UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

 

INFORMATION REQUIRED IN A PROXY STATEMENT

 

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No. )

 

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

☐ Preliminary Proxy Statement

☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

☒ Definitive Proxy Statement

☐ Definitive Additional Materials

☐ Soliciting Material under § 240-14a-12

 

SANARA MEDTECH INC.

(Name of Registrant as Specified in its Charter)

 

Payment of Filing Fee (Check the appropriate box):

☒ No fee required.

☐ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

☐ Fee paid previously with preliminary materials:

☐ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  

SANARA MEDTECH INC.

1200 Summit Ave., Suite 414

Fort Worth, Texas 76102

 

June 25, 2020

 

Dear Shareholder:

The Board of Directors and Management of Sanara MedTech Inc. invite you to attend the Annual Meeting of Shareholders to be held electronically as a virtual meeting at 10:00 a.m. Central time on Thursday, July 9, 2020. Due to the potential health dangers and related complexities of holding a meeting at a physical location, the Annual Meeting will instead be conducted virtually by electronic communication via the Internet. Details on electronic attendance and matters on which action will be taken at the meeting are explained in the notice and proxy statement following this letter. Please read them carefully.

It is important that your shares be voted at the meeting in accordance with your preference. If you do not plan to attend our virtual meeting, you may vote your shares through the Internet or by mail using the enclosed proxy card and envelope. If you are a beneficial holder with shares held through a broker, you will receive instructions for voting your shares from your broker.

Thank you for your continued support of Sanara MedTech Inc.

Ronald T. Nixon

Executive Chairman of the Board

 

J. Michael Carmena

Vice Chairman of the Board

 

 

SANARA MEDTECH INC.

1200 Summit Ave., Suite 414

Fort Worth, Texas 76102

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To Be Held July 9, 2020

 

The Annual Meeting of Shareholders of Sanara MedTech Inc., a Texas corporation (the “Company”), will be held electronically as a virtual meeting on July 9, 2020, at 10:00 a.m., Central time, for the following purposes:

Only holders of record of the Company’s common stock at the close of business on June 11, 2020, are entitled to notice of and to vote at the annual meeting. A complete list of shareholders entitled to vote will be available for examination by any Company shareholder at the Company’s principal office at 1200 Summit Ave., Suite 414, Fort Worth, Texas 76102, during ordinary business hours for a period of eleven days prior to the date of the annual Meeting. Please contact our Corporate Secretary, Michael D. McNeil, at 817-529-2300 if you would like to make arrangements to examine the shareholder list at our office.

Your attention is directed to the proxy statement that follows for further information about the matters to be considered at the annual meeting. Our annual report to shareholders with financial statements, which consists of our annual report on Form 10-K for the year ended December 31, 2019, accompanies the proxy statement.

To ensure that your vote will be counted, please complete, sign and date the enclosed proxy card and return it promptly in the enclosed prepaid envelope, or vote over the Internet, whether or not you plan to attend the Annual Meeting. Your proxy may be revoked in the manner described in the accompanying Proxy Statement at any time before it has been voted at the Annual Meeting. If you are a beneficial holder with shares held through a broker, you will receive instructions for voting your shares from your broker.

By Order of the Board of Directors

 

Michael D. McNeil

Secretary

June 25, 2020

Fort Worth, Texas

 

SANARA MEDTECH INC.

1200 Summit Ave., Suite 414

Fort Worth, Texas 76102

 

____________________________

 

 

PROXY STATEMENT

For

ANNUAL MEETING OF SHAREHOLDERS

To Be Held July 9, 2020

 

This Proxy Statement is provided in connection with the solicitation of proxies by the Board of Directors of Sanara MedTech Inc. for its annual meeting of shareholders to be held only by electronic communication on Thursday, July 9, 2020, and any adjournment thereof. The purpose of the meeting is to consider and vote on the matters set forth in the accompanying Notice of Annual Meeting of Shareholders. You are receiving this Proxy Statement because you own shares of common stock of the Company that entitles you to vote at the meeting. In this Proxy Statement, Sanara MedTech Inc. is referred to as the “Company,” “Sanara,” “we” or “us.” By use of a proxy, you can vote on the matters to be decided at the meeting without attending the virtual meeting through the Internet. You simply vote your preferences through the Internet or by completing, signing and dating the enclosed proxy card and mailing it in the enclosed envelope, and your shares will be voted in accordance with your instructions.

The Company will begin sending this Proxy Statement and Proxy to shareholders on June 25, 2020.

GENERAL MATTERS

Record Date; Shares Outstanding and Voting Rights

The Board of Directors fixed the close of business on June 11, 2020 as the record date for shareholders entitled to notice of and to vote at the annual meeting. Only holders of common stock as of the record date are entitled to vote at the annual meeting. As of the record date, there were 6,203,402 shares of common stock outstanding, which were held by approximately 241 holders of record. Each share of common stock held as of the record date entitles the holder to one vote on each matter to be voted on at the meeting. Shareholders are not entitled to cumulate their votes for the election of directors.

The Board of Directors requests that you complete, sign, date and return the enclosed proxy card promptly or vote through the Internet, whether or not you plan to attend the virtual meeting. If you own shares through a bank, broker or other intermediary, you will receive separate instructions from them on how to direct them to vote your shares. If you wish to vote at the annual meeting those shares held through a broker, bank or other nominee, you must first obtain a special proxy executed in your favor from that broker, bank or other nominee and provide evidence of that proxy when you register to attend the virtual meeting (described below). If you fail to provide your broker or other nominee with voting instructions, the broker or other nominee may exercise its discretionary authority to vote the shares only on certain matters without your instructions. If your broker or bank fails to vote the shares on a matter, a “broker non-vote” will occur on that matter, the voting effect of which is described below.

A majority of the outstanding shares must be represented in person or by proxy at the annual meeting in order to constitute a quorum to conduct business at the meeting. Abstentions and “broker non-votes” are treated as shares that are present for purposes of determining the presence of a quorum. Whether you vote by mail or the Internet, your shares of stock will be voted at the annual meeting in accordance with your instructions. If you do not designate specific voting instructions on any matter, your shares will be voted on the matter as recommended by the Board of Directors in this Proxy Statement.

You may revoke a proxy at any time before it is voted at the meeting. To revoke your proxy, you may do so with a subsequent vote by submitting another signed proxy card with a later date or voting through the Internet at a later date, or you may send a written notice of revocation to the corporate secretary of the Company at our principal office, 1200 Summit Ave., Suite 414, Fort Worth, Texas 76102. If your shares are held by a broker, bank or other nominee, you may revoke your voting instruction to the broker, bank or other nominee by so informing the entity in accordance with its procedures.

 

 

Deadline to Vote by Proxy

Any vote of a shareholder not voted at the annual meeting will be counted only if (a) in the case of a vote by mailed proxy, the proxy card is received not later than the day prior to the date of the annual meeting or (b) in the case of a vote through the Internet, the vote is made not later than the day prior to the date of the annual meeting.

Attendance and Voting at the Annual Meeting

The Company’s virtual annual meeting will be held on July 9, 2020 at 10:00 a.m., Central time, and will be presented electronically through the Internet in audio and video format. Online access to the meeting will begin at 9:45 a.m., Central time. Shareholders will not be able to physically attend the meeting.

Only shareholders of record and beneficial owners on June 11, 2020, who have registered as described below, will be allowed to attend the virtual annual meeting.

Instructions for Shareholders to Attend the Virtual Annual Meeting

Record Holders.  If you were a shareholder of record (i.e., you held your shares through a certificate registered in your name) on June 11, 2020, you may attend the virtual annual meeting, but you must first register to attend the meeting by sending an email to info@stctransfer.com and requesting a return email for instructions to register for the Sanara MedTech meeting. To register, you will need to have the proxy card that was mailed with this Proxy Statement in order to provide a control number found on the card. You may attend the annual meeting beginning at 9:45 a.m. on the date of the meeting by accessing the Internet site provided to you at registration  You will then be directed to a screen where you will enter your registered name and meeting password obtained at your registration. Please note that the meeting password is case sensitive. Once you have completed these steps, select the “login” button, which will take you to the virtual annual meeting page where you can observe the actions and presentations at the meeting and, if you choose, submit written or verbal questions. If you are a shareholder of record and you have misplaced your proxy card with your control number, please call Securities Transfer Corporation at (469) 633-0101.

Beneficial Owners.  If you were a beneficial owner on June 11, 2020 (i.e., you held your shares in “street name” through an intermediary, such as a broker, bank or other nominee), you must register as described in the preceding paragraph for record holders. However, in order to register, you must have previously obtained a special proxy from the broker, bank or other nominee that will allow you to separately vote your shares. Contact your broker, bank or other nominee holding your shares to obtain the special proxy, and when you have received it, you must submit the special proxy to Securities Transfer Corporation to receive a control number to use to access the virtual annual meeting. Any control number that was provided with your proxy materials, will not provide access to the virtual annual meeting site. Requests for registration and submission of special proxies should be labeled as “Legal Proxy” and must be received by Securities Transfer Corporation no later than 5 p.m., Central time, on July 6, 2020. All such requests should be submitted (1) by email to info@stctransfer.com, (2) by fax to (469) 633-0088, or (3) by mail to Securities Transfer Corporation, Attn: Proxy Tabulation Department, 2901 N. Dallas Parkway, Suite. 380, Plano, TX 75093. Obtaining a special proxy may take several days, so shareholders are advised to register as far in advance as possible. Once you have obtained your control number, you may follow the steps set forth above for “Record Holders” to attend the virtual annual meeting. If you have questions please call Securities Transfer Corporation at (469) 633-0101.

Voting Shares. Shareholders attending the annual meeting will be able to vote during the meeting at http://onlineproxyvote.com/SMTI, which is a separate website from the page hosting the convening of the annual meeting.

Asking Questions. Shareholders attending the annual meeting can ask questions by clicking the Q&A icon on the toolbar appearing at the bottom of the Meeting Page and then typing and submitting a question or clicking the Raise Hand icon to request placement in a queue to verbally ask a question.

 

 

Solicitation of Proxies

The Company will bear the cost of soliciting proxies, including the charges and expenses of brokerage firms, banks and other custodians and nominees to forward proxy materials to beneficial owners of our common stock. Solicitations will be made primarily by mail, but certain directors, officers or other employees may solicit proxies in person, by telephone or by other means. Such persons will not receive special compensation for their solicitation services.

Inspector of Elections

The inspector of elections will be a representative from Securities Transfer Corporation, the transfer agent and registrar for our common stock.

Item 1. ELECTION OF DIRECTORS

Shareholders will elect five directors at the annual meeting to serve until the next annual meeting and a successor has been elected and qualified, or the director’s earlier death, resignation or removal. The Board of Directors has nominated each person listed below to stand for election. The persons named as proxies on the accompanying proxy card intend to vote for each of the nominees named in this proxy statement. Each nominee has agreed to serve as a director if elected. Although we have no reason to believe that any of them will be unable or unwilling to serve, in the event that any nominee named below should become unable or unwilling to serve, the Board of Directors may reduce the size of the Board or nominate a substitute for that nominee, and the proxies named on the accompanying proxy card will vote any shares represented by such proxies received by the Company for such other person thereafter nominated for director by the Board of Directors.

Vote Required. Assuming the presence of a quorum, in order to be elected a nominee for director must receive the affirmative vote in the election of that nominee by holders of a majority of outstanding shares of common stock. Each share of common stock is entitled to one vote. The proxy card provides a means for shareholders to vote for or to withhold authority to vote for each nominee for director. A direction to “withhold” a vote is a vote against the nominee. If a shareholder executes and returns a proxy, but does not specify how the shares represented by such shareholder’s proxy are to be voted, the shares will be voted FOR the election of the nominees for director. In determining whether the nominee has received the required number of affirmative votes, abstentions and broker non-votes will have the effect of voting against the director.

The Board of Directors recommends a vote “FOR” the election of each nominee to the Board of Directors.

Director Nominees

The following table sets forth the names, ages, and positions of the nominees for election to the Board of Directors of Sanara MedTech Inc. S. Oden “Denny” Howell, Jr., a current director has decided not to stand for reelection at the annual meeting. The Board received notice of Mr. Howell’s decision only recently and has not had sufficient time to select and evaluate potential candidates to replace Mr. Howell. As a result, members of the Board have not nominated a new director to fill this seat which will become vacant after the annual meeting. The Board anticipates appointing a new director at a later time.

NAME		AGE		POSITION		YEAR FIRST ELECTED
Ronald T. Nixon		64		Executive Chairman		2019
James W. Stuckert		82		Director		2015
J. Michael Carmena		64		Vice Chairman		2019
Ann Beal Salamone		69		Director		2019
Kenneth E. Thorpe		63		Director		2019

  

 

Ronald T. Nixon, age 64, has been a director of the Company since March 2019 and has served as Executive Chairman of the Board since May 2019. As Executive Chairman, he has been involved in strategy planning, execution and identifying prospective partnerships and acquisitions opportunities for the Company. Mr. Nixon is the Founder and Managing Partner of The Catalyst Group, Inc., a private investment firm that provides growth capital and strategic advisory services to private companies. Mr. Nixon serves on the board of directors of LHC Group, Inc. as well as a number of private companies, including Trilliant Surgical, LLC, Rochal Industries, LLC, and Triad Life Sciences, Inc. Mr. Nixon also serves on the Engineering Advisory Board for the Cockrell School of Engineering at the University of Texas at Austin, where he was the previous vice chairman. Mr. Nixon holds a Bachelor’s degree in Mechanical Engineering from the University of Texas at Austin and is a registered professional engineer (inactive) in Texas.

James W. Stuckert, age 82, has been a director of the Company since September 2015. He has been engaged in personal investing activities from 2004 to 2019. Mr. Stuckert served as Chairman and Chief Executive Officer of J.J.B. Hilliard, W.L. Lyons, LLC from December 1995 until December 2003, prior to which he served in executive and broker positions from 1963. J.J.B. Hilliard, W.L. Lyons, LLC is a full-service financial asset management firm headquartered in Louisville, Kentucky. Mr. Stuckert was an initial investor and served 24 years on the board of directors of Royal Gold, Inc. He previously has served as chairman of SenBanc Fund; a director of DataBeam, Inc.; a board member of the Securities Industry Association and chairman of its regional firms committee; and a past member of the nominating committee of the New York Stock Exchange. Mr. Stuckert has served as a member of the board of trustees of the University of Kentucky and as chairman of its Finance Committee and as chairman of its Presidential Search Committee. He has also served as chairman of a local hospital’s investment committee. Mr. Stuckert earned a Bachelor’s degree in Mechanical Engineering and a Master of Business Administration degree from the University of Kentucky.

Ann Beal Salamone, M.S., age 69, has been a director of the Company since August 2019. Ms. Salamone is a co-founder of Rochal Industries, LLC and has served as its chairman since September 2019, prior to which she served as its president from 1986 to September 2019. She is one of the principal inventors of Rochal’s liquid bandages, antimicrobial compositions and skin regeneration products for burn and wound treatment, and she has participated in the development of products for electronics, water purification, personal care and healthcare. Ms. Salamone has co-founded six companies and invested in and served on the board of directors of several private entrepreneurial companies. Ms. Salamone is a member of the National Academy of Engineering and The Academy of Medicine, Engineering & Science of Texas.

Kenneth E. Thorpe, Ph.D., age 63, has been a director of the Company since August 2019. He has been the Robert W. Woodruff Professor and Chair of the Department of Health Policy & Management of the Rollins School of Public Health of Emory University in Atlanta, Georgia since 1999. From 1983 to 1999 he held faculty positions in the public health departments at Tulane University, the University of North Carolina at Chapel Hill, Harvard University and Columbia University. Since 2007 Dr. Thorpe has served as Chairman of the Partnership to Fight Chronic Disease. He served on the Board of Directors of LHC Group, Inc. in 2010; was a consultant in the Governor’s Office and Legislature of West Virginia in 2011; and was Co-Chair of the Partnership for the Future of Medicare in 2013. From 1993 to 1995, Dr. Thorpe served as Deputy Assistant Secretary for Health Policy in the U.S. Department of Health and Human Services where he coordinated all financial estimates and program impacts of the Clinton administration’s healthcare reform proposals. In 1991 he was awarded the Young Investigator Award as the most promising health services researcher in the country under age 40 by the Association for Health Services Research. He has authored multiple articles and books on healthcare financing, insurance and healthcare reform. Dr. Thorpe received his Bachelor of Arts degree from the University of Michigan, Master of Arts degree from Duke University, and Ph.D. from the Rand Graduate School.

J. Michael Carmena, age 64, has served as Vice Chairman of the Board and Principal Executive Officer of the Company since May 2019, and served as Chief Executive Officer from February 2018 to May 2019. He served as Chief Financial Officer from December 2016 to April 2018. Prior to joining the Company, Mr. Carmena served as Senior Director, Business & Sales Operations of Smith and Nephew plc (successor to Healthpoint Biotherapeutics) from 2010 to 2013. He served as Senior Director, Finance & Administration of Healthpoint Biotherapeutics from 2008 to 2010 and as Controller from 1998 to 2008, prior to which he held senior financial positions in a company engaged in oil and gas exploration and production, ranching and financial asset management. Mr. Carmena began his professional career in 1978 with Arthur Andersen & Co. and became a CPA in 1981. Mr. Carmena earned a Bachelor of Business Administration degree from Texas Christian University.

 

 

EXECUTIVE OFFICERS

The following table sets forth the names, ages, and positions of the executive officers of Sanara MedTech Inc.

 

NAME		AGE		POSITION
Zachary B. Fleming		45		Co-Chief Operating Officer and President, Surgical
Shawn M. Bowman		45		Co-Chief Operating Officer and President, Wound Care
Michael D. McNeil		55		Chief Financial Officer
J. Michael Carmena		64		Vice Chairman and Principal Executive Officer

 

Zachary B. Fleming, age 45, was appointed to the position of President, Surgical Division on May 28, 2019, and was named Co-Chief Operating Officer on January 28, 2020. Mr. Fleming joined the Company as Vice President of Sales in November 2017 and was promoted to Vice President, Surgical in September 2018. Mr. Fleming will be responsible for the continued expansion and management of the surgical sales force as well as new product introductions. Mr. Fleming has spent over fourteen years in the medical industry with Healthpoint Biotherapeutics, Smith & Nephew and Sanara MedTech. Mr. Fleming earned a Bachelor of Science from Indiana University.

Shawn M. Bowman, age 45, has served as President, Wound Care Division since May 2019, and was named Co-Chief Operating Officer on January 28, 2020. Mr. Bowman previously served as the Company’s Vice President and General Manager, Wound Care since September 2018. Mr. Bowman will be responsible for leading the strategic expansion of the Company’s wound care division. Mr. Bowman has over eighteen years of experience in the medical device, biologics and pharmaceutical industries. Prior to joining Sanara MedTech, Mr. Bowman built two successful teams as Senior Vice President of Wellsense, and as a National Sales Director for Smith & Nephew’s Advanced Wound Management Division. Mr. Bowman earned a Bachelor of Science in Marketing from the University of Connecticut.

Michael D. McNeil, age 55, has served as Chief Financial Officer since April 2018. Prior to joining the Company, Mr. McNeil served as Controller for Smith and Nephew’s U.S. Advanced Wound Management Division from 2012 to 2018. Mr. McNeil previously served as Controller and Assistant Controller with Healthpoint Biotherapeutics from 1999 to 2012. Prior to his employment at Healthpoint, Mr. McNeil held several finance and internal audit positions with Burlington Resources, Snyder Oil Corporation, and Union Pacific Corporation. Mr. McNeil earned his Bachelor of Science in Business Administration from the University of Nebraska and is a Texas certified public accountant.

J. Michael Carmena has served as an executive officer of the Company since December 2016 as described above as a director of the Company.

BOARD STRUCTURE, CORPORATE GOVERNANCE AND DIRECTOR COMPENSATION

Meetings and Committees of the Board of Directors

The Board of Directors meets on a regular basis, at least quarterly, to review significant developments affecting the Company and to act on matters requiring the approval of the Board. In addition to regularly scheduled meetings, the Board also holds special meetings when the Company faces a matter requiring attention or action by the Board. The Board of Directors does not currently have a standing audit, compensation or nominating committee. The entire Board currently performs the functions of each such committee. Due to the small size of the Company as well as the size and nature of its operations, the Board believes that the structure of the Board of Directors does not necessitate these committees

The Board of Director held 16 meeting during 2019. All directors attended 100% of all Board meetings.

 

 

Independent Directors

For purposes of determining the independence of the Company’s directors, the Board of Directors has adopted the definition of independence set forth in the rules of the Nasdaq Stock Market for corporate governance requirements of listed companies. Under that standard, a director is independent if the person has not been employed by the Company at any time during the past three years and the Board has made an affirmative determination that the person does not have a relationship with the Company that would interfere with the exercise of independent judgment in carrying out the responsibilities of a Company director. Under that definition as interpreted in the Nasdaq rules, and based upon information provided by each director concerning his/her background, employment and affiliations, the Board has determined that James W. Stuckert and Kenneth E. Thorpe are independent. Oden “Denny” Howell, who served as a director during 2019 and is not standing for election at the annual meeting, also was determined to be independent.

Nominations of Directors

The Board of Directors does not have a nominating committee to nominate directors for election to the Board. As the Board recently increased in size, the Executive Chairman of the Board has become responsible for identifying potential candidates to be nominated to serve as a director, and the other existing directors participate in evaluating these candidates. When identifying director nominees, the directors may consider, among other factors, the potential nominee’s knowledge and experience in the health care field, the business, financial or other desirable expertise, and independence from the Company. The directors will also consider the number of other public companies for which the person serves as director and the availability of the person’s time and commitment to the Company. Although the Board views diversity of directors to be an important and advantageous element for the composition of the Board of Directors, the Board has no policy or procedure for the consideration of diversity in identifying nominees for director. In the case of current directors being considered for re-nomination, the Board also considers the director’s tenure as a member of the Board, the director’s history of attendance at Board meetings and the director’s preparation for and participation in such meetings. The directors believe that this process currently functions adequately to nominate directors without the need for a formal nominating committee.

The Board of Directors does not have a specific policy regarding consideration of any persons recommended by shareholders to become a director and does not believe such a policy would be significant for the Company. The directors, particularly the Executive Chairman, have communications with shareholders from time to time and informally are able to hear and give consideration if warranted to the views and recommendations of shareholders.

Board Leadership Structure

The leadership structure of the Board of Directors provides that two individuals serve the positions of Chairman of the Board and Principal Executive Officer of the Company. The Board currently believes that this leadership structure best serves the Board’s objectives of oversight of management and the performance of its roles and responsibilities on behalf of shareholders. This structure facilitates the ability of the Executive Chairman to focus efforts on strategic planning and growth of the Company and allows the Principal Executive Officer to concentrate on management and operations of the Company.

Risk Management

 The Board of Directors is responsible for overseeing the Company’s management and operations. The full Board of Directors serves in the role of an audit committee, fulfilling its responsibilities for general oversight of the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory requirements, the independent auditor’s qualifications and independence, and risk assessment and management. The Company believes that the Board provides effective oversight of risk management functions. On a regular basis the Company performs a risk review wherein the management team evaluates the risks we expect to face in the upcoming year and over a longer-term horizon. Plans are then developed to address the risks identified. In addition, members of our management team periodically present to the Board the strategies, issues and plans for the areas of our business for which they are responsible. While the Board oversees risk management, our management team is responsible for the Company’s day-to-day risk management processes. Additionally, the Board requires that management raise exceptional issues to the Board of Directors. We believe this division of responsibilities is the most effective approach for addressing the risks we face and that the Board leadership structure supports this approach.

 

 

Code of Ethics

The Company adopted a Code of Ethics applicable to all directors, officers and employees. The Code of Ethics can be found on the Company’s website at http://sanaramedtech.com under the Investors Relations tab.

Shareholder Communications with the Board

Any matter intended for the Board of Directors, or for any individual member of the Board, should be sent to: Director, Investor Relations, Sanara MedTech Inc., 1200 Summit Ave., Suite 414, Fort Worth, Texas 76102, with a request to forward the communication to the intended recipient. In general, any shareholder communication delivered to the Company for forwarding to Board members will be forwarded in accordance with the shareholder’s instructions. However, the Company reserves the right not to forward any abusive, threatening, or otherwise inappropriate materials.

Director Compensation

The Company reimburses each director for reasonable travel expenses related to such director’s attendance at Board and committee meetings. During 2019, the Company did not pay cash or equity compensation to the members of its Board for their service as directors. The Board expects members will be compensated with annual grants of restricted stock having annual vesting restrictions based on compensation generally valued at $60,000 per year. In February 2020, directors received restricted stock grants with three-year vesting restrictions.

The Company does not sponsor a pension benefits plan, a non-qualified deferred compensation plan or a non-equity incentive plan for its directors.

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

The following table sets forth, as of May 31, 2020, the number and percentage of outstanding shares of our common stock owned by: (a) each person who is known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock; (b) each of our directors; (c) the named executive officers as defined in Item 402 of Regulation S-K; and (d) all current directors and executive officers, as a group. As of May 31, 2020, there were 6,203,402 shares of common stock issued and outstanding and no shares of Preferred Stock issued and outstanding.

 Beneficial ownership has been determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934. Under this rule, certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire shares (for example, upon exercise of an option or warrant) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the number of shares is deemed to include the number of shares beneficially owned by such person by reason of such acquisition rights. As a result, the percentage of shares beneficially owned by a person as shown in the following table does not necessarily reflect the person’s actual voting power at any particular date.

	Common Stock
OFFICERS AND DIRECTORS:	Number of Shares Beneficially Owned	Beneficial Ownership Percentage
Ronald T. Nixon (1)	3,418,996	55.1%
James W. Stuckert (2)	943,993	15.2
S. Oden “Denny” Howell Jr. (3)	483,574	7.8
J. Michael Carmena (4)	6,733
Zachary B. Fleming (5)	8,034
Shawn M. Bowman (6)	5,354
Michael D. McNeil (7)	1,846
Kenneth E. Thorpe (8)	803
Ann Beal Salamone (9)	803
All directors and executive officers as a group (5 persons)	4,870,136	78.4%

_______________

 

  

EXECUTIVE COMPENSATION

The following table and the accompanying notes provide summary information for each of the last two fiscal years concerning cash and non-cash compensation awarded to, earned by or paid to executive officers (or those acting in a similar capacity).

Summary Compensation Table

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards (a) ($)	Non-equity incentive compensation ($)	Non-qualified deferred compensation earnings ($)	All other compensation ($)	Total ($)
Zachary B. Fleming	2019	205,667	90,000	–	–	–	–	–	295,667
Co-Chief Operating Officer and	2018	161,452	68,000	–	–	–	–	–	229,452
President, Surgical
Shawn M. Bowman	2019	205,667	80,000	–	–	–	–	–	285,667
Co-Chief Operating Officer and	2018	58,833	37,000	–	–	–	–	–	95,833
President, Wound Care
J. Michael Carmena	2019	209,600	75,000	–	–	–	–	–	284,600
Principal Executive Officer	2018	207,107	60,000	–	–	–	–	–	267,107
Michael D. McNeil	2019	169,500	63,000	–	–	–	–	–	232,500
Chief Financial Officer	2018	123,625	45,300	–	4,472	–	–	–	173,197

___________

 

 

Employment Agreements

Effective June 1, 2019, the Company entered into employment agreements with two of its executive officers, Shawn M. Bowman and Zachary B. Fleming. Each agreement provides for an initial two-year term, with automatic one-year renewals unless either party gives prior notice to the other party to terminate the agreement. Each agreement provides for an initial base salary of $225,000, a one-time bonus payment of $25,000, an annual bonus opportunity equal to 50% of base salary, and an initial stock grant equal to $112,500. The initial stock grant vests in one-third increments for each year completed after the date of issuance. In the event the executive is terminated by the Company without cause, the executive is entitled to receive a severance package which will include one year of base salary following the effective date of termination, paid in twelve equal monthly installments, and continued participation in any health care benefits provided by the Company to its employees, subject to the executive’s release of any claims.

 No executive officer is entitled to payments as a result of a change in control of the Company.

Retirement Plans

The Company sponsors a 401(k) tax deferred savings plan, whereby the Company matches a portion of employees’ contributions in cash. Participation in the plan is voluntary, and all employees of the Company who are at least 18 years of age are eligible to participate. The Company matches employee contributions dollar-for-dollar on the first 4% of an employee’s pre‑tax earnings, subject to individual IRS limitations.

Non-Qualified Deferred Compensation

 The Company does not sponsor any non-qualified defined compensation plans or other non-qualified deferred compensation plans, and none of the named executive officers contributes to any such plans.

Outstanding Equity Awards at December 31, 2019

The following table provides information concerning outstanding equity awards as of December 31, 2019, for our named executive officers. Market values were determined using the last sale price of our common stock on December 31, 2019. No stock awards or performance awards were made in 2019 under the Company’s equity incentive plan, and those columns have been omitted from the following table.

	Option Awards
Name	Number of Securities Underlying Unexercised Options (Exercisable)	Number of Securities Underlying Unexercised Options (Unexercisable)	Option Exercise Price ($)	Option Expiration Date
J. Michael Carmena	5,000	–	6.00	12/31/2022
Michael D. McNeil	1,000	–	6.00	4/13/2023
Zachary B. Fleming	2,000	–	6.00	12/31/2022
	8,000	–

 

Compensation Determinations

The Board of Directors makes all decisions regarding the compensation of executive officers. The Board has not formed a compensation committee for this purpose because of the small size of the Company. Executive compensation typically consists of a base salary, an annual cash bonus, and longer-term incentive compensation of equity-based incentive awards. Annually, the principal executive officer presents to the Board recommended salary amounts for the coming year and bonus payments relating to the prior year’s performance for all executive officers. The Executive Chairman typically proposes any equity incentive awards which generally would provide for annual vesting over a period of at least three years. The entire Board of Directors considers and approves the final amounts.

 

 

Compensation of directors is generally proposed by the Executive Chairman and presented to the full Board of Directors who approve the final amounts.

 

INDEPENDENT AUDITOR MATTERS

MaloneBailey, LLP provided audit services to the Company as an independent registered public accounting firm for the year ended December 31, 2019. A representative of MaloneBailey, LLP is expected to be in attendance at the virtual annual meeting and to have an opportunity to make a statement at the meeting if desired and to be available to respond to appropriate questions.

The Company’s executive management is primarily responsible for preparation of the Company’s financial statements and the financial reporting process, including the system of internal controls over financial reporting. The Company’s independent auditors are responsible for performing an independent audit of the Company’s consolidated financial statements and internal control over financial reporting, and for issuing an opinion on the fair presentation in all material respects of the financial statements in accordance with U.S. generally accepted accounting principles.

Report of the Board of Directors Regarding the Company’s Auditors

The Board of Directors does not have a standing audit committee to assist the Board in overseeing the financial reporting process. The entire Board of Directors provides the general functions of an audit committee by providing general oversight and monitoring of:

 

When necessary and appropriate to carry out its duties, the Board obtains advice and assistance from outside legal, accounting or other advisors and receives funding for such advice and assistance.

In connection with performing the functions of an audit committee, the Board of Directors reports as follows:

 

Report submitted by the Board of Directors,

Ronald T. Nixon

James W. Stuckert

S. Oden “Denny” Howell Jr.

J. Michael Carmena

Ann Beal Salamone

Kenneth E. Thorpe

 

 

Audit Fees. We engaged MaloneBailey, LLP to conduct our annual audits and review of quarterly financial statements for the years ended December 31, 2019 and December 31, 2018. Audit fees for services performed were $88,000 during 2019 and $68,303 during 2018.

Tax Fees. We engaged Haynie & Company as our accountants for professional services provided for tax compliance, tax advice and tax planning relating to the years ended December 31, 2019 and December 31, 2018 and paid $24,951 during 2019 and $20,903 during 2018. No fees for tax-related services were paid to our independent auditors.

All Other Fees. We paid no other fees to our independent auditors.

 Pre-Approval Policy. The policy of the Board of Directors, in its capacity as the Company’s audit committee, is the pre-approval of all audit, audit-related and non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services. The Board of Directors approved all of the fees described above. The Board may also pre-approve particular services on a case-by-case basis. The independent auditors are required to periodically report to the Board regarding the extent of services provided by the auditors in accordance with that policy. The Board may also delegate pre-approval authority to one or more of its members, who must report any decisions to the Board at the next scheduled Board meeting.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company was a participant in the following transactions with related parties since January 1, 2018.

Mr. Howell and Mr. Stuckert each held a convertible note from the Company payable in the principal amount of $600,000 and accrued interest of $192,797 as of February 18, 2018. On February 19, 2018, each convertible note and $192,797 of accrued interest were converted to 113,257 shares of our common stock.

The Company paid an affiliate of Catalyst Group Inc. (“Catalyst”) a total of $229,356 in 2019. The payments were related to professional services provided to Cellerate, LLC by a Catalyst affiliate under the terms of the Professional Services agreement between the Catalyst affiliate and the Company which was executed upon the formation of Cellerate, LLC. Amounts due to Catalyst and its affiliate totaled $36,790 at December 31, 2019. The Sanara Executive Chairman is the Founder and Managing Partner of Catalyst.

The Company paid Rochal Industries, LLC (“Rochal”) a total of $1,663,073 in 2019. The payments included $1,500,000 under two separate new product license agreements whereby the Company obtained worldwide rights to market and sell certain FDA-cleared products developed by Rochal. Other payments were primarily for finished goods inventory of the licensed products. The Company will pay Rochal royalties on the licensed products at the rate of 4% of net sales during the term of the licenses. Amounts due to Rochal totaled $31,878 at December 31, 2019.

On July 8, 2019, the Company executed a license agreement with Rochal whereby the Company acquired an exclusive worldwide license to market, sell and further develop antimicrobial products for the prevention and treatment of microbes on the human body utilizing certain Rochal patents and pending patent applications. The Company makes initial payments of $1,500,000 under the license and will pay royalties of 4% of net sales during the term of the license. Currently, the products covered by the license agreement are BIAKŌS™ Antimicrobial Wound Gel, and FDA-cleared BIAKŌS™ Antimicrobial Skin and Wound Cleanser.

On October 1, 2019, the Company executed a license agreement with Rochal whereby the Company acquired an exclusive worldwide license to market, sell and further develop certain antimicrobial barrier film and skin protectant products for use in the human health care market utilizing certain Rochal patents and pending patent applications. The Company makes initial payments of $1,000,000 under the license and will pay royalties of 4% of net sales during the term of the license. Currently, the products covered by this license agreement are BIAKŌS™ Antimicrobial Barrier Film and Curashield™ No Sting Skin Protectant.

 

 

On May 4, 2020, the Company executed a product license agreement with Rochal whereby the Company acquired an exclusive world-wide license to market, sell and further develop certain products for human medical use to enhance skin condition or treat or relieve skin disorders, excluding uses primarily for beauty, cosmetic, or toiletry purposes. The Company is making initial payments of $1,950,000 under the license and will pay royalties of 4% of net sales during the term of the license.

Ronald T. Nixon, Executive Chairman of the Company, is also a director of Rochal, and indirectly a significant shareholder of Rochal, and through the potential exercise of warrants a majority shareholder of Rochal. Ann Beal Salamone, a director of the Company, is a significant shareholder, the former president and current Chairman of the Board of Rochal.

On October 15, 2019, the Company closed a private placement offering of its common stock for an aggregate purchase price of $10,000,000. The purchasers in the offering were related party entities to three members of the Company’s Board of Directors, Ronald T. Nixon, James W. Stuckert and Oden “Denny” Howell. The purchase price of the common stock and amount of the offering were determined by a special committee of the Board comprised of disinterested Directors who engaged an independent third-party to provide a valuation of the offering price and other relevant information regarding the transaction.

John C. Siedhoff was a director of the Company from 2014 until he resigned that position January 31, 2019. During 2019 and January 2020, Mr. Siedhoff received compensation in the amount of $260,000 in consulting fees as a consultant to the Company. On January 31, 2019, Mr. Siedhoff entered into a consulting agreement with the Company that terminates December 31, 2020. Under the agreement Mr. Siedhoff earned consulting fees in the amount of $21,947 per month through December 31, 2019. For the period January 1, 2020 through December 31, 2020, Mr. Siedhoff will earn $10,000 per month.

The Company does not have a written policy regarding review and approval of transactions with related parties. All members of the Board of Directors have an understanding that any transaction between the Company and any related person will be reviewed by the Board and will take into consideration the importance and scrutiny that must be given to such review to assure protection of the Company’s interest. As part of that review, members of the Board understand the importance of obtaining all relevant information regarding the transaction and will when prudent obtain independent valuation and expert advice. Additionally, to the extent any Board member is a party to or could benefit from the transaction, approval would require a majority of the disinterested directors and may require deliberations without participation of the interested person.

DELINQUENT SECTION 16(a) REPORTS

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers, and persons who own more than 10% of a registered class of our equity securities to file reports with the SEC of ownership and changes in ownership of our common stock and other equity securities of the Company. Based solely on a review of the Section 16(a) forms filed with the SEC and the representations made by the reporting persons to us, during the fiscal year ended December 31, 2019, two of our directors, Kenneth E. Thorpe and Ann Beal Salamone, and two officers, Zachary B. Fleming and Shawn M. Bowman, each filed late a single form, the Initial Statement of Beneficial Ownership, due to an oversight by Company counsel. Family Alignment, LLC and Catalyst Group, Inc. filed a late amendment to the Form 3 filing of FA Sanara, LLC in order to become a group for filing purposes with FA Sanara, LLC due to a delay in receiving EDGAR filing codes from the SEC. All transactions of our directors and officers were timely reported.

 

Item 2. APPROVAL OF RESTATED 2014 OMNIBUS LONG TERM INCENTIVE PLAN

In 2014, the Company adopted, and the shareholders approved, the Company’s 2014 Omnibus Long Term Incentive Plan (the “Plan”) under which the Company may issue various equity securities and cash bonuses to employees, directors and consultants selected to participate in the Plan. Shareholder approval is required under the Internal Revenue Code to issue incentive stock options under the Plan. Shareholder approval is also a requirement of any stock exchange on which the Company in the future desires to list the common stock.

 

 

As a result of the 1-for-100 reverse stock split of the Company’s common stock in May 2019, the Board of Directors made adjustment to a number of provisions of the Plan affected by the reverse stock split, such as the number of shares authorized for issuance under the Plan. Several other provisions were amended such as the definition of “change in control” of the Company and the effect of a change in control on outstanding awards under the Plan. The Plan is currently effective, and the Company does not believe such adjustments and changes were adverse to the shareholders, but the Board of Directors believes it is advisable to submit the restated Plan for shareholder approval.

If the Plan is not approved by the shareholders, the Company will cease issuing awards under the Plan, but awards previously issued under the Plan would remain in effect under the current terms of the Plan and the associated award agreements. The following summary and discussion does not purport to be complete and is subject to and qualified in its entirety by reference to the complete text of the Plan which is attached as Exhibit A to this proxy statement.

Description of the Plan

The Plan authorizes the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, and performance share awards to the Company’s officers, directors, employees and consultants. Awards may be granted alone, in addition to, or in combination with, any other awards under the Plan or any other compensation plan. The Plan provides a pool of 2,000,000 shares, which is equal to 10% of the total number of shares of common stock authorized for issuance under the Company’s corporate documents. The Plan will terminate on September 3, 2024, but previously granted awards remain outstanding until they expire by their terms or the terms of the Plan. In this summary, the term “shares” means the Company’s common stock, and the term “stock unit” means a unit or right whose value is based on the value of a share.

Administration. The Plan is administered by a committee appointed by and serving at the pleasure of the Board of Directors (the “Committee”) composed of at least two directors of the Company who qualify as an “independent director” under the rules of The Nasdaq Stock Market, Inc. and as a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934. Unless otherwise determined by the Board, the Compensation Committee of the Board will serve as the Committee. Currently the Board of Directors has not appointed the Committee, and until the Committee is appointed the Board of Directors is administering the Plan in lieu of the Committee. The Committee is authorized, subject to the terms of the Plan, to determine which participants will receive awards, the times when such awards will be made, the times when such awards will vest, the types of awards, the number of shares to be issued under the awards, the value or amount of the awards, and other terms and conditions of awards. All decisions with respect to the Plan will be within the discretion of the Committee.

Available Shares. To the extent an award granted under the Plan terminates or is canceled or forfeited, the shares allocable to the terminated, canceled or forfeited portion of the award will be added back to the aggregate number of shares available for grant under the Plan, and may again be subject to future awards. If, however, shares are withheld or delivered to the Company to satisfy the exercise price or tax withholding obligation of any option or other award or equivalent shares are purchased by the Company in the open market, then those shares will not be added back to the pool of shares available for grant under the Plan.

Grant Participants and Limitations. Currently the Plan has 37 participants, which include the five outside directors, the four executive officers, 28 other officers and employees and two consultants. The grants of awards are subject to the following limitations:

 

 

Vesting of Awards. The Committee may determine at the grant of an award the time or times at which portions of an award vest, which means when (i) stock options or SARs becomes exercisable, (ii) restricted stock or restricted stock units are no longer subject to forfeiture and restrictions on transfer and (iii) performance share awards are no longer subject to restrictions and forfeiture. The Committee may also determine the events (such as termination of employment) which, if an event were to occur prior to the vesting of any portion of an award, would result in the termination or forfeiture of the unvested portion of the award.

Stock Options and Stock Appreciation Rights. Stock options provide the holder the right to purchase shares at the exercise price specified in the award. SARs provide the holder the right to receive an amount in shares or cash equal to the spread between the exercise price specified in the award and the market price of a share at the time of exercise. SARs may be granted alone or in tandem with stock options. Stock options and SARs are subject to the terms and conditions determined by the Committee, except that the exercise price of an option or base value of an SAR cannot be less than 100% of the fair market value of a share on the date of the grant. The Committee determines the form in which payment of the exercise price may be made. Stock options may be granted in the form of nonqualified stock options or, if they meet certain requirements of the Internal Revenue Code, ISOs, which are subject to U.S. income tax treatment described below.

Restricted Stock and Restricted Stock Units. Restricted stock is an award of shares subject to a restriction period specified in the award. During the restriction period, the shares cannot be transferred and are subject to forfeiture. The Committee may determine whether the restricted stock carries the rights to receive dividends and to vote the shares during the restriction period. Restricted stock units are similar to restricted stock except that the award takes the form of stock units instead of actual shares. The Committee will determine whether the restricted stock units may be settled in cash or shares and whether during the restriction period, a holder of restricted stock units may be paid cash (dividend equivalents) that are equal in timing and amount to share dividends. Restricted stock units will not have voting or other shareholder rights.

Performance Share Awards. Performance share awards provide a right to receive shares in the future conditioned upon the attainment of specified performance objectives within a specified period and any other conditions, restrictions and contingencies determined by the Committee. The extent of the successful attainment of the performance criteria determines the number of shares that will be distributed to the participant. Performance measurement may be based on overall Company, business unit or divisional performance and/or on relative performance as compared with that of other publicly traded companies.

Adjustments. The Committee may make appropriate adjustments in the number of shares available under the Plan and the number of shares receivable and exercise price or other consideration payable by a participant pursuant to an award in order to reflect any stock split, stock dividend, recapitalization, reorganization, consolidation, merger, combination or exchange of shares, distribution to shareholders, liquidation, dissolution or other similar event.

Amendments. The Board of Directors may terminate or amend the Plan without participant or shareholder approval, except that shareholder approval is required for any amendment that would require shareholder approval under the rules of the stock exchange on which the common stock is then listed, or would be necessary in order for the Plan or awards to comply with Section 422 of the Internal Revenue Code, or otherwise would be required by applicable law or regulation.

Change in Control. Upon a change in control of the Company, all outstanding stock options and SARs automatically become fully vested and exercisable, all restricted share awards automatically become fully vested, and performance share awards provide for payout assuming achievement of 100% of the performance objective and a prorated payout of shares based on the number of months that have elapsed from the beginning of the performance period to the date of the change in control as a percentage of the number of months in the entire performance period. A change in control is defined as a sale of substantially all the assets of the Company or the merger or consolidation of the Company that results in the Company’s shareholders prior to the transaction holding less than 50% of the voting power of the post-transaction company.

Award Grants in 2020. Prior to 2019, the Company granted 8,000 stock options which are currently outstanding and exercisable, and in 2019 granted no awards. As a result of the 1-for-100 reverse stock split on May 10, 2019, the Board of Directors adjusted the exercise price and number shares exercisable from those outstanding options and adjusted the number of shares subject to grant and other limitations under the Plan. In 2020 the Company has granted 180,100 shares of restricted stock, consisting of 26,507 shares to outside directors, 40,910 shares to executive officers, 97,683 shares to other employees, and 15,000 shares to consultants. If the Plan is approved by the Company’s shareholders, all of the grants in 2020 will be counted against the limitation of 2,000,000 total shares granted under the Plan.

 

 

Federal Income Tax Consequences

The following discussion generally summarizes certain federal income and employment tax consequences of the issuance and receipt of awards under the Plan in effect on the date of this Proxy Statement. The rules governing the tax treatment of such awards are complex, so the following discussion of tax consequences is general in nature and is not complete. In addition, statutory provisions and these rules are subject to change, as are their interpretations, and their application may vary in individual circumstances. This discussion does not purport to cover all federal income or employment tax consequences, or other federal tax consequences, associated with the Plan, nor does it address state, local, or non-U.S. taxes. The Plan is not qualified under the provisions of Section 401(a) of the Internal Revenue Code.

Incentive Stock Options (“ISOs”). A participant who is granted an ISO recognizes no income upon the grant or the exercise of the ISO. However, the excess of the fair market value of the shares of common stock subject to the ISO on the date of exercise over the ISO’s exercise price is an item includible in the optionee’s alternative minimum taxable income (unless the optionee exercises and sells the applicable underlying shares in the same year). If an optionee holds the common stock acquired upon exercise of the ISO for at least two years from the date of grant of the ISO and at least one year following exercise (the “Statutory Holding Period”), the optionee’s gain, if any, upon a subsequent disposition of the common stock is taxed as capital gain. If, however, an optionee disposes of the common stock before satisfying the Statutory Holding Period, then depending on additional facts (e.g., the amount realized in the applicable disposition, the fair market value of the common stock on the date of exercise of the ISO, and the ISO’s exercise price), part or all of the income/gain or loss may be treated as taxable compensation income and/or as capital gain or loss. The Company is not entitled to any deduction regarding the grant or exercise of an ISO or the optionee’s subsequent disposition of the shares acquired if the optionee satisfies the Statutory Holding Period. However, if the Statutory Holding Period is not satisfied, the Company is generally entitled to a deduction in the year the optionee disposes of the common stock in an amount equal to the optionee’s compensation income.

Nonqualified Stock Options. Generally, a participant who is granted a stock option that is not an ISO recognizes no income upon grant of the option. At the time of exercise, however, the optionee generally recognizes compensation income equal to the excess, if any, of the fair market value of the common stock on the date of exercise over the exercise price. This income is subject to income and employment tax withholding by the Company, which is generally entitled to an income tax deduction corresponding to the compensation income recognized by the optionee. When an optionee disposes of common stock received upon exercise, the optionee will recognize capital gain or loss equal to the difference between the sales proceeds received and the optionee’s basis in the stock sold. The Company will not receive a deduction for any capital gain recognized by the optionee. The capital gain or loss will be treated as long-term if the common stock has been held for more than one year from the date of exercise.

Stock Appreciation Rights (“SARs”). A participant who is granted a SAR recognizes no income upon grant of the SAR. At the time of exercise, however, the participant generally recognizes compensation income equal to any cash received and the fair market value of any common stock received. This income is subject to income and employment tax withholding by the Company, which is generally entitled to an income tax deduction corresponding to the compensation income recognized by the participant.

Restricted Stock Awards. Generally, restricted stock awards are subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the Internal Revenue Code. A participant who is granted restricted stock that is subject to such a substantial risk of forfeiture may make an election under Section 83(b) of the Internal Revenue Code (a “Section 83(b) Election”) to have the fair market value of the common stock (minus any amount paid by the participant for the stock) taxed as compensation income at the date of grant. Any future appreciation (or depreciation) in the value of the common stock is taxed as capital gain (or loss) upon a subsequent sale of the stock, with the holding period commencing on the date of grant. If a participant does not make a Section 83(b) Election, then as shares vest, they will be taxed as compensation income on the vesting date in an amount equal to the fair market value of such vesting common stock as of the vesting date (minus any amount paid by the participant for the vesting portion of the restricted stock). The participant’s basis in the common stock will be the amount of compensation income recognized (plus any amount paid by the participant for the restricted stock). Any future appreciation (or depreciation) in the value of the common stock is taxed as capital gain (or loss) upon a subsequent sale of the stock, with the holding period commencing on the vesting date. Any compensation income the participant recognizes from the grant of restricted stock is subject to income and employment tax withholding by the Company, which is generally entitled to an income tax deduction corresponding to the compensation income recognized by the participant.

 

 

Restricted Stock Units and Performance Share Awards. The grant of a performance share award or a restricted stock unit does not generate taxable income to a participant or an income tax deduction by the Company. Any cash and the fair market value of any common stock received as payout on a performance share award or restricted stock unit will constitute compensation income to the participant. The participant’s income is subject to income and employment tax withholding by the Company, which is generally entitled to an income tax deduction corresponding to the compensation income recognized by the participant.

Payment of Withholding Taxes. The Company has the right to withhold or require a participant to remit to the Company an amount sufficient to satisfy any federal, state, local, or foreign withholding tax requirements on any grant, exercise, or disposition, as applicable, of common stock under the Plan.

Section 409A. Section 409A of the Internal Revenue Code establishes tax rules applying to “nonqualified deferred compensation plans.” The failure of an award under the Plan to comply with, or to qualify for an exemption from, Section 409A could result in significant adverse tax results to the award recipient, including immediate taxation upon vesting, a 20% additional tax penalty on the value of the nonqualified deferred compensation, and the imposition of an interest charge. The provisions of the Plan are intended to comply with the applicable requirements of Section 409A, and the Committee intends for awards under the Plan to be in compliance with (or exempt from) Section 409A and for the Plan to be so interpreted and administered.

Vote Required to Approve the Plan

 Approval of the Plan requires the affirmative vote for approval by holders of a majority of the outstanding shares of common stock. Each share of common stock is entitled to one vote. Abstentions and broker non-votes will have the same effect as voting against approval of the Plan. If a shareholder executes and returns a proxy, but does not specify how the shares represented by such shareholder’s proxy are to be voted, the shares will be voted FOR approval of the Plan.

The Board of Directors recommends a vote “FOR” approval of the Plan.

 

Item 3. ADVISORY VOTE ON EXECUTIVE COMPENSATION

The Company is soliciting your response of approval of the following resolution of the executive compensation paid to our executive officers as described under “Executive Compensation” above, as required by rules of the Securities and Exchange Commission. Your vote on this matter is advisory only and will not be binding on the Board of Directors. However, the Board of Directors will review the voting results of shareholders and take that into consideration when making future decisions regarding executive compensation.

RESOLVED, that the compensation paid to the Company’s executive officers as disclosed in the sections of this proxy statement entitled “Executive Compensation” and “Approval of Restated 2014 Stock Incentive Plan—Description of Plan,” in accordance with the rules of the Securities and Exchange Commission, is hereby APPROVED.

The Board of Directors recommends a vote “FOR” approval of the advisory vote on executive compensation.

 

Item 4. FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION

Federal legislation and rules of the Securities and Exchange Commission require the Company to submit to shareholders for an advisory vote how often we should present to shareholders the advisory vote on executive compensation as we are doing this year in Item 3, above. We are required to solicit your vote on whether the advisory vote by shareholders on the Company’s payment of executive compensation should be every 1, 2, or 3 years. Each shareholder may vote on whether the Company should submit to shareholders the advisory vote on executive compensation each year, every other year, or every three years, or of course you may abstain from voting. The number of years (1, 2 or 3) that receives the most votes will be deemed to be the majority choice of shareholders.

 

 

Decisions by the Board of Directors on executive compensation are complex and take into account many factors that are weighed by the Board each year, including Company operational and financial performance, individual performance, and compensation levels of executives in companies of approximately the same size that compete with the Company or are otherwise in the same industry. The Board must also determine and weigh the appropriate methods and types of compensation that reward short term performance and that also incentivize longer-term performance to benefit shareholders.

The Board of Directors believes that a frequency of three years for shareholder advisory votes on executive compensation is the appropriate period. A 3-year period is consistent with the Company’s longer-term business strategy and allows the Board time to evaluate the Company’s results and experience with its executive compensation policy and to consider shareholders’ response and feedback.

Although this is an advisory vote and not binding on the Company, the Board of Directors will carefully consider the vote of shareholders.

The Board of Directors recommends a vote “FOR” a frequency of 3 years.

 

OTHER MATTERS

Other Business at the 2020 Annual Meeting

The Board of Directors is not aware of any business to be presented for consideration at the annual meeting other than those matters described in this proxy statement. If any other business should properly come before the meeting, however, it is intended that the persons named in the accompanying proxy card will vote on those matters in accordance with their best judgment.

Submission of Shareholder Proposals for the 2021 Annual Meeting of Shareholders

Shareholder proposals intended to be presented pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 for inclusion in our proxy statement and accompanying proxy card for our 2021 annual meeting of shareholders must be received at our principal executive office in Fort Worth, Texas on or before December 15, 2020, and must meet the requirements of Rule 14a-8.

Annual Report on Form 10-K

Our 2019 Annual Report on Form 10-K for the year ended December 31, 2019 with audited financial statements as filed with the Securities and Exchange Commission accompanies this proxy statement. Additional copies will be furnished to our shareholders upon written request to: Corporate Secretary, Sanara MedTech Inc., 1200 Summit Ave., Suite 414, Fort Worth, Texas 76102.

By Order of the Board of Directors

 

Michael D. McNeil

Chief Financial Officer

   and Secretary

Fort Worth, Texas

June 25, 2020

EXHIBIT A

SANARA MEDTECH INC.

RESTATED 2014 OMNIBUS LONG TERM INCENTIVE PLAN

February 10, 2020

 

ARTICLE 1

General Purpose of Plan; Definitions

“Affiliate” means any corporation, partnership, joint venture or other entity, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with the Company within the meaning of Section 414(b) or (c) of the Code.

“Award” means any Common Share, Stock Option, Stock Appreciation Right, Restricted Share, Restricted Share Unit or Performance Share granted pursuant to this Plan.

“Base Value” is defined in Section 7.3.

“Beneficial Owner” means a “beneficial owner,” as such term is defined in Rule 13d-3 under the Exchange Act (or any successor rule thereto).

“Board” means the Board of Directors of the Company.

“Change in Control” is defined in Section 12.1.

“Code” means the Internal Revenue Code of 1986, as amended from time to time, and lawful regulations and guidance promulgated thereunder. Whenever reference is made to a specific Internal Revenue Code section, such reference shall be deemed to be a reference to any successor Internal Revenue Code section or sections with the same or similar purpose.

“Committee” means the entity administering this Plan as provided in Section 2.1.

“Common Shares” means shares of common stock of the Company, par value $0.001 per share.

“Company” means Sanara MedTech Inc., a corporation organized under the laws of the State of Texas and, except for purposes of determining whether a Change in Control has occurred, any corporation or entity that is a successor to Sanara MedTech Inc. or substantially all of the assets of Sanara MedTech Inc. and that assumes the obligations of Sanara MedTech Inc. under this Plan by operation of law or otherwise.

“Date of Grant” means the date on which the Committee grants an Award.

“Director” means a member of the Board.

“Disability” shall be defined in the Award agreements, as necessary.

 

 

“Employment” as used herein shall be deemed to refer to (i) a participant’s employment if the participant is an employee of the Company or any of its Affiliates, (ii) a participant’s services as a consultant, if the participant is a consultant to the Company or its Affiliates and (iii) a participant’s services as a non-employee director, if the participant is a non-employee member of the Board; provided that, for any Award that is or becomes subject to Section 409A of the Code, termination of Employment means a “separation from service” under Section 409A of the Code.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any lawful regulations and guidance promulgated thereunder. Whenever reference is made to a specific Securities Exchange Act of 1934 section, such reference shall be deemed to be a reference to any successor section or sections with the same or similar purpose.

“Exercise Price” means the purchase price of a Share pursuant to a Stock Option.

“Fair Market Value” means: (i) if the Common Shares are listed on a national securities exchange or quoted in an interdealer quotation system, the last sales price or, if unavailable, the average of the closing bid and asked prices per Share on such date (or, if there was no trading or quotation of the Common Shares on such date, on the next preceding date on which there was trading or quotation); or (ii) if the Common Shares are not listed on a national securities exchange or quoted in an interdealer quotation system, the “Fair Market Value” of Common Shares shall be determined by the Committee in a reasonable manner pursuant to a reasonable valuation method. Notwithstanding anything to the contrary in the foregoing, as of any date, the “Fair Market Value” of Common Shares shall be determined in a manner consistent with avoiding adverse tax consequences under Code Section 409A. In addition, “Fair Market Value” with respect to ISOs and related SARs shall be determined in accordance with Section 6.2(f).

“Full-Value Awards” means Restricted Share Awards, Restricted Share Unit Awards, Performance Share Awards and Common Share Awards.

“Incentive Stock Option” and “ISO” mean a Stock Option which meets the requirements of Section 422 of the Code.

“Non-Qualified Stock Option” and “NQSO” mean a Stock Option that does not meet the requirements of Section 422 of the Code.

“Outside Director” means a Director who meets the definitions of the terms “independent director” set forth in The Nasdaq Stock Market, Inc. rules, and “non-employee director” set forth in Rule 16b-3, or any successor definitions adopted by The Nasdaq Stock Market, Inc. and Securities and Exchange Commission, respectively, and similar requirements under any other applicable laws, rules and regulations.

“participant” is defined in Section 4.1.

“Parent” means any corporation which qualifies as a “parent corporation” of the Company under Section 424(e) of the Code.

“Performance Period” is defined in Section 8.4(g).

“Performance Shares” means any Shares issued pursuant to an Award granted under Article 9.

“person” means a “person” as such term is used for purposes of Section 13(d) or 14(d) of the Exchange Act.

“Plan” means this Sanara MedTech Inc. 2014 Omnibus Long Term Incentive Plan, as amended from time to time.

“Plan Year” means the calendar year.

 

 

“Restricted Share Units” means Shares issued by the Company pursuant to an Award granted under Article 8 that will be issued to a participant at a future time or times at no cost or at a purchase price determined by the Committee, which may be below their Fair Market Value, if continued Employment and/or other terms and conditions specified by the Committee are satisfied.

“Restricted Shares” means Shares which are issued by the Company pursuant to an Award granted under Article 8 to a participant at no cost or at a purchase price determined by the Committee which may be below their Fair Market Value but which are subject to forfeiture and restrictions on their sale or other transfer by the participant.

“Retirement” shall be defined in the Award agreements, as necessary.

“Rule 16b-3” is defined in Article 17.

 “Share” or “Shares” mean one or more of the Common Shares.

“Shareholder” means an individual or entity that owns one or more shares of stock of the Company, including Common Shares.

“Stock Appreciation Rights” and “SARs” mean any right pursuant to an Award granted under Article 7.

“Stock Option” means a right to purchase a specified number of Shares at a specified price which is granted pursuant to Article 5; such right may be an Incentive Stock Option or a Non-Qualified Stock Option.

“Stock Power” means a power of attorney executed by a participant and delivered to the Company which authorizes the Company to transfer ownership of Restricted Shares, Performance Shares or Common Shares from the participant to the Company or a third party.

“Subsidiary” means any corporation which qualifies as a “subsidiary corporation” of the Company under Section 424(f) of the Code.

“Vested” means, with respect to a Common Share, when the Common Share has been awarded; with respect to a Stock Option, when the Stock Option first becomes exercisable; with respect to a Stock Appreciation Right, when the Stock Appreciation Right first becomes exercisable; with respect to Restricted Shares, when the Shares are no longer subject to forfeiture and restrictions on transferability; with respect to Restricted Share Units and Performance Shares, when the Restricted Share Units or Performance Shares are no longer subject to restrictions and forfeiture and are convertible to, or replaceable with, Shares. “Vest” and “Vesting” shall have correlative meanings.

ARTICLE 2

Administration

 

 

 

 

 

ARTICLE 3

 Stock Subject to Plan

ARTICLE 4

Participants; Award Agreements

 

 

ARTICLE 5

Stock Option Awards

 

(a)           Exercise Price. Subject to Section 3.4, the Exercise Price will never be less than 100% of the Fair Market Value of the Shares on the Date of Grant. Except as otherwise provided in Section 3.4, no subsequent amendment of an outstanding Stock Option may reduce the Exercise Price to less than 100% of the Fair Market Value of the Shares on the Date of Grant.

 

The Committee may withhold its approval for any method of payment for any reason, in its sole discretion, including but not limited to concerns that the proposed method of payment will result in adverse financial accounting treatment, adverse tax treatment for the Company or a participant or a violation of the Sarbanes-Oxley Act of 2002, as amended from time to time, and lawful regulations and guidance promulgated thereunder.

 

 

ARTICLE 6 

Special Rules Applicable to Incentive Stock Options

  

 

ARTICLE 7

Stock Appreciation Rights

 

 

ARTICLE 8

Restricted Share and Restricted Share Unit Awards

The Committee may at any time waive such restrictions or accelerate the date or dates on which the restrictions will lapse.

“The transferability of this certificate and the Common Shares represented by it are subject to the terms and conditions (including conditions of forfeiture) contained in the Sanara MedTech Inc. 2014 Omnibus Long Term Incentive Plan and an agreement entered into between the registered owner and the Company. A copy of this Plan and agreement are on file in the office of the Secretary of the Company.”

 

 

At the end of any time period during which the Restricted Shares are subject to forfeiture and restrictions on transfer, and after the satisfaction by the participant of tax withholding requirements, such Shares will be delivered free of all restrictions (except as provided in Section 15.2) to the participant or other appropriate person and with the foregoing legend removed.

 

 

The Committee may at any time waive such restrictions or accelerate the date or dates on which the restrictions will lapse.

 

ARTICLE 9

Performance Share Awards

 

 

ARTICLE 10

Common Share Awards

ARTICLE 11

Transfers and Leaves of Absence

 

 

ARTICLE 12

Effect of Change in Control

12.1           Change in Control Defined. “Change in Control” means (i) a sale of all or substantially all of the assets of the Company to any person or entity that is not a wholly owned subsidiary of the Company; (ii) a merger or consolidation to which the Company is a party if all persons who were shareholders of the Company immediately prior to the effective date of the merger or consolidation become beneficial owners (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities having less than 50% of the total combined voting power for election of directors (or comparable governing body) of the surviving corporation or other entity following the effective date of such merger or consolidation; or (iii) the approval by shareholders of the Company of any plan or proposal for the liquidation of the Company or its subsidiaries (other than into the Company).

 

12.2           Acceleration of Award. Except as otherwise provided in this Plan or an Award agreement, immediately upon the occurrence of a Change in Control:

12.3           Treatment of Awards. If the Committee determines that it would not trigger adverse taxation under Section 409A of the Code, upon the occurrence of a Change in Control, the Committee may, but shall not be obligated to, (A) cancel Awards for fair value, which, in the case of Stock Options and Stock Appreciation Rights, shall equal the excess, if any, of the value of the consideration to be paid in the Change in Control transaction to holders of the same number of Shares subject to such Stock Options or Stock Appreciation Rights (or, if no consideration is paid in any such transaction, the Fair Market Value of the Shares subject to such Stock Options or Stock Appreciation Rights as of the date of the Change in Control) over the aggregate Exercise Price or Base Value (as applicable) of such Stock Options or Stock Appreciation Rights or (B) provide for the issuance of substitute Awards that will substantially preserve the otherwise applicable terms and value of any affected Awards previously granted hereunder as determined by the Committee or (C) provide that for a period of at least 15 days prior to the Change in Control, such Awards shall be exercisable, to the extent applicable, as to all Shares subject thereto and the Committee may further provide that upon the occurrence of the Change in Control, such Awards shall terminate and be of no further force and effect.

 

 

ARTICLE 13

Transferability of Awards

ARTICLE 14

Amendment and Discontinuation

Notwithstanding the foregoing, this Plan may be amended without obtaining the affected participants’ consent in order to: (i) comply with any law; (ii) preserve any intended favorable tax effects for the Company or participants; or (iii) avoid any unintended unfavorable tax effects for the Company or participants.

ARTICLE 15

Share Certificates

 

 

Notwithstanding the foregoing, with respect to any Award that is or becomes subject to Section 409A of the Code, a payment may only be delayed where the Company or any Affiliate reasonably anticipates that the making of the payment will violate federal securities laws or other applicable law and provided that the payment is made at the earliest date at which the Company or Affiliate reasonably anticipates that the making of the payment will not cause such violation.

ARTICLE 16

Tax Withholding

 

 

ARTICLE 17

General Provisions

 

ARTICLE 18

Effective Date; Expiration

18.1           Effective Date. The effective date of this Plan is the date on which the Shareholders of the Company approve it at a duly held Shareholders’ meeting. No Awards may be granted under this Plan after the tenth anniversary of such date, but Awards granted before such tenth anniversary may remain outstanding under this Plan until they expire according to their terms and the other terms of this Plan.

 

 

Control Number:

Number of Shares:

Registered Shareholder:

 

SANARA MEDTECH INC.

1200 Summit Ave., Suite 414

Fort Worth, Texas 76102

PROXY

Solicited on Behalf of the Board of Directors for Annual Meeting of Shareholders, July 9, 2020

The undersigned hereby appoints J. Michael Carmena and Michael D. McNeil, and each of them, as proxies with full power of substitution, to represent and to vote as set forth herein all the shares of the common stock of Sanara MedTech Inc. which the undersigned is entitled to vote at the 2020 Annual Meeting of Shareholders and any adjournments or postponements thereof, as designated below. If no designation is made, the proxy, when properly executed, will be voted: (i) “FOR” the election of the director nominees named below in Item 1, (ii) “FOR” Item 2, approval of the Restated 2014 Omnibus Long Term Incentive Plan, (iii) “FOR” Item 3, approval of the advisory vote on executive compensation, (iv) “FOR” a frequency of 3 years to vote on executive compensation in Item 4, and (v) in the discretion of the proxies upon such other matter as may properly come before the Annual Meeting.

INSTRUCTION: To withhold authority to vote for individual nominees, write their names on the line above.

☐ For

☐ Against

☐ Abstain

 

 

☐ For

☐ Against

☐ Abstain

 

☐ Each year

☐ Every 2 years

☐ Every 3 years

  

In his or her discretion, the proxy is authorized to vote upon any other matters which may properly come before the Annual Meeting, or any adjournment or postponement thereof.

 THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

	Dated: ___________________________________________, 2020   ______________________________________________________ Signature   ______________________________________________________ Signature (Joint Owners)   Please date and sign name exactly as it appears hereon. Executors, administrators, trustees, etc. should so indicate when signing. If the stockholder is a corporation, the full corporate name should be inserted and the proxy signed by an officer of the corporation indicating his/her title
	[SEE VOTING INSTRUCTIONS ON REVERSE SIDE]

  

 

VOTING INSTRUCTIONS

Please sign, date and mail this Proxy Card promptly to the following address in the enclosed postage-paid envelope:

Securities Transfer Corporation

2901 N. Dallas Parkway, Suite 380

Plano, Texas 75093

Attention: Proxy Department

OR

You may sign, date and submit your Proxy Card by facsimile to (469) 633-0088.

OR

You my sign, date, scan and email your scanned Proxy Card to proxyvote@stctransfer.com.

OR

You may vote online through the Internet:

If you vote your proxy on the Internet, you do not need to mail back, fax or email your Proxy Card.

The Proxy Statement, the form of Proxy Card and the Company’s Annual Report to Shareholders are available at http://onlineproxyvote.com/SMTI/