ITEM
10. |
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Board
of Directors
The
Board of Directors (the “Board”) currently consists of seven members, divided into three classes with two directors in Class
I, three directors in Class II and two directors in Class III. Directors serve for three-year terms with one class of directors being
elected by the Company’s stockholders at each annual meeting. The terms of our Class I directors, Messrs. Aggarwal and Sullivan,
will expire at the 2022 annual meeting, and the term of our Class III directors, Messrs. Burnell and Keegan, will expire at the 2023
Annual Meeting. The terms of our Class II directors, Messrs. Chan, Gorman, and Rocca, will expire at the 2024 annual meeting
NAME |
|
CLASS |
|
AGE |
|
PRINCIPAL
OCCUPATION OR EMPLOYMENT |
Vijay
Aggarwal |
|
I |
|
73 |
|
Managing
Partner, The Channel Group |
Thomas
W. Burnell |
|
III |
|
60 |
|
President
and Chief Executive Officer of Interpace Biosciences, Inc. |
Edward
Chan |
|
II |
|
39 |
|
Employee
of 1315 Capital Management, LLC |
Robert
Gorman |
|
II |
|
64 |
|
Managing
Partner of MLC, LLC |
Joseph
Keegan, Ph.D. |
|
III |
|
68 |
|
Independent
Investor |
Fortunato
Ron Rocca |
|
II |
|
60 |
|
President
and Chief Executive Officer of Exagen Inc. |
Stephen
J. Sullivan |
|
I |
|
75 |
|
Founder,
CRO Advisors LLC |
The
biographies and qualifications of the members of the Board are set forth below. No director is related to any of our other directors,
executive officers, or persons nominated or chosen by the Company to become a director or executive officer that would require disclosure
pursuant to Item 401(d) of Regulation S-K. Likewise, there are no family relationships between any director, executive officer, or person
nominated or chosen by the Company to become a director or executive officer that would require disclosure pursuant to Item 401(d) of
Regulation S-K.
Vijay
Aggarwal, Class I Director and Ampersand Designee. Dr. Vijay Aggarwal was designated as a director by Ampersand as holder of Series
B Convertible Preferred Stock, $0.01 par value per share (“Series B Preferred Stock”), and thereby appointed and elected
as a director effective February 1, 2022, replacing Eric B. Lev as designee of Ampersand 2018 Limited Partnership (“Ampersand Fund”).
Dr. Aggarwal will be Chair of the Board’s Regulatory Compliance Committee and a member of the Board’s Nominating and Corporate
Governance Committee. Currently a Managing Partner of The Channel Group, Dr. Aggarwal provides strategic advisory and capital formation
services to companies with operations or investments in the clinical diagnostics, molecular diagnostic, and anatomic pathology sectors.
He is also an active investor in early-stage medical technology companies. Prior to The Channel Group, he served as CEO of Vaxigenix,
a pharmaceutical company developing vaccine treatments for colorectal cancer. From 2004-2009, Dr. Aggarwal was President and CEO of Aureon
Laboratories, Inc., a predictive pathology company offering advanced tissue analysis services to practicing physicians and the pharmaceutical
industry. From 2001 to 2004, he served as President of AAI Development Services, Inc., a global contract research and development services
company serving the pharmaceutical and biotech industries. In 1999, following the acquisition of SmithKline Beecham Clinical Laboratories
by Quest Diagnostics, Dr. Aggarwal led the team that planned the integration of the two companies and served on the Chairman’s
Council. In addition, he served as President of Quest Diagnostic Ventures, where his responsibilities included new technology, new business
models, clinical trials testing, and direct–to-consumer strategies.
Dr.
Aggarwal spent 14 years with SmithKline Beecham Clinical Laboratories, the clinical laboratory operations of SmithKline Beecham plc.
During his tenure with the company, he held many positions, including Director of Business Development, Executive Vice President of Laboratories,
having direct responsibility for all of SBCL’s U.S.-based laboratories, and as Vice President of Managed Care, responsible for
third party reimbursement.
Early
in his career, Dr. Aggarwal spent 8 years at Bio Science Laboratories, finishing his time with the company as Manager of Toxicology and
Special Chemistry. He currently holds Board positions at Accugenomics, Allergenis, Moleculera and Slone Partners. Previous Board positions
include Hycor Biomedical, Targeted Diagnostics and Therapeutics and ViraCor IBT Laboratories. He earned a BA in Chemistry from Case Western
Reserve University and a Ph.D. in Pharmacology/Toxicology from the Medical College of Virginia.
Dr.
Aggarwal brings extensive leadership in clinical diagnostic services as well as institutional and individual investment experience.
Thomas
W. Burnell, Class III Director. Effective December 1, 2020, Mr. Burnell was named President, Chief Executive Officer and a director
of the Company. From October 15, 2019 until November 30, 2020, he served as President and Chief Executive Officer of Cardiovascular Clinic
of Nebraska LLC, a medical treatment facility focused on diagnosis and treatment of cardiac and vascular disorders, and from October
2, 2017 until November 29, 2017 he served as Chief Executive Officer and a director of True Nature Holding, Inc., a public company now
known as Mitesco, Inc. that focuses on development and acquisition of innovative technologies. From July 16, 2016 until March 31, 2017,
Mr. Burnell was the President of Boston Heart Diagnostics Corporation, a diagnostics subsidiary of Eurofins Scientific, Inc. (“Eurofins”).
From January 2014 to December 2016, Mr. Burnell was an Operating Partner of Ampersand Capital Partners, a private equity firm and the
manager of private equity funds that are a major stockholder of the Company, where he represented Ampersand’s investment in a dietary
supplement manufacturer, Elite One Source Nutrisciences, Inc., as its President and Chief Executive Officer. From October 2014 until
May 2016, Mr. Burnell served as Executive Chairman of Accuratus Lab Services, Inc., a provider of laboratory testing services, and from
September 2012 until July 2014 he was President and Chief Executive Officer of Viracor-IBT Laboratories, Inc., a specialty testing laboratory
with an emphasis on the transplant market, during which time it was majority-owned by Ampersand prior to its sale to Eurofins. Mr. Burnell
performed the above-described services, except for his services to us, as the Co-Owner, General Partner, and Chief Executive Officer
of Milestone Business Management, a consulting firm focused on strategic, financial, and organizational performance of food, pharmaceutical,
and life science companies.
In
addition, from September 2005 until August 2010, Mr. Burnell served as President and Chief Executive Officer of Nebraska Heart Institute
Heart Hospital, a hospital which was acquired during his tenure by Catholic Health Initiatives. From February 2001 until August 2005,
he was President and Chief Executive Officer of Eurofins, a U.S. wholly owned subsidiary of Eurofins Scientific Group, a publicly held
company (“Eurofins Group”). From September 2000 until June 2002, he was President and Chief Executive Officer of GenomicFX,
Inc., a leader in livestock and aquaculture genomics. From June 1989 until July 2000, Mr. Burnell held various senior management positions
at ContiGroup Companies, Inc., a global agriculture, food and nutrition company. Mr. Burnell holds a PhD in Nutrition from the University
of Kentucky and a BS and MS in animal sciences and nutrition, respectively, from the University of Nebraska-Lincoln.
Mr.
Burnell has extensive leadership experience in the healthcare, biotechnology, laboratory sciences and manufacturing sectors.
Edward
Chan, Class II Director and 1315 Capital Designee. Edward Chan was designated as a director by 1315 Capital II, L.P. (“1315
Capital Fund”) as a holder of the Company’s Series B Preferred Stock and thereby appointed and elected to the Board effective
January 15, 2020 and was subsequently named to the Board’s Compensation & Management Development Committee (the “Compensation
Committee”), Nominating and Corporate Governance Committee (the “Nominating Committee”), and Compliance and Regulatory
Committee (the “Regulatory Compliance Committee”), which was formerly part of the Company’s Audit Committee and was
formed in January 2020. Since October 2016, Mr. Chan has served as an employee of 1315 Capital Management, LLC, a Philadelphia-based
firm that provides expansion and growth capital to healthcare companies and is affiliated with 1315 Capital. Mr. Chan has over 14 years
of experience in healthcare investing. From 2012 to 2016, Mr. Chan was a vice president at NaviMed Capital Advisors, LLC, a lower middle-market
healthcare investment firm and an associate at Siemens Venture Capital, the investment arm of Siemens. Mr. Chan started his career developing
and commercializing a molecular diagnostic product at a venture backed company and has been involved in several diagnostics and biopharma
services investments including China Diagnostics Medical Corporation (acquired by Actis Capital), BioImagene, Inc. (acquired by Roche
Holding AG), RadPharm, Inc. (acquired by JLL Partners), Cylex, Inc. (acquired by Viracor-IBT Laboratories, Inc.), Sequenom, Inc. (acquired
by Laboratory Corporation of America Holdings) and Genoptix, Inc. (acquired by NeoGenomics, Inc.). He currently serves on the board of
the private company Homestead Smart Health Plans LLC. Mr. Chan received a BSc in Biomedical Engineering from Johns Hopkins University
and an M.B.A. from the Wharton School at the University of Pennsylvania.
Mr.
Chan’s designation as director brings to the Board experience in expanding healthcare companies and biomedical engineering and
business backgrounds.
Robert
Gorman, Class II Director and Ampersand Designee. Robert Gorman was initially designated as director on October 17, 2019 by Ampersand
as holder of the Company’s Series A Convertible Preferred Stock, which is no longer outstanding, and thereby appointed and elected
to the Board and was re-designated as director by Ampersand as holder of Series B Preferred Stock and thereby re-appointed and re-elected
to the Board effective January 15, 2020. On January 22, 2020, the Company named Mr. Gorman to the Compensation Committee and the Regulatory
Compliance Committees. On April 16, 2020, Mr. Gorman resigned as a member of the Compensation Committee and was appointed as Chairman
of the Board. Mr. Gorman’s experience includes over 30 years in healthcare leadership positions. The majority of his career has
been in the laboratory services industry with both public and private companies. After leaving public accounting, he served as Operations
Controller for Home Medical Systems, Inc., a company focused on the roll-up of the durable medical equipment business in the United States
and sold to Beverly Enterprises. He joined Central Diagnostic Laboratory, the largest independent laboratory at the time, as East Coast
Controller, which was acquired by Corning Clinical Laboratory (now known as Quest Diagnostics Incorporated). He spent over 20 years at
Quest Diagnostics Incorporated. While at Quest Diagnostics Incorporated, he held various leadership roles including responsibility for
the New York and New England laboratories and the East Region, and he ultimately became the Vice President of U.S. operations. After
retiring from Quest Diagnostics Incorporated, Mr. Gorman along with WaterStreet Healthcare Partners acquired Converge Diagnostic Services
LLC in 2009, where he served as Chief Executive Officer. He helped transform Converge Diagnostic Services LLC into a full-service regional
laboratory services company servicing the New England market. After approximately four and a half years, Converge Diagnostics Services
LLC was acquired by Quest Diagnostics Incorporated. Mr. Gorman served as Senior Vice President of U.S. Clinical Diagnostics for Eurofins
Scientific Group, an international laboratory company (OTC: ERFSF) (“Eurofins”), with responsibility for clinical diagnostic
businesses in the U.S from January 2017 to July 2018. Since July 2018, Mr. Gorman serves as a consultant for MLC, LLC, for which he is
also the managing partner. Mr. Gorman has served on several for profit and not for profit boards, including for Eurofins’s
subsidiary Boston Heart Diagnostics Corporation from January 2017 to July 2018. Mr. Gorman earned his B.S. in Accounting from Villanova
University.
Mr.
Gorman brings leadership in the laboratory services industry in public and private companies, including clinical diagnostic businesses,
to the Board.
Joseph
Keegan, Class III Director. Joseph Keegan, Ph.D. was appointed to the Board effective January 1, 2016 and was subsequently appointed
Chairman of our Audit Committee and our Nominating Committee. Dr. Keegan has more than 30 years of experience in life science businesses.
From 2007 to 2012, when it was sold to Pall Corporation, Dr. Keegan was chief executive officer at ForteBio, Inc., a life science tool
company, where he helped to lead a financing round and established product development and sales strategies for that company. From 1998
to 2007, Dr. Keegan was chief executive officer at Molecular Devices Corporation (NASDAQ: MDCC), a provider of bioanalytical measurement
systems, software and consumables, where Dr. Keegan helped grow the company both internally and through acquisitions. From 1992 to 1998,
Dr. Keegan worked at Becton Dickinson and Company, a medical technology company that manufactures and sells medical devices and instrument
systems, where he served as President of Worldwide Tissue Culture and Vice President, General Manager of Worldwide Flow Cytometry. From
1988 to 1992, Dr. Keegan was Vice President of the Microscopy and Scientific Instruments Division of Leica, Inc., a life science tool
and semiconductor equipment provider. He currently serves on the boards of directors as the chairman of the board for the following privately
held companies: Halo Labs (formerly known as Optofluidics, Inc.), Carterra (formerly known as Wasatch Microfluidics, Inc.), and Fluidic
Analytics and currently serves on the board of directors of Nuclera Nucleics. In April 2017, he joined the board of ArrayJet Ltd., a
privately held Scottish company and is currently chairman of the board. Dr. Keegan is a member of the board of directors of Bio-Techne
Corporation (NASDAQ: TECH), a publicly held biotech company. Dr. Keegan holds a B.A. in Chemistry from Boston University and a Ph.D.
in Physical Chemistry from Stanford University.
Dr.
Keegan’s specific qualifications and skills in the areas of life science businesses, product development and sales strategies led
the Board to conclude that Dr. Keegan should serve as a director.
Fortunato
Ron Rocca, Class II Director and 1315 Capital Designee. Ron Rocca was elected to the Board as a Class II director on January 22,
2020 following his designation by 1315 Capital as a holder of Series B Preferred Stock. Mr. Rocca was concurrently appointed to the Audit
and Compensation Committees. Since December 2011, Mr. Rocca
has served as President, Chief Executive Officer and Director of Exagen Inc. (NASDAQ: XGN), a company dedicated to transforming
the care continuum for patients suffering from debilitating and chronic autoimmune diseases. From
2005 to October 2011, Mr. Rocca served as Vice President, Sales and Marketing, and as General Manager at Prometheus, a specialty pharmaceutical
and diagnostic company which was acquired by Nestlé SA in 2011, where he was responsible for leading the commercial organization,
strategic planning and implementation of projects designed to maximize brand sales. Prior to joining Prometheus, Mr. Rocca served as
the General Manager of Alpharma Inc., a specialty pharmaceutical company. Earlier in his career, Mr. Rocca served in senior sales and
marketing management positions for Elan Pharmaceuticals, Inc., a neuroscience-focused biotechnology company and Janssen Pharmaceuticals,
Inc., a pharmaceutical subsidiary of Johnson & Johnson. Mr. Rocca received a B.S. in Marketing and Personnel Management from Towson
State University. Mr. Rocca’s extensive knowledge of our business, as well as his over 25 years of experience in the diagnostic
and pharmaceutical industries, contributed to our board of directors’ conclusion that he should serve as a director of our Company.
Mr.
Rocca brings to the Board extensive experience as an officer at public companies developing healthcare tests.
Stephen
J. Sullivan, Class I Director. Stephen J. Sullivan is currently a director and served as Chairman of the Board from June 21, 2016
until April 16, 2020. Mr. Sullivan served as Interim Chairman of the Board from January 1, 2016 to June 20, 2016. Mr. Sullivan joined
Interpace as a director in September 2004 and has served as Chairman of various committees of the Board. Mr. Sullivan currently serves
as Chairman of the Compensation Committee and a member of the Audit and Nominating Committees. In early 2010, Mr. Sullivan founded CRO
Advisors LLC, a specialty consulting firm he continues to head. Previously, Mr. Sullivan was the president and chief executive officer
and a member of the board of directors of Harlan Laboratories, Inc. (“Harlan”) (acquired by Huntingdon Life Sciences Inc.),
a privately held global provider of preclinical research tools and services, from February 2006 through January 2010, when he retired
from that position. Prior to joining Harlan in 2006, Mr. Sullivan was a senior vice president of Covance, Inc. (“Covance”)
and the president of Covance Central Laboratories, Inc., a major division of Covance. Prior to joining Covance, Mr. Sullivan was chairman
and chief executive officer of Xenometrix, Inc. (“Xenometrix”), a biotechnology company with proprietary gene expression
technology. He assisted with the merger of Xenometrix with Discovery Partners International. Prior to Xenometrix, Mr. Sullivan was vice
president and general manager of a global diagnostic sector of Abbott Laboratories.
Mr.
Sullivan has extensive experience as a director. In 2019, Mr. Sullivan became a director of The Emmes Company, LLC, a clinical research
collaborator within the contract research organization industry. Since April 2018, Mr. Sullivan has been a member of the board of Transnetyx,
Inc., a privately held genotyping company. Since May 2015, Mr. Sullivan has been chairman of the board of Analytical Lab Group (formerly
known as Microbiology Research Associates), a privately held microbiology services company. From April 2011 through March 2019, Mr. Sullivan
was chairman of the board of MI Bioresearch, Inc. (formerly known as Molecular Imaging, Inc.), a privately held venture-backed drug discovery
services company. In January 2016, Mr. Sullivan became chairman of the board of H2O Clinical (acquired by Pharma Start LLC). In July
2016, Mr. Sullivan became chairman of the board of PharmaStart, LLC. As of June 2017, both H20 Clinical and PharmaStart are doing business
as Firma Clinical Research, a privately held specialty contract research organization. As of July 2018, Firma Clinical Research has been
sold and Mr. Sullivan is no longer a member of its board. From November 2015 until August 2017, Mr. Sullivan was a member of the board
of Accel Clinical Research, a phase 1 contract research organization. From June 2013 through January 2016, when the company was sold,
Mr. Sullivan was the chairman of the board of BioreclamationIVT, LLC, a privately-owned bio-materials company. From May 2013 through
March 2015, when the company was sold, Mr. Sullivan was a member of the board of directors of PHT Corporation (acquired by eResearchTechnology,
Inc.), a privately-owned leader in electronic patient recorded outcomes in clinical trials.
Mr.
Sullivan graduated from the University of Dayton, was a commissioned officer in the Marine Corps, and completed his M.B.A. in Marketing
and Finance at Rutgers University. Mr. Sullivan is currently an adjunct Professor of Management at Georgetown University.
Mr.
Sullivan has held senior leadership positions in companies in the life sciences and healthcare services industries. His specific qualifications
and skills in the areas of general operations, financial operations and administration, and mergers and acquisitions led the Board to
conclude that Mr. Sullivan should serve as a director of the Company.
Director
Compensation
The
Compensation Committee is responsible for reviewing and making recommendations to the Board regarding all matters pertaining to compensation
paid to directors for Board and committee chair services. Directors who also serve as employees of the Company do not receive payment
for services as directors. The current compensation program for non-employee directors has been in effect since April 29, 2020 when
it was approved by Board resolution, and is described further below.
Cash
Compensation Policy
In
2021, each of our non-employee directors received an annual director’s fee of $40,000, payable quarterly in arrears. Additionally,
any non-employee director (except Mr. Gorman as Chairman) serving as Chairperson of a Board Committee received an annual fee of $10,000
(regardless of the number of Committees chaired.) Messrs. Chan and Lev both voluntarily agreed to waive all non-employee director compensation
in 2021. For his roles as a director and Chairman of the Board, Mr. Gorman received a total annual fee of $170,000.
From
time to time, the Board may form special committees to address discrete issues and the non-employee directors sitting on such special
committees may receive additional compensation. In addition, our non-employee directors are entitled to reimbursement for travel and
related expenses incurred in connection with attendance at Board and committee meetings.
Equity
Compensation Policy
Commencing
in 2020, each new appointee to the Board receives a grant of 28,000 stock options which vest in equal annual installments over a three-year
period. Director equity compensation is reviewed on a regular basis with the assistance of Radford from time to time.
Director
Compensation in 2021
The
following table presents information relating to total compensation for our non-employee directors for the year ended December 31, 2021.
Mr. Burnell, our Chief Executive Officer, does not receive compensation for his services on the Board. Information regarding the compensation
of Mr. Burnell can be found below, under the heading “Information About Our Executive Compensation”.
DIRECTOR COMPENSATION IN 2021 | |
Name | |
Fees earned or paid in cash ($) | | |
Stock awards
($) (1) (2) | | |
Option
awards ($) (1) | | |
Total ($) | |
Vijay Aggarwal (3) | |
| - | | |
| - | | |
| - | | |
| - | |
Edward Chan (4) | |
| - | | |
| - | | |
| - | | |
| - | |
Robert Gorman (5) | |
| 170,000 | | |
| 50,001 | | |
| - | | |
| 220,001 | |
Joseph Keegan | |
| 50,000 | | |
| - | | |
| - | | |
| 50,000 | |
Eric Lev (4) | |
| - | | |
| - | | |
| - | | |
| - | |
Fortunato Ron Rocca | |
| 40,000 | | |
| - | | |
| - | | |
| 40,000 | |
Stephen J. Sullivan | |
| 50,000 | | |
| - | | |
| - | | |
| 50,000 | |
|
(1) |
Outstanding
option awards held by the non-employee directors as of December 31, 2021 consist of the following outstanding stock option amounts:
Mr. Gorman -168,000; Dr. Keegan – 32,920; Mr. Rocca – 28,000; Mr. Sullivan – 33,820. |
|
(2) |
The
dollar amounts set forth under the headings “Stock Awards” and “Option Awards” represent aggregate grant
date fair value computed in accordance with FASB ASC Topic 718. For purposes of computing such amounts, we disregarded estimates
of forfeitures related to service-based vesting conditions. For additional information regarding our valuation assumptions, please
refer to Note 15 – “Stock-Based Compensation” to our consolidated financial statements included in our Original
Filing. |
|
(3) |
Dr.
Aggarwal received 28,000 stock options upon his appointment to the Board on February 1, 2022. |
|
(4) |
Messrs.
Chan and Lev both voluntarily agreed to waive all non-employee director compensation in 2021. |
|
(5) |
Mr.
Gorman was awarded 12,438 restricted shares of common stock in January of 2021, which had a six-month vesting period. |
Executive
Officers
The
following table sets forth the names, ages and principal position of our executive officers as of the date of this Amendment:
Name |
|
Age |
|
Position |
Thomas
W. Burnell |
|
60 |
|
President,
Chief Executive Officer and Director |
Thomas
Freeburg |
|
54 |
|
Chief
Financial Officer |
The
principal occupation and business experience for at least the last five years for each executive officer is set forth below (except for
Mr. Burnell, whose business experience is discussed in this Amendment under the heading “Board of Directors” in this Item
10).
On
February 1, 2021, Thomas Freeburg was appointed as the Chief Financial Officer, Treasurer, and Secretary of the Company. Mr. Freeburg
serves as the Company’s principal financial officer and principal accounting officer. From October 2017 to January 2021, Mr. Freeburg
served as Chief Accounting Officer of the Company.
Prior
to serving as the Company’s Chief Accounting Officer, Mr. Freeburg was the Managing Member of Cambridge Financial Consultants LLC
from 2014 to September 2017. From 2009 to 2014, Mr. Freeburg served as the Director of SEC Reporting and Accounting Policies for Coach,
Inc., which was the predecessor company to Tapestry, Inc. (NYSE: TPR). From 2006 to 2008, Mr. Freeburg served as the Director of External
Reporting of Scholastic Corporation (NASDAQ: SCHL). From 2004 to 2006, Mr. Freeburg was the Manager of Financial Analysis for DRS Technologies,
Inc., which is now known as Leonardo DRS following an acquisition by Finmeccanica S.p.A. From 2000 to 2003, Mr. Freeburg served as Vice
President, Corporate Controller for Xanboo, Inc. and from 1995 to 2000 as an auditor with BDO USA, LLP.
Except
as described herein, Mr. Freeburg has served in no other Company positions and there is no arrangement or understanding between Mr. Freeburg
and any other person pursuant to which he was selected to serve as Chief Financial Officer, Treasurer, and Secretary. Mr. Freeburg has
no family relationship with any director or executive officer or person nominated or chosen by the Company to become a director or executive
officer of the Company that would require disclosure pursuant to Item 401(d) of Regulation S-K . There are no related party transactions
as of the date hereof between Mr. Freeburg and the Company that would require disclosure under Item 404(a) of Regulation S-K.
There
are no arrangements or understandings between Mr. Burnell and any other persons pursuant to which he was selected as an officer. In addition,
there is no family relationship between Mr. Burnell and any director, executive officer or person nominated or chosen by the Company
to become a director or executive officer that would require disclosure pursuant to Item 401(d) of Regulation S-K. There is no related
party transaction as of the date hereof between Mr. Burnell and the Company that would require disclosure under Item 404(a) of Regulation
S-K.
Governance
of the Company
Corporate
Governance and Code of Business Conduct
Our
Board has adopted a written Code of Business Conduct that applies to our directors, officers, and employees, as well as Corporate Governance
Guidelines applicable specifically to our Board. You can find links to these documents in the “Investor Relations-Corporate Governance”
section of our website page at www.interpace.com. The content contained in, or that can be accessed through, our website is not incorporated
into this Amendment. Disclosure regarding any amendments to, or any waivers from, a provision of our Code of Business Conduct that applies
to one or more of our directors, our principal executive officer, our principal financial or our principal accounting officer will be
included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver, or posted on our website
(www.interpace.com). Our common stock is quoted on the OTCQX, which is operated by OTC Markets Group, Inc. (“OTC Markets”).
Audit
Committee
The
Audit Committee is currently comprised of Dr. Keegan (Chairperson), Mr. Sullivan and Mr. Rocca. The primary purposes of our Audit Committee
are to assist the Board in fulfilling its legal and fiduciary obligations with respect to matters involving the accounting, auditing,
financial reporting, internal control, legal compliance and risk management functions of the Company, including, without limitation,
assisting the Board’s oversight of: (i) the integrity of our financial statements; (ii) the effectiveness of our internal control
over financial reporting; (iii) our compliance with legal and regulatory requirements; (iv) the qualifications and independence of our
independent registered public accounting firm; (v) the selection, retention and termination of our independent registered public accounting
firm; and (vi) the performance of our internal audit function and independent registered public accounting firm. The Audit Committee
is also responsible for preparing the report of the Audit Committee required by the rules and regulations of the SEC for inclusion in
our annual proxy statement.
Our
Board has determined that each member of our Audit Committee is independent within the meaning of the rules of OTC Markets and as required
by the Audit Committee charter. Our Board has determined that the chairperson of the Audit Committee, Dr. Keegan, is an “audit
committee financial expert,” as that term is defined in Item 407(d) of Regulation S-K under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”).
Our
Audit Committee charter is posted and can be viewed in the “Investor Relations-Corporate Governance” section of our website
at www.interpace.com.
Involvement
in Certain Legal Proceedings
To
the best of our knowledge, none of our directors or executive officers has been involved in any material legal proceeding during the
past ten years.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than ten percent (10%) of our common
stock, to file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater than ten percent
(10%) stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.
To
the best of our knowledge, based solely on our review of the copies of such forms furnished to us, or written representations that no
other forms were required, we believe that all Section 16(a) filing requirements applicable to our executive officers, directors and
greater than ten percent (10%) stockholders were complied with during the fiscal year ended December 31, 2021.
ITEM 11. |
EXECUTIVE COMPENSATION |
Summary
Compensation Table
The
following table sets forth certain information concerning compensation for 2021 and 2020 earned by our Chief Executive Officer and our
current and former Chief Financial Officers during 2021.
SUMMARY
COMPENSATION TABLE FOR 2021 AND 2020 |
Name
and Principal Position | |
Year | | |
Salary
($) | | |
Bonus
($)(1) | | |
Stock
Awards ($)(2) | | |
Option
Awards ($)(2) | | |
Non-Equity
Incentive Compensation | | |
All
Other Compen-sation (3) | | |
Total | |
Thomas
W. Burnell | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
CEO | |
| 2021 | | |
$ | 425,000 | | |
$ | 160,000 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 3,352 | | |
$ | 588,352 | |
| |
| 2020 | | |
| 35,417 | | |
| - | | |
| 510,000 | | |
| - | | |
| - | | |
| - | | |
| 545,417 | |
Thomas
Freeburg | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
CFO | |
| 2021 | | |
| 231,254 | | |
| 60,000 | | |
| 250,000 | | |
| 229,000 | | |
| - | | |
| 502 | | |
| 770,756 | |
| |
| 2020 | | |
| 167,178 | | |
| 12,000 | | |
| - | | |
| - | | |
| - | | |
| 325 | | |
| 179,503 | |
Fred
Knechtel | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
CFO | |
| 2021 | | |
| 25,833 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 173,737 | | |
| 199,570 | |
| |
| 2020 | | |
| 274,181 | | |
| - | | |
| - | | |
| 705,864 | | |
| - | | |
| 10,888 | | |
| 990,933 | |
|
(1) |
The
amount set forth in this column represents an annual cash incentive bonus. |
|
|
|
|
(2) |
The
dollar amounts set forth under the headings “Stock Awards” and “Option Awards” represent aggregate grant
date fair value computed in accordance with FASB ASC Topic 718. For purposes of computing such amounts, we disregarded estimates
of forfeitures related to service-based vesting conditions. For additional information regarding our valuation assumptions, please
refer to Note 15 – “Stock-Based Compensation” to our consolidated financial statements included in our Original
Filing. |
|
|
|
|
(3) |
For
the named executive officers, this column includes the following amounts in 2021: |
| |
401(k) Company Match ($) | | |
Term Life/Disability Insurance Payment ($) | | |
Other ($) (1) | | |
Totals ($) | |
Thomas Burnell | |
$ | 1,417 | | |
$ | 1,935 | | |
$ | - | | |
$ | 3,352 | |
Thomas Freeburg (2) | |
| - | | |
| 502 | | |
| - | | |
| 502 | |
Fred Knechtel (2) | |
| 1,033 | | |
| 172 | | |
| 172,532 | | |
| 173,737 | |
|
(1) |
The
amounts set forth in this column for Mr. Knechtel represent severance of $155,000 and continuation of health benefits of $17,532. |
|
(2) |
Mr.
Knechtel no longer served as Chief Financial Officer effective January 31, 2021. Mr. Freeburg was appointed Chief Financial Officer
on February 1, 2021. |
Narrative
Disclosure to Summary Compensation Table
The
following narrative discusses the base salary, annual cash incentives, long-term equity incentives, and perquisites of the Company with
respect to Messrs. Burnell, Freeburg and Knechtel during 2021.
Base
Salary
Initially,
base salaries are generally set according to the executive officer’s agreement with the Company and adjusted based on the individual’s
current and historical performance. The base salary levels and any changes to those levels for each executive are reviewed each year
by the Compensation Committee and adjustments may be based on factors such as new roles and/or responsibilities assumed by the executive
and the executive’s impact on our strategic goals and financial performance. While our executives’ base salaries are generally
targeted to be consistent with median base salaries for similar positions based on competitive market data, there is no specific weighting
applied to any one factor in setting the level of salary, and the process ultimately relies on the evaluation of various factors considered
by the Compensation Committee with respect to each named executive officer (and the full Board, in the case of the Chief Executive Officer).
The Compensation Committee also takes into account additional factors such as historical compensation, the financial condition of the
Company in general, the individual’s potential to be a key contributor, as well as special recruiting and retention situations.
Tom
Burnell. Upon appointment as Chief Executive Officer on December 1, 2020, Mr. Burnell’s annual base salary was set at $425,000.
There was no increase to Mr. Burnell’s salary in 2021.
Thomas
Freeburg. Upon appointment as Chief Financial Officer on February 1, 2021, Mr. Freeburg’s annual base salary was set at $225,000.
Pursuant to the terms of his employment agreement, his base salary was increased to $250,000 on August 1, 2021.
Fred
Knechtel. Mr. Knechtel’s annual base salary in 2021 was $310,000. Mr. Knechtel no longer served as Chief Financial Officer
effective January 31, 2021.
Annual
Cash Incentives
The
annual cash incentive program provides our executive officers with an opportunity to receive a cash award at the discretion of the Compensation
Committee (and the full Board, in the case of the Chief Executive Officer). Annual cash incentive targets and performance metrics are
usually determined by the Compensation Committee during the first quarter of each fiscal year, based on competitive market data generally
available to the Compensation Committee as well as consideration based upon the financial condition of the Company, including revenue
and adjusted EBITDA.
Sign-on
bonuses may be granted from time to time at the discretion of our Compensation Committee in connection with new hires at the executive
officer level. There were no cash sign-on bonuses for any named executive officer in 2021.
Long-Term
Equity Incentives
Our
executives are also eligible to participate in a long-term equity incentive program, which is currently administered under the 2019 Equity
Incentive Plan. The long-term equity incentive component of our compensation program is used to promote alignment with stockholders and
to balance the short-term focus of the annual cash incentive component by linking a substantial part of compensation to our long-term
stockholder returns. The Compensation Committee believes that long-term stock-based compensation enhances our ability to attract and
retain high quality talent, provides motivation to improve our long-term financial performance, and increase stockholder value.
In
March 2021, Mr. Freeburg was awarded 50,000 RSUs and 50,000 stock options, vesting one-third each year over a three-year period, subject
generally to continued service, with accelerated vesting on a change in control during continued service.
Perquisites
As
a matter of practice, we provide only limited perquisites to our executive officers that are not generally provided to all employees.
Executives are eligible for the standard benefits and programs generally available to all of our employees. The value of special perquisites,
as well as additional benefits that are available generally to all of our employees, that were provided to each named executive officer
in 2021 are set forth in footnote 3 to the Summary Compensation Table.
Qualified
Plan
The
Company maintains a tax-qualified savings plan under Section 401(k) of the Code. Employees who participate in the plan may make elective
deferrals to the plan, subject to the limitations imposed by the Code. In addition, the Company currently offers a safe harbor matching
contribution equal to 100% of the first 3% of an employee’s contributed base salary plus 50% of the employee’s base salary
contributed exceeding 3% but not more than 5%.
Employment
Agreements and Severance Arrangements
Tom
Burnell
On
December 1, 2020, the Company appointed Mr. Burnell as Chief Executive Officer and President and entered into an employment agreement
with Mr. Burnell (the “Burnell Employment Agreement”). Under the Burnell Employment Agreement, Mr. Burnell is to receive
an annual base salary of $425,000, a target annual bonus opportunity of up to 50% of such base salary, and certain other benefits such
as housing and participation in the benefit plans and programs maintained by the Company.
In
the event that Mr. Burnell’s employment is terminated by the Company without Cause or by Mr. Burnell for Good Reason (in each case,
as defined in the Burnell Employment Agreement), then subject to, among other things, Mr. Burnell’s execution and non-revocation
of a release agreement in favor of the Company, Mr. Burnell would be entitled to: (i) salary continuation payments for a period of (a)
six (6) months, if such termination of employment occurs on or after the first anniversary of employment but prior to the second anniversary
of employment, or (b) twelve (12) months, if such termination of employment occurs on or after the second anniversary of employment;
provided, however, that there will be no salary continuation payments in the event such termination of employment occurs prior to the
first anniversary of employment; (ii) all outstanding equity awards, including the Initial RSU grants, that were scheduled to vest during
the 24-month period following the termination date, but for the termination, would become fully vested and exercisable (including any
such awards that vest in whole or in part based on the attainment of performance-vesting conditions that would be deemed achieved at
the target level of the applicable award agreement); and, (iii) continuation of health and welfare benefits for the applicable salary
continuation period.
Thomas
Freeburg
On
February 1, 2021, the Company appointed Mr. Freeburg as Chief Financial Officer, Treasurer, and Secretary of the Company, effective as
of February 1, 2021 and entered into an employment agreement with Mr. Freeburg (the “Freeburg Employment Agreement”).
Under the Freeburg Employment Agreement, Mr. Freeburg is to receive an annual base salary of $225,000 and a target annual bonus opportunity
of up to 40% of such base salary. Effective as of the date six (6) months after the Effective Date, the Base Salary shall increase to
$250,000. On March 10, 2021 Mr. Freeburg, was awarded 50,000 RSUs and 50,000 stock options which shall vest in equal installments on
each of the first three anniversaries of the grant date, subject to Mr. Freeburg’s continued employment with the Company through
the applicable vesting date, with accelerated vesting upon a Change in Control, as defined in the applicable equity incentive plan, subject
to Mr. Freeburg’s continuous employment through such Change in Control.
In
the event that Mr. Freeburg’s employment is terminated by the Company without Cause or by Mr. Freeburg for Good Reason (in each
case, as defined in the Freeburg Employment Agreement), then subject to, among other things, Mr. Freeburg’s execution and non-revocation
of a release agreement in favor of the Company, Mr. Freeburg would be entitled to: (i) salary continuation payments for a period of (a)
six (6) months, (ii) all outstanding equity awards that were scheduled to vest during the 24-month period following the termination date,
but for the termination, would become fully vested and exercisable, and, (iii) continuation of health and welfare benefits for the applicable
salary continuation period.
Fred
Knechtel
The
Company entered into an employment agreement with Mr. Knechtel as Chief Financial Officer, Treasurer, and Secretary, effective as of
January 29, 2020 (the “Knechtel Employment Agreement”).
On
January 31, 2021, Mr. Knechtel’s employment with the Company ceased, and in connection with his resignation, the Company entered
into a severance and general release, agreement with Mr. Knechtel (the “Knechtel Severance Agreement”). Pursuant to
the Knechtel Severance Agreement, in consideration of the general release of claims contained in, and contingent on continued compliance
with restrictive covenants, the Company agreed to provide Mr. Knechtel with the following payments and benefits: (i) a cash amount equal
to $155,000, which represents severance equal to six months’ base salary payable in semi-monthly installments in accordance with
the Company’s payroll practices over a six-month period and the value of certain unused paid time off days and (ii) payment for
the cost of COBRA premiums for a six-month period.
Confidential
Information, Non-Disclosure, Non-Solicitation, Non-Compete and Rights to Intellectual Property Agreement (“Restrictive Covenants
Agreement”)
Each
of Messrs. Freeburg, Knechtel, and Burnell also entered into a Restrictive Covenants Agreement with the Company that includes customary
provisions regarding confidentiality and non-disclosure, customary non-competition and non-solicitation provisions that extend for up
to one (1) year following termination of employment, and a customary invention assignment regarding ownership of intellectual property.
The payment of any severance benefits under each executive’s employment agreement and/or severance agreement is conditioned on
continued compliance with his Restrictive Covenants Agreement.
Treatment
of Outstanding Equity on a Change in Control
Pursuant
to the terms of our 2004 Stock Award and Incentive Plan, awards outstanding under that plan will generally become fully vested and exercisable
upon a change in control of the Company. There is no similar automatic vesting provision upon a change in control for awards granted
under the Interpace Biosciences, Inc. 2019 Equity Incentive Plan. However, Mr. Freeburg is entitled under his employment agreement to
accelerated vesting of his outstanding equity awards upon a change in control, subject to continued employment. During his tenure at
the Company, Mr. Knechtel had a similar entitlement.
Compensation
Features Intended to Prevent Excessive Risk Taking
The
Compensation Committee reviews our compensation policies and practices for all employees, including executive officers, and believes
that such policies and practices do not create risks that are reasonably likely to have a material adverse effect on us. In particular,
the Compensation Committee believes that the following factors help mitigate against any such risks: (i) annual cash incentive compensation
and long-term equity incentive compensation are based on a mix of our overall performance, business unit performance and individual performance;
(ii) the annual cash incentive compensation plan has no minimum funding levels, such that employees will not receive any rewards if satisfactory
financial performance is not achieved by us; and (iii) base salaries are consistent with employees’ responsibilities and general
market practices so that they are not motivated to take excessive risks to achieve a reasonable level of financial security.
Outstanding
Equity Awards as of December 31, 2021
The
following table provides information concerning the number and value of unexercised stock options and RSUs for the named executive officers
outstanding as of the year ended December 31, 2021:
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2021 | |
| |
Option Awards | |
Stock Awards | |
Name | |
Number of Securities Underlying Unexercised Options (#) Exercisable | | |
Number of Securities Underlying Unexercised Options (#) Unexercisable | | |
Option Exercise Price ($) | | |
Option Expiration Date | |
Number of Shares/RSUs that have not Vested (#) | | |
Market Value of Shares/RSUs that have not Vested ($)(1) | |
Thomas W. Burnell | |
| - | | |
| - | | |
| - | | |
| |
| 191,666 | (2) | |
| 1,431,745 | |
Thomas Freeburg | |
| 534 | | |
| 266 | (3) | |
| 9.75 | | |
3/13/2029 | |
| 50,066 | (4) | |
| 373,993 | |
| |
| - | | |
| 50,000 | (5) | |
| 6.00 | | |
3/10/2031 | |
| - | | |
| - | |
Fred Knechtel | |
| - | | |
| - | | |
| - | | |
| |
| - | | |
| - | |
|
(1) |
The
market value is based on the closing price of $7.47 on December 31, 2021, the last day of trading in 2021. |
|
(2) |
Consists
of 125,000 performance based RSUs which will be eligible to vest on the day following a 30 calendar day period in which, for each
trading day of such period, a share of Common Stock has a closing per share price of at least $11.34. Also includes 66,666 RSUs which
will vest one-half on each of December 1, 2022 and December 1, 2023. |
|
(3) |
Options
are scheduled to vest on March 13, 2022. |
|
(4) |
Consists
of 50,000 RSUs which will vest one-third on each of March 10, 2022, March 10, 2023, and March 10, 2024. Also includes 66 RSUs which
will vest on March 13, 2022. |
|
(5) |
Options
are scheduled to vest one-third each year on the first three anniversaries of the grant date, which was March 10, 2021. |
ITEM
13. |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Certain
Relationships and Related Transactions
We
are required to disclose transactions since January 1, 2020, to which we have been a party, in which the amount involved in the transaction
exceeds $120,000, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our
capital stock or an affiliate or immediate family member thereof had or will have a direct or indirect material interest, other than
employment, compensation, termination and change in control arrangements with our named executive officers.
On
January 10, 2020, we entered into the Securities Purchase and Exchange Agreement with Ampersand and 1315 Capital. Pursuant to the Securities
Purchase and Exchange Agreement, 1315 Capital agreed to purchase 19,000 shares of the Series B Preferred Stock at an aggregate purchase
price of $19.0 million and Ampersand agreed to purchase 1,000 shares of the Series B Preferred Stock at an aggregate purchase price of
$1.0 million. We also agreed to exchange all 270 shares of the Company’s issued and outstanding Series A Preferred Stock held by
Ampersand for 27,000 newly created shares of Series B Preferred Stock. The Company and the Series B Investors amended and restated that
certain Investor Rights Agreement, dated as of July 15, 2019 (the “Amended and Restated Investor Rights Agreement”),
by and between the Company and Ampersand.
The
Certificate of Designation of Series B Preferred Stock provides that, for so long as Ampersand or 1315 Capital holds at least sixty percent
(60%) of the Series B Preferred Stock issued to it on the Issuance Date (as defined therein), such Series B Investor will be entitled
to elect two directors to the Board; provided that one of the directors qualifies as an “independent director” within
the meaning of the OTCQX rules (or any successor rule or similar rule promulgated by another exchange on which our securities are then
listed or designated) However, if at any time such Series B Investor holds less than sixty percent (60%), but at least forty percent
(40%), of the Series B Preferred Stock issued to them on the Issuance Date, such Series B Investor would only be entitled to elect one
director to the Board. Any director elected pursuant to the terms of the Certificate of Designation of Series B Preferred Stock may be
removed without cause by, and only by, the affirmative vote of the holders of Series B Preferred Stock. A vacancy in any directorship
filled by the holders of Series B Preferred Stock may be filled only by vote or written consent in lieu of a meeting of such holders
of Series B Preferred Stock or by any remaining director or directors elected by such holders of Series B Preferred Stock. Moreover,
on any matter presented to holders of common stock for their action or consideration at any meeting of our stockholders (or by written
consent of stockholders in lieu of meeting), each holder of outstanding shares of our Series B Preferred Stock will be entitled to cast
the number of votes equal to the number of whole shares of common stock into which the shares of Series B Preferred Stock held by such
holder are convertible and, except as provided by law or by our Certificate of Incorporation (which includes the Series B Certificate
of Designation), will vote together with the holders of common stock as a single class, on an as-converted to common stock basis.
Concurrently
with the closing on January 15, 2020, pursuant to the Series B Investors’ rights as holder of Series B Preferred Stock, Ampersand
re-designated Messrs. Gorman and Lev and 1315 Capital initially designated Edward Chan, who were thereby appointed and elected to the
Board. Mr. Lev is a general partner of the general partner of Ampersand, Ampersand Capital Partners. As of February 2, 2022, Mr. Lev
was replaced as a director by Dr. Vijay Aggarwal, who was designated as a director by Ampersand. Mr. Chan is an employee of an entity
related to 1315 Capital, 1315 Capital Management, LLC. On January 22, 2020, 1315 Capital designated Fortunato Ron Rocca who was thereby
appointed and elected to the Board. As of the date of this prospectus, the Series B Investors and their affiliates control, on an as-converted
basis, an aggregate of sixty-five percent (65%) of our outstanding shares of common stock through their holdings of the Series B Preferred
Stock.
In
April 2020, the Company entered into Support Agreements with each of the Series B Investors (each, a “Support Agreement,”
and together, the “Support Agreements”), pursuant to which Ampersand and 1315 Capital, respectively, consented to,
and agreed to vote (by proxy or otherwise), all shares of Series B Preferred Stock registered in its name or beneficially owned by it
and/or over which it exercises voting control as of the date of the Support Agreement and any other shares of Series B Preferred Stock
legally or beneficially held or acquired by such Series B Investor after the date of the Support Agreement or over which it exercises
voting control, in favor of any Fundamental Action desired to be taken by the Company as determined by the Board. For purposes of each
Support Agreement, “Fundamental Action” means any action proposed to be taken by the Company and set forth in Section 4(d)(i),
4(d)(ii), 4(d)(v), 4(d)(vi), 4(d)(viii) or 4(d)(ix) of the Certificate of Designation of Series B Preferred Stock or Section 8.5.1.1,
8.5.1.2, 8.5.1.5, 8.5.1.6, 8.5.1.8 or 8.5.1.9 of the Amended and Restated Investor Rights Agreement. The Support Agreement with Ampersand
was terminated on September 30, 2020 pursuant to a termination agreement, dated July 9, 2020, between the Company and Ampersand.
The
28,000 shares of Series B Preferred Stock held by Ampersand are convertible from time to time into an aggregate of 4,666,666 shares of
our common stock and the 19,000 shares of Series B Preferred Stock held by 1315 Capital are convertible from time to time into an aggregate
of 3,166,666 shares of our common stock. On an as-converted basis, such shares would represent approximately 38.9% and 26.4% of our fully
diluted shares of common stock, respectively. In addition, pursuant to the terms of the Certificate of Designation of Series B Preferred
Stock and an amended and restated investor rights agreement among the Company and Ampersand and 1315 Capital, they each have the right
to (1) approve certain of our actions, including our borrowing of money and (2) designate two directors to our Board of Directors; provided
that certain of such rights held by 1315 Capital have been delegated pursuant to the related Support Agreement. As a result, the
Company considers the Notes and Security Agreement (each as defined below) to be a related party transaction.
On
January 7, 2021, the Company entered into promissory notes with Ampersand, in the amount of $3 million, and 1315 Capital, in the amount
of $2 million, respectively (together, the “Notes”), and a related security agreement (the “Security Agreement”).
The
rate of interest on the Notes was equal to eight percent (8.0%) per annum and their maturity date was the earlier of (a) September 30,
2021 and (b) the date on which all amounts become due upon the occurrence of any event of default as defined in the Notes. No interest
payments were due on the Notes until their maturity date. All payments on the Notes were pari passu.
On
May 10, 2021, (i) the Company and Ampersand amended the Ampersand Note to increase its principal amount to $4.5 million, (ii) the Company
and 1315 Capital amended the 1315 Capital Note to increase its principal amount to $3.0 million and (iii) the Company and Ampersand amended
the Security Agreement to include the new total principal amount of the Notes of $7.5 million. The maturity date of the Notes remained
the earlier of June 30, 2021 and the date on which all amounts become due upon the occurrence of any event of default and the interest
rate remained 8%, and except with respect to their respective principal amounts, the terms of the Notes and the Security Agreement were
otherwise unchanged.
On
June 24, 2021, the Company and Ampersand amended the Ampersand Note to change its maturity date to the earlier of (a) August 31, 2021
and (b) the date on which all amounts become due upon the occurrence of any event of default as defined in the Ampersand Note. On June
25, 2021, the Company and 1315 Capital amended the 1315 Capital Note to change its maturity date in a similar manner. Except with respect
to their respective maturity dates, the terms of the Notes are otherwise unchanged. The Security Agreement remains in full force and
effect, and was not amended in connection with the amendments to the Notes.
On
August 31, 2021, the Company and Ampersand amended the Ampersand Note to change its maturity date to the earlier of (a) September 30,
2021 and (b) the date on which all amounts become due upon the occurrence of any event of default as defined in the Ampersand Note. On
August 31, 2021, the Company and 1315 Capital amended the 1315 Capital Note to change its maturity date in a similar manner.
On
September 29, 2021, the Company and Ampersand amended the Ampersand Note to change its maturity date to the earlier of (a) October 31,
2021 and (b) the date on which all amounts become due upon the occurrence of any event of default as defined in the Ampersand Note. On
September 29, 2021, the Company and 1315 Capital amended the 1315 Capital Note to change its maturity date in a similar manner.
In
connection with the Security Agreement, the Notes were secured by a first priority lien and security interest on substantially all of
the assets of the Company. Additionally, if a change of control of the Company occurred (as defined in the Notes) the Company was required
to make a prepayment of the Notes in an amount equal to the unpaid principal amount, all accrued and unpaid interest, and all other amounts
payable under the Notes out of the net cash proceeds received by the Company from the consummation of the transactions related to such
change of control. The Company could prepay the Notes in whole or in part at any time or from time to time without penalty or premium
by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment.
The
Notes contained certain negative covenants which prevented the Company from issuing any debt securities pursuant to which the Company
issues shares, warrants or any other convertible security in the same transaction or a series of related transactions, except that Company
could incur or enter into any capitalized and operating leases in the ordinary course of business consistent with past practice, or borrowed
money or funded debt in an amount not to exceed $4.5 million (the “Debt Threshold”) that is subordinated to the Notes on
terms acceptable to Ampersand and 1315 Capital; provided, that if the aggregate consolidated revenue recognized by the Company as reported
on Form 10-K as filed with the SEC for any fiscal year ending after January 10, 2020 exceeds $45 million, the Debt Threshold for the
following fiscal year shall increase to an amount equal to: (x) ten percent (10%); multiplied by (y) the consolidated revenue as reported
by the Company on Form 10-K as filed with the SEC for the previous fiscal year.
On
October 29, 2021, the Company and its subsidiaries entered into a Loan and Security Agreement with BroadOak Fund V, L.P. (“BroadOak”),
providing for a term loan in the aggregate principal amount of $8,000,000 (the “Term Loan”). Funding of the Term Loan
took place on November 1, 2021. The Company used the proceeds of the Term Loan to repay in full at their maturity all outstanding indebtedness
under the Notes with Ampersand and 1315 Capital. The Company, Ampersand, and 1315 Capital also terminated the Security Agreement.
Director
Independence
The
Board determined that each of the members of the current Board, except Mr. Burnell and Mr. Gorman, are independent directors within the
meaning of the applicable rules and regulations of the SEC and OTC Markets.