are contained in a “voting instruction form”. If you
request printed copies of the proxy materials by mail, you will
receive a voting instruction form.
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If my shares are held in “street name” by my broker,
will my broker vote my shares for me?
Shares
held in “street name” by a broker or nominee who
indicates on a proxy that it does not have discretionary authority
to vote those shares on a proposal are referred to as “broker
non-votes.” Under current rules, brokers, banks or other
nominees may not vote and have no discretionary authority to vote
shares on the election of directors, executive compensation matters
and other governance matters, or “non-routine” matters,
unless they receive specific voting instructions from their
clients.
Your
bank or broker does not have discretion to vote uninstructed shares
on the proposals in this Proxy Statement, except for Proposal No. 2
to appoint our auditors and independent registered public
accounting firm for the ensuing year.
If you are a beneficial holder and do not provide specific voting
instructions to your broker, the organization that holds your
shares will not be authorized to vote on Proposal No. 1, the
election of directors, or Proposal No. 3, the amendment to our 2019
Equity Incentive Compensation Plan. Accordingly, for your vote to
be counted, you now will need to communicate your voting decisions
to your broker, bank, or other nominee before the date of the
Annual Meeting. Accordingly, we encourage you to vote promptly,
even if you plan to attend the Annual Meeting.
If I am a shareholder of record, how do I vote my
shares?
There
are three ways to vote:
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By Mail – If you received printed copies of the proxy
materials by mail, you may vote your proxy by filing out the proxy
card and sending it back in the envelope provided.
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By Telephone or the Internet – We have established
telephone and Internet voting procedures for shareholders of
record. These procedures are designed to authenticate your
identity, to allow you to give your voting instructions and to
confirm that those instructions have been properly recorded. The
toll-free telephone number for telephone voting is 1-800-690-6903.
Please have your proxy card handy when you call. Easy-to-follow
voice prompts will allow you to vote your shares and confirm that
your instructions have been properly recorded. The website for
Internet voting is http://www.proxyvote.com/. As with telephone
voting, you will be able to confirm that your instructions have
been properly recorded. Telephone and Internet voting facilities
for shareholders of record will be available 24 hours a day until
11:59 p.m. Eastern Time, on Wednesday, April 21, 2021.
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In Person – If you are a shareholder of record, you
may vote in person at the Annual Meeting. The Company will give you
a ballot when you arrive. Due to the limited seating and for
security purposes, if you wish to attend the Annual Meeting in
person, you will be required to RSVP at least 48 hours prior to the
Annual Meeting (or by 10:30 a.m. EDT on April 20, 2021) to
investors@edesabiotech.com with your name in the subject
line.
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If I am a beneficial owner of shares held in street name, how do I
vote my shares?
There
are three ways to vote:
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By Mail – If you received printed copies of the proxy
materials by mail, you may vote your proxy by filing out the voting
instruction form and sending it back in the envelope provided by
your brokerage firm, bank, broker-dealer or other similar
organization that holds your shares.
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By Telephone or the Internet – You may vote by proxy via
telephone by calling 1-800-690-6903. You may vote by proxy via
telephone or the Internet at http://www.proxyvote.com/, as further
set forth in the instructions provided by your brokerage firm,
bank, broker-dealer or other similar organization that holds your
shares.
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In Person – Shares held in “street name”
may be voted by you in person at the Annual Meeting only if you
obtain a “legal proxy” from the bank, broker or other
agent that holds your shares, which “legal proxy”
grants you the right to vote the shares. You must present that
“legal proxy” to attend the Annual Meeting and to be
entitled to vote in person shares that are held for you in
“street name.”
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What is the proxy card?
The
proxy card enables you to appoint each of Pardeep Nijhawan, a
Director and our Chief Executive Officer and Corporate Secretary,
and Michael Brooks, our President, as your representative at the
Annual Meeting. By completing and returning the proxy card, you are
authorizing these persons to vote your shares at the Annual Meeting
in accordance with your instructions on the proxy card. This way,
your shares will be voted whether or not you attend the Annual
Meeting. Even if you plan to attend the Annual Meeting, it is
strongly recommended that you complete and return your proxy card
before the Annual Meeting date just in case your plans change. If a
proposal comes up for vote at the Annual Meeting that is not on the
proxy card, the proxies will vote your shares, under your proxy,
according to their best judgment.
I share an address with another shareholder and we received only
one paper copy of the proxy materials. How may I obtain an
additional copy of the proxy materials?
As
permitted under SEC rules, we have adopted a procedure called
“householding”. Under this procedure, we deliver a
single copy of the Internet Availability Notice and, if applicable,
the proxy materials to multiple shareholders who share the same
address unless we received contrary instructions from one or more
of the shareholders. This procedure reduces our printing costs,
mailing costs and fees. Shareholders who participate in
householding will continue to be able to access and receive
separate proxy cards. Upon written request, we will deliver
promptly a separate copy of the Internet Availability Notice and,
if applicable, the proxy materials to any shareholder at a shared
address to which we delivered a single copy of any of these
documents. To receive a separate copy of the Internet Availability
Notice and, if applicable, the proxy materials, shareholders may
contact us as follows:
Edesa
Biotech, Inc.
100 Spy Court
Markham, ON L3R 5H6 Canada
Attention:
Corporate Secretary
Shareholders
who hold shares in street name may contact their brokerage firm,
bank, broker-dealer, or other similar organization to request
information about householding.
7
How do I request a paper copy of the proxy materials?
There
are four ways to request a paper copy of the proxy
materials:
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By Mail: You may obtain a paper copy of the proxy materials
by writing to us at Edesa Biotech, Inc., 100 Spy Court, Markham, ON
L3R 5H6 Canada, Attn: Corporate Secretary.
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By Telephone: You may obtain a paper copy of the proxy
materials by calling 1-800-579-1639.
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Via the Internet: You may obtain a paper copy of the proxy
materials by logging on to http://www.proxyvote.com/.
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By Email: You may obtain a paper copy of the proxy materials
by email at sendmaterial@proxyvote.com. You must provide the
control number from your proxy notice to request a paper copy of
the proxy materials by email.
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Please make your request for a paper copy as instructed above on or
before April 8, 2021 to facilitate timely delivery.
Can I change my vote or revoke my proxy?
You may
change your vote or revoke your proxy at any time prior to the vote
at the Annual Meeting. A proxy may be revoked at any time prior to
its exercise:
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by
submitting a written notice revoking that proxy, addressed to our
Corporate Secretary at our executive offices located at 100 Spy
Court, Markham, ON L3R 5H6 Canada, at any time up to and including
the last business day before the Annual Meeting,
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if you
submitted your proxy by telephone or the Internet, you may change
your vote or revoke your proxy with a later telephone or Internet
proxy, as the case may be, or
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at the
Annual Meeting prior to the taking of a vote.
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Any
shareholder entitled to vote at the Annual Meeting may attend the
meeting and vote in person on any matter presented for a vote to
our shareholders at the meeting, whether or not that shareholder
has previously given a proxy. However, attendance at the Annual
Meeting will not have the effect of revoking a proxy unless you
give written notice of revocation to our Corporate Secretary before
any vote in which the proxy has been given. If you hold your shares
in “street name” and have instructed your broker, bank
or other nominee to vote your shares for you, you must follow
directions received from your broker, bank or other nominee to
change those instructions.
What happens if I do not indicate how to vote my
proxy?
If you
just sign your proxy card without providing further instructions,
your shares will be voted “FOR” all the director
nominees, “FOR” the appointment of MNP LLP as our
auditors and independent registered public accounting for the
ensuing year and “FOR” the amendment to our 2019 Equity
Incentive Compensation Plan to increase the number of shares
available for issuance under the 2019 Plan.
Is my vote kept confidential?
Proxies,
ballots and voting tabulations identifying shareholders are kept
confidential and will not be disclosed except as may be necessary
to meet legal requirements.
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Where do I find the voting results of the Annual
Meeting?
We will
announce voting results at the Annual Meeting. The final voting
results will be tallied by the inspector of election and published
by the Company in a Current Report on Form 8-K, which the Company
is required to file with the SEC within four (4) business days
following the Annual Meeting. The Company is also required to file
on SEDAR a brief description of the proposals voted upon at the
Annual Meeting and the outcome of the votes for such proposals
promptly following the Annual Meeting, which description must
include the percentage of votes for and against such
proposals.
What constitutes a quorum?
Our
Amended and Restated Articles require the representation of at
least one person who is, or who represents by proxy, one or more
shareholders who, in the aggregate, hold at least thirty-three and
one-third percent (33-1/3%) of the issued shares entitled to be
voted at the meeting, in order to establish a quorum for the
transaction of business. Abstentions and “broker
non-votes” will be counted for purposes of determining
whether a quorum is present for the transaction of business at the
Annual Meeting.
What is the vote required for a proposal to pass?
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Proposal No. 1 — Election of directors: The
affirmative vote of the holders of a majority of shares present in
person or represented by proxy at the Annual Meeting and entitled
to vote is required for approval. With regard to this proposal,
shares which are entitled to vote but abstain from voting on a
matter will be excluded from the vote and will have no effect on
its outcome.
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Proposal No. 2 — Appointment of our auditors and independent
registered public accounting firm: The affirmative vote of
the holders of a majority of shares present in person or
represented by proxy at the Annual Meeting and entitled to vote is
required for approval. With regard to this proposal, shares which
are entitled to vote but abstain from voting on a matter will be
excluded from the vote and will have no effect on its
outcome.
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Proposal No. 3 — Amendment to our 2019 Equity Incentive Compensation Plan to
increase the number of shares available for issuance under the 2019
Plan: The affirmative vote of the holders of a majority of
shares present in person or represented by proxy at the Annual
Meeting and entitled to vote is required for approval. With regard
to this proposal, shares which are entitled to vote but abstain
from voting on a matter will be excluded from the vote and will
have no effect on its outcome.
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Who will pay the costs of soliciting proxies?
The
cost of preparing, assembling, printing and mailing this proxy
statement and the accompanying form of proxy, and the cost of
soliciting proxies relating to the Annual Meeting, will be borne by
the Company. Some banks and brokers have customers who beneficially
own shares listed of record in the names of nominees. We intend to
request banks and brokers to solicit such customers and will
reimburse them for their reasonable out-of-pocket expenses for such
solicitations. If any additional solicitation of the holders of our
outstanding shares is deemed necessary, we (through our directors
and officers) anticipate making such solicitation directly. The
solicitation of proxies by mail may be supplemented by telephone,
email and personal solicitation by officers, directors and regular
employees of the Company, but no additional compensation will be
paid to such individuals.
9
Edesa Biotech, Inc.
100 Spy Court
Markham, ON L3R 5H6 Canada
PROXY STATEMENT
This
Proxy Statement is being furnished to the holders of our common
shares in connection with the solicitation of proxies for use at
the 2021 Annual General Meeting of Shareholders of the Company (the
“Annual
Meeting”). The Annual Meeting is to be held at 10:30
a.m. (local time) on Thursday, April 22, 2021, at the Edesa Biotech
Corporate Offices, located at 100 Spy Court, Markham, ON L3R 5H6,
and at any adjournment or adjournments thereof. Due to the limited
seating and for security purposes, if you wish to attend the Annual
Meeting in person, you will be required to RSVP at least 48 hours
prior to the Annual Meeting (or by 10:30 a.m. EDT on April 20,
2021) to investors@edesabiotech.com with your name in the subject
line.
The
Board of Directors of the Company (the “Board”) has fixed the close of
business on February 24, 2021 (the “Record Date”) as the Record Date
for the determination of shareholders entitled to notice of, and to
vote and act at, the Annual Meeting. Only shareholders of record at
the close of business on that date are entitled to notice of, and
to vote and act at, the Annual Meeting.
At the
Annual Meeting, shareholders will be acting upon the following
proposals:
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1.
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To
elect Lorin Johnson, Sean MacDonald, Pardeep Nijhawan, Frank Oakes,
Paul Pay, Carlo Sistilli, and Peter van der Velden as directors to
serve until the Company’s annual meeting of shareholders to
be held in 2022 or until their successors are duly elected and
qualified;
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2.
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To
appoint MNP LLP as the Company’s auditors and independent
registered public accounting firm for the ensuing
year;
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To
amend the Company’s 2019 Equity Incentive Compensation Plan
to increase the number of shares available for issuance under the
2019 Plan; and
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4.
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To
conduct such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
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10
The
principal executive offices of the Company are located at 100 Spy
Court, Markham, Ontario, Canada L3R 5H6. The Company’s
telephone number at such address is (289) 800-9600.
As of
the Record Date, there were 11,615,942 outstanding common shares,
each share entitled to one (1) vote on each matter to be voted on
at the Annual Meeting. Only holders of common shares on the Record
Date will be entitled to vote at the Annual Meeting. The holders of
common shares are entitled to one (1) vote on all matters presented
at the Annual Meeting for each share held of record. The presence
in person or by proxy of holders of record of at least thirty-three
and one-third percent (33-1/3%) of the shares outstanding and
entitled to vote as of the Record Date shall be required for a
quorum to transact business at the Annual Meeting. If a quorum is
not present, the Annual Meeting may be adjourned until a quorum is
obtained.
To be
elected, the nominees named in Proposal 1 must receive the vote of
a majority of the votes of the common shares cast in person or
represented by proxy at the Annual Meeting. For the purposes of
election of such director, although abstentions will count toward
the presence of a quorum, they will not be counted as votes cast
and will have no effect on the result of the vote. Proposal 3 must
be approved by the vote of a majority of the votes of the common
shares cast in person or represented by proxy at the Annual
Meeting. “Broker non-votes,” which occur when brokers
are prohibited from exercising discretionary voting authority for
beneficial owners who have not provided voting instructions, will
not be counted for the purpose of determining the number of shares
present in person or by proxy on a voting matter and will have no
effect on the outcome of the vote. Brokers who hold shares in
street name may vote on behalf of beneficial owners with respect to
Proposal 2 only.
The
expense of preparing, printing and mailing the Internet
Availability Notice and this Proxy Statement and the proxies
solicited hereby will be borne by the Company. In addition to the
use of the mails, proxies may be solicited by officers, directors
and regular employees of the Company, without additional
remuneration, by personal interviews, telephone, email or facsimile
transmission. The Company will also request brokerage firms,
nominees, custodians and fiduciaries to forward proxy materials to
the beneficial owners of common shares held of record and will
provide reimbursements for the cost of forwarding the material in
accordance with customary charges.
11
Attending the Annual Meeting
Only
shareholders and our invited guests are permitted to attend the
Annual Meeting. Due to the limited seating and for security
purposes, if you wish to attend the Annual Meeting in person, you
will be required to RSVP at least 48 hours prior to the Annual
Meeting (or by 10:30 a.m. EDT on April 20, 2021) to
investors@edesabiotech.com with your name in the subject line. To
gain admittance, you must bring a form of personal identification
to the Annual Meeting, where your name will be verified against our
shareholder list. If a nominee holds your shares and you plan to
attend the Annual Meeting, you should bring a brokerage statement
showing your ownership of the shares as of the record date or a
letter from the nominee confirming such ownership, and a form of
personal identification. If you wish to vote your shares that are
held by a nominee at the meeting, you must obtain a proxy from your
nominee and bring such proxy to the meeting.
Shareholder proposals for inclusion in our proxy statement:
If a shareholder wishes to present a proposal to be included in our
proxy statement and form of proxy for our 2022 annual meeting of
shareholders, the proponent and the proposal must comply with the
proxy proposal submission rules of the SEC and namely, Rule 14a-8
promulgated under the Securities Exchange Act of 1934, as amended
(the “Exchange
Act”). One of the requirements is that the proposal
must be received by our Corporate Secretary at our executive
offices in Markham, Ontario, Canada no later than the close of
business on November 11, 2021, which is 120 calendar days before
March 11, 2022, the anniversary date that this proxy statement was
released to shareholders in connection with the 2021 Annual
Meeting. Such proposal must also comply with the applicable
requirements as to form and substance established by the SEC if
those proposals are to be included in the proxy statement and form
of proxy. If the date of next year’s annual meeting is
changed by more than 30 days from the anniversary date of the
Annual Meeting, then the deadline is a reasonable time before we
begin to print and mail proxy materials.
Other shareholder proposals: The Board has approved an
advance notice policy, which was subsequently approved by our
shareholders at our 2014 annual meeting of shareholders, that
requires advance notice be given to us in certain circumstances
where nominations of persons for election to the Board are made by
our shareholders.
In the
case of an annual meeting of shareholders, notice to the Company
must be made not less than 30 days nor more than 65 days prior to
the date of the annual meeting. However, in the event that the
annual meeting is to be held on a date that is less than 40 days
after the date on which the first public announcement of the date
of the annual meeting was made, notice may be made not later than
the close of business on the tenth day following such public
announcement.
In the
case of a special meeting of shareholders (which is not also an
annual meeting), notice to the Company must be made not later than
the close of business on the fifteenth (15th) day following the day on which the
first public announcement of the date of the special meeting was
made.
No
director or executive officer of the Company, or any person who has
held such a position since the beginning of the last completed
financial year of the Company, nor any nominee for election as a
director of the Company, nor any associate or affiliate of the
foregoing persons, has any substantial or material interest, direct
or indirect, by way of beneficial ownership of securities or
otherwise, in any matter to be acted on at the Annual Meeting other
than the election of directors.
ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES
SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF A
PROPOSAL IF NO CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES
OBTAINED WILL BE VOTED AT THE DISCRETION OF THE PERSONS NAMED IN
THE PROXY WITH RESPECT TO ANY OTHER BUSINESS THAT MAY COME BEFORE
THE ANNUAL MEETING.
THE BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL OF EACH
OF THE PROPOSALS TO BE SUBMITTED AT THE MEETING.
12
ELECTION OF DIRECTORS
Each
director is elected annually to serve until the next annual meeting
of shareholders, or until his or her successor is duly elected.
Upon the recommendation of the Nominating and Corporate Governance
Committee, the Board has nominated Lorin Johnson, Sean MacDonald,
Pardeep Nijhawan, Frank Oakes, Paul Pay, Carlo Sistilli and Peter
van der Velden to hold office until the 2022 annual meeting of
shareholders or until their respective successors have been duly
elected and qualified. In the event that any of the nominees shall
be unable or unwilling to serve as a director, the Board shall
reserve discretionary authority to vote for a substitute or
substitutes. The Board has no reason to believe that any of the
nominees will be unable or unwilling to serve.
|
Name
|
|
Age
|
|
Position(s)
Held
|
|
Director
Since
|
|
||
|
Lorin
Johnson, PhD (2)
|
|
68
|
|
Director
|
|
June 7,
2019
|
|
||
|
Sean
MacDonald (1)(2)(3)
|
|
44
|
|
Chairman
of Board of Directors
|
|
June 7,
2019
|
|
||
|
Pardeep
Nijhawan, MD
|
|
50
|
|
Director,
Chief Executive Officer and Corporate Secretary
|
|
June 7,
2019
|
|
||
|
Frank Oakes
|
|
70
|
|
Director
|
|
April
9, 2010
|
|
||
|
Paul
Pay (1)(2)
|
|
66
|
|
Director
|
|
June 7,
2019
|
|
||
|
Carlo Sistilli, CPA, CMA (1)(3)
|
|
64
|
|
Director
|
|
June 7,
2019
|
|
||
|
Peter
van der Velden (3)
|
|
59
|
|
Director
|
|
June 7,
2019
|
|
||
|
|
|
|
|
|
|
|
|
||
|
|
(1)
|
Member
of Audit Committee.
|
|||||||
|
|
(2)
|
Member
of Compensation Committee.
|
|||||||
|
|
(3)
|
Member
of Nominating and Corporate Governance Committee.
|
|||||||
There
are no arrangements between our directors and any other person
pursuant to which our directors were nominated or elected for their
positions. There are no family relationships between any of our
directors or executive officers. None of the Company’s
directors or executive officers have been involved, in the past ten
years and in a manner material to an evaluation of such
director’s or officer’s ability or integrity to serve
as a director or executive officer, in any of those “Certain
Legal Proceedings” more fully detailed in Item 401(f) of
Regulation S-K, which include but are not limited to, bankruptcies,
criminal convictions and an adjudication finding that an individual
violated federal or state securities laws.
Biographies and Qualifications. The
biographies of our directors and certain information regarding each
director’s experience, attributes, skills and/or
qualifications that led to the conclusion that the director should
be serving as a director of our Company are as
follows:
Lorin Johnson, PhD is a seasoned pharmaceutical entrepreneur and
innovator with more than 30 years of experience in building
companies. He has been a member of our board of directors since
June 2019, having previously served as a director of the
company’s principal operating subsidiary, Edesa Biotech
Research, Inc., from its founding in January 2015 to January 2016.
Dr. Johnson is currently the Chief Scientist of Glycyx Pharma
Ventures Ltd., a biopharma investment and development company he
founded in March 2016. Prior to Glycyx, Dr. Johnson co-founded
Salix Pharmaceuticals, Inc., a specialty pharmaceutical company,
and held senior leadership positions prior to its acquisition by
Valeant Pharmaceuticals International, Inc. in April 2015. Earlier
in his career, Dr. Johnson served as Director of Scientific
Operations and Chief Scientist at Scios, Inc. (formerly California
Biotechnology, Inc). In addition to Edesa, he currently serves on
the boards of Innovate Biopharmaceuticals, Inc. (trading symbol
INNT), Glycyx MOR, LTD, Kinisi Therapeutics, Ltd., Intact
Therapeutics, Inc. and ATXA Therapeutics, Ltd. Dr. Johnson has also
held academic positions at Stanford University School of Medicine
where he served as an Assistant Professor of Pathology and at the
University of California, San Francisco. He is the co-author of 76
journal articles and book chapters and is the co-inventor on 23
issued patents. Dr. Johnson holds a PhD from the University of
Southern California and was a Postdoctoral Fellow at the University
of California, San Francisco. Dr. Johnson’s qualifications to
serve on the board of directors include his knowledge of our
business and his significant experience in the pharmaceutical
industry.
13
Sean MacDonald has been
our Chairman of the Board since June 2019, having previously served
as a director of the company’s principal operating
subsidiary, Edesa Biotech Research, Inc., since September 2017. Mr.
MacDonald is currently the Head of Business Development for Cosmo
Pharmaceuticals NV, a European gastroenterology focused
pharmaceutical company, a position he has held since April
2019, as well as the chief executive of Corbin
Therapeutics, a Montreal-based biotech company focused on treating
neuroinflammation, a role he has held since October 2018. From
October 2012 to October 2018, Mr. MacDonald held various
operational and executive leadership roles at Pharmascience Inc.,
one of Canada’s largest pharmaceutical companies, including
Vice President of Business Development and Corporate Development.
He received his BSc in Molecular Biology and MBA from the
University of Ottawa. Mr. MacDonald’s qualifications to serve
on the board of directors include his extensive operational
experience and background in the pharmaceutical/biotechnology
industry.
Pardeep Nijhawan, MD,
FRCPC, AGAF has served as our Chief Executive Officer, Corporate
Secretary and a member of our board of directors since June 2019,
having previously founded and led the company’s principal
operating subsidiary, Edesa Biotech Research, Inc., since January
2015. Dr. Nijhawan is a seasoned pharmaceutical entrepreneur with
20 years of experience in cross-functional leadership roles in
finance, marketing, corporate strategy and business development.
Prior to Edesa, in 2002 Dr. Nijhawan founded Medical Futures Inc.,
and served as its CEO. He sold Medical Futures to Tribute
Pharmaceuticals in 2015. Dr. Nijhawan also founded Digestive Health
Clinic in 2000 and led it to become Canada’s largest provider
of private endoscopy services. In 2014, he founded Exzell Pharma, a
specialty Canadian-based pharmaceutical organization that markets
and commercializes approved products. He continues to serve on the
Boards of Exzell Pharma and Digestive Health Clinic. Since January
2021, he has served on the advisory board of Private Debt Partners,
a Canadian alternative asset management firm. Dr. Nijhawan received
his MD from the University of Ottawa and completed his internship
at Yale University, and his internal medicine residency and
fellowship at the Mayo Clinic. Dr. Nijhawan’s qualifications
to serve on the board of directors include his extensive executive
leadership and experience in the life sciences industry and his
knowledge of our business as its chief
executive.
Frank Oakes has more than
40 years of executive leadership experience. He has been a director
of the company since April 2010 and served as the Chairman of the
Board until June 2019. From 1999 to 2019, he also served as the
President and Chief Executive Officer of the company’s legacy
operating subsidiary, which he founded. Prior to founding Stellar
Biotechnologies, Inc., he was the Chief Executive Officer of The
Abalone Farm, Inc., where he led the company through the research
and development, capitalization, and commercialization phases of
development to become the largest abalone producer in the United
States at the time. Mr. Oakes has consulted and lectured
around the world. He received his BS degree from California State
Polytechnic University, San Luis Obispo and is a graduate of the
Los Angeles Regional Technology Alliance University’s
management program. Mr. Oakes qualifications to serve on the board
of directors include his extensive operational experience building
companies and management teams and leading a U.S. and Canadian
publicly listed life science company.
Paul Pay is an executive
with 40 years of experience in the pharmaceutical/biotechnology
industry. He has been a member of our board of directors since June
2019, having previously served as a director of the company’s
principal operating subsidiary, Edesa Biotech Research, Inc., since
its founding in January 2015. From November 2002 to present, he has
led all business development activity at Norgine and is currently
the Chief Business Development Officer and serves as a member of
the company’s executive committee. Prior to joining Norgine,
Mr. Pay held senior management positions at large, specialty and
early-stage pharmaceutical companies, and cofounded a university
spin-out company. His commercial roles have included sales,
marketing, market research, licensing, business development, public
relations, intellectual property and product development. In
addition to Edesa, Mr. Pay is currently a director of Exzell
Pharma, a specialty pharmaceutical company; Arc Medical Design, a
medical device development company and a portfolio company of
Norgine; and Norgine Ltd., an affiliate of Norgine. Mr. Pay is also
the President and CEO of Merus Labs Inc., a Norgine wholly owned
affiliate company. Mr. Pay received a BSC (hons) from the
University of Leeds. Mr. Pay’s qualifications to serve on the
board of directors include his extensive experience in the
pharmaceutical/biotechnology industry and his knowledge of
Edesa’s business.
14
Carlo Sistilli, CPA,
CMA has more than 35 years of financial experience and
has held a variety of executive positions in accounting and finance
during his career. He has been a member of our board of directors
since June 2019, having previously served as a board observer of
the company’s principal operating subsidiary, Edesa Biotech
Research, Inc., since September 2017. Mr. Sistilli has served as
the Chief Financial Officer of Arista Homes since March 2003 to
present. Prior to Arista, Mr. Sistilli was a founder and served as
CFO and a board member of an Internet start-up company in the
automotive sector, and played a key role in taking the company
public on the Alberta Ventures Exchange. Earlier in his career, Mr.
Sistilli was the Controller and a member of the senior management
team of a major regional trust company, which Mr. Sistilli helped
sell to Manulife Financial. Since January 2021, he has served on
the board of directors and audit committee of Aleafia Health Inc.
In addition to his professional career, Mr. Sistilli is an officer
and a member of the board of directors of Mother of Mercy Centre.
Mr. Sistilli holds a Bachelor of Arts from York University, with a
major in economics, Certified Management Accountant Designation and
a Chartered Professional Accountant Designation. Mr.
Sistilli’s qualifications to serve on the board of directors
include his knowledge of Edesa’s business and his background
in accounting and finance.
Peter van der Velden is an investor and business executive
with more than 28 years of experience in building growth companies.
He has been a member of our board of directors since June 2019,
having previously served as a director of the company’s
principal operating subsidiary, Edesa Biotech Research, Inc., since
September 2017. From 2007 to present, Mr. van der Velden has been
the Managing General Partner of Lumira Ventures, one of
Canada’s largest dedicated life sciences venture capital
investors. Mr. van der Velden currently serves on the boards of
Exact Imaging, Medexus Pharmaceuticals (trading symbol PDDPF) and
AmacaThera. His past corporate board roles include: Milcom
Ventures, Spinal Kinetics, Alveolus Inc., CML Healthcare, First Aid
Shot Therapy, Life Sciences Ontario, Skinstore.com, and
Vendorlink.ca. Mr. van der Velden is a past President and Chairman
of the Canadian Venture and Private Equity Association and
currently serves on the board or as an advisor to a number of
industry groups and non-profit organizations. Mr. van der Velden
holds an MBA in Finance and Policy from the Schulich School of
Business, and a MSc in Pathology and BSc (honors) in Life Sciences
from Queen’s University. Mr. van der Velden’s
qualifications to serve on the board of directors include his
extensive operational experience building growth companies and his
knowledge acquired from serving on the boards of other
companies.
With
regard to the election of directors, votes may be cast
“FOR” or “WITHHOLD.” The affirmative vote
of the holders of a majority of shares present in person or
represented by proxy at the Annual Meeting and entitled to vote is
required for the election of each of the nominees. With regard to
this proposal, shares which are entitled to vote but abstain from
voting on a matter will be excluded from the vote and will have no
effect on its outcome.
Our
Board recommends that shareholders vote “FOR” the
election of each of the director nominees identified in Proposal
No. 1.
15
Our
Board held 10 meetings in fiscal year 2020. Each director attended
at least 75% of the aggregate number of meetings of the Board held
during the period, except for Paul Pay who attended 7 of the 10
meetings. Our directors are encouraged, but not required, to attend
annual meetings. Six directors attended our 2020 annual meeting of
shareholders, and all of our directors are expected to attend this
Annual Meeting in person or by teleconference.
During
fiscal year 2020, our Audit Committee held 4 meetings, our
Compensation Committee held 6 meetings and our Nominating and
Corporate Governance Committee held 2 meetings. Each director
attended at least 75% of the aggregate number of meetings of the
Committees held during the period for which such director served on
those Committees.
The positions of our chairman of the board and chief executive
officer are separate. Separating these positions allows our chief
executive officer to focus on our day-to-day business, while
allowing the chairman of the board to lead the board of directors
in its fundamental roles of setting a company’s overall
strategy and providing advice to and independent oversight of
management. Our board of directors recognizes the time, effort and
energy that the chief executive officer must devote to his position
in the current business environment, as well as the commitment
required to serve as our chairman, particularly as the board of
directors’ oversight responsibilities continue to grow. Our
board of directors also believes that this structure ensures a
greater role for the independent directors in the oversight of the
company and active participation of the independent directors in
setting agendas and establishing priorities and procedures for the
work of our board of directors. Our board of directors believes its
administration of its risk oversight function has not affected its
leadership structure.
Although our articles do not require the chairman and chief
executive officer positions to be separate, our board of directors
believes that having separate positions is the appropriate
leadership structure for the Company at this time and demonstrates
our commitment to good corporate governance.
Our
Board is responsible for overseeing our Company’s risk
management and, either as a whole or through its committees,
regularly discusses with management our major risk exposures, their
potential impact on our business and the steps we take to manage
them. The Board monitors the adequacy of information given to
directors, communication between the Board and management and the
strategic direction and processes of the Board and committees. The
risk oversight process includes receiving regular reports from
committees of the Board and members of senior management to enable
our Board to understand the Company’s risk identification,
risk management and risk mitigation strategies with respect to
areas of potential material risk, including operations, finance,
legal, regulatory, strategic and reputational risk. The Audit
Committee discusses with our independent auditors the major
financial risk exposures and the steps management has taken to
monitor and mitigate such exposures.
The
Board evaluates the independence of each nominee for election as a
director of our Company in accordance with the Listing Rules (the
“Nasdaq Listing
Rules”) of the Nasdaq Stock Market LLC
(“Nasdaq”).
Pursuant to these rules, a majority of our Board must be
“independent directors” within the meaning of the
Nasdaq Listing Rules, and all directors who sit on our Audit
Committee, Compensation Committee and Nominating and Corporate
Governance Committee must also be independent
directors.
The
Nasdaq definition of “independence” includes a series
of objective tests, such as the director or director nominee is
not, and was not during the last three years, an employee of the
Company and has not received certain payments from, or engaged in
various types of business dealings with, the Company. In addition,
as further required by the Nasdaq Listing Rules, the Board has made
a subjective determination as to each independent director that no
relationships exist which, in the opinion of the Board, would
interfere with such individual’s exercise of independent
judgment in carrying out his or her responsibilities as a director.
In making these determinations, the Board reviewed and discussed
information provided by the directors with regard to each
director’s business and personal activities as they may
relate to the Company and its management.
As a
result, the Board of Directors has affirmatively determined that
Lorin Johnson, Sean
MacDonald, Paul Pay, Carlo Sistilli and Peter van der Velden are
“independent directors.” This means that our
Board of Directors is composed of a majority of independent
directors as required by Nasdaq. The Board of Directors has also
affirmatively determined that all members of our Audit Committee,
Compensation Committee, and Nominating and Corporate Governance
Committee are independent directors.
16
Code of Ethics and Business Conduct and Insider Trading
Policy
We have adopted a Code of Ethics and Business Conduct that applies
to all of our directors, officers, and employees, including our
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions. A copy of our Code of Ethics and Business Conduct is
available on the Investor Relations section of our website at
edesabiotech.com/investors/governance, in the Corporate Governance
section, under the Governance Documents section. We intend to
satisfy the SEC’s disclosure requirements regarding
amendments to, or waivers of, our Code of Ethics and Business
Conduct by posting such information on our website. Copies of our
Code of Ethics and Business Conduct may be obtained, free of
charge, by writing to our Corporate Secretary, Edesa Biotech, Inc.,
100 Spy Court, Markham, ON Canada L3R 5H6.
Our Board of Directors has appointed an Audit Committee, a
Compensation Committee, and a Nominating and Corporate Governance
Committee. The Board of Directors has determined that each director
who serves on these committees is “independent,” as
that term is defined by the listing rules of Nasdaq and rules of
the Securities and Exchange Commission. The Board of Directors has
adopted written charters for its Audit Committee, Compensation
Committee, and Nominating and Corporate Governance Committee.
Copies of these charters are available on our
website at
edesabiotech.com/investors/governance.
Composition of the Audit Committee
Our Audit Committee is composed of Sean MacDonald, Paul Pay and
Carlo Sistilli (chair). The purpose of the Audit Committee is to
oversee our accounting and financial reporting processes and the
audits of our financial statements. In that regard, the Audit
Committee assists the Board in monitoring: (a) the integrity of our
financial statements; (b) our independent auditor’s
qualifications, independence, and performance; (c) the performance
of our system of internal controls, financial reporting, and
disclosure controls; and (d) our compliance with legal and
regulatory requirements. To fulfill this obligation and perform its
duties, the Audit Committee maintains effective working
relationships with the Board, management, and our independent
auditor.
Carlo Sistilli is the Chair of our Audit Committee and has
extensive financial experience. He holds a Bachelor of Arts from York
University, with a major in economics, Certified Management
Accountant Designation and a Chartered Professional Accountant
Designation. He has held a variety of executive positions in
accounting and finance during the past 35 years. The Board has
determined that Mr. Sistilli is an “audit committee
financial expert” as defined in Item 407(d)(5)(ii) of
Regulation S-K.
Relevant Education and Experience
A full
description of the education and experience of the current members
of the Audit Committee is available under the section entitled
“Information as to our Board
of Directors and Nominees - Biographies and
Qualifications” detailed above.
Audit Committee Oversight
Additional
information regarding the audit committee is contained in Item 10
of our Annual Report on Form 10-K, as filed with the SEC on
December 7, 2020 and our Annual Information Form for the year ended
September 30, 2020 as filed on SEDAR.
Our Compensation Committee is composed of Lorin Johnson, Sean
MacDonald and Paul Pay (chair). The purpose of the Compensation
Committee is to assist the Board’s oversight relating to
compensation, including (i) the approval of compensation for our
Chief Executive Officer and (ii) the review of compensation for our
other named executive officers. It has overall responsibility for
evaluating, and approving or recommending to the independent
members of the Board for approval, our compensation plans, policies
and programs as such plans, policies and programs affect executive
officers.
The
Compensation Committee also reviews the Company’s incentive
compensation arrangements to determine whether they encourage
excessive risk-taking, reviews and discusses, at least annually,
the relationship between risk management policies and practices and
compensation, and evaluates compensation policies and practices
that could mitigate any such risk.
All
compensation decisions are made with consideration of the
Compensation Committee’s guiding principles to provide
competitive compensation for the purpose of attracting and
retaining talented executives and employees and of motivating our
employees to achieve improved company performance, which ultimately
benefits our shareholders. The Compensation Committee has the
authority to retain and terminate any advisors, including
independent counsel, compensation consultants and other advisors to
assist as needed, and has authority to approve the advisors’
fees, which will be paid by the Company, and the other terms and
conditions of their engagement. The Compensation Committee
considers input and recommendations from our Chief Executive
Officer, who shall not be present during any committee
deliberations with respect to his compensation, in connection with
its review of our Company’s compensation programs and its
annual review of the performance of the other executive
officers.
17
Our Nominating and Corporate Governance Committee is composed of
Sean MacDonald, Carlo Sistilli and Peter van der Velden (chair).
The purpose of the Nominating and Corporate Governance Committee is
to identify individuals qualified to become Board members;
recommend to the Board individuals to serve as directors; advise
the Board with respect to Board composition, procedures and
committees; develop, recommend to the Board and annually review a
set of corporate governance principles applicable to the Company;
and oversee any related matters required by the federal securities
laws.
Process for Identifying and Evaluating Potential Director
Nominees. The Nominating and Corporate Governance Committee
will identify, evaluate and recommend candidates to become members
of our Board with the goal of creating a Board that, as a whole,
consists of individuals with various and relevant career
experience, industry knowledge and experience, and financial
expertise. It will consider persons identified by its members,
management, shareholders, investment bankers and others for
nomination to the Board. Candidates, whether identified by the
Nominating and Corporate Governance Committee or proposed by
shareholders, will be reviewed in the context of the current
composition of our Board, our operating requirements and the
long-term interests of our shareholders. Although the Nominating
and Corporate Governance Committee does not have a formal diversity
policy concerning membership of the Board, it does consider
diversity in its broadest sense when evaluating candidates,
including persons diverse in gender, ethnicity, experience, and
background.
Process for Shareholder Nominations. The Board has approved
an advance notice policy, which was subsequently approved by our
shareholders at our 2014 annual meeting of shareholders, that
requires advance notice be given to us in certain circumstances
where nominations of persons for election to the Board are made by
our shareholders. Shareholders who wish to recommend a candidate
for election to the Board should send their letters to our
Corporate Secretary at 100 Spy Court, Markham, ON Canada L3R
5H6.
In the
case of an annual meeting of shareholders, notice to the Company
must be made not less than 30 days nor more than 65 days prior to
the date of the annual meeting. However, in the event that the
annual meeting is to be held on a date that is less than 40 days
after the date on which the first public announcement of the date
of the annual meeting was made, notice may be made not later than
the close of business on the tenth day following such public
announcement.
In the
case of a special meeting of shareholders (which is not also an
annual meeting), notice to the Company must be made not later than
the close of business on the fifteenth day following the day on
which the first public announcement of the date of the special
meeting was made.
Each of
the nominees up for election at the Annual Meeting was recommended
to the Board by the Nominating and Corporate Governance
Committee.
If you
wish to communicate with the Board, you may send your communication
in writing to our Corporate Secretary at our executive offices
located at 100 Spy Court, Markham, ON Canada L3R 5H6. Please
include your name and address in the written communication and
indicate whether you are a shareholder. Our Corporate Secretary
will review any communication received from a shareholder, and all
material communications from shareholders will be forwarded to the
appropriate director or directors or committee of the Board based
on the subject matter.
Set
forth below is certain information with respect to the names, ages,
and positions of our executive officers as of March 1, 2021.
Biographical information pertaining to Dr. Pardeep Nijhawan, who is
a director and an executive officer, may be found in the above
section entitled “Information as to our Board of Directors and
Nominees - Biographies and Qualifications.” The
executive officers serve at the pleasure of our Board of
Directors.
|
Name
|
|
Age
|
|
Position(s)
Held
|
|
Date of
Appointment
|
|
Pardeep
Nijhawan, MD
|
|
50
|
|
Director,
Chief Executive Officer and Corporate Secretary
|
|
June 7,
2019
|
|
Kathi
Niffenegger, CPA
|
|
63
|
|
Chief
Financial Officer
|
|
November
1, 2013
|
|
Michael
Brooks, PhD
|
|
42
|
|
President
|
|
June 7,
2019
|
18
Kathi Niffenegger, CPA has
served as our Chief Financial Officer since 2013. She also
previously served as the company’s Corporate Secretary from
2013 to June 2019. Ms. Niffenegger has more than 30 years of
experience in accounting and finance in a range of industries, and
has led audits of manufacturing, pharmaceutical and governmental
grant clients. She has also developed specialized expertise in cost
accounting systems and internal controls. Prior to joining the
company, she held positions of increasing responsibility in the
audit division of Glenn Burdette CPAs and served most recently as
technical partner. Earlier in her career, she was the Chief
Financial Officer of Martin Aviation. Ms. Niffenegger holds a
B.S. degree in Business Administration, Accounting from California
State University, Long Beach. She is a member of the American
Institute of Certified Public Accountants (AICPA) and holds the
Chartered Global Management Accountant (CGMA)
designation.
Michael Brooks, PhD was appointed President of Edesa in June 2019,
having served as Vice President of Corporate Development and
Strategy for the company’s principal operating subsidiary,
Edesa Biotech Research, Inc., since January 2015. Prior to joining
Edesa, Dr. Brooks held positions of increasing responsibility at
Cipher Pharmaceuticals Inc from 2010 to 2015 and served most
recently as the company's as Director of Business Development.
Prior to joining Cipher, Dr. Brooks was a Post-Doctoral fellow at
the University of Toronto. Dr. Brooks holds a Hons B.Sc. degree in
Microbiology and a PhD in Molecular Genetics from the University of
Toronto. Dr. Brooks received his MBA degree from the Rotman School
of Management where he was a Canadian Institute for Health Research
(CIHR) Science-to-Business Scholar.
As an
emerging growth company under SEC rules and the JOBS Act and as a
Smaller Reporting Company, we may provide scaled disclosure
in Item 402 paragraphs (m) through
(r). Our proxy disclosure has been prepared to comply with
those U.S. requirements as allowed under National Instrument
51-102F6.
Named Executive Officers
For the
purposes of this proxy statement, a named executive officer (NEO)
of the Company means each of the following
individuals:
|
(i)
|
All
individuals serving as the Company’s principal executive
officer or acting in a similar capacity during the last completed
fiscal year (PEO), regardless of compensation level;
|
|
(ii)
|
the
Company’s two most highly compensated executive officers
other than the PEO who were serving as executive officers at the
end of the last completed fiscal year; and
|
|
(iii)
|
Up to
two additional individuals for whom disclosure would have been
provided under (ii) above but for the fact that the individual was
not serving as an executive officer of the Company at the end of
the last completed fiscal year.
|
Our named executive officers for the year ended September 30,
2020 were Pardeep Nijhawan, MD, Director, Chief Executive Officer
and Corporate Secretary; Kathi Niffenegger, CPA, Chief Financial
Officer; and Michael Brooks, PhD, President.
The following table sets forth information regarding the
compensation awarded to, earned by or paid to the named executive
officers for the year ended September 30, 2020 and the
nine-month period ended September 30, 2019.
|
Name and
Principal Position
|
Fiscal
Year
|
Salary
($)
|
Bonus
($)
|
Option Awards($)
(1)
|
All Other
Compensation ($)
|
Total
($)
|
|
Pardeep Nijhawan,
MD
|
2020
|
$300,000
|
$56,000
|
$-
|
$55,204(2)
|
$411,204
|
|
Director, Chief
Executive
|
2019
|
105,461
|
-
|
-
|
24,571(2)
|
130,032
|
|
Officer and
Corporate Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kathi Niffenegger,
CPA
|
2020
|
234,069
|
31,354
|
214,275
|
25,613(4)
|
505,311
|
|
Chief Financial
Officer
|
2019(3)
|
63,604
|
53,750
|
-
|
5,000(4)
|
122,354
|
|
|
|
|
|
|
|
|
|
Michael Brooks,
PhD
|
2020
|
275,000
|
51,333
|
166,658
|
36,220(5)
|
529,211
|
|
President
|
2019
|
158,114
|
37,243
|
-
|
11,897(5)
|
207,254
|
|
(1)
|
The
amounts shown in this column represent the aggregate grant date
fair value of the share option awards computed in accordance with
Financial Accounting Standards Board (FASB) Accounting Standards
Codification 718, not the actual amounts paid to or realized by the
named executive officers during the covered fiscal year. The
assumptions used in determining grant date fair value of these
awards are set forth in Note 9 to our audited consolidated
financial statements for the year ended September 30, 2020 included
in our Annual Report.
|
|
(2)
|
Represents
(i) $32,435 in car allowance (ii) $2,187 in health insurance and
(iii) $20,582 in vacation payout in 2020 and (i) $23,884 in car
allowance and (ii) $687 in health insurance in 2019. The
compensation was paid in Canadian dollars and was converted to US
dollars using the average foreign exchange rate for the year from
oanda.com.
|
|
(3)
|
Ms.
Niffenegger was our Chief Financial Officer prior to our business
combination with Edesa Biotech Research, Inc., an Ontario
corporation (“Edesa Research”) and her compensation
during that time is not reflected in our audited consolidated
financial statements included in our Annual Report. In the
nine-month period September 30, 2019 prior to our business
combination on June 7, 2019, she received salary of $97,599, bonus
of $53,725 and other compensation of (i) $6,775 in health insurance
and (ii) $4,540 in 401(k) company contributions.
|
19
|
(4)
|
Represents
(i) $17,650 in health insurance and (ii) $7,963 in 401(k) company
contributions in 2020 and (i) $3,719 in health insurance and (ii)
$1,281 in 401(k) company contributions in 2019.
|
|
(5)
|
Represents
(i) $24,015 in car allowance (ii) $2,213 in health insurance and
(iii) $9,992 in vacation payout in 2020 and (i) $9,698 in car
allowance and (ii) $2,199 in health insurance in 2019. The
compensation was paid in Canadian dollars and was converted to US
dollars using the average foreign exchange rate for the year from
oanda.com.
|
Prior to the completion of our business combination with Edesa
Research, Edesa Research had employment agreements in effect with
Dr. Pardeep Nijhawan and Dr. Michael Brooks which are described
below. Upon completion of our business combination transaction with
Edesa Research, Dr. Nijhawan and Dr. Brooks each entered into new
employment agreements with us which are also described below, and
the old employment agreements were terminated. Kathi Niffenegger
entered into a new employment agreement with us on December 1, 2020
as described below and the employment agreement she entered into
upon completion of our business combination transaction with Edesa
Research was superseded.
Terminated Employment Agreement with Dr. Pardeep
Nijhawan
On August 1, 2017, Edesa Research entered into an employment
agreement with Dr. Pardeep Nijhawan which was to continue
indefinitely until terminated in accordance with its terms. The
employment agreement provided that during the term of the
agreement, Dr. Nijhawan was to serve as Edesa Research’s
Chief Executive Officer. In consideration for his services to Edesa
Research, Dr. Nijhawan received a base salary of C$35,000 per annum
and was eligible for coverage under Edesa Research’s standard
benefit programs. The agreement was terminable by Edesa Research
(i) for cause without notice or severance pay or (ii) without
cause, in which case Edesa Research was to provide 18 months notice
of termination or pay in lieu of notice (based on Dr.
Nijhawan’s base salary) and benefits for up to 18 months
following the provision of notice of termination. In addition, upon
a termination by Edesa Research without cause, all options on a
pro-rated basis were to be deemed vested on the business day
immediately preceding the termination date and would remain
exercisable for a period of 180 days. Dr. Nijhawan could resign
from his employment at any time by providing two weeks advance
notice to Edesa Research.
Employment Agreement with Pardeep Nijhawan effective as of June 7,
2019
On June 14, 2019 but effective as of June 7, 2019, we entered into
an employment agreement with Pardeep Nijhawan. Pursuant to the
employment agreement, Dr. Nijhawan will serve as our Chief
Executive Officer for an indefinite term until Dr. Nijhawan’s
employment is terminated in accordance with the agreement. As
compensation for his services to us, Dr. Nijhawan will receive a
base salary of $300,000 per year and be eligible to receive a
target annual bonus of 40% of his base salary, subject to achieving
corporate and personal targets to be determined by us. Dr. Nijhawan
will also receive an automobile allowance of $2,700 per month and
be eligible to participate in our group insured benefits program,
as may be in effect from time-to-time for our employees generally,
and executive employees specifically. Dr. Nijhawan is also eligible
for future share and/or option grants, as determined by our
Compensation Committee, commensurate with Dr. Nijhawan’s
position and any business milestones which may be established by
the Compensation Committee and subject to availability of shares
and/or options for grant under our Equity Incentive Compensation
Plan.
If Dr. Nijhawan’s employment with us is terminated for
“Cause” (as such term is defined in the employment
agreement), subject to applicable law, our only obligation shall be
to provide Dr. Nijhawan with his base salary and vacation pay
earned through the date of termination and all of Dr.
Nijhawan’s vested or non-vested stock options which have not
been exercised by Dr. Nijhawan as of the date of termination will
be automatically extinguished. If Dr. Nijhawan is terminated by us
without “Cause”, our only obligation shall be to
provide Dr. Nijhawan with (i) a lump sum payment equal to Dr.
Nijhawan’s then current base salary for twenty-four months
(the “Severance Period”), (ii) a lump sum payment of
the annual bonus to which Dr. Nijhawan is entitled for the fiscal
year immediately preceding the date of termination, if such bonus
has not already been paid, (iii) a lump sum payment equal to Dr.
Nijhawan’s annual bonus entitlement, prorated over Dr.
Nijhawan’s length of service in the fiscal year in which his
employment is terminated, calculated in accordance with the terms
of the employment agreement, (iv) payment of Dr. Nijhawan’s
annual bonus entitlement during the full Severance Period,
calculated in accordance with the terms of the employment
agreement, (v) continuation of Dr. Nijhawan’s benefits and
car allowance and any other benefit required to be maintained by
law in accordance with the terms of the employment agreement and
(vi) subject to applicable law, all stock options granted to Dr.
Nijhawan shall be exercisable in accordance with the terms of the
applicable stock option plan. Dr. Nijhawan may resign from his
employment at any time by providing us with a minimum of sixty days
advance notice, in writing. Dr. Nijhawan’s notice may be
waived by us, subject only to providing Dr. Nijhawan with payment
of his base salary and continuation of benefits until the end of
the notice period. If Dr. Nijhawan resigns from his employment,
subject to applicable law, (i) all non-vested stock options and all
vested stock options held by Dr. Nijhawan which have not been
exercised by Dr. Nijhawan as of the date of termination shall be
automatically extinguished and (ii) Dr. Nijhawan shall not be
entitled to any bonus or pro rata bonus payment not already paid on
or before the date of termination.
During the term of Dr. Nijhawan’s employment with us and for
twelve months following the cessation of Dr. Nijhawan’s
employment with us, Dr. Nijhawan is prohibited from competing with
our business in North America. In addition, for twenty-four months
following the cessation of Dr. Nijhawan’s employment with us,
Dr. Nijhawan is prohibited from soliciting customers or prospective
customers for any purpose competitive with our business,
encouraging any customer to cease doing business with us and
soliciting the employment or engagement of certain of our
employees.
20
Terminated Employment Agreement with Michael Brooks
On August 28, 2017, Edesa Research entered into an employment
agreement with Michael Brooks which was to continue indefinitely
until terminated in accordance with its terms. The employment
agreement provided that during the term of the agreement, Dr.
Brooks was to serve as Edesa Research’s Vice President
Corporate Development and Strategy. In consideration for his
services to Edesa Research, Dr. Brooks received a base salary of
C$220,000 per annum and was eligible for coverage under Edesa
Research’s standard benefit programs. In addition, subject to
achievement of bonus criteria established by Edesa Research, Dr.
Brooks was eligible to receive an annual bonus award of up to 30%
of his base salary.
The agreement was terminable by Edesa Research (i) for cause
without notice or severance pay or (ii) without cause, in which
case Edesa Research was to provide 12 months notice of termination
or pay in lieu of notice (based on Dr. Brooks’ base salary)
and benefits for up to 12 months following the provision of notice
of termination. In addition, upon a termination by Edesa Research
without cause, Dr. Brooks was entitled to a pro-rated bonus
covering any year or partial actively worked from the time of the
past applicable bonus period through to the termination date of Dr.
Brooks employment and all options on a pro-rated basis would be
deemed to be vested on the business day immediately preceding the
termination date and would remain exercisable for a period of 180
days. In the event Dr. Brook’s employment was terminated in
connection with a change of control event, any unvested options or
other equity awards then held by Dr. Brooks would be deemed to be
vested on the business day immediately preceding the termination
date and were to remain exercisable for a period of 180 days. Dr.
Brooks could also resign from his employment at any time by
providing two weeks advance notice to Edesa Research. During the
term of his employment and for a period of 12 months thereafter,
Dr. Brooks was subject to certain non-solicitation provisions
relating to Edesa Research’s employees, customers,
prospective customers and suppliers. In addition, the agreement
provided that, subject to certain exceptions, Dr. Brooks could not
compete with the business of Edesa Research during the employment
period and any notice period (or period paid in lieu of
notice).
Employment Agreement with Michael Brooks effective as of June 7,
2019
On June 14, 2019 but effective as of June 7, 2019, we entered into
an employment agreement with Michael Brooks, PhD. Pursuant to the
employment agreement, Dr. Brooks will serve as our President for an
indefinite term until Dr. Brooks’ employment is terminated in
accordance with the agreement. As compensation for his services to
us, Dr. Brooks will receive a base salary of $275,000 per year and
be eligible to receive a target annual bonus of 40% of his base
salary, subject to achieving corporate and personal targets to be
determined by us. Dr. Brooks will also receive an automobile
allowance of $2,000 per month and be eligible to participate in our
group insured benefits program, as may be in effect from
time-to-time for our employees generally, and executive employees
specifically. Dr. Brooks is also eligible for future share and/or
option grants, as determined by our Compensation Committee,
commensurate with Dr. Brooks’ position and any business
milestones which may be established by the Compensation Committee
and subject to availability of shares and/or options for grant
under our Equity Incentive Compensation Plan.
If Dr. Brooks’ employment with us is terminated for
“Cause” (as such term is defined in the employment
agreement), subject to applicable law, our only obligation shall be
to provide Dr. Brooks with his base salary and vacation pay earned
through the date of termination and all of Dr. Brooks’ vested
or non-vested stock options which have not been exercised by Dr.
Brooks as of the date of termination will be automatically
extinguished. If Dr. Brooks is terminated by us without
“Cause”, our only obligation shall be to provide Dr.
Brooks with (i) a lump sum payment equal to Dr. Brooks’ then
current base salary for twelve months plus one additional month for
every completed year of service since September 2015, not to exceed
an aggregate of twenty-four months (the “Severance
Period”), (ii) a lump sum payment of the annual bonus to
which Dr. Brooks is entitled for the fiscal year immediately
preceding the date of termination, if such bonus has not already
been paid, (iii) a lump sum payment equal to Dr. Brooks’
annual bonus entitlement, prorated over Dr. Brooks’ length of
service in the fiscal year in which his employment is terminated,
calculated in accordance with the terms of the employment
agreement, (iv) payment of Dr. Brooks’ annual bonus
entitlement during the full Severance Period, calculated in
accordance with the terms of the employment agreement, (v)
continuation of Dr. Brooks’ benefits and car allowance and
any other benefit required to be maintained by law in accordance
with the terms of the employment agreement and (vi) subject to
applicable law, all stock options granted to Dr. Brooks shall be
exercisable in accordance with the terms of the applicable stock
option plan. If Dr. Brooks’ employment is terminated or
“constructively terminated” (as such term is defined in
the employment agreement) by us without “Cause” upon or
within a twelve month period following a Change of Control (as such
term is defined in the employment agreement), Dr. Brooks shall be
entitled to the payments and benefits provided as described in
clauses (ii) to (vi) above, plus a change of control payment equal
to twenty-four months of the his then current base salary. Dr.
Brooks may resign from his employment at any time by providing us
with a minimum of sixty days advance notice, in writing. Dr.
Brooks’ notice may be waived by us, subject only to providing
Dr. Brooks with payment of his base salary and continuation of
benefits until the end of the notice period. If Dr. Brooks resigns
from his employment, subject to applicable law, (i) all non-vested
stock options and all vested stock options held by Dr. Brooks which
have not been exercised by Dr. Brooks as of the date of termination
shall be automatically extinguished and (ii) Dr. Brooks shall not
be entitled to any bonus or pro rata bonus payment not already paid
on or before the date of termination.
During the term of Dr. Brooks’ employment with us and for
twelve months following the cessation of Dr. Brooks' employment
with us, Dr. Brooks is prohibited from competing with our business
in North America. In addition, for twenty-four months following the
cessation of Dr. Brooks' employment with us, Dr. Brooks is
prohibited from soliciting customers or prospective customers for
any purpose competitive with our business, encouraging any customer
to cease doing business with us and soliciting the employment or
engagement of certain of our employees.
21
Employment Agreement with Kathi Niffenegger effective as of June 7,
2019
On June 7, 2019, we entered into an employment agreement with Ms.
Niffenegger which has subsequently been superseded by the
employment agreement with Ms. Niffenegger described below. Pursuant
to the employment agreement, Ms. Niffenegger served as our Chief
Financial Officer. Both Ms. Niffenegger and we had the right to
terminate the employment relationship at any time, with or without
cause. As compensation for her services to us, Ms. Niffenegger
received a base salary of $215,000 per year, a discretionary bonus
in an amount up to 25% of her base salary based on her performance
and the company’s performance, a one-time hiring and
retention bonus of $53,750 which was subject to partial claw back
if Ms. Niffenegger voluntary terminated her employment prior to
March 1, 2020 and such other employee benefits as are generally
provided to similarly situated employees of the company. Ms.
Niffenegger was also eligible for future share and/or option grants
in accordance with our executive compensation policy as in effect
from time to time as determined by our Compensation Committee
subject to availability of shares and/or options for grant under
our Equity Incentive Compensation Plan.
If Ms. Niffenegger’s employment with us was terminated for
“Cause” (as defined in the employment agreement) or if
Ms. Niffenegger resigned from her employment at any time, our only
obligation was to provide Ms. Niffenegger with: (i) her accrued
salary through and including her last day of employment (the
“Separation Date”); (ii) reimbursement of any
reimbursable expenses properly incurred through and including the
Separation Date; and (iii) any benefit required under applicable
law. If we terminate Ms. Niffenegger’s employment without
“Cause” or if Ms. Niffenegger’s employment with
us was “constructively terminated” (as defined in the
employment agreement), our only obligations were: (a) to provide
Ms. Niffenegger with the same payments and benefits as would be
provided if we had terminated her employment for Cause; and (b)
subject to Ms. Niffenegger’s execution of a release in our
favor, Ms. Niffenegger would also have been paid, as severance, an
amount equal to twelve months of her base salary at her
then-current rate. In the event that Ms. Niffenegger’s
employment was terminated or constructively terminated by us
without Cause upon or within a twelve month period following a
Change of Control (as defined in the employment agreement), Ms.
Niffenegger was entitled to the payments and benefits as though she
was terminated without “Cause”, plus an additional
change of control payment equal to twelve months of her base
salary.
The Agreement provided that during the term of Ms.
Niffenegger’s employment with us, Ms. Niffenegger is
prohibited from competing with our business and during such period
and for a period of one year thereafter, Ms. Niffenegger is
prohibited from soliciting for employment certain of our
employees.
Employment Agreement with Kathi Niffenegger effective as of
December 1, 2020
On
December 1, 2020, we entered into an employment agreement with Ms.
Niffenegger. Pursuant to the employment agreement, Ms. Niffenegger
will continue to serve as our Chief Financial Officer. Both Ms.
Niffenegger and we have the right to terminate the employment
relationship at any time, with or without cause. As compensation
for her services to us, Ms. Niffenegger will receive a base salary
of $275,000 per year retroactive to June 1, 2020, a discretionary
bonus in an amount up to 40% of her base salary based on her
performance and the company’s performance and such other
employee benefits as are generally provided to similarly situated
employees of the company. Ms. Niffenegger may be eligible for
future share and/or option grants in accordance with our executive
compensation policy as in effect from time to time as determined by
the independent members of our Board of Directors subject to
availability of shares and/or options for grant under our Equity
Incentive Compensation Plan.
If Ms.
Niffenegger’s employment with us is terminated for
“Cause” (as defined in the employment agreement) or if
Ms. Niffenegger resigns from her employment at any time, our only
obligation is to provide Ms. Niffenegger with: (i) her accrued
salary and accrued unused vacation pay through and including her
last day of employment (the “Separation Date”); (ii)
reimbursement of any reimbursable expenses properly incurred
through and including the Separation Date; and (iii) any benefit
required under applicable law. If Ms. Niffenegger is terminated by
us without “Cause”, our only obligations are (a) to
provide Ms. Niffenegger with the same payments and benefits as
would be provided if we had terminated her employment for Cause;
and (b) subject to Ms. Niffenegger’s execution of a release
in our favor, Ms. Niffenegger will also be paid, as severance (the
“Severance Amount”), (i) a lump sum payment equal to
twelve months of Ms. Niffenegger’s then current base salary,
plus one additional month of base salary for every completed year
of service since June 2019, not to exceed an aggregate of
twenty-four months, (ii) a lump sum payment of any discretionary
bonus for the prior calendar year already determined by our Board
of Directors, but not yet paid; and (iii) a lump sum payment equal
to Ms. Niffenegger’s potential discretionary bonus for the
calendar year in which the Separation Date occurs, prorated over
Ms. Niffenegger’s length of service in the calendar year in
which her employment is terminated, calculated in accordance with
the terms of the employment agreement. If Ms. Niffenegger’s
employment is terminated or “constructively terminated”
(as such term is defined in the employment agreement) by us without
“Cause” upon or within a twelve month period following
a Change of Control (as such term is defined in the employment
agreement), Ms. Niffenegger shall be entitled to the Severance
Amount described above, except that the portion of the Severance
Payment established by (b)(i) shall be equal to twenty four months
of Ms. Niffenegger’s base salary.
The
Agreement provides that during the term of Ms. Niffenegger’s
employment with us and for a period of one year thereafter, Ms.
Niffenegger is prohibited from soliciting for employment certain of
our employees. The Agreement also provides that both during and
after Ms. Niffenegger’s employment with us, she is prohibited
from (i) making use of our trade secrets to solicit on behalf of
Ms. Niffenegger or any other person business from any of our
customers and (ii) inducing or attempting to induce any person to
sever any existing contractual relationship they have with
us.
22
Outstanding Equity Awards at September
30, 2020
The following table summarizes the equity awards made to our named
executive officers that were outstanding at September 30,
2020.
|
|
Option Awards
|
|||||
|
Name
|
Award grant
date
|
Number of
securities underlying unexercised options (#)
exercisable
|
Number of
securities underlying unexercised options (#) unexercisable
(1)
|
|
Option exercise
prices ($)
|
Option
expiration date
|
|
Pardeep Nijhawan,
MD
|
9/26/17
|
47,490
|
-
|
|
C$2.16
|
9/26/27
|
|
12/28/18
|
945
|
6752(1)
|
|
C$2.16
|
12/28/28
|
|
|
|
|
|
|
|
|
|
|
Kathi Niffenegger,
CPA
|
11/1/13
|
238
|
-
|
|
$768.60
|
11/1/20
|
|
|
11/12/14
|
214
|
-
|
|
C$638.40
|
11/12/21
|
|
|
12/22/15
|
238
|
-
|
|
$304.08
|
12/22/22
|
|
|
12/20/16
|
238
|
-
|
|
$85.26
|
12/20/23
|
|
|
3/12/18
|
833
|
-
|
|
$35.28
|
3/12/25
|
|
|
2/12/20
|
40,828
|
47,871(3)
|
|
$3.16
|
2/12/30
|
|
|
|
|
|
|
|
|
|
Michael Brooks,
PhD
|
8/28/17
|
136,416
|
-
|
|
C$2.16
|
8/28/27
|
|
|
9/26/17
|
24,299
|
-
|
|
C$2.16
|
9/26/27
|
|
|
12/28/18
|
945
|
675(2)
|
|
C$2.16
|
12/28/28
|
|
|
2/12/20
|
31,754
|
37,234(3)
|
|
$3.16
|
2/12/30
|
|
(1)
|
Our
options vesting policy is described in the Outstanding Equity
Awards Narrative Disclosure section.
|
|
(2)
|
The option will vest over a period of three years, with one-third
vesting on the first anniversary of the date of grant and the
remainder vesting on a pro-rata basis monthly
thereafter.
|
|
(3)
|
The option will vest over a period of three years, with one-third
vesting on the date of grant and the remainder vesting on a
pro-rata basis monthly thereafter.
|
Outstanding Equity
Awards Narrative Disclosure
Equity Incentive Compensation Plan
We adopted an Equity Incentive Compensation Plan in 2019 (the
“2019 Plan”) which amended and restated our 2017
Incentive Compensation Plan (the “2017 Plan”). Under
the 2019 Plan, we are authorized to grant options, restricted
shares and restricted share units (RSUs) to any of our officers,
directors, employees, and consultants and those of our subsidiaries
and other designated affiliates. The number of shares available for
issuance under the 2019 Plan at September 30, 2020 was 1,148,697,
including shares available for the exercise of outstanding options
under the 2017 Plan. The purpose of the 2019 Plan is to advance the
interests of the Company by encouraging equity participation
through the acquisition of common shares of the Company. The 2019
Plan is to be administered by the Compensation Committee of our
Board of Directors, except to the extent (and subject to the
limitations set forth in the 2019 Plan) the Board elects to
administer the 2019 Plan, in which case the 2019 Plan shall be
administered by only those members of the Board who are
“independent” members of the Board. The administrator
of the 2019 Plan has the power to, among other things:
|
●
|
allot
common shares for issuance in connection with the exercise of
options;
|
|
●
|
grant
options, restricted shares or restricted share units;
|
|
●
|
amend,
suspend, terminate or discontinue the plan; and
|
|
●
|
delegate
all or a portion of its administrative powers as it may determine
to one or more committees.
|
Options to purchase 675,437 common shares at prices ranging from
C$2.16 to C$638.40 and $3.16 to $768.60 are outstanding at
September 30, 2020. No restricted shares or restricted share units
have been granted as of September 30, 2020.
Options granted during the year ended September 30, 2020 to
directors, officers and employees under the 2019 Plan totaled
366,365 options to purchase common shares at exercise prices
ranging from $3.16 to $8.07. There were no options granted during
the nine-month period ended September 30, 2019.
23
Options Vesting Policy
Vesting requirements for option awards are determined by the
independent members of the Board of Directors. Outstanding options
granted by Stellar Biotechnologies before the completion of our
business combination became fully vested on June 7, 2019, the date
of our business combination with Edesa Research. Options granted by
Edesa Research generally vested one-third upon the first
anniversary of the date of grant and monthly thereafter until the
third anniversary of the date of grant. The options granted by
Edesa Research on August 28, 2017 were fully vested upon the grant
date. Options granted by the Company during the year ended
September 30, 2020 generally vested one-third upon the date of
grant and monthly thereafter until the third anniversary of the
date of grant.
Executive officers and employees of our California subsidiary are
eligible to receive the company’s non-elective contribution
of 3% of eligible compensation under a 401(k) plan to provide
retirement benefits. Any company contributions we made to the plan
for our named executive officers are reflected in the “All
Other Compensation” column of the Summary Compensation Table
above.
Other than the funds contributed under our 401(k) plan, no other
funds were set aside or accrued by us during the year ended
September 30, 2020 or in the nine-month period ended September 30,
2019 to provide pension, retirement or similar benefits for our
named executive officers.
The following table sets forth information regarding the
compensation of our non-employee directors for the year ended
September 30, 2020.
|
Name
|
Fees Earned or
Paid in Cash($)
|
|
Option Awards($)
(1)
|
All Other
Compensation($)
|
Total ($)
|
|
Lorin Johnson,
PhD
|
$33,500
|
|
$27,513
|
$-
|
$61,013
|
|
Sean
MacDonald
|
50,000
|
(2)
|
27,513
|
-
|
77,513
|
|
Frank
Oakes
|
30,000
|
|
27,513
|
-
|
57,513
|
|
Paul
Pay
|
42,500
|
(2)
|
27,513
|
-
|
70,013
|
|
Carlo Sistilli,
CPA, CMA
|
43,500
|
(2)
|
27,513
|
-
|
71,013
|
|
Peter van der
Velden
|
37,500
|
(2)(3)
|
27,513
|
-
|
65,013
|
|
(1)
|
The amounts shown in this column represent the aggregate grant date
fair value of the share option awards computed in accordance with
Financial Accounting Standards Board (FASB) Accounting Standards
Codification 718, not the actual amounts paid to or realized by the
directors during the covered fiscal year. The assumptions used in
determining grant date fair value of these awards are set forth in
Note 9 to our audited consolidated financial statements for the
year ended September 30, 2020 included in our Annual
Report.
|
|
|
|
|
(2)
|
The compensation was paid in Canadian dollars or British pounds and
was converted from US dollars using the average foreign exchange
rate for each month of the year from oanda.com.
|
|
(3)
|
Fees of $34,326 and $3,174 were paid to Lumira Capital II, L.P. and
Lumira Capital II (International), L.P., respectively, as
compensation for Mr. van der Velden’s services on our board
of directors.
|
The following table summarizes the equity awards made to our
directors that were outstanding at September 30, 2020.
|
Name
|
Outstanding
Options (#)
|
|
Lorin Johnson,
PhD
|
11,389
|
|
Sean
MacDonald
|
11,389
|
|
Frank
Oakes
|
12,341
|
|
Paul
Pay
|
43,788
|
|
Carlo Sistilli,
CPA, CMA
|
11,389
|
|
Peter van der
Velden
|
11,389
|
Non-Employee Director Compensation Policy
The board adopted a compensation policy effective upon completion
of our business combination on June 7, 2019. As compensation for
their services on the board of directors, each non-executive board
member will receive annual base remuneration of $30,000 and the
Chairman of the Board will receive annual remuneration of $50,000,
inclusive of compensation for his services on committees of the
board of directors. Each member of the Company’s Audit
Committee will receive annual remuneration of $5,000, and the Chair
of the Audit Committee will receive $10,000 annually for his
services. Each member of the Company’s Compensation Committee
and Nominating and Corporate Governance Committee will receive
annual remuneration of $3,500 for each committee on which they
serve, and the Chairs of each of the Compensation Committee and
Nominating and Corporate Governance Committee shall receive $7,500
annually for their services. The Chief Executive Officer will not
receive any additional compensation for his services on the board
of directors.
24
Securities Authorized for Issuance Under Equity Compensation
Plans
Equity Compensation Plan Information
The following table provides certain information as of September
30, 2020 about our common shares that may be issued under our
equity compensation plans, which consists of our 2019 Equity
Incentive Compensation Plan in effect at September 30,
2020:
|
Plan
category
|
Number of
securities to be issued upon exercise of outstanding options,
warrants and rights
|
Weighted-average
exercise price of outstanding options, warrants and
rights
|
Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|
|
(a)
|
(b)
|
(c)
|
|
Equity compensation
plans approved by security holders
|
675,437
|
$3.30
|
473,260
|
|
Equity compensation
plans not approved by security holders
|
N/A
|
N/A
|
N/A
|
|
Total
|
675,437
|
$3.30
|
473,260
|
Warrants
and other equity held by directors, officers and employees outside
of the compensation plans are not included in the table
above.
The
Audit Committee reviews, approves and oversees any transaction
between us and any “related person” (as defined in Item
404 of Regulation S-K) and any other potential conflict of interest
situations, on an ongoing basis. Under these policies and
procedures, the Audit Committee is to be informed of transactions
subject to review before their implementation. The procedures
establish our practices for obtaining and reporting information to
the Audit Committee regarding such transactions on a periodic and
an as-needed basis. The policy provides that such transactions are
to be submitted for approval before they are initiated but also
provides for ratification of such transactions. No director who is
interested in a transaction may participate in the Audit
Committee’s determinations as to the appropriateness of such
transaction.
Lease Agreement
In January 2017, Edesa Research entered into a lease agreement with
a company related to Pardeep Nijhawan, our Chief Executive Officer,
for executive office space which serves as our head office through
December 2022, with the option to extend the lease for an
additional two years. Monthly rents range from C$8,320 to C$9,020
plus HST. Rents of approximately $76,000 and $58,000 were incurred
in the year ended September 30, 2020 and the nine-month period
ended September 30, 2019, respectively. No rent was payable at
September 30, 2020 or 2019. Future minimum lease payments totaled
approximately $177,000 at September 30, 2020.
Patent Royalty Agreement
In August 2002, our California subsidiary entered into an agreement
with Frank Oakes, a director, where he would receive royalty
payments in exchange for the assignment of his rights to U.S.
Patent No. 6,852,338 to Edesa Biotech USA, Inc. The royalty is 5%
of gross receipts from legacy products using this invention in
excess of $500,000 annually. Patent royalties of approximately
$20,000 were incurred in the nine-month period ended September 30,
2019 and royalties payable of approximately $23,000 were
outstanding at September 30, 2019. No patent royalties were
incurred during the year ended September 30, 2020 or payable at
September 30, 2020.
Section 16(a) of the Exchange Act requires that our directors,
executive officers, and beneficial owners of more than ten percent
of our common shares file reports with the SEC on their initial
beneficial ownership of our common shares and any subsequent
changes. To our knowledge, based solely on a review of copies of
such reports filed electronically with the Securities and Exchange
Commission during the Company’s year ended September 30,
2020, during such period, each of our directors, executive
officers, and beneficial owners of more than ten percent of our
common shares filed on a timely basis all reports required by
Section 16(a) of the Exchange Act.
25
The following tables sets forth certain information as of
March 1, 2021, with respect
to the beneficial ownership of our common shares by: (1) all of our
directors; (2) our named executive officers listed in the Summary
Compensation Table; (3) all of directors and executive officers as
a group; and (4) each person known by us to beneficially own more
than 5% of our outstanding common shares.
We have determined beneficial ownership in accordance with the
rules of the SEC, based on a review of filings with the SEC and
information known to us. Except as indicated by the footnotes
below, we believe, based on the information furnished to us, that
the persons and entities named in the table below have sole voting
and investment power with respect to all common shares that they
beneficially own, subject to applicable community property
laws.
Common shares subject to options or warrants currently exercisable
or exercisable within 60 days of March 1, 2021 are deemed outstanding for
computing the share ownership and percentage of the person holding
such options and warrants, but are not deemed outstanding for
computing the percentage of any other person. The percentage
ownership of our common shares of each person or entity named in
the following table is based on 13,178,442 common shares
outstanding as of March 1, 2021.
Directors and Officers
|
Name and Address
of Beneficial Owner (1)
|
Amount and
Nature of Beneficial Ownership
|
|
Percent of
Shares Beneficially Owned
|
|
Lorin Johnson,
PhD
|
29,797
|
(2)
|
*
|
|
Sean
MacDonald
|
24,987
|
(3)
|
*
|
|
Pardeep Nijhawan,
MD
|
3,329,146
|
(4)
|
25.1%
|
|
Frank
Oakes
|
12,484
|
(5)
|
*
|
|
Paul
Pay
|
48,498
|
(6)
|
*
|
|
Carlo Sistilli,
CPA, CMA
|
16,099
|
(7)
|
*
|
|
Peter van der
Velden
|
2,188,970
|
(8)
|
16.5%
|
|
Michael Brooks,
PhD
|
219,052
|
(9)
|
1.6%
|
|
Kathi Niffenegger,
CPA
|
66,372
|
(10)
|
*
|
|
|
|
|
|
|
All
directors and executive officers as a group (9
persons)
|
5,935,405
|
(11)
|
44.7%
|
*
Percentage of shares beneficially owned does not exceed one
percent.
|
(1)
|
Unless
otherwise indicated, the address of each beneficial owner is c/o
Edesa Biotech, Inc., 100 Spy Court, Markham, ON Canada L3R
5H6.
|
|
(2)
|
Consists of (i) 12,786 Common Shares, (ii) 6,393 Common Shares
issuable upon exercise of Class A Warrants and (iii) 10,618 Common
Shares issuable upon exercise of options that are exercisable
within sixty days of March 1, 2021.
|
|
(3)
|
Consists of (i) 14,369 Common Shares and (ii) 10,618 Common Shares
issuable upon exercise of options exercisable within sixty days
of March 1,
2021.
|
|
(4)
|
Consists of (A)(i) 537,312 Common Shares and (ii) 60,419 Common
Shares issuable upon exercise of options exercisable within sixty
days of March 1,
2021 held by Pardeep Nijhawan;
(B)(i) 2,128,652 Common Shares and (ii) 6,942 Common Shares
issuable upon exercise of Class A Warrants held by Pardeep Nijhawan
Medicine Professional Corporation for which Pardeep Nijhawan has
sole voting and dispositive power over all such shares; (C) 224,094
Common Shares held by The Digestive Health Clinic Inc. for which
Pardeep Nijhawan has sole voting and dispositive power over all
such shares and (D) 371,727 Common Shares held by 1968160 Ontario
Inc. for which Pardeep Nijhawan has sole voting and dispositive
power over all such shares.
|
|
(5)
|
Consists of (A)(i) 11,570 Common Shares issuable upon exercise of
options that are exercisable within sixty days of March
1, 2021 held by Frank Oakes and (B)(i) 914 Common Shares
issuable upon exercise of Class A Warrants held by Frank and
Dorothy Oakes Family Trust for which each of Frank Oakes and
Dorothy Oakes, as trustees, have voting and dispositive power over
all such shares.
|
|
(6)
|
Consists of (i) 3,654 Common Shares, (ii) 1,827 Common Shares
issuable upon exercise of Class A Warrants and (iii) 43,017 Common
Shares issuable upon exercise of options exercisable within sixty
days of March 1,
2021.
|
|
(7)
|
Consists of (A) 10,618 Common Shares issuable upon exercise of
options exercisable within sixty days of March 1, 2021 held by Carlo Sistilli and (B)(i) 3,654 Common
Shares and (ii) 1,827 Common Shares issuable upon exercise of Class
A Warrants held by York-Cav Enterprises Inc. for which Carlo
Sistilli, as President and Director, has sole voting and
dispositive power over all such shares.
|
26
|
(8)
|
Consists of (A) 10,618 Common Shares issuable upon exercise of
options exercisable within sixty days of March 1, 2021 held by Peter van der Velden; (B)(i) 1,897,428
Common Shares and (ii) 96,542 Common Shares issuable upon exercise
of Class A Warrants held by Lumira Capital II, L.P. and (C)(i)
175,454 Common Shares and (ii) 8,928 Common Shares issuable upon
exercise of Class A Warrants held by Lumira Capital II
(International), L.P., an affiliate of Lumira Capital II, L.P.
Lumira Capital GP, L.P., the general partners of which are Lumira
GP Inc. and Lumira GP Holdings Co., is the general partner of each
of Lumira Capital II, L.P. and Lumira Capital II (International),
L.P. Each of Lumira Capital II, L.P. and Lumira Capital II
(International), L.P. is managed by Lumira Capital Investment
Management Inc. Each of Lumira Capital GP, L.P., Lumira GP Inc.,
Lumira GP Holdings Co. and Lumira Capital Investment Management
Inc. may be deemed to beneficially own the shares held by Lumira
Capital II, L.P. and Lumira Capital II (International), L.P. and
such entities control voting and investment power over such shares
through an investment committee of the Lumira group. Peter van der
Velden is an executive officer of Lumira GP Inc., Lumira GP
Holdings Co. and Lumira Capital Investment Management
Inc.
|
|
(9)
|
Consists of (i) 5,241 Common Shares, (ii) 1,371 Common Shares
issuable upon exercise of Class A Warrants and (iii) 212,440 Common
Shares issuable upon exercise of options exercisable within sixty
days of March 1,
2021.
|
|
(10)
|
Consists of (A) 63,631 Common Shares issuable upon exercise of
options that are exercisable within sixty days of March
1, 2021 held by Kathi Niffenegger and (B) (i) 1,827 Common
Shares and (ii) 914 Common Shares issuable upon exercise of Class A
Warrants held by the Kathi Niffenegger Trust for which Kathi
Niffenegger, as trustee, has sole voting and dispositive power over
all such shares.
|
|
(11)
|
Consists of (i) 5,376,198 Common Shares, (ii) 125,658 Common Shares
issuable upon exercise of Class A Warrants and (iii) 433,549 Common
Shares issuable upon exercise of options that are exercisable
within sixty days of March 1, 2021.
|
27
Shareholders Known by Us to Own 5% or More of Our Common
Shares
|
Name and Address
of Beneficial Owner (1)
|
Amount and
Nature of Beneficial Ownership (1)
|
Percent of
Shares Beneficially Owned
|
|
Lumira
Capital II, L.P.
|
2,178,352
|
20.6%
|
(1)
Consists of (A)(i) 1,897,428 Common Shares and (ii) 96,542 Common
Shares issuable upon exercise of Class A Warrants held by Lumira
Capital II, L.P. and (B)(i) 175,454 Common Shares and (ii) 8,928
Common Shares issuable upon exercise of Class A Warrants held by
Lumira Capital II (International), L.P., an affiliate of Lumira
Capital II, L.P. Lumira Capital GP, L.P., the general partners of
which are Lumira GP Inc. and Lumira GP Holdings Co., is the general
partner of each of Lumira Capital II, L.P. and Lumira Capital II
(International), L.P. Each of Lumira Capital II, L.P. and Lumira
Capital II (International), L.P. is managed by Lumira Capital
Investment Management Inc. Each of Lumira Capital GP, L.P., Lumira
GP Inc., Lumira GP Holdings Co. and Lumira Capital Investment
Management Inc. may be deemed to beneficially own the shares held
by Lumira Capital II, L.P. and Lumira Capital II (International),
L.P and such entities control voting and investment power over such
shares through an investment committee of the Lumira group. The
address of each entity listed in this note is 141 Adelaide Street
West, Suite 770, Toronto, Ontario, Canada M5H 3L5.
This Audit Committee Report shall not be deemed to be
“soliciting material” or to be filed with the SEC or
subject to Regulation 14A or 14C under the Exchange Act, or to the
liabilities of Section 18 of the Exchange Act. Notwithstanding
anything to the contrary set forth in any of our previous filings
under the Securities Act of 1933, as amended (the Securities Act),
or the Exchange Act that might incorporate future filings,
including this proxy statement, in whole or in part, this report
shall not be incorporated by reference into any such
filings.
The Audit Committee reviews our financial reporting process on
behalf of our Board of Directors. Management has the primary
responsibility for the financial statements and the reporting
process. Our independent auditors are responsible for expressing an
opinion on the conformity of our audited financial statements to
accounting principles generally accepted in the United States of
America.
In this context, the Audit Committee has reviewed and discussed our
audited financial statements with management and the independent
auditors. The Audit Committee has discussed with the independent
auditors the matters required to be discussed by Auditing Standard
No. 1301 (Communication with Audit Committees) as adopted by the
Public Company Accounting Oversight Board (the PCAOB). In addition,
the Audit Committee has received the written disclosures and the
letter from the independent auditors required by the applicable
requirements of the PCAOB regarding the independent auditor’s
communications with the Audit Committee concerning independence,
and has discussed with the independent auditor the independent
auditor’s independence. In addition, the Audit Committee has
considered whether the independent auditor’s provision of
non-audit services to us is compatible with the auditor’s
independence.
In reliance on the reviews and discussions referred to above, the
Audit Committee recommended to the Board of Directors that our
audited financial statements be included in our Annual Report on
Form 10-K for the fiscal year ended September 30, 2020, for filing
with the SEC.
The foregoing report has been furnished by the members of the Audit
Committee.
Carlo Sistilli, Chairman
Sean
MacDonald
Paul Pay
28
PROPOSAL NO. 2
APPOINTMENT OF AUDITORS AND INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The
Audit Committee has selected MNP LLP as our auditors and
independent registered public accounting firm for the year ending
September 30, 2021, and the Board has approved such appointment.
The Board has directed that a resolution to appoint MNP LLP as our
auditors and independent registered public accounting firm for the
ensuing year, be presented to our shareholders for approval at the
Annual Meeting.
Representatives
of MNP LLP are expected to be available at the Annual Meeting, will
have an opportunity to make a statement if they so desire and will
be available to respond to appropriate questions.
The following table shows the aggregate fees billed for audit and
other services provided for the year ended September 30, 2020 and
nine-month period ended September 30, 2019 rendered by MNP
LLP.
Principal Accountant Fees and Services
|
Type of
Service
|
Year
Ended
2020
|
Nine-month
Period
2019
|
|
|
|
|
|
Audit
Fees
|
$166,712
|
$143,095
|
|
Tax
Fees
|
24,166
|
14,254
|
|
Total
|
$190,878
|
$157,349
|
Audit Fees consisted of
fees incurred for professional services rendered for audits and
interim reviews of the year ended September 30, 2020 and nine-month
period ended September 30, 2019 and include procedures related to
registrations and offerings.
Tax Fees consisted of fees
incurred for professional services rendered for tax compliance
related to tax returns during the year ended September 30, 2020 and
nine-month period ended September 30, 2019.
The Audit Committee is directly responsible for the appointment,
compensation and oversight of our auditors. It has established
procedures for the receipt, retention, and treatment of complaints
received by us regarding accounting, internal accounting controls,
or auditing matters, and the confidential, anonymous submission by
our employees of concerns regarding questionable accounting or
auditing matters. The Audit Committee also has the authority and
the funding to engage independent counsel and other outside
advisors.
The Audit Committee pre-approves all audit and permissible
non-audit services provided by the independent registered public
accounting firm. These services may include audit services,
audit-related services, tax services 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 and is generally subject to an amount or range of
estimated fees. All proposed engagements of the auditor for audit
and permitted non-audit services are submitted to the Audit
Committee for approval prior to the beginning of any such services.
Our auditors 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
the 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. The Audit Committee pre-approved 100% of the
audit and non-audit services performed by our independent
registered public accounting firm for the year ended September 30,
2020 and nine-month period ended September 30, 2019.
Not applicable.
With
regard to the appointment of our auditors and independent
registered public accounting firm, votes may be cast
“FOR” or “WITHHOLD.” The affirmative vote
of the holders of a majority of the shares present in person or
represented by proxy and entitled to vote at the Annual Meeting is
required to appoint MNP LLP as our auditors and independent
registered public accounting firm for the ensuing year. With regard
to this proposal, shares which are entitled to vote but abstain
from voting on a matter will be excluded from the vote and will
have no effect on its outcome.
The
Board recommends that shareholders vote “FOR” Proposal
No. 2.
29
PROPOSAL NO. 3
AMENDMENT TO 2019 EQUITY INCENTIVE COMPENSATION PLAN
Edesa shareholders are being asked to approve the amendment to the
Company’s 2019 Equity Incentive Compensation Plan (the
“2019 Plan”), that increases the number of Edesa Common
Shares issuable as awards under the 2019 Plan by 1,497,000
shares. A copy of the amendment is
attached hereto as Exhibit
A. Under the 2019 Plan, we are authorized to
grant options, restricted shares and restricted share units (RSUs)
to any of our officers, directors, employees, and consultants and
those of our subsidiaries and other designated affiliates.
The 2019 Plan was originally adopted
by our shareholders on October 22, 2019 by written consent and by
our Board on October 16, 2019.
Our Board believes that the continued growth of Edesa depends, in
large part, upon our ability to attract, motivate, retain and reward high-quality
executives and other employees, officers, directors, consultants
and other persons who provide services to us by enabling such
persons to acquire or increase a proprietary interest in the
Company in order to strengthen the mutuality of interests between
such persons and our shareholders, and providing such persons with
performance incentives to expend their maximum efforts in the
creation of shareholder value. Previously, our Board and shareholders approved
the 2019 Plan, which authorized a total of 800,000 shares for
issuance to eligible participants, plus any shares remaining available for delivery
under our previously adopted 2017 Plan (the “2017
Plan”) on the effective date of the 2019
Plan. As of March 1, 2020, only
49,864 shares remained available for future grants under the 2019
Plan. Accordingly, to ensure that we may continue to attract and
retain key employees and directors who are expected to contribute
to our success, our Board approved an amendment to the 2019 Plan to
increase by 1,497,000 shares the total number of
shares available for issuance pursuant
to awards granted under the 2019 Plan. The amendment is subject to
approval by our shareholders at the Annual Meeting. If the
amendment is not approved by our shareholders, it will not be
implemented in the form proposed.
Principal Features of the 2019
Plan
The principal features of the 2019 Plan are as follows (and are set
forth more fully below):
● All officers, directors, employees, and consultants of
the Company and its subsidiaries and other designated affiliates,
which we refer to as “Related Entities,” are eligible
to participate in the 2019 Plan;
● Options, restricted shares and restricted share units
(RSUs) are eligible for grants under the 2019 Plan;
● The 2019 Plan is to be administered by the
Compensation Committee of the Company’s Board (the
“Committee”), except to the extent (and subject to the
limitations set forth in the 2019 Plan) the Board elects to
administer the 2019 Plan, in which case the 2019 Plan shall be
administered by only those members of the Board who are
“independent” members of the Board, as that term is
defined under the rules of the stock exchange or quotation system
on which Common Shares are listed or quoted;
● Vesting requirements with respect to awards under the
2019 Plan are determined by the Committee;
● In the event of a “change in control” of
the Company, as defined in the 2019 Plan, and only to the extent
provided in any employment or other agreement between the
participant and the Company or any Related Entity, or in any award
agreement, or to the extent otherwise determined by the Committee
in its sole discretion in each particular case, (i) any option
that was not previously vested and exercisable at the time of the
change in control will become immediately vested and exercisable;
(ii) any restrictions, deferral of settlement and forfeiture
conditions applicable to a restricted share award or RSU award
subject only to future service requirements will lapse and such
awards will be deemed fully vested; and (iii) any outstanding
award subject to achievement of performance goals and conditions
under the 2019 Plan will be considered to have been earned and
payable based on achievement of performance goals or based upon
target performance (either in full or pro-rata based on the portion
of the performance period completed as of the change in control of
the Company);
● The 2019 Plan grants the Committee discretion to
determine the time when an option no longer may be exercised
following a participant’s termination, as set forth in the
applicable award agreement;
● The 2019 Plan prohibits the repricing of option awards
without approval by the Company’s shareholders;
and
● The 2019 Plan limits the aggregate grant date fair
value (computed as of the date of grant in accordance with
applicable financial accounting rules) of all awards granted to any
outside director during any single calendar year to
$250,000.
Description of the 2019
Plan
The following description of certain features of the 2019 Plan is
intended to be a summary only. The summary is qualified
in its entirety by the full text of the 2019 Plan.
30
Purpose
The purpose of the 2019 Plan is to assist the Company and its
Related Entities in attracting, motivating, retaining and rewarding
high-quality executives and other officers, employees, directors,
and consultants of the Company or its Related Entities, by enabling
such persons to acquire or increase a proprietary interest in the
Company in order to strengthen the mutuality of interests between
such persons and the Company’s shareholders, and providing
such persons with performance incentives to expend their maximum
efforts in the creation of shareholder value.
Shares Available for Awards; Annual Per-Person
Limitations
As of March 1, 2021 we had
52,564 shares remaining available for future grants under
the 2019 Plan. Options to purchase 1,085,387 common
shares at prices ranging from C$2.16 to C$638.40 and $3.16 to
$304.08 are outstanding at March 1, 2021. No restricted shares or restricted
share units have been granted as of March 1,
2021. If the amendment to
the 2019 Plan is adopted by our shareholders, the 2019 Plan will
have 1,497,000 shares available
for awards to eligible participants, plus any shares remaining available for delivery
under our previously adopted 2019 Plan.
If, any shares subject to (i) any award under the 2019 Plan, or any
awards granted under the 2017 Plan, are forfeited, expire or
otherwise terminate without issuance of such shares, or (ii) any
award under the 2019 Plan, or any award granted under the 2017
Plan, is settled for cash or otherwise does not result in the
issuance of all or a portion of the shares subject to such award,
the shares to which those awards were subject, will, to the extent
of such forfeiture, expiration, or termination, cash settlement or
non-issuance, again be available for delivery with respect to
awards under the 2019 Plan.
Any share that again becomes available for delivery pursuant to the
provisions described above will be added back as one share if the
share was subject to an option, and as 1.5 shares if such share was
subject to an award other than an option.
Substitute Awards (as defined in the 2019 Plan) will not reduce the
shares authorized for delivery under the 2019 Plan or authorized
for delivery to a participant in any period. Additionally, in the
event that a company acquired by the Company or any Related Entity
(as define in the 2019 Plan) or with which the Company or any
Related Entity combines has shares available under a pre-existing
plan approved by its stockholders and not adopted in contemplation
of such acquisition or combination, the shares available for
delivery pursuant to the terms of such pre-existing plan (as
adjusted, to the extent appropriate, using the exchange ratio or
other adjustment or valuation ratio or formula used in such
acquisition or combination to determine the consideration payable
to the holders of common stock of the entities party to such
acquisition or combination) may be used for awards under the 2019
Plan and will not reduce the shares authorized for delivery under
the 2019 Plan; provided, that awards using such available shares
will not be made after the date awards or grants could have been
made under the terms of the pre-existing plan, absent the
acquisition or combination, and will only be made to individuals
who were not employees or directors of the Company or its Related
Entities prior to such acquisition or combination.
The aggregate fair market value of our Common Shares on
the date of grant underlying incentive stock options that can be
exercisable by any individual for the first time during any year
cannot exceed $100,000 (or such other amount as specified in
Section 422 of the Code). Any excess will be treated as a
non-qualified stock option.
The maximum number of shares that may be delivered under the 2019
Plan as a result of the exercise of incentive stock options
is 1,200,000, subject to certain adjustments.
Notwithstanding any other provision of the 2019 Plan to the
contrary, the aggregate grant date fair value (computed as of the
date of grant in accordance with applicable financial accounting
rules) of all awards granted to any outside director during any
single calendar year will not exceed $250,000.
The Committee is authorized to adjust the limitations on
the number of Common Shares available for issuance
under the 2019 Plan and the individual limitations on the amount of
certain awards (other than the $100,000 limitation described above
with respect to incentive stock option awards) and will adjust
outstanding awards (including adjustments to exercise prices of
options and other affected terms of awards) to the extent it deems
equitable in the event that any extraordinary dividend or other
distribution (whether in cash, Common Shares or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange,
liquidation, dissolution or other similar corporate transaction or
event affects the Company’s Common Shares so that an
adjustment is appropriate and equitable. See the sections called
“Acceleration of Vesting;
Change in Control” and
“Other
Adjustments” below for a
summary of certain additional adjustment provisions of the 2019
Plan.
Except with respect to the adjustments referenced in the foregoing
paragraph, the Committee is prohibited from taking any of the
following actions without approval of the Company’s
shareholders: (i) lowering the exercise or grant price per share of
an option after it is granted, (ii) cancelling an option when the
exercise price or grant price per share exceeds the fair market
value of the underlying shares in exchange for cash or another
award (other than in connection with substitute awards), (iii)
cancelling an outstanding option in exchange for an option with an
exercise price that is less than the exercise price or grant price
of the original option, or (iv) taking any other action with
respect to an option that may be treated as a repricing pursuant to
the applicable rules of the stock exchange or quotation system on
which Common Shares are listed or quoted (any such action described
in (i) - (iv) being referred to as a
“Repricing”).
The closing price of one common share of the Company on Nasdaq
on March 1, 2021 was
$5.69 per share.
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Eligibility
The persons eligible to receive awards under the 2019 Plan are the
officers, directors, employees, and consultants of the Company or
any Related Entity. The foregoing notwithstanding, only employees
of the Company, or any parent corporation or subsidiary corporation
of the Company (as those terms are defined in Sections 424(e) and
(f) of the Code, respectively) are eligible for purposes of
receiving any incentive stock options that are intended to comply
with the requirements of Section 422 of the Code
(“ISOs”). An employee on leave of absence may be
considered as still in the employ of the Company or a Related
Entity for purposes of eligibility for participation in the 2019
Plan.
As of the record date, February 24, 2021,
approximately 19 persons were eligible to participate in
the 2019 Plan.
Administration
The 2019 Plan is to be administered by the Committee, except to the
extent (and subject to the limitations set forth in the 2019 Plan)
the Board elects to administer the 2019 Plan, in which case the
2019 Plan shall be administered by only those members of the Board
who are “independent” members of the Board, as that
term is defined under the rules of the stock exchange or quotation
system on which Common Shares are listed or quoted. It is intended
that the Committee will be composed exclusively of independent
non-employee directors in accordance with Nasdaq listing
requirements and Rule 16b-3 under the Exchange Act. Subject to the
terms of the 2019 Plan, the Committee is authorized to select
eligible persons to receive awards, grant awards, determine the
type, number and other terms and conditions of, and all other
matters relating to, awards, prescribe award agreements (which need
not be identical for each participant), and the rules and
regulations for the administration of the 2019 Plan, construe and
interpret the 2019 Plan and award agreements, correct defects,
supply omissions or reconcile inconsistencies therein, and make all
other decisions and determinations as the Committee may deem
necessary or advisable for the administration of the 2019
Plan.
The Committee is permitted to delegate the performance of certain
functions, including administrative functions, of the 2019 Plan to
members of the Board, or our officers or managers, or committees of
them. The delegation is required to be accomplished in a manner
that does not result in the loss of an exemption under
Rule 16b-3 under the Exchange Act for awards.
Share Options
The Committee is authorized to grant share options, including both
ISOs, which can result in potentially favorable tax treatment to
the participant, and non-qualified stock options. The exercise
price per share subject to an option is determined by the
Committee, provided that the exercise price per share of an option
will be no less than 100% of the fair market value of a common
share on the date such option is granted. An option granted to a
person who owns or is deemed to own stock representing 10% or more
of the voting power of all classes of stock of the Company or any
parent company (sometimes referred to as a “10% owner”)
will not qualify as an ISO unless the exercise price for the option
is not less than 110% of the fair market value of a common share on
the date such ISO is granted.
For purposes of the 2019 Plan, the term “fair market
value” means the fair market value of Common Shares, awards
or other property as determined by the Committee or under
procedures established by the Committee. Unless otherwise
determined by the Committee, the fair market value of a common
share as of any given date is the closing sales price per common
share as reported on the principal stock exchange or market on
which Common Shares are traded on the date as of which such value
is being determined (or as of such later measurement date as
determined by the Committee on the date the award is authorized by
the Committee) or, if there is no sale on that date, then on the
last previous day on which a sale was reported.
The maximum term of each option, the times at which each option
will be exercisable, and provisions requiring forfeiture of
unexercised options at or following termination of employment
generally are fixed by the Committee, except that no option may
have a term exceeding ten years, and no ISO granted to a 10% owner
(as described above) may have a term exceeding five years (to the
extent required by the Code at the time of grant); provided,
however, that in the event that on the last day of the term of an
option, other than an ISO, the exercise of the option would violate
an applicable federal, state, local, or foreign law, the Committee
may, in its sole and absolute discretion, extend the term of the
option for a period of no more than thirty (30) days after the date
on which the exercise of the option would no longer violate an
applicable federal, state, local, and foreign laws, provided that
such extension of the term of the option would not cause the option
to violate the requirements of Section 409A of the Code. Methods of
exercise and settlement and other terms of options are determined
by the Committee. The Committee, thus, may permit the exercise
price of options awarded under the 2019 Plan to be paid in cash,
shares, other awards or other property.
Restricted Shares and Restricted Share Units
The Committee is authorized to grant restricted shares and
restricted share units (RSUs). A grant of restricted shares is a
grant of Common Shares which may not be sold or disposed of, and
which are subject to such risks of forfeiture and other
restrictions as the Committee may impose, including time or
performance restrictions or both. A participant granted restricted
shares generally has all of the rights, other than dividend rights,
of a shareholder of the Company (including voting rights), unless
otherwise determined by the Committee. A participant granted
restricted shares will have the right to receive dividends thereon
(subject to any mandatory reinvestment or other requirement imposed
by the Committee), if and only to the extent provided in the
participant’s award agreement. An award of RSUs confers upon
a participant the right to receive Common Shares or cash equal to
the fair market value of the specified number of shares covered by
the RSUs, at the end of a specified deferral period, subject to
such risks of forfeiture and other restrictions as the Committee
may impose. Prior to settlement, an award of RSUs carries no voting
or dividend rights or other rights associated with share
ownership.
32
Transferability
Each award may be exercised during the participant’s lifetime
only by the participant or, if permissible under applicable law, by
the participant’s guardian or legal representative and may
not be otherwise transferred or encumbered by a participant other
than by will or by the laws of descent and distribution. The
Committee, however, may permit awards to be transferred to certain
family members, a trust for the benefit of such family members, a
partnership, limited liability company or corporation whose
partners, members or stockholders are the participant and his or
her family members, a foundation in which any participant and his
or her family members controls the management of assets, or anyone
else approved by it.
Other Terms of Awards
Awards may be settled in the form of cash, Common Shares, other
awards or other property, in the discretion of the Committee. The
Committee may require or permit participants to defer the
settlement of all or part of an award in accordance with such terms
and conditions as the Committee may establish, including payment or
crediting of interest or dividend equivalents on deferred amounts,
and the crediting of earnings, gains and losses based on deemed
investment of deferred amounts in specified investment vehicles.
The Committee is authorized to place cash, Common Shares or other
property in trusts or make other arrangements to provide for
payment of the Company’s obligations under the 2019 Plan. The
Committee may condition any payment relating to an award on the
withholding of taxes and may provide that a portion of any Common
Shares or other property to be distributed will be withheld (or
previously acquired Common Shares or other property be surrendered
by the participant) to satisfy withholding and other tax
obligations.
Awards under the 2019 Plan generally are granted without a
requirement that the participant pay consideration in the form of
cash or property for the grant (as distinguished from the
exercise), except to the extent required by law. The Committee may,
however, grant awards in exchange for other awards under the 2019
Plan, awards under other Company plans, or other rights to payment
from the Company, and may grant awards in addition to and in tandem
with such other awards, rights or other awards.
Acceleration of Vesting; Change in Control
Subject to certain limitations contained in the 2019 Plan,
including those described in the following paragraph, the Committee
may, in its discretion, accelerate the exercisability, the lapsing
of restrictions or the expiration of deferral or vesting periods of
any award. In the event of a “change in control” of the
Company, as defined in the 2019 Plan, and only to the extent
provided in any employment or other agreement between the
participant and the Company or any Related Entity, or in any award
agreement, or to the extent otherwise determined by the Committee
in its sole discretion in each particular case, (i) any option
that was not previously vested and exercisable at the time of the
change in control will become immediately vested and exercisable;
(ii) any restrictions, deferral of settlement and forfeiture
conditions applicable to a restricted share award or RSU award
subject only to future service requirements will lapse and such
awards will be deemed fully vested; and (iii) any outstanding
award subject to achievement of performance goals and conditions
under the 2019 Plan will be considered to have been earned and
payable based on achievement of performance goals or based upon
target performance (either in full or pro-rata based on the portion
of the performance period completed as of the change in control of
the Company).
Notwithstanding the foregoing or any provision in any award
agreement to the contrary, and unless the Committee otherwise
determines in a specific instance, or as is provided in any
employment or other agreement between the participant and the
Company or any Related Entity, each outstanding option, restricted
share or RSU will not be accelerated as described above, if either
(i) the Company is the surviving entity in the change in control
and the award continues to be outstanding after the change in
control on substantially the same terms and conditions as were
applicable immediately prior to the change in control or (ii) the
successor company assumes or substitutes for the applicable award,
as determined in accordance with the terms of the 2019 Plan.
Notwithstanding the foregoing, if and only to the extent provided
in an award agreement and on such terms and conditions as may be
set forth in an award agreement, in the event a participant’s
employment is terminated without “cause” by the Company
or any Related Entity or by such successor company or by the
participant for “good reason,” as those terms are
defined in the 2019 Plan, within 24 months following such change in
control, each award held by such participant at the time of the
change in control will be accelerated as described
above.
Subject to any limitations contained in the 2019 Plan, including
those described above in the preceding paragraph, relating to the
vesting of awards in the event of any merger, consolidation or
other reorganization in which the Company does not survive, or in
the event of any “change in control,” the agreement
relating to such transaction and/or the Committee may provide for:
(i) the continuation of the outstanding awards by the Company, if
the Company is a surviving entity, (ii) the assumption or
substitution for outstanding awards by the surviving entity or its
parent or subsidiary pursuant to the provisions contained in the
2019 Plan, (iii) full exercisability or vesting and accelerated
expiration of the outstanding awards, or (iv) settlement of the
value of the outstanding awards in cash or cash equivalents or
other property followed by cancellation of such awards. The
foregoing actions may be taken without the consent or agreement of
a participant in the 2019 Plan and without any requirement that all
such participants be treated consistently.
33
Other Adjustments
The Committee is authorized to make adjustments in the terms and
conditions of, and the criteria included in, awards (i) in
recognition of unusual or nonrecurring events (including, without
limitation, acquisitions and dispositions of businesses and assets)
affecting the Company, any Related Entity or any business unit, or
the financial statements of the Company or any Related Entity, (ii)
in response to changes in applicable laws, regulations, accounting
principles, tax rates and regulations or business conditions or
(iii) in view of the Committee's assessment of the business
strategy of the Company, any Related Entity or business unit
thereof, performance of comparable organizations, economic and
business conditions, personal performance of a participant, and any
other circumstances deemed relevant. However, without the approval
of the Company’s shareholders, the Committee may not make any
adjustment described in this paragraph if such adjustment would
result in a Repricing.
Foreign Employees and
Consultants
Awards may be granted to participants who are foreign nationals or
employed or providing services outside the United States, or both,
on such terms and conditions different from those applicable to
awards to employees or consultants providing services in the United
States as may, in the judgment of the Committee, be necessary or
desirable in order to recognize differences in local law or tax
policy. The Committee will have the authority to adopt such
modifications, procedures, and subplans as may be necessary or
desirable to comply with provisions of the laws of foreign
countries in which the Company or its Related Entities may operate
to assure the viability of the benefits from awards granted to
participants performing services in such countries and to meet the
objectives of the 2019 Plan. The Committee also may impose
conditions on the exercise or vesting of awards in order to
minimize the Company's obligation with respect to tax equalization
for employees or consultants on assignments outside their home
country.
The Board has approved a subplan to the 2019 Plan applicable to
residents of Canada. The subplan sets out the major features of the
2019 Plan and the principal terms and conditions of participation
that differ for Canadian participants in the 2019 Plan in order to,
among other things, recognize, and comply with, differences in law
and tax policy in Canada.
Clawback of Benefits
The Company may (i) cause the cancellation of any award, (ii)
require reimbursement of any award by a participant or beneficiary,
and (iii) effect any other right of recoupment of equity or other
compensation provided under the 2019 Plan or otherwise in
accordance with any Company policies that currently exist or that
may from time to time be adopted or modified in the future by the
Company and/or applicable law, which we refer to each as a clawback
policy. In addition, a participant may be required to repay to the
Company certain previously paid compensation, whether provided
under the 2019 Plan or an award agreement or otherwise, in
accordance with any clawback policy. By accepting an award, a
participant is also agreeing to be bound by any existing or future
clawback policy adopted by the Company, or any amendments that may
from time to time be made to the clawback policy in the future by
the Company in its discretion (including without limitation any
clawback policy adopted or amended to comply with applicable laws
or stock exchange requirements) and is further agreeing that all of
the participant’s award agreements may be unilaterally
amended by the Company, without the participant’s consent, to
the extent that the Company in its discretion determines to be
necessary or appropriate to comply with any clawback policy. In
addition, if a participant, without the consent of the Company,
while employed by or providing services to the Company or any
Related Entity or after termination of such employment or service,
violates a non-competition, non-solicitation or non-disclosure
covenant or agreement or otherwise engages in activity that is in
conflict with or adverse to the interests of the Company or any
Related Entity, then (x) any outstanding, vested or unvested,
earned or unearned portion of an award may, at the
Committee’s discretion, be cancelled and (y) the Committee,
in its discretion, may require the participant or other person to
whom any payment has been made or shares or other property have
been transferred in connection with an award to forfeit and pay
over to the Company all or any portion of the gain (whether or not
taxable) realized upon the exercise of any option and the value
realized (whether or not taxable) on the vesting or payment of any
other award during the time period specified in the applicable
award agreement or otherwise specified by the
Committee.
Amendment and Termination
The Board may amend, alter, suspend, discontinue or terminate the
2019 Plan or the Committee’s authority to grant awards
without further shareholder approval, except that shareholder
approval must be obtained for any amendment or alteration if such
approval is required by law or regulation or under the rules of any
stock exchange or quotation system on which Common Shares are then
listed or quoted; provided that, except as otherwise permitted by
the 2019 Plan or an award agreement, without the consent of an
affected participant, no such Board action may materially and
adversely affect the rights of such participant under the terms of
any previously granted and outstanding award. The Committee may
waive any conditions or rights under, or amend, alter, suspend,
discontinue or terminate any award theretofore granted and any
award agreement relating thereto, except as otherwise provided in
the 2019 Plan; provided that, except as otherwise permitted by the
2019 Plan or award agreement, without the consent of an affected
participant, no such Committee or the Board action may materially
and adversely affect the rights of such participant under terms of
such award. In addition, without the approval of the
Company’s shareholders, the Board may not alter or amend the
2019 Plan if such alteration or amendment would permit a Repricing
without approval of the Company’s shareholders. The 2019 Plan
will terminate at the earliest of (i) such time as no Common Shares
remain available for issuance under the 2019 Plan, (ii) termination
of the 2019 Plan by the Board, or (iii) the tenth anniversary of
the effective date of the 2019 Plan. Awards outstanding upon
expiration of the 2019 Plan will remain in effect until they have
been exercised or terminated, or have expired.
34
Federal Income Tax Consequences of
Awards
The 2019 Plan is not qualified under the provisions of section
401(a) of the Code and is not subject to any of the provisions of
the Employee Retirement Income Security Act of
1974.
Nonqualified Stock
Options
An optionee generally is not taxable upon the grant of a
nonqualified stock option granted under the 2019 Plan. On exercise
of a nonqualified stock option granted under the 2019 Plan an
optionee will recognize ordinary income equal to the excess, if
any, of the fair market value on the date of exercise of the shares
of stock acquired on exercise of the option over the exercise
price. If the optionee is an employee of the Company or a Related
Entity, that income will be subject to the withholding of Federal
income tax. The optionee’s tax basis in those shares will be
equal to their fair market value on the date of exercise of the
option, and his or her holding period for those shares will begin
on that date.
If an optionee pays for Common Shares on exercise of an option by
delivering Common Shares, the optionee will not recognize gain or
loss on the shares delivered, even if their fair market value at
the time of exercise differs from the optionee’s tax basis in
them. The optionee, however, will be taxed on the exercise of the
option in the manner described above as if he or she had paid the
exercise price in cash. If a separate identifiable share
certificate or other indicia of ownership is issued for that number
of shares equal to the number of shares delivered on exercise of
the option, the optionee’s tax basis in the shares
represented by that certificate or other indicia of ownership will
be equal to his or her tax basis in the shares delivered, and his
or her holding period for those shares will include his or her
holding period for the shares delivered. The optionee’s tax
basis and holding period for the additional shares received on
exercise of the option will be the same as if the optionee had
exercised the option solely in exchange for cash.
The Company generally will be entitled to a deduction for Federal
income tax purposes equal to the amount of ordinary income taxable
to the optionee, provided that amount constitutes an ordinary and
necessary business expense for the Company and is reasonable in
amount, and either the employee includes that amount in income or
the Company timely satisfies its reporting requirements with
respect to that amount.
Incentive Stock Options
Under the Code, an optionee generally is not subject to tax upon
the grant or exercise of an ISO. In addition, if the optionee holds
a share received on exercise of an ISO for at least two years from
the date the option was granted and at least one year from the date
the option was exercised, which we refer to as the Required Holding
Period, the difference, if any, between the amount realized on a
sale or other taxable disposition of that share and the
holder’s tax basis in that share will be long-term capital
gain or loss.
If, however, an optionee disposes of a share acquired on exercise
of an ISO before the end of the Required Holding Period, which we
refer to as a Disqualifying Disposition, the optionee generally
will recognize ordinary income in the year of the Disqualifying
Disposition equal to the excess, if any, of the fair market value
of the share on the date the ISO was exercised over the exercise
price. If, however, the Disqualifying Disposition is a sale or
exchange on which a loss, if realized, would be recognized for
Federal income tax purposes, and if the sales proceeds are less
than the fair market value of the share on the date of exercise of
the option, the amount of ordinary income recognized by the
optionee will not exceed the gain, if any, realized on the sale. If
the amount realized on a Disqualifying Disposition exceeds the fair
market value of the share on the date of exercise of the option,
that excess will be short-term or long-term capital gain, depending
on whether the holding period for the share exceeds one
year.
An optionee who exercises an ISO by delivering Common Shares
acquired previously pursuant to the exercise of an ISO before the
expiration of the Required Holding Period for those shares is
treated as making a Disqualifying Disposition of those shares. This
rule prevents “pyramiding” or the exercise of an ISO
(that is, exercising an ISO for one share and using that share, and
others so acquired, to exercise successive ISOs) without the
imposition of current income tax.
For purposes of the alternative minimum tax, the amount by which
the fair market value of a share acquired on exercise of an ISO
exceeds the exercise price of that option generally will be an
adjustment included in the optionee’s alternative minimum
taxable income for the year in which the option is exercised. If,
however, there is a Disqualifying Disposition of the share in the
year in which the option is exercised, there will be no adjustment
with respect to that share. If there is a Disqualifying Disposition
in a later year, no income with respect to the Disqualifying
Disposition is included in the optionee’s alternative minimum
taxable income for that year. In computing alternative minimum
taxable income, the tax basis of a share acquired on exercise of an
ISO is increased by the amount of the adjustment taken into account
with respect to that share for alternative minimum tax purposes in
the year the option is exercised.
The Company is not allowed an income tax deduction with respect to
the grant or exercise of an ISO or the disposition of a share
acquired on exercise of an ISO after the Required Holding Period.
However, if there is a Disqualifying Disposition of a share, the
Company is allowed a deduction in an amount equal to the ordinary
income includible in income by the optionee, provided that amount
constitutes an ordinary and necessary business expense for the
Company and is reasonable in amount, and either the employee
includes that amount in income or the Company timely satisfies its
reporting requirements with respect to that amount.
35
Share Awards
Generally, the recipient of a share award will recognize ordinary
compensation income at the time the shares are received equal to
the excess, if any, of the fair market value of the share received
over any amount paid by the recipient in exchange for the shares.
If, however, the shares are not vested when they are received under
the 2019 Plan (for example, if the recipient is required to work
for a period of time in order to have the right to sell the
shares), the recipient generally will not recognize income until
the shares become vested, at which time the recipient will
recognize ordinary compensation income equal to the excess, if any,
of the fair market value of the shares on the date it becomes
vested over any amount paid by the recipient in exchange for the
shares. A recipient may, however, file an election with the
Internal Revenue Service, within 30 days of his or her receipt of
the share award, to recognize ordinary compensation income, as of
the date the recipient receives the share award, equal to the
excess, if any, of the fair market value of the shares on the date
the share award is granted over any amount paid by the recipient in
exchange for the shares.
The recipient’s basis for the determination of gain or loss
upon the subsequent disposition of shares acquired as share awards
will be the amount paid for such shares plus any ordinary income
recognized either when the shares are received or when the shares
become vested. Upon the disposition of any shares received as a
share award under the 2019 Plan the difference between the sale
price and the recipient’s basis in the shares will be treated
as a capital gain or loss and generally will be characterized as
long-term capital gain or loss if the shares have been held for
more the one year from the date as of which he or she would be
required to recognize any compensation income.
The Company generally will be entitled to a deduction for Federal
income tax purposes equal to the amount of ordinary income taxable
to the recipient, provided that amount constitutes an ordinary and
necessary business expense for the Company, is reasonable in
amount, and is not precluded by the deduction limitations imposed
by Section 162(m) of the Code, and either the recipient includes
that amount in income or the Company timely satisfies its reporting
requirements with respect to that amount.
Restricted Share Units
The recipient of an RSU that provides for the delivery of shares at
a future date will not recognize taxable income at the time of
grant. The recipient will generally recognize taxable income, and
if the recipient is an employee, be subject to withholding for
income and employment taxes, when the delivery of shares is
actually made.
The recipient’s basis for the determination of gain or loss
upon the subsequent disposition of shares acquired pursuant to the
RSU awards will be the amount paid for such shares, if any, plus
any ordinary income recognized when the shares are received. Upon
the disposition of any such shares received, the difference between
the sale price and the recipient’s basis in the shares will
be treated as a capital gain or loss and generally will be
characterized as long-term capital gain or loss if the shares have
been held for more than one year from the date as of which he or
she would be required to recognize any compensation
income.
The Company will generally be entitled to a corresponding deduction
equal to the amount of income the recipient recognizes, provided
that amount constitutes an ordinary and necessary business expense,
is reasonable in amount, and is not precluded by the deduction
limitations imposed by Section 162(m) of the Code.
Section 162 Limitations
Section
162(m) of the Code disallows a public company’s tax deduction
for compensation to covered employees in excess of $1 million in
any tax year. Covered employees include the Company’s CEO and
CFO at any time during an applicable tax year and the three other
most highly compensated officers (other than the CEO and CFO) for
such tax year.
Section 409A of the
Code
The 2019 Plan is intended to comply with Section 409A of the
Code to the extent that such section would apply to any award under
the 2019 Plan. Section 409A of the Code governs the taxation
of deferred compensation. Any participant that is granted an award
that is deemed to be deferred compensation, such as a grant of RSUs
that does not qualify for an exemption from Section 409A of the
Code, and does not comply with Section 409A of the Code, could
be subject to taxation on the award as soon as the award is no
longer subject to a substantial risk of forfeiture (even if the
award is not exercisable) and an additional 20% tax (and a further
additional tax based upon an amount of interest determined under
Section 409A of the Code) on the value of the award.
36
The information set forth above is a summary only and does not
purport to be complete. In addition, the information is based upon
current federal income tax rules and therefore is subject to change
when those rules change.
Interests of Directors or Officers and
New Plan Benefits
Our directors may grant awards under the 2019 Plan to themselves as
well as our officers, in addition to granting awards to our other
employees.
Because the grant of awards under the 2019 Plan is within the
discretion of the Committee, we cannot determine the dollar value
or number of Common Shares that will in the future be received by
or allocated to any participant in the 2019 Plan.
Vote Required
With
regard to the amendment to the Company’s 2019 Equity
Incentive Compensation Plan, votes may be cast “FOR” or
“AGAINST.” The affirmative vote of the holders of a
majority of shares present in person or represented by proxy at the
Annual Meeting and entitled to vote is required to approve the
amendment to the 2019 Plan. With regard to this proposal, shares
which are entitled to vote but abstain from voting on a matter will
be excluded from the vote and will have no effect on its
outcome.
Recommendation
The
Board recommends that shareholders vote “FOR” Proposal
No. 3.
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
these proxy materials may have been sent to multiple shareholders
in each household. We will promptly deliver a separate copy of
these proxy materials to any shareholder upon written or verbal
request to us at our executive offices at 100 Spy Court, Markham,
ON L3R 5H6 Canada, telephone: (289) 800-9600. Any shareholder who
wants to receive separate copies of proxy materials in the future,
or any shareholder who is receiving multiple copies and would like
to receive only one (1) copy per household, should contact that
shareholder’s bank, broker, or other nominee record holder,
or that shareholder may contact us at the address and phone number
set forth above.
Our
Annual Report on Form 10-K for the fiscal year ended September 30,
2020, which was made available to shareholders with or
preceding this proxy statement, contains financial and other
information about our Company, but is not incorporated into this
proxy statement and is not to be considered a part of these proxy
soliciting materials or subject to Regulations 14A or 14C or to the
liabilities of Section 18 of the Exchange Act.
Through
our website, http://www.edesabiotech.com, we make available free of
charge all of our SEC filings, including our proxy statements, our
Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q,
and our Current Reports on Form 8-K, as well as Form 3, Form 4, and
Form 5 of our directors, officers, and principal shareholders,
together with amendments to these reports filed or furnished
pursuant to Sections 13(a), 15(d), or 16 of the Exchange Act. We
will also provide upon written request, without charge to each
shareholder of record as of the record date, a copy of our Annual
Report on Form 10-K for the fiscal year ended September 30,
2020, as filed with the SEC. Any exhibits listed in the
Annual Report on Form 10-K, as amended, also will be furnished,
upon request, at the actual expense we incur in furnishing such
exhibits. Any such requests should be directed to our Corporate
Secretary at our executive offices at 100 Spy Court, Markham, ON
L3R 5H6 Canada, telephone: (289) 800-9600.
The
Board knows of no other business to be acted upon at the Annual
Meeting. However, if any other business properly comes before the
Annual Meeting, it is the intention of the persons named in the
proxy to vote on such matters in accordance with their best
judgment.
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By
Order of the Board of Directors,
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/s/ Pardeep Nijhawan
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Pardeep
Nijhawan, MD
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Director,
Chief Executive Officer and Corporate Secretary
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(Principal
Executive Officer)
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Markham,
ON, Canada
March
1, 2021
37
Exhibit
A
Amendment
to 2019 Plan
AMENDMENT NO. 1 TO
EDESA BIOTECH, INC. 2019 EQUITY INCENTIVE COMPENSATION
PLAN
This
Amendment to the Edesa Biotech, Inc. 2019 Equity Incentive
Compensation Plan (this “Amendment”) is
made and entered into effective as of March 1, 2021 (the
“Effective
Date”), by Edesa Biotech, Inc., a British Columbia
corporation (the “Company”).
RECITALS
WHEREAS, the Company previously adopted
the Edesa Biotech, Inc. 2019 Equity Incentive Compensation Plan
(the “Plan”);
WHEREAS, by written consent of the
Company’s Board of Directors (the “Board”), dated
as of the Effective Date, the Board approved an increase of the
number of shares of the Company’s Common Shares reserved for
issuance under the Plan by 1,497,000,
which represents a number of Common Shares equal to twenty (20)
percent of the Company’s issued and outstanding Common
Shares less the number of
Common Shares remaining available for delivery under the Plan as of
the Effective Date (the “Plan Reserve
Increase”);
WHEREAS, pursuant to Section 9(f) of the
Plan, the Board may amend, alter, suspend, discontinue or terminate
the Plan, subject to obtaining the consent of the Company’s
shareholders not later than the annual meeting next following such
Board action if such shareholder
approval is required;
WHEREAS, the Company obtained the
requisite approval of its shareholders at its 2021 Annual General
Meeting;
WHEREAS, to record the adoption of the
Plan Reserve Increase by the Board, the Company has caused its
authorized officer to execute this Amendment to effectuate the Plan
Reserve Increase.
AGREEMENT
NOW THEREFORE, the Company hereby agrees
as follows:
1.
Section 4(a) of the
Plan is hereby amended and restated to read as
follows:
“Limitation
on Overall Number of Shares Available for Delivery Under
Plan. Subject to adjustment as
provided in Section 9(c) hereof, the total number of Shares
reserved and available for delivery under the Plan after the
Amendment Date (as defined below) shall be the sum of (i) 1,497,000
plus (ii) the number of Shares remaining available for delivery
under the Plan as of the Amendment Date. Any Shares that are
subject to Awards of Options shall be counted against this limit as
one (1) Share for every one (1) Share granted. Any Shares that are
subject to Awards other than Options shall be counted against this
limit as one and one-half (1.5) Shares for every one (1) Share
granted. Any Shares delivered under the Plan may consist, in whole
or in part, of authorized and unissued shares. For purposes hereof,
“Amendment Date” shall mean March 1,
2021.
2.
Except as expressly
modified by this Amendment, the Plan remains in full force and
effect pursuant to its terms. All references to the Plan in other
documentation shall be deemed to be a reference to the Plan as
amended by this Amendment.
3.
This Amendment
shall be governed by and construed in accordance with the laws of
British Columbia without giving effect to principles of conflict of
laws.
[Signature
Page Follows]
IN
WITNESS WHEREOF, the undersigned has caused this Amendment to be
duly executed effective as of the date first written
above.
EDESA
BIOTECH, INC.
By:
Name:
Kathi Niffenegger
Title:
Chief Financial Officer
