UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
SCHEDULE 14A INFORMATION
_____________________
Proxy Statement Pursuant to Section 14(a)14(A) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant
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Filed by a Party other than the Registrant | ☐ |
Check the appropriate box:
☐ | Preliminary Proxy | |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule | |
☒ | Definitive Proxy | |
☐ | Definitive Additional | |
☐ | Soliciting Material |
Arcimoto, Inc.
ARCIMOTO, INC.
(Name of Registrant as Specified In Itsin its Charter)
N/A
_______________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other thanOther Than the Registrant)
Payment of Filing Fee (Check the appropriate box)all boxes that apply):
☒ | No fee required. | |
☐ | Fee paid previously with preliminary materials. | |
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| Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules |
Notice of
June 16, 2023 Annual Meeting and
2023 Proxy Statement
2034 West 2ndAvenue
Eugene, Oregon 97402
NOTICE OF SPECIALANNUAL MEETING OF STOCKHOLDERSSHAREHOLDERS
TO BE HELD JUNE 16, 2023
To Be Held On November 11, 2022
To Our Stockholders:
the Shareholders of Arcimoto, Inc.:
Notice is hereby given that a special meetingthe Annual Meeting of stockholdersShareholders (the “Special“Annual Meeting”) of Arcimoto, Inc., an Oregon corporation (the “Company” or “Arcimoto”), will be held on June 16, 2023 at 155 Blair Blvd, 2nd floor,133 Chambers Street, Eugene, Oregon 97402 on November 11, 2022, at 9:00 a.m. (Pacific time),AM PDT. The meeting is called for the following purposes (whichpurposes:
1. To elect the five directors named in the Proxy Statement for a one-year term expiring in 2024 or until their successors have been elected and qualified;
2. To approve an amendment to the Arcimoto, Inc. 2022 Omnibus Stock Incentive Plan to increase the number of shares reserved for issuance thereunder by 1,500,000;
3. To approve, on an advisory basis, the compensation of the Company’s named executive officers;
4. To indicate, on an advisory basis, the preferred frequency of future shareholder advisory votes on the compensation of the Company’s named executive officers;
5. To ratify the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2023; and
6. To consider and take action upon such other matters as may properly come before the meeting or any adjournment or postponement thereof.
These matters are more fully described in the Proxy Statement which is attached and madeaccompanying this Notice.
If you were a partshareholder of this Notice):
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The Board of Directors unanimously recommends that stockholders vote “FOR” eachrecord of the Note and Warrant Share Issuance Proposal, the ELOC Issuance Proposal, the Increased Capitalization Proposal, the Decreased Quorum Proposal and the Reverse Stock Split Proposal. The BoardCompany as of Director’s reasons for seeking approval of each of the proposals are set forth in the attached Proxy Statement.
Stockholders of record at the close of business on October 3, 2022April 19, 2023 (the “Record Date”), you are entitled to noticereceive this Notice and vote at the Annual Meeting and any adjournments or postponements thereof, provided that our board of and to attend anddirectors may fix a new record date for an adjourned meeting. A list of the shareholders entitled to vote at the Special Meeting andmeeting may be examined at our principal executive office in Eugene, Oregon during ordinary business hours during the period beginning two business days after this notice of the meeting is mailed through the meeting date for any postponement or adjournment thereof.purposes related to the meeting.
We are pleased to take advantage of the Securities and Exchange Commission rules that allow us to furnish these proxy materials (including an electronic Proxy Card for the meeting) and our 2022 Annual Report to Shareholders (which includes our 2022 Annual Report on Form 10-K) to shareholders via the Internet. On or about May 1, 2023, we mailed to our shareholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our Proxy Statement and 2022 Annual Report to Shareholders and how to vote. We believe that posting these materials on the Internet enables us to provide shareholders with the information they need to vote more quickly, while lowering the cost and reducing the environmental impact of printing and delivering annual meeting materials.
You are cordially invited to attend the SpecialAnnual Meeting in person. Whether or not you expect to attend, our Boardboard of Directorsdirectors respectfully requests that you vote your stock in the manner described in the Proxy Statement. You may revoke your proxy in the manner described in the Proxy Statement at any time before it has been voted at the meeting.
By Order of the Board of Directors of | |||
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Mark D. Frohnmayer | |||
Chairman of the Board | |||
Eugene, Oregon
Dated: May 1, 2023
October 21, 2022
ARCIMOTO, INC.
Proxy Statement
for the
Annual Meeting of Shareholders
To Be Held June 16, 2023
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PROXY STATEMENT
FOR THE SPECIALANNUAL MEETING OF STOCKHOLDERSSHAREHOLDERS
TO BE HELD JUNE 16, 2023
Information Concerning Solicitation and Voting
To Be Held On November 11, 2022
The following informationThis Proxy Statement is furnished to each stockholderthe holders of our common stock in connection with the foregoing Noticesolicitation of Special Meetingproxies on behalf of Stockholdersour board of Arcimoto, Inc., an Oregon corporation, to be held at 155 Blair Blvd, 2nd floor, Eugene, Oregon 97402 on November 11, 2022, at 9:00 a.m. (Pacific time). The enclosed proxy isdirectors for use at the special meetingAnnual Meeting of stockholdersShareholders (the “Special“Annual Meeting”) andto be held on June 16, 2023 at 9:00 a.m. PDT at 133 Chambers Street, Eugene, Oregon 97402, or for use at any adjournment or postponement or adjournment thereof. Unless the context requires otherwise, references to “Arcimoto,” “the Company,” “we,” “our,” and “us” in this Proxy Statement refer to Arcimoto, Inc.
In accordance with the Second Amended and Restated Bylaws of the Company (the “Bylaws”), the Special Meeting has been calledthereof, for the following purposes:
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Stockholderspurposes set forth herein and in the accompanying Notice of Annual Meeting. Only shareholders of record at the close of business on October 3, 2022April 19, 2023 (the “Record Date”) are entitled to notice of and to attend and to vote at the Special MeetingAnnual Meeting.
In accordance with the rules of the Securities and any postponement or adjournment thereof. We intendExchange Commission (“SEC”), instead of mailing a printed copy of our proxy materials to maileach shareholder of record, we are furnishing proxy materials, including the Notice, this Proxy Statement, together withour 2022 Annual Report to Shareholders, including financial statements, and a proxy card,Proxy Card for the Annual Meeting, by providing access to them on the Internet to save printing costs and benefit the environment. These materials were first available on the Internet on May 1, 2023. We mailed a Notice of Internet Availability of Proxy Materials on or about October 21, 2022May 1, 2023 to our shareholders of record and beneficial owners as of the Record Date. This Proxy Statement and the Notice of Internet Availability of Proxy Materials contain instructions for accessing and reviewing our proxy materials on the Internet and for voting by proxy over the Internet. You will need to obtain your own Internet access if you choose to access the proxy materials and/or vote over the Internet. If you prefer to receive printed copies of our proxy materials, the Notice of Internet Availability of Proxy Materials contains instructions on how to request the materials by mail. You will not receive printed copies of the proxy materials unless you request them. If you elect to receive the materials by mail, you may also vote by proxy on the Proxy Card or Voter Instruction Card that you will receive in response to your request.
Each holder of our common stock is entitled to one vote for each share held as of the record date with respect to all stockholdersmatters that may be considered at the Annual Meeting. As of the Record Date, there were 7,338,249 shares of our common stock outstanding and entitled to vote at the Specialmeeting. Shareholder votes will be tabulated by persons appointed by our board of directors to act as inspectors of election for the meeting.
We bear the expense of soliciting proxies. Our directors, officers, or employees may also solicit proxies personally or by telephone, telegram, facsimile, or other means of communication. We do not intend to pay additional compensation for our directors, officers or employees doing so. In addition, we might reimburse banks, brokerage firms, and other custodians, nominees, and fiduciaries representing beneficial owners of our common stock, for their expenses in forwarding soliciting materials to those beneficial owners.
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QUESTIONS AND ANSWERS ABOUT THE 2023 ANNUAL MEETING
Q: Who may attend the Annual Meeting?
A: Attendance at the Annual Meeting will be limited to those persons who were shareholders, or held Arcimoto stock through a broker, bank or other nominee, at the close of business on the Record Date for the Annual Meeting. To attend the Annual Meeting, you will need to pre-register as instructed on your Notice of Internet Availability, Proxy Card or Voter Instruction Card and print out the attendance ticket. You will be required to show the attendance ticket as well as photo identification to enter the Annual Meeting.
Q: Who may vote at the Annual Meeting?
QuestionsA: Our board of directors set April 19, 2023 as the Record Date for the Annual Meeting. If you owned shares of our common stock at the close of business on the Record Date, you may attend and Answers aboutvote at the SpecialAnnual Meeting. Each shareholder is entitled to one vote for each share of common stock held on all matters to be voted on. As of the Record Date, there were 7,338,249 shares of our common stock outstanding and entitled to vote at the Annual Meeting.
Q: How do I vote my shares if I hold my shares through a broker rather than directly?
A: If your shares are registered directly in your name with our transfer agent, Broadridge Financial Solutions, you are considered, with respect to those shares, a shareholder of record. As a shareholder of record, you have the right to vote in person at the Annual Meeting.
If your shares are held in a brokerage account, bank or by another nominee or trustee, you are considered the beneficial owner of shares held in “street” name. In that case, the Notice of Internet Availability of Proxy Materials or proxy materials have been forwarded to you by your broker, bank or other holder of record who is considered, with respect to those shares, the shareholder of record. As the beneficial owner, you have the right to direct your broker, bank or other holder of record on how to vote your shares by using the voting instructions included in the Notice of Internet Availability or proxy materials. As the beneficial owner, you are also invited to attend the Annual Meeting, but because the beneficial owner is not the shareholder of record, you may not vote these shares in person at the Annual Meeting unless you obtain a “legal proxy” from the broker, bank, nominee, or trustee that holds your shares, giving you the right to vote the shares at the Annual Meeting.
As indicated above, if your shares are held in “street” name by a broker, bank, or other nominee, they should send you instructions that you must follow in order to have your shares voted at the Annual Meeting. If you hold shares in your own name, you may vote by proxy in any one of the following ways:
• Via the Internet by accessing the proxy materials on the secured website www.proxyvote.comand Votingfollowing the voting instructions on that website;
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• Via telephone by calling toll free 1-800-690-69031-800-690-6903 and following the recorded instructions; or
• By requesting that printed copies of the proxy materials be mailed to you pursuant to the instructions provided in the Notice of Internet Availability and completing, dating, signing and returning the Proxy Card.
Card that you receive in response to your request.
The Internet and telephone voting procedures are designed to authenticate stockholders’shareholders’ identities by use of a control number to allow stockholdersshareholders to vote their shares and to confirm that stockholders’shareholders’ instructions have been properly recorded. Voting via the Internet or telephone must be completed by 11:59 PM EDT on November 10, 2022.June 15, 2023. Of course, you can always come to the meeting and vote your shares in person. If you submit or return a Proxy Card without giving specific voting instructions, your shares will be voted as recommended by our board of directors, as permitted by law.
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Q: What is the quorum requirement for the Annual Meeting?
A: One third (1/3) of our outstanding shares of capital stock entitled to vote, as of the record date, must be present at the Annual Meeting in person or by proxy in order for us legally to hold the Annual Meeting and conduct business. This is called a quorum. Your shares will be counted as present at the Annual Meeting if you:
• Are present and entitled to vote in person at the SpecialAnnual Meeting; or
• Properly submitted a Proxy Card or Voter Instruction Card.
If you are present in person or by proxy at the SpecialAnnual Meeting, but withhold your vote or abstain from voting on any or all proposals, your shares are still counted as present and entitled to vote for purposes of establishing a quorum. Broker non-votesnon-votes are not counted for determining whether a quorum exists. Broker non-votesnon-votes occur when a person holding shares in street name, such as through a brokerage firm, does not provide instructions as to how to vote those shares, but the broker submits that person’s proxy nonetheless. The proposals listed in this Proxy Statement state the votes needed to approve the proposed actions.
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A: The Board of Directors unanimously recommends that you vote:
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Any proxy given pursuant to this solicitation and received in time for the Special Meeting will be voted on at the Annual Meeting?
A: The following five proposals will be voted on at the Annual Meeting:
1. To elect the five directors named in accordance with your specific instructions. If you providethe Proxy Statement for a proxy, but you do not provide specific instructionsone-year term expiring in 2024 or until their successors have been elected and qualified;
2. To approve an amendment to the Arcimoto, Inc. 2022 Omnibus Stock Incentive Plan to increase the number of shares reserved for issuance thereunder by 1,500,000;
3. To approve, on how to votean advisory basis, the compensation of the Company’s named executive officers;
4. To indicate, on each proposal,an advisory basis, the proxy holderpreferred frequency of future shareholder advisory votes on the compensation of the Company’s named executive officers;
5. To ratify the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2023.
We will vote your shares “FOR” the Convertible Note and Warrant Issuance Proposal, “FOR” the ELOC Issuance Proposal, “FOR” the Increased Capitalization Proposal, “FOR” the Decreased Quorum Proposal and “FOR” the Reverse Stock Split Proposal. With respect toalso consider any other proposalbusiness that properly comes before the Special Meeting,meeting. As of the proxy holders will vote in their own discretion according to their best judgment, to the extent permitted by applicable laws and regulations.
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As further described under the heading “Proposal 1” in this Proxy Statement, as a conditionwe are not aware of any other matters to be submitted for consideration at the first closingmeeting. If any other matters are properly brought before the meeting, the proxy named in the Proxy Card or Voter Instruction Card will vote the shares it represents using its best judgment.
Q: Can I access these proxy materials on the Internet? How long will they be available?
A: Yes. The Notice of Annual Meeting, Proxy Statement, and 2022 Annual Report to Shareholders (which includes the 2022 Annual Report on Form 10-K), are available for viewing, printing, and downloading at www.proxyvote.com. Our Annual Report on Form 10-K for the year ended December 31, 2022 is also available under the Purchase Agreement (as defined herein), certain existing stockholders representing approximately 20%Investor — SEC Documents section of our website at www.arcimoto.com and through the SEC’s EDGAR system at www.sec.gov. All materials will remain posted on www.proxyvote.com at least until the conclusion of the Company’s outstanding common stock have executed Voting Agreements withmeeting.
Q: How can I revoke or change my vote after submitting it?
A: If you are a shareholder of record, you can revoke your proxy before your shares are voted at the Company, pursuant to which such stockholders have agreed to vote all of their shares of the Company’s common stock in favor of the Convertible Note and Warrant Stockholder Proposal.Annual Meeting by:
ELOC Issuance Proposal. The approval of the ELOC Issuance Proposal requires that a quorum exist and that the number of votes cast in favor of approval of the ELOC Issuance Proposal exceeds the number of votes cast against approval of the ELOC Issuance Proposal. Abstentions are not considered votes cast and will therefore have no effect on the ELOC Issuance Proposal. Under applicable Nasdaq Stock Market listing rules, brokers are not permitted to vote shares held for a customer on “non-routine” matters (such as the ELOC Issuance Proposal) without specific instructions from the customer. Therefore, broker non-votes are not considered votes cast and will also have no effect on the outcome of the ELOC Issuance Proposal.
Increased Capitalization Proposal. The approval of the Increased Capitalization Proposal requires that a quorum exist and that the number of votes cast in favor of approval of the Increased Capitalization Proposal exceeds the number of votes cast against approval of the Increased Capitalization Proposal. Abstentions are not considered votes cast and will therefore have no effect on the Increased Capitalization Proposal. Under applicable Nasdaq Stock Market listing rules, brokers are not permitted to vote shares held for a customer on “non-routine” matters (such as the Increased Capitalization Proposal) without specific instructions from the customer. Therefore, broker non-votes are not considered votes cast and will also have no effect on the outcome of the Increased Capitalization Proposal.
Decreased Quorum Proposal. The approval of the Decreased Quorum Proposal requires that a quorum exist and that the number of votes cast in favor of approval of the Decreased Quorum Proposal exceeds the number of votes cast against approval of the Decreased Quorum Proposal. Abstentions are not considered votes cast and will therefore have no effect on the Decreased Quorum Proposal. Under applicable Nasdaq Stock Market listing rules, brokers are not permitted to vote shares held for a customer on “non-routine” matters (such as the Decreased Quorum Proposal) without specific instructions from the customer. Therefore, broker non-votes are not considered votes cast and will also have no effect on the outcome of the Decreased Quorum Proposal.
Reverse Stock Split Proposal. The approval of the Reverse Stock Split Proposal requires that a quorum exist and that the number of votes cast in favor of approval of the Reverse Stock Split Proposal exceeds the number of votes cast against approval of the Reverse Stock Split Proposal. Abstentions are not considered votes cast and will therefore have no effect on the Reverse Stock Split Proposal. Under applicable Nasdaq Stock Market listing rules, brokers are not permitted to vote shares held for a customer on “non-routine” matters (such as the Reverse Stock Split Proposal) without specific instructions from the customer. Therefore, broker non-votes are not considered votes cast and will also have no effect on the outcome of the Reverse Stock Split.
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• Filing a written notice of revocation bearing a later date than the proxy with our Corporate Secretary at P.O.PO Box 25658, Eugene, Oregon 97402 at or before the taking of the vote at the SpecialAnnual Meeting;
• Duly executing a later-datedlater-dated proxy relating to the same shares and delivering it to our Corporate Secretary at P.O.PO Box 25658, Eugene, Oregon 97402 at or before the taking of the vote at the SpecialAnnual Meeting;
• Attending the SpecialAnnual Meeting and voting in person (although attendance at the SpecialAnnual Meeting will not in and of itself constitute a revocation of a proxy); or
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• If you voted by telephone or via the Internet, voting again by the same means prior to 11:59 PM EDT on November 10, 2022June 15, 2023 (your latest telephone or Internet vote, as applicable, will be counted and all earlier votes will be disregarded).
If you are a beneficial owner of shares, you may submit new voting instructions by contacting your bank, broker, or other holder of record. You may also vote in person at the SpecialAnnual Meeting if you obtain a legal proxy from them and register to attend the SpecialAnnual Meeting as described in the answers to previous questions.
Q: Where can I find the voting results of the Annual Meeting?
A: We plan to announce the preliminary voting results at the Annual Meeting. We will publish the results in a Current Report on Form 8-K filed with the SEC within four business days after the Annual Meeting.
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ELECTION OF DIRECTORS
Nominees
Our board of directors currently consists of seven members and each serves for a one-year term or until a successor has been elected and qualified. Mr. Terry L. Becker and Ms. Nancy E. Calderon have elected not to stand for reelection so the Company has nominated five directors for election at the Annual Meeting.
If you are a shareholder of record, unless you mark your proxy card to withhold authority to vote, the proxy holder will vote the proxies received by it for the nominees named below, each of whom is currently a director and each of whom has consented to be named in this Proxy Statement and to serve if elected. In the event that any nominee is unable or declines to serve as a director at the time of the meeting, your proxy will be voted for any nominee designated by our board of directors to fill the vacancy. We do not expect that any nominee will be unable or will decline to serve as a director. If you are a beneficial owner of shares held in street name and you do not provide your broker with voting instructions, your broker may not vote your shares on the election of directors. Therefore, it is important that you vote.
The name of and certain information regarding each nominee as of April 19, 2023 is set forth below. This information is based on data furnished to us by the nominees. There is no family relationship between any director, executive officer or person nominated to become a director or executive officer. The business address for each nominee for matters regarding the Company is PO Box 25658, Eugene, Oregon 97402.
Director Nominees for Terms Expiring in 2024
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Mark D. Frohnmayer | 48 | Chairman of the | November 2007 | |||
Christopher W. Dawson | 41 | Director, Chief Executive Officer | August 2022 | |||
Joshua S. Scherer | 51 | Lead Independent Director | September 2018 | |||
Jesse G. Eisler | 57 | Director | September 2018 | |||
Dan M. Creed | 56 | Director | August 2022 |
Director Nominees
Mark D. Frohnmayer — Chairman of the Board and Chief Vision Officer
Mark Frohnmayer has been Chairman of our board of directors since our founding in November 2007 and our Chief Vision Officer since August 2022. He served as our President and Chief Executive Officer from November 2007 to August 2022. Previously, he was one of the founders of GarageGames.com, Inc., a software development company successfully sold to IAC, Inc. in 2007. Mr. Frohnmayer holds a B.S. in Electrical Engineering and Computer Science from UC Berkeley.
Among other experience, qualifications, attributes and skills, we believe Mr. Frohnmayer’s perspective as one of our founders, his extensive leadership experience, and his knowledge of our operations, brings to our board of directors critical strategic planning and operational leadership that qualify him to serve as one of our directors.
Christopher W. Dawson — Director and Chief Executive Officer
Christopher Dawson has been a member of our board of directors since August 2022. On April 16, 2023, Mr. Dawson was appointed as our Chief Executive Officer. Until his appointment as our Chief Executive Officer, Mr. Dawson was the Chief Executive Officer of Nikola Tesla Co., an engineering services company with projects that include electrification, hybridization, EV charging, hydrogen powertrain development, hydrogen powered VTOL, hydrogen power systems, fuel cell and hydrogen electrolyzer development. From November 2021 to November 2022, he was the Chief Technology Officer for both HNO international and Tesla Aerial Robotics. He also served as Chief Engineer on various U.S. Department of Defense projects. Mr. Dawson was an initial investor in Atlis Motor Vehicles (NASDAQ: AMV) in 2019, and subsequently led Research and Development, Engineering, and Product Development as Vice President of Manufacturing Engineering from September 2020 to September 2021 for the XT Truck, XP Platforms, and AMV Battery Cell. From November 2019 to June 2020, Mr. Dawson was a Director of Crown Poly,
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Inc. Mr. Dawson started at Tesla (NASDAQ: TSLA) in 2012 as a contractor and came on full time in 2014. During the subsequent five years through November 2019, he held positions of increasingly progressive responsibility, culminating as Senior Manufacturing Engineer and Maintenance Manager. In these roles, Mr. Dawson led manufacturing sustaining engineering teams for Tesla on the Model S/X line, Model 3 line and its battery factory in Freemont, California. He has been developing EVs for on road, off road and the battlefield for the last 10 years. He is a former U.S. Navy submarine nuclear chemist and helicopter flight Instructor. He holds an MBA from University of Denver, a BS in Nuclear Technologies from Excelsior College and Helicopter Flight Instruction from Aims Community College.
We believe Mr. Dawson’s experience brings to our board of directors important skills related to engineering and manufacturing of electric vehicles and batteries, among other matters, and qualifies him to serve as one of our directors.
Joshua S. Scherer — Lead Independent Director
Joshua Scherer has been a member of our board of directors since September 2018. He is a Founding Partner of Ducera Partners, an independent investment bank relied upon by decision makers to provide critical advice on complex and transformative transactions. Prior to the launch of Ducera Partners in June 2016, he spent eight years with Perella Weinberg Partners, an investment banking firm, most recently as a Partner. Mr. Scherer has over 25 years of investment banking experience, starting his career with Merrill Lynch in New York and Hong Kong, and thereafter with Houlihan Lokey where he focused on financial restructuring engagements.
Mr. Scherer has been actively involved in dozens of financial transactions, including M&A (buyside, sellside, distressed, etc.), financings (IPOs, other public equity, public and private debt, etc.), and financial restructurings (representing companies and investors). In addition, Mr. Scherer has advised on numerous fairness opinions and also provided testimony over a dozen times, including as a financial expert witness. He has advised companies in many of the most high profile and transformative transactions, including the restructuring and sale of Hostess Brands as well as in the financial restructurings of Caesar’s Entertainment, Hawker Beechcraft and Spectrum Brands, among others. Further, Mr. Scherer is leading the investment banking renewables practice for Ducera Partners, which in part focuses on the Electric Vehicle (EV) industry.
Mr. Scherer received a Bachelor of Arts in Economics from Middlebury College, where he graduated Summa cum Laude and was elected to Phi Beta Kappa.
We believe Mr. Scherer’s capital market experience and familiarity with investments in early-stage companies brings to our board of directors important skills related to corporate finance, among other matters, and qualifies him to serve as one of our directors.
Jesse G. Eisler — Director
Jesse Eisler has been a member of our board of directors since September 2018. He is an Orthopedic Spine Surgeon, Sole Proprietor of the Connecticut Back Center, LLC and Assistant Clinical Professor in the Department of Surgery University of Connecticut, with attending privileges at: Manchester Memorial Hospital, Rockville General Hospital, Saint Francis Medical Center and Hartford Hospital. Dr. Eisler has extensive research experience, numerous publications, honors and awards. He holds a B.S. and M.S. with honors from Stanford University, a Ph.D. and M.D. from Mount Sinai School of Medicine and an MBA from Brandeis University.
We believe Dr. Eisler’s extensive research experience brings to our board of directors important skills related to scientific methodology, among other matters, and qualifies him to serve as one of our directors.
Dan M. Creed — Director
Dan Creed has been a member of our board of directions since August 2022. Mr. Creed is the founder of holding company Creed Partners Corp. (CPC), which was founded in 2020. CPC currently engages and advises private equity ventures in retail automotive opportunities, is an active investor in the world’s pre-eminent waterside luxury company and is helping investors navigate the waters in the transition of the transportation industry to a clean and viable future. From January 2016 to April 2019, he was a senior executive with the Cadillac division of General Motors responsible for North American operations and global network development. Prior to that, from June 1996 to December 2015,
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Mr. Creed held increasing positions of responsibility with BMW Canada and BMW of North America, including Vice President roles responsible for two of the largest sales regions, Vice President of Aftersales and Vice President of Marketing. He is a graduate of the University of Ottawa holding a Bachelor of Social Sciences.
We believe Mr. Creed’s business experience brings to our board of directors important skills related to automotive retail, among other matters, and qualifies him to serve as one of our directors.
Required Vote
Provided there is a quorum for the meeting, the five director nominees receiving the highest number of affirmative votes of our common stock present or represented and entitled to be voted for them shall be elected as directors. Votes withheld will have no legal effect on the election of directors. Under applicable Nasdaq Stock Market listing rules, brokers are not permitted to vote shares held for a customer on “non-routine” matters (including election of directors) without specific instructions from the customer. As such, broker non-votes will have no effect on the outcome of this proposal.
The board of directors unanimously recommends that shareholders vote “FOR” the five director nominees listed above.
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APPROVAL OF AN AMENDMENT TO THE ARCIMOTO, INC. 2022
OMNIBUS STOCK INCENTIVE PLAN
Background. Our 2022 Omnibus Stock Incentive Plan (the “2022 Plan”), allows us to grant equity awards (including stock options, stock appreciation rights, restricted stock units and dividend equivalent rights) to our employees, officers and directors.
We believe our success is due to our highly talented employee base and that future success depends on the ability to attract and retain high caliber personnel. The ability to grant equity awards is a necessary and powerful recruiting and retention tool for us to obtain the quality personnel we need to move our business forward.
The 2022 Plan allows the issuance of up to 100,000 shares of our common stock (the “Plan Limit”). As of April 19, 2023, 100,000 shares have been issued or reserved for issuance under the 2022 Plan and no issuances of shares have been forfeited, leaving no shares available for issuance. We believe that it is in the best interests of the Company and its shareholders to be able to issue additional shares; accordingly, we are proposing that an additional 1,500,000 shares be added to the 2022 Plan.
Summary of the Proposal. Our Board of Directors has approved an amendment to the 2022 Plan, subject to approval by our shareholders at our Annual Meeting. We are seeking shareholder approval of an amendment to the 2022 Plan that increases the number of shares reserved for issuance thereunder by 1,500,000 shares.
Summary of the 2022 Plan. Following is a summary of the principal features of the 2022 Plan. The summary is qualified by the full text of the 2022 Plan, which was attached to our Proxy Statement sent in connection with the 2022 annual meeting of shareholders.
Key Provisions. Following are the key provisions of the 2022 Plan:
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Eligible Participants: | Employees, directors, and consultants of our Company, any related entity, and any successor entity that adopts the 2022 Plan. Approximately 120 employees, directors, and consultants of our Company are eligible to | |
Share Reserve: | • Currently, no shares of our Company’s common stock are available for issuance; we are seeking approval to increase this by 1,500,000 shares | |
• The reserved shares will be reduced (i) by one share for each share granted pursuant to stock rights awarded under the | ||
Award Types: | • Incentive stock options | |
• Nonstatutory stock options | ||
• Stock appreciation rights (“SARs”) | ||
• Restricted stock awards | ||
• Restricted stock unit awards | ||
• Dividend equivalent rights | ||
Vesting: | Determined by our board of directors or a committee designated by our board. | |
Award Limits: | No grantee may be granted an award of stock options or SARs in | |
Repricings: | Repricing of outstanding stock awards is not permitted without the | |
Plan Termination Date: | June 16, 2032. |
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Administration. The 2022 Plan is administered by our Compensation Committee. With respect to grants of awards to our officers or directors, the 2022 Plan is administered by our Compensation Committee in a manner that permits such grants and related transactions to be exempt from Section 16(b) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The plan administrator has the full authority to select recipients of the grants, determine the extent of the grants, establish additional terms, conditions, rules or procedures to accommodate rules or laws of applicable non-U.S. jurisdictions, adjust awards and to take any other action deemed appropriate; however, no action may be taken that is inconsistent with the terms of the 2022 Plan.
Available Shares. Subject to adjustment upon certain corporate transactions or events, a maximum of 100,000 shares of our common stock may be issued under the 2022 Plan. In addition, subject to adjustment upon certain corporate transactions or events, a participant in the 2022 Plan may not receive options or SARs with respect to more than 100,000 shares of common stock in any calendar year or an award of restricted stock, restricted stock units, dividend equivalent rights or other awards that are valued with reference to shares covering more than 100,000 shares of common stock. Any shares covered by an award that is forfeited, canceled, or expires shall be deemed to have not been issued for purposes of determining the maximum aggregate number of shares which may be issued under the 2022 Plan. Shares that actually have been issued under the 2022 Plan pursuant to an award shall not be returned to the 2022 Plan and shall not become available for future issuance under the 2022 Plan, other than unvested shares that are forfeited or repurchased by our Company. In the event any option or other award granted under the 2022 Plan is exercised through the tendering of shares (either actually or through attestation), or in the event tax withholding obligations are satisfied by tendering or withholding shares, any shares so tendered or withheld are not again available for awards under the 2022 Plan. To the extent that cash is delivered in lieu of shares of common stock upon the exercise of an SAR, then we shall be deemed, for purposes of applying the limitation on the number of shares, to have issued the number of shares of common stock which we were entitled to issue upon such exercise. Shares of common stock we reacquire on the open market or otherwise using cash proceeds from the exercise of options shall not be available for awards under the 2022 Plan.
Eligibility and Types of Awards. The 2022 Plan permits us to grant stock awards, including stock options, SARs, restricted stock, restricted stock units and dividend equivalent rights to our employees, directors, and consultants.
Stock Options
A stock option may be an incentive stock option within the meaning of, and qualifying under, Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or a nonstatutory stock option. However, only our employees (or employees of our parent or subsidiaries, if any) may be granted incentive stock options. Incentive and nonstatutory stock options are granted pursuant to option agreements adopted by the plan administrator. The plan administrator determines the exercise price for a stock option, within the terms and conditions of the 2022 Plan, provided that the exercise price of a stock option cannot be less than 100% of the fair market value of our common stock on the date of grant. Options granted under the 2022 Plan will become exercisable at the rate specified by the plan administrator.
The plan administrator determines the term of the stock options granted under the 2022 Plan, up to a maximum of 10 years, except in the case of certain incentive stock options, as described below. Unless the terms of an optionholder’s stock option agreement provide otherwise, if an optionholder’s relationship with us, or any of our affiliates, ceases for any reason other than disability or death, the optionholder may exercise any options otherwise exercisable as of the date of termination, but only during the post-termination exercise period designated in the optionholder’s stock option award agreement. The optionholder’s stock option award agreement may provide that upon the termination of the optionholder’s relationship with us for cause, the optionholder’s right to exercise his or her options shall terminate concurrently with the termination of the relationship. If an optionholder’s service relationship with us, or any of our affiliates, ceases due to retirement, disability or death, or an optionholder dies within a certain period following cessation of service, the optionholder or his or her estate or person who acquired the right to exercise the award by bequest or inheritance may exercise any vested options for a period of 12 months. The option term may be extended in the event that exercise of the option within the applicable time periods is prohibited by applicable securities laws or such longer period as specified in the stock option award agreement but in no event beyond the expiration of its term.
Acceptable consideration for the purchase of common stock issued upon the exercise of a stock option will be determined by the plan administrator and may include (a) cash or check, (b) delivery of a promissory note acceptable to the plan administrator (subject to minimum interest provisions set forth in the 2022 Plan), (c) a broker-assisted
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cashless exercise, (d) the tender of common stock previously owned by the optionholder, (e) a net exercise of the option, (f) past or future services rendered, (g) any combination of the foregoing methods of payment, and (h) any other legal consideration approved by the plan administrator.
Unless the plan administrator provides otherwise, awards generally are not transferable, except by will or the laws of descent and distribution.
Incentive stock options may be granted only to our employees (or to employees of our parent company and subsidiaries, if any). To the extent that the aggregate fair market value, determined at the time of grant, of shares of our common stock with respect to which incentive stock options are exercisable for the first time by an optionholder during any calendar year under any of our equity plans exceeds $100,000, such options will not qualify as incentive stock options. A stock option granted to any employee who, at the time of the grant, owns or is deemed to own stock representing more than 10% of the voting power of all classes of stock (or any of our affiliates) may not be an incentive stock option unless (a) the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant, and (b) the term of the incentive stock option does not exceed five years from the date of grant.
Stock Appreciation Rights
SARs may be granted under the 2022 Plan either concurrently with the grant of an option or alone, without reference to any related stock option. The plan administrator determines both the number of shares of common stock related to each SAR and the exercise price for an SAR, within the terms and conditions of the 2022 Plan, provided that the exercise price of an SAR cannot be less than 100% of the fair market value of the common stock subject thereto on the date of grant. In the case of an SAR granted concurrently with a stock option, the number of shares of common stock to which the SAR relates will be reduced in the same proportion that the holder of the stock option exercises the related option.
The plan administrator determines whether to deliver cash in lieu of shares of common stock upon the exercise of an SAR. If common stock is issued, the number of shares of common stock that will be issued upon the exercise of an SAR is determined by dividing (a) the number of shares of common stock as to which the SAR is exercised multiplied by the amount of the appreciation in such shares, by (b) the fair market value of a share of common stock on the exercise date.
If the plan administrator elects to pay the holder of the SAR cash in lieu of shares of common stock, the holder of the SAR will receive cash equal to the fair market value on the exercise date of any or all of the shares that would otherwise be issuable.
The exercise of an SAR related to a stock option is permissible only to the extent that the stock option is exercisable under the terms of the 2022 Plan on the date of surrender. Any incentive stock option surrendered will be deemed to have been converted into a nonstatutory stock option immediately prior to such surrender.
Restricted Stock
Restricted stock awards are awards of shares of our common stock that are subject to established terms and conditions. The plan administrator sets the terms of the restricted stock awards, including the size of the restricted stock award, the price (if any) to be paid by the recipient and the vesting schedule and criteria (which may include continued service to us for a period of time or the achievement of performance criteria). If a participant’s service terminates before the restricted stock is fully vested, all of the unvested shares generally will be forfeited to, or repurchased by, us.
Restricted Stock Units
A restricted stock unit is a right to receive stock, cash equal to the value of a share of stock or other securities or a combination of the three at the end of a set period or the attainment of performance criteria. No stock is issued at the time of grant. The plan administrator sets the terms of the restricted stock unit award, including the size of the restricted stock unit award, the consideration (if any) to be paid by the recipient, the vesting schedule and criteria and the form (stock or cash) in which the award will be settled. If a participant’s service terminates before the restricted stock is fully vested, the unvested portion of the restricted stock unit award generally will be forfeited to us.
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Dividend Equivalent Rights
Dividend equivalent rights entitle the recipient to compensation measured by dividends paid with respect to a specified number of shares of common stock.
Performance-Based Compensation. The 2022 Plan establishes procedures for our Company to grant performance-based awards, meaning awards structured so that they will vest only upon the achievement of performance criteria established by the plan administrator for a specified performance period. The plan administrator will establish the performance goals before the 90th day of the applicable performance period (or, if the performance period is less than a year, no later than the number of days which is equal to 25% of the performance period).
The business measures that may be used to establish the performance criteria may include one of, or combination of, the following:
A. Net earnings or net income (before or after taxes);
B. Earnings per share;
C. Net sales growth;
D. Net operating profit;
E. Return measures (including, but not limited to, return on assets, capital, equity, or sales);
F. Cash flow (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital);
G. Cash flow per share;
H. Earnings before or after taxes, interest, depreciation, and/or amortization;
I. Gross or operating margins;
J. Productivity ratios;
K. Share price (including, but not limited to, growth measures and total shareholder return);
L. Expense targets or ratios;
M. Charge-off levels;
N. Improvement in or attainment of revenue levels;
O. Margins;
P. Operating efficiency;
Q. Operating expenses;
R. Economic value added;
S. Improvement in or attainment of expense levels;
T. Improvement in or attainment of working capital levels;
U. Debt reduction;
V. Capital targets; and
W. Consummation of acquisitions, dispositions, projects or other specific events or transactions.
Corporate Transactions. Effective upon the consummation of a corporate transaction, all outstanding awards under the 2022 Plan will terminate unless they are assumed in connection with the corporate transaction.
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The plan administrator has the authority, exercisable either in advance of any actual or anticipated corporate transaction or at the time of an actual corporate transaction, and exercisable at the time of the grant of an award under the 2022 Plan or any time while an award remains outstanding, to provide for the full or partial automatic vesting and exercisability of one or more outstanding unvested awards under the 2022 Plan and the release from restrictions on transfer and repurchase or forfeiture rights of such awards in connection with a corporate transaction on such terms and conditions as the plan administrator may specify. The plan administrator may also condition any such award’s vesting and exercisability or release from such limitations upon the subsequent termination of the continuous service of the holder of the award within a specified period following the effective date of the corporate transaction. The plan administrator may provide that any awards so vested or released from such limitations in connection with a corporate transaction shall remain fully exercisable until the expiration or sooner termination of the award.
Amendment and Termination. Our board of directors generally may amend, suspend, or terminate the 2022 Plan, but it may not amend, suspend, or terminate the 2022 Plan without shareholder approval for certain actions, such as an increase in the number of shares reserved under the 2022 Plan, modifications to the terms and conditions of awards, modifications to exercise prices at which shares may be offered pursuant to options, extension of the 2022 Plan’s expiration date and certain modifications to awards, such as reducing the exercise price per share, canceling and regranting new awards with lower prices per share than the original prices per share of the cancelled awards, or canceling any awards in exchange for cash or the grant of replacement awards with an exercise price that is less than the exercise price of the original awards.
Tax Withholding. Our board of directors may require a participant to satisfy any federal, state, local, or foreign tax withholding obligation relating to a stock award by (a) causing the participant to tender a cash payment, (b) withholding shares of common stock from the shares of common stock issued or otherwise issuable to the participant in connection with the award, (c) delivering to our Company already-owned shares of common stock, (d) selling shares of common stock from the shares of common stock issued or otherwise issuable to the participant in connection with the award, (e) withholding cash from an award settled in cash or other amounts payable to the participant, and/or (f) any other means that the plan administrator determines both to comply with applicable laws and be consistent with the purposes of the 2022 Plan.
Summary of Federal Income Tax Consequences of the 2022 Plan. The following summary is intended only as a general guide to certain U.S. federal income tax consequences under current law of participation in the 2022 Plan and does not attempt to describe all possible federal, state or local, foreign, or other tax consequences of such participation or tax consequences based on any participant’s particular circumstances. Furthermore, the tax consequences are complex and subject to change, and a participant’s particular situation may be such that some variation of the described rules is applicable. Recipients of awards under the 2022 Plan should consult their own tax advisors to determine the tax consequences to them as a result of their particular circumstances.
Incentive Stock Options
A participant recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an incentive stock option qualifying under Section 422 of the Code.
If a participant holds stock acquired through exercise of an incentive stock option for more than two years from the date on which the option was granted and more than one year after the date the option was exercised for those shares, any gain or loss on a disposition of those shares (a “qualifying disposition”) will be a long-term capital gain or loss. Upon such a qualifying disposition, we will not be entitled to any income tax deduction.
If a participant disposes of shares within two years after the date of grant of the option or within one year after the date of exercise of the option (a “disqualifying disposition”), the difference between the fair market value of the shares on the option exercise date and the exercise price (not to exceed the gain realized on the sale if the disposition is a transaction with respect to which a loss, if sustained, would be recognized) will be taxed to the participant as ordinary income at the time of disposition. Any gain in excess of that amount will be a capital gain, which will be short-term or long-term gain or loss, depending on the holding period of the stock. If a loss is recognized, there will be no ordinary income, and such loss will be a capital loss. To the extent the participant recognizes ordinary income by reason of a disqualifying disposition, generally our Company will be entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax-reporting obligation) to a corresponding income tax deduction in the tax year in which the disqualifying disposition occurs. The difference between the option exercise price and the fair market value of the
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shares on the exercise date of an incentive stock option is treated as an adjustment in computing the participant’s alternative minimum taxable income and may subject the participant to alternative minimum tax liability for the year of exercise. Special rules may apply after exercise for (a) sales of the shares in a disqualifying disposition, (b) basis adjustments for computing alternative minimum taxable income on a subsequent sale of the shares, and (c) tax credits that may be available to participants subject to the alternative minimum tax.
Nonstatutory Stock Options
Options not designated or qualifying as incentive stock options will be nonstatutory stock options having no special tax status. A participant generally recognizes no taxable income upon the grant of such an option so long as (a) the exercise price is no less than the fair market value of the stock on the date of grant and (b) our option (and not the underlying stock) at such time does not have a readily ascertainable fair market value (as defined in Treasury Regulations under the Code). Upon exercise of a nonstatutory stock option, the participant normally recognizes ordinary income in the amount of the difference between the option exercise price and the then-fair market value of the shares purchased, and withholding of income and employment taxes will apply if the participant is or was an employee. Generally, the Company will be entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax-reporting obligation) to an income tax deduction in the tax year in which such ordinary income is recognized by the participant.
Upon the disposition of stock acquired by the exercise of a nonstatutory stock option, any recognized gain or loss, based on the difference between the sale price and the fair market value on the exercise date, will be taxed as capital gain or loss, which will be short-term or long-term gain or loss, depending on the holding period of the stock.
Stock Appreciation Rights
A participant recognizes no taxable income upon the receipt of an SAR. Upon the exercise of an SAR, the participant will recognize ordinary income in an amount equal to the excess of the fair market value of the underlying shares of common stock on the exercise date over the exercise price. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. The Company generally will be entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax reporting obligation) to a corresponding income tax deduction in the year in which the ordinary income from the exercise of an SAR is recognized by the participant.
Restricted Stock
A participant acquiring restricted stock generally will recognize ordinary income equal to the difference between the fair market value of the shares on the “determination date” (as defined below) and their purchase price, if any. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. The “determination date” is the date on which the participant acquires the shares unless they are subject to a substantial risk of forfeiture and are not transferable, in which case the determination date is the earliest of (a) the date the shares become transferable, (b) the date the shares are no longer subject to a substantial risk of forfeiture, or (c) the date the shares are acquired if the participant makes a timely election under Code Section 83(b). If the shares are subject to a substantial risk of forfeiture and not transferable when issued, the participant may elect, pursuant to Section 83(b) of the Code, to have the date of acquisition be the determination date by filing an election with the Internal Revenue Service, and other provisions, no later than 30 days after the date the shares are acquired. Upon the taxable disposition of shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value on the determination date, will generally be taxed as capital gain or loss; however, for any shares returned to our Company pursuant to a forfeiture provision, a participant’s loss may be computed based only on the purchase price (if any) of the shares and may not take into account any income recognized by reason of a Section 83(b) election. Such gain or loss will be long-term or short-term depending on whether the stock was held for more than one year. The Company generally will be entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax reporting obligation) to a corresponding income tax deduction in the year in which the ordinary income from restricted stock is recognized by the participant.
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Restricted Stock Units
No taxable income is recognized upon receipt of a restricted stock unit award. In general, the participant will recognize ordinary income in the year in which the units vest and are settled in an amount equal to any cash received and the fair market value of any nonrestricted shares received. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. The Company generally will be entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax reporting obligation) to an income tax deduction equal to the amount of ordinary income from restricted stock units recognized by the participant. In general, the deduction will be allowed for the taxable year in which such ordinary income is recognized by the participant.
Dividend Equivalent Rights
A recipient of dividend equivalent rights generally will recognize ordinary income at the time the dividend equivalent right is paid. If required, income and employment tax must be withheld on the income recognized by the participant. The Company will generally be entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax reporting obligation) to an income tax deduction equal to the amount of ordinary income recognized by the participant. In general, the deduction will be allowed for the taxable year in which such ordinary income is recognized by the participant.
Other Awards
Our Company generally will be entitled to an income tax deduction in connection with an award under the 2022 Plan in an amount equal to the ordinary income realized by the participant at the time the participant recognizes such income (subject to the requirement of reasonableness, the provisions of Section 162(m) and other provisions of the Code limiting the deduction of compensation, and the satisfaction of a tax-reporting obligation). Participants typically are subject to income (and employment) tax and recognize such tax at the time that an award is granted, exercised, vests or becomes nonforfeitable, unless the award provides for a further deferral.
Section 409A
Section 409A of the Code (“Section 409A”) imposes certain requirements on nonqualified deferred compensation arrangements. These include requirements on an individual’s election to defer compensation and the individual’s selection of the timing and form of distribution of the deferred compensation. Section 409A also generally provides that adverse tax consequences will apply unless distributions must be made on or following the occurrence of certain events (e.g., the individual’s separation from service, a predetermined date, or the individual’s death). Section 409A imposes restrictions on an individual’s ability to change his or her distribution timing or form after the compensation has been deferred.
Certain awards under the 2022 Plan may be subject to the requirements of Section 409A in form and in operation, but designed to meet the conditions under Section 409A for avoiding its adverse tax consequences. For example, restricted stock units that provide for a settlement date following the vesting date may be subject to Section 409A. If an award under the 2022 Plan is subject to Section 409A and fails to satisfy the requirements of Section 409A, the recipient of that award may be required to recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be before the compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with the requirements of Section 409A, Section 409A imposes an additional 20% federal penalty tax on the participant’s deferred compensation recognized as ordinary income, as well as interest on such deferred compensation.
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The foregoing is only a summary, based on the current Code and the Treasury Regulations promulgated by the U.S. Department of the Treasury thereunder, of the U.S. federal income tax consequences to the participant and our Company with respect to the grant and exercise of options and other awards under the 2022 Plan. The summary does not purport to be complete and does not address all income tax laws that may be relevant to any particular participant. It does not address the tax consequences of the participant’s death, any tax laws of any municipality, state or foreign country in which a participant might reside, or any other laws other than U.S. federal income tax laws.
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New Plan Benefits. The 2022 Plan administrator, in its discretion, selects the person(s) to whom awards may be granted and the number of shares subject to each such grant. For this reason, it is not possible to determine the benefits or amounts that will be received by any particular individual(s) in the future.
Equity Incentive Plans. As of April 19, 2023, our equity compensation plans consisted of the Second Amended and Restated 2012 Employee Stock Benefit Plan, the Amended and Restated 2015 Stock Incentive Plan, 2018 Omnibus Stock Incentive Plan, and the Arcimoto Inc. 2022 Omnibus Stock Incentive Plan, each of which were approved by our shareholders. We do not have any equity compensation plans or arrangements that have not been approved by our shareholders. The following table sets forth the indicated information as of April 19, 2023, with respect to our equity compensation plans:
Plan Category | Number of | Weighted- | Number of | ||||
Equity compensation plans approved by security holders |
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Arcimoto, Inc. Second Amended and Restated 2012 Employee Stock Benefit Plan | 15,500 | $ | 11.91 | — | |||
Arcimoto, Inc. Amended and Restated 2015 Stock Incentive Plan | 25,688 | $ | 58.74 | — | |||
Arcimoto, Inc. 2018 Omnibus Stock Incentive Plan | 207,703 | $ | 102.58 | — | |||
Arcimoto, Inc. 2022 Omnibus Stock Incentive Plan | 100,000 | $ | — | — | |||
Total | 348,891 | $ | 65.91 | — | |||
Vote Required. The approval of the amendment of the 2022 Plan requires that a quorum exist and that the number of votes in favor of approval of the amendment of the 2022 Plan must exceed the votes cast against amendment of the 2022 Plan. Abstentions are not considered votes cast and will therefore have no effect on this proposal. Under applicable Nasdaq Stock Market listing rules, brokers are not permitted to vote shares held for a customer on “non-routine” matters (such as the proposal to approve the amendment of the 2022 Plan) without specific instructions from the customer. Therefore, broker non-votes are not considered votes cast and will also have no effect on the outcome of this proposal.
The board of directors unanimously recommends that shareholders vote “FOR” approval of the amendment of the Arcimoto, Inc. 2022 Omnibus Stock Incentive Plan.
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ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Board recognizes the interests our investors have in the compensation of our executives. In recognition of that interest, we are providing our shareholders with the opportunity to vote to approve, on an advisory (nonbinding) basis, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with the SEC’s rules.
As described in detail in our Executive Officers — Overview of Compensation Philosophy and Objectives, our executive compensation programs are designed to attract, motivate and retain our named executive officers, who are critical to our success and will drive the creation of shareholder value. Under these programs, our named executive officers are rewarded for the achievement of specific annual, long-term and strategic goals, corporate goals and the realization of increased shareholder value. Please read the section “Executive Compensation” for additional details about our executive compensation programs, including information about the fiscal year 2022 compensation of our named executive officers.
The Compensation Committee of the Board continually reviews the compensation programs for our named executive officers to ensure they achieve the desired goals of aligning our executive compensation structure with our shareholders’ interests and current market practices. As described in the section “Executive Compensation,” our compensation programs are designed to motivate our executives to create a successful company. We believe that our compensation program, with its balance of short-term incentives and long-term incentives (including equity awards that vest over up to three years) reward sustained performance that is aligned with long-term shareholder interests.
We are asking our shareholders to indicate their support for our named executive officer compensation as described in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. Shareholders are encouraged to read the section “Executive Compensation,” the accompanying compensation tables, and the narrative disclosure. Accordingly, we will ask our shareholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the compensation tables and narrative discussion, is hereby APPROVED.”
In order for Proposal 3 to be approved, holders of a majority of all those outstanding shares present in person, or represented by proxy, and cast either affirmatively or negatively at the Annual Meeting must vote “FOR” Proposal 3. Abstentions and broker non-votes will not be counted either “FOR” or “AGAINST” the proposal and will have no effect on the proposal.
As an advisory vote, the result will not be binding on the Board or Compensation Committee. The Board and our Compensation Committee value the opinions of our shareholders and expect to take into account the outcome of the vote when considering future executive compensation decisions to the extent they can determine the cause or causes of any significant negative voting results.
The board of directors unanimously recommends that shareholders vote “FOR” approval of the compensation of our named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC.
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ADVISORY NON-BINDING VOTE ON THE FREQUENCY
OF A VOTE ON EXECUTIVE COMPENSATION
As described in Proposal 3 above, in accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, our shareholders have the opportunity to cast an advisory vote to approve the compensation of our named executive officers. This Proposal 4 affords shareholders the opportunity to cast an advisory vote on how often we should include a say-on-pay proposal in our proxy materials for future annual meetings of shareholders or any special meeting of shareholders for which we must include executive compensation information in the proxy statement for that meeting (a “say-on-pay frequency proposal”). Under this Proposal 4, shareholders may vote to have the say-on-pay vote every year, every two years, or every three years.
As an advisory vote, this Proposal 4 is not binding on the Company, the Board or the Compensation Committee. However, the Compensation Committee and the Board value the opinions expressed by shareholders in their votes on this Proposal 4 and will consider the outcome of the vote when making future decisions regarding the frequency of conducting a say-on-pay vote.
It is expected that the next vote on a say-on-pay frequency proposal will occur at the 2024 annual meeting of shareholders.
Shareholders may cast their advisory vote to conduct advisory votes on executive compensation every “1 Year,” “2 Years,” or “3 Years” or “Abstain.”
The board of directors unanimously recommends a vote on Proposal 4 to hold say-on-pay votes every one year (as opposed to two or three years).
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RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has selected Deloitte & Touche LLP, an independent registered public accounting firm, as our independent auditors for the year ending December 31, 2023, and has further directed that management submit the selection of independent auditors for ratification by the shareholders at the Annual Meeting. Deloitte & Touche LLP was appointed on April 25, 2022. dbbmckennon served as our independent registered public accounting firm for the years ending December 31, 2021 and December 31, 2020. The Company has been advised by Deloitte & Touche LLP that neither it nor any member thereof has any financial interest, direct or indirect, in the Company or any of its affiliates, in any capacity.
Representatives of Deloitte & Touche LLP and dbbmckennon are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Neither our bylaws nor other governing documents or laws require shareholder ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm. However, the Audit Committee of the Board is submitting the appointment of Deloitte & Touche LLP to the shareholders for ratification as a matter of good corporate practice. If the shareholders fail to ratify the selection, the Audit Committee of the Board will reconsider whether or not to retain Deloitte & Touche LLP. Even if the selection is ratified, the Audit Committee of the Board in its discretion may direct the appointment of different independent auditors at any time during the year if it determines that such a change would be in the best interests of the Company and our shareholders.
In order for Proposal 5 to pass, holders of a majority of all those outstanding shares present in person via webcast, or represented by proxy, and cast either affirmatively or negatively at the Annual Meeting must vote “FOR” Proposal 5. Abstentions and broker non-votes will be counted towards a quorum, however, they will not be counted either “FOR” or “AGAINST” the proposal and will have no effect on the proposal. Please note that brokers holding shares for a beneficial owner that have not received voting instructions with respect to the ratification of the approval of the appointment of Deloitte & Touche LLP will have discretionary voting authority with respect to this matter.
The board of directors unanimously recommends that shareholders vote “FOR” Proposal 5.
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Information about our Board
Our board of directors is currently comprised of seven members, Mr. Frohnmayer, Mr. Becker, Ms. Calderon, Mr. Eisler, Mr. Creed, Mr. Dawson and Mr. Scherer. However, Mr. Becker and Ms. Calderon will not be standing for reelection in 2023. Each director serves for a term of one year and each will serve until a successor is duly elected and qualified or until his or her earlier death, resignation, or removal. Any additional directorships resulting from an increase in the number of directors or any vacancy may be filled by the directors then in office or the shareholders (as provided in our bylaws).
Mr. Frohnmayer serves as our Chairman; and in light of our Chairman not being an independent director, considering Mr. Frohnmayer’s previous service as CEO, Mr. Scherer was appointed and presently serves as Lead Independent Director. Responsibilities of the Lead Independent Director include: serving as a liaison between the independent directors and the CEO; being a sounding board for the CEO and independent directors on strategies, plans, organization, relationships, accountabilities, and other issues; consulting between meetings with the CEO on key corporate risks and strategic initiatives; presiding at all executive sessions of independent directors and any meetings where the Chairman is not present; reviewing and making suggestions on board meeting agendas and schedules; and calling special meetings as he or she deems appropriate or upon request of an independent director.
Our board believes that this structure currently provides the most efficient and effective leadership model for our Company, given the Company’s current size and complexity. The independent directors on the board are accomplished professionals possessing substantial real-world business and business-related experience. The independent directors meet periodically in separate session excluding the non-independent directors. The board will review the current board leadership structure periodically as it appoints its Chairman.
Director Independence
Currently, our board of directors consists of seven directors, although Mr. Becker and Ms. Calderon are not standing for reelection in 2023. Our board has undertaken a review of the independence of our directors and has determined that Ms. Calderon, Mr. Scherer, Mr. Eisler, and Mr. Creed are independent within the meaning of the Nasdaq Stock Market Listing Rule 5605(a)(2). Mr. Dawson was also an independent director until his appointment as the Company’s Chief Executive Officer on April 16, 2023. Pursuant to Nasdaq Stock Market Listing Rule 5615(b)(1), a majority of our board members are required to be independent. Information on additional independence requirements with respect to board committee members is set forth below under “Board Committees.”
Due to the size of our board of directors, the independent directors are able to closely monitor the activities of our Company and they intend to meet regularly in executive sessions without management to discuss the development and strategy of our Company. These executive sessions will allow the independent directors to review key decisions and discuss matters in a manner that is independent of our Chief Executive Officer or employee directors.
Family Relationships
There is no family relationship between any director, executive officer or person nominated to become a director or executive officer of our Company.
Executive Sessions of Non-Employee Directors
In order to promote open discussion among non-employee directors, our board of directors intends to conduct executive sessions of non-employee directors at scheduled meetings and at such other times requested by a non-employee director.
Selection of Nominees for our Board of Directors
The nominating and governance committee of our board of directors is responsible for establishing the criteria for recommending which directors should stand for re-election to our board and the selection of new directors to serve on our board. Although we have no formal policy regarding shareholder nominees, our board believes that shareholder nominees should be viewed in substantially the same manner as other nominees. The committee has not formulated any specific minimum qualifications for director candidates, but has determined certain desirable characteristics,
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including strength of character, mature judgment, career specialization, relevant technical skills, diversity and independence. The nominating and governance committee does not currently maintain a separate diversity policy regarding nominees for director. Instead, the nominating and governance committee relies on diversity as one of the many desirable characteristics in the consideration of potential director nominees.
Board Diversity
The following table summarizes certain self-identified characteristics of our directors, in accordance with Nasdaq Stock Market LLC Rules 5605(f) and 5606. Each term used in the table has the meaning given to it in the rule and related instructions.
Arcimoto, Inc. Board Diversity Matrix as of May 1, 2023 | ||||||||
Total Number of Directors | 7 | |||||||
Female | Male | Non-Binary | Did Not | |||||
Part I: Gender Identity | ||||||||
Directors | 1 | 6 | — | — | ||||
Part II: Demographic Information | ||||||||
African American or Black | — | — | — | — | ||||
Alaskan Native or Native American | — | — | — | — | ||||
Asian | — | — | — | — | ||||
Hispanic or Latinx | — | — | — | — | ||||
Native Hawaiian or Pacific Islander | — | — | — | — | ||||
White | 1 | 6 | — | — | ||||
Two or More Races or Ethnicities | — | — | — | — | ||||
LGBTQ+ | — | |||||||
Did Not Disclose Demographic Background | — | |||||||
Board Committees
Committees of our Board of Directors
Our board of directors adopted written charters for each of the Audit Committee, the Compensation Committee and the nominating and governance committee, all of which are available under Investor — Corporate Governance section of our website at www.arcimoto.com. Set forth below is information about each of these committees of our board as of April 19, 2023.
Audit Committee
Our Audit Committee consists of Ms. Calderon (Chair), Mr. Eisler, and Mr. Scherer. In addition to meeting the useindependence requirements generally applicable to directors, the Board has determined that each of Ms. Calderon, Mr. Eisler, and Mr. Scherer also satisfy the independence requirements of Rule 5605(c)(2) of the mailNasdaq Stock Market listing rules and SEC Rule 10A-3. Our board further has affirmatively determined that each of Ms. Calderon and Mr. Scherer is an “audit committee financial expert.” Our Audit Committee is responsible for, among other things:
• appointing, terminating, compensating, and overseeing the work of any accounting firm engaged to prepare or issue an audit report or other audit, review or attest services;
• reviewing and approving, in advance, all audit and non-audit services to be performed by the independent auditor, taking into consideration whether the independent auditor’s provision of non-audit services to us is compatible with maintaining the independent auditor’s independence;
• reviewing and discussing the adequacy and effectiveness of our accounting and financial reporting processes and controls and the Internet, solicitations may be made personallyaudits of our financial statements;
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• establishing and overseeing procedures for the receipt, retention, and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters, including procedures for the confidential, anonymous submission by emailour employees regarding questionable accounting or telephone,auditing matters;
• investigating any matter brought to its attention within the scope of its duties and engaging independent counsel and other advisors as the Audit Committee deems necessary;
• determining compensation of the independent auditors and of advisors hired by the Audit Committee and ordinary administrative expenses;
• reviewing and discussing with management and the independent auditor the annual and quarterly financial statements prior to their release;
• monitoring and evaluating the independent auditor’s qualifications, performance, and independence on an ongoing basis;
• reviewing reports to management prepared by the internal audit function, as well as management’s response;
• reviewing and assessing the adequacy of the formal written charter on an annual basis;
• reviewing and approving related-party transactions for potential conflict of interest situations on an ongoing basis; and
• handling such other matters that are specifically delegated to the Audit Committee by our board from time to time.
Compensation Committee
Our Compensation Committee currently consists of Mr. Eisler (Chair), Mr. Creed, and Mr. Scherer. In addition to meeting the independence requirements generally applicable to directors, the Board has determined that each of Messrs. Eisler, Creed and Scherer also satisfy the independence requirements of Rule 5605(d)(2) of the Nasdaq Stock Market listing rules. Our Compensation Committee is responsible for, among other things:
• reviewing and approving the compensation, employment agreements and severance arrangements, and other benefits of all of our executive officers and key employees;
• reviewing and approving, on an annual basis, the corporate goals and objectives relevant to the compensation of the executive officers, and evaluating their performance in light thereof;
• reviewing and making recommendations, on an annual basis, to the board with respect to director compensation;
• reviewing any analysis or report on executive compensation required to be included in the annual proxy statement and periodic reports pursuant to applicable federal securities rules and regulations, and recommending the inclusion of such analysis or report in our proxy statement and period reports;
• reviewing and assessing, periodically, the adequacy of the formal written charter; and
• such other matters that are specifically delegated to the Compensation Committee by our board from time to time.
Pursuant to its written charter, our Compensation Committee has the authority to engage the services of outside advisors as it deems appropriate to assist it in the evaluation of the compensation of our directors, principal executive officer or other executive and non-executive officers, and in the fulfillment of its other duties. Additionally, our Compensation Committee has the authority to review and approve the compensation of our other officers and employees and may delegate its authority to review and approve the compensation of other non-executive officer employees to specified executive officers.
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Nominating and Governance Committee
Our nominating and governance committee consists of Mr. Creed (Chair), Mr. Eisler, and Mr. Scherer, each of whom satisfy the independence requirements generally applicable to directors, as required by Nasdaq Stock Market listing rules. Our nominating and governance committee is responsible for, among other things:
• identifying and screening candidates for our board, and recommending nominees for election as directors;
• establishing procedures to exercise oversight of the evaluation of the board and management;
• developing and recommending to the board a set of corporate governance guidelines, as well as reviewing these guidelines and recommending any changes to the board;
• reviewing the structure of the board’s committees and recommending to the board for its approval directors to serve as members of each committee, and where appropriate, making recommendations regarding the removal of any member of any committee;
• developing and reviewing our code of conduct, evaluating management’s communication of the importance of our code of conduct, and monitoring compliance with our code of conduct;
• reviewing and assessing the adequacy of the formal written charter on an annual basis; and
• generally advising the board on corporate governance and related matters.
Information Regarding Meetings of our Board and its Committees
During 2022, our board of directors held 45 meetings. During 2022, our board’s Audit Committee held 4 meetings. During 2022, our board’s nominating and governance committee held 1 meeting. During 2022, our board’s Compensation Committee held 1 meeting. Each of our directors attended at least 75% of the aggregate number of meetings of the board and of the respective committees on which he or she served that was held during 2022 during the time he or she served, except for Galileo Russell, who was absent from 14 meetings of the Board of Directors.
We do not have a formal written policy with respect to directors’ attendance at our annual meetings of shareholders. All except two of our directors attended our 2022 Annual Meeting either in person or virtually.
Risk Oversight
While our Company’s senior management has responsibility for the management of risk, our board of directors plays an important role in overseeing this function. Our board regularly reviews our market and business risks during its formal and informal meetings and, since its formation, each of its committees has begun to oversee risks associated with its respective area of responsibility. In particular, our Audit Committee oversees risk related to our accounting, tax, financial and public announcement. disclosure processes. It also assesses risks associated with our financial assets. Our Compensation Committee oversees risks related to our compensation and benefit plans and policies to ensure sound pay practices that do not cause risks to arise that are reasonably likely to have a material adverse effect on our Company. Our nominating and governance committee seeks to minimize risks related to our governance structure by implementing sound corporate governance principles and practices. Each of our committees reports to the full board as appropriate on its efforts at risk oversight and on any matter that rises to the level of a material or enterprise level of risk.
Code of Conduct
We have adopted a code of ethics relating to the conduct of our business by all of our employees, officers, and directors and it is available under Investor — Corporate Governance on our website at www.arcimoto.com.
Communications with our Board of Directors
Shareholders who wish to communicate with members of our board of directors, including the independent directors individually or as a group, may send correspondence to them in care of our Corporate Secretary at our principal executive office mailing address at PO Box 25658, Eugene, Oregon 97402. Such communication will be forwarded to the intended recipient(s). We currently do not intend to have our Corporate Secretary screen this correspondence, but we may change this policy if directed by our board due to the nature or volume of the correspondence.
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Director Compensation Table for Year Ended December 31, 2022
The Companyfollowing table sets forth information regarding compensation earned during the fiscal year ended December 31, 2022 by each of our non-employee directors:
Name | Fees Paid | Fees Paid | Total | ||||||
Nancy Calderon | $ | — | $ | 62,742 | $ | 62,742 | |||
Dan Creed | $ | — | $ | 27,248 | $ | 27,248 | |||
Christopher Dawson | $ | — | $ | 27,248 | $ | 27,248 | |||
Jesse Eisler | $ | — | $ | 65,247 | $ | 65,247 | |||
Galileo Russel | $ | — | $ | 26,996 | $ | 26,996 | |||
Joshua Scherer | $ | — | $ | 76,996 | $ | 76,996 | |||
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(1) The amounts in this column reflect the aggregate grant date fair value of RSUs awarded during the year as director compensation computed in accordance with FASB ASC Topic 718. See Note 13 to our financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022 for the assumptions underlying the valuation of equity awards. The RSUs were issued at the closing price on the last day of the relevant quarter. Fair value is calculated as the number of RSUs received multiplied by the common stock closing price on the last day of the relevant quarter. Due to third party administrative issues associated with the reverse stock split, the fourth quarter 2022 compensation was delayed until January 25, 2023. The value of the RSU compensation was determined based on the closing price on the date issued.
Director Compensation Plan
On December 30, 2020, the board of directors adopted the 2021 Director Compensation Plan, which was effective January 1, 2021 and remains in effect. It set forth a schedule of retainers to determine director compensation.
Board Member Retainer: | $ | 50,000 per annum | |
Chairman Retainer: | $ | 25,000 per annum | |
Lead Director Retainer: | $ | 12,500 per annum | |
Audit Committee Chair Retainer: | $ | 9,000 per annum | |
Audit Committee Member Retainer: | $ | 7,500 per annum | |
Compensation Committee Chair Retainer: | $ | 5,000 per annum | |
Compensation Committee Member Retainer: | $ | 4,000 per annum | |
Nominating and Governance Chair Retainer: | $ | 5,000 per annum | |
Nominating and Governance Member Retainer: | $ | 4,000 per annum |
Retainers will bearbe split and paid to members in equal quarterly installments. Retainers will be paid in the costform of up to fifty percent in cash and the remainder in Restricted Stock Units under and pursuant to the terms of the Company’s 2022 Omnibus Stock Incentive Plan, as amended, unless another equity plan has been duly adopted in accordance with applicable law and stock exchange requirements, in which case our Compensation Committee may also elect to issue shares of common stock under such equity plan. Directors may also elect to defer their stock pursuant to the terms of the Deferred Compensation Plan for Directors.
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The Audit Committee is responsible for providing independent, objective oversight and review of the Company’s accounting functions and internal controls and has primary oversight responsibility for the Company’s risk management program. The Audit Committee’s functions are described in greater detail in the “Board Committees” section of this proxy solicitation. statement. Among other things, the Audit Committee recommends to the Board of Directors that the Company’s audited financial statements be included in its Annual Report on Form 10-K.
The Audit Committee is comprised of three directors, all of whom are independent as determined in accordance with Nasdaq’s listing standards. Each member of the Audit Committee is also independent within the meaning of Rule 10A-3 under the Exchange Act.
Our Audit Committee has (1) reviewed and discussed with management the audited financial statements for the year ended December 31, 2022, (2) discussed with Deloitte & Touche LLP, our independent registered public accounting firm, the matters required to be discussed by Auditing Standards No. 1301, as adopted by the Public Company Accounting Oversight Board (“PCAOB”), and (3) received the written disclosures and the letter from Deloitte & Touche LLP concerning applicable requirements of the PCAOB regarding communications with the Audit Committee concerning independence, and has discussed with Deloitte & Touche LLP its independence. Based upon these discussions and reviews, the Audit Committee recommended to our board of directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which is filed with the SEC.
Our Audit Committee operates under a written charter adopted by our board of directors, a copy of which is available under Investor — SEC Documents on our website at www.arcimoto.com. In order to ensure that the Company’s independent registered public accounting firm is engaged only to provide audit and non-audit services that are compatible with maintaining independence as defined by applicable laws and regulations, the Audit Committee has adopted a policy for the pre-approval of all audit and permitted non-audit services that may be performed by our independent registered public accounting firm. Under this policy, each year, at the time it engages an independent registered public accounting firm, the Audit Committee pre-approves the engagement terms and fees and may also request brokers, dealers, bankspre-approve detailed types of audit-related and their nomineespermitted tax services, subject to solicit proxies from their clients where appropriatecertain dollar limits, to be performed during the year. All other permitted non-audit services are required to be pre-approved by the Audit Committee on an engagement-by-engagement basis. All of the services described below under the caption “Audit and may reimburse them for reasonable expenses related thereto.Other Fees Paid to Independent Registered Public Accounting Firms” were pre-approved by the Audit Committee.
This report has been submitted by the members of the Audit Committee:
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Nancy Calderon | ||
Jesse Eisler | ||
Joshua Scherer |
This Audit Committee report does not constitute soliciting material and shall not be deemed filed or incorporated by reference into any other filing made by the Company under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates this information by reference therein.
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Georgeson1290 AvenueTable of Contents
Audit and Other Fees Paid to Independent Registered Public Accounting Firms
We have paid or expect to pay the following fees to Deloitte & Touche LLP and dbbmckennon for work performed in 2021 and 2022 or attributable to the audit of our 2021 and 2022 consolidated financial statements:
Fiscal Year | Fiscal Year | ||||
Audit Fees paid to dbbmckennon | $ | 88,680 | 400,961 | ||
Audit-Related Fees paid to dbbmckennon |
| — | — | ||
Tax Fees paid to dbbmckennon |
| — | — | ||
All Other Fees paid to dbbmckennon |
| — | — | ||
TOTAL FEES PAID TO DBBMCKENNON | $ | 88,680 | 400,961 | ||
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Audit Fees paid to Deloitte & Touche LLP | $ | 514,928 | — | ||
Audit-Related Fees paid to Deloitte & Touche LLP |
| — | — | ||
Tax Fees paid to Deloitte & Touche LLP |
| — | — | ||
All Other Fees paid to Deloitte & Touche LLP |
| — | — | ||
TOTAL FEES PAID TO DELOITTE & TOUCHE LLP | $ | 514,928 | — | ||
Audit Fees. Audit fees include fees for services that normally would be provided by the accountant in connection with statutory and regulatory filings or engagements and that generally only the independent accountant can provide. In addition to fees for the audit of our annual financial statements, the audit of the Americas, 9th FloorNew York, NY 10104effectiveness of our internal control over financial reporting and the review of our quarterly financial statements in accordance with generally accepted auditing standards. This category contains fees for comfort letters, consents, and assistance with and review of documents filed with the SEC.
Audit-Related Fees. Audit-related fees are assurance related services that traditionally are performed by the independent accountant, not included in the Audit Fees category above, including statutory audits.
Shareholders, BanksTax Fees. Tax fees include corporate and BrokersCall Toll Free:877-507-1756subsidiary compliance and consulting.
All Other Fees. Fees for other services would include fees for products and services other than the services reported above, including any non-audit fees.
You may also contactOn April 26, 2022, the Company at:dismissed dbbmckennon as the principal accountants for the Company. The decision to change the Company’s principal accountants was recommended by our Audit Committee and subsequently approved by the Board. Concurrently therewith, the Audit Committee recommended, and the Board approved, the accounting firm of Deloitte & Touche LLP as its new principal accountants for the year ending December 31, 2022.
The audit reports of dbbmckennon on the consolidated financial statements of the Company as of and for the years ended December 31, 2021 and 2020 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle.
Arcimoto, Inc.P.O. Box 25658Eugene, Oregon 97402Attention: Corporate SecretaryDuring the Company’s two most recently completed fiscal years and through the date of the Company’s engagement of Deloitte & Touche LLP, there were no disagreements or reportable events, as described in Item 304(a)(1)(iv) or Item 304(a)(1)(v) of Regulation S-K, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of dbbmckennon, would have caused it to make reference to the subject matter thereof in connection with its report.
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During the Company’s two most recently completed fiscal years and through the date of the Company’s engagement of Deloitte & Touche LLP, the Company did not consult with Deloitte & Touche LLP regarding (i) the application of accounting principles to a specific completed or contemplated transaction, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and no written report or oral advice was provided by Deloitte & Touche LLP that was an important factor considered by the Company in reaching a decision as to accounting, auditing or financial reporting issues, or (ii) any matter that was either the subject of a disagreement or reportable event, as described in Item 304(a)(1)(iv) or Item 304(a)(1)(v) of Regulation S-K, respectively.
The Company requested and received from dbbmckennon a letter, dated April 26, 2022, addressed to the SEC stating whether or not dbbmckennon agreed with certain of the above statements regarding dbbmckennon. A copy of the letter was filed as Exhibit 16.1 (which was incorporated by reference therein) to the Current Report on Form 8-K filed April 27, 2022.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of our common stock as of September 15, 2022,April 19, 2023, unless otherwise noted below, for the following:
• each person or entity known to own beneficially more than 5% of our outstanding common stock as of the date indicated in the corresponding footnote;
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• each of the named executive officers named in the Summary Compensation table;
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• each director; and
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| • all current directors and executive officers as a group. |
Applicable percentage ownership is based on 44,910,4247,338,249 shares of our common stock outstanding as of September 15, 2022,April 19, 2023, unless otherwise noted below, together with applicable options and warrants for each stockholder.shareholder. Beneficial ownership is determined in accordance with the rules of the SEC, based on factors including voting and investment power with respect to shares of commonshares. Common stock subject to options currently exercisable, or exercisable within 60 days after September 15, 2022,April 19, 2023, and warrants currently vested, or vesting within 60 days after September 15, 2022,April 19, 2023, are deemed outstanding for the purpose of computing the percentage ownership of the person holding those securities but are not deemed outstanding for computing the percentage ownership of any other person. Unless otherwise indicated, the address for each listed stockholdershareholder is c/o Arcimoto, Inc., P.O. Box 25658,2034 West 2nd Avenue, Eugene, Oregon 97402.
Name and Address of Beneficial Owner | Shares Beneficially Owned | Percentage Beneficially Owned | |||
Mark D. Frohnmayer(1) | 400,476 | 5.4 | % | ||
Nancy E. Calderon | 15,336 | * |
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Jesse G. Eisler | 39,188 | * |
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Terry L. Becker(2) | 19,397 | * |
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Joshua S. Scherer | 22,865 | * |
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Christopher W. Dawson | 13,938 | * |
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Dan M. Creed | 13,938 | * |
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Douglas M. Campoli(3) | 9,388 | * |
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John Dorbin, Jr.(4) | 1,422 | * |
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Jesse A. Fittipaldi(5) | 9,294 | * |
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All directors and executive officers as a group (10 individuals) | 545,363 | 7.3 | % | ||
5% or Greater Shareholders: |
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None |
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Name and Address of Beneficial Owner | Shares | Percentage |
Jesse A. Fittipaldi | 172,534(2) | * |
Douglas M. Campoli | 176,844(3) | * |
Mark D. Frohnmayer | 7,652,988(4) | 16.9% |
Terry L. Becker | 149,153(5) | * |
John Dorbin, Jr. | 16,762(6) | * |
Nancy E. Calderon | 25,333 | * |
Dan M. Creed | 0 | * |
Christopher W. Dawson | 0 | * |
Jesse G. Eisler | 490,456 | 1.1% |
Joshua S. Scherer | 104,745 | * |
All current directors, directors elect, director nominees, executive officers and named executive officers as a group (ten persons) | 8,788,815 | 19.2% |
5% or Greater Stockholders: | ||
Invesco, Ltd. | 2,271,384(7) | 5.1% |
* Less than 1.0%.
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PROPOSAL 1TO APPROVE, FOR PURPOSES OF COMPLYING WITH NASDAQ LISTING RULE 5635(D), THE FULL ISSUANCE OF SHARES OF COMMON STOCK ISSUABLE BY THE COMPANY PURSUANT TO THE CONVERTIBLE NOTES AND THE WARRANTS
Background and Overview
Convertible Note and Warrant Securities Purchase Agreement
On August 31, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an accredited investor (the “Convertible Note and Warrant Purchaser”) for an aggregate financing of $20.0 million. At the first closing under the Purchase Agreement, which occurred on September 1, 2022, the Company issued to the Convertible Noteexercise of stock options, 22,866 shares of deferred compensation and Warrant Purchaser in15,000 shares issuable upon the exercise of warrants.
(2) Includes 2,850 shares that Mr. Becker has the right to acquire from us within 60 days of April 19, 2022, pursuant to the exercise of stock options and 12,308 shares of deferred compensation.
(3) Includes 7,123 shares that Mr. Campoli has the right to acquire from us within 60 days of April 19, 2022, pursuant to the exercise of stock options.
(4) Includes 1,422 shares that Mr. Dorbin has the right to acquire from us within 60 days of April 19, 2022, pursuant to the exercise of stock options.
(5) Includes 9,194 shares that Mr. Fittipaldi has the right to acquire from us within 60 days of April 19, 2022, pursuant to the exercise of stock options.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers, and any persons who own more than 10% of a registered direct offering, (i) senior secured convertible notes of the Company (the “Convertible Notes”), in an aggregate principal amount of $10.0 million, which Convertible Notes are convertible into sharesclass of the Company’s common stock under certain conditions;equity securities, to file reports of ownership and (ii) warrants (the “Warrants”)changes in ownership with the SEC. SEC regulations require executive officers, directors, and greater than 10% shareholders to purchase up to an aggregatefurnish us with copies of 500,000 sharesall Section 16(a) forms they file. Based solely upon a review of Forms 3, 4 and 5 filed electronically with the Company’s common stock. AtSEC during the second closing under the Purchase Agreement, which the Company expects to occur upon certain conditions being satisfied, including the Company obtaining stockholder approvalyear ended December 31, 2022, no director, officer, beneficial owner of the Convertible Note and Warrant Issuance Proposal, the Company will issue to the Convertible Note and Warrant Purchaser, (i) Convertible Notes in an aggregate principal amount
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more than ten percent of 500,000 shares of the Company’s common stock (the “Additional Warrants”). The Convertible Notes have an original issue discount of 6% and, as a result, the Company received gross proceeds of approximately $9,400,000 at the first closing. The Company expects to receive gross proceeds of an additional $9,400,000 at the second closing, assuming that the maximum number of Additional Convertible Notes and Additional Warrants are issued.
The securities issued pursuant to the first closing, including 2,000,000 shares of the Company’s common stock issuable upon conversion of the Convertible Notes at the initial conversion price of $5.00 (or up to 4,831,000 shares of the Company’s common stock issuable if the Company satisfies all of its amortization obligations under the Convertible Notes inour outstanding shares of common stock) and 500,000 sharesstock, or any other person subject to Section 16 of the Company’s common stock issuable upon exerciseExchange Act, failed to file on a timely basis during the fiscal year ended December 31, 2022 , except one Form 3 and one Form 4 for Mr. Dawson which covered one transaction, one Form 3 and one Form 4 for Mr. Creed which covered one transaction, two Forms 4 for Ms. Calderon which covered two transactions, two Forms 4 for Mr. Becker which covered two transactions, one Form 4 for Mr. Fittipaldi which covered two transactions, one Form 4 for Mr. Dorbin which covered two transactions, one Form 4 for Mr. Campoli which covered two transactions, one Form 4 for Mr. Galileo which covered one transaction, one Form 4 for Mr. Scherer which covered one transaction, one Form 4 for Mr. Frohnmayer which covered one transaction and one Form 4 for Mr. Eisler which covered one transaction.
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We have opted to an effective shelf registration statement on Form S-3 (File No. 333-261955), which was declared effective by the Securities and Exchange Commission (the “SEC”) on January 13, 2022, and a prospectus supplement to the base prospectus contained therein, filed by the Companycomply with the SEC on September 1, 2022 pursuantexecutive compensation disclosure rules applicable to Rule 424(b)“smaller reporting companies,” as such term is defined in the rules promulgated under the Securities Act of 1933, as amended.
Why We are Seeking Stockholder Approval ofamended, which require compensation disclosure for our principal executive officer and the Convertible Note and Warrant Issuance Proposal
Pursuant to Nasdaq Rule 5635(d), stockholder approval is required prior to the issuance of securities in a transaction,two most highly compensated executive officers other than a public offering, involving the sale, issuance or potential issuance by the Company of common stock (or securities convertible into or exercisable for common stock), which equals 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance, at a price less than the lower of: (i) the closing price immediately preceding the signing of the binding agreement, or (ii) the average closing price of the common stockour principal executive officer. Our named executive officers for the five trading days immediately preceding the signing of the binding agreement for the transaction.
In light of this rule, the Purchase Agreement provides that, unless the Company obtains the approval of its stockholders as required by Nasdaq, the Company is prohibited from issuing any shares of common stock pursuant to the terms of the Convertible Notes and/or the Warrants if the issuance of such shares of common stock would exceed 19.99% of the Company’s outstanding shares of common stock as of Augustyear ended December 31, 2022 or if such issuance would otherwise exceed the aggregate number of shares of common stock which the Company may issue without breaching its obligations under the rules and regulations of Nasdaq. Further, pursuant to the Purchase Agreement, the Company agreed to obtain stockholder approval of the Convertible Note and Warrant Issuance Proposal by either (x) obtaining written consent of the stockholders and filing an information statement relating thereto with the SEC prior to the 45th day after the date of the first closing under the Purchase Agreement or (y) filing a proxy statement and soliciting votes from the Company’s stockholders at a special meeting to be held no later than 60 days after the date of the first closing under the Purchase Agreement (the “Stockholder Meeting Deadline”), in each case, on the terms specified in the Purchase Agreement. If the Company does not obtain stockholder approval of the Convertible Note and Warrant Issuance Proposal on or prior to the Stockholder Meeting Deadline, the Company will be obligated to continue to seek stockholder approval of the Convertible Note and Warrant Issuance Proposal semi-annually until the stockholder approval is obtained.
As a condition to the first closing under the Purchase Agreement, certain existing stockholders representing approximately 20% of the Company’s outstanding common stock (collectively, the “Principal Stockholders”) executed Voting Agreements with the Company, pursuant to which the Principal Stockholders agreed to vote all of their shares of the Company’s common stock in favor of the Convertible Note and Warrant Issuance Proposal. Pursuant to the Purchase Agreement, upon obtaining stockholder approval of the Convertible Note and Warrant Issuance Proposal, the Company has the right, but not the obligation, to require the Convertible Note and Warrant Purchaser to purchase up to the maximum amount of the Additional Convertible Notes and the Additional Warrants pursuant to a registered direct offering under the Registration Statement. The second closing will occur if, after obtaining stockholder approval of the Convertible Note and Warrant Issuance Proposal, the Company chooses to exercise such right under the Purchase Agreement and gives notice to the Convertible Note and Warrant Purchaser at any time after the 90th trading day after the date of the first closing under the Purchase Agreement,are: Mark D. Frohnmayer, who served as well as certain other conditions being satisfied pursuant to the terms specified in the Purchase Agreement. In addition, pursuant to the Purchase Agreement and upon obtaining stockholder approval of the Convertible Note and Warrant Issuance Proposal, the Convertible Note and Warrant Purchaser has the right, but not the obligation, to require the Company to sell to the Convertible Note and Warrant Purchaser up to the maximum amount of Additional Notes and Additional Warrants purchased by the Convertible Note and Warrant Purchaser in the first closing under the Purchase Agreement (each such additional closing, an “Additional Optional Closing”). If the Convertible Note and Warrant Purchaser has not elected to effect an Additional Optional Closing on or prior to the earlier to occur of the first calendar day after the first anniversary of the first closing under the Purchase Agreement, the Convertible Note and Warrant Purchaser shall have no further right to effect an Additional Optional Closing under the Purchase Agreement.
Convertible Notes
The Convertible Notes bear interest at 6% per annum and mature on September 1, 2024, unless earlier converted or redeemed, subject to the right of the Convertible Note and Warrant Purchaser to extend the date under certain circumstances. Commencing October 1, 2022, the Company is required to make monthly payments on the Convertible Notes on the first trading day of each month through the maturity date, payable in cash or shares of the Company’s common stock. If the Company elects to pay in cash, the principal due includes a 10% premium, plus accrued and unpaid interest and late charges, if any, on the Convertible Notes. If the Company elects to pay in stock, the stock for purposes of the monthly amortization is valued at 92% of the average of the five lowest daily volume-weighted average closing prices over the ten trading days prior to the amortization, subject to a maximum price of $5 per share. The Convertible Note and Warrant Purchaser has the option to defer individual amortization payments to a later date, as well as, in the case of stock, accelerate four months of amortization payments per due date.
All amounts due under the Convertible Notes are convertible at any time, in whole or in part, at the Convertible Note and Warrant Purchaser’s option, into shares of the Company’s common stock at the initial conversion price of $5.00, which conversion price is subject to certain adjustments; provided, however, that the Convertible Note and Warrant Purchaser may not have the right to any shares of common stock otherwise issuable pursuant to the terms of the Convertible Notes if, after giving effect to the conversion or issuance, the Convertible Note and Warrant Purchaser together with its affiliates would beneficially own in excess of 4.99% of the outstanding shares of the Company’s common stock. The Convertible Note and Warrant Purchaser may from time to time increase this limit to 9.99%, provided, however, that such increase will not be effective until the 61st day after delivery of a notice to the Company. If an event of default occurs under the Convertible Notes, the Convertible Note and Warrant Purchaser may convert all, or any part, of the principal amount of the Convertible Notes and all accrued and unpaid interest and late charges, if any, at an alternate conversion price, as described in the Convertible Notes. Subject to certain conditions, the Company has the right to redeem all orour Chief Executive Officer during a portion of the outstanding Convertible Notes2022, Jesse A. Fittipaldi, our Interim Chief Executive Officer, Douglas M. Campoli, our Chief Financial Officer and all accruedTreasurer, and unpaid interestJohn W. Dorbin, Jr., our General Counsel and late charges in cash at a 10% redemption premium. Additionally, in connection with a Fundamental Transaction (as defined in the Convertible Notes) or an event of default, the Convertible Note and Warrant Purchaser may require the Company to redeem all or any portion of the Convertible Notes at a 20% redemption premium. Prior to the conversion of the Convertible Notes, the Convertible Note and Warrant Purchaser is entitled to receive any dividends paid or distributions made to the holders of the Company’s common stock on an “as if converted” basis.
Warrants
Corporate Secretary.
The Warrants are exercisable at an exercise price of $10.00 per share, subject to certain adjustments, on or after the six month and one day anniversary of the initial issuance date and expire on the five-year anniversary of the initial exercisability date of the Warrants. The Convertible Note and Warrant Purchaser may not have the right to any shares of common stock otherwise issuable pursuant to the terms of the Warrant if, after giving effect to the exercise of a Warrant, the Convertible Note and Warrant Purchaser together with its affiliates would beneficially own in excess of 4.99% of the outstanding shares of the Company’s common stock. The Convertible Note and Warrant Purchaser may from time to time increase this limit to 9.99%, provided, however, that such increase will not be effective until the 61st day after delivery of a notice to the Company. The Warrants restrict the Company from entering into a Fundamental Transaction (as defined in the Warrants), subject to certain exceptions, and provide for an adjustment of the exercise price in the event of a Fundamental Transaction. The Warrants may be exercised for cash, provided that, if there is no effective registration statement available registering the exercise of the warrants, the warrants may be exercised on a cashless basis. Prior to the exercise of the Warrants, the Convertible Note and Warrant Purchaser is entitled to receive any dividends paid or distributions made to the holders of the Company’s common stock on an “as if exercised” basis.
Security Agreement
In connection with the Purchase Agreement, the Company entered into a Security and Pledge Agreement (the “Security Agreement”) with the Convertible Note and Warrant Purchaser, as collateral agent. Pursuant to the terms of the Security Agreement, the Company granted to the collateral agent, for the ratable benefit of the collateral agent and the Convertible Note and Warrant Purchaser, a valid, enforceable, and perfected security interest in the Collateral (as defined in the Security Agreement) to secure the Company’s obligations under the Purchase Agreement, the Convertible Notes, and the other Transaction Documents (as defined in the Security Agreement).
Additional Information
This summary is intended to provide you with basic information concerning the Purchase Agreement, the Convertible Notes, the Warrants, the Voting Agreements and the Security Agreement. The full text of each agreement was included as exhibits to our Current Report on Form 8-K filed with the SEC on September 1, 2022.
Effect on Current Stockholders if the Convertible Note and Warrant Issuance Proposal is Approved
Each additional share of common stock that would be issuable to the Convertible Note and Warrant Purchaser would have the same rights and privileges as each shareprimary objective of our currently outstanding common stock. The issuance of shares of common stock to the Convertible Notecompensation policies and Warrant Purchaser pursuant to the terms of the Convertible Notes and the Warrants will not affect the rights of the holders of our outstanding common stock, but such issuances will have a dilutive effect on the existing stockholders, including the voting power and economic rights of the existing stockholders, and may result in a decline in our stock price or greater price volatility. Further, any sales in the public market of our shares of common stock issuable to the Convertible Note and Warrant Purchaser could adversely affect prevailing market prices of our shares of common stock.
As of the date of this Proxy Statement, the outstanding Convertible Notes are convertible into an aggregate of 2,000,000 shares of our common stock and the outstanding Warrants are exercisable for an aggregate of 500,000 shares of our common stock. Further, if all amortization payments on the outstanding Convertible Notes are satisfied in shares of common stock, we estimate that we would issue approximately 2,831,000 shares of our common stock to the Convertible Note and Warrant Purchaser in satisfaction of such amortization payments. In addition, we may be required to issue additional shares of common stock in order to satisfy any such conversions and/or amortization payments in the event of certain events under the Purchase Agreement that would have the effect of decreasing the conversion rate and/or increasing the amortization payments, respectively.
If we obtain stockholder approval of the Convertible Note and Warrant Issuance Proposal and elect to issue the maximum amount of Additional Convertible Notes and Additional Warrants to the Convertible Note and Warrant Purchaser at the second closing, such Additional Convertible Notes will be convertible into an aggregate of 2,000,000 additional shares of our common stock and such Additional Warrants will be exercisable for an aggregate of 500,000 additional shares of our common stock. Further, if all amortization payments on such Additional Convertible Notes are paid in shares of common stock, we estimate that we would issue approximately 2,831,000 shares of our common stock to the Convertible Note and Warrant Purchaser in satisfaction of such amortization payments.
Effect on Current Stockholders if the Convertible Note and Warrant Issuance Proposal is Not Approved
The Company is not seeking the approval of its stockholders to authorize its entry into the Purchase Agreement, the Convertible Notes, the Warrants and any related documents, as the Company has already done so and such documents already are binding obligations of the Company. The failure of the Company’s stockholders to approve the Convertible Note and Warrant Issuance Proposal will not negate the existing terms of the documents, which will remain binding obligations of the Company.
If the stockholders do not approve this proposal, the Company will be unable to issue 20.0% or more of the Company’s outstanding shares of common stock as of August 31, 2022 to the Convertible Note and Warrant Purchaser pursuant to the terms of the Convertible Notes and/or the Warrants. As a result, the Company may be obligated to satisfy our obligations under the Convertible Notes, including but not limited to amortization payments, and the Warrants in cash. If all amortization payments on the outstanding Convertible Notes are satisfied in cash, we estimate that we would pay approximately $11,154,000 in satisfaction of such amortization payments. Further, the Company is required to obtain stockholder approval of the Convertible Note and Warrant Issuance Proposal in order to exercise its option under the Purchase Agreement to issue the Additional Notes and Additional Warrants to the Convertible Note and Warrant Purchaser at the second closing. Accordingly, if approval of the Convertible Note and Warrant Issuance Proposal is not obtained, the Company will be unable to issue the Additional Convertible Notes and Additional Warrants and may need to seek alternative sources of financing, which financing may not be available on advantageous terms, or at all, and which may result in the incurrence of additional transaction expenses. The Company expects to receive gross proceeds of approximately $9,400,000 upon issuance of the Additional Notes and Additional Warrants.
The Company’s ability to successfully implement its business plans and ultimately generate value for its stockholders is dependent upon its ability to raise capital and satisfy its ongoing business needs. If the Company is required to satisfy its obligations under the Convertible Notes and the Warrants in cash rather than common stock, the Company may not have the capital necessary to fully satisfy its ongoing business needs, the effect of which could materially and adversely impact future operating results, and result in a delay in or modification or abandonment of our business plans. Additionally, it may be necessary for the Company to acquire additional financing in order to satisfy its obligations under the Convertible Notes and the Warrants in cash, which financing may not be available on advantageous terms, or at all, and which may result in the incurrence of additional transaction expenses.
Further, pursuant to the Purchase Agreement, if the Company does not obtain stockholder approval of the Convertible Note and Warrant Issuance Proposal on or prior to the Stockholder Meeting Deadline, the Company will be obligated to continue to seek stockholder approval of the Convertible Note and Warrant Issuance Proposal semi-annually until such approval is obtained or until the Convertible Notes are no longer outstanding. As such, failure to obtain stockholder approval of the Convertible Note and Warrant Issuance Proposal at the Special Meeting will require the Company to incur the costs of holding one or more additional stockholder meetings until it obtains such approval.
Required Vote of Stockholders
The approval of the Convertible Note and Warrant Issuance Proposal requires that a quorum exist and that the number of votes cast in favor of approval of the Convertible Note and Warrant Issuance Proposal exceeds the number of votes cast against adoption of the Convertible Note and Warrant Issuance Proposal. Abstentions are not considered votes cast and will therefore have no effect on the Convertible Note and Warrant Issuance Proposal. Under applicable Nasdaq Stock Market listing rules, brokers are not permitted to vote shares held for a customer on “non-routine” matters (such as the Convertible Note and Warrant Issuance Proposal) without specific instructions from the customer. Therefore, broker non-votes are not considered votes cast and will also have no effect on the outcome of the Convertible Note and Warrant Issuance Proposal.
As a condition to the first closing under the Purchase Agreement, certain existing stockholders representing approximately 20% of the Company’s outstanding common stock have executed Voting Agreements with the Company, pursuant to which such stockholders have agreed to vote all of their shares of the Company’s common stock in favor of the Convertible Note and Warrant Issuance Proposal.
Recommendation of our Board
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” APPROVAL, FOR PURPOSES OF COMPLYING WITH NASDAQ LISTING RULE 5635(D), OF THE FULL ISSUANCE OF SHARES OF COMMON STOCK ISSUABLE BY THE COMPANY PURSUANT TO THE CONVERTIBLE NOTES AND THE WARRANTS.
PROPOSAL 2TO APPROVE, FOR PURPOSES OF COMPLYING WITH NASDAQ LISTING RULE 5635(D), THE FULL ISSUANCE OF SHARES OF COMMON STOCK ISSUABLE BY THE COMPANY PURSUANT TO THE EQUITY LINE OF CREDIT
Background and Overview
ELOC Common Stock Purchase Agreement
On October 4, 2022, the Company entered into a common stock purchase agreement (the “Common Stock Purchase Agreement”) with Tumim Stone Capital LLC (the “ELOC Investor”). Pursuant to the Common Stock Purchase Agreement, the Company has the right, but not the obligation, to sell to the ELOC Investor, and the ELOC Investor is obligated to purchase, up to $50.0 million of newly issued shares (the “Purchase Shares”) of the Company’s common stock from time to time during the term of the agreement (the “Equity Line of Credit”), subject to certain limitations and conditions. In addition, pursuant to the terms of the Common Stock Purchase Agreement, as consideration for its commitment to purchase shares of Common Stock from time to time at our direction, the Company issued 386,369 shares of common stock to the ELOC Investor on October 5, 2022 as “initial commitment shares” (representing 50% of the total number of “commitment shares” that the Company agreed to issue to the ELOC Investor for its commitment to purchase the Purchase Shares), and the Company has agreed to issue 386,369 additional shares of common stock as “additional commitment shares” (representing the balance of the total number of “commitment shares” the Company agreed to issue to the ELOC Investor under the Common Stock Purchase Agreement) to the ELOC Investor, if and when the Company has obtained stockholder approval of the ELOC Issuance Proposal.
The Company does not have the right to commence any sales of Purchase Shares to the ELOC Investor pursuant to the Equity Line of Credit unless all of the conditions to the ELOC Investor’s purchase obligation set forth in the Common Stock Purchase Agreement are satisfied (or, where legally permissible, waived) at the time of each purchase under the Common Stock Purchase Agreement, including stockholder approval of the ELOC Issuance Proposal. As a result, unless and until we obtain stockholder approval of the ELOC Issuance Proposal, we cannot sell any Purchase Shares to the ELOC Investor under the Equity Line of Credit, unless the ELOC Investor were to agree to waive satisfaction of such condition, which it may or may not elect to do in its sole and absolute discretion.
Pursuant to the Common Stock Purchase Agreement, from and after the initial satisfaction of the conditions to the Company’s right to commence sales of Purchase Shares to the ELOC Investor, including but not limited to obtaining stockholder approval of the ELOC Issuance Proposal (such event, the “Commencement,” and the date of initial satisfaction of all such conditions, the “Commencement Date”), the Company may direct the ELOC Investor to purchase shares of common stock at a purchase price per share equal to 95% of the lowest daily dollar volume-weighted average price for the common stock during the three consecutive trading day period immediately following the date on which the Company delivers to the ELOC Investor a notice for such purchase. The Company will control the timing and amount of any such sales of common stock to the ELOC Investor. Actual sales of shares of common stock to the ELOC Investor will depend on a variety of factors to be determined by the Company from time to time, including, among other things, market conditions, the trading price of the common stock, and determinations by the Company as to the appropriate sources of funding for the Company and its operations. In addition, a beneficial ownership limitation in the Common Stock Purchase Agreement initially limits the Company from directing the ELOC Investor to purchase shares of common stock if such purchases would result in the ELOC Investor beneficially owning more than 4.99% of the then outstanding shares of common stock (subject to an increase to 9.99% at the ELOC Investor’s option upon at least 61 calendar days’ notice).
Unless earlier terminated, the Common Stock Purchase Agreement will automatically terminate upon the earliest of (i) the expiration of the 24-month period following the Commencement Date, (ii) the Investor’s purchase or receipt of all of the Purchase Shares or (iii) the occurrence of certain other events set forth in the Common Stock Purchase Agreement. The Company has the right to terminate the agreement at any time after Commencement, at no cost or penalty, upon five trading days’ prior written notice to the Investor. The Investor has the right to terminate the agreement upon five trading days’ prior written notice to the Company, but only upon the occurrence of certain events set forth in the Common Stock Purchase Agreement, including but not limited to failure to obtain stockholder approval of the ELOC Issuance Proposal prior to June 30, 2023.
The Commitment Shares and the Purchase Shares were offered by the Company pursuant to an effective shelf registration statement on Form S-3 (File No. 333-261955), which was declared effective by the SEC on January 13, 2022, and a prospectus supplement to the base prospectus contained therein, dated October 4, 2022, filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended.
Why We are Seeking Stockholder Approval of the ELOC Issuance Proposal
Pursuant to Nasdaq Rule 5635(d), stockholder approval is required prior to the issuance of securities in a transaction, other than a public offering, involving the sale, issuance or potential issuance by the Company of common stock (or securities convertible into or exercisable for common stock), which equals 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance, at a price less than the lower of: (i) the closing price immediately preceding the signing of the binding agreement, or (ii) the average closing price of the common stock for the five trading days immediately preceding the signing of the binding agreement for the transaction.
In light of this rule, the Common Stock Purchase Agreement provides that, unless the Company obtains the approval of the ELOC Issuance Proposal, the Company is prohibited from issuing any Purchase Shares to the ELOC Investor pursuant to the Equity Line of Credit if the issuance of such shares of common stock, together with the Commitment Shares, would exceed 19.99% of the Company’s outstanding shares of common stock as of October 4, 2022, or if such issuance would otherwise exceed the aggregate number of shares of common stock which the Company may issue without breaching its obligations under the rules and regulations of Nasdaq. Further, pursuant to the Common Stock Purchase Agreement, the Company agreed to obtain stockholder approval of the ELOC Issuance Proposal by no later than June 30, 2023 on the terms specified in the Common Stock Purchase Agreement. If the Company does not obtain stockholder approval of the ELOC Issuance Proposal on or prior to June 30, 2023, the ELOC Investor has the right to terminate the Common Stock Purchase Agreement upon five trading days’ prior written notice to the Company.
Additional Information
This summary is intended to provide you with basic information concerning the Common Stock Purchase Agreement. The full text of the Common Stock Purchase Agreement was included as an exhibit to our Current Report on Form 8-K filed with the SEC on October 5, 2022.
Effect on Current Stockholders if the ELOC Issuance Proposal is Approved
Each additional share of common stock that would be issuable to the ELOC Investor would have the same rights and privileges as each share of our currently outstanding common stock. The issuance of shares of common stock to the ELOC Investor pursuant to the terms of the ELOC Agreement will not affect the rights of the holders of our outstanding common stock, but such issuances will have a dilutive effect on the existing stockholders, including the voting power and economic rights of the existing stockholders, and may result in a decline in our stock price or greater price volatility. Further, any sales in the public market of our shares of common stock issuable to the ELOC Investor could adversely affect prevailing market prices of our shares of common stock.
Effect on Current Stockholders if the ELOC Issuance Proposal is Not Approved
The Company is not seeking the approval of its stockholders to authorize its entry into the Common Stock Purchase Agreement and any related documents, as the Company has already done so and such documents already are binding obligations of the Company. The failure of the Company’s stockholders to approve the ELOC Issuance Proposal will not negate the existing terms of the documents, which will remain binding obligations of the Company. In particular, the Company has already issued the Commitment Shares to the ELOC Investor as consideration for its commitment to purchase shares of common stock under the Common Stock Purchase Agreement, and the ELOC Investor will be under no obligation to return the Commitment Shares in the event that no Purchase Shares are issued pursuant to the Equity Line of Credit.
If the stockholders do not approve the ELOC Issuance Proposal, the Company will be unable to issue any Purchase Shares pursuant to the Equity Line of Credit. Accordingly, if stockholder approval of the ELOC Issuance Proposal is not obtained, the Company may need to seek alternative sources of financing, which financing may not be available on advantageous terms, or at all, and which may result in the incurrence of additional transaction expenses. The Company expects to receive gross proceeds of $50.0 million upon issuance of all of the Purchase Shares.
The Company’s ability to successfully implement its business plans and ultimately generate value for its stockholders is dependent upon its ability to raise capital and satisfy its ongoing business needs. If the Company is unable to issue Purchase Shares pursuant to the Equity Line of Credit, it may be unable to fully satisfy its ongoing business needs on the terms or timeline it anticipates, if at all, the effect of which could materially and adversely impact future operating results, and result in a delay in or modification or abandonment of our business plans.
Further, pursuant to the Common Stock Purchase Agreement, if the Company does not obtain stockholder approval of the ELOC Issuance Proposal at this Special Meeting, the Company will be obligated to continue to seek stockholder approval of the ELOC Issuance Proposal every three months until such approval is obtained or until the termination of the Common Stock Purchase Agreement. As such, failure to obtain stockholder approval of the ELOC Issuance Proposal at the Special Meeting will require the Company to incur the costs of holding one or more additional stockholder meetings until it obtains such approval.
Required Vote of Stockholders
The approval of the ELOC Issuance Proposal requires that a quorum exist and that the number of votes cast in favor of approval of the ELOC Issuance Proposal exceeds the number of votes cast against approval of the ELOC Issuance Proposal. Abstentions are not considered votes cast and will therefore have no effect on the ELOC Issuance Proposal. Under applicable Nasdaq Stock Market listing rules, brokers are not permitted to vote shares held for a customer on “non-routine” matters (such as the ELOC Issuance Proposal) without specific instructions from the customer. Therefore, broker non-votes are not considered votes cast and will also have no effect on the outcome of the ELOC Issuance Proposal.
Recommendation of our Board
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” APPROVAL, FOR PURPOSES OF COMPLYING WITH NASDAQ LISTING RULE 5635(D), OF THE FULL ISSUANCE OF SHARES OF COMMON STOCK ISSUABLE BY THE COMPANY PURSUANT TO THE EQUITY LINE OF CREDIT.
PROPOSAL 3
APPROVAL OF AN AMENDMENT TO THE COMPANY’S ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
Background and Overview
Our Board of Directors has acted unanimously to adopt the proposal to amend our Second Amended and Restated Articles of Incorporation (the “Articles of Incorporation”) to increase the number of shares of authorized common stock, no par value per share, from 100,000,000 to 200,000,000 (the “Increased Capitalization Amendment”). The Board of Directors is now asking you to approve the Increased Capitalization Amendment.
As of October 3, 2022, there were 46,086,327 shares of our common stock outstanding. As of October 3, 2022, an aggregate of 25,070,187 shares of common stock were reserved for issuance pursuant to the Convertible Notes and the Warrants. Further, if we issue the maximum number of Additional Convertible Notes and Additional Warrants at the second closing under the Convertible Note and Warrant Purchase Agreement (as described in Proposal 1), we anticipate that an aggregate of 25,500,000 additional shares of common stock will be reserved for issuance pursuant to such Additional Convertible Notes and Additional Warrants. In addition, as of October 3, 2022, an aggregate of 7,778,294 shares of common stock were reserved for issuance under our various employee benefit and compensation plans and 20,160,309 shares of common stock were reserved for issuance under the ATM program. As a result of the foregoing, as of October 3, 2022, there were only 904,883 shares of authorized common stock available for future use. Further, subsequent to October 3, 2022, we issued 386,369 shares of common stock to the ELOC Investor as “initial commitment shares,” and we have agreed to issue an additional 386,369 shares of common stock as “additional commitment shares” and to reserve $50.0 million in shares of common stock for issuance as Purchase Shares, in each case, pursuant to the terms of the Common Stock Purchase Agreement.
Form of the Increased Capitalization Amendment
If stockholders approve the Increased Capitalization Proposal, Article IV, Section 4.1 of the Articles of Incorporation will be amended to increase the number of shares of common stock the Company is authorized to issue from 100,000,000 to 200,000,000. There will be no change to the number of authorized shares of preferred stock, which will remain at 5,000,000 shares. Both the common stock and the preferred stock will continue to be no par value, respectively. The amendment would amend Article IV, Section 4.1 of our Articles of Incorporation, to read in its entirety as follows:
4.1 Number of Shares. The Company is authorized to issue 200,000,000 shares of Common Stock, without par value, and 5,000,000 shares of Preferred Stock, without par value.
Why We are Seeking Stockholder Approval of the Increased Capitalization Proposal
The Board of Directors is recommending that our stockholders approve an increase in the number of our authorized shares of common stock primarily to give the Company appropriate flexibility to issue shares for future corporate needs, including for financing, equity incentive and strategic purposes. The shares may be issued by the Board of Directors in its discretion, subject to any further stockholder action required in the case of any particular issuance by applicable law, regulatory agency, or under the rules of any securities exchange. With the exception of already outstanding rights referenced above for which reservation has been made, there is no present agreement to issue any material amount of shares. The newly authorized shares of common stock would be issuable for any proper corporate purpose, including future acquisitions, investment opportunities, capital raising transactions of equity or convertible debt securities, stock splits, stock dividends, issuance under current or future equity compensation plans, employee stock or incentive and savings plans or for other corporate purposes. There are no immediate plans, arrangements, commitments or understandingsprograms with respect to issuanceexecutive compensation is to serve our shareholders by attracting, retaining and motivating talented and qualified executives. We focus on providing a competitive compensation package that provides, at the discretion of anyour board of directors, incentives for the additional sharesachievement of common stock that would be authorized bycorporate and individual performance objectives. Decisions regarding executive compensation are the proposed amendment. However, the Boardprimary responsibility of Directors believes that these additional shares will provide the Company with needed ability to issue shares in the future to take advantage of market conditions or favorable opportunities without the potential expense or delay incident to obtaining stockholder approval for a particular issuance.
Effectiveness of the Increased Capitalization Amendment
If the proposed amendment is adopted, it will become effective upon the filing of a certificate of amendment to our Articles of Incorporation with the Secretary of State of the State of Oregon.
Effect on Current Stockholders if the Increased Capitalization Proposal is Approved
The Board of Directors selected the size of the proposed increase to provide the Company with sufficient authorized shares for useCompensation Committee. Our board regularly assesses our compensation policies for any of the purposes described above, including any necessary financing transactions, as well aspractices that are reasonably likely to provide it the ability to take advantage of other opportunities that may be available to it that would require the use of shares of common stock without the cost and time that would be needed to seek further amendments to its Certificate of Incorporation.
Approving the amendment to increase the authorized number of shares of the Company’s common stock will not result in any dilution to current shareholders unless and until the Company issues such additional shares in the future. The additional authorized shares of common stock, if and when issued, would be part of the existing class of common stock and would have the same rights and privileges as the shares of common stock currently outstanding, including the right to cast one vote per share of common stock. Although the authorization of additional shares would not, in itself, have any effect on the rights of any holder of the Company’s common stock, the future issuance of additional shares of common stock (other than a stock split or dividend) would have the effect of diluting the voting rights of existing shareholders. Future issuances of common stock or securities convertible into common stock could also have a dilutive effect on the earnings per share, book value per share and percentage interest of holdings of current stockholders.
In addition, the availability of additional shares of common stock for issuance could, under certain circumstances, discourage or make more difficult efforts to obtain control of the Company. The Board of Directors is not aware of any attempt, or contemplated attempt, to acquire control of the Company. This proposal is not being presented with the intent that it be used to prevent or discourage any acquisition attempt, but nothing would prevent the Board of Directors from taking any appropriate actions not inconsistent with its fiduciary duties.
The Company’s stockholders do not have preemptive rights with respect to the common stock. Accordingly, should the Board of Directors elect to issue additional shares of common stock, existing stockholders would not have any preferential rights to purchase the shares.
Required Vote of Stockholders
The approval of the Increased Capitalization Proposal requires that a quorum exist and that the number of votes cast in favor of approval of the Increased Capitalization Proposal exceeds the number of votes cast against approval of the Increased Capitalization Proposal. Abstentions are not considered votes cast and will therefore have no effect on the Increased Capitalization Proposal. Under applicable Nasdaq Stock Market listing rules, brokers are not permitted to vote shares held for a customer on “non-routine” matters (such as the Increased Capitalization Proposal) without specific instructions from the customer. Therefore, broker non-votes are not considered votes cast and will also have no effect on the outcome of the Increased Capitalization Proposal.
Recommendation of our Board
OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY’S ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
PROPOSAL 4
APPROVAL OF AN AMENDMENT TO THE COMPANY’S ARTICLES OF INCORPORATION TO DECREASE THE NUMBER OF SHARES OF THE COMPANY’S COMMON STOCK WHICH SHALL CONSTITUTE A QUORUM FOR THE TRANSACTION OF BUSINESS AT ANY MEETING OF STOCKHOLDERS
Background and Overview
Our Board of Directors has acted unanimously to amend our Bylaws to decrease the number of shares of common stock which shall constitute a quorum for the transaction of business at any meeting of stockholders from a majority to one-third (1/3). However, pursuant to the Oregon Business Corporation Act, in order to decrease the quorum requirement below a majority, we are required to authorize such decrease pursuant to our Articles of Incorporation. Our Articles of Incorporation are currently silent as to quorum. As a result, our Board of Directors has acted unanimously to adopt the proposal to amend our Articles of Incorporation to include a provision stating that the number of shares of common stock which shall constitute a quorum for the transaction of business at any meeting of stockholders is one-third (1/3) (the “Decreased Quorum Amendment”). The Board of Directors is now asking you to approve the Decreased Quorum Amendment.
Form of the Decreased QuorumAmendment
If stockholders approve the Decreased Amendment Proposal, the Articles of Incorporation will be amended to include a new Article X, which will read in its entirety as follows:
Article X.Quorum.
a. One-third (1/3) of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum for the transaction of business at any shareholders’ meeting. If a person attends a meeting for the express purpose of objecting to transacting any business on the grounds that the meeting was not lawfully called or convened, the shares held by that person or represented by a proxy given to that person shall not be included for purposes of determining whether a quorum is present. Once a share is represented for any purpose at a meeting, other than for the purpose of objecting as provided above, it is deemed present for quorum purposes for the remainder of the meeting and any adjournment thereof, unless a new record date is or must be set for the resumed meeting. The persons present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough persons to leave less than a quorum.
b. In the absence of a quorum, a majority of the shares represented in person or by proxy may adjourn the meeting from time to time until a quorum shall attend. Any business that might have been transacted at the original meeting may be transacted at the resumed meeting if a quorum exists.
Why We are Seeking Stockholder Approval of the Decreased Quorum Proposal
The Board of Directors believes that, without the proposed Decreased Quorum Amendment, there is an increasing danger that the Company will not be able to obtain a quorum at future stockholder meetings, thus hindering the Company’s ability to conduct business. Due to the size of, and how dispersed the Company’s stockholder base is, it has become increasingly more difficult to obtain the current quorum at stockholder meetings, and as a result the Company’s ability to conduct business has become impaired. Without stockholder consent, the Company may not be able to, among other things, alter or amend its stock option plans, conduct certain types of mergers and acquisitions, or raise capital in certain types of transactions. The Board of Directors believes that the proposed amendment will increase the likelihood that the Company will be able to obtain a quorum.
Effectiveness of the Decreased Quorum Amendment
If the Decreased Quorum Amendment is adopted, it will become effective upon the filing of a certificate of amendment to our Articles of Incorporation with the Secretary of State of the State of Oregon. The Decreased Quorum Proposal will have no effect on the existence of a quorum for purposes of the Special Meeting.
Required Vote of Stockholders
The approval of the Decreased Quorum Proposal requires that a quorum exist and that the number of votes cast in favor of approval of the Decreased Quorum Proposal exceeds the number of votes cast against approval of the Decreased Quorum Proposal. Abstentions are not considered votes cast and will therefore have no effect on the Decreased Quorum Proposal. Under applicable Nasdaq Stock Market listing rules, brokers are not permitted to vote shares held for a customer on “non-routine” matters (such as the Decreased Quorum Proposal) without specific instructions from the customer. Therefore, broker non-votes are not considered votes cast and will also have no effect on the outcome of the Decreased Quorum Proposal.
Recommendation of our Board
OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY’S ARTICLES OF INCORPORATION TO DECREASE THE NUMBER OF SHARES OF THE COMPANY’S COMMON STOCK WHICH SHALL CONSTITUTE A QUORUM FOR THE TRANSACTION OF BUSINESS AT ANY MEETING OF STOCKHOLDERS.
PROPOSAL 5
PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY’S ARTICLES OF INCORPORATION TO AUTHORIZE THE COMPANY’S BOARD OF DIRECTORS TO COMBINE OUTSTANDING SHARES OF THE COMPANY’S COMMON STOCK INTO A LESSER NUMBER OF OUTSTANDING SHARES, A “REVERSE STOCK SPLIT,” BY A RATIO OF NOT LESS THAN ONE-FOR-FIVE AND NOT MORE THAN ONE-FOR-TWENTY, WITH THE EXACT RATIO TO BE SET WITHIN THIS RANGE BY THE COMPANY’S BOARD OF DIRECTORS IN ITS SOLE DISCRETION
Background and Overview
The Board of Directors has approved the form of an amendment to our Articles of Incorporation to combine the outstanding shares of our common stock into a lesser number of outstanding shares (the “Reverse Stock Split Amendment”). As of September 15, 2022, there were 44,910,424 shares of our common stock outstanding. If approved by the stockholders as proposed, the Board of Directors would have the sole discretion to effect the amendment and combination at any time before December 31, 2023 and to fix the specific ratio for the combination, provided that the ratio would be not less than one-for-five and not more than one-for-twenty (the “Reverse Stock Split Ratio”). The Board of Directors would also have the discretion to abandon the amendment prior to its effectiveness.
Form of the Reverse Stock SplitAmendment
If stockholders approve the Reverse Stock Split Proposal, the Articles of Incorporation will be amended to include a new Article XI, the form of which will read in its entirety as follows:
Contingent and effective as of [_____] on [_____] (the “Effective Time”), each [_____] shares of Common Stock issued and outstanding prior to the Effective Time shall, automatically and without any action on the part of the respective holders thereof, be combined and converted into one (1) share of Common Stock (the “Reverse Stock Split”). No fractional share shall be issued in connection with the foregoing combination of the shares pursuant to the Reverse Stock Split. Stockholders who would otherwise be entitled to receive a fractional share as a result of the Reverse Stock Split will receive one whole share of common stock in lieu of such fractional share.
The Reverse Stock Split shall occur automatically without any further action by the holders of Common Stock, and whether or not the certificates representing such shares have been surrendered to the Company; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable as a result of the Reverse Stock Split unless the existing certificates evidencing the applicable shares of stock prior to the Reverse Stock Split are either delivered to the Company, or the holder notifies the Company that such certificates have been lost, stolen or destroyed, and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates.
Any amendment to the Articles of Incorporation to effect the Reverse Stock Split will include the Reverse Stock Split Ratio fixed by the Board of Directors, within the range approved by our stockholders.
Why We are Seeking Stockholder Approval of the Reverse Stock Split Proposal
The Company’s common stock is listed on Nasdaq, which has as one of its continued listing requirements that listed securities maintain a minimum bid price of not less than $1.00 per share. As of September 15, 2022, the last reported sales price of the Company’s common stock was $1.91. Although our minimum bid price has not yet fallen below $1.00 per share, the Reverse Stock Split Proposal primarily is intended to increase our per share bid price and ensure that we may continue to the satisfy Nasdaq continued listing requirements. Reducing the number of outstanding shares of our common stock should, absent other factors, increase the per share market price of the common stock, although we cannot provide any assurance that we will be able to meet or maintain a bid price over the minimum bid price requirement for continued listing on Nasdaq or any other exchange. The potential delisting of our common stock from Nasdaq may result in decreased liquidity, increased volatility in the price and trading volume of our common stock, a loss of current or future coverage by certain sell-side analysts, a diminution of institutional investor interest and/or the impairment of our ability to raise capital. Delisting could also cause a loss of confidence of our customers, collaborators, vendors, suppliers and employees, which could have a material adverse effect on our businessCompany. As of December 31, 2022, our board concluded that our compensation policies did not present any such risks to the Company.
In 2022, we compensated our named executive officers through a mix of base salary and future prospects. Ifequity compensation at levels that we believed were comparable to those of executives at companies of similar size and stage of development, and that rewarded our commonnamed executive officers for their contributions. We have not yet established a formal policy with respect to our allocations between long-term equity compensation and short-term incentive compensation.
Summary Compensation Table
The following table shows information regarding the compensation earned during the years ended December 31, 2022 and December 31, 2021 by our named executive officers. There were no bonuses or non-equity incentive plan compensation during these years; accordingly, those columns were omitted from the Summary Compensation Table.
Name and Principal Position | Year | Salary | Stock | Option | All Other Compensation ($) | Total | |||||||
Mark D. Frohnmayer(3) | 2022 | 161,935 | 74,991 | — | — | 236,926 | (4) | ||||||
Former Chief Executive Officer, | 2021 | 220,000 | 74,979 | — | 300 | 295,279 |
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Jesse A. Fittipaldi(5) | 2022 | 188,876 | — | 96,272 | — | 285,148 |
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John Dorbin | 2022 | 192,625 | — | 96,272 | — | 288,897 |
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General Counsel and Secretary | 2021 | 200,000 | — | 53,401 | 300 | 253,701 |
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Douglas M. Campoli | 2022 | 206,354 | — | 96,272 | — | 302,626 |
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Chief Financial Officer and Treasurer | 2021 | 144,762 | — | 51,368 | 300 | 196,430 |
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(1) The amounts in this column reflect the aggregate grant date fair value of RSUs awarded during the year as director compensation computed in accordance with FASB ASC Topic 718. See Note 13 to our financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022 for the assumptions underlying the valuation of equity awards.
(2) The amounts in this column reflect the aggregate grant date fair value of stock were delisted from Nasdaq, it may qualifyoptions awarded during the year computed in accordance with FASB ASC Topic 718. See Note 13 to our financial statements in our Annual Report on Form 10-K for quotation on the OTC Bulletin Board or other over-the-counter marketplace.year ended December 31, 2022 for the assumptions underlying the valuation of equity awards.
(3) Mr. Frohnmayer served as President and CEO until August 2022, whereupon he transitioned to the position of Chief Vision Officer.
(4) Includes $95,000 director compensation.
(5) Mr. Fittipaldi served as Chief Strategy Officer until his appointment as Interim Chief Executive Officer in August 2022. He served in that capacity until April 2023 when he was succeeded as Chief Executive Officer by Christopher W. Dawson. Mr. Fittipaldi was named President in April 2023.
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Narrative to Summary Compensation Table
We also believe thatare continually evaluating various compensation programs to implement as our business evolves. The disclosures below describe our historical compensation practices.
Annual Salary
We review compensation annually for our named executive officers. In setting base salaries and bonuses and granting equity incentive awards, we consider compensation for comparable positions in the low market, pricethe historical compensation levels of our common stock impairsexecutives, individual performance as compared to our expectations and objectives, our desire to motivate our employees to achieve short- and long-term results that are in the best interests of our shareholders, and a long-term commitment to our Company. We do not target a specific competitive position or a specific mix of compensation among base salary, bonus or long-term incentives.
Our board of directors has historically determined the compensation for our executive officers and more recently delegated this authority to the Compensation Committee, other than with respect to our chief executive officer. Our Compensation Committee typically reviews and discusses management’s proposed compensation with the chief executive officer for all executive officers other than the chief executive officer. Based on those discussions and its acceptabilitydiscretion, the Compensation Committee then approves the compensation for our executive officers. Our board, without members of management present, discusses the Compensation Committee’s report on these matters and approves the compensation of our chief executive officer. To date, our Compensation Committee has not engaged a compensation consultant.
Named Executive Officer Employment Agreements
In late 2020, the Company entered into an employment agreement with our then President and Chief Executive Officer, Mr. Frohnmayer, which was dated to important segmentsbe effective January 1, 2021. The term of the institutional investor communityEmployment Agreement was for two years. Mr. Frohnmayer was to receive a salary of $220,000 per year. If the Company elected not to renew the agreement or if Mr. Frohnmayer was terminated by the Company without “cause” (as defined in the agreement) or Mr. Frohnmayer terminated his employment for “good reason” (as defined in the agreement), provided that Mr. Frohnmayer executed a release and separation agreement in a form provided by the investing public. Many investors look upon low-priced stock as speculative in nature and, as a matter of policy, avoid investment in such stocks. Moreover, the low market price of our common stock may have reduced the effective marketability of our shares becauseCompany, he was to receive continuing payments of the reluctancethen effective Base Salary plus the costs of many brokerage firms to recommend low-priced stock to their clients. Further, a varietyCOBRA insurance coverage for 12 months. A copy of brokerage house policies and practices tend to discourage individual brokers within those firms from dealing in low-priced stocks. Some of those policies and practices pertainthe full Employment Agreement was filed as an exhibit to the payment of brokers’ commissions and to time-consuming procedures that function to make the handling of low-priced stocks unattractive to brokers from an economic standpoint. In addition, the structure of trading commissions also tends to have an adverse impact upon holders of low-priced stock because the brokerage commissionCurrent Report on a sale of low-priced stock generally represents a higher percentage of the sales price than the commissionForm 8-K filed on a relatively higher-priced issue.
In evaluating this Reverse Stock Split Proposal, in additionJanuary 6, 2021. As Mr. Frohnmayer transitioned to the considerations described above,position of Chief Vision Officer in August 2022, the BoardCompany intended to renegotiate this agreement. However, in September 2022, Mr. Frohnmayer volunteered to temporarily suspended receipt of Directors also took into account various negative factors associated with reversehis Base Salary.
Long-Term Incentives
Our board of directors approved the 2012 Employee Stock Benefit Plan, as amended, or the 2012 Plan, on July 1, 2012, as approved by the Company shareholders on December 6, 2012, and amended it on March 29, 2013 and July 21, 2017. Among the types of equity awards that may be granted under the 2012 Plan are warrants and stock splits generally. These factors include:awards. As of December 31, 2022, the negative perception of reverse stock splits held by some investors, analysts and other stock market participants; the fact that the stock price of some companies that have effected reverse stock splits has subsequently declined in share price and corresponding market capitalization; the adverse effect on liquidity that might be caused by a reducedaggregate number of shares outstanding;of our voting common stock that may be issued pursuant to the 2012 Plan was 15,550 shares. As of December 31, 2022, there were a total of 15,550 shares of our voting common stock reserved for issuance in connection with outstanding awards under the 2012 Plan. We have granted 15,000 awards to our named executive officers under the 2012 Plan.
