Proxy Statement – Form DEF 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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To Our Shareholders,
Thank you for your interest in
We are excited about the future. With our second building operational, we have doubled our capacity and are investing more than ever before in the front end of our business, including Business Development and our Website, as well as developing depth throughout the organization.
I remain thankful for, and proud of, the team we have here at
We look forward to hearing from you and answering any questions you have. You can reach the Board or myself at (949) 769-3200 or [email protected].
Sincerely,
/s/
President and Chief Executive Officer
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
To the Shareholders of
The Annual Meeting of Shareholders ("Annual Meeting") of
| 1. | To elect seven directors to serve until our 2025 annual meeting of shareholders or until their successors are duly elected and qualified. The nominees for election to our Board of Directors are named in the attached Proxy Statement, which is part of this Notice. |
| 2. | To ratify the appointment of |
| 3. | To hold an advisory vote to approve the compensation of our Named Executive Officers. |
| 4. | To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof. |
Only shareholders of record at the close of business on
All shareholders are cordially invited to attend the Annual Meeting in person. Whether or not you plan to attend the Annual Meeting, your vote is important. In an effort to facilitate the voting process, we are pleased to avail ourselves of
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE URGED TO READ THIS PROXY STATEMENT AND SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS AS SOON AS POSSIBLE BY FOLLOWING THE INSTRUCTIONS IN THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS, WHICH WAS MAILED TO YOU ON OR ABOUT
OUR BOARD OF DIRECTORS RECOMMENDS: A VOTE "FOR" EACH OF THE SEVEN DIRECTOR NOMINEES NAMED IN THE PROXY STATEMENT AND A VOTE "FOR" EACH OF PROPOSALS 2 AND 3.
By Order of the Board of Directors,
/s/
Corporate Secretary
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
PROXY STATEMENT
SOLICITATION OF PROXIES
The Board of Directors ("Board") of
Any shareholder has the power to revoke his or her proxy at any time before it is voted. A proxy may be revoked by delivering a written notice of revocation to our Secretary prior to or at the Annual Meeting, by voting again on the Internet or by telephone (only your latest Internet or telephone proxy submitted prior to
Any shareholder who owns shares in street name and would like to vote in person at the Annual Meeting should inform his or her broker of such plans and request a legal proxy from the broker. Such shareholders will need to bring the legal proxy with them to the Annual Meeting and valid picture identification, such as a driver's license or passport, in addition to documentation indicating share ownership. Such shareholders who do not receive the legal proxy in time should bring with them to the Annual Meeting their most recent brokerage account statement showing that they owned our stock as of the record date. Upon submission of proper identification and ownership documentation, we will be able to admit the shareholder to the Annual Meeting; however, such shareholder will not be able to vote his or her shares at the Annual Meeting without a legal proxy. Shareholders are advised that if they own shares in street name and request a legal proxy, any previously executed proxy will be revoked, and such shareholder's vote will not be counted unless he or she appears at the Annual Meeting and votes in person.
Our Board does not presently intend to bring any business before the Annual Meeting other than the proposals referred to in this proxy statement and specified in the accompanying Notice of Annual Meeting. So far as is known to our Board, no other matters are to be brought before the Annual Meeting. However, if any other matters are presented properly for action at the Annual Meeting or at any adjournments or postponements thereof, it is intended that the proxies will be voted with respect thereto by the proxy holders in accordance with the instructions and at the discretion of our Board or a properly authorized committee thereof.
This proxy statement, the accompanying shareholder letter, the accompanying proxy card, and our Annual Report on Form 10-K are being made available to our shareholders on the Internet at www.proxyvote.com through the notice and access process on or about
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of the 3,322,854 shares of our Common Stock outstanding at the close of business on
An "abstention" is the voluntary act of not voting by a shareholder who is represented in person or by proxy at a meeting and entitled to vote. "Broker non-votes" are shares of voting stock held in record name by brokers and nominees concerning which: (i) the broker or nominee does not have discretionary voting power under applicable rules or the instruments under which it serves in such capacity and instructions have not been received from the beneficial owners or persons entitled to vote; or (ii) the record holder has indicated on the proxy or has executed a proxy and otherwise notified us that it does not have authority to vote such shares on that matter.
For Proposal No. 1 (the election of directors), assuming that a quorum is present, the seven nominees for director receiving the highest number of affirmative votes will be elected; votes withheld and broker non-votes have no practical effect.
For Proposal No. 2 (to ratify the appointment of
Each shareholder will be entitled to one vote, in person or by proxy, for each share of Common Stock held of record on the record date. Votes cast at the Annual Meeting will be tabulated by the person or persons appointed by us to act as inspectors of election for the Annual Meeting.
Recommendations of our Board
Our Board recommends that our shareholders vote "for" each of the seven director nominees named under Proposal No. 1; and "for" each of Proposal Nos. 2 and 3.
THE PROPOSALS TO BE VOTED UPON AT THE ANNUAL MEETING ARE DISCUSSED IN DETAIL IN THIS PROXY STATEMENT. YOU ARE STRONGLY URGED TO READ AND CONSIDER CAREFULLY THIS PROXY STATEMENT IN ITS ENTIRETY.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the beneficial ownership of our Common Stock as of
| · | each member of the Board; |
| · | each of our Named Executive Officers listed in the "Summary Compensation Table" included in the "Executive Compensation" section of this proxy statement; |
| ·all of our directors and Named Executive Officers as a group; and |
| ·each person or entity known to us that beneficially owns more than five percent of our Common Stock. |
Beneficial ownership is determined in accordance with the rules of the
The percentages of Common Stock beneficially owned are based on 3,322,854 shares of Common Stock outstanding at
| Number of | Percent of | |||||||
| Shares of Common | Common Stock | |||||||
| Stock Beneficially | Beneficially | |||||||
| Owned | Owned(1) | |||||||
|
5000 West 36th Street, Suite 200 |
||||||||
| 1,026,343 | 30.9 | % | ||||||
|
|
||||||||
| 364,846 | 11.0 | % | ||||||
| 116,779 | 3.5 | % | ||||||
| 20,589 | * | |||||||
| 18,696 | * | |||||||
| 16,687 | * | |||||||
| William J. Farrell III(4) | 9,100 | * | ||||||
| 6,300 | * | |||||||
|
All Directors, Director Nominees and Named Executive Officers as a group (8 persons)(4) |
1,579,340 | 47.5 | % |
____________
| * | Indicates less than 1 percent of outstanding shares of Common Stock. |
| (1) | Applicable percentage ownership is based on 3,322,854 shares of Common Stock outstanding as of |
| (2) |
| 3 |
| (3) |
| (4) | Includes shares of Common Stock issuable upon the exercise of options that were exercisable as of |
| (5) | 14,696 are owned by Katrina's spouse and both Katrina and her spouse claim shared voting power and shared dispositive power with regard to such shares. Of these shares, 7,496 are pledged as collateral for a loan. |
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Proposal No. 1
ELECTION OF DIRECTORS
Current Board Structure and Director Terms
Our Board is currently composed of seven members. All directors or their successor nominees stand for election each year at our annual meeting of shareholders.
Certain information with respect to each of the nominees who will be presented at the Annual Meeting by our
Unless the authority to vote for directors has been withheld in the proxy, the person named in the accompanying proxy intends to vote at the Annual Meeting for the election of each of the nominees presented below. In the election of directors, assuming a quorum is present, the seven nominees for director receiving the highest number of votes cast at the Annual Meeting will be elected as our directors.
DIRECTORS
Set forth below is certain information with respect to our directors.
| Age | Position With Company | Audit | Compensation | Nominating and Governance | Investment | ||||||||||||
| 61 | Director | X | X | C | X | ||||||||||||
| 52 | Director | ||||||||||||||||
| William J. Farrell III | 51 | Director | X | X | |||||||||||||
| 62 | Director | C | |||||||||||||||
| 39 | Director | X | X | ||||||||||||||
| 56 | Director, Chairman of the Board | C | X | C | |||||||||||||
| 64 | Director, Chief Executive Officer, and President | X |
____________________________
| (X) | Member of the Committee |
| (C) | Chairman of the Committee |
Ray, Bill, Dave, Nick and Katrina currently each qualify as an "independent director" as such term is defined in Rule 5605(a)(2) of the Nasdaq Listing Rules and we expect that each will continue to qualify as an "independent director" if elected.
Our Board is of the opinion that the election to our Board of the director nominees identified herein, each of whom has consented to serve if elected, would be in our shareholders' best interests.
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OUR BOARD RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE
NOMINEES NAMED BELOW.
Ray (61), current director and nominee, has, from
Ray brings the following experience, qualifications, attributes, and skills to our Board:
| · | More than 25 years of experience as a financial analyst and investment manager; |
| · | Years of public company board experience, including three years as chairman and one year as co-chairman; and |
| · | Independent of our management. |
Angel (52), current director and nominee, has served as our Director of Quality Systems and Regulatory Affairs since 2014. Angel joined the Company in
Angel brings the following experience, qualifications, attributes, and skills to our Board:
| · | Multidisciplinary business experience within scientific industries; |
| · | Senior-level management experience in Regulatory Affairs and Quality Management Systems; |
| · | Operational and customer project management including customer strategic alliance; and |
| · | Over 15 years of management in the areas of product design, production and quality controls, risk assessment and risk mitigation, quality management and regulatory compliance. |
Bill (51), current director and nominee, currently serves as Chief Strategy & Innovation Officer of
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Bill brings the following experience, qualifications, attributes, and skills to our Board:
| · | Current senior-level management, operating and board experience; |
| · | More than 12 years of experience in engineering and management roles in the medical device industry, our primary target market; and |
| · | Independent of our management. |
Dave (62), current director and nominee, is an Executive-in-Residence (EIR) at Stanford Medicine Catalyst, a
Dave brings the following experience, qualifications, attributes, and skills to our Board:
| · | Senior-level management, operating and board experience based on more than 20 years of participation in the medical device industry, our primary target market, twelve years of which are specifically with medical devices to treat disorders of the spine, a sector within the medical device industry that we believe represents potential for future revenue growth; |
| · | Core management and leadership skills gained through experience overseeing and managing operations at the manager and chief executive officer levels, including experience in medical device intellectual property, product development, clinical testing and marketing; |
| · | Experience in financial analysis, including operational restructuring, acquisition opportunities, raising capital, budgeting and forecasting, and market entry feasibility; and |
| · | Independent of our management. |
Katrina (39), current director and nominee, has, from
Katrina brings the following experience, qualifications, attributes, and skills to our Board:
| · | Current senior-level management and operating experience; |
| · | Experience as a financial analyst, and |
| · | Independent of our management. |
Nick (56), current Chairman of the Board, director and nominee, is an executive, investor and research analyst. Since
Nick brings the following experience, qualifications, attributes and skills to our Board:
| · | 27 years of experience as a financial analyst and investment manager; |
| · | Public company C-suite roles, including operating and board experience; and |
| · | Independent of our management. |
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Rick (64), current director and nominee, has served as our Chief Executive Officer and President since
Rick brings the following experience, qualifications, attributes, and skills to our Board:
| · | Current senior-level management experience as our Chief Executive Officer; and |
| · | Over 15 years of senior-level management in the areas of manufacturing, operations, supply chain, distribution and logistics, including over 10 years of experience in our operations management. |
BUSINESS EXPERIENCE OF KEY MANAGEMENT
Set forth below is information concerning our other non-director key management personnel.
Alisha (55), was appointed as our Chief Financial Officer in
BOARD MEETINGS AND RELATED MATTERS
During the fiscal year ended
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Audit Committee
Our Board has an Audit Committee that consists of three Board members,
Nominating/Corporate Governance Committee
Our Board has a Nominating/Corporate Governance Committee ("Nominating Committee") that consists of three Board members,
The Nominating Committee works with our Board to determine the appropriate characteristics, skills and experiences for our Board as a whole and its individual members with the objective of having a Board with diverse experience. The Nominating Committee believes that it is desirable that directors possess an understanding of our business environment and have the requisite ethical standards, knowledge, skills, expertise and diversity of experience such that our Board's ability to manage and direct our affairs and business is enhanced. Additional considerations may include an individual's capacity to enhance the ability of committees of our Board to fulfill their duties and/or satisfy any independence requirements imposed by law, regulation or listing requirements. The Nominating Committee may receive candidate nomination suggestions from current Board members, our executive officers, our shareholders or other sources, which may be either unsolicited or in response to requests from our
Shareholder nominations for director should be sent to our Secretary and should include the candidate's name and qualifications and a statement from the candidate that he or she consents to being named in the proxy statement and will serve as a director if elected. In order for any such candidate to be considered for nomination and, if nominated, to be included in our proxy statement, such recommendation must satisfy the requirements discussed later in this proxy statement under the heading "Proposals of Shareholders."
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In compiling the list of our Board nominees appearing in this proxy statement, nominee referrals as well as nominee recommendations were received from existing directors and members of management-both solicited and unsolicited. No paid consultants were engaged by us, our Board or any of our Board's committees for the purposes of identifying qualified, interested Board candidates.
Compensation Committee
Our Board has a Compensation Committee that consists of four Board members,
From time to time, various members of management and other employees, as well as outside advisors or consultants, may be invited by the Compensation Committee to make presentations, provide financial or other background information or advice, or otherwise participate in Compensation Committee meetings or executive sessions of the Board. Among other things, the charter of the Compensation Committee grants the Compensation Committee authority to obtain, at our expense, advice and assistance from internal and external legal, accounting or other advisors and consultants and other external resources that the Compensation Committee considers necessary or appropriate in the performance of its duties. In particular, the Compensation Committee has the sole authority to retain compensation consultants to assist in its evaluation of executive and director compensation, including the authority to approve the consultant's reasonable fees and other retention terms.
Investment Committee
The Investment Committee was formed in
FAMILY RELATIONSHIPS
There are no family relationships among our executive officers and directors.
BOARD LEADERSHIP STRUCTURE
Our Board has separated the roles of Chairman of the Board and Chief Executive Officer. Nick, an independent director, serves as Chairman of our Board and presides at all Board and shareholder meetings. Rick, our Chief Executive Officer, serves as our primary spokesperson and supervises our business, subject to the direction of our Board. The independent Board members annually assess Rick's performance as Chief Executive Officer. We believe that an independent Chairman of the Board is better able to provide oversight and guidance to management, especially in relation to the Board's essential role in risk management oversight, and to ensure the efficient use and accountability of resources. Furthermore, this separation provides for focused engagement between these two roles in their respective areas of responsibility, while still providing for collaborative participation. The separation of the Chairman of the Board and Chief Executive Officer roles, together with our other comprehensive corporate governance practices, are designed to establish and preserve management accountability, provide a structure that allows the Board to set objectives and monitor performance, and enhance shareholder value.
BOARD'S ROLE IN RISK OVERSIGHT
Our Board has an active role, as a whole and also at the committee level, in overseeing management of our risks. Our Board regularly reviews information regarding our credit, liquidity and operations, as well as the risks associated with each. The Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements. The Audit Committee oversees management of financial risks. The Nominating Committee manages risks associated with the independence of our Board and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through committee and management reports about such risks and their mitigation. Our Board believes the division of risk management responsibilities described above is an effective approach for evaluating and addressing the risks we face and that the structure allows our Board to exercise effective oversight of the actions of management.
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BOARD DIVERSITY
The Nominating Committee believes that diversity is one of many factors to be considered when selecting candidates for nomination to serve as one of our directors. While the Nominating Committee carefully considers diversity, among other factors, when evaluating nominees for director, the Nominating Committee has not established a formal policy regarding diversity in identifying director nominees.
The table below summarizes the composition of our Board pursuant to a confidential survey:
| Board Diversity Matrix (as of |
||||||||||||||||
| Total Number of Directors | 7 | |||||||||||||||
| Gender: | Female | Male | Non-Binary | Gender Undisclosed | ||||||||||||
| Directors | 2 | 3 | - | 2 | ||||||||||||
| Demographic Background | ||||||||||||||||
| - | - | - | - | |||||||||||||
| - | - | - | - | |||||||||||||
| Asian | 1 | - | - | - | ||||||||||||
| Hispanic or Latinx | - | - | - | - | ||||||||||||
| Native Hawaiian or Pacific Islander | - | - | - | - | ||||||||||||
| White | 1 | 3 | - | - | ||||||||||||
| Two or More Races or Ethnicities | - | - | - | 1 | ||||||||||||
| LGBTQ+ | - | |||||||||||||||
| Demographic Background Undisclosed | 1 |
COMPENSATION OF EXECUTIVE OFFICERS AND MANAGEMENT
Compensation Committee Procedures
The Compensation Committee makes its most significant determinations with respect to annual compensation, bonus awards, and new financial and other corporate performance objectives for executive compensation purposes, at one or more meetings held during the fiscal year for which the targets and compensation levels are applicable. At various meetings throughout the year, the Compensation Committee also considers matters related to individual compensation, such as compensation for new executive hires, as well as high-level strategic issues, such as the efficacy of, and any risks relating to, our compensation strategies, policies and practices, potential modifications to those strategies, policies and practices, and new trends, plans or approaches to compensation.
Generally, the Compensation Committee's process consists of three related elements: (i) the determination of compensation levels, (ii) the approval of discretionary cash bonus awards based upon Company and personal performance, and (iii) the review and determination of equity incentive awards. For executive officers other than our CEO, the Compensation Committee solicits and considers evaluations and recommendations submitted to the Compensation Committee by our CEO. In the case of our CEO, the evaluation of his performance is conducted by the Compensation Committee, which determines any adjustments to his compensation. Our CEO may not participate in, or be present during, any deliberations or determinations of the Compensation Committee regarding his compensation. For all executive officers and directors, as part of its deliberations, the Compensation Committee may review and consider, as appropriate, materials such as financial reports and projections, operational data, tax and accounting information, tally sheets that set forth the total compensation that may become payable to executive officers in various hypothetical scenarios, our stock performance data, and analyses of historical executive compensation levels and our current compensation levels. Periodically, the Compensation Committee reviews all of our incentive compensation plans in order to evaluate the level of risk that such plans may encourage and, along with management's report concerning such matters and their mitigation, to ensure that each plan is properly monitored and evaluated.
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Compensation Committee Philosophy
Our compensation philosophy is predicated upon the following concepts:
| · | We pay competitively. We are committed to providing a pay program that helps attract and retain highly qualified people in the industry. To ensure that pay is competitive, we compare our pay practices with those of other leading companies of similar size and location(s) and set our pay parameters based on this review. |
| · | We pay for sustained performance. Executive officers are rewarded based upon Company performance and individual performance. Company performance is evaluated by the Compensation Committee by reviewing the extent to which strategic and business plan goals are met, including such factors as revenues, operating profit, cash flow, and stock price. |
| · | We strive for fairness in the administration of pay and to achieve a balance of the compensation paid to a particular individual as compared to the compensation paid to both our executives and executives at comparable companies. |
| · | We believe that employees should understand the performance evaluation and pay administration process. |
The Compensation Committee believes that it is important that our executives be compensated in a manner that closely links compensation with performance and yet does not incent excessive risk-taking. To that end, the Compensation Committee has developed a comprehensive and balanced compensation plan that includes a base salary; discretionary bonuses upon evaluation of Company and personal performance; performance awards generally payable in shares of Common Stock upon the satisfaction of various service periods and the market price of our Common Stock achieving certain pre-determined prices; stock options; and, a package of benefits similar in scope and nature to those offered to all our other employees. Additionally, all employees, including the Named Executive Officers, are eligible to participate in our 2014 Employee Stock Purchase Plan (the "ESPP"), which allows employees to purchase shares of Common Stock from us at 15% discount from the applicable market price as calculated under the terms of the ESPP.
The Compensation Committee believes that there are no risks related to our compensation plans that would result in a material adverse impact on us. This conclusion is based upon management's risk analysis and the Compensation Committee's belief that the following mitigating factors also serve to reduce such risks:
| · | Incentives are capped at a maximum amount regardless of the degree to which objectives may be exceeded. |
| · | Bonus payments are based upon audited year-end results. |
| · | Multiple objectives are used as performance targets. |
| · | Computations are reviewed at regular intervals during the year and are subject to multiple levels of review at the management, committee, and full Board level. |
Compensation of Executive Officers
The following table sets forth certain compensation information for the fiscal years ended
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Summary Compensation Table ("SCT")
|
|
Salary |
Bonus(1) |
Stock Awards(2) |
All Other Compensation(3) |
Total |
|||||||||||||||||||
| Principal Position | Year | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||
| 2024 | $ | 327,500 | $ | 70,114 | $ | - | $ | 43,689 | $ | 441,303 | ||||||||||||||
| Director, CEO, President and COO | 2023 | $ | 305,000 | $ | 70,114 | $ | - | $ | 43,491 | $ | 418,605 | |||||||||||||
| 2024 | $ | 242,685 | $ | 50,114 | $ | 20,070 | $ | 7,631 | $ | 320,500 | ||||||||||||||
| Chief Financial Officer | 2023 | $ | 240,000 | $ | 50,114 | $ | - | $ | 7,499 | $ | 297,613 |
(1) The Bonus amount for both fiscal 2024 and 2023 includes bonuses awarded to Rick and Alisha in the amount of
(2) The amounts reported above under the heading "Stock Awards" represent the aggregate grant date value of awards under Accounting Standards Codification Topic 718, Compensation - Stock Compensation. The assumptions used in calculating the fair value of these stock awards can be found under Note 10 (Share-Based Compensation) to the Financial Statements in the Company's Annual Report on Form 10-K for the year ended
(3) The amounts reported above under the heading "All Other Compensation" consist of the following:
| All Other Compensation ($) |
| Insurance | Car | 401K Matching | Imputed | ||||||||||||||||||||
| Premiums | Allowance | Contributions | Earnings | Total | |||||||||||||||||||
| Principal Position | Year | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||
| 2024 | $ | 25,562 | $ | 10,000 | $ | 4,563 | $ | 3,564 | $ | 43,689 | |||||||||||||
| Director, CEO, President, and COO | 2023 | $ | 24,767 | $ | 10,000 | $ | 5,160 | $ | 3,564 | $ | 43,491 | ||||||||||||
| 2024 | $ | 1,872 | $ | - | $ | 4,013 | $ | 1,746 | $ | 7,631 | |||||||||||||
| Chief Financial Officer | 2023 | $ | 2,966 | $ | - | $ | 3,346 | $ | 1,187 | $ | 7,499 |
Employment Agreements with Named Executive Officers
Employment Arrangement with
On
| • | A base annual salary of |
| • | An annual car allowance of |
| • | Rick is eligible to participate in any program of stock options or other equity grants that we provide key employees from time to time, including our 2016 Equity Incentive Plan and ESPP. |
| • | Health, dental, disability and life insurance, qualified retirement plans, and optional employee benefits on the same terms as other employees. |
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Employment Arrangement with
On
| • | A base annual salary of |
| • | Alisha is eligible to participate in any program of stock options or other equity grants that we provide key employees from time to time, including our 2016 Equity Incentive Plan and ESPP. |
| • | Health, dental, disability and life insurance, qualified retirement plans, and optional employee benefits on the same terms as other employees. |
Outstanding Equity Awards at Fiscal Year End
The following table sets forth information about outstanding equity awards held by our Named Executive Officers as of
| Option Awards | ||||||||||||||
|
Number of Securities Underlying Unexercised Options |
Option |
Option |
||||||||||||
|
|
Exercisable (#) |
Unexercisable (#)(1) |
Exercise Price ($) |
Expiration Date |
||||||||||
| 18,000 | - | |||||||||||||
| 4,500 | ||||||||||||||
| 18,000 | ||||||||||||||
| 18,000 | ||||||||||||||
| 18,000 | ||||||||||||||
| 18,000 | ||||||||||||||
| 4,250 | - | |||||||||||||
| 1,063 | ||||||||||||||
| 5,250 | ||||||||||||||
| 5,250 | ||||||||||||||
| 5,250 | ||||||||||||||
| 5,250 | ||||||||||||||
| (1) | Whether any of the unexercisable options vest, and the amount that does vest, is tied to various service periods corresponding to future testing dates and the achievement of our Common Stock trading at or above the exercise price. In the event that the market price of our Common Stock does not reach or exceed the exercise price during the 60 days immediately preceding the three testing dates of the unexercisable options, a fraction, either 50%, 75% or 100%, of the above-mentioned unexercisable stock options will expire. Accordingly, the number of unexercisable options with a strike price of |
| Stock Awards | ||||||||
|
|
Equity Incentive Plan Awards: Number of Unearned Shares That Have Not Vested (#)(1) |
Equity Incentive Plan Awards: Market Value of Unearned Shares That Have Not Vested ($)(2) |
||||||
| 29,600 | $ | 581,344 | ||||||
| 19,600 | $ | 384,944 | ||||||
| (1) | Represents performance awards which, upon vesting, will generally be paid in shares of our Common Stock. Whether any performance awards vest, and the amount that does vest, is tied to the completion of various service periods that range from |
| (2) | The payout value of unearned shares is based upon the closing market price of our Common Stock on |
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Pay Versus Performance
As required by the
The PvP table below provides compensation values reported in our current and prior SCTs, as well as the CAP amounts required in this section for the fiscal years ending
Pay Versus Performance Table ("PvP")
|
Year |
SCT for PEO(1) |
CAP for PEO(2) |
SCT for Non- |
CAP for Non- |
Fixed |
Net Income (in 000's)(6) |
||||||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | ||||||||||||||||||||
| 2024 | $ | 441,303 | $ | 397,475 | $ | 350,500 | $ | 328,349 | $ | (37.25 | ) | $ | 2,127 | |||||||||||||
| 2023 | $ | 418,605 | $ | 632,137 | $ | 297,613 | $ | 424,446 | $ | (38.98 | ) | $ | 7,074 | |||||||||||||
| 2022 | $ | 416,382 | $ | (445,055 | ) | $ | 432,889 | $ | 145,410 | $ | (49.04 | ) | $ | 4,572 |
| (1) | The dollar amounts reported in column (b) are the amounts of total compensation reported for Rick, our Chief Executive Officer, for each corresponding year in the "Total" column of the SCT. Refer to "Executive Compensation - Summary Compensation Table." |
| (2) | The dollar amounts reported in column (c) represent the amount of CAP to Rick, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to Rick during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Rick's total compensation as reported in the SCT for each year to determine the compensation actually paid: |
|
Year |
SCT Total for PEO |
SCT Reported Equity Award Value for PEO |
Equity Award Adjustments for PEO(A) |
CAP to PEO |
||||||||||||||
| 2024 | $ | 441,303 | $ | - | $ | (43,828 | ) | $ | 397,475 | |||||||||
| 2023 | $ | 418,605 | $ | - | $ | 213,532 | $ | 632,137 | ||||||||||
| 2022 | $ | 416,382 | $ | - | $ | (861,437 | ) | $ | (445,055 | ) |
| (A) | Represents the year-over-year change in the fair value of equity awards to Rick as summarized below: |
|
Year |
Add: fair value of awards granted during FY at end of year |
Change in fair value of awards granted in any PY unvested at end of FY |
Add for awards granted and vested in the same FY the fair value as of vesting date |
Change in fair value as of vesting date of any awards from a PY vested in CY |
Subtract: Awards granted in any PY fail to meet vesting conditions during the year; value at end of PY |
Total Equity Award Adjustments |
||||||||||||||||||||
| 2024 | $ | - | $ | 42,122 | $ | - | $ | - | $ | (85,950 | ) | $ | (43,828 | ) | ||||||||||||
| 2023 | $ | - | $ | 288,017 | $ | - | $ | 140,840 | $ | (215,325 | ) | $ | 213,532 | |||||||||||||
| 2022 | $ | - | $ | (875,913 | ) | $ | - | $ | 14,476 | $ | - | $ | (861,437 | ) |
| (3) | The dollar amounts reported in column (d) of the PvP table represent the amounts reported for Alisha, who is the Company's only Non-PEO NEOs in the "Total" column of the SCT in each applicable year. |
| (4) | The dollar amounts reported in column (e) represent the amount of CAP to Alisha, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to Alisha during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to |
| 15 |
|
Year |
SCT for |
SCT Reported Equity Award Value for |
Equity Award Adjustments for Alisha Charlton(A) |
Compensation Actually Paid to |
||||||||||||||
| 2024 | $ | 320,500 | $ | (20,070 | ) | $ | 27,919 | $ | 328,349 | |||||||||
| 2023 | $ | 297,613 | $ | - | $ | 126,833 | $ | 424,446 | ||||||||||
| 2022 | $ | 432,889 | $ | (132,670 | ) | $ | (154,809 | ) | $ | 145,410 |
| (A) | Represents the year-over-year change in the fair value of Alisha's equity awards as summarized below: |
|
Year |
Add: fair value of awards granted during FY at end of year |
Change in fair value of awards granted in any PY unvested at end of FY |
Add for awards granted and vested in the same FY the fair value as of vesting date |
Change in fair value as of vesting date of any awards from a PY vested in CY |
Subtract: Awards granted in any PY fail to meet vesting conditions during the year; value at end of PY |
Total Equity Award Adjustments |
||||||||||||||||||||
| 2024 | $ | 39,280 | $ | 13,708 | $ | - | $ | - | $ | (25,069 | ) | $ | 27,919 | |||||||||||||
| 2023 | $ | - | $ | 92,897 | $ | - | $ | 88,184 | $ | (54,248 | ) | $ | 126,833 | |||||||||||||
| 2022 | $ | 90,046 | $ | (248,273 | ) | $ | - | $ | 3,418 | $ | - | $ | (154,809 | ) |
| (5) | Cumulative total shareholder retu("TSR") assumes |
| (6) | The dollar amounts reported represent the amount of net income reflected in the Company's audited financial statements for the applicable year. |
Analysis of the Information Presented in the Pay versus Performance Table
Our executive compensation program reflects a variable pay-for-performance philosophy, utilizing several performance measures to align executive compensation with our performance. Moreover, we generally seek to incentivize long-term performance, and therefore do not specifically align our performance measures with compensation that is actually paid (as computed in accordance with Item 402(v) of Regulation S-K) for a particular year. In accordance with Item 402(v) of Regulation S-K, we are providing the following descriptions of the relationships between information presented in the Pay versus Performance table.
| 16 |
CAP and TSR
As demonstrated by the following graph, the amount of CAP for 2022, 2023 and 2024 and the CAP is generally aligned with our TSR over the three years presented in the table. The alignment of CAP with our TSR over the period presented is because a significant portion of the CAP is comprised of equity awards.
CAP and Net Income
As demonstrated by the following graph, the amount of CAP for 2022, 2023 and 2024 and is generally aligned with our net income over the three years presented in the table. However, as noted above, a significant portion of the CAP is comprised of equity awards, and therefore this may not always be the case.
| 17 |
Compensation of Directors
In
| · | A cash fee of |
| · | An additional cash fee of |
The following table details the fees earned by our non-employee directors during fiscal 2024.
|
Fees Earned or |
Total ($) |
|||||||
| $ | 25,000 | $ | 25,000 | |||||
| $ | 18,000 | $ | 18,000 | |||||
| William J. Farrell III | $ | 18,000 | $ | 18,000 | ||||
| $ | 18,000 | $ | 18,000 | |||||
| $ | 18,000 | $ | 18,000 |
| (1) | The cash amount reported in this column represents amounts earned during fiscal 2024. All amounts were paid in fiscal 2024 except for the 4th quarter accrual, which was paid in fiscal 2025. |
Although non-employee directors may periodically be granted equity awards at the determination of the Compensation Committee (most recently, stock options granted in fiscal 2021), no equity awards were granted to non-employee directors in fiscal 2024.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in the first column) | |||||||||
| Equity compensation plans approved by Stockholders: | ||||||||||||
| 2016 Equity Incentive Plan | 347,750 | (1) | $ | 42.11 | (2) | 914,225 | ||||||
| 2014 Employee Stock Purchase Plan | - | - | 668,273 |
| (1) | Represents performance awards issued to employees (including the Named Executive Officers) for 80,000 shares, as well as nonqualified stock options issued to employees (including the Named Executive Officers) and directors to purchase 267,750 shares (of which 57,750 options are vested and exercisable). Whether any performance awards or unvested options vest, and the amount that does vest, is tied to the completion of various service periods that range from |
| (2) | Represents the weighted average exercise price of the 267,750 non-qualified stock options included in the "Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights" column. |
| 18 |
Options and Equity Awards Generally
2016 Equity Incentive Plan
In the event of a change in control (as such term is defined in the 2016 Equity Incentive Plan, which definition includes, among other items, (a) conditions under which a person or group becomes a beneficial owner of 50% or more of the voting power of our outstanding stock, or (b) a majority change in the composition of our Board occurring within a one-year period, or (c) a change in the ownership of more than 40% of the Company's assets, or (d) a complete liquidation or dissolution of the Company):
| · | the Board has the discretion to accelerate the vesting of any outstanding options or stock appreciation rights; |
| · | unless otherwise set forth in the applicable award agreement, all restrictions applicable to restricted shares and restricted stock unit awards shall terminate fully and the underlying shares will be delivered; and |
| · | unless otherwise set forth in the applicable award agreement, all performance awards shall immediately become vested and payable within 30 days after a change of control. |
AUDIT COMMITTEE REPORT
The Audit Committee reports to and acts on behalf of our Board in providing oversight to our financial management, independent registered public accounting firm, and financial reporting procedures. Our management is responsible for preparing our financial statements and the independent registered public accounting firm is responsible for auditing those statements. In this context, the Audit Committee has reviewed and discussed the audited financial statements contained in our 2024 Annual Report on Form 10-K with management and
The Audit Committee has discussed with
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to our Board that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended
The Audit Committee has appointed
AUDIT COMMITTEE
| 19 |
CODE OF ETHICS AND BUSINESS CONDUCT
Our code of ethics and business conduct ("code of ethics"), as approved by our Board, can be obtained from https://www.pro-dex.com/investors/governance.
We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K relating to amendments to or waivers from provisions of the code of ethics that relate to one of more of the items set forth in Item 406(b) of Regulation S-K and its successor regulation, by describing on our Internet website, within four business days following the date of a waiver or a substantive amendment, the date of the waiver or amendment, the nature of the amendment or waiver, and the name of the person to whom the waiver was granted. There have been no waivers of the code of ethics granted during the fiscal year ended
Information on our Internet site is not, and shall not be deemed to be, a part of this proxy statement or incorporated into any other filings we make with the
POLICY ON HEDGING, SHORT-SELLING AND PLEDGING
Under our Policy on Insider Trading, unless advance approval is obtained from our Chief Financial Officer (who has been appointed as the compliance officer under our Policy on Insider Trading), our directors, executive officers, including our Named Executive Officers, and certain other employees are prohibited from: (i) purchasing financial instruments that are designed to hedge our securities or offset any fluctuations in the market value of our Common Stock; (ii) purchasing shares of our Common Stock on margin; (iii) short-selling shares of our Common Stock; and (iv) pledging, whether directly or indirectly, shares of our Common Stock as collateral for a loan, unless the aggregate fair market value of all collateral for the loan (inclusive of the fair market value of our Common Stock pledged as collateral for the loan) equals or exceeds 200% of the total obligations under the loan from time to time outstanding.
POLICIES AND PROCEDURES FOR APPROVAL OF RELATED PARTY TRANSACTIONS
Our Board has the responsibility to review and discuss with management and approve, and has adopted written policies and procedures relating to approval or ratification of, interested transactions with related parties. During this process, the material facts as to the related party's interest in a transaction are disclosed to all Board members or an applicable committee. Under the policies and procedures, the Board is to review each interested transaction with a related party that requires approval and either approve or disapprove of the entry into the interested transaction. An "interested transaction" is any transaction in which we are a participant and any related party has or will have a direct or indirect interest. Transactions that are in the ordinary course of business and would not require either disclosure pursuant to Item 404(a) of Regulation S-K under the Securities Act or approval of the Board or an independent committee of the Board pursuant to applicable Nasdaq rules would not be deemed interested transactions. No director may participate in any approval of an interested transaction with respect to which such director is a related party. Our Board intends to approve only those related party transactions that are in the best interests of the Company and our shareholders.
We invest surplus cash from time to time through our Investment Committee, which is comprised of one management director, Rick, and two non-management directors, Ray and Nick, who chairs the committee. Both Ray and Nick are active investors with extensive portfolio management expertise. We leverage the experience of these committee members to make investment decisions for the investment of our surplus operating capital or borrowed funds. Additionally, many of our securities holdings include stocks of public companies that either Nick or Ray or both may own from time to time either individually or through the investment funds that they manage, or other companies whose boards they sit on, such as
Certain Relationships and Related Transactions
We have invested in marketable equity securities at
| 20 |
We own 1,828,551 shares of
We have entered into indemnification agreements with each of our directors and executive officers. The indemnification agreements and our certificate of incorporation and bylaws require us to indemnify our directors and officers to the fullest extent permitted by
Director Independence
Our corporate governance guidelines provide that a majority of the Board and all members of the Audit, Compensation, and Nominating Committees of the Board will be independent. On an annual basis, each director and executive officer is obligated to complete a Director and Officer Questionnaire that requires disclosure of any transactions with us in which a director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest. Following completion of these questionnaires, the Board, with the assistance of the Nominating Committee, makes an annual determination as to the independence of each director using the current standards for "independence" established by the
The Board has determined that all of its directors are independent under these standards, except for Rick, our Chief Executive Officer and President, and Angel, our Director of Quality Systems and Regulatory Affairs.
COMMUNICATIONS WITH DIRECTORS
Our Board has established a process to receive communications from shareholders. Shareholders and other interested parties may contact any member (or all members) of our Board, or the independent directors as a group, any Board committee or any Chair of any such committee by mail or electronically. To communicate with our Board, any individual directors, or any group or committee of directors, correspondence should be addressed to our Board or any such individual directors or group or committee of directors by either name or title. All such correspondence should be sent "c/o Corporate Secretary" at
All communications received as set forth in the preceding paragraph will be opened by the Company's Secretary for the sole purpose of determining whether the contents represent a message to one or more of the directors. Any contents that are not in the nature of advertising, promotions of a product or service, or patently offensive material will be forwarded promptly to the addressee. In the case of communications to the Board or any group or committee of directors, the Company's Secretary will make sufficient copies (or forward such information in the case of e-mail) of the contents to send to each director who is a member of the group or committee to which the envelope or e-mail is addressed.
It is our policy that our directors are invited and encouraged to attend all of our annual meetings of shareholders either in person or telephonically. All of our directors were in attendance at the 2023 Annual Meeting in person.
| 21 |
Proposal No. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee has appointed the firm of
A representative of
ACCOUNTING FEES
The Audit Committee's policy is to pre-approve all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for us by our independent registered public accounting firm, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act, which are approved by the Audit Committee prior to the completion of the audit. The Audit Committee considers whether the performance of any service by our independent registered public accounting firm is compatible with maintaining such firm's independence.
The following table sets forth the aggregate fees billed during the fiscal years ended
| Years ended |
||||||||||
| 2024 | 2023 | |||||||||
| Audit Fees(1) | $ | 439,950 | $ | 249,375 | ||||||
| (1) | Audit Fees consist of fees billed for professional services rendered for the audit of our consolidated annual financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided in connection with statutory and regulatory filings or engagements. The amounts above reflect amounts paid during the fiscal year which may include a combination of pre-billings and billings in arrears. |
Required Vote and Board Recommendation
Although shareholder ratification is not required for the appointment of
OUR BOARD RECOMMENDS THAT OUR SHAREHOLDERS VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF MOSS ADAMS, LLP TO SERVE AS OUR INDEPENDENT PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING
| 22 |
Proposal No. 3
ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
Pursuant to Section 14A of the Exchange Act, we are asking our shareholders to vote to approve, on a nonbinding, advisory basis, the compensation of our Named Executive Officers, commonly referred to as the "say-on-pay" vote. In accordance with the Exchange Act requirements, we are providing our shareholders with an opportunity to express their views on our Named Executive Officers' compensation. Although this advisory vote is nonbinding, our Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our Named Executive Officer compensation and related executive compensation programs.
We encourage shareholders to read the "Compensation of Executive Officers and Management" section in this proxy statement, including the compensation tables and the related narrative disclosure, which describes the structure and amounts of the compensation of our Named Executive Officers for the fiscal year ended
Accordingly, we ask our shareholders to vote "FOR" the following resolution at the Annual Meeting:
"RESOLVED, that the shareholders approve, on an advisory basis, the compensation of our Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the compensation tables and any other related disclosure in the proxy statement."
Required Vote and Board Recommendation
Assuming a quorum is present at the Annual Meeting, this proposal to approve, on an advisory basis, the compensation of our Named Executive Officers will be approved if the votes cast in favor of this proposal exceed the votes cast opposing this proposal.
OUR BOARD RECOMMENDS THAT OUR SHAREHOLDERS VOTE "FOR", ON AN ADVISORY BASIS, THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
| 23 |
ANNUAL REPORT
Our Annual Report on Form 10-K containing audited financial statements for the fiscal year ended
PROPOSALS OF SHAREHOLDERS
Proposals by shareholders and submissions by shareholders of director nominees that are intended for inclusion in our proxy statement and proxy card and to be presented at our next annual meeting must be received by us by
Proposals by shareholders, as well as shareholder nominees for director, for possible consideration at our next annual meeting that are not intended for inclusion in our proxy materials must also be received by our Secretary no later than
In addition to complying with our Bylaws, shareholders who intend to solicit proxies in support of a director nominee other than our nominees for consideration by shareholders at our next annual meeting must also comply with the additional requirements of the
OTHER MATTERS
Our Board knows of no other matters which will be acted upon at the Annual Meeting. If any other matters are presented properly for action at the Annual Meeting or at any adjournment or postponement thereof, it is intended that the proxy will be voted with respect thereto in accordance with the best judgment and in the discretion of the proxy holder.
OUR SHAREHOLDERS ARE URGED TO PROMPTLY SUBMIT THEIR PROXY OR VOTING INSTRUCTIONS AS SOON AS POSSIBLE BY FOLLOWING THE INSTRUCTIONS IN THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS, WHICH WAS MAILED TO YOU ON OR ABOUT
By Order of the Board of Directors,
/s/
Corporate Secretary
SHAREHOLDERS MAY OBTAIN, FREE OF CHARGE, A PAPER COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
24
Attachments
Disclaimer
LTCR Joins LTC Global
Proxy Statement – Form DEF 14A
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