DEF 14A 1 dmtp20240329_def14a.htm FORM DEF 14A dmtp20240329_def14a.htm

 



 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

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 Pursuant to §240.14a-11(c) or §240.14a-2

 

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DIAMEDICA THERAPEUTICS INC.

(Name of Registrant as Specified In Its Charter)

 

 

Payment of Filing Fee (Check the appropriate box):

 

No fee required

Fee paid previously with preliminary materials

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

 



 

 

 

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April 4, 2024

 

Dear Shareholders:

 

Together with our Board of Directors and the management team at DiaMedica Therapeutics Inc., we are pleased to invite you to our 2024 Annual General Meeting of Shareholders, which will be held at our corporate offices located at 301 Carlson Parkway, Suite 210, Minneapolis, Minnesota 55305, USA, beginning at 9:00 a.m., CDT, on Wednesday, May 22, 2024.

 

At the meeting, shareholders will be asked to consider and vote upon the following voting proposals: (1) to elect seven persons to serve as directors until our next annual general meeting of shareholders or until their respective successors are elected and qualified; (2) to appoint Baker Tilly US, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2024 and to authorize the Board of Directors to fix our independent registered public accounting firm’s remuneration; (3) to approve an amendment to the DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan to increase the number of shares available under the plan; (4) to approve, on an advisory (non-binding) basis, our executive compensation; and (5) to approve, on an advisory (non-binding) basis, the frequency of future advisory votes on executive compensation. The last two voting proposals, which are commonly referred to as a say-on-pay vote and a frequency of a say-on-pay vote are new for DiaMedica and are the result of the loss of our “emerging growth company” status under applicable U.S. Securities and Exchange Commission rules.

 

The accompanying Notice of 2024 Annual General Meeting of Shareholders and proxy statement describe these matters in more detail. We urge you to read this information carefully.

 

The Board of Directors recommends a vote: FOR each of the seven nominees for director named in the proxy statement, for a frequency of every ONE YEAR on the frequency of a say-on-pay vote and FOR the approval of the other proposals being submitted to a vote of our shareholders.

 

Voting your DiaMedica common shares is easily achieved without the need to attend the meeting in person. Regardless of the number of shares you own, it is important that your shares be represented and voted at the meeting. Therefore, we urge you to vote your shares via the Internet, by telephone, or by promptly marking, dating, signing, and returning the proxy card. Voting over the Internet, by telephone, or by written proxy will ensure that your shares are represented at the meeting.

 

On behalf of the Board of Directors, we thank you for your participation, investment and support.

 

Sincerely,

 

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Richard Pilnik

Chairman of the Board

Rick Pauls

President and Chief Executive Officer

 

You can help us make a difference by eliminating paper proxy materials. With your consent, we will provide all future proxy materials electronically. Instructions for consenting to electronic delivery can be found on your proxy card or at www.proxyvote.com. Your consent to receive shareholder materials electronically will remain in effect until canceled.

 

 

 

 

 

 

 

 

 

 

 

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NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS

 

May 22, 2024

 

The Annual General Meeting of Shareholders of DiaMedica Therapeutics Inc., a corporation existing under the laws of British Columbia, will be held at our corporate offices located at 301 Carlson Parkway, Suite 210, Minneapolis, Minnesota 55305, USA, beginning at 9:00 a.m., CDT, on Wednesday, May 22, 2024, for the following purposes:

 

1.

To receive the audited consolidated financial statements of DiaMedica Therapeutics Inc. for the financial year ended December 31, 2023 and accompanying report of the independent registered public accounting firm (for discussion only).

   

2.

To elect seven persons to serve as directors until our next annual general meeting of shareholders or until their respective successors are elected and qualified (Voting Proposal One).

   

3.

To consider a proposal to appoint Baker Tilly US, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2024 and to authorize the Board of Directors to fix our independent registered public accounting firm’s remuneration (Voting Proposal Two).

   

4.

To consider a proposal to approve an amendment to the DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan to increase the number of shares available under the plan by 3,000,000 shares (Voting Proposal Three).

   

5.

To approve, on an advisory (non-binding) basis, our executive compensation (Voting Proposal Four).

   

6.

To approve, on an advisory (non-binding) basis, the frequency of future advisory votes on executive compensation (Voting Proposal Five).

   

7.

To transact such other business as may properly come before the meeting or any adjournment of the meeting.

 

Only those shareholders of record at the close of business on March 25, 2024 will be entitled to notice of, and to vote at, the meeting and any adjournments thereof. A shareholder list will be available at our corporate offices beginning April 4, 2024 during normal business hours for examination by any shareholder registered on our common share ledger as of the record date, March 25, 2024, for any purpose germane to the meeting.

 

 

By Order of the Board of Directors,

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Scott Kellen

Corporate Secretary

 

April 4, 2024

Minneapolis, Minnesota

 

 

 

TABLE OF CONTENTS

 


 

Page

 

PROXY STATEMENT SUMMARY 

1

   

GENERAL INFORMATION ABOUT THE MEETING AND VOTING 

5

Date, Time, Place and Purposes of Meeting  

5

Who Can Vote

5

How You Can Vote   

5

How Does the Board of Directors Recommend that You Vote   

7

How You May Change Your Vote or Revoke Your Proxy  

7

Quorum Requirement  

8

Vote Required   

8

Appointment of Proxyholders  

9

Other Business    

10

Procedures at the Meeting 

10

Householding of Meeting Materials  

10

Proxy Solicitation Costs  

10

   

VOTING PROPOSAL ONE—ELECTION OF DIRECTORS   

11

Board Size and Structure    

11

Information about Current Directors and Board Nominees 

11

Additional Information about Current Directors and Board Nominees     

11

Penalties or Sanctions   

15

Corporate Cease Trade Orders or Bankruptcies      

15

Board Recommendation   

15

   

VOTING PROPOSAL TWO—APPOINTMENT OF BAKER TILLY US, LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND AUTHORIZATION TO FIX REMUNERATION 

16

Appointment of Independent Registered Public Accounting Firm  

16

Authorization to Board of Directors to Fix Remuneration     

16

Audit, Audit-Related, Tax and Other Fees   

16

Audit Committee Pre-Approval Policies and Procedures  

17

Board Recommendation  

17

   

VOTING PROPOSAL THREE— APPROVAL OF AMENDMENT TO DIAMEDICA THERAPEUTICS INC. AMENDED AND RESTATED 2019 OMNIBUS INCENTIVE PLAN

18

Background and Proposed Amendment     

18

Reasons Why You Should Vote in Favor of the Plan Amendment   

18

Summary of Sound Governance Features of the Amended 2019 Plan 

19

Background for Shares Authorized for Issuance   

19

Summary of the Amended 2019 Plan Features    

21

U.S. Federal Income Tax Information    

28

Awards Previously Granted Under the Plan   

30

Board of Directors Recommendation     

30

   

VOTING PROPOSAL FOUR— ADVISORY APPROVAL OF EXECUTIVE COMPENSATION   

31

Background and Proposed Advisory Approval of Our Executive Compensation  

31

Why You Should Vote in Favor of our Say-on-Pay Vote    

31

Proposed Resolution     

31

Next Say-On-Pay Vote 

32

Board of Directors Recommendation 

32

 

i

 

VOTING PROPOSAL FIVE— ADVISORY APPROVAL OF THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION

33

Background and Proposed Advisory Approval of the Frequency of Future Say-on-Pay Votes   

33

Board of Directors Recommendation   

33

   

STOCK OWNERSHIP   

34

Security Ownership of Significant Beneficial Owners 

34

Security Ownership of Management 

35

Delinquent Section 16(a) Reports    

36

   

CORPORATE GOVERNANCE    

37

Management by Board of Directors  

37

Corporate Governance Guidelines  

37

Board Leadership Structure  

37

Director Independence   

38

Board Committees     

38

Audit Committee  

39

Compensation Committee 

41

Nominating and Corporate Governance Committee  

42

Director Qualifications and the Nomination Process     

43

Board Diversity Matrix    

44

Board Diversity   

44

Role of Board in Risk Oversight Process  

45

Code of Business Conduct and Ethics  

46

Board and Committee Meetings    

46

Policy Regarding Director Attendance at Annual General Meetings of Shareholders  

46

Complaint Procedures 

46

Process Regarding Shareholder Communications with Board of Directors  

46

   

DIRECTOR COMPENSATION    

47

Non-Employee Director Compensation Program   

47

Director Compensation Table      

49

Indemnification    

50

   

EXECUTIVE COMPENSATION   

51

Executive Compensation Overview    

51

Summary Compensation Table    

58

Outstanding Equity Awards at Fiscal Year-End     

59

Pay Versus Performance Disclosure    

60

Employee Benefit and Stock Plans   

64

Anti-Hedging and Pledging Policy    

65

 

ii

 

RELATED PERSON RELATIONSHIPS AND TRANSACTIONS   

66

Introduction  

66

Description of Related Party Transactions   

66

Policies and Procedures for Related Party Transactions      

67

   

SHAREHOLDER PROPOSALS FOR 2025 ANNUAL GENERAL MEETING OF SHAREHOLDERS

69

   

COPIES OF FISCAL 2023 ANNUAL REPORT AND ADDITIONAL INFORMATION

70

 


 

DiaMedica Therapeutics Inc. is sometimes referred to as “DiaMedica,” “we,” “our” or “us” in this proxy statement.

 

The 2024 Annual General Meeting of Shareholders is sometimes referred to as the “Annual General Meeting,” “Annual Meeting” or “meeting” in this proxy statement.

 

Our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 is sometimes referred to as our “Annual Report to Shareholders” or “2023 Annual Report” in this proxy statement.

 

Our voting common shares, no par value, are sometimes referred to as our “common shares” or “shares” in this proxy statement.

 

All dollar amounts in this proxy statement are expressed in United States currency unless otherwise noted.

 

iii

 

 

PROXY STATEMENT SUMMARY

________________

 

This summary provides an overview of the information included in this proxy statement. We recommend that you review the entire proxy statement and our Annual Report to Shareholders before voting.

 

2024 ANNUAL GENERAL MEETING OF SHAREHOLDERS

 

DATE AND TIME

 

Wednesday, May 22, 2024

9:00 a.m. (CDT)

 

LOCATION

 

DiaMedica Therapeutics Inc.

301 Carlson Parkway, Suite 210, Minneapolis, Minnesota 55305

 

RECORD DATE

 

Holders of record of our common shares at the close of business on March 25, 2024 are entitled to notice of, to attend, and to vote at the 2024 Annual Meeting.

Voting Item

Boards Vote

Recommendation

Page

Voting Proposal One:

Election of Directors

FOR

11

Voting Proposal Two:

Appointment of Independent Registered Public Accounting Firm and Authorization to Fix Remuneration

FOR

16

Voting Proposal Three:

Amendment to DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan

FOR

18

Voting Proposal Four:

Approval, on an Advisory (Non-Binding) Basis, of Executive Compensation

FOR

31

Voting Proposal Five:

Approval, on an Advisory (Non-Binding) Basis, of Frequency of Future Advisory Votes on Executive Compensation

ONE YEAR

33

 

INTERNET AVAILABILITY OF PROXY MATERIALS

 

Instead of mailing a printed copy of our proxy materials, including our Annual Report to Shareholders, to each shareholder of record, we have provided access to these materials in a fast and efficient manner via the Internet. We believe that this process expedites your receipt of our proxy materials, lowers the costs of our meeting and reduces the environmental impact of our meeting. On or about April 4, 2024, we expect to begin mailing a Notice of Internet Availability of Proxy Materials to shareholders of record as of March 25, 2024 and post our proxy materials on the website referenced in the Notice of Internet Availability of Proxy Materials (www.proxyvote.com). As more fully described in the Notice of Internet Availability of Proxy Materials, shareholders may choose to access our proxy materials at www.proxyvote.com or may request proxy materials in printed or electronic form. In addition, the Notice of Internet Availability of Proxy Materials and website provide information regarding how you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. For those who previously requested printed proxy materials or electronic materials on an ongoing basis, you will receive those materials as you previously requested.

 

Important Notice Regarding the Availability of Proxy Materials
for the Annual General Meeting of Shareholders to be Held on May 22, 2024:
The Notice of Annual General Meeting of Shareholders and Proxy Statement and
Annual Report to Shareholders, including our Annual Report on Form 10-K
for the fiscal year ended December 31, 2023, are available at www.proxyvote.com.

 

1

 

 

CORPORATE GOVERNANCE HIGHLIGHTS

 

✔    Annual election of directors

✔    Regular executive sessions

✔    Majority of independent directors

✔    No conflicts of interest

✔    Independent Board Chairman

✔    Access to independent advisors

✔    Three fully independent Board committees

✔    Independent compensation consultant

✔    Corporate governance guidelines

✔    No guaranteed salary increases or bonuses

✔    Annual review of governance documents

✔    No perquisites

✔    Clawback policy

✔    No poison pill

 

BOARD OF DIRECTORS NOMINEES

 

Below are the director nominees for election by shareholders at the 2024 Annual General Meeting, each for a one-year term. All director nominees listed below served during the fiscal year ended December 31, 2023.

 

Director

Age

Serving Since

Independent

Michael Giuffre, M.D.

68

2010

Yes

Richard Kuntz, M.D., M.Sc.

66

2023

Yes

Tanya Lewis

53

2023

Yes

James Parsons

58

2015

Yes

Rick Pauls

52

2005

No

Richard Pilnik

67

2009

Yes

Charles Semba, M.D.

64

2021

Yes

 

The Board of Directors recommends a vote “FOR” each of these seven nominees.

 

BOARD COMMITTEE COMPOSITION

 

The Board of Directors maintains a standing Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee.

 

Below are our current directors and their Board committee memberships.

 

Director

Audit

Committee

Compensation

Committee

Nominating and

Corporate

Governance

Committee

Independent

Director

(Y/N)

Michael Giuffre, M.D.

 

Chair

Y

Richard Kuntz, M.D., M.Sc.

     

Y

Tanya Lewis

 

 

Y

James Parsons

Chair

 

Y

Rick Pauls

     

N

Richard Pilnik

 

Chair

Y

Charles Semba, M.D.

 

Y

 

2

 

 

KEY QUALIFICATIONS

 

The following are some key qualifications, skills and experiences of our Board of Directors.

 

●         Leadership/Management

●         Financial Expertise

●         Business Development Experience

●         Prior Board Experience

●         Regulatory Expertise

●         Biopharmaceutical Industry Expertise

 

EXECUTIVE COMPENSATION BEST PRACTICES

 

Our compensation practices include many best practices that support our executive compensation objectives and principles and benefit our shareholders.

 

What We Do:

What We Dont Do:

●     Emphasize pay for performance

●     No guaranteed salary increases or bonuses

●     Structure our executive compensation so a significant portion of pay is at risk

●     No repricing of stock options unless approved by shareholders

●     Maintain competitive pay packages

●     No liberal share counting under our equity plan

●     Structure our executive compensation so a significant portion is paid in equity

●     No hedging or pledging of DiaMedica securities

●     Maintain a clawback policy

●     No perquisites

 

HOW WE PAY

 

Our executive compensation program consists of the following principal elements which are described in more detail below under “Executive CompensationExecutive Compensation OverviewElements of Our Executive Compensation Program”:

 

Base salary – a fixed amount, paid in cash and reviewed annually and, if appropriate, adjusted.

 

Short-term incentive – a variable, short-term element that is payable in cash and is based on annual corporate performance objectives and individual performance objectives.

 

Long-term incentive – a variable, long-term element that is provided in stock options.

 

3

 

2023 EXECUTIVE COMPENSATION ACTIONS

 

Throughout this proxy statement, discussion of our executive compensation programs includes the compensation of the following executive officers required to be named in the Summary Compensation Table under “Executive Compensation” section and referred to as our named executive officers or NEOs: (i) Rick Pauls, our Chief Executive Officer (CEO), (ii) Scott Kellen, our Chief Financial Officer (CFO) and Julie Daves, our Senior Vice President, Clinical Development Operations (SVP, Clinical) who are our two other most highly compensated executive officers serving at the end of 2023, and (iii) Kirsten Gruis, M.D., our former Chief Medical Officer (CMO) who would have been among the most highly compensated executive officers had she been serving at the end of 2023. The 2023 compensation actions and incentive plan outcomes based on performance are summarized below:

 

Element

Key 2023 Actions

Base Salary

Our CEO received a base salary increase of 8% and our other NEOs received base salary increases between 3% and 10%, in each case to move their salaries closer toward our target positioning in our peer group.

Short-Term Incentive

The target incentive percentage under our short-term incentive plan for 2023 was 50% of base salary for our CEO, 40% of base salary for our CFO and former CMO, and 35% of base salary for our SVP, Clinical, which were all unchanged from the prior year.

Long-Term Incentive

Our NEOs received stock option awards, with 25% vesting on the one-year anniversary of the grant date and the remaining 75% vesting in 12 equal quarterly installments thereafter.

Other Compensation

No changes were made to other components of our executive compensation program.

 

4

 

 

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301 Carlson Parkway, Suite 210, Minneapolis, Minnesota 55305

 


 

 

PROXY STATEMENT FOR
ANNUAL GENERAL MEETING OF SHAREHOLDERS
May 22, 2024

 


 

The Board of Directors of DiaMedica Therapeutics Inc. is soliciting your proxy for use at the 2024 Annual General Meeting of Shareholders to be held on Wednesday, May 22, 2024. The Board of Directors expects to make available to our shareholders beginning on or about April 4, 2024 the Notice of Annual General Meeting of Shareholders, this proxy statement and a form of proxy on the Internet or have these materials sent to shareholders of DiaMedica upon their request.

 

GENERAL INFORMATION ABOUT THE MEETING AND VOTING

 


 

Date, Time, Place and Purposes of Meeting

 

The Annual General Meeting of Shareholders of DiaMedica Therapeutics Inc. will be held on Wednesday, May 22, 2024, at 9:00 a.m., CDT, at our corporate offices located at 301 Carlson Parkway, Suite 210, Minneapolis, Minnesota 55305, USA, for the purposes set forth in the Notice of Annual General Meeting of Shareholders.

 

Who Can Vote

 

Shareholders of record at the close of business on March 25, 2024 will be entitled to notice of and to vote at the meeting or any adjournment thereof. As of that date, there were 37,958,000 common shares outstanding. Each common share is entitled to one vote on each matter to be voted on at the meeting. Shareholders are not entitled to cumulate voting rights.

 

How You Can Vote

 

Your vote is important. Whether you hold shares directly as a shareholder of record or beneficially in “street name” (through a broker, bank or other nominee), you may vote your shares without attending the meeting. You may vote by granting a proxy or, for shares held in street name, by submitting voting instructions to your broker, bank or other nominee.

 

5

 

If you are a registered shareholder whose shares are registered in your name, you may vote your shares in person at the meeting or by one of the three following methods:

 

 

Vote by Internet, by going to the website address http://www.proxyvote.com and following the instructions for Internet voting shown on the Notice of Internet Availability of Proxy Materials or on your proxy card.

 

 

Vote by Telephone, by dialing 1-800-690-6903 and following the instructions for telephone voting shown on the Notice of Internet Availability of Proxy Materials or on your proxy card.

 

 

Vote by Proxy Card, by completing, signing, dating and mailing the enclosed proxy card in the envelope provided if you received a paper copy of these proxy materials.

 

If you vote by Internet or telephone, please do not mail your proxy card.

 

If your shares are held in “street name” (through a broker, bank or other nominee), you may receive a separate voting instruction form with this proxy statement or you may need to contact your broker, bank or other nominee to determine whether you will be able to vote electronically using the Internet or telephone.

 

The deadline for voting by telephone or by using the Internet is 11:59 p.m., EDT (10:59 p.m., CDT), on May 21, 2024, the day before the meeting. Please see the Notice of Internet Availability of Proxy Materials, your proxy card or the information your bank, broker or other nominee provided to you for more information on your options for voting.

 

If you return your signed proxy card or use Internet or telephone voting before the meeting, the named proxies will vote your shares as you direct. You have multiple choices on each matter to be voted on as follows:

 

For Voting Proposal One—Election of Directors, you may:

 

 

Vote FOR all seven nominees for director or

 

 

WITHHOLD your vote from one or more of the seven nominees for director.

 

For Voting Proposal Two—Appointment of Baker Tilly US, LLP as our Independent Registered Public Accounting Firm and Authorization to Fix Remuneration, you may:

 

 

Vote FOR the proposal,

 

 

WITHHOLD your vote from the proposal or

 

 

ABSTAIN from voting on the proposal.

 

For Voting Proposal Three—Approval of Amendment to DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan, you may:

 

 

Vote FOR the proposal,

 

 

Vote AGAINST the proposal or

 

 

ABSTAIN from voting on the proposal.

 

6

 

For Voting Proposal Four—Approval, on an Advisory (Non-Binding) Basis, of our Executive Compensation, you may:

 

 

Vote FOR the proposal,

 

 

Vote AGAINST the proposal or

 

 

ABSTAIN from voting on the proposal.

 

For Voting Proposal Five—Approval, on an Advisory (Non-Binding) Basis, of the Frequency of Future Advisory Votes on Executive Compensation, you may:

 

 

Vote for a frequency of every ONE YEAR, TWO YEARS, or THREE YEARS or

 

 

ABSTAIN from voting on the proposal.

 

If you send in your proxy card or use Internet or telephone voting, but do not specify how you want to vote your shares, the proxies will vote your shares FOR all seven of the nominees for election to the Board of Directors in Voting Proposal One—Election of Directors, FOR Voting Proposal Two—Appointment of Baker Tilly US, LLP as our Independent Registered Public Accounting Firm and Authorization to Fix Remuneration, FOR Voting Proposal Three—Approval of Amendment to DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan, FOR Voting Proposal Four—Approval, on an Advisory Basis, of our Executive Compensation, and ONE YEAR for Voting Proposal Five—Approval, on an Advisory Basis, the Frequency of Future Advisory Votes on Executive Compensation.

 

How Does the Board of Directors Recommend that You Vote

 

The Board of Directors unanimously recommends that you vote:

 

 

FOR all seven of the nominees for election to the Board of Directors in Voting Proposal One—Election of Directors;

 

 

FOR Voting Proposal Two—Appointment of Baker Tilly US, LLP as our Independent Registered Public Accounting Firm and Authorization to Fix Remuneration;

 

 

FOR Voting Proposal Three—Approval of Amendment to DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan;

 

 

FOR Voting Proposal Four—Approval, on an Advisory Basis, of our Executive Compensation; and

 

 

ONE YEAR for Voting Proposal Five—Approval, on an Advisory Basis, of the Frequency of Future Advisory Votes on Executive Compensation.

 

How You May Change Your Vote or Revoke Your Proxy

 

If you are a shareholder whose shares are registered in your name, you may revoke your proxy at any time before it is voted at the meeting by one of the following methods:

 

 

Submitting another proper proxy with a more recent date than that of the proxy first given by following the Internet or telephone voting instructions or completing, signing, dating and returning a proxy card to us;

 

 

Sending written notice of your revocation to our Corporate Secretary; or

 

 

Attending the meeting and voting by ballot.

 

7

 

Quorum Requirement

 

The quorum for the transaction of business at the meeting is any number of shareholders who, in the aggregate, hold at least 33 and 1/3% of our issued common shares entitled to be voted at the meeting or 12,652,667 common shares. In general, our common shares represented by proxies marked “For,” “Against,” “Abstain” or “Withheld” are counted in determining whether a quorum is present. In addition, a “broker non-vote” is counted in determining whether a quorum is present. A “broker non-vote” is a proxy returned by a broker on behalf of its beneficial owner customer that is not voted on a particular matter because voting instructions have not been received by the broker from the customer and the broker has no discretionary authority to vote on behalf of such customer on such matter.

 

Vote Required

 

If your shares are held in “street name” and you do not indicate how you wish to vote, your broker is permitted to exercise its discretion to vote your shares only on certain “routine” matters.

 

Voting Proposal One—Election of Directors is not a “routine” matter. Accordingly, if you do not direct your broker how to vote, your broker may not exercise discretion and may not vote your shares on this proposal. This is called a “broker non-vote” and although your shares will be considered to be represented by proxy at the meeting, they will not be considered to be “votes cast” at the meeting and will not be counted as having been voted on the proposal.

 

Voting Proposal Two—Appointment of Baker Tilly US, LLP as our Independent Registered Public Accounting Firm and Authorization to Fix Remuneration is a “routine” matter and, as such, your broker is permitted to exercise its discretion to vote your shares for or withhold your vote from the proposal in the absence of your instruction.

 

Voting Proposal Three— Approval of Amendment to DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan is not a “routine” matter. Accordingly, if you do not direct your broker how to vote, your broker may not exercise discretion and may not vote your shares on this proposal. This is called a “broker non-vote” and although your shares will be considered to be represented by proxy at the meeting, they will not be considered to be “votes cast” at the meeting and will not be counted as having been voted on the proposal.

 

Voting Proposal Four— Approval, on an Advisory Basis, of our Executive Compensation, is not a “routine” matter. Accordingly, if you do not direct your broker how to vote, your broker may not exercise discretion and may not vote your shares on this proposal. This is called a “broker non-vote” and although your shares will be considered to be represented by proxy at the meeting, they will not be considered to be “votes cast” at the meeting and will not be counted as having been voted on the proposal.

 

Voting Proposal Five— Approval, on an Advisory Basis, of the Frequency of Future Advisory Votes on Executive Compensation, is not a “routine” matter. Accordingly, if you do not direct your broker how to vote, your broker may not exercise discretion and may not vote your shares on this proposal. This is called a “broker non-vote” and although your shares will be considered to be represented by proxy at the meeting, they will not be considered to be “votes cast” at the meeting and will not be counted as having been voted on the proposal.

 

8

 

The table below indicates the vote required for each voting proposal and the effect of any votes withheld, abstentions and broker non-votes.

 

Voting Proposal

 

Votes Required

 

Effect of

Votes

Withheld/Against

 

Effect of

Abstentions

 

Effect of

Broker Non-

Votes

 

Voting Proposal One: Election of Directors

 

Affirmative vote of a majority of votes cast on the voting proposal.

 

Votes withheld will have no effect.

 

Abstentions will have no effect.

 

Broker non-votes will have no effect.

 
                   

Voting Proposal Two: Appointment of Independent Registered Public Accounting Firm and Authorization to Fix Remuneration

 

Affirmative vote of a majority of votes cast on the voting proposal.

 

Votes withheld will have no effect.

 

Abstentions will have no effect.

 

We do not expect any broker non-votes on this proposal.

 
                   

Voting Proposal Three: Approval of Amendment to DiaMedica Therapeutics Amended and Restated 2019 Omnibus Incentive Plan

 

Affirmative vote of a majority of votes cast on the voting proposal.

 

Votes against will count against the proposal.

 

Abstentions will have no effect.

 

Broker non-votes will have no effect.

 
                   

Voting Proposal Four: Approval, on an Advisory (Non-Binding) Basis, of our Executive Compensation

 

Affirmative vote of a majority of votes cast on the voting proposal.

 

Votes against will count against the proposal.

 

Abstentions will have no effect.

 

Broker non-votes will have no effect.

 
                   

Voting Proposal Five: Approval, on an Advisory Basis, of the Frequency of Future Advisory Votes on Executive Compensation

 

Affirmative vote of a majority of votes cast on the choice of frequency.

 

Votes cast for choice of frequency other than ONE YEAR will count against the choice of frequency of ONE YEAR.

 

Abstentions will have no effect.

 

Broker non-votes will have no effect.

 

 

Appointment of Proxyholders

 

The persons named in the accompanying proxy card are officers of DiaMedica.

 

9

 

A shareholder has the right to appoint a person or company to attend and act for the shareholder and on that shareholders behalf at the meeting other than the persons designated in the enclosed proxy card. A shareholder wishing to exercise this right should strike out the names now designated in the enclosed proxy card and insert the name of the desired person or company in the blank space provided. The desired person need not be a shareholder of DiaMedica.

 

Only a registered shareholder at the close of business on March 25, 2024 will be entitled to vote, or grant proxies to vote, his, her or its common shares, as applicable, at the meeting. If your common shares are registered in your name, then you are a registered shareholder. However, if, like most shareholders, you keep your common shares in a brokerage account, then you are a beneficial shareholder. The process for voting is different for registered shareholders and beneficial shareholders. Registered shareholders and beneficial shareholders should carefully read the instructions herein if they wish to vote their common shares at the meeting.

 

Other Business

 

Our management does not intend to present other items of business and knows of no items of business that are likely to be brought before the meeting, except those described in this proxy statement. However, if any other matters should properly come before the meeting, the persons named on the proxy card will have discretionary authority to vote such proxy in accordance with their best judgment on the matters.

 

Procedures at the Meeting

 

The presiding officer at the meeting will determine how business at the meeting will be conducted. Only matters brought before the meeting in accordance with our Articles will be considered. Only a natural person present at the meeting who is either one of our shareholders, or is acting on behalf of one of our shareholders, may make a motion or second a motion. A person acting on behalf of a shareholder must present a written statement executed by the shareholder or the duly-authorized representative of the shareholder on whose behalf the person purports to act.

 

Householding of Meeting Materials

 

Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements, annual reports and the Notice of Internet Availability of Proxy Materials. This means that only one copy of this proxy statement, our Annual Report to Shareholders or the Notice of Internet Availability of Proxy Materials may have been sent to each household even though multiple shareholders are present in the household, unless contrary instructions have been received. We will promptly deliver a separate copy of any of these documents to any shareholder upon written or oral request to Corporate Secretary, DiaMedica Therapeutics Inc., 301 Carlson Parkway, Suite 210, Minneapolis, Minnesota 55305, telephone: (763) 496‑5454. Any shareholder who wants to receive separate copies of this proxy statement, our Annual Report to Shareholders or the Notice of Internet Availability of Proxy Materials in the future, or any shareholder who is receiving multiple copies and would like to receive only one copy per household, should contact the shareholder’s bank, broker or other nominee record holder, or the shareholder may contact us at the above address and telephone number.

 

Proxy Solicitation Costs

 

The cost of soliciting proxies, including the preparation, assembly, electronic availability and mailing of proxies and soliciting material, as well as the cost of making available or forwarding this material to the beneficial owners of our common shares will be borne by DiaMedica. Our directors, officers and regular employees may, without compensation other than their regular compensation, solicit proxies by telephone, e-mail, facsimile or personal conversation. We may reimburse brokerage firms and others for expenses in making available or forwarding solicitation materials to the beneficial owners of our common shares.

 

10

 

 

VOTING PROPOSAL ONEELECTION OF DIRECTORS

 

 

 

 

 

Board Size and Structure

 

Our Articles provide that the Board of Directors will consist of at least three members. The Board of Directors has fixed the number of directors at seven. The Board of Directors currently consists of seven directors. Each director is elected annually by the shareholders and serves for a term that will end at the next annual general meeting of shareholders.

 

Information about Current Directors and Board Nominees

 

The Board of Directors has nominated the following seven individuals to serve as our directors until the next annual general meeting of shareholders or until their respective successors are elected and qualified. All of the nominees named below are current members of the Board of Directors.

 

The following table sets forth as of March 25, 2024 the name, age and position of each current director and each individual who has been nominated by the Board of Directors to serve as a director of our company:

 

Name

 

Age

 

Position

Michael Giuffre, M.D.(1)(2)(3)          

 

68

 

Director

Richard Kuntz, M.D., M.Sc.(1)          

 

66

 

Director

Tanya Lewis(1)(2)         

 

53

 

Director

James Parsons(1)(2)(4)         

 

58

 

Director

Rick Pauls         

 

52

 

President and Chief Executive Officer, Director

Richard Pilnik(1)(3)(4)         

 

67

 

Chairman of the Board

Charles Semba, M.D.(1)(2)(4)         

 

64

 

Director

 


(1)

Independent Director

(2)

Member of the Compensation Committee

(3)

Member of the Nominating and Corporate Governance Committee

(4)

Member of the Audit Committee

 

The principal occupations and recent employment history of each of our directors are set forth below.

 

Additional Information about Current Directors and Board Nominees

 

The following paragraphs provide information about each current director and nominee for director, including all positions held, principal occupation and business experience for the past five years, and the names of other publicly-held companies of which the director or nominee currently serves as a director or has served as a director during the past five years. We believe that all of our directors and nominees display personal and professional integrity; satisfactory levels of education and/or business experience; broad-based business acumen; an appropriate level of understanding of our business and its industry and other industries relevant to our business; the ability and willingness to devote adequate time to the work of the Board of Directors and its committees; a fit of skills and personality with those of our other directors that helps build a board that is effective, collegial and responsive to the needs of our company; strategic thinking and a willingness to share ideas; a diversity of experiences, expertise and background; and the ability to represent the interests of all of our shareholders. The information presented below regarding each director and nominee also sets forth specific experience, qualifications, attributes and skills that led the Board of Directors to the conclusion that such individual should serve as a director in light of our business and structure.

 

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Michael Giuffre, M.D. has served as a member of the Board of Directors since August 2010. Since July 2009, Dr. Giuffre has served as a Clinical Professor of Cardiac Sciences and Pediatrics at the University of Calgary and has had an extensive portfolio of clinical practice, cardiovascular research and university teaching. Dr. Giuffre is actively involved in health care delivery, medical leadership and in the biotechnology business sector. From 2012 to October 2019, Dr. Giuffre served as Chief Scientific Officer and President of FoodChek Laboratory, a global developer and provider of proprietary rapid and accurate food safety tests for the detection of foodborne and environmental pathogens and other microorganisms, and also as a member of the board of directors of FoodChek Systems Inc. From November 2017 to October 2019, he served as FoodChek Systems Inc.’s Chairman of the Board. Dr. Giuffre previously served on the board of directors of the Canadian Medical Association (CMA), Unicef Canada, the Alberta Medical Association (AMA), Can-Cal Resources Ltd, Vacci-Test Corporation, IC2E International Inc., MedMira Inc. and Brightsquid Dental, Inc. Dr. Giuffre has received a Certified and Registered Appointment and a Distinguished Fellow appointment by the American Academy of Cardiology. In 2005, he was awarded Physician of the Year by the Calgary Medical Society and in 2017 was “Mentor of the Year” for the Royal College of Physicians and Surgeons of Canada. Dr. Giuffre was also a former President of the AMA and the Calgary and Area Physicians Association and also a past representative to the board of the Calgary Health Region. Dr. Giuffre holds a Bachelor of Science in cellular and microbial biology, a Ph.D. candidacy in molecular virology, an M.D. and an M.B.A. He is Canadian Royal College board certified FRCPS in specialties that include Pediatrics and Pediatric Cardiology and has a subspecialty in Pediatric Cardiac Electrophysiology. Dr. Giuffre is currently a member of the board of directors of Avenue Living (AL) Asset Management, a private real estate company in Alberta, Canada and its affiliates, AL Real Estate Opportunity Trust and AgriSelect Trust. Dr. Giuffre is currently a resident of Alberta, Canada.

 

We believe that Dr. Giuffre’s medical experience, including as a practicing physician and professor, enable him to make valuable contributions to the Board of Directors.

 

Richard Kuntz, M.D., M.Sc. has served as a member of our board of directors since May 2023. Dr. Kuntz recently retired from Medtronic plc (NYSE:MDT) where he was the Chief Medical Officer & Scientific Officer and a member of the Executive Committee.  Prior to that, he served as Senior Vice President and President, Neuromodulation of Medtronic from October 2005 to August 2009.  Before joining Medtronic, he was the founder and Chief Scientific Officer of the Harvard Clinical Research Institute in Boston.  He also served as an Associate Professor of Medicine at Harvard Medical School, Chief of the Division of Clinical Biometrics, and as an Interventional Cardiologist in the division of cardiovascular diseases at the Brigham and Women’s Hospital in Boston.  In addition, he served as a founding Governor of the Patient Centered Outcomes Research Institute (PCORI), as part of the US Affordable Care Act.  He also served as an advisor to multiple national and regional committees, in the National Academy of Medicine and National Institutes of Health (NIH).  He is presently serving as a working group member of NIH’s Helping to End Addiction Long-term® (HEAL) program.  Dr. Kuntz serves as a member of the board of directors of ZimVie Inc. and IDENTIV, INC., which are Nasdaq listed companies. Dr. Kuntz has directed numerous multicenter clinical trials and has authored more than 250 original publications.  His major interests are traditional and alternative clinical trial design and biostatistics. Dr. Kuntz graduated from Miami University and received his medical degree from Case Western Reserve University School of Medicine.  He completed his residency and chief residency in internal medicine at the University of Texas Southwestern Medical School, Parkland Hospital, Dallas, and then completed fellowships in cardiovascular diseases and interventional cardiology at the Beth Israel Hospital and Harvard Medical School, Boston.  Dr. Kuntz received his Master of Science in biostatistics from the Harvard T.H. Chan School of Public Health.

 

We believe that Dr. Kuntz’ experience in the pharmaceutical industry, particularly his demonstrated leadership skills relating to medical advancements in neurology and his deep expertise in stroke treatments, enable him to make valuable contributions to the Board of Directors.

 

12

 

Tanya Lewis has served as a member of the Board of Directors since March 1, 2023. Ms. Lewis has served as the Chief Development Operations Officer at Replimune Group, Inc., a Nasdaq listed clinical-stage biotechnology company, since May 2021, and beginning in April 2024, will transition from providing her functional expertise in a full-time position to an advisory capacity. Ms. Lewis served as Executive Vice President, Chief Regulatory Officer and Quality Officer at Karyopharm Therapeutics Inc., a pharmaceutical company, from November 2019 to May 2021, and previously served as Senior Vice President, Regulatory and Quality Affairs from November 2018 to November 2019. Ms. Lewis is also a former director of Karyopharm Therapeutics Inc. Prior to joining Karyopharm Therapeutics Inc., Ms. Lewis served as Vice President, Regulatory and Quality Affairs for Syros Pharmaceuticals, Inc., a pharmaceutical company, from January 2017 to July 2018. Prior to joining Syros Pharmaceuticals, Ms. Lewis served as Vice President, Regulatory Affairs and Quality Assurance for Idera Pharmaceuticals, Inc., a pharmaceutical company, from October 2015 to December 2016. Before joining Idera Pharmaceuticals, Ms. Lewis served as Vice President, Regulatory Affairs for Tesaro, Inc., a pharmaceutical company, from October 2011 to June 2015 and prior to that served in various roles at Millennium Pharmaceuticals. Inc. Ms. Lewis holds a Bachelor of Science degree in Biology from Northeastern University and a Master of Science degree in Regulatory Affairs and Health Policy from Massachusetts College of Pharmacy and Allied Health Science.

 

We believe that Ms. Lewis’s experience in the pharmaceutical industry, particularly in drug development and commercial planning for specialty biopharmaceuticals, enable her to make valuable contributions to the Board of Directors.

 

James Parsons has served as a member of the Board of Directors since October 2015. Previously, Mr. Parsons served as our Vice President of Finance from October 2010 until May 2014. Mr. Parsons served as Chief Financial Officer and Corporate Secretary of Trillium Therapeutics Inc., a Nasdaq-listed immuno-oncology company, from August 2011 until its acquisition by Pfizer in November 2021, at which time he became employed by Pfizer Canada ULC until March 2022. Mr. Parsons serves as a member of the board of directors and serves as chair of both the nominating and corporate governance committee and audit committee of Sernova Corp., which is listed on the TSX and is a member of the board of Oncolytics Biotech Inc., a Nasdaq/TSX listed company. Mr. Parsons has been a Chief Financial Officer in the life sciences industry since 2000 with experience in therapeutics, diagnostics and devices. Mr. Parsons has a Master of Accounting degree from the University of Waterloo and is a Chartered Professional Accountant and Chartered Accountant. Mr. Parsons is a resident of Ontario, Canada.

 

We believe that Mr. Parsons’ financial experience, including his history and knowledge of our company, enable him to make valuable contributions to the Board of Directors.

 

Rick Pauls was appointed our President and Chief Executive Officer in January 2010. Mr. Pauls has served as a member of the Board of Directors since April 2005 and the Chairman of the Board from April 2008 to July 2014. Prior to joining DiaMedica, Mr. Pauls was the Co-Founder and Managing Director of CentreStone Ventures Inc., a life sciences venture capital fund, from February 2002 until January 2010. Mr. Pauls was an analyst for Centara Corporation, another early stage venture capital fund, from January 2000 until January 2002. From June 1997 until November 1999, Mr. Pauls worked for General Motors Acceptation Corporation specializing in asset-backed securitization and structured finance. Mr. Pauls previously served as an independent member of the board of directors of LED Medical Diagnostics, Inc. Mr. Pauls received his Bachelor of Arts in Economics from the University of Manitoba and his MBA in Finance from the University of North Dakota. Mr. Pauls is a resident of Minnesota, USA.

 

13

 

We believe that Mr. Pauls’s experience in the biopharmaceutical industry as an executive and investor and his extensive knowledge of all aspects of our company, business, industry, and day-to-day operations as a result of his role as our President and Chief Executive Officer enable him to make valuable contributions to the Board of Directors. In addition, as a result of his role as President and Chief Executive Officer, Mr. Pauls provides unique insight into our future strategies, opportunities and challenges, and serves as the unifying element between the leadership and strategic direction provided by the Board of Directors and the implementation of our business strategies by management.

 

Richard Pilnik has served as a member of the Board of Directors since May 2009. Mr. Pilnik has served as our Chairman of the Board since July 2014. Mr. Pilnik has served as the President and member of the board of directors of Vigor Medical Services, Inc., a medical device company, since May 2017 and served as its President from May 2017 to October 2021. From December 2015 to November 2017, he served as a member of the board of directors of Chiltern International Limited, a private leading mid-tier Clinical Research Organization, and was Chairman of the Board from April 2016 to November 2017. Mr. Pilnik has a 30-year career in healthcare at Eli Lilly and Company, a pharmaceutical company, and Quintiles Transnational Corp., a global pioneer in pharmaceutical services. From April 2009 to June 2014, he served as Executive Vice President and President of Quintiles Commercial Solutions, an outsourcing business to over 70 pharma and biotech companies. Prior to that, he spent 25 years at Eli Lilly and Company where he held several leadership positions, most recently as Group Vice President and Chief Marketing Officer from May 2006 to July 2008. He was directly responsible for commercial strategy, market research, new product planning and the medical marketing interaction. From December 2000 to May 2006, Mr. Pilnik served as President of Eli Lilly Europe, Middle East and Africa and the Commonwealth of Independent States, a regional organization of former Soviet Republics, and oversaw 50 countries and positioned Eli Lilly as the fastest growing pharmaceutical company in the region. Mr. Pilnik also held several marketing and sales management positions in the United States, Europe and Latin America. Mr. Pilnik currently serves on the board of directors of Lumanity, a privately-held pharma services company, WCG-Copernicus, a privately-held clinical services company, Vigor Medical Systems, Inc., a privately-held medical device company, and BIAL Farma, a privately-held Portuguese pharmaceutical company. Mr. Pilnik is an Emeritus Board Member of Duke University Fuqua School of Business. Mr. Pilnik previously served on the board of directors of Elan Pharmaceuticals, Chiltern International, the largest mid-size Clinical Research Organization, and Certara, L.P., a private biotech company focused on drug development modeling and biosimulation. Mr. Pilnik holds a Bachelor of Arts in Economics from Duke University and an MBA from the Kellogg School of Management at Northwestern University. Mr. Pilnik is a resident of Florida, USA.

 

We believe that Mr. Pilnik’s deep experience in the industry and his history and knowledge of our company enable him to make valuable contributions to the Board of Directors.

 

Charles Semba, M.D. has served as a member of the Board of Directors since July 2021. Dr. Semba has over 20 years of drug-development experience in public and venture-funded biotechnology companies. Since June 2020, Dr. Semba has served as the Chief Medical Officer of Eluminex Biosciences, an ophthalmology-focused biotechnology company. From June 2016 to March 2020, Dr. Semba served as the Chief Medical Officer of Graybug Vision, Inc., a clinical-stage biopharmaceutical company focused on developing transformative medicines for the treatment of chronic diseases of the retina and optic nerve, and from June 2014 to June 2016, Dr. Semba served as the Chief Medical Officer of ForSight VISION5 (acquired by Allergan), a company focused on developing non-invasive products that replace eye drops and provide sustained therapy for major eye diseases, including glaucoma, dry eye, and allergy. Prior to his work at ForSight VISION5, Dr. Semba held senior positions at biopharmaceutical companies including Genentech (a Roche company) and Shire (acquired by Takeda). Additionally, since 1992, Dr. Semba has served as an adjunct professor of vascular and interventional radiology at the Stanford University School of Medicine. Dr. Semba holds a Bachelor of Arts in Chemistry from Carleton College and an M.D. from the University of Minnesota Medical School and is a recognized expert in endovascular therapy, thrombolysis, mechanical thrombectomy, and endovascular surgery. Dr. Semba is currently a resident of California, USA.

 

14

 

We believe that Dr. Semba’s experience in the biotechnology and biopharmaceutical industries, particularly in drug development and clinical-stage companies, enable him to make valuable contributions to the Board of Directors.

 

Penalties or Sanctions

 

To the knowledge of the Board of Directors and our management, none of our directors as of the date of this proxy statement is or has been subject to:

 

 

any penalties or sanctions imposed by a court relating to a securities legislation or by a securities regulatory authority or has entered in a settlement agreement with a securities regulatory authority; or

 

 

any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable security holder in deciding whether to vote for a director nominee.

 

Corporate Cease Trade Orders or Bankruptcies

 

To the knowledge of the Board of Directors and our management, none of our directors or director nominees as of the date of this proxy statement is or has been, within 10 years before the date of this proxy statement, a director, chief executive officer or chief financial officer of any company (including DiaMedica) that, while that person was acting in that capacity:

 

 

was subject to a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days; or

 

 

was subject to an event that resulted, after the director, chief executive officer or chief financial officer ceased to be a director, chief executive officer, or chief financial officer, in DiaMedica being the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days; or

 

 

within a year after the director, chief executive officer, or chief financial officer ceased to be a director, chief executive officer or chief financial officer of DiaMedica, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or was subject to or instituted any proceedings, arrangement, or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold its assets or the assets of the proposed director.

 

Board Recommendation

 

The Board of Directors unanimously recommends a vote FOR the election of all of the seven nominees named above.

 

The Board of Directors Recommends a Vote FOR Each Nominee for Director

 

15

 

 

VOTING PROPOSAL TWOAPPOINTMENT OF BAKER TILLY US, LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND AUTHORIZATION TO FIX REMUNERATION

 


 

Appointment of Independent Registered Public Accounting Firm

 

The Audit Committee of the Board of Directors appoints our independent registered public accounting firm and fixes its remuneration. In this regard, the Audit Committee evaluates the qualifications, performance and independence of our independent registered public accounting firm and determines whether to re-engage our current independent registered public accounting firm. As part of its evaluation, the Audit Committee considers, among other factors, the quality and efficiency of the services provided by the firm, including the performance, technical expertise and industry knowledge of the lead audit partner and the audit team assigned to our account; the overall strength and reputation of the firm; its capabilities relative to our business; and its knowledge of our operations. Upon consideration of these and other factors, the Audit Committee has appointed Baker Tilly US, LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2024. Baker Tilly US, LLP was first appointed as our auditor on April 27, 2018.

 

Representatives of Baker Tilly US, LLP will be present at the meeting to respond to appropriate questions. They also will have the opportunity to make a statement if they wish to do so.

 

Authorization to Board of Directors to Fix Remuneration

 

The approval of this proposal also constitutes authorization to the Board of Directors to fix the remuneration of Baker Tilly US, LLP as our independent registered public accounting firm.

 

Audit, Audit-Related, Tax and Other Fees

 

The following table presents the aggregate fees billed to us by Baker Tilly US, LLP for the fiscal years ended December 31, 2023 and December 31, 2022.

 

   

Aggregate Amount Billed by

Baker Tilly US, LLP

 
   

Fiscal 2023

   

Fiscal 2022

 

Audit Fees(1)

  $ 173,539     $ 130,134  

Audit-Related Fees(2)

    8,295       6,253  

Tax Fees

           

All Other Fees

           

Total

  $ 181,834     $ 136,387  

 


(1)

These fees consisted of the audit of our annual consolidated financial statements for fiscal 2023 and 2022, review of quarterly condensed consolidated financial statements and other services normally provided in connection with statutory and regulatory filings or engagements.

 

(2)

These fees consisted of consents in connection with registration statements and related services normally provided in connection with statutory and regulatory filings or engagements.

 

16

 

 

 

Audit Committee Pre-Approval Policies and Procedures

 

All services rendered by Baker Tilly US, LLP to DiaMedica were permissible under applicable laws and regulations and all services provided to DiaMedica, other than de minimis non-audit services allowed under applicable law, were approved in advance by the Audit Committee. The Audit Committee’s formal written charter requires the Audit Committee to pre-approve all auditing services and permitted non-audit services, including fees for such services, and permits the Audit Committee to establish pre-approval policies and procedures. While the Audit Committee has not adopted any formal pre-approval policies and procedures, it has delegated to the Audit Committee Chair the authority to pre-approve certain services up to $25,000.

 

Board Recommendation

 

The Board of Directors unanimously recommends that shareholders vote FOR the appointment of Baker Tilly US, LLP, as our independent registered public accounting firm for the fiscal year ending December 31, 2024 and authorization to the Board of Directors to fix the remuneration of our independent registered public accounting firm.

 

The Board of Directors Recommends a Vote FOR Voting Proposal Two

 

17

 

 

VOTING PROPOSAL THREE APPROVAL OF AMENDMENT TO DIAMEDICA THERAPEUTICS INC. AMENDED AND RESTATED 2019 OMNIBUS INCENTIVE PLAN

 


 

Background and Proposed Amendment

 

On March 13, 2024, the Board of Directors, upon recommendation of the Compensation Committee, adopted, subject to approval by our shareholders, an amendment to the DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan to increase the number of shares available for issuance by an additional 3,000,000 shares. We refer to this amendment as the “Plan Amendment” and the revised plan incorporating the Plan Amendment as the “Amended 2019 Plan” throughout this proxy statement. Our continuing ability to offer equity incentive awards under the plan is critical to our ability to attract, motivate and retain qualified personnel, particularly as we grow and in light of the highly competitive markets for employee talent in which we operate.

 

If our shareholders approve the Plan Amendment, it will become effective as of the date of shareholder approval. If our shareholders do not approve the Plan Amendment, then the current plan, as currently in effect, will remain in effect until it terminates in accordance with its terms.

 

Reasons Why You Should Vote in Favor of the Plan Amendment

 

The Board recommends a vote “FOR” approval of the Plan Amendment because the Board believes the proposed Plan Amendment is in the best interests of DiaMedica and our shareholders for the following reasons:

 

 

Attracts and retains talent. Talented, motivated and effective employees, non-employee directors and consultants are essential to executing our business strategy. Stock-based compensation and short-term incentive compensation payable in cash have been an important component of total compensation for our executive officers and key employees for years because such compensation enables us to effectively recruit and retain qualified individuals while encouraging them to think and act like owners of DiaMedica. If our shareholders approve the Plan Amendment, we believe we will maintain our ability to offer competitive compensation packages to both attract new talent and retain our best performers in a manner that is broad-based and preserves cash resources.

 

 

Consistent with our pay-for-performance compensation philosophy to increase shareholder value. We believe that stock-based compensation, by its very nature, is performance-based compensation. Over time, the most significant component of total compensation for our executives is incentive compensation in the form of both stock-based and cash-based incentives that are tied to the achievement of business results. We use incentive compensation both to reinforce desired business results for our key employees and to motivate them to achieve those results. By the nature of the vehicle, option recipients only receive value by creating future value for shareholders from the point of receipt.

 

 

Aligns director, employee and shareholder interests. We currently provide long-term incentives in the form of stock options to eligible employees, our non-employee directors, and consultants. Additionally, we provide our non-employee directors the opportunity to elect to receive deferred stock units (DSUs) or restricted stock units (RSUs) in lieu of up to 100% of their annual cash retainers. We believe our stock-based compensation programs and our short-term incentives payable in cash help align the interests of our non-employee directors and employees with those of our shareholders.

 

18

 

 

 

Protects shareholder interests and embraces sound equity-based compensation practices. As described in more detail below under the heading “—Summary of Sound Governance Features of the Amended 2019 Plan,” the Amended 2019 Plan includes a number of features that are consistent with protecting the interests of our shareholders and sound corporate governance practices.

 

Summary of Sound Governance Features of the Amended 2019 Plan

 

The Board and Compensation Committee believe that the Amended 2019 Plan contains several features that are consistent with protecting the interests of our shareholders and sound corporate governance practices, including the following:

 

✔    No automatic share replenishment or “evergreen” provision

✔    No re-pricing of “underwater” stock options or SARs without shareholder approval

✔    Will not be excessively dilutive to our shareholders

✔    No discounted stock options or SARs

✔    Limit on non-employee director awards

✔    No tax gross-ups

✔    No reload stock options or SARs

✔    Clawback provisions

✔    No liberal share counting or “recycling” of shares from exercised stock options, SARs, or other stock-based awards

✔    No dividends on stock options, DSUs and unvested RSUs

 

Background for Shares Authorized for Issuance

 

If the Plan Amendment is approved, the maximum number of common shares available for issuance under the Amended 2019 Plan will be increased by 3,000,000 to a total of 7,000,000. In determining the total number of shares available under the Amended 2019 Plan, the Board and Compensation Committee considered a number of factors, which are discussed further below, including:

 

 

Shares remaining available under the current plan, total outstanding equity-based awards and how long the remaining available shares are expected to last;

 

 

Historical and anticipated equity award granting practices, including our three-year average share usage (commonly referred to as “burn rate”); and

 

 

Potential dilution and overhang.

 

Shares Available and Outstanding Equity Awards

 

While the use of long-term incentives in the form of equity awards is an important part of our compensation program, we are mindful of our responsibility to our shareholders to exercise judgment in the granting of equity awards. In setting the number of shares available for issuance under the Amended 2019 Plan, the Board and Compensation Committee considered shares remaining available under the current plan, total outstanding equity awards, and how long the remaining shares available under the current plan are expected to last. To facilitate approval of the Plan Amendment, set forth below under “—Potential Dilution” is information about our common shares that may be issued under our equity compensation plans as of March 25, 2024.

 

19

 

Historical Equity Award Granting Practices

 

In setting the number of common shares authorized for issuance under the Amended 2019 Plan, the Board and Compensation Committee also considered the historical number of equity awards granted under the current plan and other equity compensation plans in the past three full fiscal years. The following table sets forth information regarding awards granted and DSUs and RSUs earned in lieu of cash director fees and the annual burn rate for each of the last three fiscal years.

 

   

2023

   

2022

   

2021

 

Stock options granted

    1,132,515       1,014,398       638,008  

DSUs granted

    107,841       66,743       24,272  

RSUs granted

    17,156              

Weighted average common shares outstanding during year

    32,566,723       26,443,067       20,773,399  

Burn rate

    3.9 %     4.1 %     3.2 %

 

The Board and Compensation Committee also considered our three-year average burn rate (2021 to 2023) of approximately 3.7%, which is lower than the industry thresholds established by certain major proxy advisory firms. Based on historical and anticipated granting practices and the recent trading price of our common shares, we expect the additional shares available for issuance under the Plan Amendment to cover awards for approximately three years. However, we cannot predict our future equity grant practices, the future price of our shares, or future hiring activity with any degree of certainty at this time, and the share increase provided by the Plan Amendment could last for a shorter or longer period of time.

 

Potential Dilution

 

In setting the number of common shares authorized for issuance under the Amended 2019 Plan, the Board and Compensation Committee also considered potential dilution that would result by approval of the Plan Amendment, including the policies of certain institutional investors and major proxy advisory firms.

 

Current dilution and potential dilution, or overhang, is as set forth in the table below, as of March 25, 2024, assuming the Plan Amendment is approved.

 

   

As of March 25,

2024 and

Assuming

Approval of

Plan Amendment

 

Options Outstanding

    4,256,638  

Weighted Average Exercise Price of Options Outstanding

  $ 3.53  

Weighted Average Remaining Term of Options Outstanding (in years)

    7.1  

DSUs Outstanding

    284,886  

RSUs Outstanding

    23,660  

Total Equity Awards Outstanding

    4,565,184  

Common Shares Outstanding

    37,958,000  

Current Dilution(1)

    12.0 %

Shares Available for Future Grant Under:

       

2019 Plan

    731,949  

Amended 2019 Plan, assuming Plan Amendment is approved

    3,731,949  

DiaMedica 2021 Employment Inducement Incentive Plan

    110,000  

Current Potential Dilution, or Overhang, as a Percentage of Shares Outstanding(2)

    14.2 %

Potential Dilution, or Overhang, as a Percentage of Shares Outstanding(3)

    22.1 %

 


(1)

Current dilution consists of the number of shares subject to equity awards outstanding as of March 25, 2024 divided by the number of common shares outstanding as of such date.

 

20

 

(2)

Current potential dilution, or overhang, under our current equity plans, consists of the number of shares subject to equity awards outstanding as March 25, 2024 and the number of shares available for future grant under our current equity plans divided by the number of common shares outstanding as of such date.

 

(3)

Potential dilution, or overhang, under the Amended 2019 Plan and Inducement Plan consists of the number of shares subject to equity awards outstanding as March 25, 2024 and the number of shares available for future grant under our equity plans, assuming the Amended 2019 Plan is approved, divided by the number of common shares outstanding as of such date.

 

Summary of the Amended 2019 Plan Features

 

The major features of the Amended 2019 Plan are summarized below. Other than increasing the number of common shares available for issuance, the Amended 2019 Plan is unchanged from the current plan. The summary is qualified in its entirety by reference to the full text of the Amended 2019 Plan, a copy of which may be obtained upon request to our Corporate Secretary at 301 Carlson Parkway, Suite 210, Minneapolis, Minnesota 55305, or by telephone at (763) 496‑5454. A copy of the Amended 2019 Plan has also been filed electronically with the SEC as Appendix A to this proxy statement and is available through the SEC’s website at www.sec.gov.

 

Purpose

The purpose of the Amended 2019 Plan is to advance the interests of DiaMedica and our shareholders by enabling DiaMedica and our subsidiaries to attract and retain qualified individuals to perform services, provide incentive compensation for such individuals in a form that is linked to the growth and profitability of DiaMedica and increases in shareholder value. As such, the Amended 2019 Plan provides opportunities for equity participation that align the interests of recipients with those of our shareholders.

 

Plan

Administration

The Amended 2019 Plan will be administered by the Board of Directors or if the Board of Directors so delegates, the Compensation Committee of the Board or a subcommittee thereof, or any other committee delegated authority by the Board of Directors to administer the Amended 2019 Plan. We expect both the Board of Directors and the Compensation Committee of the Board to administer the Amended 2019 Plan. The Board of Directors or the committee administering the Amended 2019 Plan is referred to as the “Committee.”  The Committee must be comprised solely of directors designated by the Board of Directors who are (a) “non-employee directors” within the meaning of Rule 16b-3 under the Securities and Exchange Act of 1934, as amended, (the Exchange Act) and (b) “independent directors” within the meaning of the rules of the Nasdaq Stock Market (or other applicable exchange or market on which our common shares may be traded or quoted).

 

Delegation

To the extent permitted by applicable law, the Board of Directors may delegate to one or more of its members or to one or more officers of DiaMedica such administrative duties or powers, as it may deem advisable. The Board of Directors may authorize one or more directors or officers of DiaMedica to designate employees, other than officers, non-employee directors, or 10% shareholders of DiaMedica, to receive awards under the plan and determine the size of any such awards, subject to certain limitations established by the Board.

 

 

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No Re-pricing

The Board of Directors may not, without prior approval of our shareholders, effect any re-pricing of any previously granted “underwater” option or SAR, including re-pricing effected by: (i) amending or modifying the terms of the option or SAR to lower the exercise price or grant price; (ii) canceling the underwater option or SAR in exchange for (A) cash; (B) replacement options or SARs having a lower exercise price or grant price; or (C) other awards; or (iii) repurchasing the underwater options or SARs and granting new awards under the Amended 2019 Plan. An option or SAR will be deemed to be “underwater” at any time when the fair market value of the common shares is less than the exercise price of the option or the grant price of the SAR.

 

Shares Authorized

Subject to adjustment (as described below), the maximum number of our common shares available for issuance under the Amended 2019 Plan would be 7,000,000 shares. No more than 2,000,000 common shares may be granted as incentive stock options.

 

Shares that are issued under the Amended 2019 Plan or that are subject to outstanding awards will be applied to reduce the maximum number of shares remaining available for issuance under the Amended 2019 Plan only to the extent they are used; provided, however, that the full number of shares subject to a stock-settled SAR or other stock-based award will be counted against the shares authorized for issuance under the Amended 2019 Plan, regardless of the number of shares actually issued upon settlement of such SAR or other stock-based award. Any shares withheld to satisfy tax withholding obligations on awards issued under the Amended 2019 Plan, any shares withheld to pay the exercise price or grant price of awards under the Amended 2019 Plan, and any shares not issued or delivered as a result of the “net exercise” of an outstanding option or settlement of a SAR in shares will be counted against the shares authorized for issuance under the Amended 2019 Plan and will not be available again for grant under the Amended 2019 Plan. Shares subject to awards settled in cash will again be available for issuance pursuant to awards granted under the Amended 2019 Plan. Any shares related to awards granted under the Amended 2019 Plan that terminate by expiration, forfeiture, cancellation or otherwise without the issuance of the shares will be available again for grant under the Amended 2019 Plan. Any shares repurchased by DiaMedica on the open market using the proceeds from the exercise of an award will not increase the number of shares available for future grant of awards. To the extent permitted by applicable law, shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by DiaMedica or a subsidiary or otherwise will not be counted against shares available for issuance pursuant to the Amended 2019 Plan. The shares available for issuance under the Amended 2019 Plan may be authorized and unissued shares or treasury shares.

 

Adjustments

In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture, or extraordinary dividend (including a spin off) or other similar change in the corporate structure or our common shares, the Board of Directors will make the appropriate adjustment or substitution in order to prevent dilution or enlargement of the rights of participants. These adjustments or substitutions may be to the number and kind of securities and property that may be available for issuance under the Amended 2019 Plan. In order to prevent dilution or enlargement of the rights of participants, the Board of Directors may also adjust the number, kind, and exercise price of securities or other property subject to outstanding awards.

 

 

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Eligible Participants

Awards may be granted to employees, non-employee directors and consultants of DiaMedica or any of our subsidiaries. A “consultant” for purposes of the Amended 2019 Plan is one who renders services to DiaMedica or its subsidiaries that are not in connection with the offer and sale of our securities in a capital raising transaction and do not directly or indirectly promote or maintain a market for our securities. As of March 25, 2024, 20 employees, six non-employee directors and approximately five independent consultants are eligible to participate in the current plan and in the Amended 2019 Plan if it is approved by our shareholders.

 

Types of Awards

The Amended 2019 Plan will permit us to grant non-statutory and incentive stock options, stock appreciation rights, restricted stock awards, RSUs, DSUs, performance awards, non-employee director awards, and other stock based awards. Awards may be granted either alone or in addition to or in tandem with any other type of award.

 

Stock Options

Stock options entitle the holder to purchase a specified number of our common shares at a specified price, which is called the exercise price, subject to the terms and conditions of the stock option grant. The Amended 2019 Plan permits the grant of both non-statutory and incentive stock options. Incentive stock options may be granted solely to eligible employees of DiaMedica or its subsidiaries. Each stock option granted under the Amended 2019 Plan must be evidenced by an award agreement that specifies the exercise price, the term, the number of shares underlying the stock option, the vesting and any other conditions. The exercise price of each stock option granted under the Amended 2019 Plan must be at least 100% of the fair market value of a share of our common shares as of the date the award is granted to a participant, unless the participant owns 10% or more of our outstanding shares in which case the exercise price must be at least 110% of the fair market value. Fair market value under the Amended 2019 Plan means the closing price of our common shares, as reported on the Nasdaq Stock Market, as of the end of a regular trading session on such date, or, if no shares were traded on such date, as of the next preceding date on which there was such a trade. The closing price of our common shares, as reported on the Nasdaq Stock Market, on March 25, 2024 was $2.68 per share. The Board of Directors will fix the terms and conditions of each stock option, subject to certain restrictions, such as a ten-year maximum term.

 

Stock Appreciation Rights

A stock appreciation right, or SAR, is a right granted to receive payment of cash, common shares, or a combination of both, equal to the difference between the fair market value of our common shares and the grant price of such shares. Each SAR granted must be evidenced by an award agreement that specifies the grant price, the term, and such other provisions as the Board of Directors may determine. The grant price of a SAR must be at least 100% of the fair market value of our common shares on the date of grant. The Board of Directors will fix the term of each SAR, but SARs granted under the Amended 2019 Plan will not be exercisable more than 10 years after the date the SAR is granted.

 

 

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Restricted Stock Awards, Restricted Stock Units, and Deferred Stock Units

Restricted stock awards, RSUs, and/or DSUs may be granted under the Amended 2019 Plan. A restricted stock award is an award of common shares that is subject to restrictions on transfer and risk of forfeiture upon certain events, typically including termination of service. RSUs or DSUs are similar to restricted stock awards except that no shares are actually awarded to the participant on the grant date. DSUs permit the holder to receive shares of common shares or the equivalent value in cash or other property at a future time as determined by the Board of Directors. The Board of Directors will determine, and set forth in an award agreement, the period of restriction, the number of shares subject to a restricted stock award or the number of RSUs or DSUs granted, the time of payment for DSUs, and other such conditions or restrictions.

 

Performance Awards

Performance awards, in the form of cash, common shares, or other awards (or in a combination thereof) may be granted under the Amended 2019 Plan in such amounts and upon such terms as the Board of Directors may determine. The Board of Directors shall determine, and set forth in an award agreement, the amount of cash and/or number of shares or other awards, the performance goals, the performance periods, and other terms and conditions. The extent to which the participant achieves his or her performance goals during the applicable performance period will determine the amount of cash and/or number of shares or other awards earned by the participant.

 

Limit on Non-Employee Director Compensation

The Amended 2019 Plan contains an upper total limit on annual non-employee director compensation equal to the sum of any cash compensation, or other compensation, and the value (determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of Awards granted to a non-employee director as compensation for services as a non-employee director during any fiscal year of DiaMedica may not exceed $400,000 (increased to $600,000 with respect to any non-employee director serving as Chairman of the Board or Lead Independent Director or in the fiscal year of a non-employee director’s initial service as a non-employee director). Any compensation that is deferred counts towards this limit for the year in which the compensation is first earned, and not a later year of settlement.

 

Other Stock-Based Awards

Consistent with the terms of the plan, other stock-based awards may be granted to participants in such amounts and upon such terms as the Board of Directors may determine.

 

Dividend Equivalents

With the exception of stock options, SARs, and unvested performance awards, awards under the Amended 2019 Plan may, in the discretion of the Board of Directors, earn dividend equivalents with respect to the cash or stock dividends or other distributions that would have been paid on the common shares covered by such award had such shares been issued and outstanding on the dividend payment date. However, no dividends may be paid on unvested awards. Such dividend equivalents will be converted to cash or additional common shares by such formula and at such time and subject to such limitations as determined by the Board of Directors.

 

 

24

 

Termination of Employment or Other Service

The Amended 2019 Plan provides for certain default rules in the event of a termination of a participant’s employment or other service. These default rules may be modified in an award agreement or an individual agreement between DiaMedica and a participant. If a participant’s employment or other service with DiaMedica is terminated for cause, then all outstanding awards held by such participant will be terminated and forfeited. In the event a participant’s employment or other service with DiaMedica is terminated by reason of death, disability, or retirement, then:

 

●     All outstanding stock options (excluding non-employee director options in the case of retirement) and SARs held by the participant will, to the extent exercisable, remain exercisable for a period of one year after such termination, but not later than the date the stock options or SARs would otherwise expire;

 

●     All outstanding stock options and SARs that are not exercisable and all outstanding restricted stock will be terminated and forfeited; and

 

●     All outstanding unvested RSUs, performance awards, and other stock-based awards held by the participant will terminate and be forfeited. However, with respect to any awards that vest based on the achievement of performance goals, if a participant’s employment or other service with DiaMedica or any subsidiary is terminated prior to the end of the performance period of such award, but after the conclusion of a portion of the performance period (but in no event less than one year), the Board of Directors may, in its sole discretion, cause shares to be delivered or payment made with respect to the participant’s award, but only if otherwise earned for the entire performance period and only with respect to the portion of the applicable performance period completed at the date of such event, with proration based on the number of months or years that the participant was employed or performed services during the performance period.

 

In the event a participant’s employment or other service with DiaMedica is terminated by reason other than for cause, death, disability, or retirement, then:

 

●    All outstanding stock options (including non-employee director options) and SARs held by the participant that then are exercisable will remain exercisable for three months after the date of such termination, but will not be exercisable later than the date the stock options or SARs would otherwise expire;

 

●    All outstanding restricted stock will be terminated and forfeited; and

 

All outstanding unvested RSUs, performance awards and other stock-based awards will be terminated and forfeited. However, with respect to any awards that vest based on the achievement of performance goals, if a participant’s employment or other service with DiaMedica or any subsidiary is terminated prior to the end of the performance period of such award, but after the conclusion of a portion of the performance period (but in no event less than one year), the Board of Directors may, in its sole discretion, cause shares to be delivered or payment made with respect to the participant’s award, but only if otherwise earned for the entire performance period and only with respect to the portion of the applicable performance period completed at the date of such event, with proration based on the number of months or years that the participant was employed or performed services during the performance period.

 

 

25

 

Modification of Rights upon Termination

Upon a participant’s termination of employment or other service with DiaMedica or any subsidiary, the Board of Directors may, in its sole discretion (which may be exercised at any time on or after the grant date, including following such termination) cause stock options or SARs (or any part thereof) held by such participant as of the effective date of such termination to terminate, become or continue to become exercisable or remain exercisable following such termination of employment or service, and restricted stock, RSUs, performance awards, non-employee director awards, and other stock-based awards held by such participant as of the effective date of such termination to terminate, vest, or become free of restrictions and conditions to payment, as the case may be, following such termination of employment or service, in each case in the manner determined by the Board of Directors; provided, however, that no stock option or SAR may remain exercisable beyond its expiration date any such action by the Board of Directors adversely affecting any outstanding award will not be effective without the consent of the affected participant, except to the extent the Board of Directors is authorized by the Amended 2019 Plan to take such action.

 

Forfeiture and Recoupment

If a participant is determined by the Board of Directors to have taken any action while providing services to DiaMedica or within one year after termination of such services, that would constitute “cause” or an “adverse action,” as such terms are defined in the Amended 2019 Plan, all rights of the participant under the Amended 2019 Plan and any agreements evidencing an award then held by the participant will terminate and be forfeited. The Board of Directors has the authority to rescind the exercise, vesting, issuance, or payment in respect of any awards of the participant that were exercised, vested, issued, or paid and require the participant to pay to DiaMedica, within 10 days of receipt of notice, any amount received or the amount gained as a result of any such rescinded exercise, vesting, issuance, or payment. DiaMedica may defer the exercise of any stock option or SAR for up to six months after receipt of notice of exercise in order for the Board of Directors to determine whether “cause” or “adverse action” exists. DiaMedica is entitled to withhold and deduct future wages to collect any amount due.

 

In addition, if DiaMedica is required to prepare an accounting restatement due to material noncompliance, as a result of misconduct, with any financial reporting requirement under the securities laws, then any participant who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 will reimburse DiaMedica for the amount of any award received by such individual under the Amended 2019 Plan during the 12 month period following the first public issuance or filing with the SEC, as the case may be, of the financial document embodying such financial reporting requirement. DiaMedica also may seek to recover any award made as required by the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act or any other clawback, forfeiture, or recoupment provision required by applicable law or under the requirements of any stock exchange or market upon which our common shares is then listed or traded or any policy adopted by DiaMedica.

 

 

26

 

Effect of Change in Control

Generally, a change in control will mean:

 

●     The acquisition, other than from DiaMedica, by any individual, entity, or group of beneficial ownership of 50% or more of the then outstanding shares of common shares of DiaMedica;

 

●     The consummation of a reorganization, merger, or consolidation of DiaMedica with respect to which all or substantially all of the individuals or entities who were the beneficial owners of common shares immediately prior to the transaction do not, following the transaction, beneficially own more than 50% of the outstanding shares of common shares of the corporation resulting from the transaction; or

 

●     A complete liquidation or dissolution of DiaMedica or the sale or other disposition of all or substantially all of the assets of DiaMedica.

 

Subject to the terms of the applicable award agreement or an individual agreement between DiaMedica and a participant, upon a change in control, the Board of Directors may, in its discretion, determine whether some or all outstanding options and stock appreciation rights shall become exercisable in full or in part, whether the restriction period and performance period applicable to some or all outstanding restricted stock awards and RSUs shall lapse in full or in part and whether the performance measures applicable to some or all outstanding awards shall be deemed to be satisfied. The Board of Directors may further require that shares of stock of the corporation resulting from such a change in control, or a parent corporation thereof, be substituted for some or all of our shares of common shares subject to an outstanding award and that any outstanding awards, in whole or in part, be surrendered to us by the holder, to be immediately cancelled by us, in exchange for a cash payment, shares of capital stock of the corporation resulting from or succeeding us or a combination of both cash and such shares of stock.

 

Term, Termination and Amendment

Unless sooner terminated by the Board of Directors, the Amended 2019 Plan will terminate at midnight on May 21, 2029. No award will be granted after termination of the Amended 2019 Plan, but awards outstanding upon termination of the Amended 2019 Plan will remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of the Amended 2019 Plan.

 

Subject to certain exceptions, the Board of Directors has the authority to terminate and the Board of Directors has the authority to amend the Amended 2019 Plan or any outstanding award agreement at any time and from time to time. No amendments to the Amended 2019 Plan will be effective without approval of DiaMedica’s shareholders if: (a) shareholder approval of the amendment is then required pursuant to Section 422 of the Code, the rules of the primary stock exchange on which the common shares is then traded, applicable U.S. state and federal laws or regulations, and the applicable laws of any foreign country or jurisdiction where awards are, or will be, granted under the Amended 2019 Plan; or (b) such amendment would: (i) materially increase benefits accruing to participants; (ii) increase the aggregate number of shares of common shares issued or issuable under the Amended 2019 Plan; (iii) increase any limitation set forth in the Amended 2019 Plan on the number of shares of common shares which may be issued or the aggregate value of awards which may be made, in respect of any type of award to any single participant during any specified period; or (iv) modify the eligibility requirements for participants in the Amended 2019 Plan. No termination or amendment of the Amended 2019 Plan or an award agreement shall adversely affect in any material way any award previously granted under the Amended 2019 Plan without the written consent of the participant holding such award.

 

27

 

U.S. Federal Income Tax Information

 

The following is a general summary, as of the date of this proxy statement, of the U.S. federal income tax consequences to participants and DiaMedica of transactions under the Amended 2019 Plan. This summary is intended for the information of shareholders considering how to vote at the meeting and not as tax guidance to participants in the Amended 2019 Plan, as the consequences may vary with the types of grants made, the identity of the participant, and the method of payment or settlement. The summary does not address the effects of other U.S. federal taxes or taxes imposed under state, local, or foreign tax laws. Participants are encouraged to seek the advice of a qualified tax advisor regarding the tax consequences of participation in the Amended 2019 Plan.

 

Incentive Stock Options. With respect to incentive stock options, generally, the stock option holder is not taxed, and we are not entitled to a deduction, on either the grant or the exercise of an incentive stock option so long as the requirements of Section 422 of the Code continue to be met. If the stock option holder meets the employment requirements and does not dispose of the common shares acquired upon exercise of an incentive stock option until at least one year after date of the exercise of the stock option and at least two years after the date the stock option was granted, gain or loss realized on sale of the shares will be treated as long-term capital gain or loss. If the common shares are disposed of before those periods expire, which is called a disqualifying disposition, the stock option holder will be required to recognize ordinary income in an amount equal to the lesser of (i) the excess, if any, of the fair market value of our common shares on the date of exercise over the exercise price, or (ii) if the disposition is a taxable sale or exchange, the amount of gain realized. Upon a disqualifying disposition, we will generally be entitled, in the same tax year, to a deduction equal to the amount of ordinary income recognized by the stock option holder, assuming that a deduction is allowed under Section 162(m) of the Code.

 

Non-Statutory Stock Options. The grant of a stock option that does not qualify for treatment as an incentive stock option, which is generally referred to as a non-statutory stock option, is generally not a taxable event for the stock option holder. Upon exercise of the stock option, the stock option holder will generally be required to recognize ordinary income in an amount equal to the excess of the fair market value of our common shares acquired upon exercise (determined as of the date of exercise) over the exercise price of the stock option, and we will be entitled to a deduction in an equal amount in the same tax year, assuming that a deduction is allowed under Section 162(m) of the Code. At the time of a subsequent sale or disposition of shares obtained upon exercise of a non-statutory stock option, any gain or loss will be either a long-term or short-term capital gain or loss, depending on how long the shares have been held.

 

SARs. The grant of an SAR will not cause the participant to recognize ordinary income or entitle us to a deduction for federal income tax purposes. Upon the exercise of an SAR, the participant will recognize ordinary income in the amount of the cash or the value of common shares payable to the participant (before reduction for any withholding taxes), and we will receive a corresponding deduction in an amount equal to the ordinary income recognized by the participant, assuming that a deduction is allowed under Section 162(m) of the Code.

 

28

 

Restricted Stock, RSUs, Deferred Stock Units and Other Stock-Based Awards. The federal income tax consequences with respect to restricted stock, RSUs, DSUs, performance shares and performance stock units, and other stock unit and stock-based awards depend on the facts and circumstances of each award, including, in particular, the nature of any restrictions imposed with respect to the awards. In general, if an award of stock granted to the participant is subject to a “substantial risk of forfeiture” (e.g., the award is conditioned upon the future performance of substantial services by the participant) and is nontransferable, a taxable event occurs when the risk of forfeiture ceases or the awards become transferable, whichever first occurs. At such time, the participant will recognize ordinary income to the extent of the excess of the fair market value of the stock on such date over the participant’s cost for such stock (if any), and the same amount is deductible by us, assuming that a deduction is allowed under Section 162(m) of the Code. Under certain circumstances, the participant, by making an election under Section 83(b) of the Code, can accelerate federal income tax recognition with respect to an award of stock that is subject to a substantial risk of forfeiture and transferability restrictions, in which event the ordinary income amount and our deduction, assuming that a deduction is allowed under Section 162(m) of the Code, will be measured and timed as of the grant date of the award. If the stock award granted to the participant is not subject to a substantial risk of forfeiture or transferability restrictions, the participant will recognize ordinary income with respect to the award to the extent of the excess of the fair market value of the stock at the time of grant over the participant’s cost, if any, and the same amount is deductible by us, assuming that a deduction is allowed under Section 162(m) of the Code. If a stock unit award or other stock-based award is granted but no stock is actually issued to the participant at the time the award is granted, the participant will recognize ordinary income at the time the participant receives the stock free of any substantial risk of forfeiture (or receives cash in lieu of such stock) and the amount of such income will be equal to the fair market value of the stock at such time over the participant’s cost, if any, and the same amount is then deductible by us, assuming that a deduction is allowed under Section 162(m) of the Code.

 

Withholding Obligations. We are entitled to withhold and deduct from future wages of the participant, to make other arrangements for the collection of, or to require the recipient to pay to us, an amount necessary for us to satisfy the recipient’s federal, state or local tax withholding obligations with respect to awards granted under the Amended 2019 Plan. Withholding for taxes may be calculated based on the maximum applicable tax rate for the participant’s jurisdiction or such other rate that will not trigger a negative accounting impact on DiaMedica. The Board of Directors may permit a participant to satisfy a tax obligation by withholding shares of common shares underlying an award, tendering previously acquired shares, delivery of a broker exercise notice, or a combination of these methods.

 

Code Section 409A. A grant may be subject to a 20% penalty tax, in addition to ordinary income tax, at the time the grant becomes vested, plus an interest penalty tax, if the grant constitutes deferred compensation under Section 409A of the Code and the requirements of Section 409A of the Code are not satisfied.

 

Code Section 162(m). Pursuant to Section 162(m) of the Code, the annual compensation paid to an individual who is a “covered employee” may not be deductible to the extent that it exceeds $1 million. The Tax Cut and Jobs Act, signed into law on December 22, 2017, amended Code Section 162(m), effective for tax years beginning after December 31, 2017, (i) to expand the definition of a “covered employee” to include any person who was the Chief Executive Officer or the Chief Financial Officer at any time during the year and the three most highly compensated officers (other than the Chief Executive Officer or the Chief Financial Officer) who were employed at any time during the year whether or not the compensation is reported in the Summary Compensation Table included in our proxy statement for our Annual Meeting of Shareholders; (ii) to treat any individual who is considered a covered employee at any time during a tax year beginning after December 31, 2017, as remaining a covered employee permanently; and (iii) to eliminate the performance-based compensation exception to the $1 million deduction limit (with a transition provision continuing the performance-based exception for certain compensation covered by a written binding contract in existence on November 2, 2017).

 

29

 

Excise Tax on Parachute Payments. Unless otherwise provided in a separate agreement between a participant and DiaMedica, if, with respect to a participant, the acceleration of the vesting of an award or the payment of cash in exchange for all or part of an award, together with any other payments that such participant has the right to receive from DiaMedica, would constitute a “parachute payment,” then the payments to such participant will be reduced to the largest amount as will result in no portion of such payments being subject to the excise tax imposed by Section 4999 of the Code. Such reduction, however, will only be made if the aggregate amount of the payments after such reduction exceeds the difference between the amount of such payments absent such reduction minus the aggregate amount of the excise tax imposed under Section 4999 of the Code attributable to any such excess parachute payments. If such provisions are applicable and if an employee will be subject to a 20% excise tax on any “excess parachute payment” pursuant to Section 4999 of the Code, we will be denied a deduction with respect to such excess parachute payment pursuant to Section 280G of the Code.

 

Awards Previously Granted Under the Plan

 

As of March 25, 2024, we had granted stock options, DSUs and RSUs under the current plan as follows:

 

Name and Position

 

Number of Shares

Underlying Stock

Options

   

Number of

Shares

Underlying

DSUs/RSUs

 

Rick Pauls, President and Chief Executive Officer

    1,039,000       1,749  

Scott Kellen, Chief Financial Officer

    372,000        

Julie Daves, Senior Vice President, Clinical Development Operations

    194,000        

Kirsten Gruis, M.D., Former Chief Medical Officer

    227,000        

Executive Group (6 persons)

    2,222,000       1,749  

Non-Employee Director Group

    441,345       283,137  

All Other Employee Group

    750,375        

Total

    3,413,720       284,886  

 

Board of Directors Recommendation

 

The Board of Directors unanimously recommends that our shareholders vote FOR approval of the Amendment to DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan.

 

The Board of Directors Recommends a Vote FOR Voting Proposal Three

 

30

 

VOTING PROPOSAL FOUR ADVISORY APPROVAL OF EXECUTIVE COMPENSATION

 


 

Background and Proposed Advisory Approval of Our Executive Compensation

 

Our Board of Directors is providing our shareholders with an advisory vote on our executive compensation pursuant to the Dodd-Frank Wall Street Consumer Protection Act, or Dodd-Frank Act, and Section 14A of the Exchange Act. This advisory vote, commonly known as a say-on-pay vote, is a non-binding vote on the compensation paid to our named executive officers as identified pursuant to Item 402 of Regulation S-K, as set forth in the “Executive Compensation” section of this proxy statement, including in the accompanying compensation tables and the corresponding narrative discussion and footnotes.

 

Because we no longer qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, this is our first year holding a say-on-pay vote in connection with our annual general meeting of shareholders. In addition, at the annual general meeting, our shareholders have the opportunity in Voting Proposal Five to indicate whether they prefer that we hold future advisory votes on executive compensation every one, two, or three years, or they may abstain from that vote.

 

Why You Should Vote in Favor of our Say-on-Pay Vote

 

The “Executive Compensation” section of this proxy statement describes our executive compensation program and the executive compensation decisions made by our Compensation Committee in 2023 in more detail. Our executive compensation policies, plans and programs seek to enhance our financial performance, and thus shareholder value, by aligning the financial interests of our executives with those of our shareholders and by emphasizing pay-for-performance.

 

Our compensation practices include many best pay practices that support our executive compensation objectives and principles, and benefit our shareholders.

 

What We Do:

What We Dont Do:

●     Emphasize pay for performance

●    No guaranteed salary increases or bonuses

●     Structure our executive compensation so a significant portion of pay is at risk

●    No repricing of stock options unless approved by shareholders

●     Maintain competitive pay packages

●    No liberal share counting under our equity plan

●     Structure our executive compensation so a significant portion is paid in equity

●    No hedging or pledging of DiaMedica securities

●     Maintain a clawback policy

●    No perquisites

 

Proposed Resolution

 

Our Board recommends that our shareholders vote in favor of our advisory vote on our executive compensation as set forth in the following resolution:

 

RESOLVED, that our shareholders approve, on an advisory basis, the compensation paid to the company's named executive officers, as disclosed pursuant to the compensation disclosure rules of the SEC.

 

Shareholders are not ultimately voting to approve or disapprove the recommendation of our Board. As this is an advisory vote, the outcome of the vote is not binding on us with respect to future executive compensation decisions, including those relating to our named executive officers, or otherwise. Our Compensation Committee and our Board expect to take into account the outcome of the vote when considering future executive compensation decisions.

 

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Next Say-On-Pay Vote

 

Our shareholders have an opportunity this year to vote on the frequency of future advisory votes on executive compensation. Assuming our shareholders indicate a preference to hold a say-on-pay vote every one year, in alignment with our Board’s recommendation, the next say-on-pay vote would occur in 2025 in connection with next year’s annual general meeting.

 

Board of Directors Recommendation

 

The Board of Directors unanimously recommends that our shareholders vote FOR approval, on an advisory basis, of our executive compensation, or say-on-pay vote.

 

The Board of Directors Recommends a Vote FOR Voting Proposal Four

 

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VOTING PROPOSAL FIVE ADVISORY APPROVAL OF THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION

 


 

Background and Proposed Advisory Approval of the Frequency of Future Say-on-Pay Votes

 

Our Board of Directors is providing our shareholders with an advisory vote on the frequency of future advisory votes on executive compensation, or say-on-pay votes, such as that provided for in Proposal Four. This non-binding advisory vote is required to be conducted every six years under Section 14A of the Exchange Act pursuant to the Dodd-Frank Act. Prior to this year, we were exempt from submitting a say-on-pay proposal to the vote of our shareholders as a result of our “emerging growth company” status under the JOBS Act. At the annual meeting, our shareholders may indicate whether they prefer that we hold a say-on-pay vote every one, two, or three years, or they may abstain from this vote.

 

Our Board, upon recommendation of the Compensation Committee, recommends a say-on-pay vote frequency of every year. We have determined that a say-on-pay vote every one year is the best approach for our Company and shareholders for a number of reasons, including:

 

 

It is consistent with the preference of many of our shareholders

 

 

It allows our shareholders to provide timely, direct input on our executive compensation philosophy, policies and practices as disclosed in our proxy statement each year.

 

 

It is consistent with our review of core elements of our executive compensation program annually.

 

 

It is consistent with our efforts to engage in an ongoing dialogue with shareholders on executive compensation and corporate governance matters.

 

Shareholders are not voting to approve or disapprove the recommendation of our Board. Instead, shareholders may indicate their preference regarding the frequency of future say-on-pay votes by selecting every one, two, or three years. Shareholders that do not have a preference regarding the frequency of future say-on-pay votes may abstain from voting on the proposal.

 

The option of every one, two, or three years that receives the highest number of votes cast by shareholders will reflect the frequency for future say-on-pay votes that has been selected by shareholders. As this is an advisory vote, the outcome of the vote is not binding on us, and our Compensation Committee and Board may decide that it is in the best interests of our company and shareholders to hold a say-on-pay vote more or less frequently than the preference receiving the highest number of votes of our shareholders. However, our Compensation Committee and Board value the opinions expressed by our shareholders in their vote on this proposal, and expect to take into account the outcome of this vote when considering the frequency of future advisory votes on our executive compensation.

 

Board of Directors Recommendation

 

Our Board unanimously recommends that shareholders vote, on an advisory basis, for a frequency of every ONE YEAR, for future advisory votes on executive compensation.

 

The Board of Directors Recommends a Vote for ONE YEAR on Voting Proposal Four

 

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STOCK OWNERSHIP

 


 

Security Ownership of Significant Beneficial Owners

 

The table below sets forth information as to entities that have reported to the SEC or have otherwise advised us that they are a beneficial owner, as defined by the SEC’s rules and regulations, of more than five percent of our common shares.

 

Title of Class

 

Name and Address of

Beneficial Owner

 

Amount and Nature of

Beneficial Ownership

 

Percent of Class(1)

 

Common Shares

 

Richard Jacinto II

4775 Collins Avenue

Suite 3003

Miami Beach, FL 33140

 

4,558,823(2)

 

12.0%

 

Common Shares

 

TomEqt Private AB

c/o KinKon AB

Biblioteksgatan 25

11435

Stockholm, Sweden

 

4,326,435(3)

 

11.4%

 

Common Shares

 

Trill AB

Sveavägen 17, 18th Floor

SE-111 57

Stockholm, Sweden

 

4,021,608(4)

 

10.6%

 

 


(1)

Percent of class is based on 37,958,000 shares outstanding as of our record date, March 25, 2024.

 

(2)

Based solely on information contained in a Schedule 13G/A of Mr. Richard Jacinto II filed with the SEC on June 23, 2023, reflecting beneficial ownership as of June 23, 2023. Mr. Jacinto has the sole power to vote and dispose of the common shares and is deemed to be the beneficial owner of all the shares.

 

(3)

Based solely on information contained in a Schedule 13G/A of TomEnterprise AB filed with the SEC on June 27, 2023, reflecting beneficial ownership as of June 23, 2023. TomEqt Private AB is the record holder of 4,326,435 shares. Mr. Thomas Von Koch, as the board member of TomEqt Private AB, has the sole power to vote and dispose of the common shares and is deemed to be the beneficial owner of all the shares. As of the date of the Schedule 13G/A, TomEnterprise AB, the previous record holder of the common shares, is no longer the record holder of any shares. TomEqt Private AB, TomEnterprise AB, and Mr. Von Koch filed their Schedule 13G/A jointly, but not as members of a group, and each disclaims membership in a group.

 

(4)

Based solely on information contained in a Schedule 13G of Trill AB filed with the SEC on June 27, 2023, reflecting beneficial ownership as of June 23, 2023. Trill AB is the record holder of 4,021,608 shares. Mr. Jan Ståhlberg, as the board member of Trill AB, has the sole power to vote and dispose of the shares and is deemed to be the beneficial owner of all the shares. Trill AB and Mr. Ståhlberg filed their Schedule 13G jointly, but not as members of a group, and each disclaims membership in a group.

 

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Security Ownership of Management

 

The table below sets forth information known to us regarding the beneficial ownership of our common shares as of March 25, 2024, by:

 

 

each of our current directors;

 

 

each of the individuals named in the Summary Compensation Table under “Executive Compensation” on page 58; and

 

 

all of our current directors and executive officers as a group.

 

To our knowledge, each person named in the table has sole voting and investment power with respect to all of the securities shown as beneficially owned by such person, as determined by the rules of the SEC, except as otherwise set forth in the notes to the table and subject to community property laws, where applicable. The SEC has defined “beneficial” ownership of a security to mean the possession, directly or indirectly, of voting power and/or investment power. A shareholder is also deemed to be, as of any date, the beneficial owner of all securities that such shareholder has the right to acquire within 60 days after that date through (i) the exercise of any option, warrant or right; (ii) the conversion of a security; (iii) the power to revoke a trust, discretionary account or similar arrangement; or (iv) the automatic termination of a trust, discretionary account or similar arrangement. However, such unissued shares of common shares are not deemed to be outstanding for calculating the percentage of common shares owned by any other person.

 

Unless otherwise indicated below, the address for each beneficial owner listed is c/o DiaMedica Therapeutics Inc., 301 Carlson Parkway, Suite 210, Minneapolis, Minnesota 55305.

 

Title of Class

 

Name of Beneficial Owner

 

Amount and

Nature of

Beneficial

Ownership(1)

 

Percent of Class(2)

 

Common Shares

 

Michael Giuffre, M.D.         

 

485,894(3)

 

1.3%

 

Common Shares

 

Richard Kuntz, M.D., M.Sc.          

 

11,651

 

*

 

Common Shares

 

Tanya Lewis         

 

14,434

 

*

 

Common Shares

 

James Parsons         

 

130,463

 

*

 

Common Shares

 

Richard Pilnik         

 

394,680

 

1.0%

 

Common Shares

 

Charles Semba, M.D.         

 

75,456

 

*

 

Common Shares

 

Rick Pauls         

 

779,716

 

2.0%

 

Common Shares

 

Scott Kellen         

 

287,290

 

*

 

Common Shares

 

Julie Daves         

 

17,500

 

*

 

Common Shares

 

Kirsten Gruis, M.D.         

 

83,333

 

*

 
               

Common Shares

 

All current directors and executive officers as a group (12 persons)         

 

2,872,311

 

7.2%

 

 


*

Represents beneficial ownership of less than one percent.

 

(1)

Includes for the persons listed below the following shares subject to options, restricted stock units and deferred stock units held by such persons that are currently exercisable or become exercisable within 60 days of March 25, 2024:

 

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Name

 

Shares

Underlying

Stock Options

   

Shares

Underlying

Restricted Stock

Units

   

Shares

Underlying

Deferred Stock

Units

 

Directors

                       

Michael Giuffre, M.D.

    89,097             73,904  

Richard Kuntz, M.D., M.Sc. .

    8,080       3,571        

Tanya Lewis

    14,434              

James Parsons

    86,597             41,616  

Rick Pauls

    711,125             1,749  

Richard Pilnik

    138,846             114,381  

Charles Semba, M.D.

    43,169       2,344        

Executive Officers

                       

Rick Pauls

    711,125             1,749  

Scott Kellen

    255,000              

Julie Daves

    17,500              

Kirsten Gruis, M.D.

    83,333              
                         

Other Executive Officers.

    145,313              

All current directors and executive officers as a group (12 persons)

    1,509,161       5,915       231,650  

 

(2)

Percent of class is based on 37,958,000 shares outstanding as of our record date, March 25, 2024.

 

(3)

Includes: (i) 25,573 shares held by 424822 Albert Ltd, over which Dr. Giuffre has sole voting and dispositive power, (ii) 164,890 shares Dr. Giuffre and his spouse hold jointly, (iii) 21,070 common shares held by Dr. Giuffre’s spouse and (iv) 111,360 shares held directly by Dr. Giuffre.

 

Delinquent Section 16(a) Reports

 

Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of our common shares to file with the SEC reports showing ownership of and changes in ownership of our common shares and other equity securities. Based on a review of reports filed by these reporting persons on the SEC’s electronic filing, or EDGAR, system and written representations by our directors and executive officers, we believe that all of our directors, executive officers and greater than 10% owners complied with all filing requirements applicable to them during 2023 other than Tanya Lewis filed one late Form 4 with respect to a transaction on March 1, 2023.

 

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CORPORATE GOVERNANCE

 


 

Management by Board of Directors

 

The Board of Directors is responsible for overseeing the management of DiaMedica and for the conduct of our affairs generally. Each director is elected annually by the shareholders and serves for a term that will end at the next annual general meeting of shareholders.

 

The Board of Directors facilitates its exercise of independent supervision over the management of DiaMedica through a combination of formal meetings of the Board of Directors and informal discussions amongst Board members. The Board of Directors is comprised of a majority of independent directors. The Board of Directors manages governance matters both directly and through its Board committees, which are described in more detail below. The Board of Directors looks to management of DiaMedica to keep it apprised of all significant developments affecting DiaMedica and our operations. All major acquisitions, dispositions, investments, contracts and other significant matters outside the ordinary course of our business are subject to approval by the Board of Directors.

 

Corporate Governance Guidelines

 

The Board of Directors has established Corporate Governance Guidelines that describe our basic approach to corporate governance. A copy of these Corporate Governance Guidelines can be found on the “Investor Relations—Governance” section of our corporate website www.diamedica.com. Among the topics addressed in our Corporate Governance Guidelines are:

 

●    Board size and qualifications

●    Conflicts of interest and director independence

●    Selection of directors

●    Board interaction with corporate constituencies

●    Board leadership

●    Change of principal occupation

●    Board committees

●    Term limits

●    Board and committee meetings

●    Retirement and resignation policy

●    Executive sessions of independent directors

●    Board compensation

●    Meeting attendance by directors and non-directors

●    Stock ownership by directors

●    Appropriate information and access

●    Board compensation

●    Ability to retain advisors

●    Stock ownership by directors

●    CEO evaluation

●    Loans to directors and executive officers

●    Succession planning

●    Board and committee evaluation

●    Limitations on other Board service

●    Communications with directors

●    Oversight and risk management

 

 

Board Leadership Structure

 

Under our Corporate Governance Guidelines, the Board of Directors may select from its members a Chairman of the Board. The office of Chairman of the Board and the office of President and Chief Executive Officer may be held by one person. The Board of Directors believes it is best not to have a fixed policy on this issue and that it should be free to make this determination based on what it believes is best in light of current circumstances. The Board of Directors, acting as a group or through the Nominating and Corporate Governance Committee, will periodically review the leadership structure of the Board of Directors to assess whether it is appropriate given the specific characteristics and circumstances of DiaMedica. However, the Board of Directors does strongly endorse the concept of independent directors being in a position of leadership. If at any time, the Chief Executive Officer and Chairman of the Board are the same, the Board of Directors shall elect an independent director to serve as the lead director. The lead director will have the following duties and responsibilities in addition to such other duties and responsibilities as may be determined by the Board of Directors from time to time.

 

 

chairing the executive sessions of the independent directors and calling meetings of the independent directors;

 

37

 

 

determining the agenda for the executive sessions of the independent directors and participating with the Chairman of the Board in establishing the agenda for Board meetings;

 

 

coordinating feedback among the independent directors and the Chief Executive Officer;

 

 

overseeing the development of appropriate responses to communications from shareholders and other interested persons addressed to the independent directors as a group;

 

 

on behalf of the independent directors, retaining legal counsel or other advisors as they deem appropriate in the conduct of their duties and responsibilities; and

 

 

performing such other duties as the Board of Directors deems appropriate from time to time.

 

Mr. Pilnik currently serves as Chairman of the Board and Rick Pauls currently serves as President and Chief Executive Officer.

 

We currently believe this leadership structure is in the best interests of DiaMedica and our shareholders and strikes the appropriate balance between the President and Chief Executive Officer’s responsibility for the strategic direction, day-to-day leadership and performance of our company and the Chairman of our Board’s responsibility to guide overall strategic direction of our company and provide oversight of our corporate governance and guidance to our President and Chief Executive Officer and to set the agenda for and preside over board meetings. We recognize that different leadership structures may be appropriate for companies in different situations and believe that no one structure is suitable for all companies. We believe that our company is well served by this leadership structure. We anticipate that the Board of Directors will periodically review our leadership structure and may make such changes in the future as it deems appropriate.

 

Under our Corporate Governance Guidelines, our independent directors will meet with no company management present during a portion of or after Board meetings on a regular basis but not fewer than two times per year. After each such executive session, and as otherwise necessary, our Chairman of the Board provides our Chief Executive Officer with any actionable feedback from our independent directors. The Board of Directors met six times in executive session during the fiscal year ended December 31, 2023.

 

Director Independence

 

The Board of Directors has affirmatively determined that six of DiaMedica’s current seven directors are “independent directors” under the Nasdaq Listing Rules: Michael Giuffre, M.D., Richard Kuntz, M.D., M.Sc., Tanya Lewis, James Parsons, Richard Pilnik and Charles Semba, M.D. In addition, Amy L. Burroughs, a former director, who served during a portion of 2023 was also affirmatively determined by the Board of Directors to be an “independent director” under the Nasdaq Listing Rules. In making these affirmative determinations that such individuals are “independent directors,” the Board of Directors reviewed and discussed information provided by the directors and by DiaMedica with regard to each director’s business and personal activities as they may relate to DiaMedica and our management.

 

Board Committees

 

The Board of Directors has a standing Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. Each of these committees has the composition described in the table below and the responsibilities described in the sections below. The Board of Directors has adopted a written charter for each committee of the Board of Directors which can be found on the “Investor Relations—Governance—Governance Documents” section of our corporate website www.diamedica.com and which each committee reviews and assesses on an annual basis. The Board of Directors from time to time may establish other committees.

 

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The following table summarizes the current membership of each of our three Board committees.

 

Director

Audit

Committee

Compensation

Committee

Nominating and Corporate

Governance Committee

Michael Giuffre, M.D.

 

Chair

Richard Kuntz, M.D., M.Sc.

     

Tanya Lewis

 

 

James Parsons

Chair

 

Rick Pauls

     

Richard Pilnik

 

Chair

Charles Semba, M.D.

 

 

Audit Committee

 

Responsibilities. The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to our annual and quarterly financial statements filed with the SEC and any applicable securities regulatory authorities of the provinces and territories of Canada, our financial reporting process, our internal control over financial accounting and disclosure controls and procedures, the annual independent audit of our financial statements and the effectiveness of our legal compliance and ethics programs. The Audit Committee’s primary responsibilities include:

 

 

overseeing our financial reporting process, internal control over financial reporting and disclosure controls and procedures on behalf of the Board of Directors;

 

 

having sole authority to appoint, oversee, evaluate, retain and terminate the engagement of our independent registered public accounting firm and establish the compensation to be paid to the firm;

 

 

reviewing and pre-approving all audit services and permissible non-audit services to be provided to us by our independent registered public accounting firm;

 

 

establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters and for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters; and

 

 

overseeing our systems to monitor legal and ethical compliance programs, including the establishment and administration of (including the grant of any waiver from) a written code of ethics applicable to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

 

In addition to its primary responsibilities, the Audit Committee oversees the company’s systems to monitor compliance with legal and regulatory requirements, the company’s Code of Business Conduct and Ethics, and the company’s cybersecurity efforts.

 

The Audit Committee has the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities.

 

39

 

Composition. The current members of the Audit Committee are Mr. Parsons, Mr. Pilnik, and Dr. Semba. Mr. Parsons is the Chair of the Audit Committee. In addition, Ms. Burroughs, a former director of DiaMedica, also served as an Audit Committee member during a portion of 2023.

 

Each member of the Audit Committee qualifies as “independent” for purposes of membership on audit committees pursuant to the Nasdaq Listing Rules and the rules and regulations of the SEC and is “financially literate” as required by the Nasdaq Listing Rules. In addition, the Board of Directors has determined that Mr. Parsons qualifies as an “audit committee financial expert” as defined by the rules and regulations of the SEC and meets the qualifications of “financial sophistication” under the Nasdaq Listing Rules as a result of his extensive financial background and various financial positions he has held throughout his career. Shareholders should understand that these designations related to our Audit Committee members’ experience and understanding with respect to certain accounting and auditing matters do not impose upon any of them any duties, obligations or liabilities that are greater than those generally imposed on a member of the Audit Committee or of the Board of Directors.

 

Audit Committee Report. This report is furnished by the Audit Committee of the Board of Directors with respect to DiaMedica’s consolidated financial statements for the year ended December 31, 2023.

 

One of the purposes of the Audit Committee is to oversee DiaMedica’s accounting and financial reporting processes and the audit of DiaMedica’s annual consolidated financial statements. DiaMedica’s management is responsible for the preparation and presentation of complete and accurate financial statements. DiaMedica’s independent registered public accounting firm, Baker Tilly US, LLP, is responsible for performing an independent audit of DiaMedica’s annual consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and for issuing a report on their audit.

 

In performing its oversight role, the Audit Committee has reviewed and discussed DiaMedica’s audited consolidated financial statements for the year ended December 31, 2023 with DiaMedica’s management. Management represented to the Audit Committee that DiaMedica’s financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee has discussed with Baker Tilly US, LLP the matters required to be discussed under Public Company Accounting Oversight Board standards and Securities and Exchange Commission rules. The Audit Committee has received the written disclosures and the letter from Baker Tilly US, LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding Baker Tilly US, LLP’s communications with the Audit Committee concerning independence. The Audit Committee has discussed with Baker Tilly US, LLP its independence and concluded that the independent registered public accounting firm is independent from DiaMedica and DiaMedica’s management.

 

Based on the review and discussions of the Audit Committee described above, in reliance on the unqualified opinion of Baker Tilly US, LLP regarding DiaMedica’s audited consolidated financial statements, and subject to the limitations on the role and responsibilities of the Audit Committee discussed above and in the Audit Committee’s charter, the Audit Committee recommended to the Board of Directors that DiaMedica’s audited consolidated financial statements for the fiscal year ended December 31, 2023 be included in its Annual Report on Form 10-K for the year ended December 31, 2023 for filing with the Securities and Exchange Commission.

 

Audit Committee

 

James Parsons, Chair

Richard Pilnik

Charles Semba, M.D.

 

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Other Information. Additional information regarding the Audit Committee and our independent registered public accounting firm is disclosed under the “Voting Proposal TwoAppointment of Baker Tilly US, LLP as our Independent Registered Public Accounting Firm and Authorization to Fix Remuneration” section of this proxy statement.

 

Compensation Committee

 

Responsibilities. The Compensation Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to compensation of our Chief Executive Officer and other executive officers and administers our equity compensation plans. The Compensation Committee’s primary responsibilities include:

 

 

determining all compensation for our Chief Executive Officer and other executive officers;

 

 

administering our equity-based compensation plans;

 

 

reviewing, assessing and approving overall strategies for attracting, developing, retaining and motivating our management and employees;

 

 

overseeing the development and implementation of succession plans for our Chief Executive Officer and other key executive officers and employees;

 

 

reviewing, assessing and approving overall compensation structure on an annual basis; and

 

 

recommending and leading a process for the determination of non-employee director compensation.

 

The Compensation Committee has the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities, and prior to doing so, assesses the independence of such experts and advisors from management.

 

Composition. The current members of the Compensation Committee are Dr. Giuffre, Ms. Lewis, Mr. Parsons, and Dr. Semba. Dr. Giuffre is the Chair of the Compensation Committee. The Board of Directors has determined that each of the members of the Compensation Committee is an “independent director” under the Nasdaq Listing Rules, a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, and otherwise independent under the rules and regulations of the SEC.

 

Processes and Procedures for Consideration and Determination of Executive Compensation. As described in more detail above under “—Responsibilities,” the Board of Directors has delegated to the Compensation Committee the responsibility, among other things, to determine any and all compensation payable to our executive officers, including annual salaries, short-term incentive compensation, long-term incentive compensation, perquisites and any and all other compensation, and to administer our equity-based compensation plans. The Compensation Committee has the full power and authority of the Board of Directors to perform these duties and to fulfill these responsibilities. Under the terms of its formal written charter, the Compensation Committee has the power and authority, to the extent permitted by applicable law, to delegate all or a portion of its duties and responsibilities to a subcommittee of the Compensation Committee. The Compensation Committee has delegated to the Chief Executive Officer and Chief Financial Officer, and each of them individually, under DiaMedica’s Amended and Restated 2019 Omnibus Incentive Plan the authority to approve initial stock option grants to newly hired non-executive officer employees of DiaMedica and subject to DiaMedica’s Equity Grant Policy and additional conditions and limitations specified by the Compensation Committee. The Compensation Committee has not delegated any other of its duties and responsibilities to subcommittees, but rather has taken such actions as a committee, as a whole.

 

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The Compensation Committee has engaged the services of Alpine Rewards, LLC, an independent compensation consultant, to assist the Compensation Committee in developing a comprehensive compensation strategy based upon compensation levels at benchmark companies for DiaMedica. The Compensation Committee used the information in this report, recommendations from Alpine Rewards, LLC and discussions with management, to establish a compensation strategy and set target compensation levels for officers and non-employee directors. The Compensation Committee initially retained Alpine Rewards, LLC in February 2023 to update its executive officer and non-employee director compensation analyses. In making final decisions regarding compensation to be paid to our executive officers, the Compensation Committee considers several factors, including the benchmarking information gathered by its compensation consultants, the achievement by DiaMedica of pre-established performance objectives, the general performance of DiaMedica and the individual officers, and other factors that may be relevant.

 

Final deliberations and decisions by the Compensation Committee regarding the form and amount of compensation to be paid to our executive officers are made by the Compensation Committee, without the presence of any executive officer of our company.

 

Processes and Procedures for Consideration and Determination of Director Compensation. As mentioned above under “—Responsibilities,” the Board of Directors has delegated to the Compensation Committee the responsibility, among other things, to review and make recommendations to the Board of Directors concerning compensation for non-employee members of the Board of Directors, including but not limited to retainers, meeting fees, committee chair and member retainers and equity compensation. Decisions regarding director compensation made by the Compensation Committee are not considered final and are subject to final review and approval by the entire Board of Directors. In making recommendations to the Board of Directors regarding compensation to be paid to our non-employee directors, the Compensation Committee considers fees and other compensation paid to directors of benchmark companies as gathered by its compensation consultants, the number of Board and committee meetings that our directors are expected to attend, the duties and responsibilities of individual Board members, and other factors that may be relevant. In making final decisions regarding non-employee director compensation, the Board of Directors considers the same factors and the recommendation of the Compensation Committee.

 

Nominating and Corporate Governance Committee

 

Responsibilities. The Nominating and Corporate Governance Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to director nominations and corporate governance. The primary responsibilities of the Nominating and Corporate Governance Committee include:

 

 

identifying individuals qualified to become members of the Board of Directors, which includes reviewing and considering director nominees submitted by shareholders;

 

 

recommending director nominees for each annual general meeting of our shareholders and director nominees to fill any vacancies that may occur between general meetings of shareholders;

 

 

engaging in succession planning for the Board of Directors;

 

 

being aware of best practices in corporate governance matters and developing and recommending to the Board of Directors a set of corporate governance guidelines to govern the Board of Directors, its committees, DiaMedica and our employees;

 

 

recommending director diversity, retirement age, tenure and refreshment policies;

 

 

developing and overseeing an orientation process for new directors; and

 

 

developing and overseeing a periodic Board of Directors and Board committee evaluation process.

 

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The Nominating and Corporate Governance Committee has the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities.

 

Orientation and Continuing Education of Directors. The Nominating and Corporate Governance Committee is responsible for developing and overseeing an orientation process for all new members of the Board of Directors. New directors are provided with access to our recent, publicly filed documents, technical reports and internal financial information and given copies of all Board of Director minutes and corporate governance materials. Directors are encouraged to ask questions and communicate with management, auditors, outside legal counsel and technical consultants to keep themselves current with industry trends and developments and changes in legislation. Continuing education is an important compliance requirement to promote the competence and integrity of Board members. Our directors are encouraged to take part in relevant education programs offered by appropriate regulatory bodies.

 

Composition. The current members of the Nominating and Corporate Governance Committee are Dr. Giuffre and Mr. Pilnik. Mr. Pilnik is the Chair of the Nominating and Corporate Governance Committee. In addition, Ms. Burroughs, a former director of DiaMedica, also served as a Nominating and Corporate Governance Committee member during a portion of 2023. The Board of Directors has determined that each of the members of the Nominating and Corporate Governance Committee is an “independent director” under the Nasdaq Listing Rules.

 

Director Qualifications and the Nomination Process

 

The Board of Directors seeks to ensure that the Board is composed of members whose particular experience, qualifications, attributes and skills, when taken together, will allow the Board to satisfy its oversight responsibilities effectively. New directors will be approved by the Board after evaluation and recommendation by the Nominating and Corporate Governance Committee. In identifying candidates for director, the Nominating and Corporate Governance Committee and the Board take into account the following:

 

 

the comments and recommendations of Board members regarding the qualifications and effectiveness of the existing Board, or additional qualifications that may be required when selecting new Board members;

 

 

the requisite expertise and sufficiently diverse backgrounds of the Board’s overall membership composition;

 

 

the independence of outside directors and other possible conflicts of interest of existing and potential members of the Board; and

 

 

any other factors they consider appropriate.

 

Dr. Kuntz, M.D., M.Sc., who was appointed to the Board effective as of May 30, 2023, was identified and recommended to us by one of our significant shareholders. When considering directors and nominees the Nominating and Corporate Governance Committee and the Board of Directors focuses primarily on the information discussed in each of the directors’ individual biographies, personal interview and recommendations.

 

The Nominating and Corporate Governance Committee will consider director candidates recommended to it by our shareholders. Those candidates must be qualified and exhibit the experience and expertise required of the Board’s own pool of candidates, as well as have an interest in our business and demonstrate the ability to attend and prepare for Board, committee, and shareholder meetings. Any candidate must provide a written statement, in advance, affirming his or her willingness and interest in serving on the Board. Candidates should represent the interests of all shareholders and not those of a special interest group. The Nominating and Corporate Governance Committee will evaluate candidates recommended by shareholders using the same criteria it uses to evaluate candidates recommended by others as described above. A shareholder that desires to nominate a person for election to the Board of Directors at a meeting of shareholders must follow the specified advance notice requirements and provide the specific information as required by our Articles and the British Columbia’s Business Corporations Act. See additional information below in “Shareholder Proposals for 2025 Annual General Meeting of Shareholders.”

 

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Board Diversity Matrix

 

The table below provides certain highlights of the composition of our board members and nominees. Each of the categories listed in the below table has the meaning as it is used in Nasdaq Rule 5605(f).

 

Board Diversity Matrix (As of March 25, 2024)

Total Number of Directors

7

 

Female

Male

Non-Binary

Part I: Gender Identity

     

Directors

1

6

Part II: Demographic Background

     

African American or Black

1

Alaskan Native or Native American

Asian

1

Hispanic or Latinx

Native Hawaiian or Pacific Islander

White

5

Two or More Races or Ethnicities

LGBTQ+

Did Not Disclose Demographic Background

 

Board Diversity

 

The Nominating and Corporate Governance Committee is responsible for reviewing with the Board of Directors, on an annual basis, the appropriate characteristics, skills and experience required for the Board of Directors as a whole and its individual members. In evaluating the suitability of individual candidates (both new candidates and current members), the Nominating and Corporate Governance Committee, in recommending candidates for election, and the Board of Directors in approving (and, in the case of vacancies, appointing) such candidates, take into account many factors, including the following:

 

 

personal and professional integrity, ethics and values;

 

 

experience in corporate management, such as serving as an officer or former officer of a publicly held company;

 

 

strong finance experience;

 

 

relevant social policy concerns;

 

 

experience relevant to our industry;

 

 

experience as a board member or executive officer of another publicly held company;

 

 

relevant academic expertise or other proficiency in an area of our operations;

 

 

diversity of expertise and experience in substantive matters pertaining to our business relative to other board members;

 

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diversity of background and perspective, including, but not limited to, with respect to age, gender, race, place of residence and specialized experience;

 

 

practical and mature business judgment, including, but not limited to, the ability to make independent analytical inquiries; and

 

 

any other relevant qualifications, attributes or skills.

 

The Board of Directors evaluates each individual, whether an incumbent director or a director candidate, based on their qualifications, judgment, attributes, background, experiences, perspectives and skills in the context of the Board as a whole, with the objective of recommending a group that can best perpetuate the success of the company’s business and represent shareholder interests through the exercise of sound judgment, using its diversity of experience.

 

We believe that a board of directors made up of highly qualified individuals from diverse backgrounds promotes better corporate governance, performance and effective decision-making. The Nominating and Corporate Governance Committee makes efforts to ensure that directors and officers have a wide range of skills, experiences and backgrounds to meet our needs. To support this objective, the Nominating and Corporate Governance Committee will, when seeking candidates for Board of Directors or executive positions, among other things, (a) consider candidates who are highly qualified based on their experience, functional expertise and personal skills and qualities; and (b) consider diversity criteria including gender and geographical background of the candidate. As at the date of this proxy statement, one (14%) woman and two (29%) individuals who identify as racially or ethnically diverse serve on our Board of Directors. Additionally, Mr. Pilnik was born and grew up in São Paulo, Brazil, and speaks Portuguese and Spanish fluently. As of the date of this proxy statement the executive officers of DiaMedica include two (33%) women, one (17%) individual with prior military experience, and one (17%) individual who identifies as racially or ethnically diverse.

 

Role of Board in Risk Oversight Process

 

Risk is inherent with every business. We face a number of risks, including regulatory, compliance, legal, competitive, financial (accounting, credit, interest rate, liquidity and tax), operational, political, cybersecurity, strategic and reputational risks. Our management is responsible for the day-to-day management of risks faced by us, while the Board of Directors, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board of Directors ensures that the risk management processes designed and implemented by management are adequate and functioning as designed. The Board of Directors oversees risks through the establishment of policies and procedures that are designed to guide daily operations in a manner consistent with applicable laws, regulations and risks acceptable to us. Our President and Chief Executive Officer, who is also a member of the Board of Directors, regularly discusses with the Board of Directors the strategies and risks facing our company.

 

The standing committees of the Board of Directors oversee risks associated with their respective principal areas of focus. The Audit Committee’s role includes a particular focus on the qualitative aspects of financial reporting to shareholders and on our processes for the management of business and financial risk. The Audit Committee, along with management, is also responsible for developing and participating in a process for review of important financial and operating topics that present potential significant risk to our company. The Compensation Committee is responsible for overseeing risks and exposures associated with our compensation programs and arrangements, including our executive and director compensation programs and arrangements, and management succession planning. The Nominating and Corporate Governance Committee oversees risks relating to our corporate governance matters and policies and director succession planning.

 

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Code of Business Conduct and Ethics

 

We have adopted a code of business conduct and ethics applicable to all of our directors, officers and employees, in accordance with Section 406 of the Sarbanes-Oxley Act of 2002, the rules of the SEC promulgated thereunder and the Nasdaq Listing Rules. We monitor employee and director compliance with our code of business conduct and ethics through employee and director reporting. Violations may be reported to supervisors, the Chief Financial Officer or, alternatively, to the Chair of the Audit Committee via e-mail. We investigate all reported violations and discipline as appropriate. In the event that any changes are made or any waivers from the provisions of the code of business conduct and ethics are made, these events would be disclosed on our website or in a Current Report on Form 8-K filed with the SEC within four business days of such event. The code of business conduct and ethics is posted on our website at www.diamedica.com. Copies of the code of business conduct and ethics will be provided free of charge upon written request directed to Corporate Secretary, DiaMedica Therapeutics Inc., 301 Carlson Parkway, Suite 210, Minneapolis, Minnesota 55305.

 

Board and Committee Meetings

 

The Board of Directors met seven times during the fiscal year ended December 31, 2023. The Audit Committee met four times, the Compensation Committee met five times, and the Nominating and Corporate Governance Committee met four times during the fiscal year ended December 31, 2023. Each of the directors attended at least 75% of the aggregate of the total number of meetings of the Board and the total number of meetings held by all Board committees on which the director served.

 

Policy Regarding Director Attendance at Annual General Meetings of Shareholders

 

Directors are encouraged, but not required, to attend our annual general meetings of shareholders. Four of our then current five directors attended the 2023 Annual General Meeting of Shareholders either in person, by telephone or by video conference.

 

Complaint Procedures

 

The Audit Committee has established procedures for the receipt, retention and treatment of complaints received by DiaMedica regarding accounting, internal accounting controls or auditing matters. These procedures provide for the submission by our employees, on a confidential and anonymous basis, of concerns regarding questionable accounting or auditing matters. Our personnel with such concerns are encouraged to discuss their concerns with our compliance officer, outside legal counsel or Audit Committee Chair.

 

Process Regarding Shareholder Communications with Board of Directors

 

Shareholders may communicate with the Board of Directors or any one particular director by sending correspondence, addressed to DiaMedica’s Corporate Secretary, DiaMedica Therapeutics Inc., 301 Carlson Parkway, Suite 210, Minneapolis, Minnesota 55305 with an instruction to forward the communication to the Board of Directors or one or more particular directors. DiaMedica’s Corporate Secretary will promptly forward all such shareholder communications to the Board of Directors or the one or more particular directors, with the exception of any advertisements, solicitations for periodical or other subscriptions and other similar communications.

 

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DIRECTOR COMPENSATION

 


 

Non-Employee Director Compensation Program

 

Overview. Our non-employee directors currently consist of Michael Giuffre, M.D., Richard Kuntz, M.D., M.Sc., Tanya Lewis, James Parsons, Richard Pilnik, and Charles Semba, M.D. We use a combination of cash and long-term equity-based incentive compensation in the form of annual stock option grants and either deferred stock units or restricted stock units in lieu of cash retainers to attract and retain qualified candidates to serve on the Board of Directors. In setting non-employee director compensation, we follow the process and procedures described under “Corporate GovernanceCompensation CommitteeProcesses and Procedures for the Determination of Director Compensation.”

 

On May 18, 2023, the Board approved, upon recommendation of the Compensation Committee, the following changes to the Non-Employee Director Compensation Program:

 

 

A $500 increase in the annual cash retainer for members of the Nominating and Corporate Governance Committee and a $250 increase in the annual cash retainer for the Chair of the Nominating and Corporate Governance Committee;

 

 

An increase in the annual equity award for non-employee directors from 0.05% to 0.06% of our outstanding shares; and

 

 

An increase in the initial equity award to non-employee directors from 0.10% to 0.12% of our outstanding shares.

 

In recommending these changes, the Compensation Committee consulted with its independent compensation consultant, Alpine Rewards, LLC, and reviewed a competitive analysis prepared by Alpine Rewards that used the same peer group as used in reviewing our executive compensation program.

 

Cash Retainers. The following table sets forth the annual cash retainers paid to our non-employee directors during fiscal 2023:

 

Description

 

Annual Cash

Retainer

January 1, 2023

- May 17, 2023

   

Annual Cash

Retainer

Effective

May 18, 2023

 

Board Member

  $ 40,000     $ 40,000  

Chairman of the Board

    30,000       30,000  

Audit Committee Chair

    15,000       15,000  

Audit Committee Member (Excluding Chair)

    7,500       7,500  

Compensation Committee Chair

    10,000       10,000  

Compensation Committee Member (Excluding Chair)

    5,000       5,000  

Nominating and Corporate Governance Committee Chair

    7,500       8,000  

Nominating and Corporate Governance Committee Member (Excluding Chair)

    3,750       4,000  

 

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Annual Stock Options. Under the amended Non-Employee Director Compensation Program, each non-employee director is granted a stock option to purchase a number of common shares equal to 0.06% of our outstanding shares and the Chairman of the Board is granted an additional stock option to purchase a number of common shares equal to 0.02% of our outstanding shares, in each case rounding down to the nearest whole share. These annual stock options are granted effective as of June 1st each year. All of these stock options have a term of 10 years, a per share exercise price equal to 100% of the fair market value of a common share on the date of grant and vest and become exercisable in four as nearly equal as possible quarterly installments over one year, and in each case so long as the non-employee director is a director of DiaMedica as of such date. Accordingly, on June 1, 2023, Messrs. Pilnik, Giuffre and Parsons, and Dr. Semba each received an option to purchase 16,968 common shares at an exercise price equal to $2.73 per share and Mr. Pilnik as Chairman of the Board received an additional 5,387 common shares at an exercise price equal to $2.73 per share. These options expire on May 31, 2033 and vest in four nearly equal quarterly installments over one year, subject to continued service.

 

Our Non-Employee Director Compensation Program also provides that each new non-employee director will be granted a stock option to purchase a number of common shares equal to 0.12% of our outstanding shares, rounding down to the nearest whole share, effective as of the new director’s first day as a director. This initial equity award is in lieu of an annual equity award for the first year of service. This initial stock option has a term of 10 years, a per share exercise price equal to 100% of the fair market value of a common share on the date of grant and vests and becomes exercisable in 12 as nearly equal as possible quarterly installments over three years, and in each case so long as the non-employee director is a director of DiaMedica as of such date. On March 1, 2023, Ms. Lewis received an option to purchase 26,443 common shares at an exercise price equal to $1.77 per share. Ms. Lewis’s option grant was made prior to the May 18, 2023 changes to our Non-Employee Director Compensation Program, and therefore, reflected 0.10% of our outstanding common shares as of March 1, 2023. On June 1, 2023, Ms. Lewis received an additional option to purchase 7,493 common shares at an exercise price equal to $2.73 per share to bring her total option grant to reflect 0.12% of our outstanding common shares as of her start date, March 1, 2023. On May 30, 2023, Dr. Kuntz received an option to purchase 32,320 common shares at an exercise price equal to $2.81 per share. Dr. Kuntz’s option grant was after the May 18, 2023 changes to our Non-Employee Director Compensation Program, and therefore, represented 0.12% of our outstanding common shares as of May 30, 2023.

 

Deferred Stock Units or Restricted Stock Units in Lieu of Annual Cash Retainers. We provide our non-employee directors the opportunity to elect to receive DSUs or RSUs in lieu of up to 100% of their annual cash retainers payable for services to be rendered as a non-employee director, chairman and chair or member of any board committee. Effective as of the first trading day of each year, each of our non-employee directors who elected to receive DSUs or RSUs in lieu of all or a portion of such director’s annual cash retainers, will be granted DSU or RSU awards under the 2019 Plan or any other shareholder-approved plan covering that number of shares as determined based on the following formula (rounding down to the nearest whole share):

 

 

the aggregate dollar amount of the elected portion of the annual cash retainers that otherwise would have been payable to the non-employee director for services to be rendered as a non-employee director, Chairman of the Board and Chair or member of any Board committee during the year (or transition or other period, if applicable) based on such director’s Board committee memberships and Chair positions as of the date of grant, divided by

 

 

the 10-trading day average closing sale price of our common shares, as reported by The Nasdaq Capital Market, and as determined on the third (3rd) trading day prior to the anticipated grant date of the award.

 

Such DSU and RSU awards vest in four as nearly equal as possible quarterly installments, on March 31, June 30, September 30 and December 31, (or prorated from the first date as a director in the case of new directors) in each case so long as the non-employee director is a director of DiaMedica as of such date. DSU awards are settled following a separation from service by such director and RSU awards are settled immediately upon vesting or, if earlier, the death of the director.

 

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If a non-employee director who elected to receive a DSU or RSU award in lieu of all or a portion of such director’s annual cash retainers is no longer a director of DiaMedica before such director’s interest in all of the shares underlying the DSU or RSU award have vested, the director will forfeit his or her rights to receive all of such unvested shares on the day his or her status as a director of DiaMedica terminates. However, shares underlying the DSU or RSU award corresponding to the elected cash retainers for such quarter in which the director’s status changed will vest ratably for such quarter based on the number of days of service as a director of DiaMedica during such quarter.

 

If a non-employee director of DiaMedica who elected to receive a DSU or RSU award in lieu of his or her annual cash retainers becomes entitled to receive an increased or additional annual cash retainer during the year, the director will receive such increased or additional annual cash retainer in cash until the director makes his or her election for the following year. Conversely, if a non-employee director of DiaMedica who elected to receive a DSU or RSU award in lieu of such director’s annual cash retainers experiences a change in committee membership or Chair positions during the year, such that the aggregate amount of annual cash retainers for the year to which the director is entitled is less than the aggregate amount used to calculate the director’s most recent DSU or RSU award, the director will forfeit effective as of such change his or her rights to receive the corresponding portion of the shares underlying such DSU or RSU award; provided, however, that in the event the director elected to receive only a portion of his or her cash retainers in the form of a DSU or RSU award, the amount of cash retainers to be received will be reduced first. In addition, in the event shares underlying the DSU or RSU award are forfeited, the vesting of the DSU or RSU award will be revised accordingly as of the date of such change.

 

Director Compensation Table

 

The table below provides summary information concerning the compensation of each individual who served as a director of our company during the fiscal year ended December 31, 2023, other than Rick Pauls, our President and Chief Executive Officer, who was not compensated separately for serving on the Board of Directors during fiscal 2023. His compensation during fiscal 2023 for serving as an executive officer of our company is set forth under “Executive CompensationSummary Compensation Table.”

 

Name

 

Fees Earned

or Paid in

Cash(1)

   

Option

Awards(2)(3)

   

Stock

Awards(4)(5)

   

All Other

Compensation(6)

   

Total

 

Amy Burroughs(7)

  $ 13,697     $ 24,194     $     $     $ 37,891  

Michael Giuffre, M.D.

    53,750       37,175                   90,925  

Richard Kuntz, M.D.(8)

    23,333       72,684                   96,017  

Tanya Lewis(9)

    37,500       54,350                   91,850  

James Parsons

    60,000       37,175                   97,175  

Richard Pilnik

    85,000       48,978                   133,978  

Charles Semba, M.D.

    52,500       37,175                   89,675  

 


(1)

The following directors elected to receive DSUs or RSUs in exchange for all or part of their cash retainers: Ms. Burroughs ($9,530 was paid in the form of 6,439 DSUs); Dr. Giuffre ($53,750 was paid in the form of 35,130 DSUs); Mr. Pilnik ($85,000 was paid in the form of 55,555 DSUs); and Dr. Semba ($26,250 was paid in the form of 17,156 RSUs).

 

(2)

Amounts reflect the grant date fair value for option awards granted to each non-employee director computed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, other than in the case of Ms. Burroughs who did not receive an annual option award. The amount for Ms. Burroughs reflects the incremental fair value expense associated with the modification of her outstanding stock options to accelerate the vesting of her unvested options and extend the post-termination exercise period of her options in connection with her resignation as a director.

 

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(3)

The following current and former directors held the following option awards as of December 31, 2023: Ms. Burroughs (32,008 options); Dr. Giuffre (90,839 options); Dr. Kuntz (32,320 options); Ms. Lewis (33,936 options); Mr. Parsons (90,839 options); Mr. Pilnik (144,435 options); and Dr. Semba (48,976 options).

 

(4)

Represents the difference between the grant date fair value of the DSUs or RSUs received by the director and the amount of cash retainers forfeited in lieu of such DSUs or RSUs, if such amount is positive. For 2023, the amount is negative since in the case of each director, the grant date fair value of the DSUs or RSUs received was less than amount of cash retainers forfeited since the grant date fair value per share of the DSUs and RSUs was $1.48, compared to the 10-trading day average stock price of $1.53 used to convert the dollar amount of retainers forfeited into a number of DSUs or RSUs.

 

(5)

The following current and former directors held the following stock awards (all in the form of DSUs) as of December 31, 2023: Ms. Burroughs (0); Dr. Giuffre (69,105); Dr. Kuntz (0); Ms. Lewis (0); Mr. Parsons (36,259); Mr. Pilnik (106,792); and Dr. Semba (0).

 

(6)

We do not provide perquisite and other personal benefits to our non-employee directors.

 

(7)

Ms. Burroughs resigned from the Board of Directors effective March 1, 2023, but her DSU award was vested through May 17, 2023, the date of the 2023 Annual General and Special Meeting of Shareholders.

 

(8)

Dr. Kuntz joined the Board of Directors effective May 30, 2023.

 

(9)

Ms. Lewis joined the Board of Directors effective March 1, 2023.

 

Indemnification

 

Our Articles provide that, subject to British Columbia’s Business Corporations Act, we will indemnify a director or a former director (each an “eligible party”) and his or her heirs and legal representatives, against all eligible penalties to which such person is liable. DiaMedica must pay the expenses actually and reasonably incurred by such person in respect of any eligible proceeding either as they are incurred in advance of the final disposition of the proceeding or after the final disposition of a proceeding. Our Articles define an “eligible penalty” as a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding. Our Articles define an “eligible proceeding” as a legal proceeding or investigative action, whether current, threatened, pending or completed, in which an eligible party or any of the heirs and legal personal representatives of the eligible party, by reason of the eligible party being or having been a director of DiaMedica: (i) is or may be joined as a party; or (ii) is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding.

 

We entered into indemnification agreements with all of our directors, which are nearly identical to the indemnification agreements with our executive officers as described under “Executive CompensationExecutive Compensation OverviewIndemnification Agreements.”

 

At present, there is no pending litigation or proceeding involving any of our directors or executive officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.

 

Insofar as indemnification for liabilities arising under the United States Securities Act of 1933, as amended (Securities Act) may be permitted to directors, executive officers or persons controlling us, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

 

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EXECUTIVE COMPENSATION

 


 

Executive Compensation Overview

 

This section describes the compensation of the executive officers named in the Summary Compensation Table on page 58, which individuals consist of our President and Chief Executive Officer and the two most highly compensated executive officers for the year ended December 31, 2023, as well as any individual who would have been considered a named executive officer except that such individual was not serving as an executive officer at the end of the last completed fiscal year:

 

 

Rick Pauls, our President and Chief Executive Officer (CEO);

 

 

Scott Kellen, our Chief Financial Officer and Corporate Secretary (CFO);

 

 

Julie Daves, our Senior Vice President, Clinical Development Operations (SVP, Clinical); and

 

 

Kirsten Gruis, M.D., our former Chief Medical Officer (CMO).

 

These executive officers are collectively referred to as our named executive officers. Kirsten Gruis, M.D. resigned from her position as Chief Medical Officer effective as of August 31, 2023, but agreed to serve as an independent consultant with us for nine months as described later this in this proxy statement.

 

When reading this Executive Compensation Overview, please note we are a small reporting company and are not required to provide a “Compensation Discussion and Analysis” of the type required by Item 402 of SEC Regulation S-K. This Executive Compensation Overview is intended to supplement the SEC-required disclosure, which is included in this section, and it is not a Compensation Discussion and Analysis.

 

Compensation Philosophy

 

The Compensation Committee generally targets executive compensation at the 50th percentile of our peer group as discussed below under “—Elements of Our Executive Compensation Program.”

 

Use of Market Data

 

We strive to compensate our executive officers competitively relative to other companies that are similar to us from a market capitalization, revenue, number of employees and clinical development perspective. To ensure reasonableness and competitiveness of our executive compensation packages relative to our peer companies, the Compensation Committee evaluates our peer group with the aid of our independent compensation consultant and with input from management. The peer group used to help determine 2023 compensation was prepared by Alpine Rewards, LLC, our independent compensation consultant. For 2023, Alpine Rewards, LLC recommended increasing our peer company group from 15 to 20 and consisted of the following 20 other companies in the same industry and with similar characteristics from a market capitalization, revenue, number of employees and clinical development perspective.

 

Abeona Therapeutics Inc.

Aceragen, Inc.

Annovis Bio, Inc.

Applied Therapeutics, Inc.

Athira Pharma, Inc.

BioCardia, Inc.

Brainstorm Cell Therapeutics Inc.

Clene Inc.

Galectin Therapeutics Inc.

GlycoMimetics, Inc.

Hepion Pharmaceuticals, Inc.

Immunic, Inc.

Lipocine Inc.

Matinas BioPharma Holdings, Inc.

MediciNova, Inc.

Satsuma Pharmaceuticals, Inc.

Soleno Therapeutics, Inc.

Spruce BioSciences, Inc.

Tracon Pharmaceuticals, Inc.

Zynerba Pharmaceuticals, Inc.

 

 

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Data from this peer group, therefore, was considered in the compensation benchmarking process as one input in helping us determine appropriate pay levels.

 

Use of Consultants

 

The Compensation Committee has the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities, and prior to doing so, assesses the independence of such experts and advisors from management. The Compensation Committee retained Alpine Rewards, LLC in February 2023 and updated its executive officer and non-employee director compensation analyses shortly thereafter. Alpine Rewards, LLC did not provide any services to our company other than those for which it was retained by the Compensation Committee.

 

Elements of Our Executive Compensation Program

 

During 2023, our executive compensation program consisted of several key elements, which are described in the table below, along with the key characteristics of, and the purpose for, each element and key 2023 changes.

 

Element

 

Key Characteristics

 

Purpose

 

Key 2023 Changes

Base Salary

(Fixed, Cash)

 

A fixed amount, paid in cash periodically throughout the year and reviewed annually and, if appropriate, adjusted.

 

Provides a source of fixed income that is market competitive and reflects
scope and responsibility of the position held.

 

Our CEO received a base salary increase of 8%, our CFO received a base salary increase of 5%, our SVP, Clinical received a base salary increase of 3%, and our former CMO received a base salary increase of 10%, in each case to move their salaries closer toward our target positioning in our peer group.

Short-Term Incentive (STI)

(Variable, Cash)

 

A variable, short-term element
of compensation that is payable in cash based on achievement of key pre-established annual corporate objectives, and for certain executives, individual goals.

 

Motivates and rewards our executives for achievement
of annual corporate and
other objectives.

 

The target incentive percentage under our short-term incentive plan for 2023 was 50% of base salary for our CEO, 40% of base salary for our CFO, 35% of base salary for our SVP, Clinical and 40% of base salary for our former CMO, which were all unchanged from last year.

Long-Term Incentives (LTI)

(Variable, Equity-Based Awards)

 

A variable, long-term element of compensation that is provided in the form of time-vested stock option awards.

 

Aligns the interests of our executives with our shareholders; encourages our executives to focus on our long-term performance; promotes retention; and encourages significant share ownership.

 

Our named executive officers received stock option awards, with 25% vesting on the one-year anniversary of the grant date and the remaining 75% vesting in 12 quarterly installments thereafter.

Retirement Benefits

 

A defined contribution retirement plan with a discretionary company match.

 

Provides an opportunity for employees to save and prepare financially for retirement.

 

No changes.

 

52

 

We describe each key element of our executive compensation program in more detail in the following pages, along with the compensation decisions made in 2023. The compensation paid to our named executive officers is governed, in part, by written employment agreements with them, which are described below under “—Employment Agreements.” The named executive officers also have termination and change in control benefits as set forth in their respective employment agreements. See “—Post-Termination Severance and Change in Control Arrangements.”

 

Pay for Performance and Pay Mix

 

We seek to motivate management to achieve corporate objectives and increase shareholder value through incentive plans that reward higher performance with increased incentive payouts and hold management accountable for performance that falls below targeted levels by paying reduced or no incentive payouts. Accordingly, in general, our executive compensation program emphasizes variable, at-risk, pay elements as a significant portion of each executive’s total compensation package.

 

The breakdown of variable, at-risk, pay (broken out between target short-term incentives and actual long-term incentives) compared to fixed pay (i.e., base salary) reported for 2023 in the Summary Compensation Table for our CEO and the average for our other named executive officers is as follows:

image07.jpg

 

 

 

Base Salary

 

We provide a base salary for our named executive officers, which is not subject to company or individual performance risk. We recognize the need for most executives to receive at least a portion of their total compensation in the form of a guaranteed base salary that is paid in cash regularly throughout the year. The base salaries set for our named executive officers are intended to provide a steady income regardless of share price performance, allowing executives to focus on both near-term and long-term goals and objectives without undue reliance on short-term share price performance or market fluctuations.

 

We initially fix base salaries for our executives at a level that we believe enables us to hire and retain them in a competitive environment and to reward satisfactory individual performance and a satisfactory level of contribution to our overall business objectives. The Compensation Committee reviews and approves any increases in base salaries for our named executive officers.

 

53

 

The base salary for each of our named executive officers for fiscal 2023 compared to fiscal 2022 is as follows:

 

Name

 

Fiscal 2023

   

Fiscal 2022

   

% Change from

Fiscal 2022

 

Rick Pauls

  $ 573,000     $ 529,000       8 %

Scott Kellen

    357,000       340,000       5 %

Julie Daves

    309,000       300,000       3 %

Kirsten Gruis, M.D.

    418,000       380,000       10 %

 

In March 2023, the Compensation Committee approved base salary increases of approximately 8% for our CEO, 5% for our CFO, 3% for our SVP, Clinical, and 10% for our former CMO. The base salary increases were intended to bring their base salaries closer to our target positioning in our peer group and provide for cost-of-living adjustments.

 

Annual Short-Term Incentive Compensation

 

In addition to base compensation, we provide our named executive officers the opportunity to earn short-term incentive (STI) compensation based on the achievement of certain annual corporate and individual performance goals. Our STI program directly aligns the interests of our executive officers and shareholders by providing an incentive for the achievement of key corporate and individual performance objectives that are critical to the success of our company and linking a significant portion of each executive’s annual compensation to the achievement of such objectives.

 

Under the 2023 STI program, each named executive officer had a target incentive percentage that was a percentage of their base salary.

 

Name

 

Percentage of Base Salary

Rick Pauls

 

50%

Scott Kellen

 

40%

Julie Daves

 

35%

Kirsten Gruis, M.D.

 

40%

 

2023 STI payouts were based primarily on corporate objectives, which had a 75% weighting, and to a lesser extent, individual objectives, which had a 25% weighting. The corporate objectives related to our ReMEDy2 trial, the Phase 1C study and raising additional capital and were determined by the Compensation Committee to have been achieved at 70% of target. The individual objectives varied by executive and related to our ReMEDy2 trial, manufacturing, developing people and organization, accounting and financial reporting, commercial and partnering activities. The individual objectives were determined by the Compensation Committee to have been achieved at 80% of target for our CEO, 70% of target for our CFO and 84% of target for SVP, Clinical. Our former CMO did not receive any 2023 STI payout.

 

The following sets forth each executive’s target bonus opportunity and actual STI payout for 2023:

 

Officer Name and Position

 

2023 Base Salary

   

Target Incentive

Percentage of

Base Salary

   

Target Bonus

Opportunity

   

2023 Actual

Payout

 

Rick Pauls

  $ 573,000     50%     $ 286,500     $ 239,958  

Scott Kellen

    357,000     40%       142,000       116,025  

Julie Daves

    309,000     35%       108,150       91,657  

Kirsten Gruis, M.D.

    418,000     40%       167,200        

 

54

 

Long-Term Equity-Based Incentive Compensation

 

The long-term equity-based incentive compensation component consists of stock options granted under the DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan. Long-term equity-based incentives are intended to comprise a significant portion of each executive’s compensation package, consistent with our executive compensation objective to align the interests of our executives with the interests of our shareholders.

 

The Compensation Committee believes that options effectively incentivize executives to maximize company performance over the long-term, as the value of awards is directly tied to an appreciation in the value of our common shares. Stock options also provide an effective retention mechanism because of vesting provisions. An important objective of our long-term equity-based incentive program is to strengthen the relationship between the long-term value of our common shares and the potential financial gain for our executives. Stock options provide recipients with the opportunity to purchase our common shares at a price fixed on the grant date regardless of future market price. Because stock options become valuable only if the share price increases above the exercise price and the option holder remains employed during the period required for the option to vest, they provide an incentive for an executive to remain employed. In addition, stock options link a portion of an executive’s compensation to the interests of our shareholders by providing an incentive to achieve corporate goals and increase the market price of our common shares over time.

 

The table below sets forth the stock options that we granted to our named executive officers in 2023, which options vest with respect to 25% of the underlying common shares on the one-year anniversary of the grant date, and with respect to the remaining 75% of the underlying common shares in 12 as nearly equal as possible quarterly installments commencing after the one-year anniversary of the grant date:

 

Name

 

Grant Date

 

Grant Date

Fair Value

   

Number of Shares

Underlying Options

   

Exercise Price

 

Rick Pauls

 

06/01/23

  $ 396,553       181,000     $ 2.73  

Scott Kellen

 

06/01/23

    146,790       67,000       2.73  

Julie Daves

 

06/01/23

    118,309       54,000       2.73  

Kirsten Gruis, M.D.

 

06/01/23

    146,790       67,000       2.73  

 

The number of stock options granted to our executives was determined based on a percent of company analysis as opposed to a value analysis.

 

All Other Compensation

 

It is generally our policy not to extend perquisites to our executives that are not available to our employees generally. Our executives receive benefits that are also received by our other employees, including participation in the DiaMedica USA, Inc. 401(k) Plan and health, dental, disability and life insurance benefits.

 

Employment Agreements

 

We typically enter into employment agreements with our executive officers, which provide for an annual base salary, subject to periodic reviews, incentive based compensation, equity-based compensation and benefits, in each case as determined by the Board of Directors (or a committee thereof) from time to time. The agreements contain standard confidentiality, non-competition, non-solicitation and assignment of intellectual property provisions. The agreements also contain standard severance and change in control provisions which are described under “—Post-Termination Severance and Change in Control Arrangements.”

 

55

 

Consulting Agreement with Kirsten Gruis, M.D.

 

In September 2023, we entered into a consulting agreement with Dr. Kirsten Gruis in order to implement an orderly transition of her responsibilities and projects following her resignation. Under this agreement, Dr. Gruis agreed to provide consulting services for nine months in exchange for a monthly consulting fee of $33,500. We also entered into a separation agreement with Dr. Gruis pursuant to which she agreed to provide a general release of claims against us and our subsidiaries. The separation agreement also includes customary non-disparagement and confidentiality obligations.

 

Post Termination Severance and Change in Control Arrangements

 

Severance Arrangements. Under the terms of the employment agreements with our executive officers, if we terminate the executive’s employment without “cause”, the executive will be entitled to: (i) salary continuation payments for 12 months in the case of Mr. Pauls and nine months in the case of each of the other executives, (ii) Consolidated Omnibus Budget Reconciliation Act (COBRA) premium reimbursement during the salary continuation period, (iii) a pro rata portion of the executive’s target annual bonus for the year of termination, and (iv) immediate acceleration of the executive’s equity awards. These severance benefits are subject to the executive executing a separation agreement and release of claims. “Cause” is defined in the employment agreements as: (i) gross negligence or willful failure to perform the executive’s duties and responsibilities to DiaMedica; (ii) commission of any act of fraud, theft, embezzlement, financial dishonesty or any other willful misconduct that has caused or is reasonably expected to result in injury to DiaMedica; (iii) conviction of, or pleading guilty or nolo contendere to, any felony or a lesser crime involving dishonesty or moral turpitude; (iv) material breach by the executive of any of their obligations under the agreement or any written agreement or covenant with DiaMedica, including the policies adopted from time to time by DiaMedica applicable to all executives, that has not been cured within 30 days of notice of such breach; or (v) we terminate the employment of the executive in connection with a liquidation, dissolution or winding down of DiaMedica. We believe that the form and amount of these severance benefits are fair and reasonable to both DiaMedica and our executives. The Compensation Committee reviews our severance arrangements periodically to ensure that they remain necessary and appropriate.

 

Change in Control Arrangements. To encourage continuity, stability and retention when considering the potential disruptive impact of an actual or potential corporate transaction, we have established change in control arrangements, including provisions in the 2019 Plan and executive employment agreements. These arrangements are designed to incentivize our executives to remain with our company in the event of a change in control or potential change in control.

 

Under the terms of the 2019 Plan, subject to the terms of the applicable award agreement or an individual agreement between DiaMedica and a participant, upon a change in control, the Board of Directors may, in its discretion, determine whether some or all outstanding options and stock appreciation rights shall become exercisable in full or in part, whether the restriction period and performance period applicable to some or all outstanding restricted stock awards and restricted stock unit awards shall lapse in full or in part and whether the performance measures applicable to some or all outstanding awards shall be deemed to be satisfied. The Board of Directors may further require that shares of stock of the corporation resulting from such a change in control, or a parent corporation thereof, be substituted for some or all of our common shares subject to an outstanding award and that any outstanding awards, in whole or in part, be surrendered to us by the holder, to be immediately cancelled by us, in exchange for a cash payment, shares of capital stock of the corporation resulting from or succeeding us or a combination of both cash and such shares of stock.

 

56

 

Under the terms of the employment agreements, if we terminate the executive’s employment without “cause” or the executive terminates their employment with “good reason” in connection with or within 12 months after a “change in control,” the executive will be entitled to: (i) salary continuation payments for 18 months in the case of Mr. Pauls and 12 months in the case of each of the other executives, (ii) COBRA premium reimbursement during the salary continuation period, (iii) a pro rata portion of their target annual bonus for the year of termination, and (iv) immediate acceleration of their equity awards. These severance benefits are subject to the executive executing a separation agreement and release of claims.

 

“Good reason” is defined in the employment agreements as the executive’s resignation within 30 days following the expiration of any cure period following the occurrence of one or more of the following, without the executive’s express written consent: (i) a material reduction of the executive’s duties, authority, reporting level, or responsibilities, relative to their duties, authority, reporting level, or responsibilities in effect immediately prior to such change in control; (ii) a material reduction in the executive’s base compensation; or (iii) DiaMedica’s requiring of the executive to change the principal location at which the executive is to perform services by more than 50 miles.

 

“Change in control” is defined in the employment agreements as the occurrence of any of the following: (i) the acquisition, other than from us, by any individual, entity or group of beneficial ownership of 50% or more of either our then outstanding common shares or the combined voting power of our then outstanding voting securities entitled to vote generally in the election of directors; (ii) the consummation of a reorganization, merger or consolidation of DiaMedica, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of our common shares and voting securities immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% of, respectively, of then outstanding common shares and the combined voting power of then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation; or (iii) the sale or other disposition of all or substantially all of our assets.

 

We believe these change in control arrangements are an important part of our executive compensation program in part because they mitigate some of the risk for executives working in a smaller company where there is a meaningful risk that DiaMedica may be acquired. Change in control benefits are intended to attract and retain qualified executives who, absent these arrangements and in anticipation of a possible change in control of our company, might consider seeking employment alternatives to be less risky than remaining with our company through the transaction. We believe that the form and amount of these change in control benefits are fair and reasonable to both our company and our executives. The Compensation Committee periodically reviews our change in control arrangements to ensure that they remain necessary and appropriate.

 

Indemnification Agreements

 

We have entered into indemnification agreements with all of our executive officers. The indemnification agreements are governed exclusively by and construed according to the substantive laws of the BCBCA, without regard to conflicts-of-laws principles that would require the application of any other law, and provide, among other things, for indemnification, to the fullest extent permitted by law and our Articles, against any and all expenses (including attorneys’ fees) and liabilities, judgments, fines and amounts paid in settlement that are paid or incurred by the executive or on his or her behalf in connection with such action, suit or proceeding. We will be obligated to pay these amounts only if the executive acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of our company and, in the case of a criminal or administrative proceeding that is enforced by a monetary penalty, he or she had reasonable grounds for believing that his or her conduct was lawful. The indemnification agreements provide that the executive will not be indemnified and expenses advanced with respect to an action, suit or proceeding initiated by the executive unless (i) so authorized or consented to by the Board of Directors or DiaMedica has joined in such action, suit or proceeding or (ii) the action, suit or proceeding is one to enforce the executive’s rights under the indemnification agreement. Our indemnification and expense advance obligations are subject to the condition that an appropriate person or body not party to the particular action, suit or proceeding shall not have determined that the executive is not permitted to be indemnified under applicable law. The indemnification agreements also set forth procedures that apply in the event an executive requests indemnification or an expense advance.

 

57

 

Summary Compensation Table

 

The table below provides summary information concerning all compensation awarded to, earned by or paid to our named executive officers during our 2023 and 2022 fiscal years. Mr. Pauls is also a director of DiaMedica but did not receive any compensation related to his role as a director.

 

Name and Principal Position

 

Year

 

Salary

   

Bonus(1)

   

Option

Awards(2)

   

Non-

Equity

Incentive

Plan

Compen-

sation(3)

   

All Other

Compen-

sation(4)

   

Total

 

Rick Pauls

 

2023

  $ 562,000     $     $ 396,553     $ 239,958     $ 16,650     $ 1,215,161  

President and Chief Executive Officer

 

2022

    522,796             343,819       198,342       15,650       1,080,607  
                                                     

Scott Kellen

 

2023

    352,750             146,790       116,025       16,650       632,215  

Chief Financial Officer and Secretary

 

2022

    329,392             116,549       101,983       15,650       563,574  
                                                     

Julie Daves(5)

 

2023

    306,754             118,309       91,657       16,650       533,370  

SVP, Clinical Development Operations

                                                   
                                                     

Kirsten Gruis, M.D. (6)

 

2023

    298,643             146,790             150,650       596,083  

Former Chief Medical Officer

 

2022

    364,167             487,789       137,085       15,650       1,004,691  

 


(1)

We generally do not pay discretionary bonuses.

 

(2)

Amounts reflect the full grant-date fair value of stock options granted during the applicable year computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual. The grant date fair value is determined based on our Black-Scholes option pricing model. The table below sets forth the specific assumptions used in the valuation of each such option award:

 

 

 

Grant Date

 

Grant Date Fair

Value Per Share

   

Risk Free

Interest Rate

   

Expected

Life
(in years)

   

Expected
Volatility

   

Expected

Dividend Yield

 

06/01/2022

  $ 1.94     2.93%     5.6     102.86%      

01/03/2022

  $ 1.94     2.93%     5.6     102.86%      

07/28/2021

  $ 3.05     1.41%     5.5     103.67%      

 

There can be no assurance that unvested awards will vest and, absent vesting and exercise, no value will be realized by the executive for the award.

 

(3)

Amounts reported represent awards earned for that year under our annual short-term incentive plan but paid during the following year. See “—Executive Compensation OverviewAnnual Short-Term Incentive Compensation.

 

58

 

 

(4)

The amounts shown in the “All Other Compensation” column for fiscal 2023 include the following with respect to each named executive officer:

 

Name

 

401(k)

Match

   

Health Savings

Account

Contribution

   

Consulting

Services

   

Total

 

Rick Pauls

  $ 13,200     $ 3,450     $     $ 16,650  

Scott Kellen

    13,200       3,450             16,650  

Julie Daves

    13,200       3,450             16,650  

Kirsten Gruis, M.D. .

    13,200       3,450       134,000       150,650  

 

(5)

Ms. Daves was not a named executive officer for 2022.

 

(6)

Dr. Gruis resigned effective as of August 31, 2023. The base salary for Dr. Gruis includes a payment of $29,475 for accrued paid-time off.

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table presents for each named executive officer information regarding outstanding equity awards held as of December 31, 2023.

 

   

Option Awards(1)

 

Stock Awards

 

Name

 

Number of Securities Underlying Unexercised Options (#) Exercisable

   

Number of Securities Underlying Unexercised Options (#) Unexercisable

   

Option Exercise Price

 

Option Expiration Date(2)

 

Number of Shares or Units of Stock That Have Not Vested(3) (#)

   

Market Value of Shares or Units of Stock That Have Not Vested(4)

($)

 

Rick Pauls

                                         

Stock Options

    67,500            (CAD$) 3.00  

12/01/2025

               
      42,500            (CAD$) 5.20  

11/28/2026

               
      42,500            (CAD$) 6.40  

06/19/2027

               
      33,500            (CAD$) 11.20  

04/17/2028

               
      264,000            (US$) 4.60  

06/23/2029

               
      56,000            (US$) 4.64  

05/31/2030

               
      98,438       76,563      (US$) 5.00  

07/27/2031

               
      66,375       110,652      (US$) 2.45  

05/31/2032

               
            181,000      (US$) 2.73  

05/31/2033

               
                                           

DSUs

                              1,749      (US$) 4,967  
                                           

Scott Kellen

                                         

Stock Options

    50,250            (CAD$) 11.20  

04/17/2028

               
      99,750            (US$) 4.60  

06/23/2029

               
      35,000            (US$) 4.64  

05/31/2030

               
      33,750       26,250      (US$) 5.00  

07/27/2031

               
      22,500       37,500      (US$) 2.45  

05/31/2032

               
            67,000      (US$) 2.73  

05/31/2033

               
                                           

Julie Daves

                                         

Stock Options

    61,250       78,750      (US$) 1.47  

09/12/2032

               
            54,000      (US$) 2.73  

05/31/2033

               
                                           

Kirsten Gruis, M.D.

                                         

Stock Options

    76,667       83,333      (US$) 3.88  

01/02/2032

               
            67,000      (US$) 2.73  

05/31/2033

               

 


(1)

The stock options that remained unvested as of December 31, 2023 generally vest monthly or quarterly and may be accelerated under certain circumstances, including if the recipient’s employment or service relationship with our company is involuntarily terminated.

 

59

 

(2)

All stock options have a 10-year term, but may terminate earlier if the recipient’s employment or service relationship with our company terminates.

 

(3)

All DSU awards are settled after the holder’s employment or service relationship with our company terminates.

 

(4)

The market value of DSU awards that have not been settled as of December 31, 2023 is based on the closing sale price of our common shares as reported by The Nasdaq Capital Market on December 29, 2023, the last trading day of 2023 ($2.84).

 

Pay Versus Performance Disclosure

 

As required by Section 953(a) of the Dodd-Frank Act and Item 402(v) of SEC Regulation S-K, we are providing the following information about the relationship between “compensation actually paid” to our named executive officers, within the meaning of such rules, and certain financial performance measures of our company. The table below provides information regarding compensation actually paid to our CEO who is our principal executive officer (PEO), and compensation actually paid to our other non-PEO named executive officers, during each of the past two fiscal years, as well as total shareholder return and net income (loss) for each of the past two fiscal years.

 

Year

 

Summary

Compensation

Table Total

for PEO(1)

   

Compensation

Actually Paid

to PEO(2)(3)

   

Average

Summary

Compensation

Table Total

for Non-PEO

NEOs(4)

   

Average

Compensation

actually Paid

to Non-PEO

NEOs(5)(6)

   

Value of

Initial Fixed

$100

Investment

Based on

Total

Shareholder

Return(7)

   

Net Income

(Loss)(8)

 

2023

  $ 1,215,161     $ 1,424,344     $ 587,222     $ 707,892     $ 74     $ (19,423 )

2022

    1,080,607       534,244       784,132       507,196       41       (13,676 )

 


(1)

Amounts reported represent the Summary Compensation Table total for our CEO for each of the years presented. See “Executive Compensation  Summary Compensation Table.”

 

(2)

Amounts reported represent compensation actually paid to our CEO for each of the years presented. The dollar amounts in this column do not reflect the actual amount of compensation earned by or paid to our CEO during the applicable year.

 

(3)

Compensation actually paid to our PEO consists of the following amounts deducted from or added to the Summary Compensation Table total for our CEO for each of the years presented:

 

60

 

 

Rick Pauls

 

Summary Compensation Table Total for 2023

 

$

1,215,161

 

Deduct: Stock awards(a)

   

 

Deduct: Option awards(b)

   

(396,553

)

Add: Year-end value of equity awards granted during the year that are outstanding and unvested(c)

   

387,114

 

Add: Change in fair value of equity awards granted in prior years that are outstanding and unvested(d)

   

139,587

 

Add: Change in fair value of equity awards granted in prior years that vested during the year(e)

   

79,035

 

Add: Value of dividend equivalents accrued on equity awards during the year

   

 

Compensation Actually Paid for 2023

   

1,424,344

 
         

Summary Compensation Table Total for 2022

 

$

1,080,607

 

Deduct: Stock awards(a)

   

 

Deduct: Option awards(b)

   

(343,819

)

Add: Year-end value of equity awards granted during the year that are outstanding and unvested(c)

   

147,914

 

Add: Change in fair value of equity awards granted in prior years that are outstanding and unvested(d)

   

(266,518

)

Add: Change in fair value of equity awards granted in prior years that vested during the year(e)

   

(83,940

Add: Value of dividend equivalents accrued on equity awards during the year

   

 

Compensation Actually Paid for 2022

   

534,244

 

 

 

(a)

Represents the total of the amounts reported in the “Stock Awards” column in the Summary Compensation Table for the applicable year.

 

 

(b)

Represents the total of the amounts reported in the “Option Awards” column in the Summary Compensation Table for the applicable year.

 

 

(c)

Represents the year-end value of equity awards granted during the applicable year that are outstanding and unvested as of the end of such applicable year.

 

 

(d)

Represents the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any equity awards granted in prior years that are outstanding and unvested as of the end of such applicable year.

 

 

(e)

Represents the amount of change as of the vesting date (from the end of the prior fiscal year) in fair value of any equity awards granted in prior years that vested during the applicable year.

 

Since we do not have a pension plan, all of the foregoing adjustments are equity award adjustments for each applicable year and include the addition (or subtraction, as applicable) of the following: (i) the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of such applicable year; (ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any equity awards granted in prior years that are outstanding and unvested as of the end of such applicable year; (iii) for equity awards that are granted and vest in the same applicable year, the fair value as of the vesting date; (iv) for equity awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (v) for equity awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, a deduction for the amount equal to the fair value at the end of the prior fiscal year; and (vi) the dollar value of any dividends or other earnings paid on equity awards in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any other component of total compensation for such applicable year.

 

Adjustments as provided in clauses (iii) and (vi) are inapplicable for all of the years presented in the table.

 

The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. The value of option awards is based on the fair value as of the end of the covered year or change in fair value during the covered year, in each case based on our Black-Scholes option pricing model, the assumptions of which are described in Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

(4)

Average Summary Compensation Table total for non-PEO named executive officers reflects the average Summary Compensation Table total for Mr. Kellen, Ms. Daves and Dr. Gruis for 2023 and for Mr. Kellen and Dr. Gruis for 2022.

 

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(5)

The amounts in this column represent the average compensation actually paid to the non-PEO named executive officers for each of the years presented. The dollar amounts in this column do not reflect the actual amount of compensation earned by or paid to our non-PEO named executive officers during the applicable year.

 

(6)

Average compensation actually paid to our non-PEO named executive officers consists of the following amounts deducted from or added to the Summary Compensation Table total for each of the years presented:

 

Average for Non-PEO Named Executive Officers

 

Summary Compensation Table Total for 2023

 

$

587,222

 

Deduct: Stock awards(a)

   

 

Deduct: Option awards(b)

   

(137,296

)

Add: Year-end value of equity awards granted during the year that are outstanding and unvested(c)

   

134,028

 

Add: Change in fair value of equity awards granted in prior years that are outstanding and unvested(d)

   

81,901

 

Add: Change in fair value of equity awards granted in prior years that vested during the year(e)

   

42,037

 

Add: Value of dividend equivalents accrued on equity awards during the year

   

 

Compensation Actually Paid for 2023

   

707,892

 
         

Summary Compensation Table Total for 2022

 

$

784,132

 

Deduct: Stock awards(a)

   

 

Deduct: Option awards(b)

   

(302,169

)

Add: Year-end value of equity awards granted during the year that are outstanding and unvested(c)

   

75,730

 

Add: Change in fair value of equity awards granted in prior years that are outstanding and unvested(d)

   

(36,824

)

Add: Change in fair value of equity awards granted in prior years that vested during the year(e)

   

(13,673

)

Add: Value of dividend equivalents accrued on equity awards during the year

   

 

Compensation Actually Paid for 2022

   

507,196

 

 

 

(a)

Represents the total of the amounts reported in the “Stock Awards” column in the Summary Compensation Table for the applicable year.

 

 

(b)

Represents the total of the amounts reported in the “Option Awards” column in the Summary Compensation Table for the applicable year.

 

 

(c)

Represents the year-end value of equity awards granted during the applicable year that are outstanding and unvested as of the end of such applicable year.

 

 

(d)

Represents the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any equity awards granted in prior years that are outstanding and unvested as of the end of such applicable year.

 

 

(e)

Represents the amount of change as of the vesting date (from the end of the prior fiscal year) in fair value of any equity awards granted in prior years that vested during the applicable year.

 

Since we do not have a pension plan, all of the foregoing adjustments are equity award adjustments for each applicable year and include the addition (or subtraction, as applicable) of the following: (i) the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of such applicable year; (ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any equity awards granted in prior years that are outstanding and unvested as of the end of such applicable year; (iii) for equity awards that are granted and vest in the same applicable year, the fair value as of the vesting date; (iv) for equity awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (v) for equity awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, a deduction for the amount equal to the fair value at the end of the prior fiscal year; and (vi) the dollar value of any dividends or other earnings paid on equity awards in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any other component of total compensation for such applicable year.

 

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Adjustments as provided in clauses (iii) and (vi) are inapplicable for all of the years presented in the table.

 

The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. The value of option awards is based on the fair value as of the end of the covered year or change in fair value during the covered year, in each case based on our Black-Scholes option pricing model, the assumptions of which are described in Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

(7)

The total shareholder return is calculated by the difference between our common share price at the end of the measurement period by our common share price at the beginning of the measurement period.

 

(8)

Amounts reported represent the amount of net loss reflected in our audited consolidated financial statements for the applicable year and is presented in thousands.

 

Pay Versus Performance Relationship

 

In accordance with Item 402(v) of SEC Regulation S-K, we are providing the following descriptions of the relationships between information presented in the Pay versus Performance table above. The graphs below illustrate a high correlation between compensation actually paid to our NEOs and our cumulative total shareholder return (TSR) and a low correlation between compensation actually paid to our NEOs during 2022 and 2023 and our net loss during those years.

 

As demonstrated by the following graph, the amount of compensation actually paid to our NEOs is aligned with our cumulative TSR over the two years presented in the table. The alignment of compensation actually paid with our cumulative TSR over the period presented is because a significant portion of the compensation actually paid to our NEOs is comprised of equity awards, the value of which is driven by our share price.

 

compactgrph.jpg

 

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The amount of compensation actually paid to our NEOs increased despite an increase in our net loss. This is a result of an increase in our stock price year over year, which increased the compensation actually paid to our NEOs, despite an increase in our net loss.

 

Employee Benefit and Stock Plans

 

Amended and Restated 2019 Omnibus Incentive Plan

 

The DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan was adopted by the Board of Directors on March 10, 2022 and approved by our shareholders on May 18, 2022. For more information on the 2019 Plan, see Voting Proposal Three—Approval of Amendment to DiaMedica Therapeutics Inc. Amended and Restated 2019 Omnibus Incentive Plan, beginning on page 18.

 

Employment Inducement Plan

 

The DiaMedica Therapeutics Inc. 2021 Employment Inducement Plan was adopted by the Board of Directors on December 3, 2021 to facilitate the granting of equity awards as an inducement material to new employees joining DiaMedica. The Employment Inducement Plan was adopted without shareholder approval pursuant to Nasdaq Listing Rule 5635(c)(4) and is administered by the Compensation Committee.

 

The Board of Directors reserved 1,000,000 common shares for issuance under the Employment Inducement Plan, which permits the grant of options, stock appreciation rights, restricted stock awards, restricted stock units, performance awards and other stock-based awards, to eligible recipients. The only persons eligible to receive awards under the Inducement Plan are individuals who are new employees and satisfy the standards for inducement grants under Nasdaq Listing Rule 5635(c)(4) or 5635(c)(3), as applicable.

 

Prior Stock Option Plan

 

The DiaMedica Therapeutics Inc. Amended and Restated Stock Option Plan (Option Plan) was adopted by the Board of Directors on September 30, 2018 and by our shareholders on November 6, 2018. The Option Plan was terminated with respect to future grants upon the approval by the shareholders of the 2019 Plan. Options outstanding under the Option Plan remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of the Option Plan.

 

Subject to the discretion of the Board of Directors, where a person ceases to be an eligible participant under the Option Plan, other than by reason of death or in the event of termination for cause, options granted to participants will cease to be exercisable on the earlier of the expiry date and 90 days after the date of termination. Subject to the discretion of the Board of Directors, if a participant is terminated for cause, all options received will terminate and cease to be exercisable upon such termination.

 

In the event of any change in our outstanding common shares by reason of any stock dividend, split, recapitalization, reclassification, amalgamation, merger, consolidation, combination or exchange of shares or distribution of rights to holders of shares or any other form of corporate reorganization whatsoever, an equitable adjustment will be made to the share limits in the Option Plan and any options then outstanding and the exercise price in respect of such options.

 

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Prior Deferred Share Unit Plan

 

The DiaMedica Therapeutics Inc. Deferred Share Unit Plan (DSU Plan) was adopted by the Board of Directors on August 25, 2011 and by our shareholders on September 22, 2011. The DSU Plan was terminated with respect to future grants upon the approval by the shareholders of the 2019 Plan. DSU awards outstanding under the DSU Plan remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of the DSU Plan. All DSU awards held by a recipient settle and the shares underlying such awards become issuable only after the termination of the recipient’s employment or other service with DiaMedica.

 

Anti-Hedging and Pledging Policy

 

DiaMedica has determined that there is a heightened legal risk and/or the appearance of improper or inappropriate conduct if officers, directors and employees engage in certain types of transactions in DiaMedica’s securities that hedge or offset, or are designed to hedge or offset, any decrease in the market value of DiaMedica’s equity securities. Therefore, DiaMedica’s Insider Trading Policy provides that officers, directors and employees must comply with the following policies with respect to certain transactions in DiaMedica’s securities:

 

 

Short Sales. Short sales of DiaMedica’s securities evidence an expectation on the part of the seller that the securities will decline in value, and therefore signal to the market that the seller has no confidence in DiaMedica or its short-term prospects. In addition, short sales may reduce the seller’s incentive to improve DiaMedica’s performance. For these reasons, short sales of DiaMedica’s securities are prohibited.

 

 

Publicly Traded Options. A transaction in options is, in effect, a bet on the short-term movement of DiaMedica’s common shares and therefore creates the appearance that an officer, director or employee is trading based on inside information. Transactions in options also may focus an officer’s, director’s or employee’s attention on short-term performance at the expense of DiaMedica’s long-term objectives. Accordingly, transactions in puts, calls or other derivative securities involving DiaMedica’s equity securities, on an exchange or in any other organized market, are prohibited.

 

 

Hedging Transactions. Certain forms of hedging or monetization transactions, such as zero-cost collars and forward sale contracts, allow an officer, director or employee to lock in much of the value of his or her stock holdings, often in exchange for all or part of the potential for upside appreciation in the stock. These transactions allow the officer, director or employee to continue to own the covered securities, but without the full risks and rewards of ownership. When that occurs, the officer, director or employee may no longer have the same objectives as DiaMedica’s other shareholders. Therefore, such transactions involving DiaMedica’s equity securities are prohibited.

 

 

Purchases of DiaMedicas Securities on Margin; Pledging DiaMedicas Securities to Secure Margin or Other Loans. Purchasing on margin means borrowing from a brokerage firm, bank or other entity in order to purchase DiaMedica’s securities (other than in connection with a cashless exercise of stock options through a broker under DiaMedica’s equity plans). Margin purchases of DiaMedica’s securities are prohibited. Pledging DiaMedica’s securities as collateral to secure loans is also prohibited. This prohibition means, among other things, that directors, officers and employees cannot hold DiaMedica’s securities in a “margin account.”

 

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RELATED PERSON RELATIONSHIPS AND TRANSACTIONS

 


 

Introduction

 

Below under “—Description of Related Party Transactions” is a description of transactions that have occurred during the past two fiscal years, or any currently proposed transactions, to which we were or are a participant and in which:

 

 

the amounts involved exceeded or will exceed the lesser of: $120,000 or one percent (1%) of the average of our total assets at year end for the last two completed fiscal years; and

 

 

a related person (including any director, director nominee, executive officer, holder of more than 5% of our common shares or any member of their immediate family) had or will have a direct or indirect material interest.

 

Description of Related Party Transactions

 

Insider Stock Purchases

 

On April 10, 2023, in conjunction with his appointment as Chief Business Officer, David Wambeke purchased 468,750 common shares of DiaMedica at an aggregate purchase price of $750,000 or $1.60 per share.

 

On June 21, 2023, we issued and sold an aggregate 11,011,406 common shares pursuant to a securities purchase agreement at a purchase price of $3.40 per share, or $3.91 per share in the case of our participating directors and officers, in a private placement. As a result of the offering, we received gross proceeds of $37.5 million, which resulted in net proceeds to us of approximately $36.1 million, after deducting the offering expenses. The following directors and officers participated in the private placement:

 

Director/Officer

 

Total Purchase Price

   

Number of Common

Shares Purchased

 

Richard Pilnik

  $ 150,000       38,363  

Rick Pauls

    50,000       12,787  

Michael Giuffre

    254,150       65,000  

Charles Semba, M.D.

    50,000       12,787  

Scott Kellen

    39,100       10,000  

David Wambeke

    150,000       38,364  

 

In connection with the June 2023 private placement, we entered into a registration rights agreement (Registration Rights Agreement) with the investors pursuant to which we agreed to file with the SEC a registration statement registering the resale of the shares sold in the June 2023 private placement (Resale Registration Statement). The Resale Registration Statement was filed with the SEC on June 30, 2023 and declared effective by the SEC on July 7, 2023. Under the terms of the Registration Rights Agreement, we agreed to keep the Resale Registration Statement effective at all times until the shares are no longer considered “Registrable Securities” under the Registration Rights Agreement and if we fail to keep the Resale Registration Statement effective, subject to certain permitted exceptions, we will be required to pay liquidated damages to the investors in an amount of up to 10% of the invested capital, excluding interest. We also agreed, among other things, to indemnify the selling holders under the Resale Registration Statement from certain liabilities and to pay all fees and expenses incident to our performance of or compliance with the Registration Rights Agreement.

 

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Indemnification Agreements

 

We have entered into indemnification agreements with all of our directors and executive officers. The indemnification agreements provide, among other things, for indemnification, to the fullest extent permitted by law and our Articles, against any and all expenses (including attorneys’ fees) and liabilities, judgments, fines and amounts paid in settlement that are paid or incurred by the executive or on his or her behalf in connection with such action, suit or proceeding. The indemnification agreements also set forth procedures that apply in the event an executive requests indemnification or an expense advance