| Proxy Voting: | Each share of | |
Whether or not you expect to attend the Annual Meeting, we encourage you to read the Proxy Statement and vote through the Internet at www.proxyvote.com, by phone at 800-690-6903, or request, sign and return your proxy card as soon as possible, so that your shares may be represented at the Annual Meeting. If you have questions or need assistance voting your shares, please contact our proxy solicitor, Laurel Hill Advisory Group, LLC, toll free at (888) 742-1305.
FOR THE BOARD OF DIRECTORS
/s/ Boyd G. Evans
Philip A. Theodore
Executive Vice President and Corporate Secretary
April 18, 2018
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON THIS PROXY STATEMENT AND THE ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017 ARE AVAILABLE AT www.proxyvote.com THE ANNUAL REPORT, HOWEVER, IS NOT PART OF THE PROXY SOLICITATION MATERIAL. |
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MEDIZONE INTERNATIONAL, INC.INC.
350 East Michigan Avenue, Suite 401500
Kalamazoo, Michigan 49007
Kalamazoo, Michigan 49007
PROXY STATEMENT FOR THE 20162018 ANNUAL MEETING OF STOCKHOLDERS
We are providing you with these proxy materials in connection with the solicitation by the board of directors (the “Board of Directors” or “Board”) of Medizone International, Inc. of proxies to be used at our 20162018 Annual Meeting of Stockholders (the ��Annual“Annual Meeting”), to be held at the offices of Durham JonesParks, Chesin & Pinegar, P.C. located at 111 East Broadway, Suite 900, Salt Lake City, Utah 84111Walbert, 26th Floor, 75 14th Street N.E., Atlanta, Georgia 30309 on Thursday, September 15, 2016,Wednesday, May 30, 2018, at 11:00 a.m. (Mountain(Eastern Time), and any adjournment or postponement thereof. ThisIn this Proxy Statement containswe have included important information regarding the Annual Meeting and the proposals on which you are being asked to vote, information you may find useful in determining how to vote, and information about voting procedures. As used herein, “we,” “us,” “our,” “Medizone International” or the “Company” refers to Medizone International, Inc., a Nevada corporation.
INTERNET AVAILABILITY OF PROXY MATERIALS
We are taking advantage of U.S. Securities and Exchange Commission (the “SEC”(“SEC”), we are furnishing rules that allow us to deliver proxy materials to our stockholders primarily via the Internet, instead of mailing printed copies of those materials to each stockholder. On or about August 5, 2016,April 18, 2018, we expect to send a Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”) to our stockholders, which contains instructions on how to access our proxy materials, including our Proxy Statement and our Annual Report.Report on Form 10-K for the fiscal year ended December 31, 2017 (“Annual Report”), although the Annual Report is not part of the proxy solicitation materials. The Notice of Internet Availability also provides instructions on how to vote through the Internet.Internet and by telephone. It also includes instructions on how a stockholder may request to receive a paper copy of the proxy materials by mail, uponmail. Our stockholders will not receive printed copies of the request of a stockholder.proxy materials unless specifically requested.
This process is designed to reduce our environmental impact and lowers the costs of printing and distributing our proxy materials, without impacting our stockholders’ timely access to this important information. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability. Whether or not you plan to attend the Annual Meeting, we encourage you to vote promptly.
GENERAL INFORMATION ABOUT THE MEETING
The accompanying form of proxy (the “Proxy” or “Proxy Card”) is solicited on behalf of our boardBoard of directorsDirectors for use at the Annual Meeting to be held at the offices of Durham JonesParks, Chesin & Pinegar, P.C.Walbert located at 111 East Broadway, Suite 900, Salt Lake City, Utah 84111 on Thursday, September 15, 2016,the 26th Floor of 75 14th Street N.E., Atlanta, Georgia 30309 on Wednesday, May 30, 2018, at 11:00 a.m. (Mountain(Eastern Time), and any adjournment or postponement thereof.
Purpose of the Meeting
At the Annual Meeting, stockholders will act upon the proposals described in this Proxy Statement. In addition, we will consider any other matters that are properly presented for a vote at the Annual Meeting. As of August 5, 2016,April 18, 2018, we are not aware of any other matters to be submitted for consideration at the Annual Meeting. If any other matters are properly presented for a vote at the Annual Meeting, the persons named in the Proxy Card, who are officers of the Company, have the authority in their discretion to vote the shares represented by the Proxy.
Record Date
Only holders of record of common stockCommon Stock at the close of business on July 18, 2016April 2, 2018 (the “Record Date”) will be entitled to notice of and to vote at the Annual Meeting. Common Stock is our only outstanding class of voting stock. At the close of business on the Record Date we had 369,934,068415,191,788 shares of common stockCommon Stock outstanding and entitled to vote.
The holders of a majority of the voting power of the shares of stock entitled to vote at the Annual Meeting as of the Record Date must be present at the Annual Meeting in order to hold the Annual Meeting and conduct business. This level of representation is called a quorum. Your shares are counted as present at the Annual Meeting if you are present and vote in person at the Annual Meeting, or if you have properly submitted a Proxy.Proxy, without regard to whether the Proxy is marked as casting a vote for or against, or withholding authority or abstaining with respect to a particular matter or nominee for director.
Each holder of shares of common stockCommon Stock is entitled to one vote for each share of common stockCommon Stock held as of the close of business on the Record Date. There is no cumulative voting in the election of directors – stockholders may cast one vote per share held for each nominee. You may vote all shares owned by you as of the Record Date, including (i) shares held directly in your name as the stockholder of record and (ii) shares held for you as the beneficial owner in street name through a broker, bank, trustee or other nominee.
Stockholder of Record: Shares Registered in Your Name. If on the Record Date your shares were registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, then you are considered the stockholder of record with respect to those shares. As a stockholder of record, you may vote in person at the Annual Meeting, or prior to the meeting by telephone, through the Internet or, if you request or receive paper proxy materials, by mail, by filling out and returning the Proxy Card.
Beneficial Owner: Shares Registered in the Name of a Broker or Nominee. If on the Record Date your shares were held in an account with a brokerage firm, bank or other nominee, then you are the beneficial owner of the shares held in street name. As a beneficial owner, you have the right to direct your nominee on how to vote the shares held in your account. However, the organization that holds your shares is considered the stockholder of record for purposes of voting at the Annual Meeting. Because you are not the stockholder of record, you may not vote your shares at the Annual Meeting unless you request and obtain a valid form of proxy from the organization that holds your shares, giving you the right to vote the shares at the Annual Meeting.
Required Vote
Each director will be elected by a plurality of the votes cast, which means that the five individuals nominated for election to the boardBoard of directorsDirectors at the Annual Meeting receiving the highest number of “FOR” votes will be elected. You may either vote “FOR” all nominees to the boardBoard of directorsDirectors or “WITHHOLD” your vote with respect to any nominee you specify, or all nominees. With respect to (i) approval of the non-binding advisory vote on the compensation program of our named executive officers (as identified below under “Executive Compensation,” our “NEOs”), (ii) ratification of Tanner LLC as our independent registered public accounting firm for the fiscal year ending December 31, 2016,“WITHHOLD” votes and (iii) ratification of the adoption of the equity award plan, approval or ratification, respectively, will be obtained if the number of votes cast “FOR” the proposals at the Annual Meeting exceeds the number of votes “AGAINST” the proposals. Approval of the amendment to our Articles of Incorporation increasing the number of authorized shares of common stock the Company may issue will be obtained if at least a majority of the issued and outstanding shares entitled to vote at the Annual Meeting are voted “FOR” the amendment. With respect to the non-binding advisory vote on the frequency of future non-binding advisory votes on the compensation program of our NEOs, you may vote to have such non-binding advisory votes every “ONE YEAR,” “TWO YEARS” or “THREE YEARS,” or you may “ABSTAIN.” The frequency receiving the greatest number of votes cast by stockholders will be considered the frequency of the non-binding advisory vote of our stockholders.
Ratification of Tanner LLC as our independent registered public accounting firm for the fiscal year ending December 31, 2016, is considered a routine matter. All2018, requires the affirmative vote of the other proposals presented atmajority of the Annual Meetingvotes cast (meaning the number of shares voted “for” the ratification must exceed the number of shares voted “against” ratification). Abstentions and broker non-votes are non-routine matters. Broker non-votesnot considered votes cast for the foregoing purpose, and abstentions are counted for purposes of determining whether a quorum is present, butwill have no effect on the outcomevote for the ratification.
Adoption of Proposal 3, to amend our Articles of Incorporation to increase the number of authorized shares of Common Stock from 500,000,000 to 1,000,000,000 requires the affirmative vote of the mattersholders of a majority of the outstanding shares of Common Stock (meaning that of the outstanding shares of Common Stock, a majority of them must be voted upon.“for” such proposal for it to be approved). Accordingly, we encourage youthe amendment to provide voting instructions to yourincrease the number of authorized shares of Common Stock will be approved if at least 207,595,895 shares of Common Stock are voted in favor of the amendment. Abstentions and broker whether or not you plan to attendnon-votes will have the Annual Meeting.effect of a vote against the proposal.
If you are a stockholder of record, you may:
| · | vote in person — we will provide a ballot to stockholders who attend the Annual Meeting and wish to vote in person; |
| · | vote by phone or via the Internet — in order to do either, please follow the instructions shown on your Notice of Internet Availability or Proxy Card; or |
| · | vote by mail — if you request or receive a paper Proxy Card and voting instructions by mail, simply complete, sign and date the enclosed Proxy Card and return it before the Annual Meeting in the envelope provided. |
Votes submitted through the Internet must be received by 11:59 p.m., Eastern Time, on September 14, 2016.May 29, 2018. Submitting your Proxy (whether by phone, through the Internet or, if you requested or received a paper Proxy Card, by mail) will not affect your right to vote in person should you decide to attend the Annual Meeting. If you are not the stockholder of record, please refer to the voting instructions provided by your nominee to direct it how to vote your shares. For Proposal 1, you may either vote “FOR” each of the nominees to the boardBoard of directors,Directors, or you may “WITHHOLD” your vote with respect to any nominee you specify, or all nominees. For Proposals 2 3, 5 and 6,3, you may vote “FOR” or “AGAINST” or “ABSTAIN” from voting. For Proposal 4, you may vote “ONE YEAR” or “TWO YEARS” or “THREE YEARS,” or “ABSTAIN” from voting. Your vote is important. Whether or not you plan to attend the Annual Meeting, we urge you to vote by proxy to ensure that your vote is counted. If you are a beneficial owner of shares of our Common Stock, we urge you to provide voting instructions to your broker.
All Proxies will be voted in accordance with the instructions specified on the Proxy. If you sign a physical Proxy Card and return it without instructions as to how your shares should be votedare held by a broker in “street name,” the broker has authority to vote your shares on a particular“routine” matters if the broker has not received timely voting instructions from you. Under applicable rules, the proposal atto amend our Amended and Restated Articles of Incorporation is considered routine so, if you do not give your broker instructions, your broker generally will have discretion to vote your shares “FOR” or “AGAINST” the Annual Meeting,proposal. Therefore, we urge you to provide instructions to your broker firm to vote “FOR” the proposal by returning your proxy card. This ensures that your shares will be voted in accordance with“FOR” the recommendationsproposal at the Annual Meeting. If you are a stockholder of record and you submit a proxy without providing instructions or recording a vote, the proxies named within the Proxy will vote your shares “FOR” each nominee for director, “FOR” the ratification of Tanner LLC as our independent registered public accounting firm, and “FOR” the amendment of our boardAmended and Restated Articles of directors stated above.Incorporation.
If you received a Notice of Internet Availability, please follow the instructions included on the notice on how to access your Proxy and vote through the Internet or by mail. If you do not vote and you hold your shares in street name, and your broker does not have discretionary power to vote your shares, your shares may constitute “broker non-votes” (as described above) and will not be counted in determining the number of shares necessary for approval of the proposals. However, shares that constitute broker non-votes will be counted for the purpose of establishing a quorum for the Annual Meeting.
If you receive more than one Proxy Card or Notice of Internet Availability, your shares are registered in more than one name or are registered in different accounts. To make certain all of your shares are voted, please follow the instructions included on each Notice of Internet Availability on how to access each Proxy Card and vote each Proxy Card through the Internet or by mail. If you requested or received paper proxy materials and you intend to vote by mail, please complete, sign and return each Proxy Card you received to ensure that all of your shares are voted.
Expenses of Soliciting Proxies
We will pay the expenses of soliciting Proxies. Following the original mailing of the soliciting materials, we and our agents may solicit Proxies by mail, email, telephone, facsimile, by other similar means, or in person. Laurel Hill Advisory Group, LLC, a proxy solicitation firm, will assist us in soliciting proxies for the Annual Meeting. We will pay $8,000 for these services, plus out-of-pocket expenses. Our directors, officers and other employees, without additional compensation, may solicit Proxies personally or in writing, by telephone, email or otherwise. Following the original mailing of the soliciting materials, we will request brokers, custodians, nominees and other record holders to forward copies of the soliciting materials to persons for whom they hold shares and to request authority for the exercise of Proxies. In such cases, upon the request of the record holders, we will reimburse such holders for their reasonable expenses. If you choose to access the proxy materials and/or vote through the Internet, you are responsible for any Internet access charges you may incur.
A stockholder of record who has given a Proxy may revoke it at any time before it is exercised at the Annual Meeting by:
| · | delivering to our Corporate Secretary (by any means, including facsimile) a written notice stating that the Proxy is revoked; |
| · | signing and delivering a Proxy bearing a later date; |
| · | voting again through the Internet or by telephone; or |
| · | attending and voting at the Annual Meeting (although attendance at the Annual Meeting will not, by itself, revoke a Proxy). |
Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to revoke a proxy, you must contact that organization to revoke any prior voting instructions.
Electronic Access to the Proxy Materials
The Notice of Internet Availability will provide you with instructions regarding how to:
| · | view our |
| · | instruct us to send our future proxy materials to you electronically by email. |
Choosing to receive your future proxy materials by email will reduce the impact of our annual meetings of stockholders on the environment and lower the costs of printing and distributing our proxy materials. If you choose to receive future proxy materials by email, you will receive an email prior to the next meeting with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it.
If you plan to attend the Annual Meeting, you must be a record or street name holder of our Common Stock as of the Record Date. If you are a street name holder of our Common Stock you must obtain a valid “legal” proxy from the institution in whose name your stock is registered in order to attend the Annual Meeting. On the day of the Annual Meeting, each stockholder will be required to present a valid picture identification such as a driver’s license or passport and you may be denied admission if you do not provide valid identification. Seating will begin at 10:30 a.m., and the meeting will begin at 11:00 a.m. Use of cameras, recording devices, computers and other personal electronic devices will not be permitted at the Annual Meeting.
Voting Results
Voting results will be tabulated and certified by the inspector of elections appointed for the Annual Meeting. Preliminary results will be announced at the Annual Meeting. Final results will be published in a Current Report on Form 8-K to be filed with the SEC within four business days of the Annual Meeting.
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
We are strongly committed to good corporate governance practices. These practices provide an important framework within which our boardBoard of directorsDirectors and management can pursue our strategic objectives for the benefit of our stockholders. In this and following sections of the Proxy Statement, we summarize some of the principles and practices of corporate governance that we use.
The boardBoard of directorsDirectors is responsible for theour management and direction of the Company and for establishing broad corporate policies. The boardBoard of directorsDirectors meets periodically during our fiscal year to review significant developments affecting the Companyus and to act on matters requiring boardBoard of directors’Directors’ approval.
The positions of ChairpersonChairman of the Board and Chief Executive Officer are filledoccupied by the same person, Ed Marshall.different persons, David A. Esposito and David A. Dodd, respectively. Our boardBoard of directorsDirectors believes that having an independent Chairman of the currentBoard enables the Chief Executive Officer to focus on running the Company, freeing him from potentially sensitive board structure, which includes a majority of independent directors, provides effectiveleadership tasks such as evaluating and terminating board members. It also ensures that there is true independent oversight of management. Independent directors and management sometimes have different perspectives and roles in strategy development. Our independent directors bring experience, oversight and expertise from outside the Company, while Mr. Marshall brings Company-specific experience and expertise. Our board
We have adopted a formal, written code of conduct (“Code of Ethics”) within the specific guidelines promulgated by the SEC. This document can be found on our website at http://medizoneint.com. The Code of Ethics applies to our executive officers, as well as all employees and consultants. We have communicated the high level of ethical conduct expected from all of our employees, including our officers and our consultants. We will disclose any changes or amendments to or waivers from the Code of Ethics applicable to the NEOsour named executive officers by posting such changes or waivers to our website.
Risk Oversight and Management
Our boardBoard of directorsDirectors is actively involved in the oversight and management of the material risks that could affect the Company.us. Historically, our boardBoard of directorsDirectors has carried out its risk oversight and management responsibilities by monitoring risk directly as a full board. The board’sBoard’s direct role in our risk management process includes receiving regular reports from our executive officers and other members of senior management on areas of our material risk, to the Company, including operational, strategic, financial, legal and regulatory risks.
Our Board has delegated the oversight and management of certain risks to these committees.the Audit Committee and the Compensation Committee. The Audit Committee is responsible for the oversight of Company risks relating to accounting matters, financial reporting and related-party transactions. To satisfy these oversight responsibilities, the Audit Committee meets regularly with and receives reports from the Company’sour Chief Financial Officer and the Company’sour independent registered public accounting firm.
The Compensation Committee is responsible for the oversight of risk relating to the Company’sour compensation and benefits programs. To satisfy these oversight responsibilities, the Compensation Committee meets regularly with and receives reports from the Company’sour Chief Executive Officer and Chief Financial Officer to understand the financial, human resources and stockholder implications of compensation and benefits decisions.
Our boardBoard of directorsDirectors adopted a related person transactionsrelated-person-transactions policy providing that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of our common stockCommon Stock and any member of the immediate family of and any entity affiliated with any of the foregoing persons, are not permitted to enter into a material related person transaction with us without the review and approval of our Audit Committee, or a committee composed solely of independent directors in the event it is inappropriate for our Audit Committee to review such transaction due to a conflict of interest. The policy provides that any request for us to enter into a transaction with a related party in which the amount involved exceeds $120,000 will be presented to our Audit Committee for review, consideration and approval. In approving or rejecting any such proposal, our Audit Committee will consider the facts and circumstances available and deemed relevant to the Audit Committee, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, and the extent of the related person’s interest in the transaction.
On July 6, 2016, we issued promissory notes to Mr. Edwin Marshall, our former Chairman and Chief Executive Officer, Dr. Jill Marshall, Mr. Marshall’s wife and our former Director of Operations, and Dr. Michael Shannon, our President and a member of our Board of Directors. The principal amounts of the promissory notes issued to Mr. Marshall, Dr. Marshall and Dr. Shannon were $1,065,189; $444,583 and $111,109, respectively. The promissory notes were issued in settlement of our liability to these three individuals for accrued and unpaid compensation owed for periods prior to December 31, 2009. Payment of the amounts owning under these notes is due upon the earlier to occur of (a) a change in control of the Company (as defined in the notes), (b) the executive’s death or (c) the executive’s disability as (defined in the notes or in the respective executive’s written employment agreement). In addition, in the case of the notes payable to Mr. Marshall and Dr. Marshall, payment of the notes would be triggered by the Company’s failure to pay the executive’s base salary in accordance with the terms and conditions of the executive’s employment agreement because of disability.
In February 2017, Mr. Marshall and Dr. Marshall resigned from their positions with us and their employment was terminated. At that time, we entered into Separation and Termination Agreements with Mr. and Dr. Marshall (the “Marshall Severance Agreements”). Under the terms of the Marshall Severance Agreements, we agreed to the modification of the promissory notes we previously issued to them to require monthly principal payments to Mr. Marshall of $14,000 and to Dr. Marshall of $6,900 and to waive interest except in the event of a default. We made the first payments under the notes, but have been in default under both notes since April 2017 and, as of December 31, 2017, we owed principal payments for approximately nine months totaling $122,500 to Mr. Marshall and to Dr. Marshall totaling $55,900. In addition, under the terms of the notes, as a result of our default, the notes now accrue interest until payment of the default amounts at the rate of 5% of the total amount of the notes.
During the year ended December 31, 2017, four directors and officers participated in two of our private placements of our Common Stock in which they collectively purchased 10,333,334 shares of our Common Stock at prices ranging from $0.05 to $0.06 per share. One of the offerings was made at a discount to the market price of the Common Stock on the same terms offered to non-affiliated investors. The participation of Mr. Esposito in such offering was approved by the disinterested members of the Board of Directors.
Other than the compensation arrangements, including employment, termination of employment and change in control arrangements and indemnification arrangements, discussed in the section entitled “Executiveof this Proxy Statement titled “Executive Compensation,,” since January 1, 2015,during our last two completed fiscal years, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we were or will be a party in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets as of year-end for the last two years and in which any related party had or will have a direct or indirect material interest.
Director Independence
Our Common Stock Markets (“NASDAQ”) and New York Stock Exchange (“NYSE”) have established rules and regulations which generally require companies listed on these exchanges to have a board of directors with a majority of independent directors. Our common stock is currently tradedquoted on the OTCQB,The OTC Marketplace or “OTCQB”, which does not impose standards relating to director independence or the compositionmakeup of committees with independent directors or provide definitions of independence. However,In accordance with the rules of the SEC, we determine the independence of our boarddirectors by reference to the rules of the Nasdaq Stock Market (“NASDAQ”). The Board has determined that a majority of the members of the board ofwe have three independent directors, are independent under NASDAQ Marketplace Rules.
Communication with Directors
Stockholders and interested parties who wish to communicate with our boardBoard of directors,Directors, non-management members of our boardBoard of directorsDirectors as a group, a committee of the boardBoard of directorsDirectors or a specific member of our boardBoard of directorsDirectors may do so by letters addressed to the attention of our Corporate Secretary. The address for these communications is: c/o Medizone International, Inc., 4000 Bridgeway,350 East Michigan Avenue, Suite 401, Sausalito, California 94965,500, Kalamazoo, MI 49007, Attn: Corporate Secretary.
All communications are reviewed by the Corporate Secretary and provided to the members of the boardBoard of directors,Directors, provided that sales materials; abusive, threatening or otherwise inappropriate materials; and other routine items and items unrelated to the duties and responsibilities of the boardBoard of directors,Directors, will not be provided to directors.
Certain of our corporate governance documents, of the Company, including the Company’sour Code of Ethics, are available on our website at www.medizoneint.com.www.medizoneint.com.
The boardBoard of directorsDirectors meets periodically during the Company’sour fiscal year to review significant developments affecting the Companyus and to act on matters requiring boardBoard of directors’Directors’ approval. The boardBoard of directorsDirectors held seven12 meetings during the fiscal year ended December 31, 2015,2017, the Audit Committee held three meetingsone meeting during thesuch fiscal year, and the Compensation Committee held one meeting during 2015.such fiscal year. During the year 2015,2017, each member of the boardBoard of directorsDirectors participated in all meetingsat least 80 percent of the boardmeetings held by the Board, except Mr. Caponi, who participated in 58 percent of directors and all meetings of committees on which such member served.the meetings.
Committees of the Board of Directors
Our Board of Directors
Audit Committee
The Audit Committee of the boardBoard of directorsDirectors is a standing committee that has been established as required by Section 3(a) of the Exchange Act. MembersAs of the date of this Proxy Statement, the members of the Audit Committee are Mr. Esposito (Chairman), Mr. HoytMeyer and Mr. Caponi. The boardBoard has determined that Mr. Meyer and Mr. Caponi isare each considered to be an “audit committee financial expert,” as defined by the applicable regulations promulgated by the SEC under the Exchange Act. The boardBoard also believes that each member of the Audit Committee meets Exchange Actstock exchange requirements regarding financial literacy.
The authority and responsibilities of the Audit Committee’s responsibilitiesCommittee are set forth in a charter adopted by the Board of Directors and include: (i) appointing theour independent registered public accounting firm of the Company,firm; (ii) reviewing, approving and monitoring the scope and cost of any proposed audit and non-audit services that are provided by, as well as the qualifications and independence of, the independent registered public accounting firm,firm; (iii) reviewing and monitoring with the independent registered public accounting firm, and any internal audit staff, the results of audits, any recommendations from the independent registered public accounting firm and the status of management’s actions for implementing such recommendations, as well as the quality and adequacy of our internal financial controls and any internal audit staff,staff; and (iv) reviewing and monitoring our annual and quarterly financial statements and the status of material pending litigation and regulatory proceedings.
The Audit Committee operates under a written charter that was adopted by our board of directors and satisfies the applicable standards of the SEC.met one time in 2017.
Compensation Committee
The Compensation Committee of the boardBoard of directorsDirectors includes as members Mr. Caponi (Chairman),as Chairman, with Mr. HoytMeyer and Mr. Esposito. All members of the Compensation CommitteeEsposito as additional members. Mr. Caponi and Mr. Meyer are outside directorsconsidered “outside directors” as defined by RuleSection 162(m) of the Internal Revenue Code andCode; all members are non-employee directors as defined by the applicable regulations promulgated by the SEC under the Exchange Act. The Compensation Committee’s responsibilities include: (i) reviewing and recommending to the full boardBoard of directorsDirectors the salaries, bonuses, and other forms of compensation and benefit plans for management and (ii) administering our equity compensation plans. The duties of the Compensation Committee as the administrator of those plans include, but are not limited to, determining those persons who are eligible to receive awards, establishing terms of all awards, authorizing officers of the Company to execute grants of awards, and interpreting the provisions of the equity compensation plans and grants that are made under those plans.
The Compensation Committee met once in 2017. It operates under a written charter that was adopted by our boardBoard of directorsDirectors and satisfies the applicable standards of the SEC.
Board Attendance at Annual Stockholders’ Meeting
Our policy is to invite and encourage each member of our boardBoard of directorsDirectors to be present at our annual meetings of stockholders in person or by phone.if their schedules permit. Our last Annual Meeting of Stockholders was held on December 15, 2016, and three of our directors attended that meeting.
The following table summarizes the compensation paid to the non-employee members of the Board of Directors during the year ended December 31, 2015, to our directors. During 2015, there was no cash compensation paid to our directors. We made no stock awards and we paid no non-equity incentive plan compensation, nonqualified deferred compensation earnings, or other compensation to the directors; those columns are therefore omitted from the table.2017.
Name (a) | Option awards (d) | |||
| Daniel D. Hoyt (1) | $ | 113,640 | ||
| David A. Esposito (2) | $ | 56,820 | ||
| Vincent C. Caponi (3) | $ | 56,820 | ||
| Name | Fees earned or paid in cash ($) | Stock awards ($) | Option awards ($) | Non-equity incentive plan compensation ($) | Nonqualified deferred compensation earnings ($) | All other compensation ($) | Total ($) | |||||||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | |||||||||||||||||||||
Vincent C. Caponi(1) | -- | -- | 74,147 | -- | -- | -- | 74,147 | |||||||||||||||||||||
Stephen F. Meyer (2) | -- | -- | 11,205 | -- | -- | -- | 11,205 | |||||||||||||||||||||
Dwayne Montgomery(3) | -- | -- | 18,644 | -- | -- | -- | 18,644 | |||||||||||||||||||||
Daniel Hoyt(4) | -- | -- | 74,147 | -- | -- | -- | 74,147 | |||||||||||||||||||||
| (1) As |
(2) As of grant for December 31, 2017, Mr. Meyer had options to purchase 500,000 shares of Common Stock.
(3) Mr. Montgomery resigned from our Board of Directors effective August 31, 2017. His vested options were forfeited on November 29, 2017.
(4)Mr. Hoyt Mr. Esposito and Mr. Caponi. Options granted to Mr. Marshall and Dr. Shannon for service as directors are includedretired from our Board of Directors on June 21, 2017. His vested options will expire upon the earlier of three years from his retirement date or the termination date stated in the Summary Compensation Table on page 11grant documents. As of this Proxy Statement.December 31, 2017, Mr. Hoyt had vested options to purchase 2,500,000 shares of Common Stock. On February 19, 2018, Mr. Hoyt voluntarily surrendered options to purchase 500,000 shares of Common Stock.
ELECTION OF DIRECTORS
Vincent C. Caponi, David A. Dodd, David A. Esposito, Stephen F. Meyer, and Michael E. Shannon currently serve as our Board of directors consists of five directors with each director servingDirectors. Directors serve a one yearone-year term of office and until his successor is duly elected and qualified or until such director’s death, resignation or removal. Our boardThe current directors, re-nominated by the Board of directors proposes that each of Vincent C. Caponi, David A. Esposito, Daniel D. Hoyt, Edwin G. Marshall and Michael E. Shannon, each of whom is currently serving as a director, be elected as a directorDirectors, will stand for a one-year term expiring atre-election to serve until the 20172019 annual meeting of stockholders andor until such director’s successor istheir successors are duly elected and qualified or until such director’stheir earlier death, resignation or removal.
Directors are elected by a plurality of the votes cast (meaning that the five director nominees who receive the highest number of shares voted “for” their election are elected). With respect to the election of directors, you may vote “for” or “withhold” authority to vote for each of the nominees for the Board. “Withhold” votes and broker non-votes are not considered votes cast and will have no effect on the election of the nominees.
Shares represented by proxies will be voted “FOR” the election of each of the five nominees named above, unless the Proxy Card is marked to withhold authority to so vote. If any nominee for any reason is unable to serve or for good cause will not serve, the Proxies may be voted for such substitute nominee as the Proxy holder might determine. Each nominee has consented to being named in this Proxy Statement and to serve if elected. Proxies may not be voted for more than five directors. Stockholders may not cumulate votes in the election of directors.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ELECTION OF EACH
OF THE FIVE NOMINATED DIRECTORS.
Set forth in the table below.below is certain information regarding our directors, each of whom is nominated to be re-elected at the Annual Meeting, based on information furnished to us by the director as of April 2, 2018. Additional biographical information for each director nominee is set forth below the table.
| Name | Age | Position | ||
| Director, Chairman of the Board | ||||
| David A. Dodd | 68 | Director, Chief Executive Officer | ||
| Michael E. Shannon | Director, President and | |||
| Director | ||||
| Vincent C. Caponi | Director |
David A. Espositobecame a director in February 2014.2014 and currently serves as the Chairman of our Board. From March 1, 2017 through September 18, 2017, he served as Interim Chief Executive Officer. Mr. Esposito is the President and CEO of Armune BioScience, Inc., an early stage medical diagnostics company focused on developing and commercializing unique technology for diagnostic and prognostic tests for prostate, lung, and breast cancers. Mr. Esposito also is a director of Allergenis, Inc., an early stage allergy diagnostics company. From 2011 to 2013, Mr. Esposito was Vice President, Commercial Operations, at Thermo Fisher Scientific. Before joining Thermo Fisher Scientific, he was President and General Manager of Phadia US Inc., a specialty diagnostics company, from 2009 until its acquisition by Thermo Fisher Scientific in 2011. He was employed in various positions by Merck & Co., Inc. from 1996 to 2009, including stints as Executive Director of the Respiratory Marketing Team (2006-2007), New Commercial Model (2007-2008), and US Commercial Strategy (2008-2009). He was a combat infantry officer (Lt., US Army Infantry, 101st Airborne Division) from 1990-1993 and served in Operation Desert Storm in 1991, where he was awarded the Bronze Star Medal for combat action in Iraq. He received a BS degree in civil engineering at the United States Military Academy (West Point), and an MBA from Syracuse University. He also completed an executive education program, Competitive Marketing Strategy Program, at The Wharton School (University of Pennsylvania). Mr. Esposito chairs our Audit Committee and is a member of the Compensation Committee. Our boardBoard believes that Mr. Esposito’s extensive industry experience in the medical device and diagnostics markets and his extensive executive and finance experience with public and private companies qualifyqualifies him to serve onas a member of our board.Board.
Dr. Michael E. Shannon M.A., M.Sc., M.D., became a director on August 18, 2008, President in 2011 and President of the CompanyChief Scientific Officer in 2011. He also serves as Director of Medical Affairs since 2002 and in2018. In October 2008, he was appointed President of the Canadian Foundation for Global Health, or CFGH, a not-for-profit association founded by the Company. Dr. Shannon received his medical degree from Queen’s University in Canada, which included advanced training in surgery and sports medicine. He also holds post-graduate degrees in neurochemistry and physiology. He has been actively engaged in applied medical research within these areas for over 28 years. He served in the Canadian Forces for 31 years, retiring at the rank of Commodore (Brigadier General equivalent) as Deputy Surgeon General for Canada. During the first Gulf War, Dr. Shannon served as the senior medical liaison officer for all of the Canadian forces. In 1996, he assumed responsibilities within Health Canada for re-organizing the Canadian blood system. Working with both the provincial and federal governments, he oversaw the development of a new corporate entity dedicated exclusively to the management of blood services in Canada. He was then appointed Director General for the Laboratory Centre for Disease Control, a position he held for three years. In December 2000, Dr. Shannon left the Canadian federal government to pursue a new career in industry. In that capacity, he simultaneously directed a phase III clinical trial in Canada, the United States and Great Britain for an artificial blood substitute product. Following completion of that work, he was asked to accept a special assignment with the Canadian Federal Government Auditor General’s office to conduct a cost benefit analysis of all government sponsored pharmacare programs and make recommendations directly to the Parliament of Canada. His assignment and presentation to Parliament was completed in November 2004. Dr. Shannon then served on a special assignment to the Canadian Public Health Agency (Centers for Disease Control equivalent in the United States) as Senior Medical Advisor. His responsibility was to direct the rebuilding of the Emergency Medical Response Capacity for Canada. In this regard and under his direction, the largest emergency medical response exercise in the history of the country, involving the overnight construction of a mobile hospital, hundreds of doctors and thousands of patients, was successfully held in Toronto in December 2007. Dr. Shannon has been actively engaged in medical bio-oxidative (O3)(O3) based research since 1987 and was directly responsible for the first human clinical trial to have ever been approved in North America which examined the efficacy of O3O3 delivered via minor autohemotherapy in the treatment of AIDS. He was also responsible for several primate studies utilizing O3 O3 involving scientists from various departments within the Canadian Federal Government, as well as senior investigators from the Company and Cornell University. Dr. Shannon’s qualifications to serve as a member of the Board of Directors include his extensive medical research and related experience and other accomplishments noted above.
Vincent C. Caponi became a director in October 2014. Mr. Caponi retired from Ascension Health in 2017 and now serves as an independent consultant for the Ascension Health system. He served as President and CEO of St. Vincent Medical Center in Bridgeport, CT from July 2016 to July 2017. Until July 2013, Mr. Caponi served as the Chief Executive Officer of St. Vincent Health, growing the St. Vincent Health ministry to a 22-hospital system serving central and southern Indiana. St. Vincent Health is one of Indiana’s largest employers. Ascension Health of St. Louis, Missouri – the sponsor of St. Vincent Health – is the nation’s largest Catholic non-profit health systems with 130 hospitals located in 28 states. Mr. Caponi is the former Executive Board Chair for St. Vincent Health (2013-2015) and Executive Board Chair for Ascension Texas (2014-2016). Mr. Caponi also served as the special representative for Ascension Health in the Cayman Islands at Health City Cayman Island hospital, a joint venture between Ascension Health and Narayana Health, India. In the first quarter of 2016, Mr. Caponi served as the Interim CEO for Ascension Wisconsin and now is a special advisor for that ministry. Mr. Caponi is the Chairman of our Compensation Committee and serves on our Audit Committee. Our Board believes that Mr. Caponi’s extensive executive experience in the medical field, as well as in regulatory and governmental relations and research, qualifyhealthcare industry qualifies him to serve on our board.Board.
Stephen F. Meyer became a director in May 2017. Mr. Meyer was the President and Chief Executive Officer of Welch Allyn, Inc., a privately-held developer, manufacturer and marketer of frontline care devices and diagnostic solutions, headquartered in Skaneateles Falls, New York from December 2010 until the company’s merger with Hill-Rom, Inc. in October 2015. He joined Welch Allyn in 1981 as a sales representative in Detroit, Michigan. Mr. Meyer held a series of executive and senior leadership roles in a variety of areas from international sales and marketing to product development, operations, and general management. As President and CEO, Mr. Meyer navigated Welch Allyn during a time of substantial industry change, developing and executing a new strategy, restructuring the business, engaging more deeply with customers, and becoming more acquisitive. Mr. Meyer is an executive advisor to Beecken Petty O’Keefe & Company, a private equity management firm that focuses on the healthcare industry, is a member of the boards of directors of Paragon Medical, Inc. and SRC Ventures, Inc., and is an advisor to Medical Distribution Solutions, Inc., a leading publicity and content company in the health care business and is an advisor to the founder of Vitls, an early-stage company focused on remote patient monitoring. He also is a founder and the managing director of River Marsh Capital, LLC, a firm investing primarily in healthcare developments which enhance and improve health, and providing corporate advisory services to companies, private equity, and venture firms. He is a past board member of TIDI Medical Products LLC, a past board member and chair of MedTech (Central New York’s Medical Technology Association), a past board member and president of the Health Industry Manufacturers Marketing Council, a past board member of AdvaMed and Medical Device Manufacturers Association, and past board member of AAFP’s Foundation. Mr. Meyer received a Bachelor of Science in Biology from Alma College and earned a Master’s of Business Administration from the William E. Simon Graduate School of Business at the University of Rochester, New York. In addition to the achievements noted above, our Board believes that Mr. Meyer’s experience in marketing and product development in the healthcare industry qualify him to serve as a member of our Board of Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect toas of April 2, 2018 (the “Table Date”) regarding the beneficial ownershipnumber of shares of Common Stock beneficially owned by (i) each of our common stocknamed executive officers and directors; and (ii) all officers and directors as a group. We are not aware of any person who beneficially owned five percent or more of our Common Stock as of July 18, 2016, by:the Table Date.
Title of class | Name and Address of beneficial owner (1) | Amount and nature of beneficial ownership | Percentage of class (2) | |||||||
| Common Stock | Vincent C. Caponi, Director | - | - | |||||||
| Common Stock | David A. Dodd, Director and Chief Executive Officer | 2,000,000 | * | |||||||
| Common Stock | David A. Esposito, Chairman of the Board | 9,773,334 | 2.39 | |||||||
| Common Stock | Stephen F. Meyer, Director(3) | 750,000 | * | |||||||
| Common Stock | Michael E. Shannon, Director, President and Chief Scientific Officer(4) | 3,388,048 | * | |||||||
| Common Stock | Stephanie L. Sorensen, Chief Financial Officer | - | - | |||||||
| Common Stock | All Officers and Directors as a Group (8 persons) | 16,911,382 | 4.05 | |||||||
* Less than one percent
(1) Except as of July 18, 2016. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all shares of common stock subject to options held by that person or entity that are currently exercisable or subject to settlement or that will become exercisable or subject to settlement within 60 days of July 18, 2016. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the address of each beneficial owner listed in the table below isstockholder is: c/o Medizone International, Inc., 4000 Bridgeway,350 East Michigan Avenue, Suite 401, Sausalito, California 94965.500, Kalamazoo, MI 49007.
(2) Based on a total of 415,191,788 shares outstanding.
| Title of class | Name of beneficial owner | Amount and nature of beneficial ownership | Percentage of class | |||||||
| Common Stock | Edwin G. Marshall, Director and Chief Executive Officer (1) | 16,057,597 | 4.3 | % | ||||||
| Common Stock | Michael E. Shannon, Director and President (2) | 6,239,000 | 1.7 | % | ||||||
| Common Stock | Daniel D. Hoyt, Director (3) | 11,251,988 | 3.0 | % | ||||||
| Common Stock | David A. Esposito, Director (4) | 4,190,000 | 1.1 | % | ||||||
| Common Stock | Vincent C. Caponi, Director (5) | 1,750,000 | * | |||||||
| Common Stock | Boyd G. Evans, Chief Financial Officer (6) | 150,000 | * | |||||||
| Common Stock | All Officers and Directors As a Group (6 persons) (7) | 39,638,585 | 10.7 | % | ||||||
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The names of our executive officers, their ages as of August 5, 2016,April 2, 2018, and their positions are shown in the table below. Additional information regarding the officers follows the table.
| Name | Age | Position | ||
| Michael E. Shannon | Director, President, and | |||
| Chief Financial Officer | ||||
| Philip A. Theodore | 64 | Executive Vice President – Operations and Administration, General Counsel and Corporate Secretary | ||
| Jude P. Dinges | 59 | Executive Vice President, Chief Commercial Officer |
The boardBoard of directorsDirectors chooses executive officers, who serve at the discretion of our board.Board. There is no family relationship between any of the directors or executive officers and any other director or executive officer of the Company.
Each of Messrs. Marshall’sMr. Dodd’s and Dr. Shannon’s biographies isare included in the section entitledunder Proposal No. 1, Election of Directors under “Director Biographies.” Effective April 30, 2016, we hired Boyd G. Evans as
Stephanie L. Sorensen has been our Chief Financial Officer.Officer since October 2016. Ms. Sorensen also currently serves part-time as the Corporate Controller for Q Therapeutics, Inc. and Elute, Inc. both in Salt Lake City, Utah. Q Therapeutics, Inc. is a clinical-stage biopharmaceutical company that is developing human cell-based therapies that can be sold as “off-the-shelf” pharmaceuticals intended to treat neurodegenerative diseases of the brain and spinal cord. Elute, Inc. is a start-up privately held company developing and commercializing a new class of polymer-controlled drug delivery devices designed to prevent and treat orthopedic and other surgical bone infections. From October 2009 to August 2012, Ms. Sorensen was the Assistant Controller of World Heart Corporation, a publicly traded medical device company that had developed a ventricular heart valve for late stage heart failure patients as a bridge-to-transplant solution. World Heart was acquired by HeartWare International, Inc. in 2012. From November 2007 to October 2009, Ms. Sorensen was the Assistant Controller of Amedica Corporation, a medical device company that developed and sold ceramic spinal implants. Prior to Amedica, Ms. Sorensen held various operational and financial positions for both private and public companies in the pharmaceutical, telecommunications and software development industries.
Philip A. Theodore has been our Executive Vice President – Operations and Administration, General Counsel and Corporate Secretary since November 1, 2017. Mr. Evans, age 41,Theodore is a graduate of the University of Cincinnati College of Law, and holds a B.A. (Political Science) from the University of Tennessee at Chattanooga. Before joining Medizone, Mr. Theodore served as the VPVice President, Chief Administrative Office, General Counsel and Corporate Secretary with Aeterna Zentaris Inc. from October 2014 through July 2017. Prior to joining Aeterna Zentaris, he served as Vice President, General Counsel and Corporate Secretary of FinanceZep Inc. from July 2010 through September 2014; as Senior Vice President and Business SystemsGeneral Counsel of BioFire Defense, LLC (“BioFire”),John H. Harland Company, from September 2006 to September 2007; and as Vice President, General Counsel and Corporate Secretary of Serologicals Corporation from 2004 through August 2006. Mr. Theodore was a leaderpartner in the molecular diagnosticscorporate practice of King & Spalding, LLP, an Atlanta-based law firm, from 1986 through 2003.
Jude P. Dinges joined us as Executive Vice President, Chief Commercial Officer effective as of January 30, 2018. Mr. Dinges began his career nearly 30 years ago as a professional sales representative at Bristol Laboratories and later at Merck & Co., where he was promoted to positions with increased responsibilities in training, sales, management, marketing and market development. While at Merck, Mr. Dinges won multiple awards, including the President’s Achievement Award in 2001, awarded to one of 32 Business Directors each year. He received the Change Agent Award for his market development prelaunch business planning and contributions to sales force execution, while launching the blockbuster brands Cozaar®, Fosamax®, Singulair®, Maxalt®, Vioxx®, and Vytorin®. He was recognized with a wholly owned subsidiaryCareer Achievement Award for his consistent top performance as a Senior/Executive Business Director. Mr. Dinges joined Novartis Pharmaceuticals in 2006 and led his region to top performance in the launch of bioMérieux SA, from January 2014Tekturna® while balancing a broad antihypertensive portfolio across several Novartis divisions. His region also led the nation in market share for Exelon® and Exelon Patch®. In 2008, Mr. Dinges became the Respiratory & Infectious Disease Specialty Medicines Director. In 2009, Mr. Dinges joined Amgen Inc. as Executive Director of Region Sales, Bone Health Business Unit. Mr. Dinges led his region team to December 2015. Prior to his position at BioFire,a highly successful launch of monoclonal antibody, Prolia®, across the southeastern United States and Puerto Rico. Most recently Mr. EvansDinges served as the controller for BioFire Diagnostics for over 12 years. During his tenure at the BioFire entities, Mr. Evans managed all areasSenior Vice President, Chief Commercial Officer of financial reporting, accounting, and internal controls, and facilitated the proposal, award, and execution of over $350 million in government contracts and grants.Aeterna Zentaris, Inc.
The following table summarizes information concerningSummary Compensation Table shows the total compensation ofpaid in the last two completed fiscal years to each person who served as our Chief Executive Officer (principal(our principal executive officer) during the years ended December 31, 20152017 and 2014, andto our two other highest paidmost highly compensated executive officers for services rendered in all capacities (withother than the principal executive officer collectively, the “NEOs”)Chief Executive Officer who were serving in such capacitiesas executive officers as of December 31, 2015.2017 (“Named Executive Officers”).
| Name and principal position | Year | Salary ($) | Stock awards ($) | Option awards ($) | Other ($) | Total ($) | ||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | ||||||
Edwin G. Marshall (1) Former Chairman and Chief Executive Officer | 2017 | 32,500 | -- | 74,147 | -- | 106,647 | ||||||
| 2016 | 195,000 | -- | -- | -- | 195,000 | |||||||
David A. Esposito(2) Chairman and Former Interim Chief Executive Officer | 2017 | 123,750 | 150,000 | 74,147 | 6,800 | 354,697 | ||||||
| 2016 | -- | -- | -- | -- | -- | |||||||
David A. Dodd(3) Chief Executive Officer | 2017 | 72,197 | 60,000 | -- | -- | 132,197 | ||||||
| 2016 | -- | -- | -- | -- | ||||||||
Michael E. Shannon (4) President | 2017 | 184,704 | -- | 74,147 | -- | 258,851 | ||||||
| 2016 | 175,922 | -- | -- | -- | 175,922 | |||||||
Stephanie L. Sorensen(5) Chief Financial Officer | 2017 | 60,000 | -- | 18,537 | -- | 78,537 | ||||||
| 2016 | 15,000 | -- | -- | -- | 15,000 |
| Name and principal position | Year | Salary | Option Awards | Total | ||||||||||
| (a) | (b) | (c) | (e) | (f) | ||||||||||
| Edwin G. Marshall (1) (2) | 2015 | $ | 195,000 | $ | 113,640 | $ | 308,640 | |||||||
| Chairman and Chief Executive Officer | 2014 | $ | 195,000 | $ | 35,784 | $ | 230,784 | |||||||
| Michael E. Shannon (3) | 2015 | $ | 190,187 | $ | 113,640 | $ | 303,827 | |||||||
| Director of Medical Affairs | 2014 | $ | 213,311 | $ | 149,853 | $ | 363,164 | |||||||
| Thomas (“Tommy”) E. Auger (4) | 2015 | $ | 60,000 | $ | 26,516 | $ | 86,516 | |||||||
| Chief Financial Officer | 2014 | $ | 60,000 | $ | 14,314 | $ | 74,314 | |||||||
(2) Mr. Esposito is Chairman of our Board of Directors. He became Interim Chief Executive Officer on March 1, 2017, upon the retirement of Mr. Marshall. In connection with Mr. Esposito’s appointment as Interim Chief Executive Officer, we entered into an employment agreement that provided for the payment of an annual base salary of $225,000 and eligibility for a target bonus equal to 50% of his base salary based on performance goals established by our Board. The amount of salary shown in the table is the amount of salary that was accrued but not paid to Mr. Esposito during the portion of 2017 that he served as Interim Chief Executive Officer. Mr. Esposito agreed to serve without payment until our cash position improves. Mr. Esposito also received a stock award of 1,000,000 shares of Common Stock upon his appointment and was eligible to receive an additional 1,000,000 shares of Common Stock upon the commercialization of the AsepticSure® system in the United States. Mr. Esposito stepped down as Interim Chief Executive Officer when Mr. Dodd was appointed in September 2017, at which time this award expired. In February 2017, while he was serving as a member of our Board of Directors and prior to his appointment as Interim Chief Executive Officer, he received a fully vested stock option grant to purchase 1,000,000 shares of Common Stock pursuant to our 2016 Equity Incentive Plan. Mr. Esposito voluntarily surrendered this option on February 14, 2018. Between March 1, 2017 and August 31, 2017, Mr. Esposito purchased 6,333,334 shares of Common Stock at $0.06 per share for cash in our private placement to accredited investors on terms of the offering provided to unaffiliated investors. The market price of our Common Stock during the offering fluctuated between $0.06 and $0.10 per share. The total discount to market of $6,800 related to the shares purchased by Mr. Esposito is shown in column (f) as “other” compensation. Mr. Esposito’s participation in the offering was approved by disinterested members of the Board of Directors.
(3) Mr. Dodd became Chief Executive Officer on September 18, 2017. At the time of his employment, we entered into a written employment agreement with Mr. Dodd that provides an initial base salary of $250,000 per year and an annual performance bonus with an initial target of 65% of annual base salary, payable upon achievement of targets established by the Board of Directors, including targets related to operating capital levels; commercialization of the AsepticSure® system in the United States; and building and scaling commercial operations, including recruiting of experienced personnel to lead commercialization in the U.S. market. The amount of salary shown in the table is the amount of salary that was accrued but not paid to Mr. Dodd during the portion of 2017 that he served as Chief Executive Officer. Mr. Dodd has agreed to serve without receiving cash compensation until our financial condition will permit us to make cash salary payments to him. Pursuant to his employment agreement with us, Mr. Dodd was granted 1,000,000 restricted shares of Common Stock that were scheduled to vest on March 18, 2018, and 1,000,000 restricted shares of Common Stock that will vest immediately upon the commercialization of the AsepticSure® system in the United States; provided, however, that all such shares will vest immediately in the event of a change of control. On January 3, 2018, Mr. Dodd voluntarily surrendered all rights to the 1,000,000 shares of Common Stock that were scheduled to vest on March 18, 2018.
(4) Dr. Shannon receives a base salary paid in Canadian Dollars of $240,000 per year. The above amounts have been converted to U.S. dollars using the average exchange rate between the Canadian and the U.S. dollar for each year indicated. The average exchange rates were .769601 and .7330075 for 2017 and 2016, respectively. Column (e) represents compensation paid to Dr. Shannon in the form of stock options granted as compensation for Dr. Shannon’s service as a member of our Board of Directors (see “Director Compensation”), valued using the Black-Scholes option pricing model.
(5) Ms. Sorensen became Chief Financial Officer on October 1, 2016. We entered into an employment agreement with Boyd G. Evans on April 30, 2016 when he joined us as our Chief Financial Officer. The agreement is subject to termination at the discretion of either party. Mr. Evans is paidMs. Sorensen that provides for an annualinitial base salary of $60,000.$60,000 per year. On May 19, 2016, Mr. EvansFebruary 2, 2017, Ms. Sorensen was granted options subjectan option to vesting for the purchase of 150,000250,000 shares of common stock at a purchase priceCommon Stock. Ms. Sorensen voluntarily surrendered this option on January 3, 2018.
We have entered into agreements (the “Change of Control Agreements”) with Messrs. Dodd, Dinges, Shannon and Theodore and Ms. Sorensen. The Change of Control Agreements provide that if the closing priceemployment of our common stockany of these executives is terminated by the executive for “Good Reason” (as defined in the Change of Control Agreements) or by us without “Cause” (as defined in the executive’s employment agreement), other than on the dateaccount of grant.the executive’s death or disability, in each case within 12 months following a “Change of Control” (as defined in the Change of Control Agreements), the executive will be entitled to receive severance payments (the “Severance Pay”).
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For purposes of the wifeChange of Mr. Marshall. The agreements were approved by our Compensation Committee and memorializeControl Agreements, the current compensation levels paid to these employees. In summary, the agreements provide as follows:following definitions apply:
| · | |
(ii) one person (or more than one person acting as a group) acquires (or has acquired during the earlier to occur of (a) a change in controltwelve-month period ending on the date of the Company (as defined in the note), (b) the executive’s deathmost recent acquisition) ownership of our stock possessing 30% or (c) the executive’s disability as defined in the note or in the respective executive’s written employment agreement. In addition, in the casemore of the notes payable to Mr. Marshall and to Dr. Marshall, paymenttotal voting power of our stock;
(iii) a majority of the notesmembers of our Board of Directors are replaced during any twelve-month period by directors whose appointment or election is triggerednot endorsed by a majority of our Board of Directors before the date of such appointment or election; or
(iv) the complete liquidation of us or the Company’s failure to pay the executive’s base salary in accordance with the terms and conditionssale or other disposition by us of the executive’s employment agreement, becauseall or substantially all of disability. Amounts accrued for unpaid compensation have been reported by the Company on its audited financial statements since the dates the expenses were incurred. The amounts owed under these notes are as follows:our assets.
| · | |
(i) a change in the executive’s position that materially diminishes his or her duties, responsibilities, or authority;
(ii) a material diminution of the executive’s base salary;
(iii) any requirement that the executive relocate or any assignment of duties that would be materially adverse to the maintenance of the principal residence the executive had immediately prior to the Change of Control;
(iv) our material breach of the executive’s employment or Change of Control Agreement; or
(v) our failure to secure the written assumption of our material obligations under the executive’s employment or Change of Control Agreement from any successor to us.
If the Change of Control is one of the events specified in paragraphs (i), (ii) or (iii) of the definition of Change of Control above that values us at more than $100 million, the Severance Pay payable to the executive officers is set bywill equal three times the Compensation Committee of our board of directors. As a smaller reporting company, we are not required to provide a Compensation Discussionexecutive’s annual base salary and Analysis and certain additional disclosure tables and associated footnotes required of larger reporting companies. Included for the first timetarget bonus in our Proxy Statement are an advisory vote on NEO compensation (Proposal 3) and an advisory voteeffect on the frequencydate of future say-on-pay votes (Proposal 4).the Change of Control.
If the Change of Control is one of the events specified in paragraphs (i), (ii) or (iii) of the definition of Change of Control that values us at less than $100 million, but more than $75 million, the Severance Pay will equal two times the executive’s annual base salary and target bonus in effect on the date of the Change of Control.
If the Change of Control is one of the events specified in paragraphs (i), (ii) or (iii) of the definition of Change of Control that values us at less than $75 million, but more than $50 million, the Severance Pay will equal one times the executive’s annual base salary and target bonus in effect on the date of the Change of Control.
If the Change of Control is the event specified in paragraph (iv) of the definition of Change of Control, the Severance Pay will equal one times the executive’s annual base salary and target bonus in effect on the date of the Change of Control.
The Severance Pay and the cost of group medical continuation coverage (if we elect to pay the cost of such coverage to the executive) will be paid to the executive in a lump sum within 90 days. The vesting and exercisability of each option and any other equity award granted to the executive by us (or of any property received by the executive in exchange for such options in a Change of Control) will be automatically accelerated in full upon the termination of his or her employment following table summarizes the outstanding equity awards held by our NEOs asa Change of December 31, 2015:Control.
| Option Awards | |||||||||||||||||
| Name | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Equity incentive plan awards: number of securities underlying unexercised unearned options (#) | Option exercise price ($) | Option expiration date | ||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | ||||||||||||
| Edwin G. Marshall | |||||||||||||||||
| Principal Executive Officer | 1,000,000 | - | - | $ | 0.23 | 2/21/17 | |||||||||||
| 250,000 | - | - | $ | 0.163 | 4/30/19 | ||||||||||||
| 1,500,000 | - | - | $ | 0.087 | 8/18/20 | ||||||||||||
| Michael E. Shannon | |||||||||||||||||
| President | 1,000,000 | - | - | $ | 0.23 | 2/21/17 | |||||||||||
| 250,000 | - | - | $ | 0.163 | 4/30/19 | ||||||||||||
| 1,000,000 | - | - | $ | 0.13 | 8/15/19 | ||||||||||||
| 1,500,000 | - | - | $ | 0.087 | 8/18/20 | ||||||||||||
| Thomas (“Tommy”) E. Auger | |||||||||||||||||
| Principal Accounting and Financial Officer | 150,000 | - | - | $ | 0.14 | 3/17/16 | |||||||||||
| 250,000 | - | - | $ | 0.23 | 2/21/17 | ||||||||||||
| 100,000 | - | - | $ | 0.163 | 4/30/19 | ||||||||||||
| 350,000 | - | - | $ | 0.087 | 8/18/20 | ||||||||||||
Our Compensation Committee, together with management, assesses and considers potential risks when reviewing and approving our compensation programs. Our Compensation Committee believes that any risks arising from our compensation programs are not reasonably likely to have a material adverse effect on us.
The following table summarizes the outstanding equity awards held by our Named Executive Officers as of December 31, 2017:
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
| Name | Number of Securities underlying unexercised options (#) exercisable | Number of Securities underlying unexercised options (#) unexercisable | Equity incentive plan awards: Number of securities underlying unexercised unearned options (#) | Option exercise price | Option expiration date | Number of shares or units of stock that have not vested (#) | Market value of shares or units of stock that have not vested ($) | Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) | Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($) | |||||||||||||||||||||||||||
Edwin G. Marshall Former Chairman and Chief Executive Officer | 250,000 1,500,000 1,000,000 | -- -- -- | -- -- -- | 0.163 0.0877 0.10 | 4/30/2019 2/28/2020 2/28/2020 | -- -- -- | -- -- -- | -- -- -- | -- -- -- | |||||||||||||||||||||||||||
David A. Esposito (1) Chairman and Interim Chief Executive Officer | 1,000,000 750,000 1,000,000 | -- -- -- | -- -- -- | 0.1095 0.0877 0.10 | 2/26/2019 8/18/2020 2/2/2027 | -- -- -- | -- -- -- | -- -- -- | -- -- -- | |||||||||||||||||||||||||||
David A. Dodd(2) Chief Executive Officer | -- | -- | -- | -- | -- | -- | -- | 1,000,000 | 40,000 | |||||||||||||||||||||||||||
Michael E. Shannon(3) President and Chief Scientific Officer | 650,000 1,500,000 1,000,000 | -- -- -- | -- -- -- | 0.13 0.0877 0.10 | 8/15/2019 8/18/2020 2/2/2027 | -- -- -- | -- -- -- | -- -- -- | -- -- -- | |||||||||||||||||||||||||||
Stephanie Sorensen Chief Financial Officer | 250,000 | -- | -- | 0.10 | 2/2/2027 | -- | -- | -- | -- | |||||||||||||||||||||||||||
| (1) | Mr. Esposito voluntarily surrendered all of his outstanding options on February 14, 2018. |
| (2) | Does not include the restricted stock award for 1,000,000 shares that will vest upon certain performance conditions. |
| (3) | Mr. Shannon voluntarily surrendered his option for 650,000 shares on March 1, 2018. |
| (4) | Ms. Sorensen voluntarily surrendered her option for 250,000 shares on January 3, 2018. |
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee selected Tanner LLC (“Tanner”) as our principal independent registered public accounting firm to perform the audit of our consolidated financial statements for the year ending December 31, 2016.2018. As a matter of good corporate governance, our Audit Committee has decided to submit its selection of the Company’s principal independent registered public accounting firm to our stockholders for ratification. In the event that Tanner LLC is not ratified by our stockholders, the Audit Committee will review its future selection of Tanner LLC as our principal independent registered public accounting firm.
Tanner LLC audited our financial statements for the years ended December 31, 20152017 and 2014.2016. Representatives of Tanner LLC are not expected to be present at the Annual Meeting in which case they will be given an opportunityas we do not wish to make a statement atincur the expense of their travel to the Annual Meeting if they desire to do so, and will be available to respond to appropriate questions.Meeting.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF PROPOSAL 2.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
We regularly review the services and fees from our independent registered public accounting firm. These services and fees are also reviewed with our Audit Committee annually. In accordance with standard policy, Tanner LLC periodically rotates the individuals who are responsible for our audit.
Tanner performed services consisting of the audit of our annual consolidated financial statements for 2017 and 2016. In the years ending December 31, 20152017 and 2014,2016, there were no other professional services provided by Tanner, LLC.except for minor tax compliance services.
The following table summarizes the audit fees (which include quarterly reviews and periodic filings) paid to Tanner LLC for the years ended December 31, 20152017 and 2014.2016. The table also includes tax compliance fees paid to Tanner LLC for the years indicated.
| Years Ended December 31, | Years Ended December 31, | |||||||||||||||
| 2015 | 2014 | 2017 | 2016 | |||||||||||||
| Audit Fees | $ | 28,147 | $ | 27,917 | $ | 33,000 | $ | 41,342 | ||||||||
| Audit Related Fees | 2,800 | - | -- | -- | ||||||||||||
| Tax Fees | 2,300 | 2,375 | 2,600 | (1) | 2,600 | (1) | ||||||||||
| All Other Fees | - | -- | -- | |||||||||||||
| Total Fees | $ | 33,247 | $ | 30,292 | $ | 35,600 | $ | 43,942 | ||||||||
| (1) | Estimated. |
Our Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent registered public accounting firm and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval and the fees for the services performed to date. All of the services relating to the fees described in the table above were approved by our Audit Committee or, prior to the formation of the Audit Committee in January 2015, by the full board of directors.Committee.
Independence
Tanner LLC has advised us that it has no direct or indirect financial interest in the Company or its affiliateaffiliates and that it has had, during the last three years, no connection with the Company or its affiliate,affiliates, other than as the Company’s independent registered public accounting firm or in connection with certain other activities, as described below.
The information contained in the following report of our Audit Committee is not considered to be “soliciting material,” “filed” or incorporated by reference in any past or future filing by us under the Exchange Act or the Securities Act unless and only to the extent that we specifically incorporate it by reference.
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal control over financial reporting and disclosure controls and procedures. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with our management and Tanner LLC ourthe audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015. 2017 with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.
The Audit Committee has also discussedis responsible for reviewing, approving and managing the engagement of the Company’s independent registered public accounting firm, including the scope, extent and procedures of the annual audit and compensation to be paid therefor, and all other matters the Audit Committee deems appropriate, including the Company’s independent registered public accounting firm’s accountability to the Board of Directors and the Audit Committee. The Audit Committee Chairman reviewed with Tanner LLC the Company’s independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of audited financial statements with US GAAP, its judgment as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed by SAS No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adoptedwith the Audit Committee by the Public Company Accounting Oversight Board in Rule 3200T.
The Audit Committee Chairman discussed with Tanner LLCthe Company’s independent registered public accounting firm the overall scope and plans for its audits, and received from them written disclosures and a letter regarding their independence from us.required. The Audit Committee Chairman meets with the Company’s independent registered public accounting firm, with and without management present, to discuss the results of its examinations, its evaluations of the Company’s internal control over financial reporting and the overall quality of the Company’s financial reporting.
In reliance on the reviewreviews and discussions referred to above, the Audit Committee recommended to the boardBoard of directorsDirectors (and the Board of Directors has approved) that the audited consolidated financial statements be included in our annual reportthe Company’s Annual Report on Form 10-K for the year ended December 31, 20152017 for filing with the Securities and Exchange Commission.
Audit Committee:
David A. Esposito Chair
Vincent C. Caponi
Stephen F. Meyer
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | ||||||||||
| (a) | (b) | (c) | |||||||||||
| Equity compensation plans approved by security holders | 0 | 0 | 0 | ||||||||||
| Equity compensation plans not approved by security holders (1) | 20,965,000 | $ | 0.20 | 4,935,000 | (2) | ||||||||
| Total | 20,965,000 | $ | 0.20 | 4,935,000 | (2) | ||||||||
AMENDMENT OF OUR ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
TO 500 MILLION1,000,000,000 SHARES
On March 19, 2017, the Board of directors,Directors, subject to approval of our stockholders, has authorized an amendmentapproved a proposal (the “Amendment”) to amend our Amended Articles of Incorporation to increase the number of authorized shares of common stock available for issuanceCommon Stock from 395 million500,000,000 to 500 million1,000,000,000 shares. The additional common stockCommon Stock to be authorized by adoption of the Amendment would have, upon issuance, rights identical to our currently outstanding shares of common stock.Common Stock. The number of authorized shares of our preferred stock (“Preferred Stock”) will not be affected by the Amendment. The number of shares of our authorized Preferred Stock will be maintained at 50 million shares. No shares of Preferred Stock have been issued or are outstanding asAs of the date of this Proxy Statement.Statement, we have not designated any series of or issued any shares of preferred stock. On the Record Date, there were 415,191,788 shares of our Common Stock issued and outstanding, and 78,882,877 shares of our Common Stock reserved for issuance. Accordingly, approximately 5,925,335 shares of the total number of shares of Common Stock currently authorized remain available for issuance or may be reserved for issuance.
Form of the Amendment
The Amendment provides that Article IV of the Company’sour Amended Articles of Incorporation will be amended to read as follows:
ARTICLE IV — CAPITAL STOCK
Classes of Stock. The Corporation is authorized to issue two classes of stock, to be designated, respectively, “Common Stock” and “Preferred Stock”. The total number of shares which the Corporation is authorized to issue is Five HundredOne Billion Fifty Million (550,000,000)(1,050,000,000). Five Hundred Million (500,000,000)One Billion (1,000,000,000) shares shall be Common Stock, par value $0.001 per share, and Fifty Million (50,000,000) shares shall be Preferred Stock, no par value per share, undesignated as to class, powers, designations, preferences, limitations, restrictions or relative rights. The board of directors of the Corporation is authorized to fix and determine any class or series of Preferred Stock and the number of shares of each class or series and to prescribe the powers, designations, preferences, limitations, restrictions and relative rights of any class or series established, all by resolution of the board of directors and in accordance with Section 78.1955 of the Nevada Revised Statutes, as the same may be amended and supplemented. All shares of stock issued by the Corporation shall be issued as fully paid up and nonassessable. Each share of Common Stock issued and outstanding shall entitle the holder thereof to one vote on all matters presented for a vote of the Stockholders of the Corporation.
A copy of the full text of the Amendment is attached to this Proxy Statement as Appendix A.
Reasons for the Increase in Authorized Common Stock
Our Board of Directors has determined that it is in our best interest, and in the best interest of our stockholders, to amend our Amended Articles of Incorporation to increase the total number of authorized shares of Common Stock from 500,000,000 shares to 1,000,000,000 shares. After taking into account shares subject to future issuance upon the exercise of outstanding warrants, convertible promissory notes and outstanding stock options, we currently have available for issuance only approximately 5,925,335 shares of authorized but unissued shares of our Common Stock. In this part of the AmendmentProxy Statement, we summarize several reasons for the increase in authorized Common Stock.
We currently anticipatehave exhausted our authorized Common Stock.
Currently, we are authorized to issue 500,000,000 shares of Common Stock. Of the 500,000,000 shares of Common Stock authorized as of the Record Date, there were 415,191,788 shares issued and outstanding and 78,882,877 shares reserved for issuance upon the exercise of certain stock options and warrants and the conversion of our convertible debt. Therefore, we have exhausted our current authorized Common Stock. We require additional shares of Common Stock for a variety of corporate purposes, as discussed below.
During the fourth quarter of 2017, our management sought to obtain additional shares of Common Stock to use for the corporate purposes described below by instituting a voluntary option-surrender program. Pursuant to this program, holders of out-of-the-money options were requested to voluntarily surrender their options, without expectation that the options would be reissued in the future or that the option holder would receive any other form of compensation. A total of 10,807,500 options and shares of restricted stock were surrendered pursuant to this program and the shares made available for future issuance. However, the number of shares available under our current authorized capital is insufficient to provide for the corporate purposes discussed below in the long term. Therefore, the Board of Directors determined that it is necessary to request that our stockholders approve the Amendment.
We will not have access to the full amount available under our Equity Line unless additional cash will be needed to fund our activities through the next 18 months. shares of Common Stock are authorized.
As we have yet to establish significant revenue from the sale of ourthe AsepticSure® system, we have fundedfund our operations through the sale of our equity securities –Common Stock. We must engage in financing transactions using our Common Stock to date,survive as a going concern. On January 31, 2018, we entered into that certain Equity Purchase Agreement (as amended, the “Purchase Agreement”) with L2 Capital, LLC (“L2”) and SBI Investments LLC, 2014-1 (“SBI” and, together with L2, the “Investors”), pursuant to which we may, in our common stock. Ifsole discretion, choose to issue shares of our Common Stock to the Investors at the applicable market price as defined in the Purchase Agreement and the Investors have committed to purchase in the aggregate, up to $10,000,000 of value of our Common Stock when such shares are put to them by us under the terms of the Purchase Agreement (the “Equity Line”). The Board of Directors has determined that our most feasible means of raising capital at this time is by means of the Equity Line. However, we are currently unable to continueexercise our right to usedirect the Investors to purchase shares of our common stockCommon Stock to raise funds,the maximum extent permitted by the Equity Line because we willdo not have sufficient cash resourcesauthorized shares to among other things, supportdo so. To take advantage of the Equity Line to the maximum extent possible, we must increase our operations, fund our continuing AsepticSure development activities, and be in a position to pursue potential strategic alliances and other strategic opportunities. Of the 395 millionauthorized shares as contemplated by this proposal.
We require shares of common stock authorized for issuance underCommon Stock to attract, retain and motivate employees.
Our success depends, in part, upon our Articles of Incorporation, as of July 18, 2016, there are approximately 370 million shares issuedcontinued ability to attract, retain, and outstanding and approximately 21 million shares reserved for future issuance upon exercise of outstanding options and warrants, and approximately 10 million shares available for issuance. Based on the closing market price per share on July 14, 2016 ($0.055), under current market conditions,motivate employees. In this regard, we expect that we might be able raise $230,000 from an offering of the remaining shares, which our board believes would not be sufficient to fund our activities beyond 2016 and would cause us to limit or slow the pace of our development activities, as well as efforts to identify and pursue potential strategic transactions and other opportunities.
We require shares of Common Stock to compensate third parties and to take advantage of strategic opportunities.
We wish to have flexibilityadequate Common Stock available to respondissue for compensation for outside services from time to time as may be appropriate for our benefit and to take advantage of strategic opportunities. In addition, our growth strategy may include the pursuit of selective acquisitions to execute our business plan. We could use the additional Common Stock for potential strategic opportunities, it has directed that we submit Proposal 5 to our stockholders for approval to increase the number of authorized shares of common stock from 395 million to 500 million.
transactions, including, among other things, acquisitions, spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments. There are no specific acquisitions under consideration at this time. Although there can be no assurance, such future activitiesstrategic opportunities could include engaging with the FDA and foreign regulatory authorities with respect to our regulatory strategy; development of a testing site plan for North America, Europe and South America; arranging for the manufacture of ourthe AsepticSure® system; completing the development and manufacture of a sufficient number of our next-generation systems; implementing training and processes for site logistics, distribution, and supply chain; and establishing distribution networks. Our boardBoard believes that developing a high degree of readiness to initiate or continue these activities will also better enable us to identify and enter into a potential strategic transaction. For this reason, it will be very important to have an adequate capital structure to provide the working capital needed to proceed. The Amendmentauthorization of additional shares of Common Stock as contemplated by this proposal is a critical element of our strategic and business planning.
Potential Effects of the Amendment
The Amendment will not alter the current number of issued shares or change the relative rights and limitations of the shares of common stock. However, becauseCommon Stock. Adoption of the Amendment will have no immediate dilutive effect on the proportionate voting power or other rights of our existing stockholders. Because our stockholders have no preemptive rights to purchase or subscribe for any of our unissued common stock,Common Stock, the future issuance of additional shares of common stockCommon Stock, including under the Equity Line, will reduce the current stockholders’ percentage ownership interest in the total outstanding shares of common stock.Common Stock. In the absence of a proportionate increase in our future earnings and book value, an increase in the number of our outstanding shares of common stockCommon Stock would dilute our projected future earnings per share, if any, and book value per share of all our outstanding shares of common stock.Common Stock. If these factors were reflected in the price per share of our common stock,Common Stock, the potential realizable value of a stockholder’s investment could be adversely affected. An issuance of additional shares could therefore have an effect on the potential realizable value of a stockholder’s investment.
The proposed increase inAmendment could adversely affect the authorized numberability of shares of common stock could have other effects onthird parties to take us over or change our stockholders, depending upon the exact nature and circumstances of any actualcontrol by, for example, permitting issuances of authorized but unissued shares. An increase in our outstanding shares could potentially deter takeovers, including takeovers that our board has determined are not in the best interest of our stockholders, in that additional shares could be issued (within the limits imposed by applicable law) in one or more transactions that could make a change in control or takeover more difficult. For example, we could issue additional shares so as towould dilute the stock ownership of a person seeking to effect a change in the composition of our Board or voting rightscontemplating a tender offer or other transaction for the combination of personsus with another company that the Board determines is not in our best interests or in the best interests of our stockholders. The ability of our Board to cause us to issue substantial amounts of Common Stock without the need for stockholder approval, except as may be required by law or regulation, upon such terms and conditions as our Board may determine from time to time in the exercise of its business judgement may, among other things, result in practical impediments with respect to changes in our control or have the effect of diluting the stock ownership of holders of Common Stock seeking to obtain control without our agreement. Similarly, theof us. The issuance of additional shares to certain persons alliedCommon Stock, while providing desirable flexibility in connection with our management couldpotential financings and other corporate transactions, may have the effect of makingdiscouraging, delaying or preventing a change in our control. Our Board, however, does not intend or view the Amendment to effect the increase in authorized shares as an anti-takeover measure, nor does it more difficultcontemplate its use in this manner at any time in the foreseeable future.
Appraisal or Dissenters’ Rights
Pursuant to remove our current managementthe Nevada Revised Statutes, stockholders are not entitled to appraisal rights or dissenters’ rights with respect to the Amendment or the increase in authorized shares.
Effectiveness of Amendment
If the Amendment is approved by diluting the stock ownership or voting rightsstockholders at the Annual Meeting, it will become effective upon the filing of persons seekinga certificate of amendment with the Nevada Secretary of State.
Possible Effect of Failure to cause such removal.Approve the Amendment
If Proposal 53 is not approved, we will not be able to undertake additional financings involving the issuance of shares of Common Stock, including under the Purchase Agreement, we may breach our obligation to issue shares upon the exercise of outstanding options and warrants and we will be unable to enter into transactions that require the issuance of common stock,Common Stock, which could include strategic alliances, collaboration arrangements and other strategic transactions, or undertake additional financings without first seeking stockholder approval, a process that would require a special meeting of stockholders, is time-consuming and expensive, and could impair our ability to efficiently raise capital when needed, if at all.transactions. In addition, our board may withdrawBoard will not be able to grant awards under the 2016 Plan in order to reserve the shares earmarked for the plan for future equity raises.Plan. If our stockholders do not approve Proposal 53 by the required vote, we will not have access to the additional authorized shares of common stockCommon Stock and will likely be forced to further limit our development activities. If we do not have a sufficient number of authorized shares to enable us to secure additional capital, we may not have sufficient cash flow and liquidity to fund our further development activities, which could significantly limit our ability to continue our operations. Ultimately, we may be forced to curtail all of our activities and potentially could be forced to cease operations.
If the stockholders do not approve the increase in our authorized Common Stock, we will be very limited in our efforts to raise additional equity capital. In such event, our operations and financial condition will be materially and adversely affected.
Required Vote and Recommendation
The affirmative vote of at least a majority of the outstanding shares of our Common Stock eligible to vote at the Annual Meeting will be required to approve the Amendment. Since approval requires a majority of shares outstanding, an abstentionabstentions from voting on the proposal and broker non-votes will not be counted as votes cast and accordingly will have the same effect as a negative vote on this proposal. Any Proxy received that does not include instructions with respect to this Proposal 3 will be voted in accordance with the Board’s recommendation. With respect to Proposal 3, brokers and banks who hold shares of a vote cast againstour Common Stock as nominees for their customers will have discretionary voting rights if their customers do not instruct the nominees as to their voting preferences and, accordingly, there may be few or no broker non-votes with respect to this proposal. We urge you to vote for this amendment. It is likely that, for this Proposal to be approved, we will need the affirmative vote of a substantial number of stockholders attending the Annual Meeting in person or by proxy.Proposal.
OUR BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE
“FOR” THEPROPOSAL 3 AND APPROVAL OF THE AMENDMENT.
There have been no changes in the past year to the extentprocedures by which stockholders may recommend nominees for director to our Board. Pursuant to Section 4.02 of our Amended and Restated Bylaws, in order for a stockholder recommendation for a director nominee to be considered for nomination by the total compensation (including base salary,Board at the next annual bonus, stock option exercises, transfersmeeting of property and benefits paid under nonqualified retirement plans) for certain executive officers exceeds $1 million (lessstockholders, the amount of any “excess parachute payments” as defined in Section 280G of the Code) in any one year. However, under Section 162(m), the limit on the income tax deduction does not apply to certain “performance-based compensation.” Under Section 162(m), stock options and SARs will satisfy the “performance-based compensation” exception if the awards of stock options or SARs arerecommendation must be made by a committeestockholder of record entitled to vote at the board of directors consisting solely of two or more “outside directors,” the plan sets the maximum number of shares that can be granted to any person within a specified period, and the compensation is based solely on an increase in the stock price after the grant date (i.e., the exercise price of the stock option or SAR is equal to or greater than the fair market value of the stock subject to such award on the grant date). Other types of awards may only qualify as “performance-based compensation” under Section 162(m) if such awards are granted or payable to the recipients based only upon the attainment of objectively determinable and pre-established performance targets established by a qualifying committee of the board of directors and related to performance goals approved by the Company’s stockholders.
| · | each nominee's name, age, business address, if known, and residence address of each nominee proposed in that notice; |
| · | the principal occupation or employment of each nominee for at least the five years preceding the date of the notice; |
| · | the number of shares of our Common Stock beneficially owned by each nominee; |
| · | any arrangement, affiliation, association, agreement or other relationship of the nominee with any stockholder of the Company; |
| · | a statement as to the nominee’s citizenship; and |
| · | any other information required to be included in a proxy statement regarding nominees for director pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder |
The notice tomust also state the Corporate Secretary must set forth, as to each mattername and address of the stockholder proposesof record giving the notice and the number of shares of Common Stock beneficially owned by the stockholder. Our Amended and Restated Bylaws have been publicly filed with the SEC and can also be provided upon request, addressed to bring before the annual meeting, the information required by our restated bylaws.Secretary, as noted above.
If any stockholder intends to Rule 14a-8 under the Exchange Act and intended to be presented at our 2017 annual meeting must be received by us not later than February 10, 2017, in orderpresent a proposal to be considered for inclusion in the proxy material in connection with our 2019 Annual Meeting of Stockholders, the proposal must be in proper form (per SEC Regulation 14A, Rule 14a-8 -- Stockholder Proposals) and received by our Corporate Secretary on or before December 19, 2018. We are not required to include in our proxy materials a stockholder proposal that is received after that date or that otherwise fails to meet the requirements for that meeting.stockholder proposals established by applicable SEC rules.
SECTION 16(a) Beneficial Ownership Reporting ComplianceBENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our officers, directors, executive officers and any persons who beneficially own more than 10% of our common stock (collectively “reporting persons”),Common Stock to file initial reports of ownership and reports of changes in ownership with the SEC. Such persons are required by SEC regulationand to furnish us with copies of all Section 16(a) forms that they file.
Based solely upon a review of the copies of such forms furnished to the Companyus or written representations that no Forms 5 were required, we believe that all reports required to be filed by these individuals and persons under Section 16(a) were filed during the year ended December 31, 2015,2017, and that such filings were timely.timely except as follows:
| · | Mr. Philip A. Theodore, an executive officer, was late filing his initial report of beneficial ownership of shares on Form 3 and he was late filing a Form 4 to report his acquisition of 1,000,000 shares of stock on November 30, 2017, which was filed on December 5, 2017. |
| · | Mr. Stephen Meyer, a director, was late filing his initial report of beneficial ownership of shares on Form 3, which was filed on May 29, 2017; was late filing a Form 4 to report the grant of options to purchase 500,000 shares of Common Stock on May 19, 2017, which was filed on May 30, 2017; and was late filing a Form 4 to report the acquisition of 500,000 shares of Common Stock on June 6, 2017, which was ultimately filed on June 13, 2017. |
| · | Mr. Daniel Hoyt, a former director, filed a Form 4 on June 20, 2017. This report was late and/or reported transactions involving dispositions of Common Stock that occurred while Mr. Hoyt was a director for which no Form 4 had previously been filed, including gifts and sales, as follows: |
| Date of Transaction | Nature of Transaction | Number of Shares |
| 04/23/2014 | Sale | 74,432 |
| 11/17/2016 | Gift | 500,000 |
| 02/23/2017 | Gift | 500,000 |
| 05/16/2017 | Sale | 46,500 |
| 05/18/2017 | Sale | 53,500 |
| 05/26/2017 | Sale | 48,800 |
| 06/01/2017 | Sale | 24,000 |
| 06/02/2017 | Sale | 30,860 |
| 06/05/2017 | Sale | 96,340 |
| 06/14/2017 | Sale | 78,100 |
| 06/15/2017 | Sale | 121,900 |
| 06/15/2017 | Sale | 400,000 |
| 06/16/2017 | Sale | 236,500 |
The SEC has adopted rules that permit companies and intermediaries (such as brokers) to implement a delivery procedure called “householding.” Under this procedure, multiple stockholders who reside at the same address may receive a single copy of our annual report and proxy materials, including the Notice of Internet Availability, unless the affected stockholder has provided contrary instructions. This procedure reduces printing costs and postage fees, and helps protect the environment as well.
This year, a number of brokers with account holders who are stockholders will be “householding” our annual report and proxy materials, including the Notice of Internet Availability. A single Notice of Internet Availability and, if applicable, a single set of annual report and other proxy materials, will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that it will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. Stockholders may revoke their consent at any time by contacting American Stock Transfer & Trust Company, either by calling toll-free (800) 937-5449, or by writing to American Stock Transfer & Trust Company, Operations Center, 6201 15th Avenue, Brooklyn, New York 11219.
Upon written or oral request, we will promptly deliver a separate copy of the Notice of Internet Availability, and, if applicable, the annual report and other proxy materials, to any stockholder at a shared address to which a single copy of any of those documents was delivered. To receive a separate copy of the Notice of Internet Availability, and, if applicable, the annual report and other proxy materials, you may write or call our Investor Relations departmentCorporate Secretary at 4000 Bridgeway,350 East Michigan Avenue, Suite 401, Sausalito, California 94965,500, Kalamazoo, Michigan 49007, Attn: Investor Relations, telephone number (415)-331-0202.404-663-7360.
Any stockholders who share the same address and currently receive multiple copies of our Notice of Internet Availability or annual report and other proxy materials who wish to receive only one copy in the future can contact their bank, broker or other holder of record to request information about householding or our Investor Relations department at the address or telephone number listed above.
The boardBoard of directorsDirectors does not presently intend to bring any other business before the Annual Meeting and, so far as is known to the boardBoard of directors,Directors, no matters are to be brought before the Annual Meeting except as specified in the notice of the Annual Meeting. As to any business that may arise and properly come before the Annual Meeting, however, it is intended that Proxies, in the form enclosed, will be voted in respect thereof in accordance with the judgment of the persons voting such Proxies.
We have filed reports, proxy statements and other information with the SEC. You may read and copy any document we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.W., Washington D.C. 20549. You may obtain information on the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains the reports, proxy statements and other information we file electronically with the SEC. The address of the SEC website is http://www.sec.gov.
We will mail, without charge, upon written request, a copy of our Annual Report on Form 10-K for the year ended December 31, 2017, including the financial statements and list of exhibits, and any exhibit specifically requested. Requests should be sent to:
Investor Relations
Medizone International, Inc.
350 East Michigan Avenue, Suite 500
Kalamazoo, Michigan 49007
350 East Michigan Avenue, Suite 500
Kalamazoo, Michigan 49007
The Annual Report is also available at www.medizoneint.com/investor-relations/sec-filings/.
 |
Certificate of Amendment to Articles of Incorporation For Nevada Profit Corporations
(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)
| 1. | Name of |
Corporation: Medizone International, Inc. |
| 2. | The articles have been amended as follows: |
Article IV is hereby amended in its entirety as follows:
“ARTICLE IV — CAPITAL STOCK Classes of Stock. The Corporation is authorized to issue two classes of stock, to be designated, respectively, “Common Stock” and “Preferred Stock”. The total number of shares which the Corporation is authorized to issue is One Billion Fifty Million (1,050,000,000). One Billion (1,000,000,000) shares shall be Common Stock, par value $0.001 per share, and Fifty Million (50,000,000) shares shall be Preferred Stock, no par value per share, undesignated as to class, powers, designations, preferences, limitations, restrictions or relative rights. The board of directors of the Corporation is authorized to fix |
and determine any class or series of Preferred Stock and the number of shares of each class or series and to prescribe the powers, designations, preferences, limitations, restrictions and relative rights of any class or series established, all by resolution of the board of directors and in accordance with Section 78.1955 of the Nevada Revised Statutes, as the same may be amended and supplemented. All shares of stock issued by the Corporation shall be issued as fully paid up and nonassessable. Each share of Common Stock issued and outstanding shall entitle the holder thereof to one vote on all matters presented for a vote of the Stockholders of the Corporation.”
| 3. | The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation* have voted in favor of the amendment is: Majority of all Stockholders |
| 4. | Effective date and time of filing: (optional) Date: _____________ Time: ______________________ (must not be later than 90 days after the certificate is filed) |
| 5. | Signature: (required) |
X
Signature of Officer
*If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless to limitations or restrictions on the voting power thereof.
IMPORTANT: Failure to include any of the above information and submit with the proper fees may cause this filing to be rejected.
This form must be accompanied by appropriate fees.
Nevada Secretary of State Amend Profit-After
Revised: 1-5-15
MEDIZONE INTERNATIONAL, INC. ATTN: Philip A. Theodore 350 EAST MICHIGAN AVENUE SUITE 500 KALAMAZOO, MI 49007 | VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ET on 05/29/2018. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. ET on 05/29/2018. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. | ||
Investor Address Line 1 Investor Address Line 2 Investor Address Line 3 Investor Address Line 4 Investor Address Line 5 John Sample 1234 ANYWHERE STREET ANY CITY, ON A1A 1A1 |
CONTROL # → | 0000000000000000 | ||
| NAME | |||
| THE COMPANY NAME INC. - COMMON | SHARES | 123,456,789,012.12345 | |
| THE COMPANY NAME INC. - CLASS A | 123,456,789,012.12345 | ||
| THE COMPANY NAME INC. - CLASS B | 123,456,789,012.12345 | ||
| THE COMPANY NAME INC. - CLASS C | 123,456,789,012.12345 | ||
| THE COMPANY NAME INC. - CLASS D | 123,456,789,012.12345 | ||
| THE COMPANY NAME INC. - CLASS E | 123,456,789,012.12345 | ||
| THE COMPANY NAME INC. - CLASS F | 123,456,789,012.12345 | ||
| THE COMPANY NAME INC. - 401 K | 123,456,789,012.12345 | ||
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: ☒ | KEEP THIS PORTION FOR YOUR RECORDS |
| DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
The Board of Directors recommends you vote FOR the following: | For All | Withhold All | For All Except | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | ||||
| ☐ | ☐ | ☐ | ||||||
1. Election of Directors | ||||||||
Nominees 01 David A. Dodd02 Michael E. Shannon 03 Stephen Meyer 04 David A. Esposito 05 Vincent C. Caponi | ||||||||
| The Board of Directors recommends you vote FOR proposals 2 and 3. | For | Against | Abstain | |||||
2.To ratify the appointment of Tanner LLC as the independent registered public accounting firm for the fiscal year ending December 31, 2018. | ☐ | ☐ | ☐ | |||||
3.To approve an amendment of the Company's Articles of Incorporation to increase the number of authorized shares of common stock to One Billion (1,000,000,000) shares. | ☐ | ☐ | ☐ | |||||
NOTE: Such other business as may properly come before the meeting or any adjournment thereof. | ||||||||
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | Investor Address Line 1 Investor Address Line 2 Investor Address Line 3 Investor Address Line 4 Investor Address Line 5 John Sample 1234 ANYWHERE STREET ANY CITY, ON A1A 1A1 | |||||||
SHARES CUSIP # | ||||||||
| Signature [PLEASE SIGN WITHIN BOX] | Date | JOB # | Signature (Joint Owners) | Date | SEQUENCE # | |||
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Combined Document is available at www.proxyvote.com
MEDIZONE INTERNATIONAL, INC. Annual Meeting of Stockholders May 30, 2018 11:00 AM Eastern Time This proxy is solicited by the Board of Directors The shareholder(s) hereby appoint(s) David A. Dodd and Philip A. Theodore, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of MEDIZONE INTERNATIONAL, INC. that the shareholder(s) is/are entitled to vote at the Annual Meeting of shareholder(s) to be held at 11:00 AM, Eastern Time on May 30, 2018, at the offices of Parks, Chesin & Walbert, 26th Floor, 75 14th Street N.E., Atlanta, Georgia 30309, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations. Continued and to be signed on reverse side |