UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.______)
| Filed by the Registrant ☒ |
| Filed by a Party other than the Registrant ☐ |
| Check the appropriate box: |
☐☒ | Preliminary Proxy Statement |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
☒☐ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material Pursuant to §240.14a-12 |
| WidePoint Corporation |
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| ☐ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| | (1) | Title of each class of securities to which transaction applies: |
| | (2) | Aggregate number of securities to which transaction applies: |
| | (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| | (4) | Proposed maximum aggregate value of transaction: |
| | (5) | Total fee paid: |
☐ Fee paid previously with preliminary materials.
☐ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
| | (1) | Amount Previously Paid: |
| | (2) | Form, Schedule or Registration Statement No.: |
| | (3) | Filing Party: |
| | (4) | Date Filed: |
PRELIMINARY PROXY STATEMENT, SUBJECT TO COMPLETION, DATED JUNE 19, 2020
WIDEPOINT CORPORATION
11250 Waples Mill Road, South Tower, Suite 210
Fairfax, Virginia 22030
[July 8], 2020
April 24, 2020
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Our Stockholders:the Stockholders of WidePoint Corporation:
You are cordially invited to attend the AnnualWe hereby notify you that a Special Meeting of Stockholders (the “Special Meeting”) of WidePoint Corporation which, a Delaware corporation, will be held at 10:[10:00 a.m.], EST, on Thursday, June 18,[Monday], [August 24], 2020. Due to the public health impact of the coronavirus pandemicoutbreak (i.e., COVID-19) and to support the health and well-being of our stockholders and other stakeholders, we have decided that this year's annual meetingthe Special Meeting will be a completely virtual meeting of stockholders, which will be conducted solely online via live webcast. You will be able to participate in the annual meetingSpecial Meeting online and vote your shares electronically and submit your questions prior to and during the meeting by visiting: [www.virtualshareholdermeeting.com/WYY2020.WYY2020]. You must enter the control number found on your proxy card, voting instruction form or notice you previously received. There is no physical location for the annual meeting. As we have done in the past, we are taking advantage of the Securities and Exchange Commission's rule that allows companies to provide proxy materials for the annual meeting via the Internet to registered stockholders.Special Meeting. The accompanying notice of meeting and proxy statement describe the following matters described in the accompanying proxy statement:
(1)
to approve an amendment to our amended and restated certificate of incorporation, as amended (the “Restated Certificate of Incorporation”), to effect a reverse stock split of our issued and outstanding shares of common stock, $0.001 par value per share, at a ratio to be voted ondetermined in the discretion of the Board of Directors within a range of one (1) share of common stock for every five (5) to fifteen (15) shares of common stock (the “Reverse Stock Split”), such amendment to be effected after stockholder approval thereof only in the event the Board of Directors still deems it advisable;
(2)
to approve an amendment to the Restated Certificate of Incorporation, to decrease the number of authorized shares of common stock to 30,000,000 (the “Authorized Common Stock Decrease”), such amendment contingent upon the Reverse Stock Split being approved and effected;
(3)
to approve an adjournment of the Special Meeting, if the Board of Directors determines it to be necessary or appropriate, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of any of Proposal 1–the Reverse Stock Split, and Proposal 2–the Authorized Common Stock Decrease; and
(4)
to transact such other business as may properly come before the meeting or any adjournments or postponements of the meeting.
Stockholders of record at the meeting.close of business on [July 6], 2020 are entitled to receive notice of, and to vote at, the Special Meeting.
YOUR VOTE IS IMPORTANT. We encourage you to read the proxy statement and vote your shares as soon as possible. We ask that you vote your shares via the Internet or by telephone, as instructed on the Notice of Internet Availability of Proxy Materials or as instructed on the accompanying proxy. If you received or requested a copy of the proxy card by mail, you may submit your vote by completing, signing, dating and returning the proxy card by mail. You may also participate in the annual meetingSpecial Meeting online and vote your shares electronically. We encourage you to vote via the Internet or by telephone. These methods save us significant postage and processing charges. Please vote your shares as soon as possible. This is your Annual Meeting and your participation is important.
| Sincerely,
Jin Kang
Chief Executive Officer
|
WIDEPOINT CORPORATION
11250 Waples Mill Road, South Tower, Suite 210
Fairfax, Virginia 22030
NOTICE OF 2020 ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of WidePoint Corporation will be held at 10:00 a.m., EST, on Thursday, June 18, 2020. Due to the public health impact of the coronavirus pandemic (i.e., COVID-19) and to support the health and well-being of our stockholders and other stakeholders, we have decided that this year's annual meeting will be a completely virtual meeting of stockholders, which will be conducted solely online via live webcast. You will be able to participate in the annual meeting online, vote your shares electronically and submit your questions prior to and during the meeting by visiting: www.virtualshareholdermeeting.com/WYY2020. You must enter the control number found on your proxy card, voting instruction form or notice you previously received. There is no physical location for the annual meeting. The accompanying notice of meeting and proxy statement describe the following matters described in the accompanying proxy statement:
●
To elect the one director nominee named in the attached proxy statement as Class II director to serve for a three-year period until the Annual Meeting of Stockholders in the year 2023;
●
To ratify the selection of Moss Adams LLP as the Company’s independent accountants; and
●
To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on April 20, 2020 are entitled to receive notice of, and to vote at, the Annual Meeting.
| | By order of the Board of Directors, |
| | Jin Kang Chief Executive Officer |
April 24,[July 8], 2020
TABLE OF CONTENTS |
| |
Notice of Electronic Availability of Proxy Materials | 2 |
Voting Procedures and Securities | 4 |
Proposal One – Election of Directors | 6 |
Board Meetings – Committees of the Board | 9 |
Director Independence | 10 |
Identification and Evaluation of Director Candidates | 11 |
Process for Communicating with Board Member | 12 |
Director Attendance at Annual Meetings | 12 |
Board Leadership Structure and Role in Risk Oversight | 12 |
Director Compensation | 13 |
Section 16(A) Beneficial Ownership Reporting Compliance | 14 |
Executive Officers | 14 |
Principal Stockholders | 15 |
Executive Compensation | 17 |
Certain Related Person Transactions | 23 |
Proposal Two – Independent Accountants | 24 |
Audit Committee Report | 25 |
Independent Registered Certified Public Accounting Firm Fees and Services | 25 |
Other Information | 26 |
Stockholder Proposals for 2020 Annual Meeting | 26 |
Other Matters | 26 |
PRELIMINARY PROXY STATEMENT, SUBJECT TO COMPLETION, DATED JUNE 19, 2020
WIDEPOINT CORPORATION
11250 Waples Mill Road, South Tower, Suite 210
Fairfax, Virginia 22030
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of WidePoint Corporation, a Delaware corporation (referred to herein as “WidePoint,” the “Company,” “we” or “our”), of proxies of stockholders to be voted at the 2020 WidePoint Annuala Special Meeting of Stockholders to be held at 10:[10:00 a.m.], EST, on Thursday, June 18, 2020 and any and all adjournments thereof.[Monday], [August 24], 2020. Due to the public health impact of the coronavirus pandemicoutbreak (i.e., COVID-19) and to support the health and well-being of our stockholders and other stakeholders, we have decided that this year's annual meetingthe Special Meeting will be a completely virtual meeting of stockholders, which will be conducted solely online via live webcast. You will be able to participate in the annual meetingSpecial Meeting online and vote your shares electronically and submit your questions prior to and during the meeting by visiting: [www.virtualshareholdermeeting.com/WYY2020.WYY2020]. You must enter the control number found on your proxy card, voting instruction form or notice you previously received. There is no physical location for the annual meeting.Special Meeting. Any stockholder executing a proxy retains the right to revoke it at any time prior to its being exercised by giving written notice to the Secretary of the Company.
The Board of Directors is soliciting votes (1) FOR the approval of an amendment to our amended and restated certificate of incorporation, as amended (the “Restated Certificate of Incorporation”), to effect a reverse stock split of our issued and outstanding shares of common stock, at a ratio to be determined in the discretion of the Board of Directors within a range of one (1) share of common stock for every five (5) to fifteen (15) shares of common stock (the “Reverse Stock Split”), such amendment to be effected after stockholder approval thereof only in the event the Board of Directors still deems it advisable; (2) FOR the approval of an amendment to the Restated Certificate of Incorporation to decrease the number of authorized shares of common stock from 110,000,000 to 30,000,000 (the “Authorized Common Stock Decrease”), such amendment contingent upon the Reverse Stock Split being approved and effected; and (3) FOR approval to adjourn the Special Meeting, if the Board determines it to be necessary or appropriate, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of any of the Reverse Stock Split and the Authorized Common Stock Decrease (the “Adjournment”).
This Proxy Statement and the accompanying proxy are first being sent to stockholders of the Company on or about April 24,[July 8], 2020.
NOTICE OF ELECTRONIC AVAILABILITY OF PROXY MATERIALS
In accordance with regulations adopted by the Securities and Exchange Commission, instead of mailing a printed copy of our proxy materials, including our annual report to stockholders, to each stockholder of record, we may now furnish these materials by mail or e-mail. On or about April 24,[July 8], 2020, we mailed to our stockholders who have not previously requested to receive these materials by mail or e-mail a Notice of Internet Availability of Proxy Materials containing instructions on how to access this proxy statement and our annual report and to vote online. The Notice instructs you as to how you may access and review all of the important information contained in the proxy materials. The Notice also instructs you as to how you may submit your proxy on the Internet or by telephone. If you received the Notice by mail, you will not automatically receive a printed copy of our proxy materials or annual report unless you follow the instructions for requesting these materials included in the Notice.
VOTING PROCEDURES AND SECURITIES
Your Vote is Very Important
Whether or not you plan to attend the meeting, please take the time to vote your shares as soon as possible. You may submit your vote by completing, signing, dating and returning the proxy card by mail. We encourage you to vote via the Internet or by telephone. These methods save us significant postage and processing charges.
Vote Required, Abstentions and Broker Non-Votes
Shares of WidePoint common stock represented by proxy will be voted according to the instructions, if any, given in the proxy. Unless otherwise instructed, the person or persons named in the proxy will vote (1) FOR the electionapproval of the nominee for director listed herein (or a substitute inReverse Stock Split; (2) FOR the event a nominee is unavailable for election); (2) FOR the ratificationapproval of the selection of Moss Adams LLP as the independent accountants for the Company for the current fiscal year;Authorized Common Stock Decrease; and (3) in their discretion, with respect to such other business as may properly come beforeFOR the meeting.Adjournment. The Board of Directors has designated Jin Kang and Jason Holloway, and each or any of them, as proxies to vote the shares of common stock solicited on its behalf.
Votes cast by proxy or in person at the AnnualSpecial Meeting will be tabulated by an inspector of election appointed by the Company for the meeting. A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if at least a majority of the outstanding shares of common stock of the Company entitled to vote are present at the AnnualSpecial Meeting in person or by proxy. A directorAbstentions are treated as present for purposes of determining whether a quorum exists. Your shares will be counted towards the quorum only if you submit a valid proxy (or one is electedsubmitted on your behalf by your broker, bank or other nominee) or if you vote at the Special Meeting. Broker non-votes (which result when your shares are held in “street name”, and you do not tell the nominee how to vote your shares and the nominee does not have discretion to vote such shares or declines to exercise discretion) are treated as present for purposes of determining whether a pluralityquorum is present at the meeting.
To be approved, Proposal 1, which relates to the approval of the Reverse Stock Split within a range of one (1) share of common stock for every five (5) to fifteen (15) shares of common stock, must receive FOR votes cast atfrom the Annual Meeting, which means that the nominee who receives the highest numberholders of properly executed votes will be elected as a director, even if the nominee did not receive a majority of the votes cast. Theissued and outstanding shares of common stock as of the record date. Accordingly, abstentions and broker non-votes with respect this proposal will have the same effect as voting AGAINST this proposal (although no broker non-votes are expected to exist in connection with Proposal 1 since this is a routine matter for which brokers have discretion to vote if beneficial owners do not provide voting instructions).
To be approved, Proposal 2, which relates to the approval of the ratificationAuthorized Common Stock Decrease to decrease the number of authorized shares of common stock from 110,000,000 to 30,000,000, must receive FOR votes from the appointmentholders of Moss Adams LLP as the Company’s independent accountants require the affirmative vote of thea majority of the issued and outstanding shares of common stock as of the record date. Accordingly, abstentions and broker non-votes with respect this proposal will have the same effect as voting AGAINST this proposal (although no broker non-votes are expected to exist in connection with Proposal 2 since this is a routine matter for which brokers have discretion to vote if beneficial owners do not provide voting instructions).
To be approved, Proposal 3, which relates to the approval of the Adjournment of the Special Meeting, if the Board determines it to be necessary or appropriate to solicit additional proxies if there are insufficient votes in favor of the Reverse Stock Split and the Authorized Common Stock Decrease, must receive FOR votes from the holders of a majority of the shares present in person or represented by proxy and voting at the Annual Meeting.
The inspector of election will treat abstentions as shares that are presentmeeting and entitled to vote at the Special Meeting. Abstentions will be included in the vote tally and will have the same effect as a vote AGAINST and broker non-votes will not affect the outcome of this proposal (although no broker non-votes are expected to exist in connection with Proposal 3 since this is a routine matter for purposes of determining the presence of a quorum, but as unvoted for purposes of determining the approval of any matter submittedwhich brokers have discretion to the stockholders for a vote. Yourvote if beneficial owners do not provide voting instructions).
If your shares are held in “street name” and you do not indicate how you wish to vote, your broker bank or other nominee is permitted to exercise its discretion to vote your shares on certain “routine” matters. The routine matters to be submitted to our stockholders at the ratification of the appointment of Moss Adams LLP as our independent auditor without receiving voting instructions from you. All other itemsSpecial Meeting are "non-discretionary" items. This means brokerage firms that have not received voting instructions from their clients on any proposal other than the appointment of Moss Adams LLP will not be permittedProposals 1 and 2 and 3.
We encourage you to vote such shares for any other matters at the Annual Meeting. These "broker non-votes" will be included in the calculation of the number of votes considered to be present at the Annual Meeting for purposes of determining a quorum, but will not be considered in determining the number of votes necessary for approval and will have no effect on the outcome of any of the proposals because in tabulating the voting results, shares that constitute broker non-votes are not considered votes cast on that proposal.FORall three (3) proposals.
The cost of soliciting proxies will be borne by the Company. Certain of our officers and other employees may, without compensation other than their regular compensation, solicit proxies by further mailing or personal conversations, or by telephone, facsimile or other electronic means. We will also, upon request, reimburse brokers and other persons holding stock in their names, or in the names of nominees, for their reasonable out-of-pocket expenses for forwarding proxy materials to the beneficial owners of our stock and to obtain proxies.
Shares Outstanding
As of April 20,[July 6], 2020, the record date for determining stockholders entitled to vote at the AnnualSpecial Meeting, a total of 83,837,289[ ] shares of common stock of the Company, par value $.001 per share, which is the only class of voting securities of the Company, were issued and outstanding. All holders of record of the common stock as of the close of business on April 20,[July 6], 2020 are entitled to one vote for each share held when voting at the AnnualSpecial Meeting, or any adjournment thereof, upon the matters listed in the Notice of AnnualSpecial Meeting. Cumulative voting is not permitted.
Other Business
The Board knows of no other matters to be presented for stockholder action at the meeting. If other matters are properly brought before the meeting, the persons named as proxies in the accompanying proxy card intend to vote the shares represented by them in accordance with their best judgment.
PROPOSAL ONE – ELECTIONREVERSE STOCK SPLIT
APPROVAL OF AN AMENDMENT TO OUR RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT OF THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK AT A RATIO TO BE DETERMINED IN THE DISCRETION OF THE BOARD OF DIRECTORS WITHIN A RANGE OF ONE (1) SHARE OF COMMON STOCK FOR EVERY FIVE (5) TO FIFTEEN (15) SHARES OF COMMON STOCK
General
The Company’s Board of Directors has adopted, and is classifiedrecommending that our stockholders approve, a proposed amendment to our Restated Certificate of Incorporation to effect a Reverse Stock Split of the issued and outstanding shares of common stock. Such amendment will be effected after stockholder approval thereof only in the event the Board of Directors still deems it advisable. Holders of the common stock are being asked to approve the proposal that Article Four of our Restated Certificate of Incorporation be amended to effect a Reverse Stock Split of the common stock at a ratio to be determined in the discretion of the Board of Directors within the range of one (1) share of common stock for every five (5) to fifteen (15) shares of common stock and also to decide whether or not to proceed to effect a Reverse Stock Split or instead to abandon the proposed amendment altogether. Pursuant to the laws of the State of Delaware, our state of incorporation, the Board of Directors must adopt any amendment to our Restated Certificate of Incorporation and submit the amendment to stockholders for their approval. The form of proposed amendment to effect the Reverse Stock Split is set forth in the certificate of amendment to our Restated Certificate of Incorporation attached as Appendix A to this proxy statement. If the Reverse Stock Split is approved by our stockholders and if a certificate of amendment is filed with the Secretary of State of the State of Delaware, the certificate of amendment to the Restated Certificate of Incorporation will effect the Reverse Stock Split by reducing the outstanding number of shares of common stock by the ratio to be determined by the Board of Directors. If the Board of Directors does not implement an approved Reverse Stock Split prior to the one-year anniversary of this meeting, the Board will seek stockholder approval before implementing any Reverse Stock Split after that time. The Board of Directors may abandon the proposed amendment to effect the Reverse Stock Split at any time prior to its effectiveness, whether before or after stockholder approval thereof.
By approving this proposal, stockholders will approve the amendment to our Restated Certificate of Incorporation pursuant to which any whole number of outstanding shares, between and including five and fifteen, would be combined into three classesone share of directors,common stock, and authorize the Board of Directors to file a certificate of amendment setting forth such amendment, as determined by the Board of Directors in the manner described herein. If approved, the Board of Directors may also elect not to effect any Reverse Stock Split and consequently not to file any certificate of amendment to the Restated Certificate of Incorporation. The Board of Directors believes that stockholder approval of an amendment granting the Board of Directors this discretion, rather than approval of a specified exchange ratio, provides the Board of Directors with maximum flexibility to react to then-current market conditions and, therefore, is in the best interests of our Company and its stockholders. The Board of Directors’ decision as to whether and when to effect the Reverse Stock Split will be based on a number of factors, including market conditions and existing and expected trading prices for the common stock. Although our stockholders may approve the Reverse Stock Split, we will not effect the Reverse Stock Split if the Board of Directors does not deem it to be in our best interest and the best interest of our stockholders. The Reverse Stock Split, if authorized and if deemed by the Board of Directors to be in our best interest and the best interest of our stockholders, will be effected, if at all, at a time that is not later than one classyear from the date of directors being elected at each annualthe Special Meeting.
This Proposal 1, the proposed approval of the Reverse Stock Split as set forth in the certificate of amendment to our Restated Certificate of Incorporation, will not change the number of authorized shares of common stock or preferred stock, or the par value of common stock or preferred stock; however effecting the Reverse Stock Split will provide for additional shares of unissued authorized common stock. If Proposal 2 (the Authorized Common Stock Decrease) is approved and the Board of Directors determined to effect the Authorized Common Stock Decrease and not abandon the Authorized Common Stock Decrease, the authorized number of shares of common stock will be decreased from 110,000,000 to 30,000,000. As of the date of this proxy statement, our current authorized number of shares of common stock is sufficient to satisfy all of our share issuance obligations and current share plans and we do not have any current plans, arrangements or understandings relating to the issuance of the additional shares of authorized common stock that will become available following the Reverse Stock Split.
Purpose and Background of the Reverse Stock Split
The Board of Directors believes that the current low per share market price of the common stock has a negative effect on the marketability of our existing shares. The Board of Directors believes there are several reasons for this effect. First, certain institutional investors have internal policies preventing the purchase of low-priced stocks. Second, a variety of policies and practices of broker-dealers discourage individual brokers within those firms from dealing in low-priced stocks. Third, because the brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher priced stocks, the current share price of the common stock can result in individual stockholders paying transaction costs (commissions, markups or markdowns) that are a higher percentage of their total share value than would be the case if the share price of the common stock were substantially higher. This factor is also believed to limit the willingness of some institutions to purchase the common stock. The Board of Directors anticipates that a Reverse Stock Split will result in a higher bid price for the common stock, which may help to alleviate some of these problems.
We expect that, if effected, a Reverse Stock Split of the common stock will increase the market price of the common stock. However, the effect of a Reverse Stock Split on the market price of the common stock cannot be predicted with any certainty, and the history of similar stock split combinations for companies in like circumstances is varied. It is possible that the per share price of the common stock after the Reverse Stock Split will not rise in proportion to the reduction in the number of shares of the common stock outstanding resulting from the Reverse Stock Split, effectively reducing our market capitalization, and there can be no assurance that the market price per post-reverse split share will be for a sustained period of time. The market price of the common stock may vary based on other factors that are unrelated to the number of shares outstanding, including our future performance.
PLEASE NOTE THAT UNLESS SPECIFICALLY INDICATED TO THE CONTRARY, THE DATA CONTAINED IN THIS PROXY STATEMENT, INCLUDING BUT NOT LIMITED TO SHARE NUMBERS, CONVERSION PRICES AND EXERCISE PRICES OF OPTIONS, DOES NOT REFLECT THE IMPACT OF THE REVERSE STOCK SPLIT THAT MAY BE EFFECTUATED.
Board Discretion to Implement the Reverse Stock Split
If Proposal No. 1 is approved by the stockholders and the Board determines to effect the Reverse Stock Split, it will consider certain factors in selecting the specific stock split ratio, including prevailing market conditions and the trading price of the common stock. Based in part on the price of the common stock on the days leading up to the filing of the certificate of amendment to the Restated Certificate of Incorporation effecting the Reverse Stock Split, the Board of Directors will determine the ratio of the Reverse Stock Split, in the range of 1:5 to 1:15.
Notwithstanding approval of the Reverse Stock Split by the stockholders, the Board of Directors may, in its sole discretion, abandon the proposed amendment and determine prior to the effectiveness of any filing with the Secretary of State of the State of Delaware not to effect the Reverse Stock Split prior to the one year anniversary of the Special Meeting of stockholders, as permitted under Section 242(c) of the DGCL. If the Board fails to implement the amendment prior to the one-year anniversary of this meeting of stockholders, stockholder approval would again be required prior to implementing any Reverse Stock Split.
Consequences if Stockholder Approval for Proposal Is Not Obtained
If stockholder approval for Proposal No. 1 is not obtained, we will not be able to file a certificate of amendment to the Restated Certificate of Incorporation to effect the Reverse Stock Split.
Principal Effects of the CompanyReverse Stock Split
If the stockholders approve the proposal to serveauthorize the Board of Directors to implement the Reverse Stock Split and the Board of Directors determines to implement the Reverse Stock Split, we will publicly announce the selected ratio for a termthe Reverse Stock Split and file the certificate of three years or untilamendment to amend the earlier expirationexisting provision of our Restated Certificate of Incorporation to effect the Reverse Stock Split. The text of the termform of their class of directors or until their successors are elected and take office as provided below. To maintain the staggered terms of election of directors, stockholders of the Company are voting upon the election of one director nominee as a Class II director to serve for a three-year period until the Annual Meeting of Stockholdersproposed amendment is set forth in the year 2023certificate of amendment to the Restated Certificate of Incorporation is annexed to this proxy statement as Appendix A.
The BylawsReverse Stock Split will be effected simultaneously for all issued and outstanding shares of common stock and the stock split ratio will be the same for all issued and outstanding shares of common stock. The Reverse Stock Split will affect all of our stockholders uniformly and will not affect any stockholder's percentage ownership interests in our Company provideor proportionate voting power, except for minor adjustment due to the additional net share fraction that the Board will determine the number of directorsneed to serve on the Board. The Company’s Board presently consists of five members (two Class I and III directors and one Class II director) with no vacancies. The Board did not re-nominate Philip Richter for directorbe issued as a result of his desire to retire from the Board. Accordingly, Mr. Richter’s termtreatment of fractional shares. No fractional shares will expire at this Annual Meeting of Stockholders. Mr. Richter has been a valuable memberbe issued in connection with the Reverse Stock Split. Instead, the Company will issue one full share of the Company’spost-Reverse Stock Split common stock to any stockholder of record who would have been entitled to receive a fractional share as a result of the process. After the Reverse Stock Split, the shares of the common stock will have the same voting rights and rights to dividends and distributions and will be identical in all other respects to the common stock now authorized, common stock issued pursuant to the Reverse Stock Split will remain fully paid and non-assessable. The Reverse Stock Split will not affect us continuing to be subject to the periodic reporting requirements of the Exchange Act. The Reverse Stock Split is not intended to be, and will not have the effect of, a “going private transaction” covered by Rule 13e-3 under the Exchange Act.
The Reverse Stock Split may result in some stockholders owning “odd-lots” of less than 100 shares of the common stock. Brokerage commissions and other costs of transactions in odd-lots are generally higher than the costs of transactions in “round-lots” of even multiples of 100 shares.
Following the effectiveness of any Reverse Stock Split approved by the stockholders and implementation by the Board of Directors, andcurrent stockholders will hold fewer shares of common stock, with such number of shares dependent on the Company wishes himspecific ratio for the best in his future endeavors. Our Class II director nominee, Phillip Garfinkle, is not currently, and has never been,Reverse Stock Split. For example, if the Board approves of a member1-for-5 Reverse Stock Split, a stockholder owning a “round-lot” of 100 shares of common stock prior to the Board.Reverse Stock Split would hold 20 shares of common stock following the Reverse Stock Split. THE HIGHER THE REVERSE RATIO (1-FOR-10 BEING HIGHER THAN 1-FOR-5, FOR EXAMPLE), THE GREATER THE REDUCTION OF RELATED SHARES EACH EXISTING STOCKHOLDER, POST REVERSE STOCK SPLIT, WILL EXPERIENCE.
On July 3, 2018,Risks Associated with the Reverse Stock Split
There are risks associated with the Reverse Stock Split, including that the Reverse Stock Split may not result in a sustained increase in the per share price of our common stock. There is no assurance that:
●
the market price per share of our common stock after the Reverse Stock Split will rise in proportion to the reduction in the number of shares of our common stock outstanding before the Reverse Stock Split;
●
the Reverse Stock Split will result in a per share price that will attract brokers and investors who do not trade in lower priced stocks; and
●
the liquidity of the common stock will increase.
Stockholders should note that the effect of the Reverse Stock Split, if any, upon the market price for our common stock cannot be accurately predicted. In particular, we entered intocannot assure you that prices for shares of our common stock after the Reverse Stock Split will be five (5) to fifteen (15) times, as applicable, the prices for shares of our common stock immediately prior to the Reverse Stock Split. Furthermore, even if the market price of our common stock does rise following the Reverse Stock Split, we cannot assure you that the market price of the common stock immediately after the proposed Reverse Stock Split will be maintained for any period of time. Even if an appointmentincreased per-share price can be maintained, the Reverse Stock Split may not achieve the desired results that have been outlined above. Moreover, because some investors may view the Reverse Stock Split negatively, we cannot assure you that the Reverse Stock Split will not adversely impact the market price of the common stock.
The market price of the common stock will also be based on our performance and standstill agreement with our significant stockholder, Nokomis Capital, L.L.C. (“Nokomis”). The appointmentother factors, some of which are unrelated to the Reverse Stock Split or the number of shares outstanding. If the Reverse Stock Split is effected and standstill agreement, among other things, provided that (i) Nokomis shall be entitled to appoint one qualified independent individualthe market price of the common stock declines, the percentage decline as a Class III directoran absolute number and as a memberpercentage of our overall market capitalization may be greater than would occur in the absence of a Reverse Stock Split. The total market capitalization of the Corporate Governance and Nominating Committee and the Compensation Committeecommon stock after implementation of the BoardReverse Stock Split when and we shall nominateif implemented may also be lower than the total market capitalization before the Reverse Stock Split. Furthermore, the liquidity of the common stock could be adversely affected by the reduced number of shares that would be outstanding after the Reverse Stock Split.
We believe that the Reverse Stock Split may result in greater liquidity for our stockholders. However, it is also possible that such appointee for election atliquidity could be adversely affected by the 2019 Annual Meetingreduced number of Stockholders and (ii) we and Nokomis shall mutually select a qualified independent individual to serveshares outstanding after the Reverse Stock Split, particularly if the share price does not increase as a Class III director and as a memberresult of the Corporate Governance and Nominating Committee andReverse Stock Split.
Common Stock
After the Compensation Committeeeffective date of the Board and we shall nominate such appointee for election at the 2019 Annual Meeting of Stockholders. On February 7, 2019 and in accordance with the termsReverse Stock Split, each stockholder will own fewer shares of the appointment and standstill agreement,common stock. The following table sets forth the Board appointed Richard L. Todaro and Julia A. Bowen as Class III directorsapproximate number of shares of the Company, with Mr. Todaro ascommon stock that would be outstanding immediately after the appointee by Nokomis and Ms. Bowen as the mutual appointee. As part of the agreement, Nokomis, among other things, agreed to customary standstill commitments during the term of the Agreement and to vote its shares in favor of the Board's recommendations regarding director elections and other matters to be submitted to a vote at the 2018 and 2019 Annual Meetings of Stockholders. The term of the agreement expiredReverse Stock Split based on the date that was thirty days priorcurrent authorized number of shares of common stock at various exchange ratios, based on 85,910,275 shares of common stock actually outstanding as of June 17, 2020 (without giving effect to the deadline related to nominations by stockholders of directorsany adjustments for election at this 2020 Annual Meeting of Stockholders.
Previously, on July 20, 2017, the Company entered into a prior appointment and standstill agreement with Nokomis pursuant to which, among other things, the Company agreed to appoint Alan Howe and Philip Richter as Class II directors of the Company and as members of the Corporate Governance and Nominating Committee and the Compensation Committee of the Board and to nominate them for re-election at the Company’s 2017 Annual Meeting of Stockholders.
Proxies will be voted at the Annual Meeting, unless authority is withheld, FOR the election of the person named below. The Company does not contemplate that the person named below will be unable or will decline to serve; however, if the nominee is unable or declines to serve, the persons named in the accompanying proxy will vote for a substitute, or substitutes, in their discretion.
Class II Director Nominee For a Term That Will Expire at the 2023 Annual Meeting of Stockholders:fractional shares).
Name | Age | PositionApproximate Shares of Common Stock |
| | Outstanding After Reverse Stock Split |
| | Based on Current Authorized |
| Ratio of Reverse Stock Split | | Number of Shares |
| | | |
Philip GarfinkleNone | 59 | Director Nominee— |
| 1:5 | | 17,182,055 |
| 1:10 | | 8,591,028 |
| 1:15 | | 5,727,352 |
Philip GarfinkleProcedure for Effecting Reverse Stock Split and Exchange of Stock Certificates, if Applicable
If the certificate of amendment is approved by the stockholders, and if at such time the Board of Directors still believes that a Reverse Stock Split is in our best interests and the best interests of our stockholders, the Board of Directors will determine the ratio, within the range approved by stockholders, of the Reverse Stock Split to be implemented and will publicly announce the selected ratio for the Reverse Stock Split. We will file the certificate of amendment with the Secretary of State of the State of Delaware at such time as the Board of Directors has determined the appropriate effective time for the Reverse Stock Split. The Board of Directors may delay effecting the Reverse Stock Split without re-soliciting stockholder approval. The Reverse Stock Split will become effective on the effective date set forth in the certificate of amendment. Beginning on the effective date of the Reverse Stock Split, each certificate representing pre-split shares will be deemed for all corporate purposes to evidence ownership of post-split shares.
As soon as practicable after the effective date of the Reverse Stock Split, stockholders will be notified that the Reverse Stock Split has been effected. If you hold shares of common stock in a book-entry form, you will receive a transmittal letter from our transfer agent as soon as practicable after the effective time of the Reverse Stock Split with instructions. After you submit your completed transmittal letter, if you are entitled to post-split shares of the common stock, a transaction statement will be sent to your address of record as soon as practicable after the effective date of the split indicating the number of shares of the common stock you hold.
Some stockholders hold their shares of common stock in certificate form or a combination of certificate and book-entry form. We expect that our transfer agent will act as exchange agent for purposes of implementing the exchange of stock certificates, if applicable. If you are a stockholder holding pre-split shares in certificate form, you will receive a transmittal letter from our transfer agent as soon as practicable after the effective time of the Reverse Stock Split. The transmittal letter will be accompanied by instructions specifying how you can exchange your certificate representing the pre-split shares of the common stock for a statement of holding. When you submit your certificate representing the pre-split shares of the common stock, your post-split shares of the common stock will be held electronically in book-entry form in the Direct Registration System. This means that, instead of receiving a new stock certificate, you will receive a statement of holding that indicates the number of post-split shares you own in book-entry form. We will no longer issue physical stock certificates unless you make a specific request for a share certificate representing your post-split ownership interest.
STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
Beginning on the effective time of the Reverse Stock Split, each certificate representing pre-split shares will be deemed for all corporate purposes to evidence ownership of post-split shares.
Fractional Shares
No fractional shares will be issued in connection with the Reverse Stock Split. Instead, the Company will issue one full share of the post-Reverse Stock Split common stock to any stockholder of record who would have been entitled to receive a fractional share as a result of the process. Each common stockholder will hold the same percentage of the outstanding common stock immediately following the Reverse Stock Split as that stockholder did immediately prior to the Reverse Stock Split, except for minor adjustment due to the additional net share fraction that will need to be issued as a result of the treatment of fractional shares.
Effect of the Reverse Stock Split on Equity Incentive Plans
We maintain equity inventive plans (the “Plans”) pursuant to which we have granted stock options and awards of restricted stock that are presently outstanding and additional equity incentive compensation awards may be granted in the future. Pursuant to the terms of the Plans, the Board of Directors or a committee thereof, as applicable, will adjust the number of shares available for future grant under the Plans, the number of shares underlying outstanding awards, the exercise price per share of outstanding stock options and other terms of outstanding awards issued pursuant to the Plans to equitably reflect the effects of the Reverse Stock Split.
Accounting Matters
The Reverse Stock Split will not affect the common stock capital account on our balance sheet. However, because the par value of the common stock will remain unchanged on the effective date of the split, the components that make up the common stock capital account will change by offsetting amounts. Depending on the size of the Reverse Stock Split the Board of Directors decides to implement, the stated capital component will be reduced to an amount between one-fifth (1/5) and one-fifteenth (1/15) of its present amount, and the additional paid-in capital component will be increased with the amount by which the stated capital is reduced. The per share net income or loss and net book value of the common stock will be increased because there will be fewer shares of common stock outstanding. Prior periods per share amounts will be restated to reflect the Reverse Stock Split.
Material Tax Consequences of the Reverse Stock Split Generally
The following is a nomineesummary of the material U.S. federal income tax consequences of the reverse stock split to holders of our common stock and to the Company. This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), existing, proposed and temporary Treasury Regulations promulgated thereunder, Internal Revenue Service (“IRS”) rulings, administrative pronouncements and judicial decisions in effect as of the date of this Information Statement, all of which are subject to change (possibly with retroactive effect) or to different interpretations. The summary does not address all aspects of federal income taxation that may apply to a stockholder as a result of the Reverse Stock Split and is included for director. Mr. Garfinkle isgeneral information only. In addition, the summary does not address any state, local or non-U.S. income or other tax consequences of the Reverse Stock Split.
The summary does not address tax consequences to stockholders that are subject to special tax rules, including, without limitation, banks, insurance companies, regulated investment companies, personal holding companies, non-U.S. entities, nonresident alien individuals, broker-dealers, S corporations, entities treated as partnerships or partners of such partnerships, persons who acquired our common stock pursuant to the exercise of compensatory stock options, estates, trusts and tax-exempt entities. The summary further assumes that stockholders have held our common stock subject to the Reverse Stock Split as a successful technology visionary, bringingcapital asset within the meaning of Section 1221 of the Code, and will continue to hold such common stock as a wealthcapital asset following the Reverse Stock Split. No ruling from the IRS or opinion of experiencecounsel will be obtained regarding the federal income tax consequences to stockholders as a result of the Reverse Stock Split.
THE FOLLOWING DISCUSSION IS BASED ON CURRENT LAW AND IS NOT INTENDED TO CONSTITUTE A COMPLETE DESCRIPTION OF ALL U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE REVERSE STOCK SPLIT. STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT IN LIGHT OF THEIR INDIVIDUAL CIRCUMSTANCES. THIS DISCUSSION IS FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE TAX ADVICE.
We believe that the Reverse Stock Split, if implemented, would be a tax-free recapitalization under the Code. If the Reverse Stock Split qualifies as a recapitalization under the Code, then, generally, for U.S. federal income tax purposes, no gain or loss will be recognized by the Company in connection with the Reverse Stock Split, and no gain or loss will be recognized by stockholders that exchange their shares of pre-split common stock for shares of post-split common stock. The post-split common stock in the hands of a stockholder following the Reverse Stock Split will have an entrepreneur, inventor, CEO, and deal maker, withaggregate tax basis equal to the aggregate tax basis of the pre-split common stock held by that stockholder immediately prior to the Reverse Stock Split. Similarly, a focus on emerging technologies. He is a five-time successful entrepreneur and has been the senior operating manager in many successful organizations. Mr. Garfinkle is currently Managing Director of Navig8 USA, Senior Managing Partner at Planet Cotton, and President and CEO of NewSight Reality. He also serves as an Economic Evaluatorstockholder’s holding period for the MIPS programpost-split common stock will be the same as the holding period for the pre-split common stock exchanged therefor.
Alternative characterizations of the Reverse Stock Split are possible. For example, while the Reverse Stock Split, if implemented, would generally be treated as a tax-free recapitalization under the Code, stockholders whose fractional shares resulting from the Reverse Stock Split are rounded up to the nearest whole share may recognize gain for federal income tax purposes equal to the value of the additional fractional share. However, we believe that, in such case, the resulting tax liability may not be material in view of the low value of such fractional interest. Stockholders should consult their own tax advisors regarding alternative characterizations of the Reverse Stock Split for federal income tax purposes.
THE COMPANY’S VIEW REGARDING THE TAX CONSEQUENCE OF THE REVERSE STOCK SPLIT IS NOT BINDING ON THE IRS OR THE COURTS. ACCORDINGLY, EACH STOCKHOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISORS REGARDING ALL OF THE POTENTIAL TAX CONSEQUENCES TO HIM OR HER OF THE REVERSE STOCK SPLIT.
Vote Required to Approve Amendment of our Restated Certificate of Incorporation
Approval of the Reverse Stock Split as set forth in the statecertificate of Maryland. He possessesamendment to our Restated Certificate of Incorporation included as Appendix A, requires an affirmative vote of a unique blend of technological and business acumen to guide business on a path to success. He was a co-founder of Yazam, an Israeli / global Venture Capital / Merchant Banking organization, which he sold to US Technologies. He also founded PhotoNet Japan, which went public in 2002, PictureVision (Chairman, CEO, and President), which he led the sale to Kodak, where he also served as a Senior Executive. PictureVision pioneered online photo processing, sharing, and printing services. He established alliances with AOL for “You’ve Got Pictures,” Sony’s ImageStation, Adobe, and many other major product lines. PictureVision was known for its excellence in engineering which he multi-located globally. Mr. Garfinkle has also served as Chairman of Johns Hopkins Technology Advisory Board, focused on technology transfer from academia to the commercial sector. Mr. Garfinkle brings to the Board extensive knowledge of technology and entrepreneurial experience. This experience, as well as his independence from the Company, led the Board to conclude that he should serve as a directormajority of the Company.common stock outstanding entitled to vote at the Special Meeting as of the record date. Abstentions and broker non-votes will have the same effect as “against” votes. Approval by our stockholders of the Reverse Stock Split is not conditioned upon approval by our stockholders of the Authorized Common Stock Decrease.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
A VOTE FOR“FOR” THE ELECTIONAMENDMENT TO OUR RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT OF OUR COMMON STOCK AT A RATIO TO BE DETERMINED IN THE DISCRETION OF THE ABOVE NOMINEE AS
A DIRECTORBOARD OF DIRECTORS IN THE RANGE OF ONE (1) SHARE OF COMMON STOCK FOR EVERY FIVE (5) TO FIFTEEN (15) SHARES OF COMMON STOCK, AND PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN FAVOR OF THE COMPANY.
Directors Not Being Elected in 2020:AMENDMENT UNLESS A STOCKHOLDER INDICATES OTHERWISE ON THE PROXY.
The directors whose terms are not expiring this year are listed below. They will continue to serve as directors for the remainder of their terms or until their respective successors are elected and qualified, or until their earlier death, resignation or removal. Information regarding each of such directors is provided below.
PROPOSAL 2
Class I Directors With a Term That Will Expire at the 2022 Annual Meeting of Stockholders:
Name | Age | Position |
| | |
Jin Kang | 55 | Director and Chief Executive Officer |
Julia A. Bowen | 54 | Director |
APPROVAL OF AMENDMENT (IN THE EVENT IT IS DEEMED BY THE BOARD TO BE ADVISABLE) TO OUR RESTATED CERTIFICATE OF INCORPORATION TO DECREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 110,000,000 to 30,000,000
Jin Kanghas served as a director and as our Chief Executive Officer and President since his appointment on July 5, 2017. Prior to his appointment as Chief Executive Officer and President of the Company, Mr. Kang served as Executive Vice President and Chief Operations Officer of WidePoint since June 30, 2012. Mr. Kang has also served as the Chief Executive Officer and President of WidePoint Integrated Solutions Corp., a wholly-owned subsidiary of the Company, since our acquisition of WidePoint Integrated Solutions Corp. formerly, iSYS, LLC on January 4, 2008. Mr. Kang founded WidePoint Integrated Solutions Corp. in 1999 and has managed the company since its inception. Mr. Kang has over 34 years of professional experience in both public and private sectors. Prior to founding, iSYS, LLC (now WidePoint Integrated Solutions Corp.), Mr. Kang held various senior management positions at large technology companies to include, Northrop Grumman, Science Applications International Corporation (SAIC), ManTech, and Atlantic Research Corporation. Mr. Kang managed marquee contracts for the federal government such as the Combined DNA Index System (CODIS) for the Federal Bureau of Investigation and Defense Medical Information Systems/Systems Integration, Design Development, Operations and Maintenance Services (D/SIDDOMS) Mr. Kang received a Bachelor and Master’s Degrees in Computer Science and Computer Systems Management from the University of Maryland.
Mr. Kang brings to the Board years of experience in the Federal Government Information Technology Services field. This experience, as well as his experience with the Company, led the Board to conclude that he should serve as a director of the Company.
Julia A. Bowen has served as a director since her appointment on February 9, 2019 pursuant to an appointment and standstill agreement with Nokomis. Ms. Bowen is currently senior vice president of strategic alliances, general counsel and corporate secretary of The MITRE Corporation, where she advises on all legal matters, including cybersecurity, contracting, international and global presence, intellectual property, HR, and national security. Previously, Bowen held several senior positions in the private sector, including chief legal counsel of DHL Global Mail, vice president, general counsel and secretary of QuadraMed Corporation, and vice president, general counsel and secretary of TREEV. Bowen is an active member of industry, academic and professional groups, including the Board of Visitors of The Catholic University of America’s Columbus School of Law and the Association of Corporate Counsel. She also serves on the Advisory Board of Manetu, Inc. Ms. Bowen graduated from The Catholic University of America, where she received her bachelor’s and law degrees. She is admitted to the bars of Maryland, the District of Columbia and Virginia.
Ms. Bowen brings to the Board extensive knowledge of legal and corporate governance experience. This experience, as well as her independence from the Company, led the Board to conclude that she should serve as a director of the Company.
Class III Directors With a Term That Will Expire at the 2021 Annual Meeting of Stockholders:
Name | Age | Position |
| | |
Otto Guenther | 78 | Chairman of the Board of Directors |
Richard L. Todaro | 47 | Director |
Lieutenant General (Ret.) Otto J. Guenther has served as a director since his appointment on August 15, 2007 and is currently the Chairman of the Board of Directors. He joined the Board after a distinguished 34-year military career, including serving as the Army’s first chief information officer, followed by nearly a decade of exceptional leadership within the federal information technology industry. His key assignments included the following: commanding general for Fort Monmouth, NJ, and the Communications Electronics Command; program executive officer for the Army’s tactical communications equipment; project manager for the Tactical Automated Data Distribution System; and director for the Defense Federal Acquisition Regulatory Council. General Guenther retired from Northrop Grumman Mission Systems, where he served as the Sector Vice President and General Manager of Tactical Systems Division. While there, he oversaw battlefield digitization, command and control, and system engineering activities for the U.S. Army. Under his leadership, the division grew to approximately 1,650 employees across several locations and completed over $700 million in acquisitions. Previously General Guenther was general manager of Computer Associates International’s Federal Systems Group, a $300 million operation providing IT products and services to the federal market area. General Guenther was awarded several honors by the U.S. Army, including the Distinguished Service Medal, Legion of Merit (Oak Leaf Cluster), Defense Superior Service Medal (Oak Leaf Cluster), Joint Service Medal, and Army Commendation Medal. Recognized for his work within the industry, he also received several Armed Forces Communications and Electronics Association awards and was inducted into the Government Computer News Hall of Fame. Since 2006 has been an active trustee at McDaniel College and in June 2019 he became the Chairman of the Board of Trustees at the College. General Guenther received a Bachelor of Science Degree in Economics from Western Maryland College, now called McDaniel College, and a Master’s Degree in Procurement and Contracting from the Florida Institute of Technology.
General Guenther brings to the Board extensive knowledge of the federal marketplace as a result of a career that has spanned both military and informational technology industries, as well as over 30 years of acquisition and procurement experience. In addition, General Guenther’s knowledge of federal infrastructure as well as experience in successful business development and board service is particularly valuable to the Company. This experience, as well as his independence from the Company and his prior performance as a Board member, led the Board to conclude that he should continue to serve as a director of the Company.
Richard L. Todaro has served as a director since his appointment on February 9, 2019 pursuant to an appointment and standstill agreement with Nokomis. Mr. Todaro spent 20 years at Kennedy Capital Management, a St. Louis-based, boutique investment firm with more than $5 billion of assets under management, where he held several positions, including portfolio manager and a member of its board of directors. Prior to Kennedy Capital Management, Todaro served as an advisory board member of the University of Missouri – St. Louis Finance Department as well as Gateway Greening. He has also served as a director on public company boards, including Telenav (Nasdaq: TNAV) from 2015 to 2016 and B. Riley Financial (Nasdaq: RILY) from 2014 to 2018. Todaro served in the Air National Guard as a staff sergeant from 1992 to 1998. Todaro received a BSBA in Finance from the University of Missouri – St. Louis and a Master of Finance from Saint Louis University. Todaro is a Chartered Financial Analyst (CFA), and passed the Uniform Investment Advisor Law examination.
Mr. Todaro brings to the board financial and capital market expertise. This experience, as well as his independence from the Company, led the Board to conclude that he should continue to serve as a director of the Company.
BOARD MEETINGS – COMMITTEES OF THE BOARD
The Board of Directors held eight (8) meetings during 2019. During this period, allhas adopted a resolution approving and recommending to our stockholders for their approval, a proposed amendment to our Restated Certificate of the directors attended or participatedIncorporation to effect a decrease in more than 75% of the aggregate of the total number of meetingsshares of our authorized common stock from the 110,000,000 shares that are currently authorized for issuance pursuant to our Restated Certificate of Incorporation to a total of 30,000,000 shares of common stock, contingent upon the Reverse Stock Split being approved and effected in accordance with Proposal 1. The proposed amendment to the Restated Certificate of Incorporation reflecting the decrease to the Company's authorized shares of common stock is included in Appendix B to this Proxy Statement.
In the event that the Board of Directors decides to effect the Reverse Stock Split following stockholder approval of Proposal 1 and this Proposal 2 is approved at the total number of meetings held by all Committees ofSpecial Meeting, the Board of Directors on which each such director served.
The Board currently haswill also effect an amendment to our Restated Certificate of Incorporation that will result in a decrease in the following standing Committees: Audit; Corporate Governancenumber of authorized shares of common stock from 110,000,000 to 30,000,000, concurrently with the amendment to our Restated Certificate of Incorporation to effect the Reverse Stock Split. In the event that (i) Proposal 1 is approved by our stockholders at the Special Meeting and Nominating, Mergers and Acquisitions; and Compensation. The current composition of the Board of directorsDirectors decides to effect the Reverse Stock Split following such approval and standing committees(ii) this Proposal 2 is not approved at the Special Meeting, the authorized number of shares of our common stock will remain at 110,000,000.
Even if Proposal 2 is approved at the Annual Meeting, the Board of Directors may determine in its sole discretion not to effect the Reverse Stock Split and not to file any amendments to our Restated Certificate of Incorporation. If the Board of Directors determines not to implement the Reverse Stock Split in accordance with Proposal 1, the number of authorized shares of our common stock will not be reduced to 30,000,000 in accordance with this Proposal 2, even if this proposal is approved at the Special Meeting. If the Board of Directors determines to change the number of authorized shares of our common stock other than a reduction to 30,000,000 concurrently with effecting the Reverse Stock Split in accordance with Proposal 1, further stockholder approval would be required prior to the Company implementing any such change in the number of authorized shares of our common stock.
If Proposal 1 is not approved, then we will not amend our Restated Certificate of Incorporation to decrease the number of authorized shares of common stock.
No changes to the Restated Certificate of Incorporation are being proposed with respect to the number of authorized shares of preferred stock.
Reasons for the Amendment
In the event that the Reverse Stock Split is approved and effected in accordance with Proposal 1, the Board of Directors believes, based on current information, that we will need fewer authorized shares of common dtock to meet our projected capital stock needs for capital-raising transactions, issuance of equity-based compensation and, to the extent opportunities may arise in the future, strategic transactions that may involve our issuance of stock-based consideration. Therefore, the Board of Directors is summarized below:seeking approval of an amendment to our Restated Certificate of Incorporation to reduce our authorized capital stock.
Name
| Board Class | Term End | Board of Directors | Audit Committee | Corporate Governance and Nominating Committee | Compensation Committee |
Otto J. Guenther | III | 2021 | X* | X | X | X |
Julia A. Bowen | I | 2022 | X | X | X | X |
Richard L. Todaro | III | 2021 | X | X | | |
Philip Richter | II | 2020 | X | | X | X |
Philip Garfinkle (assuming appointment) | II | 2023 | X | | X | X |
Jin Kang** | I | 2022 | X | | | |
| | | | | | |
*Individual holds the chairman position.
**Individual is not an independent memberEffects of the board of director.Amendment
The Audit, Corporate Governance and Nominating, and Compensation Committees consist entirely of independent, non-employee directors in accordance with the listing standardsdecrease of the NYSE American. Membership and principal responsibilitiesnumber of shares of authorized common stock (if it is approved by the Company's stockholders at the Special Meeting) will not change any rights of any holder of our common stock as such decrease would only apply to unissued authorized common stock. Voting rights of the Board’s Committees are described below. Each Committeeholders of the Board has adopted a charter and each such charter is available freeissued shares of charge on our website, www.widepoint.com, or by writing to WidePoint Corporation, 11250 Waples Mill Road, South Tower, Suite 210, Fairfax, Virginia 22030, c/o Corporate Secretary.common stock will remain the same.
Audit Committee
The Audit Committee met four (4) times in 2020. The Audit Committee has been established in accordance with Section 3(a)(58)(A)proposed amendment to our Restated Certificate of Incorporation would decrease the total number of authorized shares of our common stock to 30,000,000 shares. However, the proposed amendment would not change any of the Securitiescurrent rights and Exchange Act of 1934. The primary functions of the Audit Committee are to: appoint (subject to stockholder approval), and be directly responsible for the compensation, retention and oversight of, the firm that will serve as the Company’s independent accountants to audit our financial statements and to perform services related to the audit (including the resolution of disagreements between management and the independent accountants regarding financial reporting); review the scope and results of the audit with the independent accountants; review with management and the independent accountants, prior to the filing thereof, the annual and interim financial results (including Management’s Discussion and Analysis) to be included in our Forms 10-K and 10-Q, respectively; consider the adequacy and effectivenessprivileges of our internal accounting controls and auditing procedures; review, approve and thereby establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controlscommon stock or auditing matters and for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters; review and approve related person transactions in accordance with the policies and procedures of the Company; and consider the accountants’ independence and establish policies and procedures for pre-approval of all audit and non-audit services provided to WidePoint by the independent accountants who audit its financial statements. At each meeting, Audit Committee members may meet privately with representatives of Moss Adams LLP, our independent accountants, and with the Company’s Chief Financial Officer.par value.
The Board has determined that each member of the Audit Committee meet the definition of "independent director" for purposes of serving on an audit committee under applicable rules of the Securities and Exchange Commission and the listing standards of the NYSE American. In addition, the Board has determined that Mr. Todaro satisfies the “financially sophisticated” requirements set forth in the NYSE American Company Guide, and has designated Mr. Todaro as the “audit committee financial expert,” as such term is defined in the rules and regulations of the SEC.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee met one (1) time in 2019. The primary functions of this Committee are to: identify individuals qualified to become Board members and recommend to the Board the nominees for election to the Board at the next Annual Meeting of Stockholders; review annually and recommend changes to the Company’s Corporate Governance Guidelines; lead the Board in its annual review of the performance of the Board and its committees; review policies and make recommendations to the Board concerning the size and composition of the Board, the qualifications and criteria for election to the Board, retirement from the Board, compensation and benefits of non-employee directors, the conduct of business between WidePoint and any person or entity affiliated with a director, and the structure and composition of the Board’s Committees; review the Company’s policies and programs relating to compliance with its Code of Business Conduct and such other matters as may be brought to the attention of the Committee regarding WidePoint’s role as a responsible corporate citizen. See “Identification and Evaluation of Director Candidates” and “Director Compensation”amendment proposed in this proxy statement.
Compensation Committee
The Compensation Committee met two (2) times in 2019. The primary functions of the Compensation Committee are to: evaluate and approve executive compensation plans, policies and programs, including review of relevant corporate and individual goals and objectives, as submitted by the Chief Executive Officer; evaluate the Chief Executive Officer’s performance relative to established goals and objectives and, together with the other independent directors, determine and approve the Chief Executive Officer’s compensation level based on this evaluation; review and approve the annual salary and other remuneration of all other officers; review the management development program, including executive succession plans; review with management, prior to the filing thereof, the executive compensation disclosure included in this proxy statement; recommend individuals for election as officers; and review or take such other action as may be required in connection with the bonus, stock and other benefit plans of WidePoint and its subsidiaries.
DIRECTOR INDEPENDENCE
The listing standards of the NYSE American require that our Board be comprised of a majority of "independent directors" and that the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee each be comprised solely of "independent directors," as defined under the listing standards of the NYSE American.
The Company’s Corporate Governance and Nominating Committee conducts an annual review of the independence of the members of the Board and its Committees and reports its findings to the full Board of Directors. Based on the report and recommendation of the Corporate Governance Committee, the Board has determined that each of the Company’s non-employee directors and the director nominee each satisfy the independence criteria set forth in the listing standards of the NYSE American and Securities and Exchange Commission rules.
IDENTIFICATION AND EVALUATION OF DIRECTOR CANDIDATES
The Corporate Governance and Nominating Committee is charged with seeking individuals qualified to become directors and recommending candidates for all directorships to the full Board of Directors. The Committee considers director candidates in anticipation of upcoming director elections and other potential or expected Board vacancies.
The Committee considers director candidates suggested by members of the Committee, other directors, senior management and stockholders.
Director candidates are reviewed by the Committee based on the needs of the Board and the Company’s various constituencies, their relative skills, characteristics and age, and against the following qualities and skills that are considered desirable for Board membership: exemplification of the highest standards of personal and professional integrity; independence from management under applicable securities laws, listing standards, and the Company’s Corporate Governance Principles; experience and industry and educational background; potential contribution to the composition, diversity and culture of the Board; and ability and willingness to constructively challenge management through active participation in Board and committee meetings and to otherwise devote sufficient time to Board duties.
The Committee’s charter includes diversity as one of the criteria used to evaluate director candidates. The Corporate Governance and Nominating Committee may consider diversity in its broadest sense when evaluating candidates. Though we do not have a formal policy regarding how diversity will be considered in identifying potential director nominees, our Corporate Governance Guidelines direct that the evaluation of nominees should include (butProposal 2 would not be limited to) an assessmentexpected to limit our ability to use the remaining number of whether a nominee would provide the Board with a diversity of viewpoints, backgrounds, experiences, and other demographics.
In evaluating the needs of the Board, the Committee considers the qualifications of sitting directors and consults with other members of the Board, the Chief Executive Officer and other members of senior management. All recommended candidates must possess the requisite personal and professional integrity, meet any required independence standards, and be willing and able to constructively participate in, and contribute to, Board and committee meetings. Additionally, the Committee conducts regular reviews of current directors whose terms are nearing expiration, but who may be proposed for re-election, in light of the considerations described above and their past contributions to the Board.
The Corporate Governance and Nominating Committee has adopted a policy pursuant to which a stockholder who has owned at least 5% of the Company’s outstandingauthorized shares of common stock for at least two years may recommend a director candidateappropriate future corporate purposes, including equity financing transactions, debt-for-equity refinancing transactions, refinancing transactions with an equity component, acquisitions involving equity consideration and other equity considerations that the Committee will consider when there is a vacancy on the Board either as a resultboard of a director resignation or an increase in the size of the Board. Such recommendation must be made in writing addressed to the Chairman of the Corporate Governance and Nominating Committee at the Company’s principal executive offices and must be received by the Chairman at least 120 days prior to the anniversary date of the release of the prior year’s proxy statement.
Although the Committee has not formulated any specific minimum qualifications that the Committee believes must be met by a nominee that the Committee recommends to the Board, the factors it will take into account will include strength of character, mature judgment, career specialization, relevant technical skills or financial acumen, diversity of viewpoint and industry knowledge. There will be no differences between the manner in which the Committee evaluates a nominee recommended by a stockholder and the manner in which the Committee evaluates nominees recommended by other persons.
The Company did not receive in a timely manner, in accordance with the Securities and Exchange Commission’s requirements, any recommendation of a director candidate from a stockholder, or group of stockholders that beneficially owned more than 5% of the Company’s common stock for at least two years as of the date of recommendation other than the appointment and standstill agreements with Nokomis.
PROCESS FOR COMMUNICATING WITH BOARD MEMBERS
Interested partiesdirectors may communicate directly with the Board, or the presiding director for an upcoming meeting or the non-employee directors as a group, by writing to WidePoint Corporation, 11250 Waples Mill Road, South Tower, Suite 210, Fairfax, Virginia 22030, c/o Corporate Secretary. Communications may also be sent to individual directors at the above address.
DIRECTOR ATTENDANCE AT ANNUAL MEETINGS
The Company has adopted a policy that each director should attempt to attend and/or be available via online access or phone for each Annual Meeting of Stockholders. All members of the Board attended last year’s Annual Meeting of Stockholders.
BOARD LEADERSHIP STRUCTURE AND ROLE IN RISK OVERSIGHT
Our Board of Directors does not have a policy on whether or not the roles of Chief Executive Officer and Chairman should be separate. Our board reserves the right to assign the responsibilities of the Chief Executive Officer and Chairman in different individuals or in the same individual if, in the Board’s judgment, a combined Chief Executive Officer and Chairman position is determineddetermine to be in the best interestinterests of the Company and its stockholders from time to time.
The proposed decrease in the number of authorized shares of our Company.common stock could have adverse effects on us. We will have less flexibility to issue shares of common stock, including in connection with a potential merger or acquisition, other strategic transaction or follow-on offering if the number of authorized shares of our common stock is reduced. In the circumstance whereevent that our board of directors determines that it would be in the responsibilitiesbest interests of the Chief Executive OfficerCompany and Chairmanits stockholders to issue a number of shares of common stock in excess of the number of then authorized but unissued and unreserved shares, we would be required to seek the approval of our stockholders to increase the number of shares of authorized common stock. If we are vestednot able to obtain the approval of our stockholders for such an increase in a timely fashion, we may be unable to take advantage of opportunities that might otherwise be advantageous to us and our stockholders.
Vote Required to Approve the Amendment of our Restated Certificate of Incorporation
Approval of the amendment to our Restated Certificate of Incorporation to effect a decrease in the same individual ornumber of shares of our authorized common stock as set forth in other circumstances when deemed appropriate, the Board will designatecertificate of amendment to our Restated Certificate of Incorporation included as Appendix B, requires an affirmative vote of a lead independent director from amongmajority of the independent directorscommon stock outstanding entitled to presidevote at the meetingsSpecial Meeting as of the non-employee director executive sessions.
The positions of Chief Executive Officerrecord date. Abstentions and Chairmanbroker non-votes will have been separate since Steve L. Komar retiredthe same effect as our Chief Executive Officer in January 2017.“against” votes. In connection with the retirement of Steve L. Komar from our Board of Directors, the Board selected Otto J. Guenther as the non-executive Chairman of the Board in October 2017. Our Board retains the authority to modify this structure to best address our Company’s unique circumstances as and when appropriate.
Non-management members ofevent that the Board of Directors conductdecides to effect the Reverse Stock Split following stockholder approval of Proposal 1 and this Proposal 2 is approved at least two regularly scheduled meetings per year without members of management being present. Following an executive session of non-employee directors, the Presiding Independent Director may act as a liaison between the non-employee directors and the Chairman, provide the Chairman with input regarding agenda items for Board of Directors and Committee meetings, and coordinate with the Chairman regarding information to be provided to the non-employee directors in performing their duties.
The Board oversees the management of the risks inherent in the operation of the Company’s business. This is accomplished principally through the Audit Committee. Additionally, the Compensation Committee is responsible for overseeing the assessment of risks associated with the Company’s compensation policies and programs. Each of these committees receives and discusses reports regularly with members of management who are responsible for applicable day-to-day risk management functions of the Company, and reports regularly to the Board. The Board’s, the Audit Committee’s and the Compensation Committee’s respective roles in our risk oversight process have not affected our Board leadership structure.
DIRECTOR COMPENSATION
In December 2017, the Compensation Committee ofSpecial Meeting, the Board of Directors will also effect an amendment to our Restated Certificate of Incorporation that will result in a decrease in the number of authorized a board member compensation studyshares of common stock from 110,000,000 to 30,000,000, concurrently with the amendment to our Restated Certificate of Incorporation to effect the Reverse Stock Split. In the event that (i) Proposal 1 is approved by Compensia, an independent compensation consultant, to evaluate whetherour stockholders at the current annual retainer reflects market compensation for directors of similarly-sized organizations. In order to attractSpecial Meeting and retain qualified directors, the Compensation Committee of the Board of Directors recommended,decides to effect the Reverse Stock Split following such approval and the full Board of Directors(ii) this Proposal 2 is not approved an increase in the annual retainer per board member commencing in 2018 to include $20,000 in cash and $50,000 in restricted stock ($70,000 in restricted stock for Board Chairman) that vests at the annual meetingSpecial Meeting, the authorized number of stockholders. In April 2019,shares of our common stock will remain at 110,000,000.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE AUTHORIZED COMMON STOCK DECREASE.
PROPOSAL 3
ADJOURNMENT OF THE SPECIAL MEETING OF STOCKHOLDERS, IF NECESSARY, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE INSUFFICIENT VOTES IN FAVOR OF PROPOSAL 1 OR PROPOSAL 2
Adjournment to Solicit Additional Proxies
If we fail to receive a sufficient number of votes to approve any of Proposal 1 (an amendment to the Restated Certificate of Incorporation to effect the Reverse Stock Split), and/or Proposal 2 (an amendment to the Restated Certificate of Incorporation to effect the Authorized Common Stock Decrease) we may propose to adjourn the Special Meeting, if the Board of Directors approved a partial year grant of restricted stockdetermines it to each non-employee director in the amount of $16,700 in order to align the vesting period to end in June to coincide with the Annual Meeting of Stockholders, which was held on June 11, 2019. The director compensation program was unchanged for 2019, although the annual restricted stock grants of $50,000 ($70,000) for Board Chairman were made in April 2020 and vest at this Annual Meeting of Stockholders. The following table sets forth non-employee director compensationbe necessary or appropriate for the year ended December 31, 2019:purpose of soliciting additional proxies to approve Proposal 1 and/or Proposal 2. We currently do not intend to propose adjournment of the Special Meeting, if there are sufficient votes in favor of each of Proposal 1 and Proposal 2. If our stockholders approve this proposal, we could adjourn the Special Meeting and any adjourned session of the Special Meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from our stockholders that have previously voted. Among other things, approval of this proposal could mean that, even if we had received proxies representing a sufficient number of votes to defeat Proposal 1 and Proposal 2, we could adjourn the Special Meeting without a vote on such proposal and seek to convince our stockholders to change their votes in favor of such proposal.
| Director Name | | | All Other Compensation ($) | Total Annual Board Retainer |
| Otto J. Guenther (3) | $20,000 | $16,700 | $- | $36,700 |
| Julia Bowen | 20,000 | 16,700 | - | 36,700 |
| Richard Todaro | 20,000 | 16,700 | - | 36,700 |
| Philip Richter | 20,000 | 16,700 | - | 36,700 |
| Alan B. Howe (former director) (4) | 30,000 | 16,700 | - | 46,700 |
| Morton S. Taubman (former director) (5) | 15,000 | 16,700 | - | 31,700 |
(1) Represents the meeting retainers and annual payments earnedIf it is necessary or appropriate (as determined in 2019. Each director receives an annual payment of $20,000 paid in arrears in quarterly installments.
(2) Amount represents the grant date fair value calculated pursuant to ASC Topic 718. Additional information about the assumptions used when valuing equity awards is set forth in the notes the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 24, 2020.
(3) Mr. Howe served ongood faith by the Board until April 30, 2019 and received payments for Q4 2018, Q1 2019 and one year of annual payment.
(4) Mr. Taubman served onDirectors) to adjourn the Board until June 11, 2019 and received payments for Q4 2018, Q1 2019 and Q2 2019.
(5) As Chairman, Mr. Guenther was entitled to receive $23,380 of restricted stock award, but received $16,700. The difference will be paid in June of 2020.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a)Special Meeting, no notice of the Securities Exchange Act of 1934, as amended, requires the Company’s officers and directors, and persons who own more than 10% of a registered class of the Company’s equity securities, to file reports of securities ownership and changes in such ownership with the Securities and Exchange Commission. Statements of Changes in Beneficial Ownership of Securities on Form 4 are generallyadjourned meeting is required to be filed beforegiven to our stockholders under Delaware law, other than an announcement at the endSpecial Meeting of the second business day following the day ontime and place to which the change in beneficial ownership occurred. Based onSpecial Meeting is adjourned, so long as the Company's review of Forms 3meeting is adjourned for 30 days or less and 4 filed during 2019, all such Forms 3 and Forms 4 were filed on a timely basis.no new record date is fixed for the adjourned meeting. At the adjourned meeting, we may transact any business which might have been transacted at the original meeting.
EXECUTIVE OFFICERSRequired Vote
The Company’s executive officers asApproval of April 20, 2020the Adjournment requires an affirmative vote of a majority of the votes cast at the Special Meeting. Abstentions and broker non-votes are as follows:not votes cast and therefore will not affect the outcome of this proposal.
Name | | Age | | Position |
| | | | |
Jin Kang | | 55 | | Chief Executive Officer, President and Director |
| | | | |
Jason Holloway | | 52 | | Executive Vice President, Chief Sales and Marketing Officer, and President of WidePoint Cybersecurity Solutions Corporation |
| | | | |
Kellie H. Kim | | 56 | | Executive Vice President and Chief Financial Officer |
Recommendation
For information with respect to Jin Kang, please see the information about the members of our Board of Directors on the preceding pages. There are no family relationships among any of our executive officers or directors.THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” PROPOSAL 3 THE ADJOURNMENT OF THE SPECIAL MEETING, IF THE BOARD DETERMINES IT TO BE NECESSARY OR APPROPRIATE, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF PROPOSAL 1 AND/OR PROPOSAL 2.
Jason Holloway has served as the Chief Executive Officer and President of WidePoint’s wholly-owned subsidiary, WidePoint Cybersecurity Solutions Corporation, since July 10, 2017 and has served as the Company’s Executive Vice President and Chief Sales and Marketing Officer since May 2016. Mr. Holloway has been in the IT industry for more than 25 years, holding senior executive positions in multiple IT organizations, with a primary focus on business development, sales, and management to profitability. Mr. Holloway has industry vertical experience in Government, Technology, Finance, Transportation, Health Care, Entertainment, and Manufacturing. Mr. Holloway co-founded Nexcentri, an IT provider for the Credit Union industry, in 2001 and served as president and CEO until 2013. At Nexcentri, working with key vendor partners including Microsoft, First Data, and HP, he developed and implemented three successful financial services software products and was recognized as the first Credit Union service organization to successfully conduct business internationally. Prior to Nexcentri, he was president and CEO of Networked Knowledge Systems (NKS), a global Linux security managed service company where he increased annual revenue more than 800% in five years, servicing clients such as IBM and PwC, and making NKS an Open Source Managed Security industry leader. In addition, Mr. Holloway has held several key executive roles within technology start-up companies that were being positioned for an IPO.
Kellie H. Kim has served as Executive Vice President and Chief Financial Officer since her appointment effective January 2, 2020, replacing interim Chief Financial Officer Ian Sparling (who remains with the Company). Ms. Kim has more than 30 years of experience in financial and business leadership supporting both public and private companies that operate in a variety of industries, including telecom, technology, and professional services with government practice. Ms. Kim has helped organizations through their transformation and reorganization, implementing best practices, streamlining their technology and/or process and procedures, and updating business systems or scaling organically or through acquisitions. Most recently Ms. Kim served as the Principal of Clarius Consultants LLC, a consulting firm providing outsourced CFO services that was founded by Ms. Kim. Prior to that time, she served as the CFO of various companies, including CFO of Witt O’Brien’s LLC, a wholly-owned subsidiary of Seacor Holdings, CFO of Opus Group, LLC and CFO of Astrium Services Government, Inc., a subsidiary of Airbus Defense & Space. Kim is an active member of professional groups, including American Institute of Certified Public Accountants, Virginia Society of CPAs, Maryland Association of Certified Public Accountants and Washington Women’s Leadership Initiative. Kim is a Certified Public Accountant and has a Bachelor of Science in Accounting from the University of Maryland.
PRINCIPAL STOCKHOLDERSOTHER INFORMATION REGARDING THE COMPANY
Security Ownership of Directors and Executive Officers
In general, “beneficial ownership” includes those shares a director or executive officer has the power to vote or transfer, except as otherwise noted, and shares underlying stock options that are exercisable currently or within 60 days. The calculation of the percentage of outstanding shares is based on 83,837,28985,910,275 shares outstanding as of April 20,June 17, 2020. The mailing address for each of our directors director nominees and officers is c/o WidePoint Corporation - 11250 Waples Mill Road, South Tower, Suite 210, Fairfax, Virginia 22030.
The following tables set forth the number of shares of our common stock beneficially owned as of April 20,June 17, 2020 by each director director nominee,and executive officer and beneficial owner of more than 5% of the outstanding shares of the common stock:officer:
| Directors, Nominees and Executive Officers | Direct Common Stock Owned | | Stock Options Exercisable (1) | Number of Shares of Common Stock (1) | Percent of Common Stock Outstanding (1) | |
| Otto Guenther (2) (6) | 595,314 | 196,616 | 50,000 | 645,314 | * | |
| Philip Richter (3) (6) | 345,651 | 128,206 | 50,000 | 395,651 | * | |
| Directors and Executive Officers | | Direct Common Stock Owned | | Stock Options Exercisable (1) | Number of Shares of Common Stock (1) | Percent of Common Stock Outstanding (1) |
| |
| Otto Guenther (2) (3) | | 595,314 | - | 50,000 | 645,314 | * |
| Jin Kang (4) | 3,634,323 | 328,979 | 0 | 3,634,323 | 4.3% | 3,411,385 | 422,938 | 0 | 3,834,323 | 4.5% |
| Jason Holloway (5) | 1,229,979 | 328,979 | 500,000 | 1,729,979 | 2.1% | 1,007,041 | 322,938 | 500,000 | 1,829,979 | 2.1% |
Kellie Kim | - | * | - | 100,000 | - | 100,000 | * |
Julia Bowen (6)(3) | 167,968 | 128,206 | - | 167,968 | * | 167,968 | - | 167,968 | * |
Richard Todaro (6)(3) | 267,968 | 128,206 | - | 267,968 | * | 267,968 | - | 267,968 | * |
| Philip Garfinkle | 113,722 | - | 113,722 | | |
| All director nominees, directors and executive officers as a group (8 persons) (7) | 6,354,925 | 1,239,192 | 600,000 | 6,954,925 | 8.3% | |
| Philip Garfinkle (3) (7) | | 113,722 | - | 113,722 | * |
| All directors and executive officers as a group (7 persons) (8) | | 5,563,398 | 845,876 | 550,000 | 6,959,274 | 8.1% |
_________________________
*Indicates ownership percentage is less than 1.0%.
(1)(1) Assumes in the case of each stockholder listed above that all options and/or restricted stock held by such stockholder that are exercisable currently or vesting within 60 days of April 20, June 17, 2020 were fully exercised or vested by such stockholder, without the exercise or vesting of any shares of restricted stock or options held by any other stockholders.
(2) Includes 50,000 earned and exercisable options to purchase shares from the Company at a price $0.44 per share.
(3) Includes 50,000 earnedExcludes shares to be granted for one year service period beginning June 19, 2020 and exercisable options to purchase shares from the Company at a price $0.45 per share.ending June 18, 2021.
(4) Includes 222,938422,938 shares of unvested restricted stock.
(5) Includes 500,000 earned and exercisable options to purchase shares from the Company at a price $.70 per share and 222,938322,938 shares of unvested restricted stock.
(6) Includes 128,206100,000 shares to be vestedof unvested restricted stock.
(7) Director as of June 18, 2020 for directors and 196,615 shares to be vested June 18, 2020 for chairman. These shares were granted for one year service period ending June 18,19, 2020.
(7)(8) Includes the shares referred to as included in notes (2) through (6)(7) above.
Security Ownership of Certain Beneficial Owners (Greater than 5% Holders)
The following table sets forth beneficial owners of more than 5% based on 83,837,289 85,910,275 outstanding shares of Common Stockcommon stock as of April 20, June 17, 2020:
| | |
Names and Complete Mailing Address | | |
| | |
Nokomis Capital, L.L.C., and
Brett Hendrickson
2305 Cedar Springs Rd., Suite 420
Dallas, Texas 75201
| 12,774,251
| 15.2%(1)
|
| | |
| Names and Complete Mailing Address | Number of Shares of Common Stock | | Percent of Common Stock Outstanding |
| | | | |
Nokomis Capital, L.L.C., and Brett Hendrickson 2305 Cedar Springs Rd., Suite 420 Dallas, Texas 75201 | 8,378,081
| | 9.8%(1) |
(1)
Based on information provided in Amendment No. 3 Schedule 13D/A13G filed on July 6, 2018,May 29, 2020, Nokomis Capital, L.L.C. is a Texas limited liability company and Mr. Brett Hendrickson is the principal of Nokomis Capital, L.L.C. The Schedule 13D relates to shares purchased by Nokomis Capital through the accounts of certain private funds and managed accounts (collectively, the “Nokomis Accounts”). Nokomis Capital serves as the investment adviser to the Nokomis Accounts and may direct the vote and dispose of the shares held by the Nokomis Accounts. As the principal of Nokomis Capital, Mr. Hendrickson may direct the vote and disposition of the shares held by the Nokomis Accounts. Pursuant to Rule 16a-1, both Nokomis Capital and Mr. Hendrickson disclaim such beneficial ownership.
On July 3, 2018, we entered into an appointment and standstill agreement with Nokomis. The appointment and standstill agreement, among other things, provided that (i) Nokomis shall be entitled to appoint one qualified independent individual as a Class III director and as a member of the Corporate Governance and Nominating Committee and the Compensation Committee of the Board and we shall nominate such appointee for election at the 2019 Annual Meeting of Stockholders and (ii) we and Nokomis shall mutually select a qualified independent individual to serve as a Class III director and as a member of the Corporate Governance and Nominating Committee and the Compensation Committee of the Board and we shall nominate such appointee for election at the 2019 Annual Meeting of Stockholders. On February 7, 2019 and in accordance with the terms of the appointment and standstill agreement, the Board appointed Richard L. Todaro and Julia A. Bowen as Class III directors of the Company, with Mr. Todaro as the appointee by Nokomis and Ms. Bowen as the mutual appointee. Also, on July 20, 2017, we previously entered into an appointment and standstill agreement with Nokomis, pursuant to which, among other things, the Company agreed to immediately appoint Alan Howe and Philip Richter as Class II directors and as members of the Corporate Governance and Nominating Committee and the Compensation Committee of the Board and to nominate them for election at the Company’s 2017 Annual Meeting of Stockholders.
EXECUTIVE COMPENSATIONNO DISSENTERS’ OR APPRAISAL RIGHTS
Compensation Discussion and Analysis
This compensation discussion and analysis describes the material elements of compensation awarded to, earned by, or paid to each of our named executive officers, whom we refer to as our “NEOs,” during 2019 and describes our policies and decisions made with respect to the information containedThe corporate actions described in the following tables, related footnotes and narrative for 2019. The NEOs are identified below in the table titled “Summary Compensation Table.” In this compensation discussion and analysis, we also describe various actions regarding NEO compensation take before or after 2019 when we believe it enhances the understanding of our executive compensation program.
Overview of Our Executive Compensation Philosophy and Design
We believe that a skilled, experienced and dedicated executive and senior management team is essential to the future performance of our Company and to building stockholder value. We have sought to establish competitive compensation programs that enable us to attract and retain executive officers with these qualities. The other objectives of our compensation programs for our executive officers are the following:
●
to motivate our executive officers to achieve strong financial performance;
●
to attract and retain executive officers who we believe have the experience, temperament, talents and convictions to contribute significantly to our future success; and
●
to align the economic interests of our executive officers with the interests of our stockholders.
Setting Executive Compensation
Our compensation committee has primary responsibility for, among other things, determining our compensation philosophy, evaluating the performance of our NEOs, setting the compensation and other benefits of our NEOs, overseeing the Company’s response to the outcome of the advisory votes ofproxy statement will not afford stockholders on executive compensation, assessing the relative enterprise risk of our compensation program and administering our equity compensation plans. The Company’s compensation planning is done annually for cash based performance goals and in multi-year periods for equity based performance goal setting.
It is our Chief Executive Officer’s (CEO) responsibility to provide recommendations to the Compensation Committee for most compensation matters related to executive compensation. The recommendations are based on a general analysis of market standards and trends and an evaluation of the contribution of each executive officer to the Company’s performance. Our Compensation Committee considers, but retains the right to accept, reject or modify such recommendations and has the right to obtain independent compensation advice. Neither the Chief Executive Officer nor any other members of management is present during executive sessions of the Compensation Committee. The Chief Executive Officer is not present when decisions with respect to his compensation are made. Our Board of Directors appoints the members of our compensation committee and delegates to the compensation committee the direct responsibility for overseeing the design and administration of our executive compensation program.
We have not historically utilized a compensation consultant to set the compensation of our NEOs.
Elements of Executive Compensation
We believe the most effective compensation package for our NEOs is one designed to reward achievement of individual and corporate objectives, provide for short-term, medium-term and long-term financial and strategic goals and align the interest of management with those of the stockholders by providing incentives for improving stockholder value. Compensation for our NEOs consists of base salary and an annual bonus opportunity, along with multi-year accelerated vesting goals associated with either stock option awards and or stock grant awards. Our annual bonus opportunity is intended to incentivize the achievement of goals that drive annual and multi-year performance, while our accelerated stock option and or stock grant vesting goals are intended to incentivize the achievement of goals that drive multi-year performance.
Base Salary. We pay our NEOs a base salary to compensate them for services rendered and to provide them with a steady source of income for living expenses throughout the year. The fiscal 2019 and projected fiscal 2020 salaries of our named executive officers and the percentage increases over their 2019 base salaries, are as follows:
| | | Percentage Increase Over Fiscal 2019 Base Salary |
| Jin Kang | $325,000 | $350,000 | 8% |
| Kellie Kim (1) | n/a | $230,000 | n/a |
| Jason Holloway | $265,000 | $265,000 | 0% |
(1)
Ms. Kim began serving as Chief Financial Officer on January 2, 2020. Salary to be increased to $250,000 on May 1, 2020.
Annual Cash Based Bonus Opportunity. Our performance-based cash incentive compensation in recent years has included targets for achieving various levels of revenue, operating income, and other financial goals and metrics, along with individual performance assessments that has included goals in personal professional improvement, team building, and other individual personal growth goals. The amount of the annual discretionary cash based bonus award is based on individual performance assessments along with the financial performance of the Company.
In 2019, each of our NEOs had a target bonus of 50% of their base salary with the opportunity to earn a cash bonus of up to 100% of their base annual salary if they achieved certain financial targets of cash flows, revenue and adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA). In 2019, our NEOs each earned a $136,000 performance-based bonus due to the Company achieving certain financial goals. One-half of the bonus amount was paid in cash and one-half in restricted stock vesting one yeardissent from the date of issuance amountingactions described herein or to 222,938receive an agreed or judicially appraised value for their shares.
In 2020, each of our NEOs have a target bonus of 50% of their base salary with the opportunity to earn a cash bonus of up to 100% of their base annual salary if they achieve certain financial targets of cash flows, revenue and earnings before interest, taxes, depreciation
and amortization (EBITDA).
Equity Awards. The Company has used equity grants and awards linked to accelerated vesting goals to reinforce the alignment of interest of our named executive officers with those of our stockholders, as the value of the awards granted thereunder is linked to the value of our Common Stock, which, in turn, is indirectly attributable to the performance of our executive officers. In January 2018, we awarded Mr. Kang and Mr. Holloway 100,000 shares and 50,000 shares of restricted common stock, respectively, subject to time and accelerated vesting conditions, including the achievement of certain financial targets of cash flows, revenue and adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA). All shares became fully vested and were issued as of April 2, 2020. The acceleration of equity awards are generally tied to company specific performance measures including but not limited to managed services revenue, Adjusted EBITDA and other triggers that are deemed to have a significant impact on the financial performance goals of the Company. In 2019, each NEO was granted 106,041 shares as one-half of bonus earned in 2018. There were no stock option awards granted during 2018 or 2019 to our NEOs.
We believe these cash and equity-based award opportunities reinforce the alignment of interests of our NEOs with those of our stockholders as they indirectly influence the performance of the Company’s common stock. We believe the compensation model described above for our NEOs motivates our NEOs to expand their expertise and expand the effectiveness of the Company’s staff allowing for greater organization efficiencies while improving Company performance, which drives short-term, medium-term, and long-term organizational improvement and ultimately value for the stockholders in the form of better financial and common stock performance.
Retirement and Other Benefits. We are strongly committed to encouraging all employees to save for retirement. To provide employees with the opportunity to save for retirement on a tax-deferred basis, we sponsor a defined contribution 401(k) savings plan. We also provide health, dental, vision, short term disability insurance and basic life insurance to our NEOs on the same basis offered to all of our employees.
Summary Compensation Table
The following table summarizes the compensation earned by us in each of the last two recently completed fiscal years for our NEOs:
| Name | | Year | | | | | |
| Jin Kang | | 2019 | $325,000 | $68,000(3) | $- | $68,000(3) | $461,000 |
| Chief Executive Officer, President and Director | | 2018 | $300,000 | $62,500(4) | $- | $130,500(5) | $493,000 |
| | | | | | | | |
| Kellie Kim (6) | | 2019 | $- | $- | $- | $- | $- |
| Executive Vice President and Chief Financial Officer | | | | | | | |
| | | | | | | | |
| Jason Holloway | | 2019 | $265,000 | $68,000(3) | $- | $68,000(3) | $401,000 |
Executive Vice President, Chief Sales and Marketing Officer
| | 2018 | $265,000 | $62,500(4) | $- | $96,500(7) | $424,000 |
and President of WidePoint Cybersecurity Solutions Corporation | | | | | | | |
| | | | | | | | |
| Kito Mussa | | 2019 | $89,000(7) | $- | $- | $- | $89,000 |
| Former Executive Vice President and Chief Financial Officer | | 2018 | $200,000 | $- | $- | $- | $200,000 |
| | | | | | | | |
| Ian Sparling | | 2019 | $223,800(9) | $68,000(3) | $- | $68,000(3) | $359,800 |
| Former Interim Chief Financial Officer | | | | | | | |
(1) Amount represents annual base salary paid to executive.
(2) Amount represents the grant date fair value calculated pursuant to ASC Topic 718. Additional information about the assumptions used when valuing equity awards is set forth in the notes the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 24, 2020.
(3) In 2019, our NEOs each earned a $136,000 performance-based bonus due to the Company achieving certain financial goals. One-half of the bonus amount was paid in cash and one-half in restricted stock vesting one year from the date of issuance amounting to 222,938 shares.
(4) Performance-based discretionary award of $125,000, 50% of which is paid in cash and 50% is paid in stock.
(5) During fiscal year 2018 Mr. Kang was granted a restricted stock award of 100,000 shares on January 2, 2018. Also, includes a stock award of $62,500 earned as a performance-based discretionary award.
(6) Ms. Kim began serving as Chief Financial Officer on January 2, 2020.
(7) During fiscal year 2018 Mr. Holloway was granted a restricted stock award of 50,000 shares on January 2, 2018. Also, includes a stock award of $62,500 earned as a performance-based discretionary award.
(8) Mr. Mussa resigned in 2019. This amount was paid through May 15, 2019.
(9) Mr. Sparling is paid in Euros. His salary was converted to US dollars using average foreign exchange rate for 2019 ($1.12/1.00€)
Grant of Plan Based Awards During 2019
During the year ended December 31, 2019, NEOs were granted equity awards as summarized below:
| Name | | Grant Date | | Date of Committee Action | All Other Stock Awards: Number of Shares of Stock (#) | All Other Option Awards: Number of Securities Underlying Option Awards (#) | Exercise Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(1) |
| Jin Kang | | 5/9/19 | | 5/9/19 | 106,042 | - | - | $63,500 |
| Chief Executive Officer, | | | | | | | | |
| President and Director | | | | | | | | |
| | | | | | |
| Jason Holloway | | 5/9/19 | | 5/9/19 | 106,042 | - | - | $63,500 |
| Executive Vice President, | | | | | | | | |
| Chief Sales and Marketing | | | | | | | | |
| Officer and President of | | | | | | | | |
| WidePoint Cybersecurity | | | | | | | | |
| Solutions Corporation | | | | | | | | |
| | | | | | |
| Ian Sparling | | 5/9/19 | | 5/9/19 | 106,042 | - | - | $63,500 |
| Former Interim Chief | | | | | | | | |
| Financial Officer | | | | | | | | |
(1) Amount represents the grant date fair value calculated pursuant to ASC Topic 718. Additional information about the assumptions used when valuing equity awards is set forth in the notes the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 24, 2020.
Outstanding Equity Awards at December 31, 2019
The following table sets forth information on outstanding equity awards held by NEOs at December 31, 2019:
| | Option Awards | Stock Awards |
| Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | | | | Equity Incentive Plan Awards: Unearned Shares or other Rights that have not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares or Rights that have not Vested ($) |
| Jin Kang | 170,000(1) | - | $0.57 | 3/21/13 | | 3/20/20 | 139,375(3) | $55,750 |
| Chief Executive Officer, | 25,000(1) | - | $1.38 | 5/8/15 | | 5/8/20 | | |
| President and Director | - | 750,000(2) | $0.65 | 9/7/17 | | 9/27/22 | | |
| | | | | | | | | |
| Jason Holloway | 500,000(1) | - | $0.70 | 4/26/16 | | 4/26/21 | 122,707(3) | $49,083 |
| Executive Vice President, | | | | | | | | |
| Chief Sales and Marketing | | | | | | | | |
| Officer and President of | | | | | | | | |
| WidePoint Cybersecurity | | | | | | | | |
| Solutions Corporation | | | | | | | | |
(1) All options are fully vested.
(2) All options vest on September 27, 2021 provided that executive is employed by the Company. Options are subject to accelerated vesting of 250,000 options for each financial performance condition met. Acceleration provisions will be considered achieved when executive: i) achieves three consecutive quarters of positive earnings before interest, taxes, depreciation and amortization; ii) thirty percent revenue growth excluding carrier services; or iii) positive cash flow for 12 successive months.
(3) Includes restricted stock award of 106,041 shares granted May 9, 2019 to vest in one year from the grant date and one-third of shares granted in January 2, 2018 and fully vested April 2, 2020.
Option Exercises and Stock Vested for Fiscal 2019
The following table sets forth information about the exercise of options by our NEOs and the vesting of their restricted stock awards in fiscal 2019.
| | | |
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) |
| | | | | |
| Jin Kang | — | — | 66,666 | $28,600 |
| | | | | |
| Jason Holloway | — | — | 33,334 | $14,300 |
| | | | | |
| Ian Sparling | — | — | 33,334 | $14,300 |
| | | | | |
| Kito Mussa | — | — | 0 | $0 |
(1) The amounts in this column have been computed based on the closing price of our common stock on the vesting date.
Employment Agreements and Compensation Arrangements;
Termination and Change in Control Provisions
The following describes the terms of employment agreements between the Company and the named executive officers included in the above Summary Compensation Table and sets forth information regarding potential payments upon termination of employment or a change in control of the Company.
Mr. Kang. On December 20, 2017, we entered into an employment agreement with Mr. Kang for a three year employment agreement, effective January 1, 2018, providing the following: (i) an annual base salary of $300,000 (increasing $25,000 annually); (ii) an annual target bonus opportunity equal to 50% of the base salary (with a maximum of 100% of base salary) based on the Company achieving performance goals determined by the Compensation Committee of the Board of Directors (payable one-half in cash and one-half in common stock of the Company); (iii) a restricted stock grant of 100,000 shares of common stock effective January 2, 2018 vesting only if certain performance goals are met, (iv) participation in the Company’s employee benefit plans and (v) four (4) weeks of vacation. The employment agreement contains severance provisions which provide that upon the termination of his employment without Cause (as described below) or his voluntary resignation for a Good Reason (as described in below), Mr. Kang will receive severance compensation payable in a lump-sum of cash equal to twelve (12) months of base salary and a pro rata bonus amount. The employment agreement further provides that if within 90 days prior to or two years after a change in control of the Company there occurs any termination of Mr. Kang for any reason other than for Cause or a voluntary resignation without a Good Reason, then the Company will be required to pay to Mr. Kang a one-time severance payment equal twelve (12) months base salary and a pro rata bonus.
Mr. Holloway. On December 20, 2017, we entered into an employment agreement with Mr. Holloway. The employment agreement for Mr. Holloway is the same as Mr. Kang’s, except that it provides for: (i) an annual base salary of $265,000; (ii) a restricted stock grant of 50,000 shares of common stock effective January 2, 2018 vesting only if certain performance goals are met and (iii) the severance compensation payable upon termination without Cause or For Good Reason is equal to twelve (12) months of base salary.
A termination of an executive’s employment by the Company shall be deemed for “Cause” if, and only if, it is based upon the following: (i) executive's failure, neglect or refusal to perform executive’s material duties (in each instance, other than any such failure resulting from incapacity due to physical or mental illness); (ii) executive's failure to comply with any valid, material and legal directive of the Board of Directors; (iii) executive's engagement in dishonesty, illegal or disloyal conduct, or willful or grossly negligent misconduct, which is, in each case, injurious to the interests, reputation or business of the Company or its Affiliates as determined by the Compensation Committee of the Board of Directors; (iv) executive's embezzlement, misappropriation, or fraud, whether or not related to the Executive's employment with the Company; (v) executive's conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent) or a crime that constitutes a misdemeanor involving moral turpitude; (vi) any material failure by executive to comply with the Company's written policies or rules, as they may be in effect from time to time during the employment term; or (vii) executive's material breach of any material obligation under the agreement or any other written agreement between executive and the Company.
A resignation by executive shall not be deemed to be voluntary and shall be deemed to be a resignation with “Good Reason” if it is based upon (i) a material diminution in executive’s title, duties, responsibilities, authority or salary; (ii) a material reduction in bonus target or benefits; (iii) a direction by the Board of Directors that executive report to any person or group other than the Board of Directors; (iv) a requirement that the executive relocate; or (v) the Company’s material breach of the agreement.
Ms. Kim. In December 2019, we entered into an offer letter with Ms. Kim that provides that she will earn an initial base salary of $230,000 and be eligible for a merit bonus equal to 100% of her base salary (50% of which is payable in cash and 50% of which is payable in shares of restricted common stock). The Company expects to enter into an employment agreement with Ms. Kim during 2020.
Compensation Committee Interlocks and Insider Participation
During the last fiscal year, no member of the Compensation Committee had a relationship with us that required disclosure under Item 404 of Regulation S-K. During the past fiscal year, none of our executive officers served as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive officers who served as members of our Board of Directors or our Compensation Committee. None of the members of our Compensation Committee is an officer or employee of our Company, nor have they ever been an officer or employee of our Company.
Compensation Committee Report
Our Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” contained herein with management. Based on our Compensation Committee’s review and discussions with management, our Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included herein.
Otto J. Guenther
Julia Bowen
Philip Richter
CERTAIN RELATED PERSON TRANSACTIONS
A related person transaction is a consummated or currently proposed transaction in which the Company has been, is or will be a participant and the amount involved exceeds $120,000, and in which a related person (i.e., any director or executive officer or nominee for director, or any member of the immediate family of such person) has or will have a direct or indirect material interest.
The Company was not a participant in any related person transactions in the past two fiscal years and no such transactions are currently proposed.
Under the Company’s corporate governance principles (the “Corporate Governance Principles”), a majority of the Company’s Board will consist of independent directors. An “independent” director is a director who meets the NYSE American definition of independence and other applicable independence standards under SEC guidelines, as determined by the Board. The Company’s Corporate Governance and Nominating Committee conduct an annual review of the independence of the members of the Board and its Committees and report its findings to the full Board of Directors. Based on the report and recommendation of the Corporate and Nominating Governance Committee, the Board has determined that each of the Company’s non-employee directors (and the director nominee) satisfies the independence criteria set forth in the applicable NYSE American listing standards and SEC rules. Each standing Board Committee consists entirely of independent, non-employee directors.
Non-management members of the Board of Directors conduct at least two regularly-scheduled meetings per year without members of management being present.
PROPOSAL TWO – INDEPENDENT ACCOUNTANTS
The Audit Committee is recommending that stockholders ratify its appointment of Moss Adams LLP as independent accountants for WidePoint to audit its consolidated financial statements for the fiscal year ending December 31, 2020, to perform audit-related services, including review of our quarterly interim financial information, periodic reports and registration statements filed with the Securities and Exchange Commission and consultation in connection with various accounting and financial reporting matters. The stockholder vote is not binding on the Audit Committee. If the appointment of Moss Adams LLP is not ratified by stockholders, the Audit Committee will evaluate the basis for the stockholders' vote when determining whether to continue the firm's engagement, but may ultimately determine to continue the engagement of the firm or another audit firm without re-submitting the matter to stockholders. Even if the appointment of Moss Adams LLP is ratified, the Audit Committee may in its sole discretion terminate the engagement of the firm and direct the appointment of another independent auditor at any time during the year if it determines that such an appointment would be in the best interests of our Company and our stockholders.
A resolution will be presented at the Annual Meeting to ratify the appointment of Moss Adams LLP to serve as the Company’s independent public accountants for the fiscal year ending December 31, 2020. A representative of Moss Adams LLP will be available either via phone or in person at the Annual Meeting to answer appropriate questions concerning the Company’s financial statements and to make a statement if desired.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF THE RATIFICATION OF THE COMPANY’S AUDITORS.
AUDIT COMMITTEE REPORT
The Audit Committee has: (a) reviewed and discussed the audited financial statements with the management of the Company; (b) discussed with the Company’s independent auditors, Moss Adams LLP, the matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 16 and the American Institute of Certificated Public Accountants’ Statement on Auditing Standards No. 114; (c) received from the Company’s independent auditors the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board, and discussed with the Company’s independent auditors their independence; and (d) based on the review and discussions referred to in clauses (a), (b) and (c) above, recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for fiscal year 2019.
The foregoing report is submitted by the members of the Audit Committee:
Otto J. Guenther
Julia Bowen
Richard Todaro
INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM FEES AND SERVICES
The following table sets forth fees paid to our principal accountants in connection with audit and audit-related, tax and other non-audit fees for the years ended December 31:
| Service Type | | |
| | | |
| Audit and Quarterly Review Fees (1) | $161,500 | $158,900 |
| | | |
| Audit-Related Fees | - | - |
| | | |
| Total | $161,500 | $158,900 |
(1) Audit and quarterly review fees for the annual audit and review of financial statements included in the Company’s quarterly filings. Excludes a flat expense charge, calculated as five percent (5%) of fees for administrative expense or reimbursable expenses, such as travel expense.
Audit Committee Policies and Procedures For Pre-Approval of Independent Auditor Services
The following describes the Audit Committee’s policies and procedures regarding pre-approval of the engagement of the Company’s independent auditor to perform audit as well as permissible non-audit services for the Company.
For audit services and audit-related fees, the independent auditor will provide the Committee with an engagement letter during the March-May quarter of each year outlining the scope of the audit services proposed to be performed in connection with the audit of the current fiscal year. If agreed to by the Committee, the engagement letter will be formally accepted by the Committee at an Audit Committee meeting held as soon as practicable following receipt of the engagement letter. The independent auditor will submit to the Committee for approval an audit services fee proposal after acceptance of the engagement letter.
For non-audit services and other fees, Company management may submit to the Committee for approval (during May through September of each fiscal year) the list of non-audit services that it recommends the Committee engage the independent auditor to provide for the fiscal year. The list of services must be detailed as to the particular service and may not call for broad categorical approvals. Company management and the independent auditor will each confirm to the Audit Committee that each non-audit service on the list is permissible under all applicable legal requirements. In addition to the list of planned non-audit services, a budget estimating non-audit service spending for the fiscal year may be provided. The Committee will consider for approval both the list of permissible non-audit services and the budget for such services. The Committee will be informed routinely as to the non-audit services actually provided by the independent auditor pursuant to this pre-approval process.
To ensure prompt handling of unexpected matters, the Audit Committee delegates to its Chairman the authority to amend or modify the list of approved permissible non-audit services and fees. The Chairman will report any action taken pursuant to this delegation to the Committee at its next meeting.
All audit and non-audit services provided to the Company are required to be pre-approved by the Committee. The Chief Financial Officer of the Company will be responsible for tracking all independent auditor fees against the budget for such services and report at least annually to the Audit Committee.
OTHER INFORMATION
We maintain an internet website at http://www.widepoint.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendment to those reports, are available free of charge on our website immediately after they are filed with or furnished to the Securities and Exchange Commission. WidePoint’s Code of Business Conduct, Corporate Governance Principles and Charters of the Committees of the Board of Directors are also available free of charge on our website or by writing to WidePoint Corporation, 11250 Waples Mill Road, South Tower, Suite 210, Fairfax, Virginia 22030, c/o Corporate Secretary. WidePoint’s Code of Business Conduct applies to all directors, officers (including the Chief Executive Officer and Chief Financial Officer) and employees. Amendments to or waivers of the Code of Conduct granted to any of the Company’s directors or executive officers will be published on our website within four business days of such amendment or waiver.
STOCKHOLDER PROPOSALS FOR 2021 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2021 Annual Meeting must be received by the Secretary of the Company, 11250 Waples Mill Road, South Tower, Suite 210, Fairfax, Virginia 22030, no later than December 25, 2020 in order for them to be considered for inclusion in the 2021 Proxy Statement. Any such proposal must comply with Rule 14a-8 of Regulation 14A of the proxy rules of the Securities and Exchange Commission. Based on our anticipated meeting date, a stockholder desiring to submit a proposal to be voted on at next year’s Annual Meeting of Stockholders, but not desiring to have such proposal included in next year’s proxy statement relating to that meeting, should submit such proposal to the Company no later than December 25, 2020. Failure to comply with that advance notice requirement will result in the proposal not being placed on the agenda at the meeting.
OTHER MATTERS
Management is not aware of any other matters to be considered at the AnnualSpecial Meeting. If any other matters properly come before the AnnualSpecial Meeting, the persons named in the enclosed Proxy will vote said Proxy in accordance with their discretion.
APPENDIX A
FORM OF CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
WIDEPOINT CORPORATION
(a Delaware Corporation)
WidePoint corporation, a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), does hereby certify:
1. The Board of Directors of the Corporation has duly adopted a resolution pursuant to Section 242 of the General Corporation Law of the State of Delaware setting forth a proposed amendment to the Amended and Restated Certificate of Incorporation of the Corporation, as amended (the “Restated Certificate”), and declaring said amendment to be advisable. The requisite stockholders of the Corporation have duly approved said proposed amendment in accordance with Section 242 of the General Corporation Law of the State of Delaware. The Restated Certificate is hereby amended by deleting Article FOURTH in its entirety and substituting in lieu thereof the following:
ARTICLE IV. CAPITAL STOCK
The aggregate number of shares of stock that the Corporation shall have authority to issue is one hundred twenty million (120,000,000), of which ten million (10,000,000) shares, with a par value of $0.001 per share, are designated as Preferred Stock, and one hundred ten million (110,000,000), with a par value of $0.001 per share, are designated as Common Stock.
(a) Provisions Relating to the Common Stock.
| (1) Each holder of Common Stock is entitled to one vote for each share of Common Stock standing in such holder’s name on the records of the Corporation on each matter submitted to a vote of the stockholders, except as otherwise required by law. |
| (2) The holders of the Common Stock shall have no preemptive rights to subscribe for any shares of any class of stock of the Corporation whether now or hereafter authorized. (3) Effective as of [date] (the "Effective Time"), each [number to be determined from five to fifteen] shares of Common Stock issued and outstanding or held in treasury immediately prior to the Effective Time shall be reclassified and combined into one (1) validly issued, fully paid and non-assessable share of Common Stock without any further action by the Corporation or any holder thereof, subject to the treatment of fractional share interests as described below (the "Reverse Stock Split"). The Reverse Stock Split shall occur without any further action on the part of the Company or the holder thereof and whether or not certificates representing such holder's shares prior to the Reverse Stock Split are surrendered for cancellation. No fractional interest in a share of Common Stock shall be deliverable upon the Reverse Stock Split. Stockholders who otherwise would be entitled to receive fractional shares of Common Stock because they hold a number of shares not evenly divisible by the Reverse Stock Split ratio will automatically be entitled to receive an additional fraction of a share of Common Stock to round up to the next whole share. Each certificate that immediately prior to the Effective Time represented shares of Common Stock ("Old Certificate"), shall thereafter represent that number of shares of Common Stock into which the shares of Common Stock represented by the Old Certificate shall have been combined, plus any additional fraction of a share of Common Stock to round up to the next whole share." |
(b) Provisions Relating to the Preferred Stock. The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:
| (1) The number of shares constituting that series and the distinctive designation of that series; |
| (2) The dividend rate on the shares of that series, whether dividends shall be cumulative, and if so, from which date(s), and the relative rights of priority, if any, of payment of dividends on shares of that series; |
| (3) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; |
| (4) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine; |
| (5) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or date upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; |
| (6) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; |
| (7) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the relative rights of priority, if any, of payment of shares of that series; |
| (8) Any other relative rights, preferences and limitations of that series. |
Dividends on outstanding shares of Preferred Stock shall be paid or declared and set apart for payment before any dividends shall be paid or declared and set apart for payment on the Common Stock with respect to the same dividend period. If upon any voluntary or involuntary liquidation, dissolution or winding up of the corporation, the assets available for distribution to holders of shares of Preferred Stock of all series shall be insufficient to pay such holders the full preferential amount to which they are entitled, then such assets shall be distributed ratably among the shares of all series of Preferred Stock in accordance with the respective preferential amounts (including unpaid cumulative dividends, if any) payable with respect thereto.
2. This Certificate of Amendment shall be effective as of ____ at ____ Eastern Time.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed this [ ] day of [ ], 202[ ].
| WIDEPOINT CORPORATION |
| | |
| By: | |
| Name: | |
| Title: | |
APPENDIX B
FORM OF CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
WIDEPOINT CORPORATION
(a Delaware Corporation)
WidePoint corporation, a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), does hereby certify:
1. The Board of Directors of the Corporation has duly adopted a resolution pursuant to Section 242 of the General Corporation Law of the State of Delaware setting forth a proposed amendment to the Amended and Restated Certificate of Incorporation of the Corporation, as amended (the “Restated Certificate”), and declaring said amendment to be advisable. The requisite stockholders of the Corporation have duly approved said proposed amendment in accordance with Section 242 of the General Corporation Law of the State of Delaware. The Restated Certificate is hereby amended by deleting Article FOURTH in its entirety and substituting in lieu thereof the following:
ARTICLE IV. CAPITAL STOCK
The aggregate number of shares of stock that the Corporation shall have authority to issue is forty million (40,000,000), of which ten million (10,000,000) shares, with a par value of $0.001 per share, are designated as Preferred Stock, and thirty million (30,000,000), with a par value of $0.001 per share, are designated as Common Stock.
(a) Provisions Relating to the Common Stock.
| (1) Each holder of Common Stock is entitled to one vote for each share of Common Stock standing in such holder’s name on the records of the Corporation on each matter submitted to a vote of the stockholders, except as otherwise required by law. |
| (2) The holders of the Common Stock shall have no preemptive rights to subscribe for any shares of any class of stock of the Corporation whether now or hereafter authorized. (3) Effective as of [date] (the "Effective Time"), each [number to be determined from five to fifteen] shares of Common Stock issued and outstanding or held in treasury immediately prior to the Effective Time shall be reclassified and combined into one (1) validly issued, fully paid and non-assessable share of Common Stock without any further action by the Corporation or any holder thereof, subject to the treatment of fractional share interests as described below (the "Reverse Stock Split"). The Reverse Stock Split shall occur without any further action on the part of the Company or the holder thereof and whether or not certificates representing such holder's shares prior to the Reverse Stock Split are surrendered for cancellation. No fractional interest in a share of Common Stock shall be deliverable upon the Reverse Stock Split. Stockholders who otherwise would be entitled to receive fractional shares of Common Stock because they hold a number of shares not evenly divisible by the Reverse Stock Split ratio will automatically be entitled to receive an additional fraction of a share of Common Stock to round up to the next whole share. Each certificate that immediately prior to the Effective Time represented shares of Common Stock ("Old Certificate"), shall thereafter represent that number of shares of Common Stock into which the shares of Common Stock represented by the Old Certificate shall have been combined, plus any additional fraction of a share of Common Stock to round up to the next whole share." |
(b) Provisions Relating to the Preferred Stock. The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:
| (1) The number of shares constituting that series and the distinctive designation of that series; |
| (2) The dividend rate on the shares of that series, whether dividends shall be cumulative, and if so, from which date(s), and the relative rights of priority, if any, of payment of dividends on shares of that series; |
| (3) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; |
| (4) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine; |
| (5) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or date upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; |
| (6) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; |
| (7) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the relative rights of priority, if any, of payment of shares of that series; |
| (8) Any other relative rights, preferences and limitations of that series. |
Dividends on outstanding shares of Preferred Stock shall be paid or declared and set apart for payment before any dividends shall be paid or declared and set apart for payment on the Common Stock with respect to the same dividend period. If upon any voluntary or involuntary liquidation, dissolution or winding up of the corporation, the assets available for distribution to holders of shares of Preferred Stock of all series shall be insufficient to pay such holders the full preferential amount to which they are entitled, then such assets shall be distributed ratably among the shares of all series of Preferred Stock in accordance with the respective preferential amounts (including unpaid cumulative dividends, if any) payable with respect thereto.
2. This Certificate of Amendment shall be effective as of ____ at ____ Eastern Time.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed this day of , .
| WIDEPOINT CORPORATION |
| | |
| By: | |
| Name: | |
| Title: | |
