ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following table
sets forth certain information concerning the Company’s
current executive officers and directors, their ages, their offices
with the Company, if any, their principal occupations or employment
for the past five years.
|
Name
|
|
Position
|
|
|
|
|
|
|
|
EXECUTIVE OFFICERS:
|
|
|
|
|
|
|
|
|
|
Jerry
Lepore
|
64
|
Chief Executive Officer,
Director
|
2020**
|
|
Gleb
Mikhailov
|
41
|
Chief Financial
Officer
|
2013
|
|
Name
|
|
Position
|
|
|
|
|
|
|
|
DIRECTORS:
|
|
|
|
|
Ronen
Shviki
|
49
|
Director
|
2013
|
|
Robert
Smith
|
69
|
Director, Chairman of
the Board
|
2017
|
|
Amir
Elbaz
|
43
|
Director
|
2010*
|
* Mr. Elbaz was
our Chief Executive Officer through January 17, 2017,
a position he had held since May 2013.
** Mr. Lepore has
held a director position since March 18 2018. On January 17, 2020
Mr. Lepore also assumed the role of President and Chief Executive
Officer.
Jerry Lepore,
Director, Chief
Executive Officer
On March 21, 2018,
the Board of Directors appointed Jerry Lepore to the
Board. On January 17, 2020, subsequent to Randy
Tomlin's announcement of a leave of absence from responsibilities
as President and Chief Executive Officer, Mr. Lepore assumed the
role of President and Chief Executive Officer.
Mr. Lepore is an experienced business and technology executive with
strong background in healthcare, insurance, financial services,
education, and software industries. In his 40 year career he has
held CEO, COO and CTO positions in public and private companies. He
has also provided transitional leadership in turnaround and/or
growth situations. Mr. Lepore has founded and operated
several companies in the software and strategic services
industries. He has experience in capital raises, public offerings,
strategic sales, corporate acquisitions, and mergers.
Mr. Lepore has served on boards of healthcare and software
organizations. He received a Bachelor of Science Degree in
Mathematics from the University of Connecticut in Storrs,
CT.
Gleb Mikhailov, Chief Financial Officer
Mr. Mikhailov has
been our Chief Financial Officer since April 2013. From January
2013 to March 2013, Mr. Mikhailov served as the Manager of
Financial Reporting and SEC Consulting in the SEC Solutions Group
of Citrin Cooperman, LLP, an accounting firm providing business
solutions and accounting services to middle market companies. From
January 2005 until December 2012, Mr. Mikhailov was employed by
EisnerAmper LLP, a full-service advisory and public accounting
firm, in its Private Business Services Group and Audit and
Assurance Group. He was a Manager at EisnerAmper LLP since
2010. Mr. Mikhailov holds a B.A. in Accounting from Rutgers, The
State University of New Jersey and an M.B.A. from Rutgers Business
School. Mr. Mikhailov holds a CPA license issued by the State of
New Jersey.
Ronen Shviki, Director
Mr. Shviki has
served on the Board since February 2013. Since January 2013, Mr.
Shviki has served as the Vice President for Business Development of
Mendelssohn Ltd., an Israeli distribution company. Prior to this,
Mr. Shviki served in the Israel Defense Forces as a Colonel
in the Army branch. Mr. Shviki holds a B.A. in Business
Administration from Interdisciplinary Center Herzliya and an LLB
from Interdisciplinary Center Herzliya.
The Board believes
Mr. Shviki’s extensive marketing and management experience,
in addition to his knowledge of the international marketplace,
contributes to the strategic composition of the Board.
Robert Smith,
Director, Chairman of the
Board
On October 31,
2017, the Board of Directors (the "Board") appointed Robert L.
Smith to the Board. On March 18, 2020, Mr. Smith was
appointed as the Chairman of the Board after the resignation of
Randy J. Tomlin from the Board and as the Chairman. Mr. Tomlin was
also the Company's former Chief Executive
Officer.
Robert Smith is an
experienced multi-facility health care executive with varied
background in complex urban and rural health care
settings. During his 40-year career in the industry he has
held CEO and other executive positions of various for profit and
non-profit hospitals and health care organizations, where he
demonstrated ability to turnaround, create, and grow business units
in complex and competitive environments. Mr. Smith's broad
business experience includes reorganization, restructuring and
public company experience at the CEO and Board of Directors
level. Mr. Smith has served on the boards of various
healthcare organizations. He currently serves on the boards
of Parkland Center for Clinical Innovation and Flashback
Technologies. He is a 2011 recipient of the Texas Hospital
Associations Earl N. Collier Award for Distinguished Health Care
Administration. Mr. Smith received his Master of Health
Administration Degree from Washington University School of
Medicine, St. Louis, MO and his Bachelor of Science Degree in
Psychology from University of Missouri in St. Louis,
MO.
The Board believes
that Mr. Smith's background in healthcare will provide the Company
management with insights regarding market penetration and enhance
management's and Board's ability to interpret healthcare industry
changes.
Amir Elbaz, Director
Until January of
2017 Mr. Elbaz held positions of Chief Executive Officer since May
2013 and Chairman of the Company’s Board of Directors since
November of 2012. During his tenure as a member of the
Board, and its Chairman and Company CEO, Mr. Elbaz has been
actively involved in the Company operations and played significant
role in ensuring that the Company's products and strategy had
continued backing of investors and shareholders. Mr. Elbaz
continues in the employ of the Company primarily focusing on
investor and public relations and regulatory and operational
compliance.
The Board believes
Mr. Elbaz's significant experience in the technology sector,
coupled with this extensive financial and economic background
and his deep knowledge of our company provide invaluable insight
with respect to the Company’s business and
technologies.
Section
16(a) Beneficial Ownership Reporting Compliance
The members of the
Board, its executive officers, and persons who hold more than 10%
of the Company’s outstanding shares of common stock, $0.001
par value per share, or common stock, are subject to the reporting
requirements of Section 16(a) of the Securities Exchange Act of
1934, as amended, (the "Exchange Act"), which requires them to file
reports with respect to their ownership of the Company’s
common stock and their transactions in such common stock. Based
upon the Company’s review of the Section 16(a) reports in its
records for fiscal year 2020 transactions in the Company’s
common stock, the Company believes that all reporting requirements
under Section 16(a) for fiscal year 2020 were met in a timely
manner by its directors, executive officers, and greater than 10%
beneficial owners, except that Union Bancaire Privée, or UBP,
has not filed a Form 3 or any subsequent reports in respect of its
ownership of 7,167,832 shares of Company common stock
and of 695,728 shares of Series A convertible preferred stock (the
"Series A Preferred Shares") , which Series A Preferred Shares may
be converted into 20,871,840 shares of the Company’s common
stock by UBP at any time upon notice, as of December 31,
2020.
Code
of Ethics
The Company has
adopted a Code of Ethics applicable to its executives, including
the principal executive officer, principal financial officer, and
principal accounting officer, as defined by applicable rules of the
SEC. The Company will promptly deliver free of charge, upon
request, a copy the Code of Ethics to any stockholder requesting a
copy. Requests should be directed to the Company’s Chief
Financial Officer at 5400 Trinity Rd., Suite 208, Raleigh, NC,
27607. If the Company makes any amendments to the Code
of Ethics other than technical, administrative, or other
non-substantive amendments, or grants any waivers, including
implicit waivers, from a provision of the Code of Ethics to the
Company’s Chief Executive Officer, Chief Financial Officer,
Chief Operating Officer or certain other finance executives, the
Company will disclose the nature of the amendment or waiver, its
effective date, and to whom it applies in a Current Report on Form
8-K.
The Board
The size of the
Board is currently comprised of four members. The Board
believes that the current number of directors is appropriate at
this time; however, the Board will consider adding members in the
future with additional skills and professional connections that
will be of benefit to the Company.
We do not have any
defined policy or procedure requirements for stockholders to submit
recommendations or nominations for directors. The board of
directors believes that, given the stage of our development, a
specific nominating policy would be premature and of little
assistance until our business operations develop to a more advanced
level. Our company does not currently have any specific or minimum
criteria for the election of nominees to the board of directors and
we do not have any specific process or procedure for evaluating
such nominees. The board of directors will assess all candidates,
whether submitted by management or stockholders, and make
recommendations for election or appointment. A shareholder who
wishes to communicate with our board of directors may do so by
directing a written request addressed to our Chief Executive
Officer, Jerry Lepore, at the address appearing on the first page
of this report.
Audit Committee and Compensation Committee
Effective April 3,
2020, the Board approved the dissolution of the Audit Committee and
Compensation Committee of the Board. From that date moving
forward, the entire Board has and will address all audit and
compensation matters that would otherwise have been addressed by
the Audit Committee and Compensation Committee. Mr. Smith
shall act as the lead Board member with respect to all audit
matters and Mr. Elbaz shall act as the lead Board member with
respect to all compensation matters. Messrs. Lepore and Tomlin
shall recuse themselves from any vote on audit or compensation
matters at the request of Messrs. Smith or Elbaz, as applicable.
The Board has determined the following members of the Board are
deemed to be independent in accordance with the rules promulgated
by the Securities and Exchange Commission: (i) Mr. Elbaz,
(ii) Mr. Shviki and (iii) Mr. Smith.
ITEM
11. EXECUTIVE COMPENSATION.
The following table
summarizes the compensation earned during the years ended
December 31, 2020 and December 31, 2019 by our principal
executive officer, our former principal executive officer, the two
other most highly paid executive officers who were serving as
executive officers on December 31, 2020:
SUMMARY
COMPENSATION TABLE.
|
Name and Principal Position
|
|
Year
|
|
|
|
|
Non-Equity Incentive Plan Compensation
($)
|
Change In Pension Value And Nonqualified Deferred Compensation
Earnings
($)
|
All Other Compensation ($)
|
|
|
Jerry
Lepore
|
|
2020
|
$225,000
|
-
|
-
|
$1,030,232
|
-
|
-
|
$62,972
|
$1,318,204
|
|
Chief
Executive Officer, Executive Chairman of the
Board
|
|
2019
|
-
|
-
|
-
|
$375,431
|
-
|
-
|
$30,000
|
$405,431
|
|
Randy J
Tomlin
|
|
2020
|
$41,667
|
-
|
-
|
-
|
-
|
-
|
-
|
$41,667
|
|
Chief
Executive Officer, Executive Chairman of the
Board
|
|
2019
|
$250,000
|
-
|
-
|
$375,430
|
-
|
-
|
-
|
$625,430
|
|
Gleb
Mikhailov
|
|
2020
|
$195,367
|
$6,460
|
-
|
-
|
-
|
-
|
-
|
$201,827
|
|
Chief
Financial Officer
|
|
2019
|
$172,200
|
$9,900
|
-
|
$682,601
|
-
|
-
|
-
|
$864,701
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Amounts in this
column reflect the aggregate grant date fair value computed in
accordance with FASB ASC 718 with respect to employee stock options
granted under our 2016 Equity Incentive Plan. The assumptions used
to calculate the fair value of stock option grant are set forth in
Note 2 (Significant Accounting Policies) to our financial
statements, which are included in the Original Filing. The
grant-date fair value does not necessarily reflect the value of
shares which may be received in the future with respect to these
awards. The fair value of the stock options will likely vary from
the actual value the holder receives because the actual value
depends on the number of options exercised and the market price of
our Common Stock on the date of exercise.
|
|
|
|
Grants
of Plan-Based Awards for Year Ended December 31,
2020
There were two
grants of plan-based awards in 2020, issued to Jerry Lepore, our
Chief Executive Officer, and member of the Board, during 2020 . The
awards were granted as follows: (i) on January 23, 2020 an option
to purchase up to 65,000 shares of common stock at an exercise
price of $2.51 and (ii) on April 29, 2020, an option to purchase up
to 375,000 shares of common stock at an exercise price of
$2.75.
Outstanding Equity Awards
The following table
provides information about outstanding equity awards held by the
named executive officers as of December 31, 2020:
|
|
Option awards
|
Option awards
|
|
|
|
|
number of
|
number of
|
|
|
|
|
securities
|
securities
|
|
|
|
|
underlying
|
underlying
|
|
|
|
|
unexercised
|
unexercised
|
|
|
|
|
options (#)
|
option (#)
|
Option exercise
|
|
|
|
Exercisable
|
Unexercisable
|
price ($/Sh)
|
Option expiration date
|
|
Jerry
Lepore
|
336,398
|
30,582
|
$2.00
|
3/20/2028
|
|
Jerry
Lepore
|
96,250
|
178,750
|
$1.60
|
5/15/2029
|
|
Jerry
Lepore
|
13,000
|
52,000
|
$2.51
|
1/23/2030
|
|
Jerry
Lepore
|
56,250
|
318,750
|
$2.75
|
4/29/2030
|
|
Gleb
Mikhailov
|
222,425
|
208,075
|
$1.95
|
5/25/2028
|
|
Gleb
Mikhailov
|
175,000
|
325,000
|
$1.60
|
5/15/2029
|
Option
Exercises and Stock Vested in 2020
None of our named executive officers
acquired shares upon exercise of options during the year ended
2020. During 2020, options to purchase up to 432,677 shares
previously granted to the named executive officers
vested.
Compensation
of Directors
The following table
summarizes the compensation paid to the directors for the fiscal
year ended December 31, 2020, not covered in the tables
above.
2020
DIRECTOR COMPENSATION
|
Name
|
Fees Earned or Paid in Cash
($)
|
Stock Awards ($)
|
Option Awards
($)
|
All Other Compensation
($)
|
Total ($)
|
|
Ronen
Shviki
|
$30,000
|
$-
|
$-
|
$-
|
$30,000
|
|
Amir Elbaz
|
$100,000
|
$-
|
$-
|
$-
|
$62,500
|
|
Robert
Smith
|
$53,629
|
$-
|
$-
|
$-
|
$53,629
|
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.
Principal Stockholders and Share Ownership by
Management
The following table
sets forth information regarding beneficial ownership of the
Company’s common stock as of April 29, 2021, by (i) each
person who is known by the Company to beneficially own more than 5%
of the Company’s common stock; (ii) each person who served as
a named executive officer of the Company in fiscal year 2020
(iii) each person serving as a director or nominated for
election as a director; and (iv) all current executive officers and
directors as a group. Except as otherwise indicated by footnote, to
the Company’s knowledge, the persons named in the table below
have sole voting and investment power with respect to all shares of
the Company’s common stock shown as beneficially owned by
them.
Name and
Address of Beneficial Owner(1)
|
Shares Beneficially Owned
(2)
|
% of Shares Beneficially
Owned
|
|
Avy Lugassy
(3)
|
23,830,945
|
56.52%
|
|
|
|
|
|
Union Bancaire Privee,
UBP SA (4)
|
28,729,671
|
57.52%
|
|
|
|
|
|
Doron Rotler
(5)
|
2,947,643
|
10.19%
|
|
|
|
|
|
Directors and Named Executive
Officers:
|
|
|
|
Jerry Lepore, Director
and Chief Executive Officer
|
603,980
|
2.08%
|
|
Gleb Mikhailov, Chief
Financial Officer
|
625,475
|
2.16%
|
|
Amir Elbaz,
Director
|
385,500
|
1.34%
|
|
Ronen Shviki,
Director
|
463,730
|
1.61%
|
|
Robert Smith,
Director
|
490,730
|
1.70%
|
|
|
|
|
|
All executive officers
and directors as a group (5) persons
|
2,569,415
|
7.90%
|
* Less than
2%.
(1) Unless
otherwise indicated, the address of such individual is c/o
MobileSmith, Inc., 5400 Trinity Road, Suite 208, Raleigh, North
Carolina 27607.
(2) In computing
the number of shares beneficially owned by a person and the
percentage ownership of a person, shares of our common stock
subject to options held by that person that are currently
exercisable or exercisable within 60 days of April 29, 2021 are
deemed outstanding. Such shares, however, are not deemed
outstanding for purposes of computing the percentage ownership of
each other person. Except as indicated in the footnotes to this
table and pursuant to applicable community property laws, the
persons named in the table have sole voting and investment power
with respect to all shares of common stock.
(3)
Beneficial ownership is comprised of 10,054,045 shares of the
Company’s common stock and 13,776,900 shares issuable upon
conversion of the Company's Series A Preferred Shares. Unless
otherwise indicated, the address of such individual is 126 Chemin
des Hauts, Crets 1253 Vandeeuvres, Geneva.
Switzerland.
(4) Comprised
of 7,167,831 shares issued and 21,561,840 shares issuable
upon conversion of Series A Preferred Shares. Unless otherwise
indicated, the address of such individual is Rue du Rhone
9698 | CP | CH1211 Geneva 1, Switzerland.
(5) Comprised
of 2,332,807 shares of Common Stock held as of record by Mountain
Top LTD., a British Anguilla company (an entity controlled by Mr.
Rotler), 85,900 shares held in the name of Mr. Rotler and 529,290
shares of the Company’s Series A Preferred Shares by Crystal
Management Ltd., a company registered in British Anguilla (entity
controlled by Mr. Rotler). Unless otherwise indicated, the address
of such individual is c/o S. Rotler, 134 Aluf David Street Ramat
Gan 52236, Israel.
Equity Compensation
Plans
The following table
provides information, as of December 31, 2020, regarding the
Company’s compensation plans (including individual
compensation arrangements) under which the Company is authorized to
issue equity securities.
2016
EQUITY COMPENSATION PLAN INFORMATION.
|
|
|
|
|
Number
of
|
|
|
|
|
|
|
securities
|
|
|
|
|
|
|
remaining
|
|
|
|
|
|
|
available
for
|
|
|
|
Number
of
|
|
|
future
issuance
|
|
|
|
securities to
be
|
|
Weighted
|
under
equity
|
|
|
|
issued
upon
|
|
average
|
compensation
|
|
|
|
exercise
of
|
|
exercise
price
|
plans
|
|
|
|
outstanding
|
|
of
outstanding
|
(excluding
|
|
|
|
options,
|
|
options,
|
securities
|
|
|
|
warrants
and
|
|
warrants
and
|
reflected
in
|
|
|
Plan Category
|
rights
(a)
|
|
rights
(b)
|
column
(a)(c))
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved
by security holders
|
10,683,300
|
(1)
|
$ 1.85
|
4,316,700
|
(2)
|
|
Equity compensation plans not
approved by security holders
|
-
|
|
-
|
-
|
|
|
Total
|
10,683,300
|
|
$ 1.85
|
4,316,700
|
|
|
(1)
|
Consists of shares
issuable upon exercise of outstanding options under the
Company’s 2016 Equity Compensation Plans.
|
|
(2)
|
All of the shares
remaining for future issuance under the 2016 Equity Compensation
Plan are available for issuance as options or restricted stock
awards.
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.
Certain Relationships and Related Transactions
The Company has issued subordinated notes to related parties to
finance its shortfall in working capital. The subordinated
notes carry interest rate of 8% per year, which is paid twice a
year. The subordinated notes are unsecured and are
subordinated to all other Company debt. The subordinated
notes had maturity date in November of 2022. Avy Lugassy, one
of the Company's principal shareholders is a beneficial owner of
the related parties holding the subordinated
notes.
The Company started the year with $3,518,250 on January 1, 2020 in
outstanding notes and issued additional $1,910,000 notes during the
year under the same terms. During the May 2020 Note Exchange
$4,063,250 of subordinated promissory notes to related parties were
exchanged for the same face value of 2014 NPA note under the terms
described above (refer to "May 2020 Note Exchange" paragraph below
for more detail), which were subsequently exchanged again in the
December 2020 Debt Exchange. The remaining balance of
$1,365,000 in subordinated promissory notes to related parties were
also exchanged in the December 2020 Debt
Exchange.
On December 23, 2020, the Company and all but one
debt investor entered into a debt exchange transaction where the
Company exchanged its convertible and non-convertible debt plus
accrued but unpaid interest into Series A Convertible Preferred
equity. On that date both related parties UBP SA and Avy
Lugassy, as beneficial owner completed the following
transactions:
(1) UBP SA
exchanged $29,846,731 in debt and accrued interest for 695,728
shares of Series A Preferred Stock;
(2) Avy
Lugassy exchanged $18,576,043 in debt and accrued interest for
433,008 shares of Series A Preferred Stock.
On December 21, 2020 Avy Lugassy purchased
8,156 shares of Series A Preferred Stock for $350,000 in
cash.
Policy
for Approval of Related Party Transactions
The Company
requires that any related party transactions must be approved by
the full Board of Directors with any interested member of the Board
relating to the transaction recusing her or himself from the
vote.