GI DYNAMICS, INC. - FORM 10-K/A

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EX-32.4 - CERTIFICATION - GI DYNAMICS, INC.	f10k2019a1ex32-4_gidynamics.htm
EX-32.3 - CERTIFICATION - GI DYNAMICS, INC.	f10k2019a1ex32-3_gidynamics.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-55195

GI DYNAMICS, INC.

(Exact name of registrant as specified in its charter)

Delaware		84-1621425
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

320 Congress Street, 3^rd Floor
Boston, Massachusetts		02210
(Address of Principal Executive Offices)		(Zip Code)

(781) 357-3300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $0.01 par value per share

Title of each class		Trading symbol(s)		Name of each non U.S. exchange on which registered
Common Stock, par value $0.01		GID.ASX		Australia Securities Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files): Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	Accelerated filer ☐
Large accelerated filer ☐	Smaller reporting company ☒
Non-accelerated filer ☒	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): ☐ Yes ☒ No

The aggregate market value of the registrant’s common stock, in the form of CHESS Depositary Interests (“CDI” in singular, “CDIs” in plural, each CDI representing 1/50^th of one share of common stock), held by non-affiliates of the registrant (without admitting that any person whose shares are not included in such calculation is an affiliate), computed by reference to the price at which the CDIs were last sold on June 28 2019, the last business day of the registrant’s most recently completed second quarter, as reported on the Australian Securities Exchange, was $19,603,047 (A$27,952,442).

The registrant’s common stock is publicly traded on the ASX in the form of CDIs convertible at the option of the holders into shares of the registrant’s common stock on a 1-for-50 basis. The total number of shares of the registrant’s common stock outstanding on March 12, 2020, including shares of common stock underlying CDIs, was 36,598,291.

DOCUMENTS INCORPORATED BY REFERENCE

None.

EXPLANATORY NOTE

GI Dynamics, Inc. (the “Company”) is filing this Amendment No. 1 to Annual Report on Form 10-K/A (the “Amendment”) to amend its Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed by the Company with the Securities and Exchange Commission (the “SEC”) on March 27, 2020 (the “Original Form 10-K”). The purpose of this Amendment is to amend Part III, Items 10 through 14 of the Original Form 10-K to include information previously omitted from the Original Form 10-K in reliance on General Instruction G(3) to Form 10-K. Accordingly, Part III of the Original Form 10-K is hereby amended and restated as set forth below and the reference on the cover page of the Original Form 10-K to the incorporation by reference of our definitive proxy statement into Part III of the Original Form 10-K is hereby deleted. In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), new certifications by the Company’s principal executive officer and principal financial officer are filed as exhibits to this Amendment.

No attempt has been made in this Amendment to modify or update the other disclosures presented in the Original Form 10-K. This Amendment does not reflect events occurring after the filing of the original report (i.e., those events occurring after March 27, 2020) or modify or update those disclosures that may be affected by subsequent events. Accordingly, this Amendment should be read in conjunction with the Original Form 10-K and the Company’s other filings with the SEC.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Amendment and the Original Form 10-K (together, the “Annual Report”) contain forward-looking statements as defined in Section 27A of the United States Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Throughout the Annual Report, all references to the “Company” or “GI Dynamics,” unless where the context requires otherwise, refers to the consolidated entity of GI Dynamics, Inc. These forward-looking statements concern the Company’s business, operations, financial performance and condition as well as plans, objectives and expectations for the Company’s business, operations and financial performance and condition. Any statements contained in the Annual Report that are not of historical facts may be deemed to be forward-looking statements. The forward-looking statements are contained principally in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include, but are not limited to, statements about the Company’s:

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expectations with respect to the Company’s intellectual property position;

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expectations with respect to clinical trials for EndoBarrier^®;

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expectations with respect to regulatory submissions and receipt and maintenance of regulatory approvals;

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ability to commercialize products;

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ability to develop and commercialize new products;

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expectation with regard to product manufacture and inventory; and

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estimates regarding capital requirements and need for additional financing.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “aims,” “assumes,” “goal,” “intends,” “objective,” “potential,” “positioned,” “target,” “continue,” “seek,” “vision,” or the negative thereof and similar expressions intended to identify forward-looking statements.

These forward-looking statements are based on current expectations, estimates, forecasts and projections about the Company’s business and the industry in which it operates and management’s beliefs and assumptions. These forward-looking statements are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond the Company’s control. As a result, any or all forward-looking statements in the Annual Report may later become inaccurate. The Company may not actually achieve the plans, intentions or expectations disclosed in any forward-looking statements, and actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements made by the Company. The Company has included important factors in the cautionary statements included in the Annual Report, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements made.

You are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on the forward-looking statements. You should read the Annual Report and the documents that the Company has filed as exhibits to the Annual Report completely and with the understanding that actual future results may be materially different from what the Company expects. These forward-looking statements speak only as at the date of the Annual Report. Unless required by law, the Company does not intend to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise. You should, however, review the factors and risks described in the reports the Company will file from time to time with the SEC after the date of the Annual Report.

TABLE OF CONTENTS

		Page

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	1
Item 11.	Executive Compensation	24
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	30
Item 13.	Certain Relationships and Related Transactions, and Director Independence	32
Item 14.	Principal Accountant Fees and Services	33

PART IV

Item 15.	Exhibits and Financial Statement Schedules	34
	Signatures	38

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Board of Directors and Risk Oversight

The board is responsible for the overall corporate governance of the Company. Issues of substance affecting the Company are considered by the full board, with advice from external advisers as required. Each director must bring an independent view and judgment to the board and must declare all conflicts of interest. Any issue concerning a director must be provided to the board at a board meeting as soon as practicable, and directors may not participate in discussions or resolutions pertaining to any matter in which the director has a material personal interest.

The board’s role in risk oversight includes receiving reports from senior management and the audit committee on a regular basis regarding material risks faced by the Company and applicable mitigation strategies and activities. The reports detail the effectiveness of the risk management program and identify and address material business risks such as technological, strategic, business, operational, financial, human resources and legal/regulatory risks. The board and its committees (described below) consider these reports, discuss matters with management and identify and evaluate any potential strategic or operational risks, and appropriate activity to address those risks.

The responsibilities of the board are set down in the Company’s Board Charter, which has been prepared having regard to the ASX Corporate Governance Council’s ASX Corporate Governance Principles and Recommendations 3rd edition (“ASX Corporate Governance Principles”). A copy of the Company’s Board Charter is available on the Company’s website at www.gidynamics.com.

Directors of the Registrant

The following is certain information as of March 2, 2020 regarding each of the Company’s directors:

Name	Age	Position
Daniel J. Moore ⁽³⁾	58	Non-executive Chairman of the Board
Timothy J. Barberich ⁽¹⁾⁽²⁾	72	Non-executive Director
Juliet Thompson ⁽¹⁾	53	Non-executive Director
Oern R. Stuge, M.D. ⁽²⁾⁽³⁾	65	Non-executive Director
Praveen Tyle, Ph.D.	59	Non-executive Director

1.	Member of the audit committee.
2.	Member of compensation committee.
3.	Member of nominating and corporate governance committee.

Daniel J. Moore has served as a director of GI Dynamics since 2014, as vice-chairman from March 2015 to April 2016 and chairman since May 2016. Mr. Moore’s extensive experience in domestic and international sales, operations and executive management in global medical device manufacturers and years of service on other boards makes him qualified to serve on the Company’s board of directors.

Mr. Moore has served as president, chief executive officer and director of Cyberonics, Inc., a medical technology company with core expertise in neuromodulation, from 2007 to October 2015. From 1989 to 2007, Mr. Moore held positions in sales, marketing, and senior management in the U.S. and in Europe at Boston Scientific Corporation, a diverse maker of minimally invasive medical products. His last position at Boston Scientific was President, International Distributor Management. Prior to that role, he held the position of President, Inter-Continental, the fourth largest business unit of Boston Scientific, with more than 1,000 global employees and revenues exceeding $700 million. Mr. Moore previously held senior management positions at several Boston Scientific U.S. and international divisions.

Mr. Moore currently serves as the chairman of LivaNova PLC (the company resulting from the merger of Sorin S.p.A. and Cyberonics, Inc.), chairman of ViewRay, a member of the board of directors for the Epilepsy Foundation of America, and as a member of the boards or advisory boards for BioHouston, Inc. and the Weldon School of Biomedical Engineering at Purdue University. Past board positions include Brainscope, Smiling Kids, Inc., the Epilepsy Foundation of Texas (past-Chair), the Epilepsy Foundation of Texas — Houston (past-President), the Medical Device Manufacturers Association (past-Chair), Cyberonics, Inc., Topera, Inc. (acquired by Abbott) and TriVascular Technologies, Inc. (acquired by Endologix).

Mr. Moore holds a B.A. from Harvard University and earned an MBA from Boston University.

Timothy J. Barberich has been a director of GI Dynamics since June 2011. Mr. Barberich has nearly 40 years’ experience in pharmaceutical and medical device companies, in technical, sales, marketing and management positions, including as chief executive officer and chairman of the board. Mr. Barberich is the founder and former president, chief executive officer and chairman of Sepracor, Inc., a NASDAQ-listed-pharmaceutical company based in Massachusetts, which was acquired by Dainippon Sumitomo Pharma Co., Ltd. in 2009. Mr. Barberich founded Sepracor in 1984 and served as its chief executive officer from 1984 to 2007 and chairman of the board from 1990 to 2007. From 2007 to 2008, Mr. Barberich served as executive chairman of Sepracor and then chairman of the board from 2008 to 2009. Mr. Barberich led Sepracor through its early-stage research and development, product approvals, commercialization, private financings and initial public offering, partnerships with major companies, several successful spin-outs and achievement of revenues in excess of $1 billion. Prior to founding Sepracor, Mr. Barberich spent 10 years as a senior executive at Millipore Corporation, a company that provides separations products to the life science research, pharmaceutical, biotechnology and electronic markets. Mr. Barberich brings to the Company’s board the knowledge and experience of leading a company in the health care industry through every stage of its life cycle. GI Dynamics believes this experience and familiarity with the types of risks that the Company may face, together with his broad medical device and pharmaceutical industry experience, makes Mr. Barberich uniquely suited to serve on the Company’s board.

Mr. Barberich is currently chairman and CEO of BioNevia Pharmaceuticals, Inc., a director of Verastem Oncology, a NASDAQ-listed biotechnology company, TScan and Frequency Therapeutics, both privately funded biotechnology companies. Mr. Barberich was formerly a director of Inotek Pharmaceuticals, a NASDAQ-listed biotechnology company, Neurovance, Inc., a privately held biotechnology company, HeartWare International, Inc., a NASDAQ-listed medical device company, Tokai Pharmaceuticals, Inc., a NASDAQ-listed biopharmaceutical company, MirImmune Inc., which was acquired in 2016, BioSphere Medical, Inc., a NASDAQ-listed biotechnology company, Gemin X Biotechnologies, Inc. and Resolvyx Pharmaceuticals, which were acquired in 2011 and 2010, respectively, and Virucon, a publicly traded biotechnology company.

Mr. Barberich holds a Bachelor of Science degree in Chemistry from Kings College in Pennsylvania and has taken graduate courses from the School of Chemistry at Rutgers University.

Juliet Thompson has been a director of GI Dynamics since August 22, 2017. Ms. Thompson also assumed the role of chair of the Company’s audit committee. Ms. Thompson has spent approximately 20 years working as an investment banker and strategic advisor to healthcare companies in Europe. Ms. Thompson’s extensive experience in investment banking, including capital raising and strategic initiatives, makes her qualified to serve on the Company’s board of directors.

Since March 2015, Ms. Thompson has served on the board of Nexstim Limited, a medical technology company listed on Nasdaq First North Finland and Sweden. Prior to that, Ms. Thompson led the European healthcare practice at Stifel Financial Corp., a diversified financial services holding company, serving as a partner from October 2013 to April 2015. In 2003, Ms. Thompson co-founded Code Securities, a healthcare investment banking firm that was purchased by Nomura and renamed Nomura Code Securities Limited (“Nomura Code”) in 2005 and served as Head of Corporate Finance and as a member of the board of Nomura Code until 2013. She is also currently a non-executive director of Vectura PLC, a company listed on the London Stock Exchange plc, and Novacyt S.A., a French-based company whose shares are admitted to trade on AIM, Ms. Thompson is a member of the Institute of Chartered Accountants in England and Wales (ACA) and holds a BSc degree in Economics from the University of Bristol. Her experience also includes roles at WestLB Panmure, ICI PLC, Deloitte and Touche and HM Treasury.

Oern R. Stuge, M.D. has served as a director of GI Dynamics since his appointment in January 2017. Dr. Stuge’s extensive experience in domestic and international sales, management and operations in a global medical device manufacturer makes him qualified to serve on the Company’s board of directors.

Dr. Stuge has served as an executive in various medical device, health care and life sciences companies over the last thirty years. Since January 2011, Dr. Stuge has been Chairman of Orsco Lifesciences AG, a management firm that specializes in medical technology through which he supports several companies. Prior to that, Dr. Stuge served in various positions, including as Senior Vice-President, at Medtronic Inc., from May 1998 to December 2009. Dr. Stuge is currently Chairman of Mainstay Medical Limited, a Euronext Paris-listed and Irish Stock Exchange-listed medical devices company and Luminas Limited, formerly a NASDAQ-listed medical company. Dr. Stuge is chairman of the board of OrthoD Ltd. and serves on the board of several private companies including Balt Extrusion SAS, Pulmonx International SA, and Phagenesis Limited. Furthermore, until December 2016, Dr. Stuge served on the board of Bonesupport AB, a private medical technology company.

Dr. Stuge received an M.D. from the University of Oslo, Norway, an M.B.A. from IMD and an INSEAD Certification in Corporate Governance.

Praveen Tyle, Ph.D. has served as a director since February 2020. Dr. Tyle’s executive research and development leadership experience, including within diabetes and obesity, and significant mergers and acquisitions and business development and licensing experience makes him qualified to serve on the Company’s board of directors.

Since May 2016, Dr. Tyle has served as Executive Vice President of Research and Development of Lexicon Pharmaceuticals. Dr. Tyle was previously a member of the executive management team at Osmotica Pharmaceutical Corp., serving as President and Chief Executive Officer from January 2013 through April 2016 and as Executive Vice President and Chief Scientific Officer from August 2012 to December 2012. He is also a member of the board of Orient EuroPharma Co., Ltd. of Taiwan. Dr. Tyle has nearly 30 years of experience in the pharmaceutical industry with the majority of his tenure in senior executive leadership positions in areas of research and development, manufacturing, quality, business development and operations. Prior to joining Osmotica Pharmaceutical Corp., Dr. Tyle served as Executive Vice President (from January 2012 to August 2012) and Chief Scientific Officer (from October 2011 to August 2012) for the United States Pharmacopeia, or USP. Prior to joining USP, Dr. Tyle from 2008 to 2011, served as the Senior Vice President and Global Head of Business Development and Licensing at Novartis Consumer Health from March 2009 to September 2011. At Novartis Consumer Health, Dr. Tyle also served as Senior Vice President & Global Head of Research and Development from March 2009 to February 2010. Dr. Tyle holds a doctorate in pharmaceutics and pharmaceutical chemistry from the Ohio State University and a BS in Pharmacy (honors) from the Institute of Technology, Banaras Hindu University in India.

Director Independence

As of March 2, 2020, our board of directors consists of five (5) members: Timothy J. Barberich; Daniel J. Moore; Oern R. Stuge, M.D., Juliet Thompson and Praveen Tyle. Our board of directors has determined that all directors are “independent.” We consider that a director is an “independent” director where that director is free from any business or other relationship that could materially interfere, or be perceived to interfere with, the independent exercise of the director’s judgment. We have assessed the independence of our directors regarding the requirements for independence that are set out in Principle 2 of the ASX Corporate Governance Principles. We have also assessed the independence of our directors with respect to the definition of independence prescribed by Nasdaq. There are no family relationships among our officers and directors, nor are there any arrangements or understandings between any of our directors or officers or any other person pursuant to which any officer or director was, or is, to be selected as an officer or director.

Committees of the Board of Directors and Meetings

As of March 2, 2020, the board of directors has the following three standing committees to facilitate and assist the board in fulfilling its responsibilities: (1) an audit committee, (2) a compensation committee and (3) a nominating and corporate governance committee. The board may also establish other committees from time to time to assist in the discharge of its responsibilities.

Meeting Attendance. During the fiscal year ended December 31, 2019 there were eleven (11) meetings of our board of directors, and the various committees of the board met a total of eighteen (18) times. All directors attended 100% of the total number of meetings of the board and of committees of the board on which he or she served during their Board term during fiscal 2019. We encourage all our directors to participate in each annual meeting of stockholders. Two of our directors attended our 2019 annual meeting of stockholders.

Audit Committee. Our audit committee met four (4) times during fiscal 2019. This committee had two (2) members, Juliet Thompson (chair) and Timothy J. Barberich in 2019. All members of the Audit Committee satisfy the current independence standards promulgated by the Securities and Exchange Commission (“SEC”); and by The Nasdaq Stock Market, as such standards apply specifically to members of audit committees. Our board of directors has determined that Juliet Thompson is an “audit committee financial expert,” as the SEC has defined that term. Our audit committee’s role and responsibilities are set forth in the audit committee’s written charter, a copy of which is publicly available on our website at www.gidynamics.com. The audit committee, among other things, oversees our corporate accounting and financial reporting, including auditing of our financial statements, reviewing the performance of our internal audit function and the qualifications, independence, performance and terms of engagement of our external auditor.

Compensation Committee. Our compensation committee met two (2) times during fiscal 2019. This committee had two (2) members, Timothy J. Barberich (chair) and Dr. Oern Stuge in 2019. All members of the compensation committee qualify as independent under the current definition promulgated by The Nasdaq Stock Market. All members of the compensation committee qualify as independent under the current definition promulgated by the ASX. Our compensation committee’s role and responsibilities are set forth in the compensation committee’s written charter, a copy of which is publicly available on our website at www.gidynamics.com. The compensation committee, among other things, establishes, amends, reviews and approves the compensation and benefit plans with respect to our senior management and employees including determining individual elements of total compensation of our chief executive officer and other members of senior management. The compensation committee is also responsible for reviewing the performance of our executive officers with respect to these elements of compensation.

Nominating and Corporate Governance Committee. Our nominating and corporate governance committee met one (1) time during fiscal 2019 and has two (2) members, Daniel Moore (chair) and, Oern R. Stuge. All members of the nominating and corporate governance committee qualify as independent under the current definition promulgated by The Nasdaq Stock Market. All members of the nominating and corporate governance committee qualify as independent under the current definition promulgated by the ASX. The nominating and corporate governance committee’s role and responsibilities are set forth in the nominating and corporate governance committee’s written charter, a copy of which is publicly available on our website at www.gidynamics.com. The nominating and corporate governance committee, among other things, recommends the director nominees for each annual meeting and ensures that the audit, compensation and nominating and corporate governance committees of the board have the benefit of qualified and experienced independent directors.

In addition, under our current Board Charter, the nominating and corporate governance committee will review annually the results of the evaluation of the board and its committees, and the needs of the board for various skills, experience, expected contributions and other characteristics in determining the director candidates to be nominated at the annual meeting. The nominating and corporate governance committee will evaluate candidates for directors proposed by directors, stockholders or management in light of the committee’s views of the current needs of the board for certain skills, experience or other characteristics, the candidate’s background, skills, experience, other characteristics and expected contributions and the qualification standards established from time to time by the nominating and corporate governance committee. If the nominating and corporate governance committee believes that the board requires additional candidates for nomination, the committee may engage, as appropriate, a third-party search firm to assist in identifying qualified candidates. All nominees for director positions will submit a completed form of directors’ and officers’ questionnaire as part of the nominating process. The process may also include interviews and additional background and reference checks for nonincumbent nominees, at the discretion of the nominating and corporate governance committee.

The nominating and corporate governance committee will review a reasonable number of candidates for director recommended by a single stockholder who has held over 5% of our common stock for over one year and who satisfies the notice, information and consent provisions set forth in our bylaws. Candidates so recommended will be reviewed using the same process and standards for reviewing board recommended candidates. If a stockholder wishes to nominate a candidate for director, it must follow the procedures described in our bylaws and in “Stockholder Proposals for 2020 Annual Meeting” at the end of our most recent proxy statement.

Code of Business Conduct and Ethics

GI Dynamics has adopted a code of business conduct and ethics applicable to directors, executive officers and all other employees. A copy of that code is available on the Company’s corporate website at http://www.gidynamics.com. Any amendments to the code of business conduct and ethics, and any waivers thereto involving the Company executive officers, also will be available on the corporate website. A printed copy of these documents will be made available upon request. The content on the Company website is not incorporated by reference into this Annual Report on Form 10-K.

Stockholder Communications to the Board

Communications to directors must be in writing and sent in care of the Company’s corporate secretary to GI Dynamics, Inc., 320 Congress Street, Boston, Massachusetts 02210, U.S.A., Attention: Corporate Secretary or delivered via e-mail to corporatesecretary@gidynamics.com. The name(s) of any specific intended board recipient(s) should be noted in the communication.

A copy of each communication received since the date of the last board meeting shall be distributed to each director in advance of each regularly scheduled board meeting, except items that are unrelated to the duties and responsibilities of the board, such as: spam, junk mail and mass mailings, business solicitations and advertisements, and communications that advocate the Company’s engaging in illegal activities or that, under community standards, contain offensive, scurrilous or abusive content.

The Company’s corporate secretary shall be responsible for and oversee the receipt and processing of stockholder communications to board members. An acknowledgement of receipt shall be sent by the corporate secretary or assistant secretary to each stockholder submitting a communication. The Company’s corporate secretary shall retain a copy of each communication for one year from the date of its receipt by the Company. The board of directors or individual directors so addressed shall be advised of any communication withheld for safety or security reasons as soon as practicable. The corporate secretary shall relay all communications to directors absent safety or security issues.

Compensation Committee Interlocks and Insider Participation

The compensation committee consisted of two (2) non-executive directors: Timothy J. Barberich (chair) and Dr. Oern Stuge in 2019 and until March 30, 2020, when Timothy J. Barberich resigned as a non-executive director and compensation committee chair and Praveen Tyle was appointed to the compensation committee as chair. No member of the compensation committee is, or was formerly, one of our executive officers or employees. No interlocking relationship exists between the board of directors or compensation committee and the board of directors or compensation committee of any other company, nor has any interlocking relationship existed in the past.

Executive Officers

The following is certain information as of March 2, 2020 regarding our executive officers who are not also directors.

Name	Age	Position
Scott Schorer	51	President and Chief Executive Officer
Charles Carter	53	Chief Financial Officer
Stephen Linhares	63	Vice President of Clinical and Regulatory Affairs

Scott Schorer—President and Chief Executive Officer

Scott Schorer has served as our president and chief executive officer since March 2016. Mr. Schorer has served as a consultant to numerous boards and CEOs across a wide variety of companies in the medical device, biologics and related markets. He was Chief Executive Officer of PlasmaTech Biopharmaceuticals, Inc. from September 2014 to June 2015. From May 2010 to September 2014, Mr. Schorer ran an interim leadership and strategic consulting practice under the name of SSMC. From February 2009 to May 2010, Mr. Schorer led the turnaround effort at Systagenix Wound Management, the former Advanced Wound Care division of Johnson & Johnson, as President of the Americas. Prior to that, Mr. Schorer founded and led IST: Innovative Spinal Technologies, where he served as CEO for eight years until February 2009, during which time IST received CE Mark and FDA approvals for five products before the company was sold to Integra Spine. Prior to IST, he co- founded and was CEO of CentriMed, leading to an acquisition by Global Healthcare Exchange (“GHX”). Mr. Schorer began his medical device career as a sales representative for a surgical distributor following his career as an infantry officer in the 82nd Airborne Division as a rifle and scout platoon leader. He has led financing for over $120 million in public and private equity financings. Mr. Schorer is also a co-inventor of 6 patents, and holds Bachelor of Arts and Bachelor of Engineering degrees from Dartmouth College, where he was also captain of the men’s crew.

Charles Carter – Chief Financial Officer

Charles Carter has served as our chief financial officer since December 2018. Mr. Carter brings over 15 years of experience as a finance executive in the medical industry, having worked with a wide variety of life sciences, therapeutics, and medical device companies. Mr. Carter was previously a consulting finance executive with Danforth Advisors, LLC from February 2018 until September 2091 and from 2012 to 2015, and served as a consulting senior finance executive for Marina Biotech (NASDAQ: MRNA), Interleukin Genetics (NASDAQ: ILGN) and numerous private life science companies. From 2015 to February 2018, Mr. Carter was CFO of The Guild for Human Services, a not-for-profit community-based residential school and program for special needs students and adults. Before joining Danforth and the Guild, Mr. Carter held positions as CFO for Aeris Therapeutics, Inc., and Intelligent Medical Devices, Inc. and served various other companies as an independent consultant. From 2003 to 2005, Mr. Carter was Vice President of Finance for Adnexus Therapeutics, Inc., and from 2001 to 2003, he was Senior Director, Financial Planning and Analysis for Transkaryotic Therapies, Inc./Shire, PLC. (NASDAQ: TKT; NASDAQ: SHPG). Prior to TKT, Mr. Carter was a partner with Mercer Management Consulting, Inc. Mr. Carter holds an M.B.A. and an M.S. in Molecular Genetics from the University of Chicago and a B.A. in Biology from Colgate University.

Stephen Linhares – Vice President of Clinical and Regulatory Affairs

Stephen Linhares has served as our vice president of clinical and regulatory affairs since January of 2019. Before joining GI Dynamics, Mr. Linhares was consulting with start-up companies helping them with clinical, quality and regulatory affairs, establishing systems and compiling regulatory submissions. He was Vice President of Clinical, Regulatory and Quality at Neograft Technologies, Inc., a cardiac device company, from October of 2010 to June of 2017 where he build the quality, clinical and regulatory departments and developed and implemented regulatory and clinical strategies. From 2008 to 2010, Mr. Linhares was the director of Clinical, Regulatory and Quality at Insulet Corporation, an insulin pump manufacturer, where he worked to obtain the CE Mark for the Omnipod and other FDA and international approvals. Prior to that Mr. Linhares held various executive positions at Boston Scientific, and Phase Forward. Prior to that Mr. Linhares was the Vice President of R&D and Clinical Affairs at PLC Medical Systems, manufacturer of state-of-the-art medical lasers, where he was responsible for multiple FDA and International submissions and approvals, he held various positions at PLC Medical from 1983 to 1999. Mr. Linhares earned a Bachelor of Science Degree in Physics from Bridgewater State University.

The Company has employment agreements in place with Scott Schorer and Charles Carter. Stephen Linhares is an at-will employee.

Australian Disclosure Requirements

Because GI Dynamics is listed on the ASX, it is required to comply with various disclosure requirements as set out in the ASX Listing Rules. The following information is provided to comply with the ASX Listing Rules and is not intended to fulfill SEC information required by Part III of this Annual Report on Form 10-K.

Overview

GI Dynamics securities are listed for quotation in the form of CDIs on the ASX and trade under the symbol “GID.AX” Each share of GI Dynamics common stock is equivalent to fifty CDIs. The stockholder information below was applicable as at March 12, 2020.

Our share capital was as follows:

Type of Security	Number of Securities		Equivalent in CDIs
Common Stock		73,631		3,681,550
CDIs		36,524,665		1,826,233,250
Total				1,829,914,800

Stock Options¹		3,186,154		159,307,700
Restricted stock units¹		250,000		12,500,000
Warrants		4,625,425		231,271,250
Total				2,232,993,750

1.	As of March 12, 2020, an additional 574,866 shares of common stock (equivalent to 28,743,300 CDIs) were available for grant under the Company’s 2011 Employee, Director and Consultant Equity Incentive Plan.

Substantial Holders

The number of CDIs held by the Company’s substantial stockholders (being stockholders who, together with their associates, have a relevant interest in at least 5% of the Company’s voting shares) assuming the conversion of common stock held by those stockholders into CDIs and based on the information in the substantial holder notices the Company received as of February 21, 2020, was as follows:

Name of Holder	Number of CDIs Held		% of Total CDIs
Crystal Amber Fund Limited		1,337,659,335		73.10	%
Richard Cashin		199,364,713		10.89	%

Distribution of Equity Security Holders

On March 12, 2020, a total of 36,598,291 shares of common stock were on issue, 36,524,665 of which were held as CDIs (being 1,826,233,250 CDIs in total). The table below presents the number of shares of common stock and the number of CDIs on issue, as well as the number of stock options, restricted stock units and warrants on issue by size of holding as of March 12, 2020:

	Common Stock (unlisted)				CDIs				Stock Options (unlisted)				Restricted Stock Units (unlisted)				Warrants (unlisted)
	Number		Number		Number		Number		Number		Number		Number		Number		Number		Number
	of		of		of		of		of		of		of		of		of		of
	Holders		Shares		Holders		Shares		Holders		Shares		Holders		Shares		Holders		Shares
1 – 1,000		—		—		127		43,522		2		616		—		—		—		—
1,001 – 5,000		1		28		205		566,427		1		5,000		—		—		—		—
5,001 – 10,000		1		105		109		925,189		3		30,000		—		—		—		—
10,001 – 100,000		9		8,526		242		9,681,727		18		715,167		—		—		1		28,532
100,001 – and over		7		64,972		142		1,815,016,385		3		2,435,371		1		250,000		1		4,596,893

Total		18		73,631		825		1,826,233,250		27		3,186,154		1		250,000		2		4,625,425

Unmarketable Parcels

As of March 12, 2020, the number of stockholders holding less than a marketable parcel (for the purposes of the ASX Listing Rules) was 664, based on the closing market price at March 12, 2020.

Top 20 Holders

Holders of CDIs Only

The table below provides a list of the top 20 holders of our CDIs. Related but separate legal entities are not aggregated.

No.	Name of Holder	Number of CDIs Held		% of Total CDIs
1	Crystal Amber Fund		1,337,659,335		48.93	%
2	Mr Richard Cashin		199,364,713		20.68	%
3	Mr Paul Cozzi		40,358,565		4.19	%
4	MS Pace LP		39,115,442		4.06	%
5	Advanced Technology Ventures		31,719,318		3.29	%
6	Johnson & Johnson Development Corp		28,278,460		2.93	%
7	Polaris Venture Partners		17,222,719		1.79	%
8	Mr David Brock		10,001,249		1.04	%
9	Bank Leumi Le Israel BM a/c Main		8,504,551		0.88	%
10	Mr & Mrs Ian Moore		7,000,060		0.73	%
11	Fidelity Pacific Basin Fund		5,561,290		0.58	%
12	Invus Public Equity Advisors		5,185,659		0.54	%
13	Ms Rena C Merchant		4,685,000		0.49	%
14	Transact		3,790,771		0.39	%
15	MK Pension Plan		3,437,363		0.36	%
16	UBS Zurich		3,419,165		0.35	%
17	Mr Colin P Smith & Ms Mary Christoforou		3,166,470		0.33	%
18	Mr Timothy J Barberich		3,103,705		0.32	%
19	TD Ameritrade Clearing		3,038,153		0.32	%
20	E Trade Financial Corporation		2,901,588		0.30	%
Total CDIs held by top 20 CDI holders			1,757,513,576		92.49	%
Total CDIs held by all other CDI holders			68,719,674		7.51	%
	TOTAL		1,826,233,250

Holders of CDIs and Common Stock Combined

The table below provides a list of the top 20 holders of our securities taking into account securities held in the form of both Common Stock and CDIs. Information presented below is prepared on the assumption that all shares of Common Stock on issue are held as CDIs. Related but separate legal entities are not aggregated.

Details of Shareholders if all shares of Common Stock on issue are held as CDIs

No.	Name of Holder	Number of CDIs Held		% of Total CDIs
1	Crystal Amber Fund		1,337,659,335		73.10	%
2	Mr Richard Cashin		199,364,713		10.89	%
3	Mr Paul Cozzi		40,358,565		2.21	%
4	MS Pace LP		39,115,442		2.14	%
5	Advanced Technology Ventures		31,719,318		1.73	%
6	Johnson & Johnson Development Corp		28,278,460		1.55	%
7	Polaris Venture Partners		17,222,719		0.94	%
8	Mr David Brock		10,001,249		0.55	%
9	Bank Leumi Le Israel BM a/c Main		8,504,551		0.46	%
10	Mr & Mrs Ian Moore		7,000,060		0.38	%
11	Fidelity Pacific Basin Fund		5,561,290		0.30	%
12	Invus Public Equity Advisors		5,185,659		0.28	%
13	Ms Rena C Merchant		4,685,000		0.26	%
14	Transact		3,790,771		0.21	%
15	MK Pension Plan		3,437,363		0.19	%
16	UBS Zurich		3,419,165		0.19	%
17	Mr Colin P Smith & Ms Mary Christoforou		3,166,470		0.17	%
18	Mr Timothy J Barberich		3,103,705		0.17	%
19	TD Ameritrade Clearing		3,038,153		0.17	%
20	E Trade Financial Corporation		2,901,588		0.16	%
Total securities held by top 20 securities holders			1,757,513,576		96.04	%
Total securities held by all other securities holders			72,401,224		3.96	%
			1,829,914,800

Stock Options (not listed on ASX)

As of March 12, 2020, there are 3,186,154 stock options on issue to purchase shares of common stock under the 2011 Employee, Director and Consultant Equity Incentive Plan and the 2003 Omnibus Stock Plan with varying exercise prices. These stock options are held by 27 individuals.

Restricted Stock Units (not listed on ASX)

As of March 12, 2020, there are 250,000 performance related restricted stock units on issue for 250,000 shares of common stock under the 2011 Employee, Director and Consultant Equity Incentive Plan. These restricted stock units are held by 1 individual.

Warrants (not listed on ASX)

There are two warrants on issue as of March 12, 2020. One to subscribe for in aggregate 28,532 shares of common stock at an exercise price of $0.64 per share and another to subscribe for in aggregate 4,596,893 shares of common stock at an exercise price of $1.00.

Restricted Securities

There were 866,037,501 CDIs held by Crystal Amber on account with Link Market Services which are restricted as to sale or transfer until June 30, 2020 or later. These CDIs were issued with a one-year sale restriction as a result of the July 3, 2019 note conversions and the warrant exercises that were executed between August 23, 2019 and November 15, 2019.

Voting Rights

The Company’s bylaws provide that each stockholder has one vote for every share of common stock entitled to vote held of record by such stockholder and a proportionate vote for each fractional share of common stock entitled to vote so held, unless otherwise provided by Delaware General Corporation Law or in the certificate of incorporation.

Holders of CDIs have one vote for every fifty CDIs held of record by such stockholder. If holders of CDIs wish to attend the Company’s general meetings, they will be able to do so. Under the ASX Listing Rules, the Company, as an issuer of CDIs, must allow CDI holders to attend any meeting of the holders of the underlying securities unless relevant U.S. law at the time of the meeting prevents CDI holders from attending those meetings.

In order to vote at such meetings, CDI holders have the following options:

Instructing CHESS Depositary Nominees Pty Ltd (CDN), as the legal owner, to vote the shares of common stock underlying their CDIs in a particular manner. The instruction form must be completed and returned to the Company’s share registry prior to the meeting;

Informing the Company that they wish to nominate themselves or another person to be appointed as CDN’s proxy for the purposes of attending and voting at the general meeting; and

Converting their CDIs into a holding of shares of common stock and voting these at the meeting (however, if thereafter the former CDI holder wishes to sell their investment on the ASX, it would be necessary to convert the shares of common stock back to CDIs). This must be done prior to the record date for the meeting.

As holders of CDIs will not appear on the Company’s share register as the legal holders of shares of common stock, they will not be entitled to vote at GI Dynamics stockholder meetings unless one of the above steps is undertaken.

Proxy forms and details of these alternatives will be included in each notice of meeting the Company sends to CDI holders.

Holders of restricted stock units, issued but unexercised stock options and warrants are not entitled to vote.

Required Statements

GI Dynamics, Inc. makes the following disclosures:

There is no current on-market buy-back of GI Dynamics securities.

GI Dynamics, Inc. is incorporated in the state of Delaware in the United States of America.

GI Dynamics, Inc. is not subject to Chapters 6, 6A, 6B or 6C of the Corporations Act 2001 (Cth), or Corporations Act, dealing with the acquisitions of shares (including substantial shareholdings and takeovers).

Under the Delaware General Corporation Law, shares are generally freely transferable subject to restrictions imposed by U.S. federal or state securities laws, by the Company’s certificate of incorporation or bylaws, or by an agreement signed with the holders of the shares at issue. The Company’s amended and restated certificate of incorporation and bylaws do not impose any specific restrictions on transfer. Section 203 of the Delaware General Corporation Law prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the time the person became an interested stockholder, unless the business combination or acquisition of shares that resulted in a stockholder becoming an interested stockholder is approved in a prescribed manner. A “business combination” can include a merger, asset or share sale, or other transaction resulting in a financial benefit to an interested stockholder. Generally, an interested stockholder is a person who, together with its affiliates and associates, owns (or within three years prior to the determination of interested stockholder status did own) 15% or more of a corporation’s voting shares. The existence of this provision would be expected to have an anti-takeover effect with respect to transactions not approved in advance by the board of directors, including discouraging attempts that might result in a premium over the market price for the shares of common stock held by stockholders. As a general matter, Section 203 applies solely to corporations with a class of voting stock listed on a national securities exchange in the U.S. or held of record by 2,000 or more stockholders, neither of which currently apply to the Company, but may at any time in the future.

GI Dynamics has used the cash (and assets in a form readily convertible to cash) that it had at the time of admission to the ASX in a manner consistent with the Company’s stated business objectives (as described in the Australian prospectus lodged with the Australian Securities and Investments Commission with respect to the GI Dynamics IPO) from the time of the Company’s admission to the ASX through to December 31, 2019.

The securities of GI Dynamics, Inc. are not quoted on any exchange other than the ASX.

The name of the Company’s Corporate Secretary is Charles R. Carter.

The address and telephone number of the Company’s principal registered office in Australia is:

KPMG

Tower Three

International Towers Sydney

300 Barangaroo Avenue

Sydney NSW 2000 Australia

Telephone: +61 2 9335 8054

Registers of securities are held as follows:

for CDIs in Australia at:

Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Telephone: +61 1300 554 474

for common stock in the United States at:

American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn New York 11219
Telephone: +1 718 921 8124

Australian Corporate Governance Statement

The Company’s board of directors, or Board, and employees are committed to developing, promoting and maintaining a strong culture of good corporate governance and ethical conduct.

The Board confirms that the Company’s corporate governance framework is generally consistent with the ASX Corporate Governance Council’s “Corporate Governance Principles and Recommendations 3rd Edition” (“ASX Governance Recommendations”), other than as set out below. To this end, the Company provides below a review of its corporate governance framework using the same numbering as adopted for the principles as set out in the ASX Governance Recommendations.

This corporate governance statement relates to the financial year ended December 31, 2019 and has been approved by the Board.

Copies of the Company’s codes and policies may be downloaded from the corporate governance section of the Company’s website at www.gidynamics.com.

Principle 1 – Lay solid foundations for management and oversight

Recommendation 1.1 – A listed entity should disclose:

the respective roles and responsibilities of its board and management; and

those matters expressly reserved to the board and those delegated to management.

The Board’s responsibilities are recognized and documented by the charter of the Board (“Board Charter”), a copy of which is available on the Company’s website at www.gidynamics.com, and there is a clear delineation between the Board’s responsibility for the Company’s strategy and activities, and the day-to-day management of operations conferred upon the Company’s officers.

The Board Charter provides that the role of the Board, as the body ultimately responsible for the corporate governance of the Company, includes the following major functions:

●

providing input into and final approval of management’s development of corporate strategy and performance objectives;

●

reviewing, ratifying and monitoring systems of risk management and internal control, codes of conduct, and legal compliance;

●

ensuring appropriate resources are available to senior executives;

●

approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestments;

●

approving and monitoring financial and other reporting;

●

evaluating the overall effectiveness of the Board and its committees; and

●

evaluating, selecting and recommending an appropriate slate of candidates for election as directors.

Management is responsible for implementing the strategic objectives set by the Board, carrying out the day-to-day operations of the Company, and making accurate, timely, and clear reports to the Board.

Recommendation 1.2 – A listed entity should:

undertake the appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director; and

provide security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director.

The nominating and corporate governance committee of GI Dynamics is responsible for reviewing, with the Board from time to time, the appropriate skills and characteristics required of Board members in the context of the current make-up of the Board and the Company’s business needs. When considering Board appointments, the committee ensures that appropriate checks are undertaken on the candidate’s character, education, qualifications, criminal record and bankruptcy history and that sufficient information is provided to security holders when a candidate is standing for election or re-election as a director to enable them to make an informed decision on whether or not to elect or re-elect the candidate. Information regarding the director who was re-appointed at the Company’s 2019 annual general meeting was provided in the notice of meeting disclosed to the ASX and stockholders on June 21, 2019.

Recommendation 1.3 – A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment.

The terms of Board membership are set forth in the GI Dynamics Board Charter and the remuneration paid to Board members is provided in accordance with stockholder approval (where required) following the compensation committee’s recommendation. While the Company does not have a separate written agreement with each of its Board members, it believes the terms set out in the Board Charter are adequate to provide a clear understanding of the roles and responsibilities of Board members. In the case of senior executives, the Company has provided a letter or contract of employment to each executive detailing the terms of employment and has developed job descriptions setting forth the position, duties, and reporting structure. Where there are any agreed entitlements upon termination, such agreed items are set forth in the employment letters or contracts.

Recommendation 1.4 - The company secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with the proper functioning of the board:

The role and responsibilities of the Company’s secretary are set forth in the Company’s bylaws. The Board is responsible for electing or appointing the secretary and for prescribing the duties and powers of the secretary. Each director is able to communicate freely and directly with the secretary and vice versa. The secretary is accountable to the Board, through the chairman of the Board, for all matters to do with the proper functioning of the Board, including:

●

monitoring the Company’s compliance in respect of all corporate governance matters;

●

drafting and circulating the minutes of meetings of the Board and all committees for approval at the next meeting; and

●

monitoring the Company’s compliance with all disclosure obligations and regularly reviewing Company policies and procedures relating to compliance with such disclosure obligations.

Recommendation 1.5 – A listed entity should:

have a diversity policy which includes requirements for the board or a relevant committee of the board to set measurable objectives for achieving gender diversity and to assess annually both the objectives and the entity’s progress in achieving them;

disclose as at the end of each reporting period the measurable objectives for achieving gender diversity set by the board or a relevant committee of the board in accordance with the entity’s diversity policy and its progress towards achieving them, and either:

the respective proportions of men and women on the board, in senior executive positions and across the whole organization (including how the entity has defined ‘senior executive’ for these purposes); or

ii.

if the entity is a “relevant employer” under the Workplace Gender Equality Act, the entity’s most recent “Gender Equality Indicators”, as defined in and published under that Act.

The Company has adopted a Diversity Policy, a copy of which is available on the corporate governance section of the Company’s website. The Company’s Diversity Policy includes requirements for the Board to establish measurable objectives to assist the Company in achieving diversity.

The Board continued to evaluate the gender diversity of the Company’s employees, its senior executives, and the Board during 2019. During 2019, the Board, in considering measurable objectives to set for achieving gender diversity, concluded that, because of the current stage of the Company’s development and the ongoing restructuring efforts, the Company should continue to recruit employees from a diverse pool of talented candidates without regard to gender while continuing to focus on the necessary skills and experience required to achieve the Company’s performance objectives. As a result, the Company did not set measurable objectives for achieving gender diversity in 2019 but used 2018 data as a baseline to measure gender diversity among its employees, senior executives and Board for 2019.

At December 31, 2019, the proportion of women in the Company as a percentage of its total employees increased from 44% (4 out of 9 in 2018) to 50% (7 out of 14) based on data maintained by the Company’s human resources organization. In senior executive positions (vice president and above), the proportion of women remained the same at 0% (none out of 1 in 2018 and none of 3 in 2019). The proportion of women on the Board remained the same at 25% (1 out of 4 in 2018 and 2019).

Recommendation 1.6 – A listed entity should:

have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and

disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process.

In accordance with the Company’s agreed evaluation process, during the reporting period ended December 31, 2019, the Board and each committee performed a self-evaluation. Each director provided their assessments of the effectiveness of the Board and the committees on which they serve to the nominating and corporate governance committee. The individual assessments were summarized by the nominating and corporate governance committee and reported for discussion to the full Board and the committees. The nominating and corporate governance committee completed its assessment of the Board’s compliance with the principles set forth in the Board Charter and did not identify any areas in which the Board or committees needed to improve performance and has reviewed and approved disclosures relating to any departures from the ASX Governance Recommendations. During the reporting period ended December 31, 2019, the nominating and corporate governance committee also evaluated individual directors in accordance with the criteria set by the nominating and corporate governance committee and the Board from time to time. Based on such assessments, the nominating and corporate governance committee has determined that the Board, its committees and each director were effective.

Recommendation 1.7 – A listed entity should:

have and disclose a process for periodically evaluating the performance of its senior executives; and

Under the Board Charter, the directors of GI Dynamics are ultimately responsible for monitoring the performance of the senior management team and the compensation committee, in accordance with its charter, reviews and approves corporate and personal performance goals and objectives relevant to the compensation of all executive officers. At the end of each calendar year, the chief executive officer presents to the compensation committee his assessment of the performance during the year of each executive officer (other than himself) against pre-established performance objectives. The compensation committee considers this assessment and determines each executive officer’s (including the chief executive officer’s) compensation, including but not limited to salary, bonus, incentive compensation and equity awards based on such an evaluation. In addition, the compensation committee is responsible for regularly reviewing the Company’s compensation, recruitment, retention and termination policies for senior executives.

In 2020, a performance evaluation of the Company’s executive officers for the year ended December 31, 2019 was undertaken before March 15, 2020. Following each performance evaluation, the Company’s compensation committee reviewed and approved changes to the compensation of the Company’s executive officers based on the individual levels of achievement against pre-established performance objectives.

Further information regarding executive compensation for the year ended December 31, 2019, as required by Item 11 of this Annual Report on Form 10-K, is incorporated by reference to the applicable information to be included in the Company’s Proxy Statement to be filed with the SEC in connection with its 2020 Annual Meeting of Stockholders or an amendment to this report filed under cover of Form 10-K/A not later than 120 days after the end of the fiscal year ended December 31, 2019.

Principle 2 – Structure the board to add value

Recommendation 2.1 – The board of a listed entity should:

have a nomination committee which:

has at least three members, a majority of whom are independent directors; and

ii.

is chaired by an independent director;

and disclose:

iii.

the charter of the committee;

iv.

the members of the committee; and

as at the end of each reporting period the number of times the committee met throughout the period and the individual attendances of the members at those meetings.

As of December 31, 2019, the members of the nominating and corporate governance committee were Daniel Moore and Dr. Oern Stuge (Chair). Mr. Moore and Dr. Stuge are considered independent directors for ASX, NASDAQ and SEC purposes and a copy of the Nominating and Corporate Governance Committee Charter is available on the corporate governance section of the Company’s website. The nominating and corporate governance committee met once during 2019 and both members were present at the meeting.

At December 31, 2019, there were only two directors appointed as members of the nominating and corporate governance committee (instead of the recommended three members), which was a decision made by the Board initially at the end of 2017 (and reported in the corporate governance statement for December 31, 2017) in order to properly utilize the resources of the four members of the Board across all of the various committees. As a result of only having two members, the Company was not fully compliant with recommendation 2.1 for the 2019 reporting period. The Board of Directors will continue to periodically assess the effectiveness of this committee, including the size and the experience of the members appointed, with a view to ensuring that the committee’s performance accords with the best possible practice in the context of the overall Board size and structure.

Recommendation 2.2 – A listed entity should have and disclose a board skills matrix setting out the mix of skills and diversity that the board currently has or is looking to achieve in its membership.

The nominating and corporate governance committee is responsible for reviewing with the Board from time to time the appropriate skills and characteristics required of Board members in the context of the current make-up of the Board and the Company’s business needs. This assessment includes, among other things, an individual’s business experience and skills (including skills in core areas such as operations, management, technology, medical device industry knowledge, accounting and finance, marketing, leadership, strategic planning and international markets), independence, judgment, integrity and ability to commit sufficient time and attention to the activities of the Board, as well as the absence of any potential conflicts with the Company’s interests. The nominating and corporate governance committee considers these criteria in the context of an assessment of the perceived needs of the Board as a whole and seeks to achieve diversity of occupational and personal backgrounds on the Board.

Information regarding the skills, experience and expertise relevant to each director is set out in the section titled “Directors of the Registrant” in this Item 10.

While the Board did not disclose the Board skills matrix for the reporting period the Board believes that its members possess the mix of skills and diversity that the Company needs at this stage of its development. The Board continues to evolve a board skills matrix setting out the mix of skills and diversity that the Board currently has or is looking to achieve in its membership.

Recommendation 2.3 – A listed entity should disclose:

the names of the directors considered by the board to be independent directors;

if a director has an interest, position, association or relationship of the type described in this recommendation but the board is of the opinion that it does not compromise the independence of the director, the nature of the interest, position, association or relationship in question and an explanation of why the board is of that opinion; and

the length of service of each director.

The Company considers that a director is an independent director where that director is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s decisions relating to the Company or with the director’s ability to act in the best interests of the Company. The Company also assesses the independence of its directors with regard to requirements for independence set out under ASX Governance Recommendation 2.3.

The composition and tenure of the Board as of December 31, 2019, as well as each member’s independence status during 2019, was as follows:

Committees

Nominating

and

Corporate

Director

Director Position

Tenure¹

Independent

Audit

Compensation

Governance

Daniel J. Moore

Non-executive Chairman

5.3 years

Yes

Timothy J. Barberich

Non-executive Director

8.6 years

Yes

Chair

Dr. Oern Stuge

Non-executive Director

3.0 years

Yes

Chair

Juliet Thompson

Non-executive Director

2.3 years

Yes

Chair

1.	Calculated as of December 31, 2019

The number of directors’ meetings (including meetings of committees) and number of meetings attended by each of the directors during the reporting period are as follows:

					Committee Meetings
									Nominating and				Compensation
	Directors’ Meetings				Audit Committee				Corporate Governance				Committee
Director	A		B		A		B		A		B		A		B
Daniel J. Moore		11		11		—		—		1		1		—		—
Timothy J. Barberich		11		11		4		4		—		—		2		2
Dr. Oern Stuge		11		11		—		—		1		1		2		2
Juliet Thompson		11		11		4		4		—		—		—		—

1 – Calculated as of December 31, 2019

A – Number of meetings attended.

B – Number of meetings held during the time the director held office during the reporting period.

Independent advice

At the Company’s expense, each member of the Board and each member of a committee of the Board is entitled to seek advice from independent external advisers in relation to any matter that is considered necessary to fulfil their relevant duties and responsibilities.

Recommendation 2.4 – A majority of the board of a listed entity should be independent directors.

The Board for the reporting period comprised a majority of independent directors.

Recommendation 2.5 – The chair of the board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO of the entity.

In compliance with the ASX Governance Recommendations, the chairman of the Board is an independent director and the roles of the chairman and the chief executive officer of the Company are not currently exercised by the same individual. However, the Company’s Board Charter does not specifically address whether or not the offices of chairman and chief executive officer should be vested in the same person or two different people, or whether the chairman should be an employee of the Company or should be elected from among the non-executive directors. The needs of the Company and the individuals available to serve in these roles may dictate different outcomes at different times, and the Board believes that retaining flexibility in these decisions is in the best interest of the Company and its stockholders.

Recommendation 2.6 – A listed entity should have a program for inducting new directors and provide appropriate professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform their roles as directors effectively.

The nominating and corporate governance committee of the Board continually assesses the needs of the Company and the skills and knowledge required of its Board members. On appointment, new directors are provided with induction information that generally includes historical information about the Company and its operations, details of the Company’s directors’ and officers’ insurance, the Company’s corporate governance guidelines, and other Company governance policies. The induction process also involves one-on-one discussions with the Chairman and other directors and briefings from senior management to help new directors participate actively in Board decision making at the earliest opportunity. When it is necessary, resources are provided for the Board as a whole, and for individual Board members as needed, to supplement their skills and knowledge and fill any identified gaps.

Principle 3 – Act ethically and responsibly

Recommendation 3.1 – A listed entity should:

have a code of conduct for its directors, senior executives and employees; and

disclose that code or a summary of it.

The Company has adopted a Code of Business Conduct and Ethics and an Insider Trading Policy, copies of which are available on the corporate governance section of the Company’s website.

Principle 4 – Safeguard integrity in corporate reporting

Recommendation 4.1 – The board of a listed entity should:

have an audit committee which:

has at least three members, all of whom are non-executive directors and a majority of whom are independent directors; and

ii.

is chaired by an independent director, who is not the chair of the board;

and disclose:

iii.

the charter of the committee;

iv.

the relevant qualifications and experience of the members of the committee; and

in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings.

The Board has established an audit committee to oversee the management of the Company’s financial and internal risks and reporting. As of December 31, 2019, the members of the audit committee were Juliet Thompson and Timothy Barberich, both independent, non-executive directors. The audit committee is chaired by Juliet Thompson who is an independent director and not chair of the Board.

The audit committee met four times during 2019 with Ms. Thompson and Mr. Barberich attending on all four occasions.

At December 31, 2019, there were only two directors appointed as members of the audit committee (instead of the recommended three members), which was a decision made by the Board initially at the end of 2017 (and reported in the corporate governance statement for December 31, 2017) in order to properly utilize the resources of the four members of the Board across all of the various committees. As a result of only having two members, the Company was not fully compliant with recommendation 4.1 for the 2019 reporting period. The Board of Directors will continue to periodically assess the effectiveness of this committee, including the size and the experience of the members appointed, with a view to ensuring that the committee’s performance accords with the best possible practice in the context of the overall Board size and structure.

The members of the audit committee must be financially literate and have familiarity with financial and accounting matters, with at least one member a qualified accountant or other financial professional with appropriate expertise in financial and accounting matters. The qualifications of those appointed to the audit committee are set out in the section titled “Directors of the Registrant” in this Item 10.

The audit committee is governed by the Audit Committee Charter, a copy of which is available on the corporate governance section of the Company’s website.

In its Audit Committee Charter, the Company has disclosed its policy for the selection and appointment of the Company’s independent auditor and for the rotation of the lead audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit every five years. The audit committee will regularly report to the Board about committee activities, issues and related recommendations.

Recommendation 4.2 – The board of a listed entity should, before it approves the entity’s financial statements for a financial period, receive from its CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal controls which is operating effectively.

As the Company prepares and files its consolidated financial statements under United States accounting practices and laws, management is required to provide representations to the Board on a wide range of issues, including the effectiveness of the Company’s disclosure controls and procedures as well as the design and operation of internal control over financial reporting. However, as the Company is incorporated in the State of Delaware, United States, it is not required to provide a declaration under section 295A of the Corporations Act. To this end, stockholders’ attention is drawn to Item 9A of this Annual Report on Form 10-K and the certifications provided by the principal executive officer and the principal financial officer at the end of the Annual Report on Form 10-K. As stated above, Item 9A discloses information regarding the Company’s controls and procedures and management’s evaluation of the effectiveness of its internal control over financial reporting. As required by Rule 13a-15(d) of the Exchange Act, management, including the principal executive officer and the principal financial and accounting officer, conducted an evaluation of the internal control over financial reporting to determine whether any changes occurred during the year ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Based on that evaluation, the principal executive officer and principal financial and accounting officer have concluded that, based on and as of the time of such evaluation, the Company’s disclosure controls and procedures were effective at the reasonable assurance level and believes the consolidated financial statements included in this Annual Report present, in all material respects, the Company’s financial position, results of operations and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles.

Recommendation 4.3 – A listed entity that has an annual general meeting should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit.

The Company’s policy is to ensure its external auditor attends the annual general meeting of stockholders, in person, to have an opportunity to make a statement, if desired, and to respond to appropriate questions from security holders regarding the audit. The Company’s auditor for the year ended December 31, 2018 was Moody, Famiglietti & Andronico, LLP (“MFA”). MFA attended the 2019 annual general meeting with respect to the financial year ended December 31, 2018. The Company’s auditor for the year ended December 31, 2019 is Wolf & Company, P.C. (“Wolf”) and Wolf intends to be present at the 2020 Annual Meeting of Stockholders.

Principle 5 – Make timely and balanced disclosure

Recommendation 5.1 – A listed entity should:

have a written policy for complying with its continuous disclosure obligations under the Listing Rules; and

disclose that policy or a summary of it.

The Company is committed to providing timely and balanced disclosure to the market in accordance with its continuous disclosure obligations. In accordance with its commitment to fully comply with its continuous disclosure obligations and to ensure accountability at a senior management level for that compliance, the Company has adopted a Continuous Disclosure Policy, together with other internal mechanisms and reporting requirements. A copy of the Company’s Continuous Disclosure Policy is available on the corporate governance section of the Company’s website. In addition, a copy of all of the Company’s ASX announcements, financial reports and related public information is also available on the Company’s website.

Principle 6 – Respect the rights of security holders

Recommendation 6.1 – A listed entity should provide information about itself and its governance to investors via its website.

The Company aims to provide stockholders with comprehensive and timely access to Company documents and releases through its website, including:

●

details of the Company’s certificate of incorporation and bylaws, Board and committee charters and key corporate governance policies;

●

copies of all material information lodged with ASX and any other applicable securities regulators and securities exchanges;

●

copies of material announcements, financial reports, briefings and speeches made to the market or media;

●

a means for the stockholders to submit enquiries directly to the Company;

●

the full text of notices of stockholder meetings and explanatory material; and

●

advance notice of all open briefings to institutional investors and analysts, including copies of presentation materials.

Other information may be provided to stockholders via periodic mail-outs. In addition, the Company allows stockholders to elect to receive email communications where appropriate.

Recommendation 6.2 – A listed entity should design and implement an investor relations program to facilitate effective two-way communications with investors.

The Company has adopted a Stockholder Communications Policy which supports effective two-way communication with its stockholders, a copy of which is available on the corporate governance section of the Company’s website. The Company seeks to utilize numerous modes of communication, including electronic communication, to ensure that its communication with stockholders is frequent, clear, and accessible. Stockholders are entitled to and encouraged to participate in briefing calls and/or contact the Company directly with questions or concerns. Contact information is provided in each communication with stockholders, as well as on the Company’s website.

Recommendation 6.3 – A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders.

All stockholders are invited to attend the Company’s annual general meeting either in person or by proxy. The Board regards the annual general meeting as an excellent forum in which to discuss issues relevant to the Company and accordingly encourages full participation by stockholders. To facilitate attendance, the Company arranges the annual general meeting to be held in an easily accessed location and announces the date and location of the meeting in advance of the meeting. Stockholders have an opportunity to submit questions to the Board and the Company’s auditor. The meeting may also be audio cast and/or webcast to provide access to those stockholders who are unable to attend the annual general meeting in person.

Recommendation 6.4 – A listed entity should give security holders the option to receive communications from, and send communications to, the entity and its security registry electronically.

The Company provides its stockholders with the option to receive communications from, and send communications to, the Company and the Company’s share registry electronically.

Principle 7 – Recognize and manage risk

Recommendation 7.1 – The board of a listed entity should:

have a committee or committees to oversee risk, each of which:

has at least three members, a majority of whom are independent directors; and

ii.

is chaired by an independent director;

and disclose:

iii.

the charter of the committee;

iv.

the members of the committee; and

as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings.

The risks that the Company faces are continually changing in line with the development of the Company. In simple terms, risk is inherent in all activities undertaken by the Company. Many of these risks are beyond the control of the Company and, as such, it is important that risk be mitigated on a continuous basis, particularly if the Company is to preserve stockholder value.

To ensure appropriate oversight and management of material business risks, the Company has adopted a Risk Management Policy that sets forth the process to identify, assess, and manage risk in the Company’s business operations. A copy of the policy is available on the corporate governance section of the Company’s website.

The day-to-day oversight and management of the Company’s risk management program has been conferred upon the audit committee. The audit committee is responsible for ensuring that the Company maintains effective risk management and internal control systems and processes and provides regular reports to the Board on the effectiveness of the risk management program in identifying and addressing material business risks. Details of the audit committee are set out above in response to ASX Governance Recommendation 4.1.

In addition, the Board is responsible for reviewing and ratifying the risk management structure, processes and guidelines which are developed and maintained by senior management. The audit committee or management may also refer particular risk management issues to the Board for final consideration and direction.

Recommendation 7.2 – The board or a committee of the board should:

review the entity’s risk management framework at least annually to satisfy itself that it continues to be sound; and

disclose, in relation to each reporting period, whether such a review has taken place.

While the Board does not currently conduct a formal annual review of the material risks to the Company and the methods used to identify and communicate those risks, the Board continually assesses these matters. The Board holds regular meetings by teleconference as well as at the Company’s facility in Boston, Massachusetts, for the purposes of discussing and reviewing operational developments and reviewing the effectiveness of the implementation of the Company’s risk management systems.

The Company’s Risk Management Policy (a copy of which is available on the corporate governance section of the Company’s website) also requires that management report on an on-going basis to the Board, primarily through the audit committee which has the responsibility for day-to-day oversight of the Company’s risk management program, on the status and effectiveness of the risk management program.

Recommendation 7.3 – A listed entity should disclose:

if it has an internal audit function, how the function is structured and what role it performs; or

if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes.

The Company does not currently have an internal audit function. Rather, the Company has implemented the following processes to evaluate and continually improve the effectiveness of its risk management and internal control processes:

●

the Board has conferred responsibility on senior management to develop and maintain a risk management program in light of the day-to-day needs of the Company;

●

the Board has established three standing committees to provide focused support in key areas; namely the nominating and corporate governance committee, audit committee and compensation committee;

●

management provides the Board with frequent updates on the state of the Company’s business, including the risks that the Company faces from time-to-time allowing the Board to assess the Company’s management of its material business risks. These updates include up-to-date financial information, operational activity, clinical status and competitor updates. These updates are founded on internal communications that are fostered internally through weekly management meetings and other internal communications; and

●

these processes operate in addition to the Company’s system of internal controls over financial reporting, its quality system, complaint handling processes, employee policies and standard operating procedures, which are all designed to address various forms of risk.

Recommendation 7.4 – A listed entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks.

The economic risks that the Company is subject to and must manage are set out in the “Risk Factors” section of this Annual Report on Form 10-K. In general, the Board considers that the Company is not susceptible to material environmental or social sustainability risks in operating its business.

Principle 8 – Remunerate fairly and responsibly

Recommendation 8.1 – The board of a listed entity should:

have a remuneration committee which:

has at least three members, a majority of whom are independent directors; and

ii.

is chaired by an independent director;

and disclose:

iii.

that charter of the committee;

iv.

the members of the committee; and

as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings.

The Board has established a compensation committee to review and assess executive and director compensation. The compensation committee is governed by the Compensation Committee Charter, a copy of which is available on the corporate governance section of the Company’s website.

As of December 31, 2019, the members of the compensation committee were Timothy J. Barberich (Chair) and Dr. Oern Stuge both independent non-executive directors. The compensation committee met twice during 2019 and both members were present. At December 31, 2019, the committee has two directors appointed (instead of the recommended three members), which was a decision made by the Board initially during 2017 (and reported in the corporate governance statement for December 31, 2017) in order to properly utilize the resources of the four members of the Board across all of the various committees. As a result of only having two members, the Company was not fully compliant with recommendation 8.1 for the 2019 reporting period. The Board of Directors will periodically assess the effectiveness of this committee, including the size and the experience of the members appointed, with a view to ensuring that the committee’s performance accords with the best possible practice in the context of the overall Board size and structure.

While the compensation committee reviews and reports compensation items to the Board for both non-executive directors and executive management, including each individual’s skills, knowledge, and contributions to the Company, the compensation committee does not provide a separate report of compensation by gender.

Recommendation 8.2 – A listed entity should separately disclose its policies and practices regarding the remuneration of non-executive directors and the remuneration of executive directors and other senior executives.

In accordance with the Compensation Committee Charter, the compensation committee is responsible for ensuring that the structure of non-executive and executive directors’ and other senior executives’ compensation is clearly distinguished.

The Company has adopted a non-executive director compensation policy pursuant to which non-executive directors are compensated for their services to the Board which includes annual cash fees for serving as a member or the chair of the Board and for serving as a member or the chair of the Board committees. In addition, the policy provides that non-executive directors may receive grants of a fixed number of stock options upon their joining the Board and annual grants (which commenced in 2014) of a fixed number of stock options and restricted stock units, in each case subject to the terms of the non-executive director compensation policy as well as the approval of stockholders. Juliet Thompson was granted 30,000 non-qualified stock options on August 22, 2017, and approval was obtained at the Company’s May 2018 annual general meeting. Following receipt of stockholder approval in December 2019, each of the four current Non-Executive Directors were granted non-qualified stock options conferring the right to purchase up to 30,000 common shares of the Company for $1.34 per share any time within the period starting October 29, 2020 and ending December 16, 2029.

The Company has adopted a separate executive compensation program that consists of base salary, equity-based incentives, performance-based cash bonuses, severance benefits, and other customary benefits such as health insurance on the same basis as provided to all other employees. None of the Company’s non-executive directors are entitled to any retirement benefits. The Company currently has no executive directors.

Further information regarding the compensation committee, as required by Item 10 of this Annual Report on Form 10-K, is incorporated by reference to the applicable information in the proxy statement for the GI Dynamics 2020 Annual Meeting of Stockholders to be filed with the SEC and ASX.

Recommendation 8.3 – A listed entity which has an equity-based remuneration scheme should:

have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and

disclose that policy or a summary of it.

The Company provides compensation in the form of equity-based awards to non-executive directors (upon approval by stockholders), senior executives, and employees of the Company. Awards are made under the Company’s 2011 Employee, Director and Consultant Equity Incentive Plan, as amended, which has been approved by stockholders. The Company’s Insider Trading Policy, a copy of which is available on the corporate governance section of the Company’s website, provides a summary of the Company’s policy on prohibiting entering into transactions in associated products which limit the economic risk of participating in unvested entitlements under any equity-based remuneration schemes. This policy operates to help limit the economic risk to the Company’s securities. This report is made in accordance with a resolution of the Board.

ITEM 11. EXECUTIVE COMPENSATION

The following table shows the total compensation paid during the fiscal years ended December 31, 2019 and December 31, 2018 to (1) our current president and chief executive officer, and (2) our next most highly compensated executive officers who earned more than $100,000 during the fiscal year ended December 31, 2019 and were serving as executive officers as of such date.

Name and Principal Position		Year	Salary ($)		Bonus ($)		Stock Awards ($)(1)		Option Awards ($)(2)		Non-Equity Incentive Plan Compensation ($)(3)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Scott W. Schorer	(4)	2019	$	414,699	$	-	$	-	$	1,309,890	$	200,000	$	-	$	-	$	1,924,589
President and Chief Executive Officer		2018	$	400,000	$	-	$	-	$	306,000	$	160,000	$	-	$	-	$	866,000

Charles Carter	(5)	2019	$	100,000	$	-	$	-	$	431,453	$	-	$	-	$	-	$	531,453
Chief Financial Officer and Secretary		2018	$	-	$	-	$	-	$	-	$	-	$	-	$	29,373	$	29,373

Stephen Linares	(6)	2019	$	228,258	$	-	$	-	$	105,600	$	-	$	-	$	-	$	333,858
Vice President of Clinical and Regulatory Affairs		2018	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

1)	The amounts in the “Stock Awards” column do not reflect compensation actually received by our executive officers. Rather, these amounts represent the aggregate grant date fair value of all service based RSUs and the target value of the performance based RSUs granted during each fiscal year computed in accordance with FASB ASC Topic 718, Compensation – Stock Compensation, excluding the impact of estimated forfeitures. The aggregate fair value of these stock awards is determined using the market value of our common stock which is derived from the market value of our CDIs on the ASX, converted to a USD equivalent and adjusting for the ratio of 1 share of common stock per 50 CDIs and using the exchange rate as published by the Reserve Bank of Australia in effect on the date of grant, multiplied by the aggregate number of restricted stock units granted. A discussion of the assumptions used in calculating the grant date fair value may be found in “Note 14 – Share Based Compensation” in the notes to our Financial Statements included in our Annual Report on Form 10-K.

2)	The amounts in the “Option Awards” column represent the aggregate grant date fair value for option awards awarded during fiscal years 2019 and 2018 computed in accordance with the provisions of FASB ASC Topic 718, excluding the impact of estimated forfeitures related to service-based vesting conditions. A discussion of the assumptions used in determining grant date fair value may be found in “Note 14 – Share Based Compensation” in the notes to our Financial Statements included in our Annual Report on Form 10-K.

3)	Payments listed in the “Non-Equity Incentive Plan Compensation” column reflect discretionary performance-based awards made by our board for the named executive officers.

4)	In September 2019, Mr. Schorer’s offer letter agreement was revised to include a new base salary of $450,000 and a grant of 1,169,545 stock options.

5)	Mr. Carter was hired as our Chief Financial Officer in September 2019 at an annual base salary of $300,000 per year. In connection with Mr. Carter’s appointment, he was granted 385,226 stock options.

6)	Mr. Linhares was hired as our Vice President of Clinical and Regulatory Affairs in January 2019 at an annual base salary of $230,000 per year. In connection with Mr. Linhares’s appointment, he was granted 160,000 stock options. In January 2020, Mr. Linhares’s annual base salary increased to $250,000, retroactive to September 2019.

Narrative Disclosure To Summary Compensation Table

Employment Agreements, Offer Letters and Separation Agreements

The following section summarizes the employment agreements, offer letters and separation agreements we have entered into with our named executive officers. For purposes of the employment agreements and offer letters, we use the following terms:

(i) “cause” to mean termination of employment as a result of the employee’s conviction of a crime involving moral turpitude, any material act of dishonesty by the employee involving the Company or a breach by the employee of his or her obligations under the terms of the non-competition, non-solicitation or non-disclosure agreements with the Company; and (ii) “constructive termination” to mean a material diminution in the employee’s title, responsibilities or duties, a material breach of the offer letter by us, a material reduction in the employee’s compensation or the relocation of the Company’s office beyond a 25-mile radius from its current location.

Scott Schorer

In March 2016, we entered into an executive employment agreement with Mr. Schorer to serve as our president and chief executive officer. We amended Mr. Schorer’s employment agreement in January 2017. Mr. Schorer’s agreement provided for, among other things: (i) an initial annual base salary of $400 thousand, subject to review by the board, (ii) eligibility to receive an annual bonus at a target amount of 30% of his base salary if approved in the sole discretion of our board, which bonus, if any, shall be paid within 45 days after the end of the fiscal year to which it relates. The most recent adjustment effective January 2017 increased Mr. Schorer’s potential annual bonus to 40% of his base salary. We further amended Mr. Schorer’s employment agreement in September 2019. Mr. Schorer’s agreement provided for, among other things: (i) an initial annual base salary of $450 thousand, subject to review by the board, (ii) eligibility to receive an annual bonus at a target amount of 50% of his base salary if approved in the sole discretion of our board, which bonus, if any, shall be paid within 45 days after the end of the fiscal year to which it relates.

Under the terms of the employment agreement, upon his Commencement Date, Mr. Schorer was granted 250,000 stock options. The stock options are exercisable at a price equal to the closing price on the Commencement Date and will vest as to 25% of the shares on the first anniversary of the Commencement Date, and equally over each successive quarter thereafter for three years, provided that he remains employed by the Company on the vesting dates. Upon the Commencement Date, the Company also granted Mr. Schorer PSUs equal to 250,000 shares of the Company’s common stock. The shares underlying these PSUs will be issued to Mr. Schorer according to certain performance targets as detailed in the Employment Agreement. One quarter of the PSUs will lapse if they have not vested by June 30, 2019, an additional one quarter of the PSUs will lapse if they have not vested by June 30, 2020, and the remainder of the PSUs will lapse if they have not vested by January 30, 2021. None of the shares underlying these PSUs have been issued as of May 19, 2019. Under the terms of the September 2019 amended employment agreement, Mr. Schorer was granted 1,169,545 stock options under similar terms as the agreement made upon his Commencement Date.

The employment agreement provides that if Mr. Schorer’s employment with the Company is terminated by the Company without Cause (as defined in the employment agreement) or by Mr. Schorer for Good Reason (as defined in the employment agreement), subject to his execution of a release of claims agreement acceptable to the Company, he will be entitled to continuation of salary for up to 12 months, and payment of health insurance premiums necessary to continue health insurance coverage under COBRA for up to 12 months.

In addition, if a Change of Control (as defined in the employment agreement) takes place, upon the consummation of such Change of Control, 100% of Mr. Schorer’s unvested stock options and PSUs shall vest and become immediately exercisable.

Charles Carter

In September 2019, the Company entered into an executive employment agreement with Mr. Carter to serve as our chief financial officer. Mr. Carter’s agreement provided for, among other things: an initial annual base salary of $300,000, subject to review by the board, (ii) eligibility to receive an annual bonus at a target amount of 35% of his base salary if approved in the sole discretion of our board, which bonus, if any, shall be paid within 45 days after the end of the fiscal year to which it relates. Under the terms of the employment agreement, upon his Commencement Date, Mr. Carter was awarded 385,226 stock options. The stock options are exercisable at a price equal to the closing price on the Commencement Date and will vest as to 25% of the shares on the first anniversary of the Commencement Date, and equally over each successive quarter thereafter for three years, provided that he remains employed by the Company on the vesting dates.

The employment agreement provides that if Mr. Carter’s employment with the Company is terminated by the Company without Cause (as defined in the employment agreement) or by Mr. Carter for Good Reason (as defined in the employment agreement), subject to his execution of a release of claims agreement acceptable to the Company, he will be entitled to continuation of salary for up to 6 months, and payment of health insurance premiums necessary to continue health insurance coverage under COBRA for up to 6 months.

Stephen Linhares

In January 2019, the Company hired Mr. Linhares to serve as its vice president of clinical and regulatory affairs. Mr. Linhares’s offer letter provided for, among other things: an initial annual base salary of $230,000, subject to review by the board, (ii) eligibility to receive an annual bonus at a target amount of 30% of his base salary if approved in the sole discretion of our board, which bonus, if any, shall be paid within 45 days after the end of the fiscal year to which it relates. Under the terms of the offer letter, upon his Commencement Date, Mr. Linhares was awarded 160,000 stock options. The stock options are exercisable at a price equal to the closing price on the Commencement Date and will vest as to 25% of the shares on the first anniversary of the Commencement Date, and equally over each successive quarter thereafter for three years, provided that he remains employed by the Company on the vesting dates. On January 1, 2020, Mr. Linhares’s base salary was increased to $250,000, retroactive to September 1, 2019.

Outstanding Equity Awards at 2019 Fiscal Year-End

The following table shows all outstanding equity awards for the named executive officers in the Summary Compensation Table as of December 31, 2019.

			Option Awards								Stock Awards
Name			Number of Securities Underlying Unexercised Stock Options (#) Exercisable		Number of Securities Underlying Unexercised Stock Options (#) Unexercisable		Option Exercise Price ($)		Option Expiration Date		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($ )

Scott W. Schorer	(1)	2019		—		1,169,545	$	1.12		9/16/2029		—	$	-
President and Chief Executive Officer		2018		75,000		225,000	$	0.72		11/15/2028		—	$	-
		2017		117,282		53,318	$	0.78		1/12/2027		—	$	-
		2016		234,375		265,625	$	0.80		3/26/2026		—	$	-

Charles Carter	(2)	2019		—		385,226	$	1.12		9/16/2029		—	$	-
Chief Financial Officer		2018		—		—	$	-		—		—	$	-

Stephen Linhares	(3)	2019		—		160,000	$	0.66		1/3/2029		—	$	-
Vice President of Clinical and Regulatory Affairs		2018		—		—	$	-		—		—	$	-

(1)	The option and stock awards shown for Mr. Schorer were issued consistent with the terms of his Employment Agreement. The stock options granted in 2016 vest as to 25% of the shares on the first anniversary of the grant date, and equally over each successive quarter thereafter for three years, provided that he remains employed by the Company on the vesting dates. The stock options granted in 2017 will vest quarterly over four years, provided that he remains employed by the Company on the vesting dates. The stock options granted in 2018 will vest quarterly over four years, provided that he remains employed by the Company on the vesting dates. The stock options granted in 2019 will vest quarterly over four years, provided that he remains employed by the Company on the vesting dates.

(2)	The stock options shown for Mr. Carter were issued consistent with the terms of his Employment Agreement. The stock options granted in 2019 will vest quarterly over four years, provided that he remains employed by the Company on the vesting dates. In 2018, Mr. Carter was a consultant and was not issued stock options or other stock awards.

(3)	The stock options shown for Mr. Linhares were issued consistent with the terms of his offer letter. The stock options granted in 2019 will vest quarterly over four years, provided that he remains employed by the Company on the vesting dates. In 2018, Mr. Linhares was not with the Company.

Pension Benefits

We do not have any plans that provide for payments or other benefits at, following or in connection with the retirement of our employees, other than our 401(k) retirement plan which is available for all of our employees, including our named executive officers.

Nonqualified Deferred Compensation

We do not have any nonqualified defined contribution plans or other deferred compensation plan.

Potential Payments upon Termination or Change of Control

Upon termination of employment without cause or a resignation for good reason, our named executive officers and our current chief executive officer, Scott Schorer, are entitled to receive certain severance payments and other benefits. In determining whether to approve and in setting the terms of such severance arrangements, our compensation committee and our board recognize that executives, especially highly-ranked executives, often face challenges securing new employment following termination. We have agreed to provide severance benefits to our named executive officers and our current chief executive officer, as described below.

Scott Schorer. Severance amounts for termination without cause or a resignation for good reason for Mr. Schorer include: (A) continuation of salary for up to twelve months and (B) payment of health insurance premiums necessary to continue health insurance coverage under COBRA for up to twelve months. In addition, Mr. Schorer may also be entitled to a pro-rate portion of the performance bonus then in effect. Mr. Schorer’s employment agreement also provides that 100% of any unvested stock options and performance stock units will immediately vest and become exercisable as of the consummation of a change in control in the Company.

Charles Carter. Severance amounts for termination without cause or a resignation for good reason for Mr. Carter include: (A) continuation of salary for up to six months and (B) payment of health insurance premiums necessary to continue health insurance coverage under COBRA for up to six months. In addition, Mr. Carter may also be entitled to a pro-rate portion of the performance bonus then in effect. Mr. Carter’s employment agreement also provides that 100% of any unvested stock options and performance stock units will immediately vest and become exercisable as of the consummation of a change in control in the Company.

Stephen Linhares. Mr. Linhares is an at-will employee and has no severance terms defined in his offer letter. Severance payments are determined by the Company on a case-by-case basis and not guaranteed.

We believe that our named executive officers’ and our current chief executive officer’s severance packages are in line with severance packages offered to executive officers of similar rank at companies of similar size to us in our industry.

Director Compensation

The following table shows the total compensation paid or accrued during the fiscal year ended December 31, 2019 to each of our non-employee directors who received compensation for their service as directors.

Mr. Praveen Tyle was elected to serve as a non-employee director on February 28, 2020 and, therefore, did not receive any compensation during the fiscal year ended December 31, 2019.

Name	Fees Earned or Paid in Cash ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Daniel J. Moore	$	76,000	$	40,200	$	-	$	-	$	-	$	116,200
Timothy J. Barberich	$	63,000	$	40,200	$	-	$	-	$	-	$	103,200
Oern R. Stuge, M.D.	$	57,000	$	40,200	$	-	$	-	$	-	$	97,200
Juliet Thompson	$	65,000	$	40,200	$	-	$	-	$	-	$	105,200

Option awards were granted to all directors in fiscal 2019.

In August 2011, our board adopted a non-executive director compensation policy, which was amended in May 2014 and further amended in January 2017, pursuant to which the non-executive directors will be compensated for their service on our board including as members of the various committees of our board. The number of directors on our board is determined from time to time by our board, up to a maximum of ten directors. The material terms of the policy are as follows:

	●	each non-executive director will receive an annual fee of $50,000 payable for the director’s service during the year;

	●	the chairman of our board will receive an additional annual fee of $25,000 payable for that director’s service during the year;

	●	each non-executive director who serves as either a member or chair of certain committees of our board will receive an additional annual fee for their work on such committee as either a member or chair as follows:

	●	audit committee: chair ($15,000) and member ($3,000);

	●	compensation committee: chair ($10,000) and member ($2,000); and

	●	nominating and corporate governance committee: chair ($5,000) and member ($1,000).

These fees are payable quarterly in arrears as of the last day of each fiscal quarter. Each director is also entitled to be reimbursed for reasonable travel and other expenses incurred in connection with attending meetings of our board and any committee on which he or she serves.

Each non-executive director whose service on our board commences at or following January 12, 2017 was granted a non-qualified stock option to purchase 30,000 shares of our common stock under our 2011 Stock Plan on the date of his or her initial appointment or election to our board and furthermore, each continuing director thereafter shall be granted a non-qualified stock option to purchase 8,000 shares of our common stock under our 2011 Stock Plan. Each option granted upon initial appointment shall vest over three years from the date of the grant in (i) one installment of 33% of the shares on the first anniversary of the date of the grant and (ii) 24 substantially equal monthly installments thereafter, each subject to the non-executive director’s continued service on our board. Each option granted to a continuing director shall grant in full on the first anniversary of the date of the grant.

In January 2014, at the recommendation of our compensation consultant, the board amended our non-executive director compensation policy to reflect that beginning in 2014, each non-executive director shall be granted a non-qualified stock option to purchase 1,000 shares of our common stock and a restricted stock unit for 1,000 shares of our common stock under the 2011 Stock Plan each year. Each such award shall vest in full on the first anniversary of the grant date, each subject to the non-executive director’s continued service on our board. On March 21, 2016, the board of directors waived the 2016 annual grant of stock options to purchase 1,000 shares of our common stock and a restricted stock unit for 1,000 shares of our common stock under our 2011 Stock Plan to each of our non-executive directors under our current non-executive director compensation policy.

In January 2017, the board amended our non-executive director compensation policy to reflect that beginning in 2017, each non-executive director shall be granted a non-qualified stock option to purchase 8,000 shares of our common stock under the 2011 Stock Plan each year. Each such award shall vest in full on the first anniversary of the grant date, each subject to the non-executive director’s continued service on our board.

In December 2019, each non-executive director was granted a non-qualified stock option to purchase 30,000 shares of our common stock under the 2011 Stock Plan each year. Each such award shall vest in full on the first anniversary of the grant date, each subject to the non-executive director’s continued service on our board.

Securities Authorized for Issuance Under Equity Compensation Plans

As a result of our listing on the ASX, all equity grants to directors are subject to stockholder approval under the ASX Listing Rules.

Unless otherwise specified by our board or the compensation committee at the time of grant, all stock options granted under this policy shall (i) have an exercise price equal to the fair market value of the Company’s common stock as determined pursuant to the 2011 Stock Plan on the date of grant and (ii) such stock options shall become exercisable in full immediately prior to a change of control of the Company. Our non-executive directors in Australia will also be subject to a six-month restriction on selling any of our common stock or CDIs following the exercise of their stock options.

The table below sets forth information with regard to shares authorized for issuance under our equity compensation plans as of December 31, 2019. As of December 31, 2019, we had two active equity compensation plans, each of which was approved by our stockholders:

●

Our 2003 Omnibus Stock Plan; and

●

Our 2011 Employee, Director and Consultant Equity Incentive Plan.

Plan Category	Number of shares to be issued upon exercise of outstanding options or vesting of restricted stock units		Weighted-average exercise price of outstanding options		Number of shares remaining available for future issuance under equity compensation plans(1)
Equity compensation plans approved by security holders		3,346,154	$	1.36		134,866
Equity compensation plans not approved by security holders		—				—
Total		3,346,154	$	1.36		134,866

Our 2011 Employee, Director and Consultant Equity Incentive Plan allows for an annual increase in the number of shares available for issue commencing on the first day of each fiscal year during the period beginning in fiscal year 2012 and ending in fiscal year 2020. The annual increase in the number of shares shall be equal to the lowest of: (i) 500,000 shares; (ii) 4% of the number of common shares outstanding as of such date; and (iii) an amount determined by our board of directors or our compensation committee.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth, as of March 9, 2020, information regarding beneficial ownership of our common stock, and common stock held as CDIs, by the following:

	●	each person, or group of affiliated persons, who is known by us to beneficially own 5% or more of any class of our voting securities;

	●	each of our directors;

	●	each of our named executive officers; an

	●	all current directors and executive officers as a group.

Beneficial ownership is determined according to the rules of the SEC. Beneficial ownership generally includes voting or investment power of a security and includes shares underlying stock options that are currently exercisable or exercisable within 60 days of March 9, 2020. This table is based on information supplied by officers, directors and principal stockholders. Except as otherwise indicated, we believe that the beneficial owners of the CDIs and common stock listed below, based on the information each of them has given to us, have sole investment and voting power with respect to their shares, except where community property laws may apply.

Percentage of ownership is based on 36,598,296 shares of outstanding common stock, or common stock equivalent CDIs, outstanding on March 9, 2020. Unless otherwise indicated, we deem shares subject to stock options that are exercisable within 60 days of March 9, 2020, to be outstanding and beneficially owned by the person holding the stock options for the purpose of computing percentage ownership of that person, but we do not treat them as outstanding for the purpose of computing the ownership percentage of any other person.

Following our reverse stock split effected on April 9, 2015, because CDIs represent one-fiftieth of a share of our common stock, converting the number of CDIs owned by the person holding them into the equivalent number of shares of common stock may result in fractional shares of common stock. In the following table, the number of shares of common stock owned by each beneficial owner is rounded down to the nearest whole share of common stock.

Unless otherwise indicated in the table, the address of each of the individuals named below is: c/o GI Dynamics, Inc., 320 Congress Street, Boston, MA 02210, U.S.A.

Name and Address of Beneficial Owner	Number of Shares of Common Stock		Percentage of Common Stock
5% Shareholders
Crystal Amber Fund Limited(1)		31,350,079		78.9	%
Richard Cashin(2)		3,987,294		10.9	%

Directors and Executive Officers
Daniel J. Moore(3)		6,500		*
Timothy J. Barberich(4)		76,074		*
Oern Stuge(5)		30,000		*
Juliet Thompson(6)		24,993		*
Praveen Tyle, Ph.D.(7)		0		*
Scott W. Schorer(8)		721,694		*
Charles Carter(7)		0		*
All directors and executive officers as a group (7 persons)		859,261		*

*	Indicates less than 1%

(1)

Based upon our corporate records and upon the information provided by Crystal Amber Fund Limited, (“CAFL”), in a Notice of Change of Interests of Substantial Holder (Form 604) filed with the ASX on 3 February 2020, reporting as of 3 February 2020. The address for CAFL is P.O. Box 286, Floor 2, Trafalgar Court, Les Banques, St Peter Port, Guernsey GY14LY U.K.

Includes 4,596,893 shares of common stock underlying warrants to purchase CDIs immediately exercisable as of 6 March 2020. Excludes shares that may be issued in the future upon the conversion of the 2017 Note (as defined below) or August 2019 Note (as defined below).

(2)	Based on our corporate records. The address for Mr. Cashin is c/o One Equity Partners, 510 Madison Avenue, 19th Floor, New York, NY 10022.

(3)	Includes 1,000 shares and 5,500 shares subject to stock options exercisable within 60 days of March 9, 2020.

(4)	Includes 62,074 shares and 14,000 shares subject to stock options exercisable within 60 days of March 9, 2020.

(5)	Includes 30,000 shares subject to stock options exercisable within 60 days of March 9, 2020.

(6)	Includes 24,993 shares subject to stock options exercisable within 60 days of March 9, 2020.

(7)	Includes 0 shares subject to stock options exercisable within 60 days of March 9, 2020.

(8)	Includes 471,694 shares subject to stock options exercisable within 60 days of March 9, 2020 and granted and outstanding performance stock units totaling 250,000.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Certain Relationships and Related Party Transactions

There are no existing agreements or arrangements and there are no currently proposed transactions in which the Company was, or is to be, a participant, in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of the Company’s total assets at year-end for the last two completed fiscal years and in which any current director, executive officer, beneficial owner of more than 5% of our common stock, or entities affiliated with them, had or will have a material interest since January 1, 2018, except that

	(i)	in June 2017, the Company issued a convertible term promissory note (the “2017 Note”) in the aggregate principal amount of $5.0 million to Crystal Amber Fund Limited, our largest shareholder, which note accrues interest at 5% per annum compounded annually, is secured by substantially all of our personal property, initially matured on December 31, 2018, and contains certain provisions for conversion during the term of the note. In January 2019, the Company paid Crustal Amber approximately $394,000 representing the unpaid interest accrued through December 31, 2018 in exchange for extending the maturity date of the 2017 Note. Subsequently, the maturity date of the 2017 Note has been extended without cash payment multiple times, most recently to May 1, 2020. As of December 31, 2019, unpaid interest of $250 thousand had accrued on the 2017 Note, and

	(ii)	in January 2018, the Company entered into an agreement to offer and sell an aggregate of 27,391,756 CDIs (equivalent to 547,835 shares of common stock) at an issue price of A$0.035 per CDI to Crystal Amber Fund Limited in a private placement, which offer and sale was consummated in March 2018, and

	(iii)	in May 2018, we issued a convertible term promissory note in the aggregate principal amount of $1.75 million to Crystal Amber Fund Limited, our largest shareholder, which note accrued interest at 10% per annum compounded annually, matured on the fifth anniversary of the issuance date, and contained certain provisions for conversion during the term of the note. On June 30, 2019, the $1.75 million of principal and approximately $192 thousand of accrued interest was converted into 134,852,549 CDIs, and

	(iv)	in May 2018, we issued a warrant to Crystal Amber Fund Limited, our largest shareholder, to purchase up to 97,222,200 CDIs prior to expiration on the fifth anniversary of issuance for an initial exercise price of $0.014 per CDI, subject to subsequent anti-dilution price adjustments. The 2018 Warrant was exercised in full for approximately $1.4 million on August 26, 2019, and

	(v)	in March 2019, we issued a convertible term promissory note in the aggregate principal amount of $1.0 million to Crystal Amber Fund Limited, our largest shareholder, which note accrued interest at 10% per annum compounded annually, matured on the fifth anniversary of the issuance date, and contingent on obtaining shareholder approval, which was granted June 30, 2019, contained certain provisions for conversion during the term of the note. On June 30, 2019, the $1.0 million of principal and approximately $30 thousand of accrued interest was converted into 81,070,003 CDIs, and

	(vi)	in March 2019, we issued a warrant to Crystal Amber Fund Limited, our largest shareholder, to purchase up to 78,984,823 CDIs prior to expiration on the fifth anniversary of issuance for an initial exercise price of $0.0127 per CDI, subject to subsequent anti-dilution price adjustments. Under the March 2019 Warrant, Crystal Amber purchased 47,244,119 CDIs for approximately $600 thousand on August 26, 2019 and the remaining 31,740,704 CDIs were purchased for approximately $400 thousand on October 4, 2019, and

	(vii)	in May 2019, we issued a convertible term promissory note in the aggregate principal amount of $3.0 million to Crystal Amber Fund Limited, our largest shareholder, which note accrued interest at 10% per annum compounded annually, matured on the fifth anniversary of the issuance date, and contingent on obtaining shareholder approval, which was granted June 30, 2019, contained certain provisions for conversion during the term of the note. On June 30, 2019, the $3.0 million of principal approximately $19 thousand of accrued interest was converted into 237,687,411 CDIs, and

	(viii)	in May 2019, we issued a warrant to Crystal Amber Fund Limited, our largest shareholder, to purchase up to 236,220,472 CDIs prior to expiration on the fifth anniversary of issuance for an initial exercise price of $0.0127 per CDI, subject to subsequent anti-dilution price adjustments. Under the May 2019 Warrant, Crystal Amber purchased 125,480,314 CDIs for approximately $1.4 million on October 4, 2019, another 78,740,157 CDIs for approximately $1.0 million on November 4, and the remaining 31,740,713 CDIs for approximately $400 thousand on November 18, 2019, and

	(ix)	in August 2019, we issued a convertible term promissory note in the aggregate principal amount of up to approximately $4.6 million to Crystal Amber Fund Limited, our largest shareholder, which note accrued interest at 10% per annum compounded annually, matured on the fifth anniversary of the issuance date, and contained certain provisions for conversion during the term of the note. The note was funded to the maximum amount of approximately $4.6 million on January 13, 2020, and

	(x)	in January 2020, we issued a warrant to Crystal Amber Fund Limited (as part of the issue of the note in paragraph xi), our largest shareholder, to purchase up to 229,844,650 CDIs prior to expiration on the fifth anniversary of issuance for an initial exercise price of $0.02 per CDI, subject to subsequent anti-dilution price adjustments

Policies and Procedures for Review and Approval of Related Party Transactions

We have adopted a policy and procedure for related party transactions. Our audit committee is responsible for reviewing and approving all transactions in which we are a participant and in which any parties related to us, including our executive officers, directors, beneficial owners of more than 5% of our common stock, immediate family members of the foregoing persons and any other persons whom the board determines may be considered related parties of the Company, has or will have a direct or indirect material interest. The audit committee or its chairman, as the case may be, will only approve those related party transactions that are determined to be in, or are not inconsistent with, the best interests of the Company and its stockholders, after taking into account all available facts and circumstances as the audit committee or the chairman determines in good faith to be necessary. Transactions with related parties will also be subject to stockholder approval to the extent required by the listing rules of ASX.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fees Paid to Independent Registered Public Accounting Firm

The following table provides information regarding the fees billed by Wolf & Company, P.C. (“Wolf”) for the fiscal year ended December 31, 2019, inclusive of out-of-pocket expenses.

	2019
Audit fees	$	86,395
Audit-related fees		12,200
Tax fees		-
Total	$	98,595

Fees Paid to Prior Independent Registered Public Accounting Firm

The following table provides information regarding the fees billed by the Company’s previous independent registered public accounting firm, Moody, Famiglietti & Andronico, LLP (“MFA”) for the fiscal year ended December 31, 2019 and 2018, inclusive of out-of-pocket expenses.

	2019		2018

Audit fees	$	51,000	$	124,000
Audit-related fees		22,500		-
Tax fees		-		24,750
All other fees		-		2,175
Total	$	73,500	$	150,925

Audit and Audit-Related Fees

Audit fees of Wolf and MFA during the 2019 and 2018 fiscal years include the aggregate fees incurred for the audits of the annual consolidated financial statements and the review of each of the quarterly consolidated financial statements included in Quarterly Reports on Form 10-Q.

Audit-related fees of Wolf during the 2019 fiscal year include out of scope fees related to the potential restatement of prior filings and research. Audit-related fees of MFA during the 2019 and 2018 fiscal years include professional services rendered to consent to the inclusion of the audit of our financial statements for the fiscal years ended December 31, 2019 and 2018 and other fees that were out of scope.

Tax Fees

Tax fees of MFA for the fiscal year ended December 31, 2018 primarily include tax compliance and return preparation.

Policy Regarding Pre-Approval of Audit and Permissible Non-audit Services Provided by the Independent Public Accountant

The audit committee is responsible for approving in advance the engagement of the independent auditor for all audit services and non-audit services, based on independence, qualifications and, if applicable, performance, and approving the fees and other terms of any such engagement. Of the services described above performed by Wolf and MFA in 2019 and MFA in 2018, all were pre-approved by the audit committee and no fees were paid under a de minimus exception that waives pre-approval for certain non-audit services.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

List of documents filed as part of this Annual Report on Form 10-K

(1)

Exhibits

The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Annual Report on Form 10-K.

EXHIBIT INDEX

Exhibit No:		Description

3.1.1		Certificate of Incorporation of GI Dynamics, Inc. incorporated by reference to Exhibit 3.1 of GI Dynamics, Inc.’s registration statement on Form 10, filed with the SEC on April 30, 2014.

3.1.2		Certificate of Amendment to the Restated Certificate of Incorporation of GI Dynamics, Inc. incorporated by reference to Exhibit 3.1 of GI Dynamics, Inc.’s Current Report on Form 8-K, filed with the SEC on April 9, 2015.

3.1.3		Certificate of Amendment to the Restated Certificate of Incorporation of GI Dynamics, Inc. incorporated by reference to Exhibit 3.1.3 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on August 14, 2017.

3.1.4		Certificate of Amendment to Amended and Restated Certificate of Incorporation of GI Dynamics, Inc., incorporated by reference to Exhibit 3.1 of GI Dynamics, Inc.’s Current Report on Form 8-K, filed with the SEC on December 20, 2019.

3.2		Bylaws of GI Dynamics, Inc. incorporated by reference to Exhibit 3.2 of GI Dynamics, Inc.’s registration statement on Form 10, filed with the SEC on April 30, 2014.

4.1		Form of Warrant incorporated by reference to Exhibit 4.1 of GI Dynamics, Inc.’s registration statement on Form 10, filed with the SEC on April 30, 2014.

4.2		Warrant dated May 4, 2016, between GI Dynamics, Inc. and Danforth Advisors, LLC incorporated by reference to Exhibit 4.1 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on August 10, 2016.

4.3		Warrant dated May 30, 2018, between GI Dynamics, Inc. and Crystal Amber Fund Limited, incorporated by reference to Exhibit 10.3 of GI Dynamics, Inc.’s Current Report on Form 8-K, filed with the SEC on June 5, 2018.

4.4		Warrant to Purchase 78,984,823 CHESS Depositary Interests of GI Dynamics, Inc., dated June 30, 2019, between GI Dynamics, Inc. and Crystal Amber Fund Limited, incorporated by reference to Exhibit 10.5 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on August 15, 2019.

4.5		Warrant to Purchase up to 236,220,472 CHESS Depositary Interests of GI Dynamics, Inc., dated June 30, 2019, between GI Dynamics, Inc. and Crystal Amber Fund Limited, incorporated by reference to Exhibit 10.6 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on August 15, 2019.

4.6		Form of Warrant to Purchase up to 229,844,650 CHESS Depositary Interests of GI Dynamics, Inc., between GI Dynamics, Inc. and Crystal Amber Fund Limited, incorporated by reference to Exhibit 10.5 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on November 8, 2019.

4.7*		Description of Registrant’s Securities.

10.1†		2011 Employee, Director and Consultant Equity Incentive Plan incorporated by reference to Exhibit 10.1 of GI Dynamics, Inc.’s Annual Report on Form 10-K, filed with the SEC on March 30, 2015.

10.2†		2003 Omnibus Stock Plan incorporated by reference to Exhibit 10.2 of GI Dynamics, Inc.’s registration statement on Form 10, filed with the SEC on April 30, 2014.

10.3		Form of Indemnification Agreement incorporated by reference to Exhibit 10.4 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on November 10, 2014.

10.4		Technology Transfer Agreement, dated May 27, 2003, between GI Dynamics, Inc. and Seedling Enterprises, LLC incorporated by reference to Exhibit 10.9 of GI Dynamics, Inc.’s registration statement on Form 10, filed with the SEC on June 13, 2014.

10.5†		Non-Employee Director Compensation Policy incorporated by reference to Exhibit 10.1 of GI Dynamics, Inc.’s Current Report on Form 8-K, filed with the SEC on September 12, 2014.

10.6†		Letter of Employment, dated March 23, 2016, between GI Dynamics, Inc. and Scott Schorer incorporated by reference to Exhibit 10.1 of GI Dynamics, Inc.’s Current Report on Form 8-K, filed with the SEC on March 24, 2016.

10.7†		Amended and Restated Offer Letter Agreement, dated September 19, 2019, by and between Scott Schorer and the Company, incorporated by reference to Exhibit 10.1 of GI Dynamics, Inc.’s Current Report on Form 8-K, filed with the SEC on September 20, 2019.

Exhibit No:		Description
10.8		Lease Agreement, dated June 1, 2016, between GI Dynamics, Inc. and E F and C, LLC incorporated by reference to Exhibit 10.1 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on August 10, 2016.

10.9		Note Purchase Agreement, dated June 15, 2017, by and between GI Dynamics, Inc. and Crystal Amber Fund Limited, as purchaser, incorporated by reference to Exhibit 10.1 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on August 14, 2017.

10.10		First Amendment to Note Purchase Agreement, dated June 15, 2017, by and between GI Dynamics, Inc. and Crystal Amber Fund Limited, as purchaser, dated December 31, 2018, incorporated by reference to Exhibit 10.13 of GI Dynamics, Inc.’s Annual Report on Form 10-K filed with the SEC on March 13, 2019.

10.11		Second Amendment to Note Purchase Agreement, dated June 15, 2017, by and between GI Dynamics, Inc. and Crystal Amber Fund Limited, as purchaser, dated March 29, 2019, incorporated by reference to Exhibit 10.3 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on May 16, 2019.

10.12		Third Amendment to Note Purchase Agreement, dated June 15, 2017, between GI Dynamics, Inc. and Crystal Amber Fund Limited, as purchaser, dated April 30, 2019, incorporated by reference to Exhibit 10.1 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on August 15, 2019.

10.13		Fourth Amendment to Note Purchase Agreement, dated June 15, 2017, between GI Dynamics, Inc. and Crystal Amber Fund Limited, as purchaser, dated June 30, 2019, incorporated by reference to Exhibit 10.7 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on August 15, 2019.

10.14		Fifth Amendment to Note Purchase Agreement, dated June 15, 2017, between GI Dynamics, Inc. and Crystal Amber Fund Limited, as purchaser, dated August 21, 2019, incorporated by reference to Exhibit 10.1 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on November 8, 2019.

10.15		Senior Secured Convertible Promissory Note, dated June 15, 2017, by and between GI Dynamics, Inc., as payor, and Crystal Amber Fund Limited, as holder, incorporated by reference to Exhibit 10.2 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on August 14, 2017.

10.16		First Amendment to Senior Secured Convertible Promissory Note, dated June 15, 2017, by and between GI Dynamics, Inc., as payor, and Crystal Amber Fund Limited, as holder, dated December 31, 2018, incorporated by reference to Exhibit 10.15 of GI Dynamics, Inc.’s Annual Report on Form 10-K filed with the SEC on March 13, 2019.

10.17		Second Amendment to Senior Secured Convertible Promissory Note, dated June 15, 2017, by and between GI Dynamics, Inc., as payor, and Crystal Amber Fund Limited, as holder, dated March 29, 2019, incorporated by reference to Exhibit 10.4 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on May 16, 2019.

10.18		Third Amendment to Senior Secured Convertible Promissory Note, dated June 15, 2017, between GI Dynamics, Inc. and Crystal Amber Fund Limited, dated April 30, 2019, incorporated by reference to Exhibit 10.2 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on August 15, 2019.

10.19		Fourth Amendment to Senior Secured Convertible Promissory Note, dated June 15, 2017, by and between GI Dynamics, Inc. and Crystal Amber Fund Limited, dated June 30, 2019, incorporated by reference to Exhibit 10.8 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on August 15, 2019.

10.20		Fifth Amendment to Senior Secured Convertible Promissory Note, dated June 15, 2017, by and between GI Dynamics, Inc. and Crystal Amber Fund Limited, dated August 21, 2019, incorporated by reference to Exhibit 10.2 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on November 8, 2019.

10.21		Note and Warrant Purchase Agreement, dated May 30, 2018, between GI Dynamics, Inc. and Crystal Amber Fund Limited, incorporated by reference to Exhibit 10.1 of GI Dynamics, Inc.’s Current Report on Form 8-K, filed with the SEC on June 5, 2018.

10.22		Senior Unsecured Convertible Promissory Note, dated May 30, 2018, issued by GI Dynamics, Inc. to Crystal Amber Fund Limited, incorporated by reference to Exhibit 10.2 of GI Dynamics, Inc.’s Current Report on Form 8-K, filed with the SEC on June 5, 2018.

10.23		Note and Warrant Purchase Agreement, dated March 15, 2019, between the Company and Crystal Amber Fund Limited, incorporated by reference to Exhibit 10.1 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on May 16, 2019.

10.24		Senior Unsecured Convertible Promissory Note, dated March 15, 2019, issued by the Company to Crystal Amber Fund Limited, incorporated by reference to Exhibit 10.2 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on May 16, 2019.

10.25		Note and Warrant Purchase Agreement, dated May 8, 2019, between GI Dynamics, Inc. and Crystal Amber Fund Limited, as purchaser, incorporated by reference to Exhibit 10.3 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on August 15, 2019.

Exhibit No:		Description
10.26		Senior Unsecured Convertible Promissory Note, dated May 8, 2019, between GI Dynamics, Inc. and Crystal Amber Fund Limited, incorporated by reference to Exhibit 10.4 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on August 15, 2019.

10.27		Securities Purchase Agreement, dated August 21, 2019, between GI Dynamics, Inc. and Crystal Amber Fund Limited, as purchaser, incorporated by reference to Exhibit 10.3 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on November 8, 2019.

10.28		Senior Unsecured Convertible Promissory Note, dated August 21, 2019, between GI Dynamics, Inc. and Crystal Amber Fund Limited, incorporated by reference to Exhibit 10.4 of GI Dynamics, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on November 8, 2019.

10.29†		Offer Letter Agreement, dated September 19, 2019, by and between Charles Carter and the Company, incorporated by reference to Exhibit 10.2 of GI Dynamics, Inc.’s Current Report on Form 8-K, filed with the SEC on September 20, 2019.

10.30		Board Observer Agreement, dated as of November 18, 2019, between the Company and Crystal Amber Fund Limited, incorporated by reference to Exhibit 10.1 of GI Dynamics, Inc.’s Current Report on Form 8-K, filed with the SEC on November 19, 2019.

10.31†		Board Member Agreement by and between GI Dynamics, Inc. and Praveen Tyle, incorporated by reference to Exhibit 10.2 of GI Dynamics, Inc.’s Current Report on Form 8-K, filed with the SEC on March 3, 2020.

10.32‡		Membership Agreement, dated July 19, 2018, between GI Dynamics, Inc. and WeWork 745 Atlantic, LLC.

10.33‡		Membership Agreement, dated August 28, 2018, between GI Dynamics, Inc. and WeWork 745 Atlantic, LLC.

10.34‡		Membership Agreement, dated August 28, 2018, between GI Dynamics, Inc. and 77 Sleeper Street Tenant LLC.

10.35‡		Lease Agreement, dated April 22, 2019, between GI Dynamics, Inc. and Congress Plaza, LLC.

16.1		Letter, dated December 6, 2019, from MFA to the SEC, incorporated by reference to Exhibit 16.1 of GI Dynamics, Inc.’s Current Report on Form 8-K, filed with the SEC on December 6, 2019.

21.1		Subsidiaries of the Registrant incorporated by reference to Exhibit 21.1 of GI Dynamics, Inc.’s registration statement on Form 10, filed with the SEC on April 30, 2014.

23.1*		Consent of Wolf & Company, P.C.

31.1*		Certification of principal executive officer pursuant to Rules 13a-14 or 15d-14 of the Exchange Act

31.2*		Certification of principal financial officer pursuant to Rules 13a-14 or 15d-14 of the Exchange Act

32.1‡		Certification of principal executive officer pursuant to Rules 13a-14(b) or 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350

32.2‡		Certification of principal financial officer pursuant to Rules 13a-14(b) or 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350

32.3**		Certification of principal executive officer pursuant to Rules 13a-14(b) or 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350

32.4**		Certification of principal financial officer pursuant to Rules 13a-14(b) or 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Database

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

*	Filed as an exhibit to the 10-K, filed with the SEC on March 27, 2020.
**	Filed herewith
‡	Furnished as an exhibit to the 10-K, filed with the SEC on March 27, 2020.
†	Management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

	GI Dynamics, Inc.

Date: April 29, 2020	By:	/s/ SCOTT W. SCHORER
	Name:	Scott W. Schorer
	Title:	President, Chief Executive Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated.

Signature	Title	Date

/s/ SCOTT W. SCHORER	President, Chief Executive Officer	April 29, 2020
Scott W. Schorer	(Principal Executive Officer)

/s/ CHARLES CARTER	Chief Financial Officer, Secretary	April 29, 2020
Charles Carter	(Principal Financial and Accounting Officer)

/s/ DANIEL J. MOORE	Chairman and Director	April 29, 2020
Daniel J. Moore

/s/ PRAVEEN TYLE	Director	April 29, 2020
Praveen Tyle

/s/ OERN STUGE, MD	Director	April 29, 2020
Oern Stuge, MD

/s/ JULIET THOMPSON	Director	April 29, 2020
Juliet Thompson

GI DYNAMICS, INC. - FORM 10-K/A - April 29, 2020

Attached files

GI DYNAMICS, INC. Reports