trust account if the Extension Amendment proposal is approved; and the amount remaining in the trust account may be significantly reduced from the approximately $148.8 million that was in the trust account as of January 31, 2019. However, we will not proceed if we do not have at least $5,000,001 of net tangible assets following approval of the Extension Amendment proposal.
Redemption Rights
If the Extension Amendment proposal is approved, the Company will provide the public shareholders making the Election, the opportunity to receive, at the time the Extension Amendment becomes effective, and in exchange for the surrender of their shares, a pro rata portion of the funds available in the trust account, less any taxes owed on such funds but not yet paid. You will also be able to redeem your public shares in connection with any shareholder vote to approve a proposed business combination, or if the Company has not consummated a business combination by the Extended Date.
TO DEMAND REDEMPTION, YOU MUST ENSURE YOUR BANK OR BROKER COMPLIES WITH THE REQUIREMENTS IDENTIFIED ELSEWHERE HEREIN, INCLUDING DELIVERING YOUR SHARES TO THE TRANSFER AGENT PRIOR TO THE VOTE ON THE EXTENSION AMENDMENT. You will only be entitled to receive cash in connection with a redemption of these shares if you continue to hold them until the effective date of the Extension Amendment.
In connection with tendering your shares for redemption, you must elect either to physically tender your share certificates totransfer agent, Continental Stock Transfer & Trust Company, then you are a stockholder of record.
If on April 3, 2023 your shares were held, not in your name, but rather in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and the Notice is being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. You are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may not vote your shares at the Annual Meeting unless you request and
obtain in advance a valid proxy from your broker or other agent. You must also register at https://proxydocs.com/DMTK prior to the start of the meeting on May 31, 2023 at 1:30 p.m. Pacific Time.
You do not need to attend the Annual Meeting to vote your shares. Shares represented by valid proxies, received in time for the Annual Meeting and not revoked prior to the Annual Meeting, will be voted at the Annual Meeting. For instructions on how to change or revoke your proxy, see “May I Change or Revoke My Proxy?” below.
How many votes do I have?
Each share of our common stock that you own entitles you to one vote.
How do I vote?
Whether you plan to attend the Annual Meeting or not, we urge you to vote by proxy. All shares represented by valid proxies that we receive through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card or as instructed via internet or telephone. You may specify whether your shares should be voted for or withheld for the nominee for director and whether your shares should be voted for, against or abstain with respect to the other proposal. If you properly submit a proxy without giving specific voting instructions, your shares will be voted in accordance with the Board’s recommendations as noted below. Voting by proxy will not affect your right to attend the Annual Meeting. If your shares are registered directly in your name through our stock transfer agent, Continental Stock Transfer & Trust Company, or you have stock certificates registered in your name, you may vote:
•By internet (https://proxypush.com/DMTK). Use the internet to transmit your voting instructions and for electronic delivery of information. Have your Notice or proxy card and 12-digit control number(s) in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form.
•By telephone (866-430-8291). Use a touch-tone phone to transmit your voting instructions. Have your Notice or proxy card and 12-digit control number(s) in hand when you call and then follow the instructions.
•By mail. If you received a proxy card by mail, you can vote by mail by completing, signing, dating and returning the proxy card as instructed on the card.
•At the Annual Meeting. If you attend the meeting, you may vote on the Annual Meeting Website at https://proxydocs.com/DMTK. As noted elsewhere in this proxy statement, in order to attend the Annual Meeting, you must register at https://proxydocs.com/DMTK prior to the start of the meeting on May 31, 2023 at 1:30 p.m. Pacific Time. We encourage you to register in advance, and in any case at least 15 minutes prior to the start of the meeting. Upon completing your registration, you will receive further instructions via email, including your unique link that will allow you to access the Annual Meeting, vote and submit questions.
If your shares are held in “street name” (held in the name of a bank, broker or other holder of record), you will receive instructions from the holder of record. You must follow the instructions of the holder of record in order for your shares to be voted. Telephone and internet voting also will be offered to stockholders owning shares through certain banks and brokers. If your shares are not registered in your own name and you plan to vote your shares at the Annual Meeting, you should contact your broker or agent well in advance of the meeting to obtain a legal proxy or broker’s proxy card. You must also register at https://proxydocs.com/DMTK prior to the start of the meeting. We encourage you to register in advance, and in any case at least 15 minutes prior to the start of the meeting. Upon completing your registration, you will receive further instructions via email, including your unique link that will allow you to access the Annual Meeting and submit questions. You will not be able to attend the Annual Meeting in person.
Telephone and internet voting facilities for stockholders of record will be available 24 hours a day until the closing of the polls at the Annual Meeting on May 31, 2023.
How does the Board recommend that I vote on the proposals?
The Board recommends that you vote as follows:
•“FOR” the election of the nominee for director (Proposal 1).
•“FOR” the amendment to our Amended and Restated Certificate of Incorporation to increase the aggregate number of shares of common stock authorized to be issued (Proposal 2).
•“FOR” the amendment to our Amended and Restated Certificate of Incorporation to reflect new Delaware law provisions regarding officer exculpation (Proposal 3).
•“FOR” the amendment to the DermTech, Inc. 2020 Equity Incentive Plan to modify the plan’s evergreen provision (Proposal 4).
•“FOR” the ratification of the selection of KPMG LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2023 (Proposal 5).
•“FOR” the approval, on an advisory basis, of the compensation of our named executive officers (Proposal 6)
If any other matter is presented at the Annual Meeting, your proxy provides that your shares will be voted by the proxy holder in accordance with his or her best judgment. At the time this proxy statement was first made available, we knew of no matters that needed to be acted on at or would be brought before the Annual Meeting, other than those discussed in this proxy statement.
May I change or revoke my proxy?
If you give us your proxy, you may change or revoke it at any time before the Annual Meeting. You may change or revoke your proxy in any one of the following ways:
•if you received a proxy card, by signing a new proxy card with a date later than your previously delivered proxy and submitting it as instructed above;
•by re-voting by internet or by telephone as instructed above;
•by notifying the Company’s Secretary in writing before the Annual Meeting that you have revoked your proxy; or
•by attending the Annual Meeting (having registered at https://proxydocs.com/DMTK prior to the start of the meeting as described elsewhere in this proxy statement) and voting at the Annual Meeting. Attending the Annual Meeting will not in and of itself revoke a previously submitted proxy. You must specifically request at the Annual Meeting that it be revoked.
Your most current vote, whether by telephone, internet, proxy card or while attending the Annual Meeting is the vote that will be counted.
What if I receive more than one notice or proxy card?
You may receive more than one Notice or proxy card if you hold shares of our common stock in more than one account, which may be in registered form or held in street name. Please vote in the manner described above under “How Do I Vote?” for each account to ensure that all of your shares are voted.
Will my shares be voted if I do not vote?
If your shares are registered in your name or if you have stock certificates, they will not be counted if you do not vote as described above under “How Do I Vote?” If your shares are held in street name and you do not provide voting instructions to the bank, broker or other nominee that holds your shares as described above, the bank, broker or other nominee that holds your shares has the authority to vote your unvoted shares only on the amendment to our Amended and Restated Certificate of Incorporation to increase the aggregate number of shares of common stock authorized to be issued (Proposal 2 of this proxy statement) and the ratification of the selection of our independent registered accounting firm (Proposal 5 of this proxy statement). Therefore, we encourage you to provide voting instructions to your bank, broker or other nominee. This ensures your shares will be voted at the Annual Meeting. A “broker non-vote” will occur if your broker cannot vote your shares on a particular matter because it has not received instructions from you and does not have discretionary voting authority on that matter or because your broker chooses not to vote on a matter for which it does have discretionary voting authority.
What vote is required to approve each proposal and how are votes counted?
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Proposal 1: Election of Director | To be elected, the nominee for director must receive a plurality of the votes cast on this proposal. Accordingly, as this is an uncontested election, the director nominee will be elected if she receives at least one vote. You may vote either FOR the nominee or WITHHOLD your vote from the nominee. Abstentions and votes that are withheld will not be included in the vote tally for the election of the director. Brokerage firms do not have authority to vote customers’ unvoted shares held by the firms in street name for the election of the director. As a result, any shares held by a brokerage firm not voted by a customer will be treated as a broker non-vote. Such broker non-votes will also not be included in the vote tally for the election of the director. |
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Proposal 2. Amendment to Our Amended and Restated Certificate of Incorporation to Increase the Aggregate Number of Shares of Common Stock Authorized to be Issued | The affirmative vote of a majority of the outstanding common stock of the Company is required to approve the amendment to the Company’s Amended and Restated Certificate of Incorporation. Abstentions and broker non-votes, if any, will be treated as votes against this proposal. Brokerage firms have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. |
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Proposal 3. Amendment to Our Amended and Restated Certificate of Incorporation to reflect new Delaware law provisions regarding officer exculpation | The affirmative vote of a majority of the outstanding common stock of the Company is required to approve this amendment to the Company’s Amended and Restated Certificate of Incorporation. Brokerage firms do not have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. As a result, any shares held by a brokerage firm not voted by a customer will be treated as a broker non-vote. Such broker non-votes and any abstentions will be treated as votes against this proposal. |
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Proposal 4. Amendment to the DermTech, Inc. 2020 Equity Incentive Plan to Modify the Plan’s Evergreen Provision | The affirmative vote of a majority of the votes cast, either affirmatively or negatively, on this proposal is required to approve the amendment to the DermTech, Inc. 2020 Equity Incentive Plan to amend the “evergreen” provision of the plan to: (i) increase the maximum number of additional shares of our common stock that may annually be reserved for issuance under the plan by operation of its “evergreen” provision from 3.5% to 5.0% of the number of shares of our common stock outstanding on the first day of January of each year and (ii) extend the period during which the “evergreen” provision of the plan will operate from ending on the second day of fiscal year 2025 to ending on the second day of fiscal year 2030. Brokerage firms do not have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. As a result, any shares not voted by a customer will be treated as a broker non-vote. Such broker non-votes and any abstentions will have no effect on the results of this vote. |
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Proposal 5: Ratification of Selection of Independent Registered Public Accounting Firm | The affirmative vote of a majority of the votes cast, either affirmatively or negatively, on this proposal is required to ratify the selection of our independent registered public accounting firm. Abstentions will have no effect on the results of this vote. Brokerage firms have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. If a broker does not exercise this authority, such broker non-votes will have no effect on the results of this vote. We are not required to obtain the approval of our stockholders to select our independent registered public accounting firm. However, if our stockholders do not ratify the selection of KPMG LLP as our independent registered public accounting firm for 2023, the Audit Committee of our Board will reconsider its selection. |
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Proposal 6: Approval, on an Advisory Basis, of the Compensation of the Company’s Named Executive Officers | The affirmative vote of a majority of the votes cast, either affirmatively or negatively, on this proposal is required to approve, on an advisory basis, the compensation of the Company’s named executive officers. Abstentions will have no effect on the results of this vote. Brokerage firms do not have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. As a result, any shares held by a brokerage firm not voted by a customer will be treated as a broker non-vote. Such broker non-votes will have no effect on the results of this vote. Although the advisory vote is non-binding, the compensation committee and the Board will review the voting results and take them into consideration when making future decisions regarding executive compensation. |
Where can I find the voting results of the Annual Meeting?
The preliminary voting results will be announced at the Annual Meeting, and we will publish preliminary results, or final results if available, in a Current Report on Form 8-K within four business days of the Annual Meeting. If final results are unavailable at the time we file the Form 8-K, then we will file an amended report on Form 8-K to disclose the final voting results within four business days after the final voting results are known.
What are the costs of soliciting these proxies?
We will pay all of the costs of soliciting these proxies. Our directors and employees may solicit proxies in person (by means of remote communication as authorized by the Board) or by telephone, fax or email. We will pay these employees and directors no additional compensation for these services. We will ask banks, brokers and other institutions, nominees and fiduciaries to forward these proxy materials to their principals and to obtain authority to execute proxies. We will then reimburse them for their expenses.
We have engaged Mediant, Inc., to act as our proxy solicitor in connection with the proposals to be acted upon at our annual meeting. Pursuant to our agreement with Mediant, Inc., Mediant, Inc. will, among other things, provide advice regarding proxy solicitation issues and solicit proxies from our stockholders on our behalf in connection with the annual meeting. For these services, we will pay a fee of approximately $28,000.
What constitutes a quorum for the Annual Meeting?
The presence, in person (by means of remote communication as authorized by the Board) or by proxy, of the holders of a majority of the voting power of all outstanding shares of our capital stock entitled to vote at the Annual Meeting is necessary to constitute a quorum at the Annual Meeting. Votes of stockholders of record who are present at the Annual Meeting in person (by means of remote communication as authorized by the Board) or by proxy, abstentions, and broker non-votes are counted for purposes of determining whether a quorum exists.
What is the Business Combination referred to in this proxy statement?
On August 29, 2019, the Company, formerly known as Constellation Alpha Capital Corp., or Constellation, and DermTech Operations, Inc., formerly known as DermTech, Inc., or DermTech Operations, consummated the transactions contemplated by an Agreement and Plan of Merger, dated May 29, 2019, as amended, by and among the Company, DT Merger Sub, Inc., and DermTech Operations. Pursuant to the Agreement and Plan of Merger, DT Merger Sub, Inc. merged with and into DermTech Operations, with DermTech Operations surviving as the Company’s wholly owned subsidiary. We refer to this transaction as the Business Combination. Also, in connection with and prior to the completion of the Business Combination, Constellation re-domiciled out of the British Virgin Islands and continued as a company incorporated in the State of Delaware. Following the Business Combination, we changed the name of the Company to DermTech, Inc. Prior to the completion of the Business Combination, the Company was a shell company. Following the Business Combination, the business of DermTech Operations is the business of the Company.
Attending the Annual Meeting
This year, our Annual Meeting will be held at 1:30 p.m., Pacific Time, on May 31, 2023, in a virtual meeting format only. In order to attend the Annual Meeting, you must register at https://proxydocs.com/DMTK prior to the start of the meeting. We encourage you to register in advance, and in any case at least 15 minutes prior to the start of the meeting.
Upon completing your registration, you will receive further instructions via email, including your unique link that will allow you to access the Annual Meeting and submit questions.
Householding of Annual Disclosure Documents
SEC rules concerning the delivery of annual disclosure documents allow us or your broker to send a single Notice or, if applicable, a single set of our proxy materials to any household at which two or more of our stockholders reside, if we or your broker believe that the stockholders are members of the same family. This practice, referred to as “householding,” benefits both you and us. It reduces the volume of duplicate information received at your household and helps to reduce our expenses. The rule applies to our Notices, annual reports, proxy statements and information statements. Once you receive notice from your broker or from us that communications to your address will be “householded,” the practice will continue until you are otherwise notified or until you revoke your consent to the practice. Stockholders who participate in householding will continue to have access to and utilize separate proxy voting instructions.
If your household received a single Notice or, if applicable, a single set of proxy materials this year, but you would prefer to receive your own copy, please contact our transfer agent, Continental Stock Transfer & Trust Company, by calling them at (212) 509-4000.
If you do not wish to participate in householding and would like to receive your own Notice or, if applicable, set of our proxy materials in future years, follow the instructions described below. Conversely, if you share an address with another Company stockholder and together both of you would like to receive only a single Notice or, if applicable, set of proxy materials, follow these instructions:
•If your Company shares are registered in your own name, please contact our transfer agent, Continental Stock Transfer & Trust Company, and inform them of your request by calling them at 1-212-509-4000 or writing them at Continental Stock Transfer & Trust Company, One1 State Street, Plaza, 3030th Floor, New York, NY 10004.
th• Floor,If a broker or other nominee holds your Company shares, please contact the broker or other nominee directly and inform them of your request. Be sure to include your name, the name of your brokerage firm and your account number.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the ownership of our common stock as of March 15, 2023, by (i) those persons who are known by us to be the beneficial owner(s) of more than five percent of our common stock, (ii) each of our directors, director nominee, and named executive officers and (iii) all of our current directors and executive officers as a group.
The number of shares beneficially owned by each entity, person, director or executive officer is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership generally includes any shares over which the individual has sole or shared voting power or investment power as well as any shares that the individual has the right to acquire within 60 days of March 15, 2023, such as through the exercise of stock options, warrants or other rights or the vesting of restricted stock units. Unless otherwise indicated in the footnotes to this table, we believe each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.
The percentage of shares beneficially owned is computed on the basis of 31,003,260 shares of our common stock outstanding as of March 15, 2023. Shares of our common stock that the entity, person, or group has the right to acquire within 60 days of March 15, 2023, including common stock subject to (i) stock options exercisable within 60 days of March 15, 2023, (ii) warrants exercisable within 60 days of March 15, 2023 and (iii) restricted stock units vesting within 60 days of March 15, 2023, are in each case deemed outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all directors and executive officers as a group. Unless otherwise indicated below, the address of each beneficial owner listed is c/o DermTech, Inc., 12340 El Camino Real, San Diego, California 92130.
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Name and Address of Beneficial Owner** | | Shares Beneficially Owned | | Percentage of Beneficial Ownership |
Beneficial Owners of More Than 5% of Our Common Stock | | | | |
Entities affiliated with RTW Investments LP (1) | | 3,018,666 | | | 9.7 | % |
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Named Executive Officers and Directors | | | | |
Mark Capone (2) | | 19,860 | | | * |
Cynthia Collins (3) | | 69,121 | | | * |
Nathalie Gerschtein Keraudy (4) | | 30,977 | | | * |
Kirk Malloy (5) | | 4,405 | | | * |
Matthew Posard (6) | | 122,501 | | | * |
Herm Rosenman (7) | | 98,862 | | | * |
Monica Tellado (8) | | 32,101 | | | * |
John Dobak (9) | | 647,542 | | | 2.1 | % |
Kevin Sun (10) | | 199,335 | | | * |
Todd Wood (11) | | 195,361 | | | * |
Ray Akhavan (12) | | 65,752 | | | * |
Claudia Ibarra (13) | | 103,738 | | | * |
All current directors and executive officers as a group (12 persons) (14) | | 1,589,555 | | | 5.1 | % |
*Indicates beneficial ownership of less than 1%.
** Addresses are given for beneficial owners of more than 5% of the outstanding common stock only.
(1)Consists of 3,018,666 shares of common stock beneficially owned by RTW Investments, LP. RTW Investments, LP has the power to direct the vote and disposition of securities held by RTW Master Fund, Ltd., RTW Innovation Master Fund, Ltd. and RTW Venture Fund Limited. Accordingly, RTW Investments, LP may be deemed to be the beneficial owner of such securities. Roderick Wong, M.D. has the power to direct the vote and disposition of the securities held by RTW Investments, LP. Dr. Wong is the managing partner of RTW Investments GP, LLC, which is the managing partner of RTW Investments, LP. Dr. Wong disclaims beneficial ownership of the shares held by
RTW Master Fund, Ltd., RTW Innovation Master Fund, Ltd., and RTW Venture Fund Limited, except to the extent of his pecuniary interest therein. The address and principal office of RTW Investments, LP and Dr. Wong is 919 Third Avenue, New York, New York 10004-1561, Attn: Mark Zimkind, mzimkind@continentalstock.com, prior10022. This information is based on Amendment No. 3 to Schedule 13D, filed with the SEC on November 8, 2022, and such additional information as is known to us.
(2)Consists of 19,860 shares of common stock that may be acquired pursuant to restricted stock units within 60 days after March 15, 2023.
(3)Consists of 42,641 shares of common stock and 26,480 shares of common stock that may be acquired pursuant to restricted stock units within 60 days after March 15, 2023.
(4)Consists of 4,497 shares of common stock and 26,480 shares of common stock that may be acquired pursuant to restricted stock units within 60 days after March 15, 2023.
(5)Consists of 4,405 shares of common stock.
(6)Consists of 96,021 shares of common stock and 26,480 shares of common stock that may be acquired pursuant to restricted stock units within 60 days after March 15, 2023.
(7)Consists of 72,382 shares of common stock and 26,480 shares of common stock that may be acquired pursuant to restricted stock units within 60 days after March 15, 2023.
(8)Consists of 5,621 shares of common stock and 26,480 shares of common stock that may be acquired pursuant to restricted stock units within 60 days after March 15, 2023.
(9)Consists of 468,967 shares of common stock and 178,575 of common stock that may be acquired pursuant to the voteexercise of stock options within 60 days after March 15, 2023.
(10)Consists of 136,288 shares of common stock and 63,047 of common stock that may be acquired pursuant to the exercise of stock options within 60 days after March 15, 2023.
(11)Consists of 145,774 shares of common stock and 49,587 of common stock that may be acquired pursuant to the exercise of stock options within 60 days after March 15, 2023.
(12)Consists of 29,294 shares of common stock and 36,458 of common stock that may be acquired pursuant to the exercise of stock options within 60 days after March 15, 2023.
(13)Consists of 80,116 shares of common stock and 23,622 of common stock that may be acquired pursuant to the exercise of stock options within 60 days after March 15, 2023.
(14)Includes the shares described in footnotes 2 through 13.
MANAGEMENT AND CORPORATE GOVERNANCE
The Board of Directors
Our certificate of incorporation and bylaws provide that our business is to be managed by or under the direction of our Board. Our Board is divided into three classes for purposes of election. One class is elected at each annual meeting of stockholders to serve for a three-year term. Our Board currently consists of eight members with no vacancies, classified into three classes as follows:
•our Class I directors are Cynthia Collins, Kirk Malloy and Matthew Posard and their terms will expire at the annual meeting of stockholders in 2025;
•our Class II directors are John Dobak, M.D., Mark Capone and Herm Rosenman and their terms will expire at the annual meeting of stockholders in 2024; and
•our Class III directors are Monica Tellado and Nathalie Gerschtein Keraudy and their terms will expire at the Annual Meeting.
Our Board has voted to nominate Nathalie Gerschtein Keraudy for election at the Annual Meeting for a term of three years to serve until the 2026 annual meeting of stockholders and until her successor has been elected and qualified. Monica Tellado’s term as a director will expire at the Annual Meeting and the Board is not nominating a candidate to fill the resulting vacancy in this election cycle. Following the Annual Meeting, the size of the Board will be reduced to seven members.
Set forth below are the names of the director nominated for re-election this year and those directors whose terms do not expire this year, their ages, their offices in the Company, if any, their principal occupations or employment for at least the past five years, the length of their tenure as directors and the names of other public companies in which such persons hold or have held directorships during the past five years. Additionally, information about the specific experience, qualifications, attributes or skills that led to our Board’s conclusion at the time of filing of this proxy statement that each person listed below should serve as a director is set forth below:
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Name | | Age | | Position(s) |
John Dobak, M.D. | | 57 | | President, Chief Executive Officer and Class II Director |
Matthew Posard | | 56 | | Chairman of the Board and Class I Director |
Cynthia Collins | | 64 | | Class I Director |
Nathalie Gerschtein Keraudy | | 44 | | Class III Director |
Herm Rosenman | | 75 | | Class II Director |
Mark Capone | | 60 | | Class II Director |
Kirk Malloy | | 56 | | Class I Director |
Nominee for Election as Class III Director
Nathalie Gerschtein Keraudy has served on our Board since October 2021. Ms. Gerschtein Keraudy currently serves as the President of Consumer Products Division for the Extension AmendmentNorth America Zone of L’Oréal Group, a leading global beauty company. In her current role, Ms. Gerschtein Keraudy is responsible for accelerating growth, innovation, and sustainable practices across North America’s mass market portfolio of brands and product categories. This extensive portfolio includes some of the most trusted and iconic brands such as L’Oréal Paris, Maybelline New York, Garnier, and NYX Professional Makeup, in addition to Essie, Thayer’s Natural Remedies, Carol’s Daughter, and Softsheen-Carson. Through an appointment by the French Prime Minister, Ms. Gerschtein Keraudy also serves as a French Foreign Trade Advisor. Ms. Gerschtein Keraudy is a graduate of HEC School of Management in Paris, the London Business School, and INSEAD’s senior executive leadership program. Ms. Gerschtein Keraudy is qualified to serve on our Board because of her broad experience as an executive in the direct-to-consumer skin care industry.
Continuing Directors
John Dobak, M.D. has served on our Board since the completion of the Business Combination in August 2019 and served on DermTech Operations’ board of directors between June 2012 and August 2019. Dr. Dobak has served as our
Chief Executive Officer since the completion of the Business Combination in August 2019 and served as Chief Executive Officer of DermTech Operations between June 2012 and August 2019. From 2006 until 2011, Dr. Dobak served as the founder and Chief Executive Officer of Lithera, Inc., a pharmaceutical company developing an injectable product for dermatology. Dr. Dobak is the founder and President of the JAKK Group, a life sciences technology accelerator, which has created several companies including Lithera, Inc., INNERCOOL Therapies, Inc., CryoGen, Inc., and CryoCor, Inc. Dr. Dobak’s companies have developed and marketed therapeutics devices for endovascular hypothermia, cryosurgical cardiac catheters, and endometrial ablation. Dr. Dobak received a Bachelor’s Degree from the University of California, Los Angeles and a Medical Doctorate from the University of California, San Diego. Dr. Dobak is qualified to serve on our Board because of his service as DermTech Operations’ Chief Executive Officer, his service as a member of DermTech Operations’ board of directors and his experience founding and operating multiple companies in the life sciences industry.
Herm Rosenman has served on our Board since the completion of the Business Combination in August 2019 and on DermTech Operations’ board of directors between February 2017 and August 2019. Additionally, Mr. Rosenman served as Chief Financial Officer of Natera Inc. (Nasdaq:NTRA) from February 2014 to January 2017 and has served on its board of directors since February 2017. Prior to Natera, Mr. Rosenman served as Senior Vice President of Finance and Chief Financial Officer at Gen-Probe Incorporated, or Gen-Probe, a developer, manufacturer and marketer of diagnostic and screening products using nucleic acid probes, from June 2001 to October 2012, when Gen-Probe was acquired by Hologic, Inc., a diagnostic products, medical imaging systems, and surgical products company. Mr. Rosenman holds a B.B.A. in accounting and finance from Pace University and an M.B.A. from the Wharton School of the University of Pennsylvania. Mr. Rosenman is qualified to serve on our Board because of his experience serving as the chief financial officer and as a director of multiple life sciences companies.
Cynthia Collins has served on our Board since the completion of the Business Combination in August 2019 and on DermTech Operations’ board of directors between July 2018 and August 2019. Ms. Collins served as Chief Executive Officer of Editas Medicine, Inc. (Nasdaq:EDIT) from March 2019 to February 2021 and served as a member of the board of directors of Editas Medicine from December 2018 to February 2021. Ms. Collins served as Chief Executive Officer of Human Longevity Inc. from January 2017 to December 2017. Before that, Ms. Collins served as the Chief Executive Officer and General Manager of General Electric’s (NYSE:GE) Healthcare Cell Therapy and Lab Businesses from April 2015 to December 2016, and as Chief Executive Officer of General Electric’s Clarient Diagnostics, Inc. division from October 2013 to April 2015. Prior to that, Ms. Collins served as CEO of GenVec, Inc. (Nasdaq:GNVC) from May 2012 to September 2013. Before that, she served as Group Vice President, Cellular Analysis Business of Beckman Coulter Inc. from 2007 to 2011 and as CEO of Sequoia Pharmaceuticals, Inc. Ms. Collins is currently a member of the board of directors of Certara, Inc. (Nasdaq:CERT) and Poseida Therapeutics, Inc. (Nasdaq:PSTX). Ms. Collins received her BS degree in Microbiology from the University of Illinois, Urbana and her MBA from The University of Chicago Booth School of Business. Ms. Collins is qualified to serve on our Board because of her broad experience serving as the Chief Executive Officer for a variety of companies in the life sciences industry and her experience serving on numerous boards of directors.
Matthew L. Posard has served as Chairman of our Board since the completion of the Business Combination in August 2019, served on DermTech Operations’ board of directors between 2016 and August 2019, and served as Chairman of DermTech Operations’ board of directors between June 2019 and August 2019. Mr. Posard currently serves as Founding Principal at Explore-DNA, a Life Sciences and Diagnostics consulting firm. Mr. Posard served as the President and Chief Commercial Officer of GenePeeks, Inc. from February 2017 to April 2018 and as Executive Vice President and Chief Commercial Officer at Trovagene, Inc. (now Cardiff Oncology, Inc. (Nasdaq:CRDF)) from March 2015 to April 2016. Mr. Posard also held multiple executive leadership roles at Illumina, Inc. (Nasdaq:ILMN) from 2006 to 2015. Mr. Posard is currently on the boards of Halozyme Therapeutics, Inc. (Nasdaq:HALO) and Talis BioMedical Corporation (Nasdaq:TLIS), and is Executive Chairman of Nautilus Biotechnology, Inc. (Nasdaq:NAUT). Mr. Posard holds a bachelor’s degree in Management Science from the University of California, San Diego. Mr. Posard is qualified to serve on our Board because of his extensive experience as an executive and serving on various boards of directors of companies in the life sciences industry, including DermTech Operations.
Mark Capone has served on our Board since July 2022. Mr. Capone currently serves as the Chief Executive Officer of Precision Medicine Advisors, LLC. From July 2015 to February 2020, Mr. Capone was the President and Chief Executive Officer of Myriad Genetics, Inc. (Nasdaq:MYGN), which he transformed from a pioneering start-up to one of the largest precision medicine companies in the world. During his 17-year tenure, Myriad Genetics developed and launched more than a dozen reimbursed molecular diagnostics, achieving total annual revenues of more than $800 million. Prior to Myriad Genetics, Mr. Capone spent 17 years at Eli Lilly and Company (NYSE:LLY) in various leadership positions. Mr. Capone is currently a non-executive board member of Abcam plc (Nasdaq:ABCM). Mr. Capone received a B.S. in
Chemical Engineering from Penn State University graduating with highest distinction, and his M.S. in Chemical Engineering (biotechnology emphasis) and Management from the Massachusetts Institute of Technology. Mr. Capone is qualified to serve on our Board because of his experience serving as the Chief Executive Officer for a life sciences company and his experience serving on numerous boards of directors.
Kirk Malloy, Ph.D. has served on our Board since July 2022. Dr. Malloy is currently the Founder and Principal at BioAdvisors, LLC, where he provides strategic consulting services to life sciences, diagnostics, and genomics companies. From August 2017 to August 2018, Dr. Malloy served as Chief Executive Officer of Verogen, Inc., a biotechnology company focused on the development and supply of next-generation sequencing-based human identification products. Prior to Verogen, Dr. Malloy held numerous positions at Illumina, Inc. (Nasdaq:ILMN) from 2002 to 2016, most recently as Senior Vice President and General Manager of Life Sciences and Applied Markets. Dr. Malloy currently serves as a director for NanoString Technologies, Inc. (Nasdaq:NSTG). Dr. Malloy earned his B.S. in Biology from the University of Miami, and his M.S. and Ph.D. from the University of Delaware, and has held post-doctoral and instructor positions at Boston University and Northeastern University. Dr. Malloy is qualified to serve on our Board because of his extensive experience as an executive and as a member on various boards of directors of companies in the life sciences industry.
Committees of the Board of Directors and Meetings
Meeting Attendance. Our Board met nine times during the fiscal year ended December 31, 2022. No director attended fewer than 75% of the total number of meetings of our Board and of committees of our Board on which he or she served during the fiscal year ended December 31, 2022. The Board has adopted a policy under which each member of the Board makes every effort to but is not required to attend each annual meeting of our stockholders. All individuals serving on our Board at the time of the 2022 annual meeting, attended the 2022 annual meeting of stockholders.
Audit Committee. Our Audit Committee met nine times during the fiscal year ended December 31, 2022. This committee currently has four members, Herm Rosenman (Chair), Cynthia Collins, Monica Tellado and Mark Capone. Our Audit Committee’s role and responsibilities are set forth in the Audit Committee’s written charter and include the authority to retain and terminate the services of our independent registered public accounting firm. In addition, the Audit Committee reviews annual financial statements, considers matters relating to accounting policy and internal controls and reviews the scope of annual audits. All members of the Audit Committee satisfy the current independence standards promulgated by the SEC, and by The Nasdaq Stock Market, as such standards apply specifically to members of audit committees. The Board has determined that Mr. Rosenman is an “audit committee financial expert,” as the SEC has defined that term in Item 407 of Regulation S-K. Please also see the report of the Audit Committee set forth elsewhere in this proxy statement.
A copy of the Audit Committee’s written charter is publicly available on our website at www.dermtech.com.
Compensation Committee. Our Compensation Committee met eight times during the fiscal year ended December 31, 2022. This committee currently has three members, Matthew Posard (Chair), Kirk Malloy and Cynthia Collins. Our Compensation Committee’s role and responsibilities are set forth in the Compensation Committee’s written charter and include reviewing, approving and making recommendations regarding our compensation policies, practices and procedures to ensure that legal and fiduciary responsibilities of the Board are carried out and that such policies, practices and procedures contribute to our success. Our Compensation Committee also administers our 2020 Equity Incentive Plan, 2020 Employee Stock Purchase Plan and2022 Inducement Equity Incentive Plan, as amended.The Compensation Committee is responsible for recommending to the Board the compensation of our chief executive officer, and conducts its decision making process with respect to such compensation without the chief executive officer present. Our chief executive officer meets with the Compensation Committee to discuss compensation-related matters regarding our executive officers other than himself. Also, the Compensation Committee is responsible for approving the compensation of our directors and employees, including executive officers other than our chief executive officer. All members of the Compensation Committee qualify as independent under the definition promulgated by The Nasdaq Stock Market.
In establishing compensation amounts for executives, the Compensation Committee seeks to (i) enhance the profitability of the Company and increase stockholder value, (ii) reward executives for their contribution to the Company’s growth and profitability, (iii) recognize individual initiative, leadership, achievement, and other contributions and (iv) provide competitive compensation that will attract and retain qualified executives. The Compensation Committee may delegate authority to one or more subcommittees of the Compensation Committee, each such subcommittee to consist of at least two members of the Compensation Committee. In addition, the Compensation Committee may, to the extent consistent with applicable law and the provisions of a given equity-based plan, delegate to one or more executive officers
of the Company the power to grant options or other stock awards pursuant to such equity-based plan to employees of the Company who are not directors or executive officers of the Company.
During fiscal year 2022, the Compensation Committee engaged the services of Compensia, an independent executive compensation consulting firm, to review and provide recommendations concerning all of the components of our executive and director compensation program. Compensia has not provided any services to the Company other than executive and director compensation consulting services and provision of certain non-executive employee compensation data. Compensia performs services solely on behalf of the Compensation Committee and has no relationship with the Company or management relating to compensation or other human resources related services except as it may relate to performing such services. Compensia assists the Compensation Committee in defining the appropriate peer companies for executive compensation and compensation practices and in benchmarking our executive compensation program against the peer group. Compensia also assists the Compensation Committee in benchmarking our director compensation program and practices against those of our peers. The Compensation Committee has assessed the independence of Compensia pursuant to SEC rules and the corporate governance rules of The Nasdaq Stock Market and concluded that no conflict of interest exists that would prevent Compensia from independently representing the Compensation Committee.
A copy of the Compensation Committee’s written charter is publicly available on our website at www.dermtech.com.
Nominating and Corporate Governance Committee. Our Nominating and Corporate Governance Committee met five times during the fiscal year ended December 31, 2022. This committee currently has three members, Cynthia Collins (Chair), Nathalie Gerschtein Keraudy and Matthew Posard. Our Board has determined that all members of the Nominating and Corporate Governance Committee qualify as independent under the definition promulgated by The Nasdaq Stock Market. The Nominating and Corporate Governance Committee’s role and responsibilities are set forth in the Nominating and Corporate Governance Committee’s written charter and include:
•evaluating and making recommendations to the full Board as to the composition, organization and governance of our Board and its committees,
•evaluating and making recommendations as to director candidates,
•evaluating current Board members’ performance,
•overseeing the process for CEO and other executive officer succession planning,
•developing and recommending governance guidelines for the Company, and
•overseeing the Company’s Environmental, Social and Governance, or ESG, strategy, initiatives and policies. Our ESG report can be found at https://investors.dermtech.com/corporate-governance/governance-overview.
Generally, our Nominating and Corporate Governance Committee considers candidates recommended by stockholders as well as from other sources such as other directors or officers, third party search firms or other appropriate sources. Once identified, the Nominating and Corporate Governance Committee will evaluate a candidate’s qualifications in accordance with our Nominating and Governance Committee Policy Regarding Qualifications of Directors appended to our Nominating and Corporate Governance Committee’s written charter. Threshold criteria include: personal integrity and sound judgment, business and professional skills and experience, independence, knowledge of our industry, possible conflicts of interest, diversity, the extent to which the candidate would fill a present need on our Board, and concern for the long-term interests of our stockholders. Our Nominating and Corporate Governance Committee has not adopted a formal diversity policy in connection with the consideration of director nominations or the selection of nominees. However, the Nominating and Corporate Governance Committee will consider issues of diversity among its members in identifying and considering nominees for director, and strive where appropriate to achieve a diverse balance of backgrounds, perspectives, experience, age, gender, ethnicity and country of citizenship on our Board and its committees. The Nominating and Corporate Governance Committee will also evaluate candidates for nomination in light of the recommendations for diversity of the Board, as those recommendations evolve from time to time, and oversee compliance by management with the requirements for board diversity and disclosure of diversity characteristics of the Board in our public filings, including pursuant to the rules of the Nasdaq Stock Market and otherwise. Our board consists of 3 directors that self-identify as female and 1 director that self identifies as an underrepresented minority, as illustrated in the following Board Diversity Matrix.
| | | | | | | | | | | | | | |
Board Diversity Matrix (As of March 15, 2023) |
Board Size: | | | | |
Total Number of Directors | 8 |
| Female | Male | Non-Binary | Did Not Disclose Gender |
Gender: | | | | |
Directors | 3 | 5 | — | — |
Number of Directors Who Identify in Any of the Categories Below: | | | | |
African American or Black | — | — | — | — |
Alaskan Native or Native American | — | — | — | — |
Asian (other than South Asian) | — | — | — | — |
South Asian | — | — | — | — |
Hispanic or Latinx | 1 | — | — | — |
Native Hawaiian or Pacific Islander | — | — | — | — |
White | 2 | 5 | — | — |
Two or More Races or Ethnicities | — | — | — | — |
LGBTQ+ | — |
Persons with Disabilities | — |
Did not Disclose Demographic Background | — |
If a stockholder wishes to propose a candidate for consideration as a nominee for election to our Board, it must follow the procedures described in our bylaws and in “Stockholder Proposals and Nominations For Director” at the end of this proxy statement. In general, persons recommended by stockholders will be considered in accordance with our Policy on Stockholder Recommendation of Candidates for Election as Directors appended to our Nominating Committee’s written charter. Any such recommendation should be made in writing to the Nominating and Corporate Governance Committee, care of our Secretary at our principal office and should be accompanied by the following information concerning each recommending stockholder and the beneficial owner, if any, on whose behalf the nomination is made:
•all information relating to such person that would be required to be disclosed in a proxy statement;
•certain biographical and share ownership information about the stockholder and any other proponent, including a description of any derivative transactions in the Company’s securities;
•a description of certain arrangements and understandings between the proposing stockholder and any beneficial owner and any other person in connection with such stockholder nomination; and
•a statement whether or not either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of voting shares sufficient to carry the proposal.
The recommendation must also be accompanied by the following information concerning the proposed nominee:
•certain biographical information concerning the proposed nominee;
•all information concerning the proposed nominee required to be disclosed in solicitations of proxies for election of directors;
•certain information about any other security holder of the Company who supports the proposed nominee;
•a description of all relationships between the proposed nominee and the recommending stockholder or any beneficial owner, including any agreements or understandings regarding the nomination; and
•additional disclosures relating to stockholder nominees for directors, including completed questionnaires and disclosures required by our Bylaws.
A copy of the Nominating and Corporate Governance Committee’s written charter is publicly available on our website at www.dermtech.com.
Director Independence
Our common stock is listed on the Nasdaq Capital Market. Under the rules of The Nasdaq Stock Market, or Nasdaq, independent directors must comprise a majority of a listed company’s board of directors. In addition, Nasdaq rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating committee be independent. Audit committee and compensation committee members must also satisfy the enhanced independence criteria set forth in Rules 10A-3 and 10C-1 under the Exchange Act, respectively, and corresponding Nasdaq rules.
Based on information requested from and provided by each director concerning his or her background, employment and affiliations, our Board has determined that each of Cynthia Collins, Kirk Malloy, Mark Capone, Matthew Posard, Monica Tellado, Nathalie Gerschtein Keraudy and Herm Rosenman are independent directors within the meaning of applicable Nasdaq rules, and that each member of our audit committee and compensation committee satisfies the enhanced independence requirements of applicable Nasdaq and SEC rules. In making this determination, the current and prior relationships of each non-employee director with the Company and all other facts and circumstances deemed relevant were considered, including their beneficial ownership of our capital stock and any related party relationships involving the Company and any such director, as described under “Certain Relationships and Related Person Transactions” below. John Dobak, M.D. is not an independent director because he is an employee of the Company.
There are no family relationships between any director, director nominee or executive officer of the Company, and there are no arrangements or understandings between any director or director nominee and any other person pursuant to which such director or nominee was selected as a director or nominee.
Board Leadership Structure
Our corporate governance practices do not require a particular board leadership structure. Our Board is given the flexibility to select its chairperson and our chief executive officer in the manner that it believes is in the best interests of our stockholders. Accordingly, the positions of chairperson and Chief Executive Officer may be filled by either one individual or two individuals. At present, the Board has elected to separate the positions of Chairman and Chief Executive Officer. John Dobak serves as our Chief Executive Officer and as a member of our Board. Matthew Posard serves as the Chairman of our Board. The Board believes that this structure serves us well by maintaining a link between management, through John Dobak’s membership on the Board, and the non-executive directors led by Matthew Posard in his role as a non-executive Chairman.
Role of the Board in Risk Oversight
One of the key functions of our Board is informed oversight of our risk management process. The Board does not have a standing risk management committee, but rather administers this oversight function directly through the Board as a whole, as well as through the various standing committees of our Board that address risks inherent in their respective areas of oversight. In particular, our Board is responsible for monitoring and assessing strategic risk exposure and our Audit Committee has the responsibility to consider and discuss the major financial risk exposures facing the Company and the steps management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The Audit Committee also monitors compliance with legal and regulatory requirements. Our Nominating and Corporate Governance Committee monitors the effectiveness of our corporate governance practices, including whether such practices are successful in preventing illegal or improper liability-creating conduct. Our Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.
Stockholder Communications to the Board
Generally, stockholders who have questions or concerns should contact our Investor Relations department at investorrelations@dermtech.com. However, any stockholder who wishes to address questions regarding our business directly with the Board, or any individual director, should direct his or her questions in writing to DermTech, Inc., 12340 El Camino Real, San Diego, California 92130. Communications will be distributed to the Board, or to deliver your sharesany individual director or directors as appropriate, depending on the facts and circumstances outlined in the communications. Items that are unrelated to the transfer agent electronicallyduties and responsibilities of the Board may be excluded, such as:
•junk mail and mass mailings;
•resumes and other forms of job inquiries;
•surveys; and
•solicitations or advertisements.
In addition, any material that is unduly hostile, threatening, or illegal in nature may be excluded, provided that any communication that is filtered out will be made available to any outside director upon request.
Executive Officers
The following table sets forth certain information regarding our executive officers and their respective ages as of March 15, 2023.
| | | | | | | | | | | | | | |
Name | | Age | | Position(s) |
Executive Officers | | | | |
John Dobak, M.D.* | | 57 | | President, Chief Executive Officer and Class II Director |
Kevin Sun, MBA, MSSM | | 45 | | Chief Financial Officer, Treasurer and Secretary |
Todd Wood | | 54 | | Chief Commercial Officer |
Ray Akhavan, Esq. | | 54 | | General Counsel |
Claudia Ibarra | | 60 | | Chief Operating Officer |
*John Dobak, M.D. is a member of our Board. See “Management and Corporate Governance – The Board of Directors” within this proxy statement for more information about Dr. Dobak.
Kevin Sun has served as our Chief Financial Officer, Treasurer and Secretary since September 2019. Mr. Sun joined DermTech Operations in August 2019 and served in the role of Vice President, Finance. From June 2008 to November 2018, Mr. Sun served in various management and executive roles for Dexcom, Inc. (Nasdaq:DXCM) including most recently as Vice President, Corporate Controller and Treasury from November 2017 to November 2018, as Interim Chief Financial Officer from April 2017 to September 2017, as Vice President, Finance from February 2016 to November 2017, and as Senior Director, Finance from March 2014 to February 2016. Prior to Dexcom, Mr. Sun held various roles of increasing responsibility at Biosite Incorporated from 2004 to 2008, most recently as Senior Manager, Financial Planning and Analysis. Mr. Sun holds a B.S. in Business with a dual major in Accounting and Finance, a minor in Psychology, a Masters in Strategic Management and an MBA from the Kelley School of Business at Indiana University.
Todd Wood has served as our Chief Commercial Officer since the completion of the Business Combination in August 2019 and served as Chief Commercial Officer of DermTech Operations between January 2019 and August 2019. From March 2018 to December 2018, Mr. Wood served as Vice President Global Sales for Obalon Therapeutics, a medical device company. Prior to that Mr. Wood served in a variety of executive roles at Allergan including Vice President US Medical Dermatology Sales from June 2016 through March 2018 and as Vice President US Eye Care Sales from March 2013 to June 2016. Mr. Wood received a bachelor’s degree in Marketing from Grand Valley State University.
Ray Akhavan has served as our General Counsel since January 2021. From February 2017 to January 2021, Mr. Akhavan served as Associate General Counsel and Chief IP Counsel at Ancestry.com Inc. Prior to that, Mr. Akhavan was General Counsel and Chief IP Counsel at Caris Life Sciences, Inc., a cancer molecular diagnostic company, from November 2009 to December 2016. Mr. Akhavan’s experience also includes working at an international law firm, the National Institutes of Health and the United States Patent & Trademark Office. Mr. Akhavan received a J.D. from Washington College of Law at American University and an M.S. in Molecular Biology from George Mason University.
Claudia Ibarra joined us in October 2019 as our Chief Operating Officer and, following a transition period, assumed day-to-day leadership of our operations function in March 2020. Ms. Ibarra has over 25 years of experience in clinical laboratory operations, in the areas of oncology, immunology and molecular biology. From February 2012 through October 2019, Ms. Ibarra served in various management roles for Exagen Inc. (Nasdaq:XGN), including most recently as Senior Vice President of Laboratory Operations. From March 2006 through February 2012, Ms. Ibarra served in various roles of increasing responsibility at Genoptix, Inc., most recently as the Director of the Molecular Oncology Laboratory and the Molecular Genetic Training Program Coordinator. Ms. Ibarra also has experience at other reference clinical laboratories focused on immunology and solid tumors. Ms. Ibarra holds a degree in Biochemistry with specialization in clinical laboratory science from the University of Buenos Aires, Argentina and a California License as Clinical Laboratory Scientist.
COMPENSATION DISCUSSION AND ANALYSIS
We are a leading genomics company in dermatology and are creating a new category of medicine, precision dermatology. Our mission is to improve the lives of millions by providing non-invasive precision dermatology solutions that enable individualized care. We provide genomic analysis of skin samples collected non-invasively using an adhesive patch rather than a scalpel. We market and develop products that facilitate the early detection of skin cancers and are developing products that assess inflammatory diseases and customize drug treatments.
The Depository Trustfollowing Compensation Discussion and Analysis describes the philosophy, objectives and structure of our 2022 executive compensation program for the following executive officers, who constituted our named executive officers, or NEOs:
| | | | | | | | |
Name | | Position(s) |
John Dobak, M.D. | | President, Chief Executive Officer and Class II Director |
Kevin Sun, MBA, MSSM | | Chief Financial Officer, Treasurer and Secretary |
Todd Wood | | Chief Commercial Officer |
Ray Akhavan | | General Counsel |
Claudia Ibarra | | Chief Operating Officer |
Executive Summary
2022 Business Highlights
Over the course of 2022, we further developed the precision dermatology market by increasing the number of ordering clinicians, increasing awareness of our DermTech Melanoma Test and growing our billable sample volume. To date, we have devoted substantially all of our efforts to product development, increasing revenue and continuing innovation. 2022 was an important year for the Company and our achievements included the following:
Financial Performance
•Increased our assay revenue to $13.8 million, an increase of 25% compared to 2021.
•Increased our number of billable samples 53% to approximately 68,230 in 2022, compared to approximately 44,620 in 2021.
•Achieved the milestone of over 150,000 DMTs run since inception.
•Increased our unique ordering clinician population 47% to approximately 4,110 in 2022, compared to approximately 2,800 in 2021.
•Increased our overall Medicare proportion of billable samples to 24% in 2022, compared to 20% in 2021.
New Business and Expansion
•Addition of approximately 14 million covered lives through various Blue’s plans.
•Received a favorable medical policy for the DMT from the second largest lab benefit manager in the U.S.
•Executed an agreement with Sonora Quest Laboratories ("Sonora Quest") that allows them to be the exclusive laboratory for primary care in Arizona to offer the DMT to its vast network of healthcare providers.
•Initiated a pilot with an important primary care payor/provider network.
•Expanded our telemedicine solution, DermTech Connect, to 46 states.
Pipeline Progression and Clinical Evidence
•Publication of “Cost-Benefit Analysis of the Pigmented Lesion Assay When Introduced into the Visual Assessment / Histopathology Pathway for Lesions Clinically Suspicious for Melanoma,” in SKIN: The Journal of Cutaneous Medicine, which suggests that use of the DMT to rule out melanoma can minimize avoidable surgical
procedures on benign lesions and decrease downstream costs of late-stage melanoma diagnoses, which reduces overall cost of care.
•Introduced new research that enhances the differentiation of the inflammatory signatures of atopic dermatitis from psoriasis in potential clinical trial participants.
•Announced membership in the Corporate Council of the Pediatric Dermatology Research Alliance (“PeDRA”). As a member of the PeDRA Corporate Council, the Company will contribute to the development and expansion of PeDRA’s research infrastructure and serve as a valuable partner to PeDRA members.
In achieving the above, we have continued to execute on our business objectives, improving our products and technologies, and strengthening our financial position.
CEO Transition
As previously reported, on March 1, 2023, we entered into a transition agreement with our President and Chief Executive Officer, John Dobak (the “Transition Agreement”). Pursuant to the Transition Agreement, Dr. Dobak will remain employed as the Company’s DWAC (Deposit/WithdrawalPresident and Chief Executive Officer until the earliest to occur of (i) the Company’s retention of a new chief executive officer and (ii) September 30, 2023 (the “Separation Date”). Dr. Dobak has agreed to, in addition to performing his existing duties as President and Chief Executive Officer, cooperate with the Company’s efforts to recruit and engage a new chief executive officer until the Separation Date and to resign as President and Chief Executive Officer and as a director of the Company on the Separation Date.
Compensation Philosophy and Objectives
We operate within a complex business environment, which requires a strong leadership team. We are creating a new category of medicine, precision dermatology, which requires our leadership team to be experienced in commercializing new products, educating physicians and payors about how the DermTech Melanoma Test can improve patient care and reduce healthcare system costs, generating meaningful clinical data, and scaling the organization. The diagnostics industry is also characterized by rapid product development and technological advances, which require our leadership team to be adept at managing these key areas of the business. As a result, the Compensation Committee believes that it is critical to attract, develop, and retain a highly-qualified leadership team with the experience, knowledge, expertise, and vision capable of not only operating a growing commercial organization, but also excelling at developing and commercializing new products, new and improved technologies, and new applications for our existing technologies.
The Compensation Committee seeks to develop total compensation packages that are competitive with programs offered by other companies against which we compete for executive talent. At Custodian) System,the same time, the Compensation Committee believes that the compensation paid to our executive officers should be substantially dependent upon our performance and the value we create for stockholders.
To that end, the Compensation Committee has embraced a philosophy of pay-for-performance, whereby an individual’s experience, potential, and contribution to our business determines a substantial portion of his or her actual compensation. The Compensation Committee seeks to: (i) provide meaningful incentives for the attainment of specific financial or operational objectives; (ii) reward those executive officers who make substantial contributions to the attainment of those objectives, and (iii) link executive officer compensation with Company and individual performance.
The Compensation Committee’s objectives include, to:
•attract, engage and retain talented executive officers responsible for the success of our organization;
•appropriately align our business objectives and stockholder interests;
•maintain a reasonable balance across types and purposes of compensation;
•motivate our executive officers to achieve our annual and long-term financial, operational and other strategic goals and reward performance based on the attainment of such goals;
•maintain a reasonable and responsible cost structure;
•appropriately consider risk and reward in the context of our business environment and long-range business plans;
•provide compensation to our executive officers that is externally competitive, internally equitable, and performance-based; and
•provide total compensation levels reflective of Company and individual performance and provide our executive officers with the opportunity to receive above-market total compensation for exceptional business performance.
We seek to achieve these objectives in a way that is consistent with the long-term interests of our Company and those of our stakeholders, including our stockholders and employees. We structure the annual compensation of our executive officers, including our NEOs, using three principal elements: base salary, short-term incentive compensation in the form of annual cash bonuses, and long-term incentive compensation in the form of equity awards.
The Compensation Committee believes that our executive compensation program should align executive interests with the drivers of growth and stockholder returns, and support achievement of our primary business goals. The expertise, leadership, and contributions of our executive officers are critical to our ability to create sustained long-term stockholder value. Consequently, our Compensation Committee believes the substantial portion of NEO compensation should be at-risk, variable pay to facilitate the successful execution of our business strategy.
Compensation Process and Benchmarking
Role of the Compensation Committee
The purpose of the Compensation Committee is to:
•to assist our Board in the discharge of its responsibilities relating to compensation of our chief executive officer;
•to discharge the responsibilities of our Board relating to compensation of our directors and employees, including executive officers, other than our chief executive officer;
•to assist our Board in establishing appropriate incentive compensation and equity-based plans and to administer such plans;
•to oversee the annual process of evaluation of the performance of our management; and
•to perform such other duties and responsibilities as enumerated in and consistent with the written charter of the Compensation Committee, which electionis available on our website at www.dermtech.com.
The Compensation Committee, among other things:
•is comprised solely of independent directors;
•regularly meets in executive session without members of management present;
•engages an independent compensation consultant to advise on executive compensation matters;
•reviews its charter on a regular basis; and
•regularly reviews the realizable compensation of our chief executive officer and other executive officers and the Company’s performance to evaluate the alignment of compensation with performance.
In determining each executive officer’s compensation, the Compensation Committee reviews our corporate financial performance and financial condition and assesses the performance of the individual executive officers. Individual executive officer performance is evaluated by our chief executive officer, in the case of our executive officers other than our chief executive officer, and by our Compensation Committee, in the case of our chief executive officer. Our chief executive officer does not participate in the deliberations of our Compensation Committee or Board regarding his own compensation. Our chief executive officer meets with our Compensation Committee to discuss executive compensation matters and to make recommendations to our Compensation Committee with respect to our other executive officers. Our Compensation Committee is not bound to follow our chief executive officer’s recommendations and may determine the compensation of our executive officers other than our chief executive officer in its discretion.
Evaluation of management performance and rewards is performed annually or more often, as needed. Although many of our compensation decisions are made in the first quarter of each calendar year, the compensation evaluation process is continuous and compensation discussions and decisions designed to promote our fundamental business objectives and strategies may occur more frequently.
Role of the Compensation Consultant
The Compensation Committee is authorized to engage the services of outside consultants. In 2022, the Compensation Committee engaged Compensia, a national compensation consulting firm, or Compensia, as its compensation consultant to review our executive compensation program, assess the competitiveness of this program, and advise the Compensation Committee on matters related to executive compensation. During 2022, Compensia assisted the Compensation Committee by providing the following services:
•assisting the Compensation Committee in reviewing and updating an appropriate peer group of companies for purposes of benchmarking our levels of compensation;
•gathering and analyzing compensation data from available compensation surveys;
•advising the Compensation Committee on policies and practices related to executive officer and director stock ownership and structuring of such policies and practices relative to peer group companies’ publicly disclosed policies and practices;
•assisting the Compensation Committee in assessing the competitiveness of our executive compensation program; and
•providing guidance concerning changes in competitive executive compensation standards in response to changing macroeconomic conditions amongst our peer group.
Compensia served at the discretion of and reported directly to our Compensation Committee. Our Compensation Committee assessed Compensia’s independence, taking into account, among other things, the independence standards and factors set forth in Exchange Act Rule 10C-1 and the applicable Nasdaq Listing Standards, and concluded that there were no conflicts of interest with respect to the work that Compensia performed for our Compensation Committee in 2022. Compensia did not provide any services to us or our management in 2022 other than those provided to our Compensation Committee and our Board as described above.
Use of Competitive Market Data
The Compensation Committee regularly considers the appropriate compensation levels for our executive officers, including our NEOs, and, as part of that process, considers compensation levels provided by comparable, or peer, companies in order to ensure that our target total direct compensation is competitive with the compensation paid within the industry and is appropriate given the NEO’s level of responsibilities. However, the Compensation Committee recognizes that consideration of such comparative data alone is an imperfect tool for establishing competitive compensation packages as the job responsibilities of persons with similar titles may vary significantly from company to company, and a person’s title is not necessarily descriptive of a person���s duties.
As directed by the Compensation Committee, Compensia identified a peer group appropriate for purposes of comparing compensation levels and practices for 2022. When selecting appropriate peers, Compensia used peer companies, the following general criteria:
•Location – Headquarteredin the United States;
•Industry – public biotechnology, health care supplies, and life science tools and services;
•Revenues– less than $500 million; and
•Market Capitalization– between $48.0 million and $1.0 billion.
The companies considered by Compensia and approved by our Compensation Committee for purposes of their 2022 executive compensation assessments, or the Peer Group, were as follows:
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Alphatec Holdings | Codexis | Quanterix |
Arcturus Therapeutics Holdings | Exagen | Standard BioTools |
Biodesix | IDEAYA Biosciences | Senseonics Holdings |
Bionano Genomics | Nanostring Technologies | Singular Genomics Systems |
CareDx | Nautilus Biotechnology | Vanda Pharmaceuticals |
Castle Biosciences | Personalis | Veracyte |
Cerus | Pulse Biosciences | |
With Compensia’s assistance, our Compensation Committee used compensation data from the public filings of the companies in the Peer Group and data from the Radford’s Life Sciences Survey, which included data from 20 life science companies of similar industry and size to the Company, to establish a competitive market range within which our NEO’s compensation could be positioned. Compensia provided the Compensation Committee with an analysis that identified the competitive market median range for each executive officer based on their respective, or substantially similar, positions at companies within the Peer Group. In cases where the data from the Peer Group was unavailable or insufficient, a competitive market median range was derived from the Radford survey data reflecting companies of comparable size and business profile.
Our Compensation Committee evaluated the cash and equity compensation data analyzed in Compensia’s report, combined with its review of each executive officer’s past individual performance, level of responsibility, and expected future contributions to the Company in setting base salary levels and determining the design and size of equity awards for 2022. Our Compensation Committee believes that relying upon the Peer Group data alone is not sufficient for setting compensation levels but is important as a reference point in making its compensation decisions.
After considering the results of Compensia’s report, the Compensation Committee determined for 2022, that it was appropriate to target the same approximate percentiles of the Peer Group that it targeted for 2021: the 25th to 50th percentile of the Peer Group for base salaries, the 50th percentile of the Peer Group for target annual cash incentives, and the 50th to 75th percentile of the Peer Group competitive market for equity awards. The target percentiles of the Peer Group competitive market for base salaries and target annual cash bonuses were selected by our Compensation Committee with the goal of providing a total target cash compensation opportunity that for our executive officers was likely promote motivation and retention in light of each executive officer’s reflected role and scope of responsibilities. The target percentiles of the Peer Group competitive market for equity awards were selected with the goal of making a significant portion of the executive officers’ target total direct compensation “at risk” and aligned with the interests of our stockholders. The 50th percentile level was the same level generally targeted for equity awards among all of our non-executive employees for 2022.
Elements of our Compensation Program
Our executive compensation program consists of three primary elements: base salaries, annual cash incentives, and long-term incentive compensation opportunities in the form of equity awards:
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Element | | Performance Period | | Objective | | Performance Measured / Rewarded |
Base Salary | | Annual | | Provide NEOs with fixed compensation as a means to attract, retain, and reward top talent and reflect an NEO’s responsibilities and performance. | | Reward NEOs for key performance and contributions |
Annual Incentive Cash Bonuses | | Annual | | Reward achievement of annual Company goals subject to meeting individual performance expectations | | Cash bonuses reward NEOs for their individual performance and the performance of the Company over and based on the Company’s financial and strategic goals. |
Long-Term Incentive Equity Awards | | Long-Term (three years) | | Align the interests of NEOs and our stockholders by supporting the achievement of strong share price growth and serve as an important retention vehicle. | | NEOs receive a mix of restricted stock unit awards and stock options, each with time-based vesting to reward long-term stock price growth and encourage retention. |
We are committed to maintaining a strong performance orientation in our executive compensation program and effective corporate governance practices for a company at our development stage and industry. As such, we routinely review our program design and policies and practices. Some of the governance practices we observe include:
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What We Do | |
þ Pay-for-performance alignment—our annual cash incentive program includes both financial and non-financial performance metrics þ Maintain an Insider Trading Policy þ Align compensation with stockholder interests þ Maintain “double trigger” payments and benefits in the event of a Change in Control þ Conduct annual compensation review þ Recommend an annual stockholder advisory vote on NEO compensation þ Provide limited perquisites to our executive officers | þ Maintain director and executive officer stock ownership guidelines þ Balance mix of fixed and variable compensation þ Multi-year vesting requirements for stock options and restricted stock unit awards þ Robust anti-hedging and pledging policies þ Retain an independent compensation consultant þ Only independent directors serve on the audit, compensation and nominating and corporate governance committees of our Board |
What We Do Not Do | |
x Provide excessive severance payments x Use excise tax gross-ups x Use guaranteed bonuses x Provide “single trigger” change-in-control severance payments and benefits x Provide excessive perquisites x Provide special executive retirement plans | x Provide special welfare benefits to our executive officers x Permit certain direct or indirect option repricings without stockholder consent |
Base Salary
Base salary is the only fixed component of our NEO’s total cash compensation and provides competitive pay to attract and retain our executive officers. Generally, we use base salary to provide each NEO with a specified level of cash compensation during the year with the expectation that he or she will perform his or her responsibilities to the best of his or her ability and in our best interests and the best interests of our stockholders. Annual base salary decisions are made after evaluating competitive market data as well as the skills and experience that each individual brings to the Company and the performance contributions each makes.
Base salary changes in 2022 varied among the NEOs due either to merit increases and/or market adjustmentsup to levels that approximate the 25th to 50th percentile of base salaries of comparable position with companies in the Peer Group. The increases in 2022 were based on an assessment of the following factors:
•peer group data and external market information;
•individual performance;
•the level of responsibility assumed and the nature and complexity of each NEO’s role;
•the leadership demonstrated to create and promote a day-to-day working environment; and
•the desire to attract, engage, and retain NEOs capable of achieving the Company’s strategic objectives and the marketability and criticality of retention of our NEOs.
Annual base salaries for our NEOs as of December 31, 2022 and December 31, 2021 were as follows:
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Named Executive Officer | | 2022 | | 2021 | | Increase |
John Dobak, M.D. | | $ | 597,400 | | (1) | $ | 580,000 | | | 3.0 | % |
Kevin Sun, MBA, MSSM | | $ | 400,000 | | (2) | $ | 370,000 | | | 8.1 | % |
Todd Wood | | $ | 391,400 | | (3) | $ | 380,000 | | | 3.0 | % |
Ray Akhavan | | $ | 360,500 | | (4) | $ | 350,000 | | | 3.0 | % |
Claudia Ibarra | | $ | 360,500 | | (5) | $ | 335,000 | | | 7.6 | % |
*See footnotes for a description of the changes to base salary that were effected throughout 2022. Actual amounts of salary paid to our NEOs are described in the “Summary Compensation Table” below.
(1)Effective January 1, 2022, John Dobak, M.D.’s annual base salary was increased to $597,400 pursuant to annual discretionary raises as determined by our Compensation Committee.
(2)Effective January 1, 2022, Mr. Sun’s annual base salary was increased to $400,000 pursuant to annual discretionary raises as determined by our Compensation Committee.
(3)Effective January 1, 2022, Mr. Wood’s annual base salary was increased to $391,400 pursuant to annual discretionary raises as determined by our Compensation Committee.
(4)Effective January 1, 2022, Mr. Akhavan’s annual base salary was increased to $360,500 pursuant to annual discretionary raises as determined by our Compensation Committee..
(5)Ms. Ibarra’s annual base salary was increased to $345,050 effective January 1, 2022 and to $360,500 effective March 23, 2022 pursuant to annual discretionary raises as determined by our Compensation Committee.
Annual Incentive Cash Bonuses
Our 2022 Corporate Bonus Plan, or the 2022 Bonus Plan, is designed to provide a financial incentive to reward key executive officers for the achievement of annual corporate performance objectives. Under our 2022 Bonus Plan, each NEO has a target bonus determined annually by our Compensation Committee expressed as a percentage of the amount of his or her base salary received during the fiscal year. Payments under the 2022 Bonus Plan are primarily based on the achievement of goals determined by the Compensation Committee. However, the 2022 Bonus Plan provides that our Compensation Committee has authority and discretion to adjust goals and determine goal achievement, and modify, increase or decrease any bonus payments at any time. We believe this flexibility is important in that it allows our Compensation Committee to adapt to unexpected market or other conditions that might otherwise cause a misalignment of our 2022 Bonus Plan and the objectives we intend it to serve.
For purposes of our 2022 Bonus Plan, the target bonuses set by the Board or the Compensation Committee ranged from zero to 125% of the respective salaries the 2022 Bonus Plan participants earned in 2022. For 2022, our Compensation Committee set goals under the 2022 Bonus Plan regarding certain metrics including: assay revenue, total number of covered lives secured, DMT cost of goods sold and product pipeline developments. For each of these metrics, the Compensation Committee established performance thresholds at the following levels: 50% achievement; 75% achievement; 100% achievement and 125% or greater achievement. The Compensation Committee also determined that under the 2022 Bonus Plan a certain percentage of each participant's bonus opportunity would likely be determined based on his or her individual performance, with the mannerremainder being based on the Company's performance. The total bonus opportunity under the 2022 Bonus Plan for our chief executive officer is 100% based on the Company's performance. The 25% of the total bonus opportunity under the 2022 Bonus Plan for our NEOs of other than our chief executive officer is based on individual performance and the remaining 75% of their bonus opportunity is based on the Company's performance.
Our Compensation Committee determined that the goals it set under the 2022 Bonus Plan for individual performance by our NEOs (other than our chief executive officer) were 100% achieved, but the goals it set under the 2022 Bonus Plan for the Company's performance were 0% achieved. Awards under our 2022 Bonus Plan are typically paid in the quarter following the close of the performance period.
The cash bonuses paid to our NEOs for 2022 were:
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Named Executive Officer | | Base Salary for Purposes of Bonus Calculation | | 2022 Annual Target Bonus (% of salary) | | Percentage of Total Bonus Opportunity Based on the Company’s Performance | | Percentage of Company Performance Goals Achieved | | Percentage of Total Bonus Opportunity Based on Individual Performance | | Percentage of Individual Performance Goals Achieved | | 2022 Earned Bonus |
John Dobak, M.D. | | $ | 597,400 | | | 80 | % | | 100 | % | | — | % | | N/A | | N/A | | $ | — | |
Kevin Sun, MBA, MSSM | | $ | 400,000 | | | 50 | % | | 75 | % | | — | % | | 25 | % | | 100 | % | | $ | 50,000 | |
Todd Wood | | $ | 391,400 | | | 50 | % | | 75 | % | | — | % | | 25 | % | | 100 | % | | $ | 48,925 | |
Ray Akhavan | | $ | 360,500 | | | 45 | % | | 75 | % | | — | % | | 25 | % | | 100 | % | | $ | 40,556 | |
Claudia Ibarra | | $ | 356,984 | | | 50 | % | | 75 | % | | — | % | | 25 | % | | 100 | % | | $ | 44,623 | |
Long-Term Incentives
Our focus on long-term value creation lead us to develop an executive compensation program that heavily weights equity compensation, which you hold your shares. The requirement for physicalcan consist of stock options and restricted stock units, relative to cash compensation. We use equity compensation that vests over a multi-year period to see that a significant portion of our NEO’s compensation opportunity is tied to increasing stockholder value. We believe this serves as incentive to drive appreciation in our stock price and long-term value creation, and enables us to further our executive retention objectives. We also believe that equity participation establishes a sense of ownership and aligns executive officer interests with those of our other stockholders.
In 2022, we provided our executives’ target long-term incentive compensation via restricted stock units. Our standard practice is to typically require that restricted stock units or electronic delivery priorstock options vest over three to four years subject to the vote atcontinued service of the special meeting ensures that a redeeming holder’s electionrecipient. The Compensation Committee believes this structure is irrevocable onceappropriate for us given our current competitive recruiting landscape, our current company size and our current growth trajectory.
In 2022, we granted our NEOs restricted stock units reflected in the Extension Amendment is approved. In furtherancefollowing table, vesting over three years with one third of such irrevocable election, shareholders making the election willgrant vesting on March 5, 2023 and the remaining two-thirds vesting in equal quarterly installments thereafter until fully vested on March 5, 2026, in each case subject to the continued service of the recipient:
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| | Restricted Stock Units |
Named Executive Officer | | (#) | | ($)(1) |
John Dobak, M.D. | | 209,527 | | $ | 2,738,518 | |
Kevin Sun, MBA, MSSM | | 75,215 | | $ | 999,607 | |
Todd Wood | | 75,215 | | $ | 999,607 | |
Ray Akhavan | | 59,097 | | $ | 785,399 | |
Claudia Ibarra | | 59,097 | | $ | 785,399 | |
(1)Amounts set forth in this column generally represent the aggregate grant date fair value of the restricted stock unit awards granted to each NEO, computed in accordance with ASC Topic 718. These amounts do not be ablerepresent the actual amounts paid to tender their shares after the vote at the special meeting.
Through the DWAC system, this electronic delivery process can be accomplishedor realized by the shareholder, whether or not itNEOs. The actual value, if any, that may be realized from a restricted stock unit award is a record holder or its shares are held in “street name,” by contactingcontingent upon the transfer agent or its broker and requesting deliverysatisfaction of its shares through the DWAC system. Delivering shares physically may take significantly longer. In orderconditions to obtain a physical share certificate, a shareholder’s broker and/or clearing broker, DTC,vesting of that award and the Company’s transfer agent will needprice of our common stock on the date the shares underlying the restricted stock units are sold.
Health and Welfare Benefits
We provide our NEOs with other benefits that we believe are reasonable and consistent with, or less than, what our Peer Group offers their executive officers and that help us to act togetherattract and retain high quality executives. The Compensation Committee periodically reviews the levels of benefits provided to facilitate this request. There is a nominal costour executive officers to ensure they remain reasonable and consistent with our compensation philosophy.
Our NEOs are eligible to participate in all of our employee benefit plans, such as our 401(k) Plan, medical, dental, vision coverage, short-term disability, long-term disability, group life insurance, accidental death and dismemberment benefits, employee assistance plan and the 2020 Employee Stock Purchase Plan, in each case on the same basis as our other employees. We do not currently offer pension or other retirement benefits for our NEOs other than the 401(k) Plan.
Hedging and Pledging Prohibitions
Our insider trading policy prohibits our directors, officers (including our NEOs and other executive officers), employees and agents, as well as their immediate family members, from engaging in short sales of our securities and from engaging in transactions in publicly-traded options and other derivative securities with respect to our securities. This prohibition extends to any hedging or similar transactions designed to decrease the risks associated with holding our securities. Our insider trading policy also prohibits certain individuals, including our directors and executive officers, from use of the above-referenced tendering processCompany’s securities to secure a margin or other loan.
Change of Control and Severance Benefits
Change in Control and Severance Plan
Dr. Dobak, Messrs. Sun, Wood, and Akhavan and Ms. Ibarra are each participants in our change of control and severance plan, referred to as the actSeverance Plan, in each case providing for certain change of certificatingcontrol related severance payments and benefits. For more information regarding our change of control related severance payments and benefits, please see the sharessection below entitled “Employment, Severance and Change in Control Agreements.” The Compensation Committee believes that these change of control related severance payments and benefits are an important element of our executive compensation program, which have particular importance in the context of a change in control. The Company change of control related severance payments and benefits under the Severance Plan, including equity award vesting acceleration, are structured on a “double-trigger” basis, meaning that the executive officer must experience an actual termination of employment without cause or delivering them throughresign for good reason within twelve months following a change in control in order for the DWAC system.payments and benefits to become due. The transfer agent will typically chargeCompensation Committee believes that the tendering broker $45events triggering payment, comprising of a change in control and either a termination other than for cause or resignation for good reason, are appropriate conditions for the broker would determine whether or not to pass this cost on to the redeeming holder.ensuing benefits. It is the Company’s understandingCompensation Committee’s belief that shareholdersproviding change in control payments and benefits should reduce any reluctance of our executive officers to diligently consider and pursue potential change in control transactions that may be in the best interests of our stockholders.
The Severance Plan also provides for certain severance payments and benefits in the event of an involuntary termination of employment without cause outside of the twelve months following a change in control, including continued payment of certain healthcare benefits, certain severance and bonus payments and partial acceleration of unvested equity awards, in exchange for a general release of claims, in favor of the Company. Our Board and Compensation Committee believe that the non-change in control related severance payments and benefits provided to our NEOs are each an important element of their retention and motivation and are consistent with compensation arrangements provided in a competitive market for executive talent. It is further believed that the payments and benefits of such severance arrangements, including generally allot at least two weeksrequiring a release of claims in favor of the Company as a condition to obtain physical certificatesreceiving the severance payments and benefits, are in the best interests of the Company and its stockholders.
Additionally, on March 1, 2023, Dr. Dobak entered into the Transition Agreement with the Company. Under the Transition Agreement, through the Separation Date (as defined in the Transition Agreement), the Company will continue to pay Dr. Dobak’s salary and benefits. Also pursuant to the Transition Agreement, the Company granted Dr. Dobak 56,407 restricted stock units, subject to quarterly vesting. Dr. Dobak’s equity awards shall continue to vest from the transfer agent. The Company does not have any control over this process or overSeparation Date until January 1, 2024. Provided Dr. Dobak remains party to the brokers or DTC,Transition Agreement and it may take longer than two weekscertain releases, he will also be entitled to obtainreceive a physical share certificate. Such shareholders will have less timelump sum cash payment in an amount equal to make their investment decision than those shareholders that deliver their shares through12 months of his then current base salary within 30 days of his agreement to certain releases, payment of COBRA premiums for up to twelve months following the DWAC system. Shareholders who request physical share certificatesSeparation Date, additional vesting and wish to redeem may be unable to meetextended exercisability for certain equity awards, and certain cash bonuses, each as further described in the deadlineTransition Agreement.
Accounting and Tax Considerations
We account for tendering their shares before exercising their redemption rights and thus will be unable to redeem their shares.
Certificates that have not been tenderedstock-based awards exchanged for employee services in accordance with the Financial Accounting Standards Board Accounting Standards Codification No. 718, Compensation-Stock Compensation, or FASB ASC Topic 718. In accordance with FASB ASC Topic 718, we are required to estimate and record an expense for each award of equity compensation over the vesting period of the award. Accounting rules also require us to record cash compensation as an expense over the period during which it is earned.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of our Board has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K, which appears elsewhere in this proxy statement, with our management and, based on such review and discussions, the Compensation Committee has recommended to our Board that the Compensation Discussion and Analysis be included in this proxy statement.
Members of the DermTech, Inc. Compensation Committee:
Matthew Posard (Chair)
Cynthia Collins
Kirk Malloy
EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
2022 Summary Compensation Table
The following table provides information regarding the compensation paid to, or earned by, our NEOs during years indicated.
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Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | Stock Awards ($) (1) | | Option Awards ($) (2) | | Non-Equity Incentive Plan Compensation ($)(3) | | All Other Compensation ($) | | Total ($) |
John Dobak, M.D. President and Chief Executive Officer | | 2022 | | 597,400 | | | — | | | 2,738,518 | | | — | | | — | | | 516 | | (4) | 3,336,434 | |
| 2021 | | 580,000 | | | — | | | 1,298,591 | | | 1,300,174 | | | 203,000 | | | 413 | | (4) | 3,382,178 | |
| 2020 | | 480,000 | | | — | | | 1,395,675 | | | 1,400,849 | | | 187,200 | | | 557 | | (4) | 3,464,281 | |
Kevin Sun, MBA, MSSM Chief Financial Officer | | 2022 | | 400,000 | | | — | | | 999,607 | | | — | | | 50,000 | | | 11,921 | | (5) | 1,461,528 | |
| 2021 | | 370,000 | | | — | | | 356,729 | | | 357,155 | | | 74,000 | | | 516 | | (4) | 1,158,400 | |
| 2020 | | 308,000 | | | — | | | 1,803,281 | | | 491,307 | | | 69,956 | | | 696 | | (4) | 2,673,240 | |
Todd Wood Chief Commercial Officer | | 2022 | | 391,400 | | | — | | | 999,607 | | | — | | | 48,925 | | | 13,404 | | (5) | 1,453,336 | |
| 2021 | | 380,000 | | | — | | | 363,046 | | | 363,468 | | | 95,000 | | | 413 | | (4) | 1,201,927 | |
| 2020 | | 315,000 | | | — | | | 404,485 | | | 380,153 | | | 102,375 | | | 557 | | (4) | 1,202,570 | |
Ray Akhavan(6) General Counsel | | 2022 | | 360,500 | | | — | | | 785,399 | | | — | | | 40,556 | | | 11,999 | | (5) | 1,198,454 | |
| 2021 | | 347,532 | | | 80,000 | | (7) | 1,158,909 | | | 1,298,125 | | | 69,506 | | | 46,914 | | (8) | 3,000,986 | |
Claudia Ibarra Chief Operating Officer | | 2022 | | 356,984 | | | — | | | 785,399 | | | — | | | 44,623 | | | 12,480 | | (5) | 1,199,486 | |
| 2021 | | 335,000 | | | — | | | 266,212 | | | 266,527 | | | 67,000 | | | 413 | | (4) | 935,152 | |
| 2020 | | 285,000 | | | — | | | 1,480,166 | | | 232,248 | | | 64,838 | | | 557 | | (4) | 2,062,809 | |
(1)Amounts reported represent the aggregate fair value of stock awards computed as of the grant date of each stock award in accordance with FASB ASC Topic 718. A discussion of the assumptions used in determining the grant date fair value may be found in Note 3 to our Financial Statements, included in our Annual Report on Form 10-K for the year ended December 31, 2022.
(2)Amounts reported represent the aggregate fair value of option awards computed as of the grant date of each option award in accordance with FASB ASC Topic 718.
(3)Amounts reported represent the annual cash incentives bonus earned in the designated fiscal year under our 2022 Bonus Plan, 2021 Bonus Plan or 2020 Bonus Plan, as applicable. See the “Compensation Discussion and Analysis” section above for a more detailed discussion.
(4)Amounts reported represent life insurance premiums paid by the Company.
(5)Amount For the 2022 fiscal year, amounts represent, (i) with respect to Messrs. Sun, Wood, Akhavan and Ms. Ibarra, matching contributions under our 401(k) plan in the amount of $11,405 for Mr. Sun, $12,852 for Mr. Wood, $11,483 for Mr. Akhavan and $11,964 for Ms. Ibarra, (ii) life insurance premiums paid by the Company of $516 and (iii) tax gross up of $36 for Mr. Wood.
(6)Mr. Akhavan commenced employment with the Company on January 5, 2021 and was not an NEO in 2020. Accordingly, 2020 compensation information for Mr. Akhavan is not included in this table.
(7)Amount reported represents a sign-on bonus.
(8)Amount reported represents the sum of (i) reimbursement of relocation expenses in the amount of $46,535, (ii) life insurance premiums of $379.
2022 Grants of Plan-Based Awards Table
The following table presents, for each of our NEOs, information concerning each grant of an equity award made during the fiscal year ended December 31, 2022. This information supplements the information about these procedures priorawards set forth in the 2022 Summary Compensation Table and the 2022 Outstanding Equity Awards at Fiscal Year-End Table.
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| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | Stock Awards |
Name | | Grant Date | | Threshold ($) | Target ($) | Maximum ($) | | Number of shares of stock or units (#) | | Grant Date Fair Value of Stock Awards ($)(2) | |
John Dobak, M.D. | | 3/25/2022 | | 238,960 | 477,920 | 563,946 | (3) | 209,527 | (5) | 2,738,518 | | |
Kevin Sun, MBA, MSSM | | 3/23/2022 | | 125,000 | 200,000 | 227,000 | (4) | 75,215 | (5) | 999,607 | | |
Todd Wood | | 3/23/2022 | | 122,313 | 195,700 | 222,120 | (4) | 75,215 | (5) | 999,607 | | |
Ray Akhavan | | 3/23/2022 | | 101,391 | 162,225 | 184,125 | (4) | 59,097 | (5) | 785,399 | | |
Claudia Ibarra | | 3/23/2022 | | 111,558 | 178,492 | 202,589 | (4) | 59,097 | (5) | 785,399 | | |
___________________________
(1)Represents the threshold, target and maximum bonus opportunity under the Company’s 2022 Bonus Plan for the named executive officers as further described in the “Compensation Discussion and Analysis.”
(2)The amounts reported in this column reflect the aggregate grant date fair value of the stock awards granted in 2022, determined in accordance with FASB ASC Topic 718.
(3)100% of our Chief Executive Officer’s bonus is linked to corporate performance.
(4)75% of this named executive officer’s bonus is linked to corporate performance, which is capped at 118% of the target amount, and 25% is linked to individual performance, which is capped at 100% of the target amount.
(5)Three thirty-sixths (12/36) of the restricted stock units shall vest on March 5, 2023 and the remaining twenty-four thirty-sixths (24/36) shall vest in eight (8) equal installments of three thirty-sixths (3/36) on the fifth day of each third month following March 5, 2023 until the final vesting date on March 5, 2025.
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Employment Agreements
We entered into an executive employment agreement with our Chief Executive Officer, John Dobak, and employment offer letters with our Chief Financial Officer, Kevin Sun, our Chief Commercial Officer, Todd Wood, our General Counsel, Ray Akhavan and our Chief Operating Officer, Claudia Ibarra, each in connection with their employment with us, the material terms of which are described below. Except as noted below, these documents provide for “at will” employment. In addition, the NEOs have entered into confidentiality agreements obligating them to refrain from disclosing any of our proprietary information received during the course of their employment.
John Dobak, M.D.
We entered into an executive employment agreement with Dr. Dobak, as our Chief Executive Officer and President, on June 26, 2012. Pursuant to the voteterms of this agreement, Dr. Dobak’s initial annual base salary was $250,000, which salary has since increased to $597,400 pursuant to annual discretionary raises as determined by our Compensation Committee and Board. In connection with his hiring, Dr. Dobak received a stock option grant exercisable for the Extension Amendment will not be redeemed for a pro rata portionup to 5% of the funds held in the trust account. In the event that a public shareholder tenders its shares and decides priorDermTech Operations’ fully-diluted capitalization at an exercise price equal to the vote at the special meeting that it does not want to redeem its shares, the shareholder may withdraw the tender. If you delivered your shares for redemption tofair market value of our transfer agent and decide prior to the vote at the special meeting not to redeem your shares, you may request that our transfer agent return the shares (physically or electronically). You may make such request by contacting our transfer agent at the address listed above. In the event that a public shareholder tenders shares and the Extension Amendment is not approved or is abandoned, these shares will not be redeemed and the physical certificates representing these shares will be returned to the shareholder promptly following the determination that the Extension will not be approved or will be abandoned. The Company anticipates that a public shareholder who tenders shares for redemption in