UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
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by the Registrant |
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| Filed
by a Party other than the Registrant |
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Check
the appropriate box:
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Preliminary
Proxy Statement |
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive
Proxy Statement |
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Definitive
Additional Materials |
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Soliciting
Material Under Rule 14a-12 |
NEPHROS,
INC.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed
on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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(1) |
Title
of each class of securities to which transaction applies: |
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(2) |
Aggregate
number of securities to which transaction applies: |
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(3) |
Per
unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): |
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(4) |
Proposed
maximum aggregate value of transaction: |
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(5) |
Total
fee paid: |
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Fee paid
previously with preliminary materials. |
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Check box
if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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(1) |
Amount
Previously Paid: |
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(2) |
Form,
Schedule or Registration Statement No.: |
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Filing
Party: |
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Date
Filed: |
Notice
Date: April 21, 2023
Nephros,
Inc.
380
Lackawanna Place
South
Orange, New Jersey 07079
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held Thursday, June 1, 2023
To
Stockholders of Nephros, Inc.:
The
Annual Meeting of Stockholders of Nephros, Inc., a Delaware corporation (the “Company”), will be held virtually and conducted
live via webcast on Thursday, June 1, 2023, at 10:00 a.m., Eastern Time, for the following purposes, each of which is more fully described
in the attached proxy statement:
| ● | Elect
one director to serve a three-year term expiring in 2026; |
| ● | Ratify
the appointment of Baker Tilly US, LLP as the Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2023; |
| ● | Approve
the compensation of the Company’s named executive officers on an advisory (non-binding)
basis; and |
| ● | Act
upon such other matters as may properly come before the meeting or any adjournment thereof. |
The
Board of Directors has fixed the close of business on April 11, 2023 as the record date for the determination of stockholders entitled
to notice of and to vote at the virtual Annual Meeting or any adjournment thereof.
This
year’s Annual Meeting will be held virtually and will be conducted live via webcast. You will be able to attend the virtual Annual
Meeting online and submit your questions during the virtual Annual Meeting by visiting virtualshareholdermeeting.com/NEPH2023. You will
also be able to vote your shares electronically at the virtual Annual Meeting.
We
are excited to continue to utilize the latest technology to provide ready access, real-time communication and cost savings for our stockholders
and the Company. We believe that hosting a virtual Annual Meeting will facilitate stockholder attendance and participation from any location
in the world.
Whether
or not you plan to attend the virtual Annual Meeting, please vote your shares by proxy. You may vote by proxy over the telephone or the
Internet as instructed in the accompanying proxy statement. If you received a proxy card or voting instruction form by mail, you may
submit your proxy card or voting instruction form by completing, signing, dating and mailing your proxy card or voting instruction form
in the envelope provided. Any stockholder attending live via webcast may vote at the virtual Annual Meeting, even if you already returned
a proxy card or voting instruction form or voted by proxy over the telephone or the Internet. Please note, however, that if your shares
are held of record by a broker, bank or other agent and you wish to vote at the virtual Annual Meeting, you must obtain a proxy issued
in your name from that such broker, bank or other agent.
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By
Order of the Board of Directors |
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Andrew
Astor |
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President
and Chief Executive Officer |
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 1, 2023:
The
proxy statement and the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 are available at http://materials.proxyvote.com/640671.
Nephros,
Inc.
380
Lackawanna Place
South
Orange, New Jersey 07079
PROXY
STATEMENT
ANNUAL
MEETING OF STOCKHOLDERS
THURSDAY,
JUNE 1, 2023
INFORMATION
CONCERNING SOLICITATION AND VOTING
The
Board of Directors of Nephros, Inc. (the “Company,” “we,” “us” or “our”) is soliciting
your proxy to vote at the Annual Meeting of Stockholders (the “Annual Meeting”) to be held virtually and live via webcast
on Thursday, June 1, 2023 at 10:00 a.m., Eastern Time, including at any adjournments or postponements of the virtual Annual Meeting.
You are invited to attend the virtual Annual Meeting to vote on the proposals described in this proxy statement by joining the webcast
available at virtualshareholdermeeting.com/NEPH2023. You do not need to attend the virtual Annual Meeting to vote your shares. Instead,
you may simply complete, sign and return the enclosed proxy card or voting instruction form, if you received paper copies of the proxy
materials, or follow the instructions below to submit your proxy over the telephone or the Internet.
In
accordance with rules and regulations adopted by the U.S. Securities and Exchange Commission (the “SEC”), we have elected
to provide our beneficial owners and stockholders of record access to our proxy materials over the Internet. Beneficial owners are stockholders
whose shares are held in the name of a broker, bank or other agent (i.e., in “street name”). Accordingly, a Notice of Internet
Availability of Proxy Materials (the “Notice”) will be mailed on or about April 21, 2023 to our beneficial owners and stockholders
of record who owned our common stock at the close of business on April 11, 2023. Beneficial owners and stockholders of record will have
the ability to access the proxy materials on a website referred to in the Notice or request a printed set of the proxy materials be sent
to them by following the instructions in the Notice. Beneficial owners and stockholders of record who have previously requested to receive
paper copies of our proxy materials will receive paper copies of the proxy materials instead of a Notice.
We
will conduct the Annual Meeting virtually and live via webcast, which may be accessed at virtualshareholdermeeting.com/NEPH2023. It is
important that you retain a copy of the control number found on your proxy card, voting instruction form or Notice, as such number will
be required for you to gain access to the virtual Annual Meeting.
QUESTIONS
AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
Why
did I receive a Notice of Internet Availability of Proxy Materials instead of a full set of proxy materials?
We
are pleased to take advantage of the SEC rule that allows companies to furnish their proxy materials over the Internet. Accordingly,
we have sent to our beneficial owners and stockholders of record a Notice of Internet Availability of Proxy Materials. Instructions on
how to access the proxy materials over the Internet or to request a paper copy may be found in the Notice. Our stockholders may request
to receive proxy materials in paper copy by mail or electronically over the Internet on an ongoing basis. A stockholder’s election
to receive proxy materials in paper copy by mail or electronically over the Internet will remain in effect until such stockholder terminates
its election.
Why
did I receive a full set of proxy materials instead of a Notice of Internet Availability of Proxy Materials?
We
are providing paper copies of the proxy materials instead of a Notice to beneficial owners or stockholders of record who have previously
requested to receive paper copies of our proxy materials. If you are a beneficial owner or stockholder of record who received a paper
copy of the proxy materials, and you would like to reduce the environmental impact and the costs incurred by us in mailing proxy materials,
you may elect to receive all future proxy materials electronically over the Internet.
You
can choose to receive our future proxy materials electronically by visiting http://www.proxyvote.com. Your choice to receive proxy materials
electronically will remain in effect until you instruct us otherwise by following the instructions contained in your Notice and visiting
http://www.proxyvote.com, sending an electronic mail message to sendmaterial@proxyvote.com, or calling 1-800-579-1639.
The
SEC has enacted rules that permit us to make available to stockholders electronic versions of the proxy materials even if the stockholder
has not previously elected to receive the materials in this manner. We have chosen this option in connection with the virtual Annual
Meeting with respect to both our beneficial owners and stockholders of record.
Who
can vote at the virtual Annual Meeting?
Only
the holders of record of our common stock at the close of business on the record date, April 11, 2023, are entitled to notice of and
to vote at the virtual Annual Meeting. On the record date, 10,484,932 shares of our common stock were outstanding. Stockholders are entitled
to one vote for each share of common stock held on the record date.
Stockholder
of Record: Shares Registered in Your Name
If,
on April 11, 2023, your shares were registered directly in your name with our transfer agent, V Stock Transfer LLC, then you are a stockholder
of record. As a stockholder of record, you may vote at the virtual Annual Meeting through virtualshareholdermeeting.com/NEPH2023 or vote
by proxy prior to the virtual Annual Meeting. Whether or not you plan to attend the virtual Annual Meeting, we urge you to vote your
shares by proxy by completing, signing, dating and mailing your proxy card in the envelope provided, if you received paper copies of
the proxy materials, or vote your shares by proxy over the telephone or the Internet as instructed below to ensure your vote is counted.
Beneficial
Owner: Shares Registered in the Name of a Broker, Bank or Other Agent
If,
on April 11, 2023, your shares were held, not in your name, but rather in an account at a brokerage firm, bank, dealer, or other similar
organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded
to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting
at the virtual Annual Meeting. As a beneficial owner, you have the right to direct your broker, bank or other agent regarding how to
vote the shares in your account. You are also invited to attend the virtual Annual Meeting; however, since you are not the stockholder
of record, you may not vote your shares online at the virtual Annual Meeting unless you request and obtain a valid proxy from your broker,
bank or other agent.
What
am I voting on?
There
are three matters scheduled for a vote:
| (1) | Election
of Joseph Harris as a director to serve a three-year term expiring in 2026; |
| (2) | Ratification
of the appointment of Baker Tilly US, LLP as our independent registered public accounting
firm for the fiscal year ending December 31, 2023; and |
| (3) | Approval
of the compensation of our named executive officers on an advisory (non-binding) basis. |
What
votes may I cast?
| (1) | For
the election of the director nominee, you may vote “For” or “Withhold”
your vote. |
| (2) | For
the ratification of the appointment of Baker Tilly US, LLP as our independent registered
public accounting firm for the fiscal year ending December 31, 2023, you may vote “For”
or “Against” or abstain from voting. |
| (3) | For
the approval of the compensation of our named executive officers on an advisory (non-binding)
basis, you may vote “For” or “Against” or abstain from voting. |
The
procedures for voting are as follows:
Stockholder
of Record: Shares Registered in Your Name
If
you are a stockholder of record, you may vote at the virtual Annual Meeting, vote by proxy using the enclosed proxy card (if you received
paper copies of the proxy materials), vote by proxy over the telephone, or vote by proxy over the Internet.
Whether
or not you plan to attend the virtual Annual Meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend
the virtual Annual Meeting and vote at that time even if you have already voted by proxy.
| ● | To
vote in person, log in through virtualshareholdermeeting.com/NEPH2023. Please have available
the 16-digit control number from the enclosed proxy card, if you received one, or from your
Notice. |
| ● | If
you received paper copies of the proxy materials, to vote using the proxy card, simply complete,
sign and date the enclosed proxy card and return it promptly in the envelope provided. If
you return your signed proxy card to us before the Annual Meeting, we will vote your shares
as you direct. |
| ● | To
vote over the telephone, dial toll-free 1-800-690-6903 using a touch-tone phone and follow
the recorded instructions. Please have available the 16-digit control number from the proxy
card, if you received one, or from your Notice. Your vote must be received by 11:59 p.m.,
Eastern Time, on May 31, 2023, to be counted. |
| ● | To
vote over the Internet, go to http://www.proxyvote.com. Please have available the 16-digit
control number from the proxy card, if you received one, or from your Notice. Your vote must
be received by 11:59 p.m., Eastern Time, on May 31, 2023, to be counted. |
We
are providing Internet proxy voting to allow you to vote your shares online, with procedures designed to ensure the authenticity and
correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your Internet access,
such as usage charges from Internet access providers and telephone companies. These costs will also apply to attendance at the virtual
Annual Meeting.
Beneficial
Owner: Shares Registered in the Name of Broker, Bank or Other Agent
If
you are a beneficial owner of shares registered in the name of your broker, bank or other agent, you may have received a proxy card and
voting instructions with these proxy materials from that organization rather than from us. Simply complete and mail the proxy card to
ensure that your vote by proxy is submitted to your broker, bank or other agent. Alternatively, you may vote by proxy by telephone or
over the Internet as instructed by your broker, bank or other agent. To vote in person at the virtual Annual Meeting, you must obtain
a valid proxy from your broker, bank or other agent. Follow the instructions from your broker, bank or other agent included with these
proxy materials, or contact your broker, bank or other agent to request a proxy form.
How
many votes do I have?
On
each matter to be voted upon, you have one vote for each share of common stock you own as of April 11, 2023. There is no cumulative voting
for election of directors.
What
if I return a proxy card but do not make specific choices?
If
you return a signed and dated proxy card without marking any voting selections, your shares will be voted as follows:
| (1) | “For”
the election of the director nominee; |
| (2) | “For”
the ratification of the appointment of Baker Tilly US, LLP as our independent registered
public accounting firm for the fiscal year ending December 31, 2023; and |
| (3) | “For”
the approval of the compensation of our named executive officers on an advisory (non-binding)
basis. |
If
any other matter is properly presented at the Annual Meeting, your proxyholder (one of the individuals named on your proxy card) will
vote your shares using his or her best judgment.
Who
is paying for this proxy solicitation?
We
will bear the cost of soliciting proxies. In addition to solicitation of proxies by mail, our employees, without extra remuneration,
may solicit proxies personally or by telephone. We will reimburse brokerage firms and other custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses for forwarding proxy materials to beneficial owners and seeking instruction with respect thereto.
What
does it mean if I receive more than one proxy card?
If
you receive more than one proxy card, your shares are registered in more than one name or are registered in different accounts. Please
complete, sign and return each proxy card to ensure that all of your shares are voted.
Are
proxy materials available on the Internet?
This
proxy statement and our Annual Report on Form 10-K for the year ended December 31, 2022 are available at: http://materials.proxyvote.com/640671.
Can
I change my vote after submitting my proxy?
Yes.
You can revoke your proxy at any time before the final vote at the Annual Meeting. If you are the record holder of your shares, you may
revoke your proxy in any one of four ways:
| (1) | You
may submit another properly completed proxy card with a later date. |
| (2) | You
may submit a new proxy by telephone or Internet. |
| (3) | You
may send a timely written notice that you are revoking your proxy to our President and Chief
Executive Officer, Andrew Astor, at our principal executive offices, located at 380 Lackawanna
Place, South Orange, New Jersey 07079. |
| (4) | You
may attend the virtual Annual Meeting and vote at virtualshareholdermeeting.com/NEPH2023.
Simply attending the virtual Annual Meeting will not, by itself, revoke your proxy. |
If
your shares are held by your broker, bank or other agent, you should follow the instructions provided by your broker, bank or other agent.
How
are votes counted?
Votes
will be counted by the inspector of election appointed for the meeting, who will separately count “For” and “Withhold”
votes and broker non-votes for the election of the director nominee; “For” and “Against” votes and abstentions
for the auditor ratification; and “For” and “Against” votes and abstentions and broker non-votes for the advisory
vote on compensation of our named executive officers.
Abstentions
will be counted towards the vote total for the applicable proposals and will have the same effect as “Against” votes for
these proposals. Broker non-votes have no effect and will not be counted towards the vote total for any proposal.
What
are “broker non-votes”?
Broker
non-votes occur when a beneficial owner of shares held in “street name” does not give instructions to the broker, bank or
other agent holding the shares as to how to vote on matters deemed “non-routine.” Generally, if shares are held in street
name, the beneficial owner of the shares is entitled to give voting instructions to the broker, bank or other agent holding the shares.
If the beneficial owner does not provide voting instructions, the broker, bank or other agent can still vote the shares with respect
to matters that are considered to be “routine,” but not with respect to “non-routine” matters. The ratification
of the appointment of Baker Tilly US, LLP as our independent registered public accounting firm is currently considered a routine matter.
The election of directors and the advisory vote on compensation of our named executive officers are currently considered non-routine
matters under the rules of the New York Stock Exchange.
How
many votes are needed to approve each proposal?
| (1) | To
elect Joseph Harris as a director to serve a three-year term expiring in 2026, the director
nominee receiving the most “For” votes (from the holders of shares present in
person or represented by proxy and entitled to vote on the election of directors) will be
elected. Only votes “For” or “Withhold” will affect the outcome. |
| (2) | To
ratify the appointment of Baker Tilly US, LLP as our independent registered public accounting
firm for the fiscal year ending December 31, 2023, this proposal must receive a “For”
vote from the majority of shares present in person or represented by proxy and entitled to
vote. If you “Abstain” from voting, it will have the same effect as an “Against”
vote. |
| (3) | The
proposal to approve the compensation of our named executive officers, is an advisory (non-binding)
vote, which means that the vote is not binding on the Company, our Board of Directors or
the Compensation Committee of the Board of Directors. To the extent there is any significant
vote against the compensation of our named executive officers as disclosed in this proxy
statement, the Board of Directors and the Compensation Committee will evaluate whether any
actions are necessary to address the concerns of stockholders. |
What
is the quorum requirement?
A
quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if stockholders holding at least a majority of
the outstanding shares are present at the virtual Annual Meeting or represented by proxy. On the record date, there were 10,484,932 shares
outstanding and entitled to vote. Thus, the holders of 5,242,467 shares must be present in person or represented by proxy at the meeting
to have a quorum.
Your
shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or
other agent) or if you vote in person at the virtual Annual Meeting. Votes withheld from any director nominee, abstentions and broker
non-votes will be counted towards the quorum requirement. If there is no quorum, the holders of a majority of shares present in person
or represented by proxy at the virtual Annual Meeting, or the chairman of the virtual Annual Meeting, may adjourn the virtual Annual
Meeting to another date.
How
can I find out the results of the voting at the virtual Annual Meeting?
Preliminary
voting results will be announced at the virtual Annual Meeting. Final voting results will be published on a Current Report on Form 8-K,
which we will file with the SEC within four business days of the virtual Annual Meeting.
What
are “householding” rules and how do they affect me?
The
SEC has adopted rules that permit companies and brokers, banks or other agents to satisfy the delivery requirements for proxy statements
and annual reports, with respect to two or more stockholders sharing the same address and who do not participate in electronic delivery
of proxy materials, by delivering a single copy of such documents addressed to those stockholders. This process, which is commonly referred
to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
Brokers,
bank and other agents may be “householding” our proxy materials. This means that only one copy of proxy materials may have
been sent to multiple stockholders in a household. If, at any time, you no longer wish to participate in householding and would prefer
to receive a separate proxy statement and annual report from the other stockholder(s) sharing your address, please: (i) notify your broker,
bank or other agent, (ii) direct your written request to Chief Executive Officer, 380 Lackawanna Place, South Orange, New Jersey 07079,
or (iii) contact our Chief Executive Officer at 201-343-5202. We will undertake to deliver promptly, upon any such oral or written request,
a separate copy of the proxy materials to a stockholder at a shared address to which a single copy of these documents was delivered.
Stockholders who currently receive multiple copies of proxy materials at their address and would like to request householding of their
communications should notify their broker, bank or other agent, or contact our Chief Executive Officer at the above address or phone
number.
Why
is the Company holding a virtual Annual Meeting?
Our
Annual Meeting will be a virtual meeting that will be conducted live via webcast. We are excited to continue to utilize the latest technology
to provide ready access, real-time communication and cost savings for our stockholders and the Company. We believe that hosting a virtual
meeting will more efficiently facilitate full and equal stockholder attendance and participation from any location in the world. You
will bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies,
but you will incur no costs of traveling to the meeting. A virtual Annual Meeting makes it possible for more stockholders (regardless
of size, resources or physical location) to have direct access to information more quickly, while saving us and our stockholders time
and money, especially as physical attendance at meetings has fallen. We also believe that the online tools we have selected will increase
stockholder communication. We are sensitive to concerns that virtual meetings may diminish the stockholder voice or reduce accountability
of management. Accordingly, we have designed our virtual format to enhance, rather than constrain, stockholder access, participation
and communication.
How
can I participate and ask questions at the virtual Annual Meeting?
We
are committed to ensuring that our stockholders have substantially the same opportunities to participate in the virtual Annual Meeting
as they would at an in-person meeting. In order to submit a question at the virtual Annual Meeting, you will need your 16-digit control
number that is printed on the Notice or proxy card that you received in the mail, or via email if you have elected to receive material
electronically. You may log in 15 minutes before the start of the virtual Annual Meeting and submit questions online. You will also be
able to submit questions during the virtual Annual Meeting. We encourage you to submit any question that is relevant to the business
of the virtual Annual Meeting. All appropriate questions asked during the virtual Annual Meeting will be read and addressed during the
virtual Annual Meeting, as time permits. Questions and answers may be grouped by topic, and we will group substantially similar questions
together and answer them once. Questions regarding personal matters or general economic or political questions that are not directly
related to the business of the Company are not pertinent to virtual Annual Meeting matters and, therefore, will not be answered. We will
limit each stockholder to one question in order to allow us to answer questions from as many stockholders as possible. If there are matters
of individual concern to a stockholder and not of general concern to all stockholders, or if a question posed was not otherwise answered,
we encourage stockholders to contact us separately after the virtual Annual Meeting. We encourage stockholders to log into the webcast
at least 15 minutes prior to the start of the virtual Annual Meeting to test their Internet connectivity. We want to be sure that all
our stockholders are afforded the same rights and opportunities to participate as they would at an in-person meeting, so all members
of our Board of Directors and executive officers are expected to join the virtual Annual Meeting and be available for questions.
What
do I do if I have technical problems during the virtual Annual Meeting?
If
you encounter any difficulties accessing the virtual Annual Meeting webcast, please call the technical support number that will be posted
on the Annual Meeting website log-in page.
If
I can’t participate in the live Annual Meeting webcast, can I listen to it later?
An
audio replay of the virtual Annual Meeting will be available as soon as practical on www.investors.nephros.com and will remain posted
until our 2024 Annual Meeting.
PROPOSAL
NO. 1 — ELECTION OF DIRECTORS
At
the Annual Meeting, the director nominee named below will stand for election to serve until our annual meeting in 2026. If the director
nominee cannot or will not serve as a director (which events are not anticipated), then your proxyholder (one of the individuals named
on your proxy card) may vote your shares for a substitute nominee named by the Board of Directors in the discretion of the proxyholder.
Director
Classes
Our
Board of Directors (the “Board”) is currently composed of five directors and is divided into three classes. One class is
elected each year to serve for a term of three years. The business address for each director for matters regarding our company is 380
Lackawanna Place, South Orange, New Jersey 07079.
In
connection with our September 2007 financing, we entered into an investor rights agreement with the investors pursuant to which we agreed
to take such corporate actions as may be required, among other things, to entitle certain entities affiliated with Wexford Capital LP
(“Wexford”), as successor to Lambda Investors LLC, (i) to nominate two individuals having reasonably appropriate experience
and background to our Board to serve as directors until their respective successor(s) are elected and qualified, (ii) to nominate each
successor to the Wexford nominees, provided that any successor will have reasonably appropriate experience and background, and (iii)
to direct the removal from the Board of any director nominated under the foregoing clauses (i) or (ii). Under the investor rights agreement,
we are required to convene meetings of the Board at least once every three months. If we fail to do so, a Wexford director will be empowered
to convene such meeting. Arthur Amron is a current Wexford director, and the other Wexford director position is currently vacant.
Director
Nominees
Biographical
information regarding our director nominee is set forth below. This nominee is presently serving on our Board and has served continuously
as a member of our Board since the year indicated below.
| Name |
|
Age
(as
of
4/11/23) |
|
Director
Since |
|
Business
Experience for the Last Five Years |
| Class
III Directors – Term expiring 2023 |
| |
|
|
|
|
|
|
| Joseph
Harris |
|
55 |
|
2022 |
|
Mr.
Harris was appointed to our Board in September 2022. He is currently the Midwest, Sales Director at Murj, a position he has held
since February 2019. Previously, he was Areas Sales Director, East at HeartFlow, Inc. from January 2018 to February 2019 and Midwest
Regional Sales Director at BIOTRONIK from January 2016 to January 2018. He also held various positions with Boston Scientific from
1998 to 2015, including Regional Sales Manager, and previously served as an officer in the United States Army. Mr. Harris holds a
B.S. in Systems Engineering Economics from the United States Military Academy at West Point and an M.B.A. in Marketing Finance from
the University of Michigan. Among other experience, qualifications, attributes and skills, Mr. Harris’s extensive sales background
led our Board to conclude that he should serve as a director of our company in light of our business and structure. |
Continuing
Directors
Biographical
information regarding our continuing directors is set forth below. Each of these directors has served continuously as a member of our
Board since the year indicated below.
| Name |
|
Age
(as
of
4/11/23) |
|
Director
Since |
|
Business
Experience for the Last Five Years |
| Class
I Director Nominees – Term expiring 2024 |
| Arthur
H. Amron |
|
66 |
|
2007 |
|
Mr.
Amron has served as a director of our company since September 2007. Mr. Amron is a Partner of Wexford Capital LP, an SEC-registered
investment advisor and serves as its General Counsel. Mr. Amron also actively participates in various private equity transactions,
particularly in the bankruptcy and restructuring areas, and has served on the boards and creditors’ committees of a number
of public and private companies in which Wexford has held investments. Mr. Amron has also served as a director of Mammoth Energy
Service, Inc., a Nasdaq-listed company, since January 2019. From 1991 to 1994, Mr. Amron was an associate at Schulte Roth & Zabel
LLP, specializing in corporate and bankruptcy law, and from 1984 to 1991, Mr. Amron was an associate at Debevoise & Plimpton
LLP specializing in corporate litigation and bankruptcy law. Mr. Amron holds a J.D. from Harvard University, a B.A. in Political
Theory from Colgate University and is a member of the New York Bar. Among other experience, qualifications, attributes and skills,
Mr. Amron’s legal training and experience in the capital markets, as well as his experience serving on boards of directors
of other public companies, led our Board to conclude that he should serve as a director of our company in light of our business and
structure. |
| |
|
|
|
|
|
|
| Oliver
Spandow |
|
51 |
|
2018 |
|
Mr.
Spandow was appointed to our Board in August 2018 and has served as the Chief Financial Officer, Executive Vice President and a member
of the board of directors of IDOC, LLC, an optometry-based consulting and member service organization since December 2014. Prior
to IDOC, Mr. Spandow spent 15 years with Johnson and Johnson (J&J), including roles as the General Manager of the J&J Vision
Care business in the United Kingdom and Ireland, Vice President of Strategic Accounts and Business Insights at Vistakon (J&J)
USA, and Vice President, Finance and CFO of Vistakon (J&J) USA. While at J&J, in addition to general finance, sales and marketing
roles, Mr. Spandow was involved with multiple acquisitions, divestment, and licensing deals. Prior to J&J, Mr. Spandow was a
Management Consultant with Price Waterhouse. Mr. Spandow holds a B.S. in Finance from the University of Connecticut and an M.B.A.
from the Fuqua School of Business, Duke University. Among other experience, qualifications, attributes and skills, Mr. Spandow’s
experience with transactions and organization scale-up in the medical device space let our Board to conclude that he should serve
as a director of our company in light of our business and structure. In addition, his extensive finance background, including his
current employment as chief financial officer, is invaluable to Mr. Spandow’s role as an audit committee financial expert and
the Chair of our Audit Committee. |
| Class
II Directors – Term expiring 2025 |
| |
|
|
|
|
|
|
| Andrew
Astor |
|
66 |
|
2020 |
|
Mr.
Astor has served as our President and Chief Executive Officer since August 2020 and has also held the position of Chief Financial
Officer since January 2021. He previously served as our Chief Financial Officer (February 2017 to October 2020) and our Chief Operating
Officer (December 2018 to August 2020). Prior to joining us, Mr. Astor was President and Chief Financial Officer at Open Source Consulting
Group, a growth stage services firm. Previously, he was a Managing Director at Synechron, a global consulting organization, from
2013 to 2015. From 2009 to 2013, he served as Vice President at Asurion, a large, privately-held insurance company. Mr. Astor was
co-founder of the software company EnterpriseDB and served as its CEO from 2004 to 2008. Mr. Astor was Vice President at webMethods,
a software firm, from 2002 to 2004 and Vice President at Dun & Bradstreet from 1998 to 2001. Prior to 1998, Mr. Astor held various
roles at American Management Systems, SHL/MCI Systemhouse, and Ernst & Young. Mr. Astor received his Bachelor of Arts in Mathematics
from Clark University, and his M.B.A. from The Wharton School at the University of Pennsylvania. Among other experience, qualifications,
attributes and skills, Mr. Astor’s extensive operational and business development experience led to the conclusion of our Board
that he should serve as a director of our company in light of our business and structure. |
| |
|
|
|
|
|
|
| Alisa
Lask |
|
52 |
|
2019 |
|
Ms.
Lask was appointed to our Board in February 2019. Since January 2022, she has served as Chief Executive Officer and a director of
Rion Aesthetics, Inc., a generative aesthetics company, and since November 2021 has been Chief Commercial Officer of Rion, Inc.,
a clinical stage regenerative medicine company and a majority owned subsidiary of Rion, Inc. Prior to that, from July 2014 to June
2021, Ms. Lask was employed by Galderma, including serving as its Vice President & General Manger from September 2017 to June
2021, where she oversaw the franchise of pharmaceutical, medical device injectable brands, and cosmeceutical skincare products. Previously,
Ms. Lask was Senior Director of Global Strategic Marketing at Allergan, Vice President, Global Strategic Marketing at Zimmer Biomet,
and spent ten years at Eli Lilly in a number of positions of increasing responsibility, with her final role as Director, Global Neuroscience.
Ms. Lask received her M.B.A. from the University of Michigan in Marketing and her B.A. in Marketing from Miami University of Ohio.
Among other experience, qualifications, attributes and skills, Ms. Lask’s depth of sales and marketing experience, which will
be invaluable as we continue to grow our commercial operations, led our Board to conclude that she should serve as a director of
our company in light of our business and structure. |
Vote
Required
Directors
will be elected by plurality vote, and no minimum vote is required for the director nominees to be elected. The director nominee receiving
the most “For” votes from the holders of shares present in person or represented by proxy and entitled to vote on the election
of directors will be elected. Stockholders do not have cumulative voting rights. Your vote may be cast “For” or “Withheld”
from any individual director nominee.
Our
Board of Directors has unanimously approved and recommends that stockholders vote “FOR”
the
election of Mr. Joseph Harris as Class III director.
PROPOSAL
NO. 2 —
RATIFICATION
OF APPOINTMENT OF INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM
The
Audit Committee of the Board has appointed Baker Tilly US, LLP (“Baker Tilly”) to serve as our independent registered public
accounting firm for the fiscal year ending December 31, 2023. The Board has ratified this appointment and recommends that the stockholders
also ratify this appointment. If the appointment of Baker Tilly is not ratified by the stockholders, the Audit Committee will reconsider,
but might not change, its decision to appoint Baker Tilly.
Baker
Tilly was appointed as the Company’s independent registered public accounting firm following Baker Tilly’s combination with
Moody, Famiglietti and Andronico, LLP (“MFA”), on December 2, 2021. MFA audited our financial statements from 2015 to 2021.
During the interim period from the end of the 2020 fiscal year through December 2, 2021, the date of MFA’s resignation, there were
no disagreements with MFA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures,
which disagreements, if not resolved to the satisfaction of MFA would have caused it to make reference to such disagreement in its reports.
Baker
Tilly has advised us that it does not have, and has not had, any direct or indirect financial interest in our company in any capacity
other than that of serving as independent registered public accounting firm. Representatives of Baker Tilly are expected to attend the
virtual Annual Meeting. They will have an opportunity to make a statement, if they desire to do so, and will also be available to respond
to appropriate questions.
Summary
of Auditor Fees and Pre-Approval Policy
In
accordance with its charter, the Audit Committee approves in advance all audit and non-audit services to be provided by our independent
registered public accounting firm. Although the Audit Committee does not have formal pre-approval policies and procedures in place, it
pre-approved all of the services performed by Baker Tilly and MFA during 2022 and 2021.
Audit
Fees
Fees
billed for audit services by Baker Tilly for the years ended December 31, 2022 and December 31, 2021 totaled approximately $166,000 and
$0, respectively. Fees billed for audit services by MFA for the years ended December 31, 2022 and December 31, 2021 totaled approximately
$0 and $209,213, respectively, in connection with the interim reviews, the year-end audit, and consents for registration statements.
Audit-Related
Fees
No
audit-related services were provided by Baker Tilly or MFA for the year ended December 31, 2022 or 2021.
Tax
Fees
No
tax services were provided by Baker Tilly or MFA for the year ended December 31, 2022 or 2021.
All
Other Fees
We
did not engage Baker Tilly or MFA to provide any other services during the years ended December 31, 2022 and 2021.
Vote
Required
The
affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote on this proposal
will constitute ratification of the appointment of Baker Tilly. Abstentions will have the same effect as a vote against this proposal,
but broker non-votes will have no effect on the outcome of this proposal.
Our
Board of Directors has unanimously approved and recommends the stockholders vote “FOR”
the
ratification of the appointment of Baker Tilly US, LLP as our independent registered public accounting firm for the fiscal year ending
December 31, 2023.
PROPOSAL
NO. 3 —
ADVISORY
VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
We
are asking our stockholders to cast an advisory vote to approve the compensation of our named executive officers as disclosed in this
proxy statement under “Compensation Matters,” and in the tabular and accompanying narrative disclosure regarding named executive
officer compensation.
As
required by Section 14A(a)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our stockholders are
entitled to vote at the virtual Annual Meeting to approve the compensation of our named executive officers, as disclosed in this proxy
statement pursuant to Item 402 of Regulation S-K, at least once every three years. In accordance with the preference of our stockholders,
as expressed in a non-binding advisory vote on the frequency of advisory votes on executive compensation at our annual meeting in 2020,
we have determined to hold advisory votes on the compensation of our named executive officers each year.
Our
executive compensation arrangements are designed to enhance stockholder value on an annual and long-term basis. Through the use of base
pay as well as annual and long-term incentives, we seek to compensate our named executive officers for their contributions to our profitability
and success. Please read “Compensation Matters” beginning on page 19 of this proxy statement for additional details about
our executive compensation arrangements, including information about the fiscal year 2022 compensation of our named executive officers.
We are asking our stockholders to indicate their support for our compensation arrangements as described in this proxy statement.
For
the reasons discussed above, the Board recommends that stockholders vote in favor of the following resolution:
“RESOLVED,
that the compensation paid to the company’s named executive officers, as disclosed in this proxy statement pursuant to Item 402
of Regulation S-K under the heading “Compensation Matters”, including the compensation tables and narrative discussion, is
hereby APPROVED.”
Vote
Required
The
affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote on this proposal
will constitute advisory approval of our named executive officer compensation. However, this approval is only advisory, which means that
the vote is not binding on the Company, our Board of Directors or the Compensation Committee of the Board of Directors. To the extent
there is any significant vote against the compensation of our named executive officers as disclosed in this proxy statement, the Board
of Directors and the Compensation Committee will evaluate whether any actions are necessary to address the concerns of stockholders.
Our
Board of Directors has unanimously approved and recommends a vote “FOR”
the
approval of the compensation of our named executive officers as disclosed in this proxy statement.
CORPORATE
GOVERNANCE
Board
of Director Meetings
Our
business is under the general oversight of the Board as provided by the Delaware General Corporation Law and our bylaws. During the year
ended December 31, 2022, the Board held 16 meetings and took action by unanimous written consent in lieu of a meeting three times. Each
person who was a director during 2022 attended at least 75% of the Board meetings and the meetings of the committees on which such director
served that occurred during the time such director was on the Board or such committees.
Each
of our directors is encouraged to be present at the annual meeting of our stockholders absent exigent circumstances that prevents such
director’s attendance. Directors may participate in the meeting in person or electronically. One of our directors attended our
annual meeting held in 2022.
Selection
of Nominees for the Board of Directors
The
Nominating and Corporate Governance Committee (the “Governance Committee”) is responsible for nominating individuals for
election to the Board and for filling vacancies on the Board that might occur between annual meetings of the stockholders. The Governance
Committee is also responsible for identifying, screening, and recommending candidates for prospective Board membership. When formulating
its membership recommendations, the Governance Committee also considers any qualified candidate for an open Board position timely submitted
by our stockholders in accordance with our established procedures.
The
Governance Committee will evaluate and recommend candidates for membership on the Board consistent with certain criteria, including,
but not limited to, personal qualities and characteristics, accomplishments, and reputation in the business community; financial, regulatory,
and business experience; current knowledge and contacts in the industry in which we do business; ability and willingness to commit adequate
time to Board and committee matters; fit of the individual’s skills with those of other directors and potential directors in building
a Board that is effective and responsive to our needs; independence; and any other factors the Board deems relevant, including diversity
of viewpoints, background, experience, and other demographics. In addition, prior to nominating a current director for re-election, the
Board will consider and review such director’s Board and committee attendance and performance; length of Board service; experience,
skills, and contributions that the current director brings to the Board; and independence.
To
identify nominees, the Governance Committee will rely on personal contacts as well as its knowledge of persons in our industry. We have
not previously used an independent search firm to identify nominees.
The
Board will consider stockholder recommendations of candidates when the recommendations are properly submitted. Stockholder recommendations
should be submitted to us pursuant to the procedures discussed in “Procedures For Security Holder Submission of Nominating Recommendations”
which is available on our website at https://investors.nephros.com/corporate-governance/ by clicking on the link titled “Procedures
for Security Holder Submission of Nominating Recommendations.” Written notice of any nomination must be timely delivered to Nephros,
Inc., 380 Lackawanna Place, South Orange, New Jersey 07079, Attention: Board of Directors, c/o Chief Executive Officer.
The
Governance Committee uses a variety of methods for identifying and evaluating non-incumbent candidates for director. The Governance Committee
regularly assesses the appropriate size and composition of the Board, the needs of the Board and the respective committees of the Board
as well as the qualifications of candidates in light of these needs. The Governance Committee will solicit recommendations for nominees
from persons that the Board believes are likely to be familiar with qualified candidates, including members of the Board, our management
or a professional search firm. The evaluation of these candidates may be based solely upon information provided to the Governance Committee
or may also include discussions with persons familiar with the candidate, an interview of the candidate or other actions the Governance
Committee deems appropriate, including the use of third parties to review candidates.
Nasdaq
Board Diversity Rules and Matrix
On
August 6, 2021, the SEC approved new board diversity rules for Nasdaq-listed companies. As of August 8, 2022, we are required to disclose
on an annual basis our directors’ voluntary, self-identified demographic information using a standardized board diversity matrix
(“Board Diversity Matrix”). To comply with this requirement, the following Board Diversity Matrix provides the self-identified
demographic information for our directors as of April 11, 2023. Each of the categories listed in the table below has the meaning as set
forth in Nasdaq Rule 5605(f).
| |
As
of April 11, 2023 |
| Total
Number of Directors |
5 |
| |
Female |
Male |
Non-Binary |
| Part
I: Gender Identity |
| Directors |
1 |
4 |
0 |
| Part
II: Demographic Background |
| African
American or Black |
0 |
0 |
0 |
| Alaskan
Native or Native American |
0 |
0 |
0 |
| Asian
|
0 |
0 |
0 |
| Hispanic
or Latinx |
0 |
0 |
0 |
| Native
Hawaiian or Pacific Islander |
0 |
0 |
0 |
| White |
1 |
4 |
0 |
| Two
or More Races or Ethnicities |
0 |
0 |
0 |
| LGBTQ+ |
0 |
| Did
Not Disclose Demographic Background |
0 |
In
addition, the new board diversity rules require that, by August 7, 2023, our Board have at least one diverse director that self-identifies
as female, LGBTQ+, and/or an underrepresented minority, and by August 7, 2026, two diverse directors (including at least one that self-identifies
as female and another who self-identifies as female, LGBTQ+, and/or an underrepresented minority). If we do not meet these criteria,
we will be required to disclose the reasons for non-compliance. We intend to meet the requirements by the specified deadlines, provided
that no assurances can be made that we will be able to attract and retain one or more directors meeting such requirements. Please note
that the specific requirements and deadlines for the Nasdaq diversity rules vary depending on whether we continue to qualify as a smaller
reporting company and the specific filing dates of the applicable proxy statement for our annual meetings, and as such, the preceding
summary of the rules is subject to change from time to time.
Director
Independence
Under
the Nasdaq Stock Market (“Nasdaq”) listing standards, a majority of the members of a listed company’s board of directors
must qualify as “independent,” as affirmatively determined by the board of directors. Our Board consults with the Company’s
legal counsel to ensure that the Board’s determinations are consistent with relevant securities and other laws and regulations
regarding the definition of “independent,” including those set forth in the applicable Nasdaq listing standards as in effect
from time to time.
Consistent
with these considerations, the Board, following the determination of the Governance Committee, has affirmatively determined that the
following directors are independent within the meaning of the applicable Nasdaq listing standards: Mr. Harris, Ms. Lask and Mr. Spandow.
In making this determination, the Board and the Governance Committee reviewed whether there were any relevant transactions or relationships
between each director, nominee, or any of his or her family members, and the Company, its senior management and its independent registered
public accounting firm, and determined that there were none.
In
making its determination as to the independence of the above-listed directors, the Board found that none of these directors had a material
or other disqualifying relationship with the Company. Mr. Astor, the Company’s President and Chief Executive Officer, is not an
independent director by virtue of his service as an officer of the Company and Mr. Amron is not an independent director as he is a partner
of Wexford Capital LP, which, along with certain other Wexford-related entities, beneficially owned approximately 35% of our common stock
as of April 11, 2023.
Committees
Our
Board of Directors has established an Audit Committee, a Compensation Committee, and a Governance Committee. These committees are each
governed by a specific charter, each of which is available on our website at https://investors.nephros.com/corporate-governance/.
Audit
Committee
The
Audit Committee is currently composed of Oliver Spandow (Chairman), Joseph Harris, and Alisa Lask, none of whom is our employee. Each
of Mr. Spandow, Mr. Harris, and Ms. Lask has been determined by the Board to be independent under the Nasdaq listing standards. The purpose
of the Audit Committee is to (i) oversee accounting, auditing, and financial reporting processes; (ii) ensure that our internal controls
and procedures are designed to promote compliance with accounting standards and applicable laws and regulations; and (iii) appoint and
evaluate the qualifications and independence of our independent registered public accounting firm. The Audit Committee held four meetings
in 2022.
The
Board has determined that all Audit Committee members are financially literate under the Nasdaq listing standards. The Board also determined
that Mr. Spandow qualifies as an “audit committee financial expert” as defined in the applicable SEC rules, based on his
extensive experience previously outlined.
Compensation
Committee
The
Compensation Committee is composed of Oliver Spandow, Joseph Harris and Alisa Lask, each of whom has been determined by the Board to
be independent under the Nasdaq listing standards. The purpose of the Compensation Committee is to (i) assist the Board in discharging
its responsibilities with respect to the determination and review of our compensation plans, policies, and programs, including compensation
of our directors and executive officers; (ii) evaluate the performance of our executive officers; (iii) assist the Board in developing
succession plans for executive officers; and (iv) administer our stock and incentive compensation plans and recommend changes in such
plans to the Board as needed. The Compensation Committee establishes the compensation of our executive officers on an annual basis. The
Compensation Committee held one meeting in 2022.
The
Compensation Committee reviews and approves, on an annual basis, the corporate goals and objectives with respect to the compensation
of our executive officers. The Compensation Committee evaluates, at least once a year, our executive officers’ performance in light
of these established goals and objectives, and, based upon these evaluations, recommends to the full Board the annual compensation of
such executive officers, including salary, bonus, incentive, and equity compensation. In reviewing and recommending the compensation
of the executive officers, the Compensation Committee may consider the compensation awarded to officers of similarly situated companies,
our performance, the individuals’ performance, compensation given to our executive officers in past years or any other fact that
the Compensation Committee deems appropriate. The Chief Executive Officer does not participate in the discussions and processes concerning
his own compensation and is not present during any discussions regarding his own compensation. The Compensation Committee also reviews
and recommends to the full Board appropriate director compensation programs for service as directors and committee members. The Compensation
Committee has the authority to delegate any of its responsibilities to subcommittees as the Committee may deem appropriate.
Governance
Committee
The
Governance Committee is currently composed of Alisa Lask and Joseph Harris, each of whom has been determined by the Board to be independent
under the Nasdaq listing standards. The purpose of the Governance Committee is to assist the Board in (i) identifying qualified individuals
to become Board members; (ii) determining the composition of the Board and its committees; (iii) monitoring a process to assess Board
effectiveness and in developing; and (iv) implementing our corporate procedures and policies. Further discussion of the Governance Committee’s
role is above under “Selection of Nominees for the Board of Directors.” The Governance Committee did not meet in 2022 but
took action by unanimous written consent in lieu of meeting once.
Board
Leadership Structure and Oversight of Risk
The
Board is responsible for providing oversight of our affairs. The Chairman of the Board, among other responsibilities, works with the
Chief Executive Officer and the Board to prepare Board meeting agendas and schedules, acts as liaison to other members of the Board,
and, in conjunction with our Chief Executive Officer, presides at Board meetings. There was no named Chairman of the Board during 2022.
As
explained above, our Board of Directors has three committees—the Audit Committee, the Compensation Committee and the Governance
Committee. Our Audit Committee is responsible for overseeing certain accounting-related aspects of our risk management processes while
our full Board focuses on overall risk management. The Audit Committee and the full Board focus on what they believe to be the most significant
risks facing us and our general risk management strategy, and also attempt to ensure, together with the Chief Executive Officer, that
risks undertaken by us are consistent with the Board’s appetite for risk. While the Board oversees our risk management, our management
is responsible for day-to-day risk management processes. We believe this division of responsibilities at the present time is an appropriate
approach for addressing the risks facing our company and that our Board leadership structure supports this approach. We can offer no
assurance that this structure, or any other structure, will be effective in all circumstances.
Stockholder
Communication with the Board
Stockholders
may communicate with the Board, members of particular committees or individual directors, by sending a letter to such persons in care
of our Chief Executive Officer at our principal executive offices. The Chief Executive Officer has the authority to disregard any inappropriate
communications or to take other appropriate actions with respect to any inappropriate communications. If deemed an appropriate communication,
the Chief Executive Officer will submit the correspondence to the Board or to any committee or specific director to whom the correspondence
is directed. Procedures for sending communications to the Board of Directors can be found on our website at https://investors.nephros.com/corporate-governance/
by clicking on the link titled “Procedures for Communicating with the Board.” Please note that all such communications
must be accompanied by a statement of the type and amount of our securities that the person holds; any special interest, meaning an interest
that is not derived from the proponent’s capacity as a stockholder, of the person in the subject matter of the communication; and
the address, telephone number and e-mail address, if any, of the person submitting the communication.
Code
of Business Conduct and Code of Ethics
We
have adopted a Code of Ethics and Business Conduct (the “Code of Ethics”) for our employees, officers and directors. The
Code of Ethics is available free of charge on our website at https://investors.nephros.com/corporate-governance/. We intend to
timely disclose any amendments to, or waivers from, our Code of Ethics that are required to be publicly disclosed pursuant to rules of
the SEC by filing such amendment or waiver with the SEC or posting such amendment or waiver on our website.
Additionally,
under our Insider Trading Policy, officers, directors and employees may not pledge or sell short Company stock, and they are further
prohibited from engaging in hedging or buying or selling puts or calls with respect to Company securities.
Executive
Officers
Our
named executive officers are Andrew Astor, who serves as our President, Chief Executive Officer and Chief Financial Officer, and Wesley
Lobo, who served as our Chief Marketing Officer from February 16, 2021 to August 31, 2021, and as our Chief Commercial Officer from September
1, 2021 to September 30, 2022. Mr. Astor’s biography may be found above in the section titled “PROPOSAL NO. 1 — ELECTION
OF DIRECTORS.”
AUDIT
COMMITTEE REPORT
The
Audit Committee has reviewed and discussed our consolidated audited financial statements for fiscal year 2022 with management. The Audit
Committee has discussed with Baker Tilly US, LLP, our independent registered public accounting firm, the matters required to be discussed
by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. The Audit Committee
has received the written disclosures and the letter from Baker Tilly US, LLP required by the PCAOB regarding communications with the
Audit Committee regarding independence, and has discussed with Baker Tilly US, LLP its independence. Based on the review and discussions
described above, among other things, the Audit Committee recommended to the Board that the consolidated audited financial statements
be included in our Annual Report on Form 10-K for the year ended December 31, 2022.
| Submitted
by: |
The
Audit Committee |
| |
Oliver
Spandow, Chairman |
| |
Alisa
Lask |
| |
Joseph
Harris |
STOCK
OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The
following table sets forth the beneficial ownership of our common stock as of April 11, 2023, by (i) each person known to us to own beneficially
more than five percent of our common stock, based on such persons’ or entities’ filings with the SEC; (ii) each director,
director nominee and executive officer; and (iii) all directors and executive officers as a group. Except as otherwise provided, the
address for each beneficial owner is c/o Nephros, Inc. 380 Lackawanna Place, South Orange, NJ 07079.
| Name and Address of Beneficial Owner | |
Amount and Nature of Beneficial Ownership | | |
Percentage of Class(1) | |
| Wexford Entities (2) | |
| 3,655,111 | | |
| 34.7 | % |
| Pessin Group (3) | |
| 961,509 | | |
| 9.2 | % |
| Arthur H. Amron (4) | |
| 0 | | |
| * | |
| Andrew Astor (5) | |
| 364,336 | | |
| 3.4 | % |
| Joseph Harris (6) | |
| 15,134 | | |
| * | % |
| Alisa Lask (7) | |
| 68,441 | | |
| * | |
| Oliver Spandow (8) | |
| 101,425 | | |
| * | |
| Wesley S. Lobo (9) | |
| 20,168 | | |
| * | |
| All executive officers and directors as a group (5 individuals) (10) | |
| 549,336 | | |
| 5.1 | % |
| * |
Represents
less than 1% of the outstanding shares of our common stock. |
| |
|
| (1) |
Applicable
percentage ownership is based on 10,484,932 shares of common stock outstanding as of April 11, 2023, together with applicable options
and warrants for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC, based on factors including
voting and investment power with respect to shares. Common stock subject to options and warrants exercisable on or within 60 days
after April 11, 2023 are deemed outstanding for the purpose of computing the percentage ownership of the person holding those options
or warrants, but not for computing the percentage ownership of any other person. |
| |
|
| (2) |
Based
on information provided in a Schedule 13D/A filed on October 26, 2020, as updated by information provided to us. The shares beneficially
owned by the Wexford Entities may be deemed beneficially owned by (i) Wexford Capital LP, which is the controlling party of certain
private investment funds and special purpose vehicles, (ii) Wexford GP LLC, which is the general partner of Wexford Capital LP, and/or
(iii) Charles E. Davidson and Joseph M. Jacobs, each in his capacity as a managing member of Wexford GP LLC and certain private investment
fund vehicles. The address of each of Wexford Capital LP, Wexford GP LLC, Mr. Davidson and Mr. Jacobs is c/o Wexford Capital LP,
777 South Flagler Drive, Suite 602 East, West Palm Beach, FL 33401. Includes 35,845 shares issuable upon exercise of options. Mr.
Amron, a current director, is a partner and general counsel of Wexford Capital LP. |
| |
|
| (3) |
Based
on information provided in a Schedule 13D/A filed on October 21, 2020, as updated by information provided to us. The shares beneficially
owned by the Pessin Group are individually owned as follows: (i) Brian Pessin, 174,580 shares; (ii) Sandra F. Pessin, 489,435 shares;
and (iii) Norman H. Pessin, 217,707 shares. Each of Brian Pessin, Sandra F. Pessin, and Norman H. Pessin have sole voting and dispositive
power over the shares each individually owns. The address for Brian Pessin is 310 East 75th Street, Apt. 2A, New York, NY 10021.
The address for Sandra F. Pessin and Norman H. Pessin is 366 Madison Avenue, 14th Floor, New York, NY 10017. |
| |
|
| (4) |
Mr.
Amron’s address is c/o Wexford Capital LP, 777 West Putnam Avenue, Greenwich, CT 06830. |
| |
|
| (5) |
Includes
216,100 shares issuable upon the exercise of options. |
| |
|
| (6) |
Includes
6,732 shares issuable upon the exercise of options. |
| |
|
| (7) |
Includes
(i) 29,103 shares issuable upon exercise of options; and (ii) 27,613 shares of unvested restricted stock. |
| |
|
| (8) |
Includes
(i) 34,115 shares issuable upon exercise of options; and (ii) 42,481 shares of unvested restricted stock. |
| |
|
| (9) |
Mr.
Lobo resigned as Chief Commercial Officer effective as of September 30, 2022. |
| |
|
| (10) |
Includes
(i) 286,050 shares issuable upon exercise of options and (ii) 70,094 shares of unvested restricted stock. See Footnotes 4-8 above. |
COMPENSATION
MATTERS
Executive
Compensation
The
following table sets forth all compensation earned in the years ended December 31, 2022 and 2021 by our named executive officers.
Summary
Compensation Table
| Name and Principal Position | |
Year | | |
Salary ($) | | |
Bonus ($) | | |
Stock Awards (1) ($) | | |
Option Awards (1) ($) | | |
All Other Compensation (2) ($) | | |
Total ($) | |
| Andrew Astor (3) | |
| 2022 | | |
| 325,000 | | |
| - | | |
| - | | |
| - | | |
| 9,750 | | |
| 334,750 | |
| President, Chief Executive Officer and Chief Financial Officer | |
| 2021 | | |
| 325,000 | | |
| 43,875 | | |
| - | | |
| 167,099 | | |
| 9,750 | | |
| 545,724 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Wesley Lobo (4) | |
| 2022 | | |
| 206,250 | | |
| - | | |
| - | | |
| - | | |
| 6,188 | | |
| 212,438 | |
| Chief Marketing Officer | |
| 2021 | | |
| 240,625 | | |
| 112,446 | | |
| 351,224 | | |
| 938,679 | | |
| 7,219 | | |
| 1,650,193 | |
| (1) |
The
amount reported is the aggregate grant date fair value of the options and restricted stock awards granted, computed in accordance
with FASB ASC Topic 718. The assumptions used in determining the grant date fair values of the option awards are set forth in Notes
2 and 17 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022. |
| |
|
| (2) |
Consists
of employer matching SIMPLE IRA Plan contributions. |
| |
|
| (3) |
Mr.
Astor has served as President and Chief Executive Officer since August 24, 2020 and, additionally, resumed his role as Chief Financial
Officer on January 28, 2021. Previously, Mr. Astor served as Chief Financial Officer (from February 13, 2017 to November 6, 2020)
and Chief Operating Officer (from December 13, 2018 to August 24, 2020). |
| |
|
| (4) |
Mr.
Lobo served as our Chief Marketing Officer from February 16, 2021 until August 31, 2021, and as our Chief Commercial Officer from
September 1, 2021 to September 30, 2022. |
Option
and Restricted Stock Holdings and Fiscal Year-End Option and Restricted Stock Values
The
following table shows information concerning unexercised options and unvested restricted stock awards outstanding as of December 31,
2022 for our named executive officers.
Outstanding
Equity Awards at Fiscal Year-End 2022
| | |
| |
Option Awards (2) | | |
Stock Awards | |
| Name | |
Grant Date (1) | |
Number of Securities Underlying Unexercised Options (#) Exercisable (2) | | |
Number of Securities Underlying Unexercised Options (#) Unexercisable (2) | | |
Option Exercise Price ($) | | |
Option Expiration Date | |
Number of Shares of Restricted Stock that Have Not Vested (#) | | |
Market Value of Shares of Restricted Stock that Have Not Vested ($) | |
| Andrew Astor | |
02/13/2017 | |
| 64,399 | | |
| — | | |
| 4.14 | | |
02/13/2027 | |
| — | | |
| — | |
| Andrew Astor | |
05/01/2017 | |
| 46,525 | | |
| — | | |
| 2.64 | | |
05/01/2027 | |
| — | | |
| — | |
| Andrew Astor | |
12/20/2017 | |
| 5,556 | | |
| — | | |
| 4.50 | | |
12/20/2027 | |
| — | | |
| — | |
| Andrew Astor | |
12/19/2018 | |
| 22,223 | | |
| — | | |
| 5.85 | | |
12/19/2028 | |
| — | | |
| — | |
| Andrew Astor | |
12/16/2019 | |
| 15,000 | | |
| 5,000 | | |
| 8.57 | | |
12/16/2029 | |
| — | | |
| — | |
| Andrew Astor | |
08/24/2020 | |
| 85,536 | | |
| 66,528 | | |
| 7.07 | | |
08/24/2030 | |
| — | | |
| — | |
| Andrew Astor | |
12/14/2021 | |
| 9,653 | | |
| 28,959 | | |
| 6.82 | | |
12/14/2031 | |
| — | | |
| — | |
| (1) |
For
better understanding of this table, we have included an additional column showing the grant date of stock options. |
| |
|
| (2) |
Stock
options became or will become exercisable in accordance with the vesting schedule below: |
| Name |
|
Grant
Date |
|
Vesting |
| Andrew
Astor |
|
02/13/2017 |
|
12.5%
of the shares subject to the option vested on February 13, 2018; 37.5% of the shares subject to the option vest in twelve equal quarterly
installments, with the first installment vesting three months following the first anniversary of the grant date; and 20% of the shares
subject to the option vested upon approval of listing of our common stock on the Nasdaq Stock Market. The remaining 30% of the shares
subject to the option vested on February 1, 2020 following our first completed fiscal year in which we exceeded certain revenue targets.
|
| |
|
|
|
|
| Andrew
Astor |
|
05/01/2017 |
|
12.5%
of the shares subject to the option vested on May 1, 2018; 37.5% of the shares subject to the option vest in twelve equal quarterly
installments, with the first installment vesting three months following the first anniversary of the grant date; and 20% of the shares
subject to the option vested upon approval of listing of our common stock on the Nasdaq Stock Market. The remaining 30% of the shares
subject to the option vested on February 1, 2020 following our first completed fiscal year in which we exceeded certain revenue targets. |
| |
|
|
|
|
| Andrew
Astor |
|
12/20/2017 |
|
25%
of the shares subject to the option vested on the first anniversary of the grant date, the remainder of the shares subject to the
option vest therein after on a quarterly basis. |
| |
|
|
|
|
| Andrew
Astor |
|
12/19/2018 |
|
25%
of the shares subject to the option vested on the first anniversary of the grant date, the remainder of the shares subject to the
option will vest therein after on a quarterly basis. |
| |
|
|
|
|
| Andrew
Astor |
|
12/16/2019 |
|
25%
of the shares subject to the option will vest on the first anniversary of the grant date, the remainder of the shares subject to
the option will vest therein after on a quarterly basis. |
| |
|
|
|
|
| Andrew
Astor |
|
08/24/2020 |
|
25%
of the shares subject to the option will vest on the first anniversary of the grant date, the remainder of the shares subject to
the option will vest therein after on a quarterly basis. |
| |
|
|
|
|
| Andrew
Astor |
|
12/14/2021 |
|
25%
of the shares subject to the option will vest on the first anniversary of the grant date, the remainder of the shares subject to
the option will vest therein after on a quarterly basis. |
Employment
and Change in Control Agreements
We
have used employment agreements as a means to attract and retain executive officers. We believe that these agreements provide our executive
officers with the assurance that their employment is a long-term arrangement and provide us with the assurance that the officers’
services will be available to us for the foreseeable future.
Agreements
with Mr. Andrew Astor
On
August 13, 2020, Mr. Astor was appointed President and Chief Executive Officer effective August 24, 2020. Pursuant to the terms of his
current employment agreement, Mr. Astor receives an initial base salary of $325,000 and is eligible for an annual performance bonus targeted
at 30% of his annualized base salary, based primarily on our performance and other performance objectives established by the Board. His
employment agreement also provides that if we terminate Mr. Astor without “cause” or Mr. Astor resigns for “good reason”
(as defined in his agreement), then Mr. Astor will be entitled to twelve months base salary and six months of health benefits.
Agreement
with Mr. Wesley S. Lobo
Mr.
Lobo served as our Chief Marketing Officer from February 16, 2021 to September 30, 2022. The terms of Mr. Lobo’s employment were
governed by the terms of a Letter Agreement dated as of November 30, 2020 (the “Lobo Letter Agreement”), pursuant to which
Mr. Lobo received an initial base salary of $275,000 and was eligible for an annual performance bonus targeted at 30% of his annualized
base salary, based primarily on our performance and other performance objectives established by the Board.
Change
in Control Agreements
Although
we do not currently have change in control agreements in place with any employees, our 2015 Equity Incentive Plan (the “2015 Plan”)
provides that upon a change of control, as such term is defined in the 2015 Plan, unless the agreement granting an award provides otherwise,
the administrator of the 2015 Plan may provide for one or more of the following: (i) the acceleration of the exercisability, vesting,
or lapse of the risks of forfeiture of any or all awards (or portions thereof); (ii) the complete termination of the 2015 Plan and the
cancellation of any or all awards (or portions thereof) that have not been exercised, have not vested, or remain subject to risks of
forfeiture, as applicable in each case as of the effective date of the change of control; (iii) that the entity succeeding us by reason
of such change of control, or the parent of such entity, must assume or continue any or all awards (or portions thereof) outstanding
immediately prior to the change of control or substitute for any or all such awards (or portions thereof) a substantially equivalent
award with respect to the securities of such successor entity, as determined in accordance with applicable laws and regulations; or (iv)
that participants holding outstanding awards will become entitled to receive, with respect to each share of common stock subject to such
award (whether vested or unvested, as determined by the administrator pursuant to the 2015 Plan) as of the effective date of any such
change of control, cash in an amount equal to (1) for participants holding options or stock appreciation rights, the excess of the fair
market value of such common stock on the date immediately preceding the effective date of such change of control over the exercise price
per share of options or stock appreciation rights, or (2) for participants holding awards other than options or stock appreciation rights,
the fair market value of such common stock on the date immediately preceding the effective date of such change of control. The administrator
need not take the same action with respect to all awards (or portions thereof) or with respect to all participants.
Pay
Versus Performance
As
required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are
providing the following information about the past two fiscal years’ total compensation for our named executive officers (NEOs)
as set forth in the Summary Compensation Table, the “Compensation Actually Paid” to our named executive officers (as computed
under SEC rules), our total shareholder return (TSR), and our net income.
SEC
rules require certain adjustments be made to the Summary Compensation Table totals to determine Compensation Actually Paid as reported
in the Pay Versus Performance Table. Compensation Actually Paid does not necessarily represent cash and/or equity value earned by or
paid to the applicable named executive officer without restriction, but rather is a valuation calculated under applicable SEC rules.
In general, Compensation Actually Paid is calculated as summary compensation table total compensation adjusted to show the change in
fair market value of equity awards as of December 31, 2022 or, if earlier, the vesting date (rather than the grant date) and factor in
dividends or other earnings paid on such awards in the applicable year, prior to the vesting date, that are not otherwise reflected in
the fair value of such award or included in total compensation for the year.
| Year | |
Summary Compensation Table Total for Principal Executive Officer (“PEO”)(1) ($) | | |
Compensation Actually Paid to PEO(2) ($) | | |
Average Summary Compensation Table Total for Non-PEO NEOs(3) ($) | | |
Average Compensation Actually Paid to Non-PEO NEOs(4) ($) | | |
Value of Initial Fixed $100 Investment Based on Total Shareholder Return (“TSR”)(5) ($) | | |
Net Income (Loss) ($) | |
| (a) | |
(b) | | |
(c) | | |
(d) | | |
(e) | | |
(f) | | |
(g) | |
| 2022 | |
| 334,750 | | |
| (36,677 | ) | |
| 212,438 | | |
| (507,497 | ) | |
| 19.66 | | |
| (7,382,000 | ) |
| 2021 | |
| 545,724 | | |
| 93,095 | | |
| 1,650,193 | | |
| 1,120,269 | | |
| 68.76 | | |
| (4,107,000 | ) |
| (1) |
The dollar amounts reported in column (b) are the amounts of total compensation reported for Mr. Astor (our President, Chief Executive
Officer and Chief Financial Officer) for each corresponding year in the “Total” column of the Summary Compensation Table.
Refer to “Summary Compensation Table” in this proxy statement. |
| |
| (2) |
The dollar amounts reported in column (c) represent the amount of Compensation Actually Paid to Mr. Astor. In accordance with the requirements
of Item 402(v) of Regulation S-K, the following adjustments were made to Mr. Astor’s Total Compensation from the Summary Compensation
Table, in order to determine Compensation Actually Paid: |
| Year | |
Reported Summary Compensation Table Total for PEO ($) | | |
Less: Grant date fair value of any equity awards granted during the applicable year(a) ($) | | |
Less: Fair value as of the end of the prior fiscal year of any awards granted in any prior fiscal year that fail to meet the applicable vesting conditions during the covered year ($) | | |
Plus: Year-end fair value of outstanding and unvested equity awards granted during the applicable year ($) | | |
Plus: Vesting date fair value of awards that were granted and vested during the applicable year ($) | | |
Plus: year-over-year change in the fair value of equity awards granted in prior years that are outstanding and unvested as of the end of the covered year ($) | | |
Plus: year-over-year change in fair value of equity awards granted in prior years that vested during the covered year(b) ($) | | |
Plus: Value of dividends or other earnings paid on equity awards in the applicable year prior to the vesting date that are not otherwise included in total compensation for the year ($) | | |
Compensation Actually Paid ($) | |
| 2022 | |
| 334,750 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (256,985 | ) | |
| (114,442 | ) | |
| - | | |
| (36,677 | ) |
| 2021 | |
| 545,724 | | |
| (167,099 | ) | |
| - | | |
| 134,499 | | |
| - | | |
| (376,599 | ) | |
| (43,430 | ) | |
| - | | |
| 93,095 | |
| |
(a) |
The grant date fair value of equity awards represents the total of the amounts reported in the “Stock Awards” and “Option
Awards” columns in the Summary Compensation Table for the applicable year. |
| |
|
| |
(b) |
Measured from the end of the prior fiscal year to the vesting date. |
| (3) |
For the 2022 and 2021 fiscal years, our Non-PEO NEO was Wesley Lobo, Chief Marketing Officer. The dollar amounts reported in column
(d) are the amounts of total compensation reported for Mr. Lobo for each corresponding year in the “Total” column of the
Summary Compensation Table. Refer to “Summary Compensation Table” in this proxy statement. |
| |
| (4) |
The dollar amounts reported in column (e) represent the amount of Compensation Actually Paid to Mr. Lobo. In accordance with the requirements
of Item 402(v) of Regulation S-K, the following adjustments were made to Mr. Lobo’s Total Compensation from the Summary Compensation
Table, in order to determine Compensation Actually Paid: |
| Year | |
Average of Reported Summary Compensation Table Total for non-PEO NEOs ($) | | |
Less: Grant date fair value of any equity awards granted during the applicable year(a) ($) | | |
Less: Fair value as of the end of the prior fiscal year of any awards granted in any prior fiscal year that fail to meet the applicable vesting conditions during the covered year ($) | | |
Plus: Year-end fair value of outstanding and unvested equity awards granted during the applicable year ($) | | |
Plus: Vesting date fair value of awards that were granted and vested during the applicable year ($) | | |
Plus: year-over-year change in the fair value of equity awards granted in prior years that are outstanding and unvested as of the end of the covered year ($) | | |
Plus: year-over-year change in fair value of equity awards granted in prior years that vested during the covered year(b) ($) | | |
Plus: Value of dividends or other earnings paid on equity awards in the applicable year prior to the vesting date that are not otherwise included in total compensation for the year ($) | | |
Compensation Actually Paid ($) | |
| 2022 | |
| 212,438 | | |
| - | | |
| (579,693 | ) | |
| - | | |
| - | | |
| - | | |
| (140,242 | ) | |
| - | | |
| (507,497 | ) |
| 2021 | |
| 1,650,193 | | |
| (1,289,903 | ) | |
| - | | |
| 759,979 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,120,269 | |
| |
(a) |
The grant date fair value of equity awards represents the total of the amounts reported in the “Stock Awards” and “Option
Awards” columns in the Summary Compensation Table for the applicable year. |
| |
|
| |
(b) |
Measured from the end of the prior fiscal year to the vesting date. |
| (5) |
Calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and
the difference between the share price of our common stock at the end and the beginning of the measurement period by the share price
of our common stock at the beginning of the measurement period. |
| |
|
| (6) | The
dollar amounts reported represent the amount of net income (loss) reflected in our consolidated
audited financial statements for the applicable year. |
Analysis
of the Information Presented in the Pay Versus Performance Table
Compensation
Actually Paid and Net Income (Loss)
Due
to the nature of our Company’s consolidated financials and primary focus on achieving market acceptance of our products, our company
has not historically utilized net income (loss) as a performance measure for our executive compensation program. From 2021 to 2022, our
net loss increased and the Compensation Actually Paid our PEO and Non-PEO NEOs also decreased between those years.
Compensation
Actually Paid and Company Total Shareholder Return (“TSR”)
The
following graph sets forth the relationship between Compensation Actually Paid to our PEO, the average of Compensation Actually Paid
to our Non-PEO NEOs, and the Company’s TSR over the period covering fiscal years 2021 and 2022. As demonstrated by the graph below,
the amount of Compensation Actually Paid to Mr. Astor, and the average amount of Compensation Actually paid to the company’s other
NEOs as a group (i.e., Mr. Lobo), is aligned with the Company’s TSR for the years presented. The alignment of Compensation
Actually Paid with the Company’s cumulative TSR over the period presented is a result of having a significant portion of executive
compensation tied to equity awards, the fair value of which is inherently driven by the Company’s stock price. During 2022, we
did not award any equity or non-equity incentives to our named executive officers.
All
information provided above under the “Pay Versus Performance” heading will not be deemed to be incorporated by reference
in any filing of our company under the Securities Act of 1933, as amended, whether made before or after the date hereof and irrespective
of any general incorporation language in any such filing.
Equity
Compensation Plan Information
Our
equity compensation plans as of December 31, 2022 consisted of the 2015 Plan and one other terminated equity plan, the Nephros, Inc.
2004 Stock Incentive Plan (the “Prior Plan”). The 2015 Plan and the Prior Plan were approved by our stockholders. All of
our employees and directors were eligible to participate in the Prior Plan and are eligible to participate in the 2015 Plan. The Prior
Plan has expired, and no further equity is granted under the Prior Plan.
The
following table summarizes equity securities authorized for issuance to employees, consultants or members of our Board under our 2015
Plan and the Prior Plan as of December 31, 2022.
| Plan Category | |
(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights | | |
(b) Weighted-average exercise price of outstanding options, warrants and rights | | |
(c) Number of securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (a)) | |
| Equity compensation plans approved by our stockholders | |
| 1,365,365 | | |
$ | 5.25 | | |
| 664,741 | |
| Equity compensation plans not approved by our stockholders | |
| - | | |
| - | | |
| - | |
| Total | |
| 1,365,365 | | |
$ | 5.25 | | |
| 664,741 | |
Retirement
Plans
On
January 1, 2017, we established a Savings Incentive Match Plan for Employees Individual Retirement Account (SIMPLE IRA), which covers
all employees. The SIMPLE IRA Plan provides for voluntary employee contributions up to statutory IRA limitations. We match 100% of employee
contributions to the SIMPLE IRA Plan, up to 3% of each employee’s salary. We contributed and expensed approximately $92,000 to
this plan in 2021.
Director
Compensation
For
fiscal year 2022, our directors received a $20,000 annual retainer, $1,500 per meeting for each quarterly Board meeting attended and
reimbursement for expenses incurred in connection with serving on our Board. The Chairman of our Audit Committee was paid a $10,000 annual
retainer and $1,000 per meeting for meetings of the Audit Committee, with a maximum of eight meetings per year. Members of any Special
Committee formed during fiscal year 2022 are also paid a $10,000 annual retainer and $1,000 per meeting. Director fees for 2022 were
paid in restricted stock in lieu of cash payment on January 5, 2023.
We
grant each non-employee director who first joins our Board, immediately upon such director joining our Board, the number of options equal
to the product of 0.0011 multiplied by the total number of outstanding shares of our common stock on a fully-diluted basis. The exercise
price per share is equal to the fair market value price per share of our common stock on the date of grant. We also grant annually to
each non-employee director the number of options equal to the product of 0.0006 multiplied by the total number of outstanding shares
of common stock of the company on a fully-diluted basis. The exercise price per share is equal to the fair market value price per share
of our common stock on the date of grant. These non-employee director options vest in three equal installments on each of the date of
grant and the first and second anniversaries thereof.
Our
executive officers do not receive additional compensation for service as directors if any of them so serve.
The
following table shows the compensation earned by each of our non-employee directors for the year ended December 31, 2022.
Non-Employee
Director Compensation in Fiscal Year 2022
| Name | |
Fees Earned or Paid in Cash | | |
Restricted Stock Awards (1)(2) | | |
Option Awards(3)(4) | | |
Total | |
| Arthur H. Amron(5) | |
$ | - | | |
$ | 29,546 | | |
$ | - | | |
$ | 29,546 | |
| Thomas Gwydir(6) | |
$ | - | | |
$ | 29,546 | | |
$ | - | | |
$ | 29,546 | |
| Joseph Harris | |
$ | - | | |
$ | 8,990 | | |
$ | 11,148 | | |
$ | 20,138 | |
| Alisa Lask | |
$ | - | | |
$ | 29,546 | | |
$ | - | | |
$ | 29,546 | |
| Oliver Spandow | |
$ | - | | |
$ | 45,455 | | |
$ | - | | |
$ | 45,455 | |
| (1) |
Director
fees for 2022 were paid in restricted stock in lieu of a cash payment. Payments of restricted stock were made on January 5, 2023.
|
| |
|
| (2) |
As
of December 31, 2022, none of our non-employee directors held unvested restricted stock. |
| |
|
| (3) |
The
amount reported is the aggregate grant date fair value of the options granted, computed in accordance with FASB ASC Topic 718. The
assumptions used in determining the grant date fair values of these awards are set forth in Notes 2 and 16 to the consolidated financial
statements included in our Annual Report on Form 10-K for the year ended December 31, 2022. In accordance with the non-employee director
compensation plan, on January 5, 2023, the Company also granted to each current director his or her annual stock option award to
purchase 7,080 shares, which amount represents 0.06% of the Company’s fully-diluted outstanding shares. |
| |
|
| (4) |
As
of December 31, 2022, Mr. Amron had 33,426 shares of common stock issuable upon exercise of vested options and 4,637 shares issuable
upon exercise of unvested options; Mr. Gwydir had 19,833 shares of common stock issuable upon exercise of vested options and 4,708
shares issuable upon exercise of unvested options; Mr. Harris had 4,372 shares of common stock issuable upon exercise of vested options
and 8,743 shares of common stock issuable upon exercise of unvested options; Ms. Lask had 24,460 shares of common stock issuable
upon exercise of vested options and 4,637 shares issuable upon exercise of unvested options; and Mr. Spandow had 29,472 shares of
common stock issuable upon exercise of vested options and 4,637 shares issuable upon exercise of unvested options. |
| |
|
| (5) |
At
the request of Mr. Amron, his options and director fees were directed to Wexford Capital LP. |
| |
|
| (6) |
Mr.
Gwydir resigned as a director effective February 1, 2023. |
Advisory
Vote on Executive Compensation
Our
Board recognizes the fundamental interest our stockholders have in the compensation of our executive officers. Based on an advisory vote
of our stockholders at our 2022 Annual Meeting relating to the frequency of the advisory vote on the compensation of our named executive
officers, our stockholders indicated their approval of the Board’s recommendation to hold a non-binding advisory vote on our executive
compensation once every year.
At
our 2022 Annual Meeting, approximately 96% of the votes cast, on an advisory basis, were voted in favor of the compensation of our named
executive officers as disclosed in the compensation tables and related narrative disclosure in the proxy statement for the 2022 Annual
Meeting. Based on the results of such advisory vote and our review of our compensation policies and decisions, we believe that our existing
compensation policies and decisions are consistent with our compensation philosophy and objectives disclosed in the compensation tables
and related narrative disclosure and adequately align the interests of our named executive officers with our long-term goals.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Other
than as described below, since the beginning of our 2021 fiscal year, there have been no transactions or series of transactions to which
we were a participant or will be a participant in which:
| |
● |
the
amounts involved exceeded the lesser of $120,000 or one percent of the average of our total assets at year-end for our last two completed
fiscal years; and |
| |
|
|
| |
● |
a
director, executive officer, beneficial owner of more than 5% of any class of our voting securities or any member of their immediate
family had or will have a direct or indirect material interest. |
As
of April 11, 2023, the Wexford Entities are our largest stockholder and beneficially own approximately 35% of our outstanding common
stock. The shares beneficially owned by the Wexford Entities may be deemed beneficially owned by (i) Wexford Capital LP, which is the
manager or investment manager of certain Wexford Entities, (ii) Wexford GP LLC, which is the General Partner of Wexford Capital LP, and/or
(iii) Charles E. Davidson and Joseph M. Jacobs, each in his capacity as a managing member of Wexford GP LLC and certain Wexford Entities.
Arthur H. Amron, one of our directors, is a Partner and General Counsel of Wexford Capital LP. During 2022 and 2021, at the request of
Mr. Amron, fees and options in the aggregate amount of approximately $29,546 and $59,526, respectively, earned in respect of services
Mr. Amron rendered to us were directed to Wexford Capital LP.
On
February 1, 2022, Specialty Renal Products, Inc. (“SRP”), the Company’s
majority-owned subsidiary, entered into a First Amendment to Series A Preferred Stock Purchase Agreement (the “Amendment”)
with the holders of SRP’s outstanding shares of Series A Preferred Stock. The Amendment amended the terms of the Series A Preferred
Stock Purchase Agreement, dated September 9, 2018, among SRP and the purchasers identified therein (the “SRP Purchase Agreement”),
pursuant to which SRP had sold to such purchasers an aggregate of 600,000 shares of its Series A Preferred Stock at a price of $5.00
per share resulting in total gross proceeds of $3.0 million. The purpose of the Amendment was to permit SRP to sell up to an additional
100,003 shares of its Series A Preferred Stock at one or more closings to occur by February 28, 2022, and on the same terms and conditions
as otherwise set forth in the SRP Purchase Agreement. Pursuant to the Amendment, on February 4, 2022, SRP conducted a closing in which
it sold 100,003 shares of Series A Preferred Stock, resulting in gross proceeds of $500,015. The Company purchased 62,500 shares of SRP’s
Series A Preferred at such closing and, as a result, maintained its 62.5% stock ownership position in SRP. The other purchasers at the
February 4, 2022 closing included the Company’s Chief Executive Officer, Andrew Astor, who purchased
833 shares, and Lambda Investors LLC (“Lambda”), an affiliate of Wexford Capital, which beneficially owns approximately
35% of the Company’s common stock, which purchased 29,938 shares of SRP Series A Preferred Stock. Such purchases were made on the
same terms as all other purchasers. On March 6 2023, the Board of Directors of SRP approved a plan
to wind down SRP’s operations, liquidate SRP’s remaining assets and dissolve the company, which plan was approved by SRP’s
stockholders on March 9, 2023. Following the satisfaction of all of SRP’s outstanding liabilities, the Company does not expect
that there will be any liquidation proceeds or other assets available for distribution to SRP’s stockholders.
DEADLINE
FOR STOCKHOLDER PROPOSALS FOR 2024 ANNUAL MEETING
Stockholders
having proposals that they desire to present at next year’s annual meeting of our stockholders should, if they desire that such
proposals be included in our proxy statement relating to such meeting, submit such proposals in time to be received by us not later than
December 16, 2023, approximately 120 days prior to the one-year anniversary of the mailing of this Proxy Statement. Proposals should
be mailed to the attention of our Chief Executive Officer at our principal executive offices, 380 Lackawanna Place, South Orange, New
Jersey 07079. In order to avoid controversy, stockholders should submit any proposals by means, including electronic means, which permit
them to prove the date of delivery. Also, to be so included, all such submissions must comply with the requirements of Rule 14a-8 promulgated
under the Securities Exchange Act and we direct your close attention to that rule.
In
addition to satisfying the foregoing, to comply with the universal proxy rules under the Exchange Act, stockholders who intend to solicit
proxies in support of director nominees other than our nominees must provide notice that sets forth the information required by Rule
14a-19 under the Exchange Act no later than April 2, 2024, which is 60 days prior to the anniversary of the 2023 Annual Meeting.
Additionally,
Rule 14a-4 of the Exchange Act governs the use of our discretionary proxy voting authority with respect to a stockholder proposal that
is not addressed in our proxy statement. With respect to our next annual meeting of stockholders, if we are not provided notice of a
stockholder proposal prior to February 29, 2024, then we will be allowed to use our discretionary voting authority when the proposal
is raised at the meeting, without any discussion of the matter in the proxy statement.
OTHER
MATTERS
The
Board of Directors does not know of any other business matters that are to be presented for action at the Annual Meeting. If any other
matters come before the Annual Meeting, the persons named on the enclosed proxy have the discretionary authority to vote all proxies
received with regard to those matters in accordance with their best judgment.
BY ORDER
OF THE BOARD OF DIRECTORS
Dated
April 21, 2023
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