ENVELA CORP
10-Ks and 10-Qs
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UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Registrant
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Preliminary Proxy Statement
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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ENVELA CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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ENVELA CORPORATION
13022 PRESTON ROAD
DALLAS, TEXAS 75240
N
OTICE OF ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD JUNE 5, 2020
Dear Envela Stockholder:
On behalf of the Envela Corporation’s Board of Directors and
our senior management team, I am pleased to invite you to attend
our 2020 Annual Meeting of Stockholders to be held virtually on
Friday, June 5, 2020 at 2:00 p.m. Central Standard Time. The
Meeting will be conducted online by registering at;
https://zoom.us/meeting/register/tJAscumopjsqGtd1nIT6tJX4uuJuoIc0gic1
You will be given a link to the meeting upon registration. Upon
registration, you will also be sent a password for the meeting to
the e-mail address listed on your registration. Registered
shareholders and duly appointed proxyholders who participate in the
Meeting online will be able to listen to the Meeting, ask questions
and vote at the Meeting in real time. Shareholders will not be able
to attend the Meeting physically. Please see Voting Procedures and
Revocability of Proxies, starting on page 2, for instructions for
voting at the Virtual Meeting.
At this year’s stockholders’ meeting, you will be asked
to: (i) elect five directors to serve until the next annual
meeting of stockholders and until their respective successors shall
have been duly elected and qualified; (ii) ratify the
appointment of Whitley Penn LLP (“Whitley Penn”) as our
independent registered public accountants for the fiscal year
ending December 31, 2020; (iii) vote to adjourn the annual
meeting, if necessary, to solicit additional proxies in favor of
proposals one through two; and (iv) transact such other
business as may properly come before the meeting and any
adjournment(s) thereof. Our Board of Directors unanimously
recommends that you vote: (a) FOR the directors nominated; (b) FOR
the ratification of Whitley Penn. Accordingly, please give careful
attention to these proxy materials.
Only holders of record of our Common Stock as of the close of
business on May 8, 2020, are entitled to notice of and to vote at
our annual meeting and any adjournment(s) thereof. Our transfer
books will not be closed.
You are cordially invited to attend the annual meeting virtually.
Whether you expect to attend the annual meeting or not, please
vote, sign, date and return in the self-addressed envelope provided
the enclosed proxy card as promptly as possible. If you attend the
annual meeting, you may vote your shares in person, even though you
have previously signed and returned your proxy.
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By
Order of the Board of Directors,
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/s/
Bret A. Pedersen
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Bret
A. Pedersen
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Chief
Financial Officer
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Dallas,
Texas
April
30, 2020
YOUR VOTE IS IMPORTANT.
PLEASE EXECUTE AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED HEREIN.
TABLE OF CONTENTS
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Page
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1
ENVELA CORPORATION
13022 PRESTON ROAD
DALLAS, TEXAS 75240
P
ROXY
STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 5, 2020
To Our Stockholders:
This proxy statement (this “Proxy
Statement”) is furnished in connection with the solicitation
of proxies by the Board of Directors (our “Board of
Directors” or “Board”) of Envela Corporation, a
Nevada corporation (the “Company,” “we,”
“us,” “our,” and “Envela”), to
be used at our Annual Meeting of Stockholders to be held
virtually,
on June 5, 2020 at 2:00 p.m. (Central Standard
Time), or at any adjournment or adjournments thereof. Our
stockholders of record as of the close of business on May 8, 2020
(the “Record Date”) are entitled to vote at our annual
meeting.
Important Notice of Availability of Proxy Materials for the Annual
Meeting of Stockholders to be held on June 5, 2020.
Our proxy materials, including our Proxy Statement for the 2020
Annual
Meeting, 2019 Annual Report on Form 10-K for the year
ended
December 31, 2019 and proxy card, are being sent to security
holders on
May 15, 2020 and are available on the internet at
www.Envela.com.
VO
TING PROCEDURES AND
REVOCABILITY OF PROXIES
The
accompanying proxy card is designed to permit each of our
stockholders as of the Record Date to vote on each of the proposals
properly brought before the annual meeting. As of the Record Date,
there were 26,924,381 shares of our common stock, par value $0.01
per share (our “Common Stock”), issued and outstanding
and entitled to vote at the annual meeting. Each outstanding share
of our Common Stock is entitled to one vote.
The
holders of a majority of our outstanding shares of Common Stock
entitled to vote, present in person or by proxy, will constitute a
quorum for the transaction of business at the annual meeting. If a
quorum is not present, the annual meeting may be adjourned from
time to time until a quorum is obtained.
Abstentions
and broker non-votes will be counted for the purpose of determining
whether a quorum is present. Abstentions, but not broker non-votes,
are treated as shares present and entitled to vote. Broker
non-votes are treated as shares present but not entitled to vote on
the particular matter. Broker non-votes occur when nominees, such
as banks and brokers holding shares on behalf of beneficial owners,
do not receive voting instructions from the beneficial holders at
least ten days before the meeting. If that happens, the nominees
may vote those shares only on matters deemed “routine”
by the NYSE American LLC (the “Exchange”), such as the
election of directors and the ratification of auditors. Nominees
cannot vote on non-routine matters, unless they receive voting
instructions from beneficial holders, resulting in so-called
“broker non-votes.”
Assuming
that a quorum is present, directors will be elected by a plurality
vote and the five nominees who receive the most votes will be
elected. As a result, abstentions and broker non-votes, if any,
will not affect the outcome of the vote on this proposal. There is
no right to cumulative voting unless cumulative voting is requested
at the Annual Meeting by a stockholder who has complied with the
requirements set forth in our bylaws with respect to cumulative
voting.
2
Assuming
that a quorum is present, the ratification of the appointment of
Whitley Penn as our independent registered public accountants for
the fiscal year ending December 31, 2020 and approval of any other
matter that may properly come before the annual meeting, requires
the affirmative vote of a majority of the total votes cast on these
proposals, in person or by proxy, is required to approve these
proposals. As a result, abstentions and broker non-votes, if any,
will not affect the outcome of the vote on these proposals because
they are not considered votes cast. We believe that the proposal
for the ratification of our independent registered public
accounting firm is considered to be a “routine” matter,
and hence we do not expect that there will be a significant number
of broker non-votes on the proposal.
The accompanying proxy card provides space for you
to vote in favor of, against or to withhold or abstain voting for:
(i) the nominees for the Board of Directors identified herein;
(ii) ratification of the appointment of Whitley Penn as our
independent registered public accountants for the fiscal year
ending December 31, 2019; (iii) adjournment of the annual meeting,
if necessary, to solicit additional proxies in favor of proposals
one through two; and (iv) transaction of such other business
as may properly come before the meeting and any adjournment(s)
thereof.
Our
Board of Directors urges you to complete, sign, date and return the
proxy card in the accompanying envelope, which is postage prepaid
for mailing in the United States.
When
a signed proxy card is returned with choices specified with respect
to voting matters, the proxies designated on the proxy card will
vote the shares in accordance with the stockholder’s
instructions. We have designated Bret Pedersen and Sheila Jiang as
proxies for the stockholders. If you desire to name another person
as your proxy, you may do so by crossing out the names of the
designated proxies and inserting the name of the other person to
act as your proxy. In that case, it will be necessary for you to
sign the proxy card and deliver it to the person named as your
proxy and for the named proxy to be present and vote at the annual
meeting. Proxy cards so marked should not be mailed to
us.
If
you sign your proxy card and return it to us and you have made no
specifications with respect to voting matters, your shares will be
voted FOR: (i) the election of the nominees for director
identified herein; (ii) ratification of the appointment of
Whitley Penn as our independent registered public accountants for
the fiscal year ending December 31, 2020; (iii) adjournment of
the annual meeting, if necessary, to solicit additional proxies in
favor of proposals one through two; and (iv) transaction of
such other business as may properly come before the meeting and any
adjournment(s) thereof.
You
have the unconditional right to revoke your proxy at any time prior
to the voting of the proxy by taking any act inconsistent with the
proxy. Acts inconsistent with the proxy include notifying our
Secretary in writing of your revocation, executing a subsequent
proxy, or personally appearing at the annual meeting and casting a
contrary vote. However, no revocation shall be effective unless at
or prior to the annual meeting we have received notice of such
revocation.
At
least ten (10) days before the annual meeting, we will make a
complete list of the stockholders entitled to vote at the annual
meeting open to the examination of any stockholder for any purpose
germane to the meeting. The list will be open for inspection during
ordinary business hours at our executive offices located at 13022
Preston Road, Dallas, TX 75240, and will also be made available to
stockholders by request.
3
In
order to attend the Meeting, registered Shareholders and duly
appointed proxyholders must log in online as set out
below:
·
Step 1: Register for the meeting
online at
https://zoom.us/meeting/register/tJAscumopjsqGtd1nIT6tJX4uuJuoIc0gic1
. Upon registration, you will receive
the meeting link.
Upon
registration, you will also be sent a password for the meeting to
the e-mail address listed on your registration.
All
Registered Shareholders and Duly appointed proxyholders will be
provided with the ability to vote by ballot on the matters put
forth at the Meeting.
·
Step 2: Follow the instructions below, as applicable:
·
Registered Shareholders: Click on the meeting link before the start
of the Meeting. You will have received a meeting password in
advance of the meeting located on the form of proxy or in the
e-mail notification you received from Envela’s Secretary.
Those shareholders wishing to vote during the meeting will be
provided with a list of the ballot items in a separate voting link
to be sent out during the meeting, based on the email address
provided during your registration process. When registered
Shareholders fill out ballot items using this voting link, you will
be revoking any and all previously submitted proxies, in which
case, you will be provided the opportunity to vote by ballot on the
matters put forth at the Meeting. If registered Shareholders DO NOT
wish to revoke all previously submitted proxies, you should not
open the voting link provided during the meeting.
·
Duly appointed proxyholders Click on the meeting link before the
start of the Meeting. Proxyholders will receive the meeting
password and be able to register for the meeting after the proxy
voting deadline has passed and the proxyholder has been duly
appointed and registered.
Shareholders who wish to appoint a third party
proxyholder to represent them at the Meeting must submit their duly
completed proxy card naming their assigned proxyholder for the
meeting AND e-mail their proxyholder to Bret Pedersen at
bpedersen@envela.com
.
Shareholders must submit their proxy form naming their third party
proxyholder prior to registering the proxyholder. Failure to
register a duly appointed proxyholder will result in the
proxyholder not receiving information to participate in the Meeting
and such proxyholder would not be able to attend the Meeting. It is
important that you are connected to the internet at all times
during the Meeting in order to vote when balloting commences. It is
your responsibility to ensure connectivity for the duration of the
Meeting. In order to participate online, registered Shareholders
must have registered for the meeting and been verified by Envela
and Computershare by the record date.
4
PROPOSAL
O
NE:
ELECTION OF DIRECTORS
Five directors are proposed to be elected at the annual meeting. If
elected, each director will hold office until the next annual
meeting of stockholders or until his successor is elected and
qualified. The election of directors will be decided by a plurality
vote.
The five nominees for election as directors to serve until the next
annual meeting of stockholders and until their successors have been
duly elected and qualified are John R. Loftus, Joel S. Friedman,
Jim R. Ruth, Alexandra C. Griffin and Allison M. DeStefano. All
five nominees are members of our current Board of Directors, and
have served since January 2017, except for Ms. DeStefano who has
served since March 2018. All nominees have consented to serve if
elected and we have no reason to believe that any of the nominees
named will be unable to serve. If any nominee becomes unable to
serve: (i) the shares represented by the designated proxies
will be voted for the election of a substitute as our Board of
Directors may recommend; or (ii) our Board of Directors may
fill the vacancy at a later date after selecting an appropriate
nominee.
The Compliance, Governance and Nominating Committee of the Board
nominated the individuals named below for election to our Board of
Directors, and information regarding the background and
qualifications of each of the nominees is set forth below. See
“Security Ownership of Certain Beneficial Owners and
Management” for additional information about the nominees,
including their ownership of securities issued by
Envela.
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Name
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Age
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Director Since
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Position
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John R. Loftus
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51
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2016
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Chairman of the Board, Chief Executive
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Officer and President
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Joel S. Friedman (1)
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51
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January 2017
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Lead Independent Director and
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Chairman of the Compensation Committee
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Alexandra C. Griffin (1)
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31
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January 2017
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Independent Director and Chairman of
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the Audit Committee
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Jim R. Ruth (1)
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56
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January 2017
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Independent Director and Chairman of
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the Compliance, Governance and
Nominating
Committee
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Allison M. DeStefano
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36
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March
2018
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Director
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(1)
Member
of the Audit Committee, Compensation Committee, and Compliance,
Governance and Nominating Committee.
5
The
following paragraphs summarize each nominee’s principal
occupation, business affiliations and other
information.
John R. Loftus
has served as Chief Executive Officer,
President and Chairman of the Board since December 12, 2016. Under
his guidance, the Company posted its third consecutive annual
profit in 2019. Prior to joining Envela, Loftus was the CEO of a
precious metals company until the end of 2014. In 2015 and 2016 he
acted primarily as an efficiency consultant focusing on optimizing
existing operations and cutting waste for the purpose of increasing
value. He also managed his personal real estate holdings during
this time. Mr. Loftus holds an M.B.A. from the SMU Cox School of
Business. The board concluded that Mr. Loftus should serve as a
director based on his previous leadership and industry
knowledge.
Joel S. Friedman
has served as Lead Independent Director and
Chairman of the Compensation Committee since January 18,
2017. Mr. Friedman has his undergraduate degree from the
University of North Texas and holds a Masters of Business
Administration from the SMU Cox School of Business. Mr.
Friedman brings a wealth of Operations and Technology experience.
Along with 20+ years of Senior Leadership in the Financial
Services space, he has also held CIO and COO positions for
companies in the Payment Processing Space-Century Payments and SaaS
space-OppMetrix. The board concluded that Mr. Friedman has the
leadership qualities and business knowledge to serve as
director.
Alexandra C. Griffin
has served as a director and as
Chairman of the Audit Committee since January 17, 2017. Ms. Griffin
has a Bachelor of Science Degree in Accounting from the University
of Texas at Arlington. She has been with PrimeLending since
December 2014 and is currently an Accounting Manager. Ms. Griffin
is a CPA skilled in financial analysis and financial statement
reporting in accordance with GAAP. The board has concluded that Ms.
Griffin should serve as director due to her training, skills and
business knowledge.
Jim R. Ruth
has served as a director and as Chairman of the
Compliance and Nominating Committee since January 17, 2017. Mr.
Ruth is currently the President and Chief Executive Officer of
OppMetrix, a position he has held since 2015. From 2010 to 2015, he
was the Executive Vice President-Sales and Marketing and Strategic
Planning of OppMetrix. He obtained his Bachelor of Science Degree
from the University of Michigan and holds a Masters of Business
Administration from the SMU Cox School of Business. The board has
concluded that Mr. Ruth qualifies to be a director of the Company
due to his business knowledge and leadership history.
Allison M. DeStefano
has served as a director since March
19, 2018. She is also the Campany’s Data Information and
Marketing Officer, a position she assumed in May 2019. Ms.
DeStefano filled numerous roles at Echo Environmental, LLC from
2013 until its purchase by an Envela subsidiary in May 2019. These
roles included serving as national sales director, client services,
marketing, communications, investment analysis, structuring and
execution and internal operations. A native of Buffalo, New York,
she studied art at the State University of New York and is
currently pursuing an M.B.A at the SMU Cox School of Business. The
board has concluded that Ms. DeStefano should serve as director due
to her business experience and training.
None of
the individuals listed above have been involved in a legal
proceeding as defined by Item 401(f) of Regulation
S-K.
6
Family Relationships
There are no family relationships among our directors, our
executive officers or our key employees.
Vote Required
Directors will be elected by a plurality of the votes cast by the
holders of our Common Stock voting in person, once authenticity is
established, or by proxy at the annual meeting. Abstentions and
broker non-votes will each be counted as present for purposes of
determining the presence of a quorum, but will have no effect on
the vote for election of directors.
THE BOARD OF DIRECTORS URGES YOU TO VOTE
“FOR”
EACH OF THE NOMINEES FOR DIRECTOR SET FORTH ABOVE.
7
S
ECURITY OWNERSHIP OF CERTAIN
BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership each
stockholder known by us to own beneficially more than five (5)
percent of our outstanding shares of Common Stock as of September
May 8, 2020. Common Stock beneficially owned and percentage
ownership as of May 8, 2020 was based on 26,924,381 shares
outstanding
.
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Title of
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Name and
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Amount
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Percent
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Sole
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Shared
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Sole
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Shared
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class
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Address of
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and nature
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of class
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Voting
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Voting
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Investment
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Investment
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beneficial
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of beneficial
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Power
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Power
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Power
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Power
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owner
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ownership
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John
R. Loftus (1)
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Common
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15850
Dallas Parkway
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19,180,187
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71.2
%
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(1
)
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(1
)
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(1
)
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(1
)
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Stock
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Dallas,
TX 75248
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(1)
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Based solely on information disclosed in the Schedule 13D/A,
jointly filed with the SEC on May 24, 2019 by
Eduro
Holdings, LLC (“Eduro”), N10TR, LLC
(“N10TR”) and John R. Loftus
.
Eduro and Mr Loftus reported shared
voting and dispositive power with respect to 6,365,460 shares.
N10TR and Mr. Loftus reported shared voting and dispositive power
with respect to 12,814,727 shares.
|
8
The
following table sets forth information with respect to beneficial
ownership of our Common Stock by each of our executive officers, by
each of our directors and nominees, and by all executive officers
and directors as a group as of May 8, 2020. Except as otherwise
noted, the address of each of the following beneficial owners is
c/o Envela Corporation, 13022 Preston Road, Dallas, TX
75240.
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Amount and
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nature of
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Sole
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Shared
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Name and Address of
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beneficial
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Percent of
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Sole voting
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Shared voting
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investment
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investment
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Title of Class
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beneificial owner
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ownership
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class
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power
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power
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power
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power
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Common
Stock
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John
R. Loftus
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19,180,187
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71.24
%
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-
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19,180,187
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-
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19,180,187
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Common
Stock
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Bret
A. Pedersen (1)
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47,603
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*
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47,603
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-
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-
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-
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|
Common
Stock
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Alexandra
C. Griffin
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2,050
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*
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2,050
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-
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-
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-
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|
Common
Stock
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Jim
R. Ruth
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10,000
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*
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10,000
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-
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-
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-
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Common
Stock
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Joel
S. Friedman
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8,267
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*
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8,267
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-
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-
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-
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Common
Stock
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Allison
M. DeStefano
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23,285
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*
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23,285
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-
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-
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-
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Common
Stock
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All Directors and Executive
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Officers
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19,271,392
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71.58
%
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91,205
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19,180,187
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-
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19,180,187
|
* less than 1%
(1)
Includes 5,000
shares held by family members, as to which he claims beneficial
ownership.
B
OARD OF DIRECTORS AND
COMMITTEES
Our
Board is currently composed of five directors. Our Board has
determined that current board members Joel S. Friedman, Alexandra
C. Griffin and Jim R. Ruth are “independent” under the
standards of the SEC and the Exchange. Under applicable SEC and
Exchange rules, the existence of certain “related
person” transactions above certain thresholds between a
director and us are required to be disclosed and preclude a finding
by our Board that the director is independent. In addition to
transactions required to be disclosed under SEC rules, our Board
considered certain other relationships in making its independence
determinations, and determined in each case that such other
relationships did not impair the director’s ability to
exercise independent judgment on our behalf.
Our
directors are elected at an annual meeting of our shareholders by
the holders of shares entitled to vote in the election of
directors, except in the case of vacancy, which can be filled by an
affirmative vote of a majority of the remaining directors. Each
director is elected to serve until the annual meeting of
shareholders following his election or until he chooses to resign
from his position.
9
Board Meetings
Our
Board meets as often as necessary to perform its duties and
responsibilities. During Fiscal 2019, the Board met four times in
person or telephonically. All members of our Board were present at
and participated in all meetings and all members attended the 2019
annual shareholder meeting. Management also regularly conferred
with directors between meetings regarding our affairs.
Audit Committee
The
Audit Committee, established in accordance with Section 3(a)(58)(A)
of the Exchange Act, consisting of all three independent directors
of our Board, is chaired by Alexandra C. Griffin, who is also an
“audit committee financial expert,” as that term is
defined in Item 407(d)(5)(ii) of Regulation S-K, promulgated under
the Securities Act. Ms. Griffin is “independent,” as
defined by the listing standards of the Exchange. The other members
of the Audit Committee are Joel S. Friedman and Jim R. Ruth. The
Audit Committee is primarily tasked with overseeing our financial
reporting process, evaluation of independent auditors and, where
appropriate, exercising its duty to replace our independent
auditors. Management is responsible for preparing our financial
statements, and the independent auditors are responsible for
auditing those financial statements. During Fiscal 2019, the Audit
Committee met four times in person or telephonically.
In
addition to their regular activities, the Audit Committee is
available to meet with the independent auditors, the Chief
Executive Officer or the Chief Financial Officer whenever a special
situation arises and meets as often as necessary to perform its
duties and responsibilities. The charter for the Audit Committee is
available under the “Governance” menu of our corporate
website at www.Envela.com. We certify that we have adopted a formal
written audit committee charter and that the Audit Committee
reviews and reassesses the adequacy of the charter
annually.
Audit Committee Report
The
Audit Committee has reviewed and discussed the audited financial
statements with management and Whitley Penn LLP (“Whitley
Penn”), our independent registered accounting firm, and all
matters required to be discussed by the American Institute of
Certified Public Accountants, Professional Standards, Vol. 1, AU
Section 380, as adopted by the Public Company Accounting Oversight
Board (“PCAOB”) in Rule 3200T.
The
Audit Committee has received written disclosures and the letter
from Whitley Penn required by applicable rules of the PCAOB
regarding Whitley Penn’s communications with the Audit
Committee concerning independence, and the Audit Committee has
discussed with Whitley Penn its independence.
Based
on the review and discussions noted in the preceding two
paragraphs, the Audit Committee recommended to the Board that the
audited financial statements for the year ended December 31, 2019
and 2018 be included in our annual report on Form 10-K with the
SEC.
10
All
three independent directors, Joel S. Friedman, Alexandra C. Griffin
and Jim R. Ruth, are members of the Audit Committee. The Audit
Committee acts pursuant to our audit Committee Charter. Each of the
members of the Audit Committee qualifies as an independent director
under the current listing standards of the exchange.
Compensation Committee
On
August 31, 2012, the Board approved the creation of a Compensation
Committee comprised of our independent directors. The Compensation
Committee is chaired by Joel S. Friedman and is primarily concerned
with reviewing, approving and determining the compensation of our
executive officers to ensure that we employ ethical compensation
standards and that our executive officers are fairly compensated
based upon their performance and contribution to us. The Committee
shall have the authority to delegate any of its responsibilities,
along with the authority to take action in relation to such
responsibilities, to one or more subcommittees as the Committee may
deem appropriate in its sole discretion. To the extent permitted by
applicable law, the Committee also may delegate to management
certain of its duties and responsibilities, including with respect
to the adoption, amendment, modification or termination of benefit
plans and with respect to the grant of stock options or other
equity awards under certain stock plans.
The
Compensation Committee meets as often as necessary to perform its
duties and responsibilities. During Fiscal 2019, the Compensation
Committee met four times in person or telephonically. We have
adopted a formal written Compensation Committee Charter, and the
Compensation Committee reviews and reassesses the adequacy of the
charter annually. The charter for the Compensation Committee is
available under the “Governance” menu of our corporate
website at www.Envela.com.
Compliance, Governance, and Nominating Committee
On
January 17, 2013, the Board approved the creation of a Nominating
and Corporate Governance Committee comprised of our independent
directors, and on February 20, 2015, the Board approved a
resolution, which changed the name of this committee to the
Compliance, Governance, and Nominating Committee, and also
delegated certain additional responsibilities to the committee. The
Compliance, Governance, and Nominating Committee is chaired by Jim
R. Ruth and is primarily concerned with matters relating to the
Company’s director nominations process and procedures,
developing and maintaining the Company’s corporate governance
policies, monitoring the Company’s compliance with its code
of conduct and ethics, and any related matters required by the
federal securities laws.
The
Compliance, Governance, and Nominating Committee is responsible for
assessing, developing and communicating with the Board of Directors
the appropriate criteria required for members of the Board of
Directors. This assessment includes factors such as judgment,
skill, diversity, integrity, experience with businesses and other
organizations of comparable size, the interplay of the
candidate’s experience with the experience of other Board
members, and the extent to which the candidate would be a desirable
addition to the Board of Directors and any committees of the Board
of Directors. The Committee will consider nominations of director
candidates validly made by stockholders in accordance with
applicable laws, rules and regulations and the provisions of the
Company’s charter documents. The Committee will review such
candidates in the same manner in which it evaluates new and
incumbent directors. See “Stockholder Communications and
Proposals” below for additional information on how to submit
a director nomination to the Board of Directors.
11
The
Compliance, Governance, and Nominating Committee meets as often as
necessary to perform its duties and responsibilities. During Fiscal
2019, the Compliance, Governance, and Nominating Committee met
once. We have adopted a formal written Compliance, Governance, and
Nominating Committee Charter, and the Compliance, Governance, and
Nominating Committee reviews and reassesses the adequacy of the
charter annually. The charter for the Compliance, Governance and
Nominating Committee is available under the “Investors”
menu on our corporate website at www.Envela.com. All nominees
standing for election as a member of our Board were selected by the
Compliance, Governance, and Nominating Committee, based on a review
of each individual’s background, credentials and business
experience.
The
Committee shall have the authority to delegate any of its
responsibilities, along with the authority to take action in
relation to such responsibilities, to one or more subcommittees as
the Committee may deem appropriate in its sole
discretion.
Leadership
Pursuant
to our bylaws, the Chairman of our Board shall be and is our Chief
Executive Officer. On June 11, 2014, the Board passed a resolution
to create the role of Lead Independent Director. The independent
directors elected Joel S. Friedman to fill that role. The Lead
Independent Director consults with the Chairman in setting the
schedule and agenda for Board meetings, coordinates, moderates and
presides over executive sessions of the independent directors, acts
as a liaison between the independent directors and the Chairman,
and assists the Board and officers in providing oversight for the
Company’s governance guidelines and policies. As noted above,
Mr. Friedman also serves as chairman of the Compensation
Committee.
Pursuant
to our bylaws, the Chairman of our Board and Chief Executive
Officer presides, when present, at all meetings of the shareholders
and at all meetings of our Board. The Chairman of our Board and
Chief Executive Officer generally supervises over our affairs, has
general and active control of all of our business and sees that all
orders and resolutions of our Board and our shareholders are
carried into effect. We have determined this leadership structure
appropriate given the need for a centralized model of
oversight.
Risk Oversight
Like
other companies, we face a variety of risks, including investment
risk, liquidity risk, and operational risk. Our Board believes an
effective risk management system should: (i) timely identify the
material risks that we face; (ii) communicate necessary
information with respect to material risks to senior executives
and, as appropriate, to the Board or the relevant committee of our
Board of Directors; (iii) implement appropriate and responsive risk
management strategies consistent with our risk profile; and, (iv)
integrate risk management into decision-making. Our Board is tasked
with overseeing risk oversight, and periodically meets with
management and advisors regarding the adequacy and effectiveness of
our risk management processes and to analyze the most likely areas
of future risk for us. In addition to the formal compliance
program, our Board encourages management to promote a corporate
culture that incorporates risk management into our corporate
strategy and day-to-day business operations.
12
Code of Business Conduct & Ethics and Related Party Transaction
Policy
We have
adopted a Code of Business Conduct and Ethics that applies to our
directors, officers and employees, as well as a Related Person
Transaction Policy, that applies to our directors (and director
nominees), executive officers (or persons performing similar
functions), and certain of our family members, affiliates,
associates and/or related persons, as well as stockholders owning
at least 5% of our Common Stock. The latest copies of our Code of
Business Conduct and Ethics and Related Person Transaction Policy
are available under the “Governance” menu on our
corporate website at www.Envela.com. Any transactions between us
and our officers, directors, principal shareholders, or other
affiliates have been on terms no less favorable to us than the
Board believes could be obtained from unaffiliated third parties on
an arms-length basis. We intend to disclose future amendments to
these policies, or waivers of such provisions, at the same location
on our website and also in public filings.
Shareholder Communication
Shareholders
may send communications to our Board, individual directors or
officers through our Investor Relations Department, Attn:
Secretary, c/o Envela, 2101 Beltline Road, Carrollton, TX 75006, by
phone at 972-587-4021, or via email at
investorrelations@envela.com. The Secretary will forward all
shareholder communications that, in his judgment, are appropriate
for consideration by members of our Board. Comments or questions
regarding our accounting, internal controls or auditing matters
will be referred to members of the Audit Committee. Comments or
questions regarding the nomination of directors and other corporate
governance matters will be referred to our Compliance, Governance,
and Nominating Committee.
EXECUTIVE
O
FFICERS
The
following table sets forth certain information regarding the
current executive officers of the Company:
|
|
|
|
|
|
Employee or
|
|
|
|
|
|
|
|
|
Director
|
|
|
|
Name
|
|
Age
|
|
Since
|
|
Position
|
|
|
|
|
|
|
|
|
|
|
|
John R. Loftus
|
|
50
|
|
2016
|
|
Chairman of the Board, President and
|
|
|
|
|
|
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
Bret A. Pedersen
|
|
59
|
|
2017
|
|
Chief Financial Officer
|
|
John R. Loftus
has served as Chief Executive Officer and
President and Chairman of the Board since December 12, 2016. Under
his guidance, the company posted its third consecutive annual
profit in 2019. Mr. Loftus holds an M.B.A. from the SMU Cox School
of Business.
13
Bret A. Pedersen
was elected as
Chief Financial Officer on January 17, 2017. Mr. Pedersen has
a bachelor’s degree in Accounting from Southwest Texas State
University. Having been a CPA for over twenty years, he has
extensive experience in reporting, analyzing, and financially
controlling companies. He served in the capacity as a financial
controller for various
companies
prior to Envela Corporation. Two years prior to being elected as
Chief Financial Officer for Envela Corporation, Mr. Pedersen was
the financial controller, from 2014 to 2016, for Payson Petroleum,
Inc., which is the parent company of Payson Operating, LLC. Prior
to Payson Petroleum, Mr. Pedersen was the financial controller,
from 2009 to 2014, for Iron Creek Ventures,
Inc.
None of the individuals listed above have been involved in a legal
proceeding as defined by Item 401(f) of Regulation
S-K.
EXECUTIVE
C
OMPENSATION
Our Board is responsible for establishing and administering our
executive compensation and employee benefit programs in the context
of our overall goals and objectives. This Board duty has been
delegated to the Compensation Committee of our Board of Directors
(the “Compensation Committee”) in accordance with the
Compensation Committee’s Charter. The Compensation Committee
reviews the executive compensation program at least annually and
approves appropriate modifications to executive officer
compensation, including specific amounts and types of compensation.
The Compensation Committee is responsible for establishing the
compensation of the CEO and CFO. The Compensation Committee
establishes the annual compensation of the non-employee directors
and oversees our equity compensation plans, including the
administration of our stock-based compensation plans.
The objectives of our compensation program are to: (i) provide a
competitive, comprehensive compensation package to attract, retain
and motivate highly talented personnel at all levels of our
organization; and, (ii) provide incentives and rewards for
implementing and accomplishing our short-term and long-term
strategic and operational goals and objectives. Therefore, we
strive to structure compensation packages that are competitive
within the industry, while maintaining and promoting our interests,
as well as the interests of our shareholders.
We believe that specific levels of executive compensation should
reflect the responsibilities of each position within our Company,
the relative value of the position and the competition for quality,
key personnel in our industry. Our executive compensation program
includes three primary components:
●
Base salary
. Base salary is the
guaranteed element of an executive’s annual cash
compensation. The level of base salary reflects the Compensation
Committee’s assessment of the employee’s long-term
performance, his or her skill set and the market value of that
skill set.
●
Annual cash bonus opportunities
.
Performance-based incentive cash bonuses are intended to reward
executives for achieving specific financial and operational goals
both at a corporate and an individual level.
●
Long-term incentive awards
. Long-term
incentives are provided through grants of stock options and
restricted stock units intended to encourage our executives to take
steps that they believe are necessary to ensure our long-term
success, and to align their interests with our other
shareholders.
14
Advice of Compensation Consultant
In
February 2015, as part of a set of corporate governance reforms
that the Board implemented, the Compensation Committee recommended
and the Board approved an Executive Compensation Policy. As part of
this policy, the Compensation Committee is required to retain an
independent compensation consultant at least once every three years
to review the Company’s compensation philosophy and plan to
ensure that the criteria, factors, and policies and procedures for
determining compensation comport with current best practices. Such
consultant shall make recommendations to the Compensation Committee
and/or the entire Board regarding any appropriate actions to better
align executive and director compensation with shareholder
interests and long-term value creation. Accordingly, in 2016, the
Compensation Committee retained an independent compensation
consultant, Paradox Compensation Advisors (“Paradox”),
to analyze our executive compensation program as compared to our
peers. Paradox also advised the Compensation Committee regarding
appropriate elements of a competitive executive compensation
structure, including fixed and at-risk elements, short-term and
long-term incentives, and cash and equity components. Paradox
reported the results of its analysis of our total executive
compensation packages for positions held by members of our
executive leadership team, as well as specific components of these
packages, as compared to executives holding similar positions as
similar-sized companies and/or labor market peers in related
industries.
Summary Compensation Table
The
following tables and discussion sets forth the compensation paid or
accrued to our Chief Executive Officer (or person acting in a
similar capacity), and our two most highly compensated executive
officers other than our Chief Executive Officer (“Named
Executive Officers”), for all services rendered to us by
these individuals in all capacities for Fiscal 2019 and Fiscal
2018.
|
Name and
|
Fiscal
|
|
|
Stock
|
Other
|
Total
|
|
Principal Position
|
Year
|
Salary ($)
|
Bonus ($)
|
Awards ($)
|
Compensation
|
Compensation
|
|
|
|
|
|
|
|
|
|
John
R. Loftus
|
2018
|
-
|
-
|
-
|
-
|
-
|
|
Chief
Executive
|
2019
|
-
|
-
|
-
|
-
|
-
|
|
Officer
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bret
A. Pedersen
|
2018
|
150,000
|
25,527
|
-
|
-
|
175,527
|
|
Chief
Financial
|
2019
|
165,000
|
-
|
-
|
-
|
165,000
|
|
Officer
|
|
|
|
|
|
|
_____________________
(1)
Mr.
Loftus has chosen not to receive a salary at this
time.
Employment Agreement
There are no Employment Agreements as of December 31, 2019;
however, each of the executive officers are beneficiaries of
indemnification agreements.
Outstanding Equity Awards at Fiscal Year End
There
are no Outstanding Equity Awards as of December 31,
2019.
15
Compensation of Directors
Beginning
in January 2017, the Compensation Committee recommended that
independent directors be paid cash compensation of $10,000 per
year, to be paid in $2,500 quarterly increments due on the day of
each quarterly board meeting. No other compensation is to be paid.
The full Board subsequently approved these
recommendations.
Our
employee directors receive no separate compensation for their
services as directors.
The
following table sets forth the total compensation paid to our
directors (other than directors who are Named Executive Officers
and whose compensation is described above under the heading Summary
Compensation Table) for their service on our Board and committees
of the Board during Fiscal 2019.
|
|
Director
|
|
|
|
|
|
Fees Paid in
|
Stock
|
All Other
|
|
|
Name
|
Cash ($)
|
Awards ($)(8)
|
Compensation
|
Total ($)
|
|
Joel
S. Friedman (1)
|
10,000
|
-
|
-
|
10,000
|
|
Alexandra
C. Griffin (2)
|
10,000
|
-
|
-
|
10,000
|
|
Jim
R. Ruth (3)
|
10,000
|
-
|
-
|
10,000
|
____________________________________
(1)
Joel S. Friedman
was elected as independent director on January 18,
2017.
(2)
Alexandra C.
Griffin was elected as independent director on January 17,
2017.
(3)
Jim R. Ruth was
elected as independent director on January 17, 2017.
Equity Compensation Plan Information
On June
21, 2004, our shareholders approved the adoption of the 2004 Stock
Option Plan (the “2004 Plan”) which reserved
1,700,000 shares of our Common Stock for issuance upon
exercise of options to purchase our Common Stock. We granted
options to purchase an aggregate of 1,459,634
shares of our Common Stock under
the 2004 Plan to certain of our officers, directors, key employees
and certain other individuals who provided us with goods and
services. Each
option
vested on either January 1, 2004 or immediately upon issuance
thereafter. The exercise price of each option issued pursuant to
the 2004 Plan is equal to the market value of our Common Stock on
the date of grant, as determined by the closing bid price for our
Common Stock on the Exchange on the date of grant or, if no trading
occurred on the date of grant, on the last day prior to the date of
grant on which our securities were listed and traded on the
Exchange. Of the options issued under the 2004 Plan, as of
December 31, 2018, 845,634 have been exercised, 599,000 have
expired, and 15,000 remain outstanding. No further issuances can be
made pursuant to the 2004 Plan.
16
On June
27, 2006, our shareholders approved the adoption of the 2006 Equity
Incentive Plan (the “2006 Plan”), which reserved
750,000 shares for issuance upon exercise of options to purchase
our Common Stock or other stock awards. We subsequently granted
options to purchase 150,000 shares of our Common Stock pursuant to
the 2006 Plan, of which 100,000 have been exercised and the
remaining 50,000 have expired as of December 31,
2019.
On
March 24, 2016, the Board awarded the three independent directors
on the Board at that time a total of 122,040 RSUs as compensation
for their Board service. One-fourth (or 30,510) of the RSUs vested
and were issued on March 31, 2016. The remaining RSUs vested
ratably and were exercisable at the end of every quarter (June 30,
September 30, and December 31, 2016). Each vested RSU converted
into one share of our Common Stock, par value $0.01, without
additional consideration, on the applicable vesting
date.
On
April 27, 2016, the Board awarded Matthew Peakes, the
Company’s former Chief Executive Officer, and Nabil J. Lopez,
the Company’s former Chief Financial Officer, a total of
75,000 and 50,000 RSUs, respectively, as compensation for their
service as executives of the Company. For Mr. Peakes, one-fourth
(or 18,750), and for Mr. Lopez, one-fourth (or 12,500) of the RSUs
were to vest ratably in equal annual installments over a four year
period beginning on April 27, 2017, subject to a continued status
as an employee on each such date and other terms and conditions set
forth in the RSU Award Agreement, dated April 27, 2016. Each vested
RSU was convertible into one share of our Common Stock, par value
$0.01, without additional consideration. Upon termination of
service of the employee, other than by death or disability, any
RSUs that have not vested will be forfeited and the award of such
units shall terminate. As a result of his resignation effective
August 15, 2016, all 50,000 RSUs awarded to Mr. Lopez were
forfeited. As a result of the continued employment of Matthew
Peakes on April 27, 2017, his first annual installment (or 18,750)
RSUs became vested. As a result of Matthew Peakes resignation
effective June 30, 2017, all further service RSUs awarded to Mr.
Peakes were forfeited. In addition to the RSU grant above for
Matthew Peakes and Nabil Lopez, the compensation committee granted
an additional 75,000 and 50,000, respectively, performance based
RSUs to the executives that were to vest ratably over a four year
period beginning April 27, 2017 if certain financial performance
criteria are achieved. As a result of his resignation effective
August 15, 2016, all additional 50,000 RSUs awarded to Mr. Lopez
were forfeited. As a result of the financial performance being
below the minimum level, no RSUs were vested on the first annual
installment. As a result of Matthew Peakes resignation effective
June 30, 2017, all performance RSUs awarded to Mr. Peakes were
forfeited.
Subsequent
to such grants, the 2006 Plan expired, as a result, no further
issuances can be made pursuant to the 2006 Plan.
17
On
December 7, 2016, our shareholders approved the adoption of the
2016 Equity Incentive Plan (the “2016 Plan”), which
reserved 1,100,000 shares for issuance pursuant to awards issued
thereunder. As of December 31, 2019, no awards had been made under
the 2016 Plan.
The
following table summarizes options to purchase shares of Common
Stock, and RSUs, outstanding as of December 31,
2019:
|
Plan Category
|
Number of
securities to be
issued upon
exercise of options
|
Weighted average
exercise price of
outstanding options
|
Numbers of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
|
|
|
|
|
|
|
Equity
compensation plans approved by
|
15,500
|
2.17
|
1,100,000
|
|
security
holders
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by
|
None
|
|
None
|
|
security
holders
|
15,500
|
|
1,100,000
|
____________________
(1)
Pursuant to the
terms of individual Restricted Stock Unit Award Agreements, such
RSUs will vest over time, or subject to performance conditions
contingent upon the continued service to the Company by the
recipient. Each vested RSU may be converted into one share of
common stock, par value $0.01, of the Company without additional
consideration (other than such conversion and reduction in the
number of RSUs held).
C
ERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
From
time to time, we engage in business transactions with our
shareholders and other related parties. Set forth below in the
section entitled “Related Party Transactions” is a
summary of such transactions.
Related Party Transactions
Envela
has a corporate policy governing the identification, review,
consideration and approval or ratification of transactions with
related persons, as that term is defined in the Instructions to
Item 404(a) of Regulation S-K, promulgated under the Securities Act
(“Related Party”). Under this policy, all Related Party
transactions are identified and approved prior to consummation of
the transaction to ensure they are consistent with the
Company’s best interests and the best interests of its
stockholders. Among other factors, Envela’s Board considers
the size and duration of the transaction, the nature and interest
of the of the Related Party in the transaction, whether the
transaction may involve a conflict of interest and if the
transaction is on terms that are at least as favorable to the
Company as would be available in a comparable transaction with an
unaffiliated third party. Envela’s Board reviews all Related
Party transactions at least annually to determine if it is in
Company’s best interests and the best interests of
Envela’s stockholders to continue, modify, or terminate any
of the Related Party transactions. The Company’s Related
Person Transaction Policy is available for review in its entirety
under the “Investors” menu of the Company’s
corporate relations website at
www.Envela.com
.
18
Through a series of transactions beginning in 2010, Elemetal, NTR
and Truscott (“Related Entities”) became the largest
shareholders of our Common Stock. NTR transferred all of its Common
Stock to Eduro Holdings, LLC (“Eduro”) on August 29,
2018. Elemetal has been the Company’s primary refiner of our
scrap in Fiscal 2018 accounting for 11% of sales and 2% of
purchases, and Elemetal was our primary refiner and bullion partner
accounting for 17% of sales and 11% of purchases in the same period
of Fiscal 2017. On December 9, 2016, Envela and Elemetal closed the
transactions contemplated by the Debt Exchange Agreement whereby
the Company issued Elemetal 8,536,585 shares of its common stock
and a warrant to purchase an additional 1,000,000 shares to be
exercised within two years after December 9, 2016, in exchange for
the cancellation and forgiveness of $3,500,000 of trade payables
owed to Elemetal as a result of bullion-related transactions. The
warrant to purchase an additional 1,000,000 shares expired in
December, 2018 and was not exercised. As of December 31, 2018,
the Company was obligated to pay $3,088,973 to Elemetal as a trade
payable, and had a $0 receivable from Elemetal. As of
December 31, 2017, the Company was obligated to pay $3,902,293
to Elemetal as a trade payable, and had a $39,215 receivable from
Elemetal.
For the year ended
December 31, 2018 and 2017, the Company paid the Related
Entities $149,540 and $199,243, respectively, in interest on the
Company’s outstanding payable.
On July 19, 2012, the Company entered into the Loan Agreement
with NTR, pursuant to which NTR agreed to provide the Company with
a guidance line of revolving credit in an amount up to $7,500,000.
The Loan Agreement anticipated termination–at which point all
amounts outstanding thereunder would be due and payable–upon
the earlier of: (i) August 1, 2014; (ii) the date that is
twelve months after the Company receives notice from NTR demanding
the repayment of the Obligations; (iii) the date the
Obligations are accelerated in accordance with the terms of the
Loan Agreement; or, (iv) the date on which the commitment
terminates under the Loan Agreement. In connection with the Loan
Agreement, the Company granted a security interest in the
respective personal property of each of its subsidiaries. The loan
carried an interest rate of two percent (2%) per annum for all
funds borrowed pursuant to the Loan Agreement. Proceeds received by
the Company pursuant to the terms of the Loan Agreement were used
for repayment of all outstanding financial obligations incurred in
connection with that certain Loan Agreement, dated as of
December 22, 2005, between the Company and Texas Capital Bank,
N.A., and additional proceeds were used as working capital in the
ordinary course of business. On February 25, 2014, we entered into
a one-year extension of the Loan Agreement with NTR, extending the
termination date to August 1, 2015, and on February 4, 2015,
we entered into an additional two-year extension, extending the
termination date to August 1, 2017.
On December 9, 2016, the
Company and NTR closed the transactions contemplated by the Debt
Exchange Agreement whereby Envela issued NTR 5,948,560 shares of
common stock in exchange for the cancellation and forgiveness of
the loan principal and accrued interest totaling
$2,438,909
.
On May
20, 2019, ECHG, LLC (“ECHG”) (f/k/a Corrent Resources,
LLC), a wholly owned subsidiary of the Company, entered into an
asset purchase agreement (the “Purchase Agreement”)
with each of Echo Environmental, LLC and its wholly owned
subsidiary ITAD USA, LLC (collectively, the “Echo
Entities”), pursuant to which the Echo Entities agreed to
sell and ECHG, LLC agreed to purchase all of the assets, rights and
interests of the Echo Entities (the “Acquired Assets”)
for $6,925,978.00 (the “Echo Transaction”). The Echo
Entities were wholly owned subsidiaries of Elemetal, LLC
(“Elemetal”). John R. Loftus (“Loftus”) is
Envela’s CEO, President and Chairman of the Board, and owned
approximately one-third of the equity interests of Elemetal prior
to the transactions reported herein. In connection with the Echo
Transaction, on May 20, 2019, ECHG executed and delivered to
Loftus, a promissory note (the “ECHG Note”), pursuant
to which ECHG borrowed from Loftus $6,925,979.00, the proceeds of
which were used to purchase of the Acquired Assets. At the same
time, Loftus purchased the outstanding shares owned by Elemetal on
May 20, 2019, therefore, after that date, making Elemetal and
subsidiaries no longer Related Parties.
Also on
May 20, 2019, DGSE LLC (f/k/a DGSE Companies, LLC), a wholly owned
subsidiary of the Company, executed and delivered to Loftus a
promissory note (the “DGSE LLC Note”), pursuant to
which DGSE LLC borrowed from Loftus $3,074,021.00, the proceeds of
which were used to pay in full the approximately $3,074,021.00 debt
owed by the Company to Elemetal or its subsidiaries as a result of
bullion-related transactions. Following the transactions reported
herein, Loftus no longer owns any equity interests in
Elemetal.
19
PROPOSAL
T
WO
RATIFICATION OF THE APPOINTMENT OF
WHITLEY PENN AS INDEPENDENT AUDITORS OF ENVELA
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020
The Audit Committee has appointed Whitley Penn as our independent
registered accountants to audit our financial statements for the
fiscal year ending December 31, 2020, and has further directed that
management submit the selection of independent registered
accountants for ratification by our stockholders at the annual
meeting. Stockholder ratification of the selection of Whitley Penn
is not required by our bylaws or otherwise. However, we are
submitting the selection of Whitley Penn to the stockholders for
ratification as a matter of good corporate practice. If the
stockholders fail to ratify the selection, the Audit Committee will
reconsider whether or not to retain Whitley Penn. Even if the
selection is ratified, the Audit Committee in its discretion may
direct the appointment of a different independent accounting firm
at any time during the year if it is determined that such a change
would be in the best interests of Envela and our
stockholders.
Representatives of the firm of Whitley Penn are expected to be
present at our annual meeting and will have an opportunity to make
a statement, if they so desire, and will be available to respond to
appropriate questions.
In accordance with the requirements of the Sarbanes-Oxley Act of
2002 and the Audit Committee’s charter, all audit and
audit-related work and all non-audit work performed by our
independent accountants, Whitley Penn, is approved in advance by
the Audit Committee, including the proposed fees for such work. The
Audit Committee is informed of each service actually
rendered.
The following table presents fees for the audits of our annual
Consolidated Financial Statements for Fiscal 2019 and Fiscal
2018.
|
Type of Fees
|
2019
|
2018
|
|
Audit
Fees
|
$
295,000
|
$
190,500
|
|
Tax
Fees
|
17,100
|
10,700
|
|
Total
|
312,100
|
$
201,200
|
The amounts for audit fees include generally the fees charged for:
(i) the audit of our annual consolidated financial statements
included in the Company’s Form 10-K; and, (ii) the reviews of
our quarterly consolidated financial statements included in the
Company’s Forms 10-Q. The tax fees were primarily for tax
return preparation and tax-related services, including the
preparation of all applicable state tax returns.
All audit services were pre-approved by the Audit Committee, which
concluded that the provision of such services by Whitley Penn LLP
was compatible with the maintenance of that firm’s
independence in the conduct of its auditing functions. The Audit
Committee’s pre-approval policy: (i) identifies the guiding
principles that must be considered by the audit committee in
approving services to ensure that Whitley Penn LLP’s
independence is not impaired; (b) describes the audit, and tax
services that may be provided; and (c) sets forth pre-approval
requirements for all permitted services. Under the policy, all
services to be provided by Whitley Penn LLP must be pre-approved by
the Audit Committee.
20
We originally engaged the firm of Whitley Penn in May 2012, as our
principal independent accountant to audit our financial statements.
The members of our Board of Directors unanimously approved the
engagement of Whitley Penn. Prior to the engagement of Whitley
Penn, neither we nor any person on our behalf consulted Whitley
Penn regarding either: (i) the application of accounting principles
to a specified completed or proposed transaction or the type of
audit opinion that might be rendered on our financial statements;
or, (ii) any matter that was the subject of a disagreement (as
defined in Item 304(a)(1)(iv) of Regulation S-K, promulgated under
the Securities Act and the related instructions to such Item) or a
reportable event (as defined in Item 304(a)(1)(v) of Regulation
S-K, promulgated under the Securities Act).
Vote Required
The affirmative vote of a majority of the votes cast at the Annual
Meeting, assuming a quorum is present, is required for the
ratification of our independent registered
accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE
RATIFICATION OF THE APPOINTMENT OF WHITLEY PENN AS INDEPENDENT
AUDITORS OF ENVELA FOR THE FISCAL YEAR ENDING DECEMBER 31,
2020.
21
PROPOSAL
T
HREE:
ADJOURNMENT OF THE ANNUAL MEETING TO SOLICIT ADDITIONAL PROXIES IN
FAVOR OF PROPOSALS ONE THROUGH THREE
At the
Annual Meeting, we may ask stockholders to vote to adjourn the
Special Meeting to solicit additional proxies in favor of the
approval of Proposals One and Two if we have not obtained
sufficient votes to approve any such proposal. Approval of the
Adjournment Proposal requires the affirmative vote of a majority of
the votes cast on the matter, assuming a quorum is present at the
meeting. As this vote is a non-routine matter under applicable
rules, your bank, broker or other nominee cannot vote without
instructions from you.
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE PROPOSAL
TO ADJOURN THE ANNUAL MEETING TO SOLICIT ADDITIONAL PROXIES IN
FAVOR OF PROPOSALS ONE AND TWO.
22
S
ECTION 16(a) BENEFICIAL
OWNERSHIP
REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires our directors and officers and
persons who beneficially own more than ten percent of our common
stock to file with the SEC reports of beneficial ownership on Forms
3 and changes in beneficial ownership of our common stock and other
equity securities on Forms 4 or Forms 5. SEC regulations require
all officers, directors and greater than 10% stockholders to
furnish us with copies of all Section 16(a) forms they
file.
Based
solely upon a review of Forms 3 and 4 and amendments thereto
furnished to us during, and Forms 5 and amendments thereto
furnished to us with respect to, Fiscal 2019, and any written
representations from reporting persons that no Form 5 is required,
the following table sets forth information regarding each person
who, at any time during Fiscal 2019, was a director, officer or
beneficial owner of more than 10% of our common stock who failed to
file on a timely basis, as disclosed in the above forms, reports
required by Section 16(a) of the Exchange Act during Fiscal 2019 or
prior fiscal years:
|
|
|
Number of
|
|
|
|
|
Transactions Not
|
Known Failures
|
|
|
Number of
|
Reported On a
|
to File a Required
|
|
Name
|
Late Reports
|
Timely Basis
|
Form
|
|
John
R. Loftus
|
0
|
0
|
0
|
|
Allison
M. DeStefano
|
0
|
0
|
0
|
|
Joel
S. Friedman
|
0
|
0
|
0
|
|
Alexandra
C. Griffin
|
0
|
0
|
0
|
|
Jim
R. Ruth
|
0
|
0
|
0
|
|
Bret
A. Pedersen
|
0
|
0
|
0
|
STO
CKHOLDER COMMUNICATIONS AND
PROPOSALS
We have adopted a formal process by which stockholders, or other
interested parties, may communicate with our Board of Directors or
any of its members. Our Board recommends that stockholders, or
other interested parties, initiate any communications with the
Board in writing and send them in care of the investor relations
department by mail to our principal offices at 13022 Preston Road,
Dallas, Texas 75240. This centralized process will assist the Board
in reviewing and responding to such communications in an
appropriate manner. The name of any specific intended Board
recipient should be noted in the communication. The Board of
Directors has instructed the investor relations department to
forward such correspondence only to the intended recipients;
however, the Board has also instructed the investor relations
department, prior to forwarding any correspondence, to review such
correspondence and, in its discretion, not to forward certain items
if they are deemed of a personal, illegal, commercial, offensive or
frivolous nature or otherwise inappropriate for the Board’s
consideration. In such cases, that correspondence will be forwarded
to our corporate secretary for review and possible response. This
information is also contained on our website at
www.Envela.com
.
23
Stockholder proposals made in compliance with Rule 14(a)-8 of the
Exchange Act to be presented at our Annual Meeting of Stockholders
to be held in 2020, for inclusion in our proxy statement and form
of proxy relating to that meeting, must be received on or before
March 1, 2020, unless the Annual Meeting has been changed by more
than thirty days from the date of the 2020 Annual Meeting, in which
case stockholder proposals must be received by a reasonable time
before the Company begins to print and send its proxy materials.
Stockholder proposals made outside the process described in Rule
14(a)-8 of the Exchange Act must be received by May 1, 2020. Such
stockholder proposals must comply with our bylaws and the
requirements of Regulation 14A of the Exchange
Act.
Rule 14a-4 of the Exchange Act governs our use of
discretionary proxy voting authority with respect to a stockholder
proposal that is not addressed in the proxy statement. With respect
to our 2020 Annual Meeting of Stockholders, if we are not provided
notice of a stockholder proposal by May 22, 2020, we will be
permitted to use our discretionary voting authority when the
proposal is raised at the meeting, without any discussion of the
matter in the proxy statement.
P
ERSONS MAKING THE
SOLICITATION
The enclosed proxy is solicited on behalf of our Board of
Directors. We will pay the cost of soliciting proxies in the
accompanying form. Our officers may solicit proxies by mail,
telephone, telegraph or fax. Upon request, we will reimburse
brokers, dealers, banks and trustees, or their nominees, for
reasonable expenses incurred by them in forwarding proxy material
to beneficial owners of our shares of Common Stock.
O
THER MATTERS
The Board of Directors is not aware of any matter to be presented
for action at the meeting other than the matters set forth herein.
Should any other matter requiring a vote of stockholders arise, the
proxies in the enclosed form confer upon the person or persons
entitled to vote the shares represented by such proxies’
discretionary authority to vote the same in accordance with their
best judgment in the interest of Envela.
The Company has adopted a process for mailing the 2019 Annual
Report and the 2020 Proxy Statement called
“householding,” which has been approved by the
Securities and Exchange Commission. Householding means that
stockholders who share the same last name and address will receive
only one copy of the 2019 Annual Report and Proxy Statement, unless
the Company receives contrary instructions from any stockholder at
that address. Envela will continue to mail a proxy card to each
stockholder of record.
If you prefer to receive multiple copies of the 2019 Annual Report
and the 2020 Proxy Statement at the same address, additional copies
will be promptly provided to you upon your request. If you are a
stockholder of record, requests for additional copies should be
directed to 13022 Preston Road, Dallas, TX 75240, Attention: Bret
Pedersen, Telephone: 972-587-4024. Eligible stockholders of record
receiving multiple copies of the 2019 Annual Report and the 2020
Proxy Statement can request householding by contacting the Company
in the same manner. Envela has undertaken householding to reduce
printing costs and postage fees, and we encourage you to
participate.
24
If you are a beneficial owner, you may request additional copies of
the 2019 Annual Report and Proxy Statement or you may request
householding by notifying your broker, bank or
nominee.
Current and prospective investors can also access free copies of
our 2019 Annual Report, the 2020 Proxy Statement and other
financial information on our Investor Relations section of our web
site at www.Envela.com.
ANNNUAL REPORT ON FORM 10-K
A copy of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2019, including financial statements, accompanies
this proxy statement. The Annual Report is not to be regarded as
proxy soliciting material or as a communication by means of which
any solicitation is to be made. A copy of our Annual Report on Form
10-K for the fiscal year ended December 31, 2019, filed with
the SEC, is available (excluding exhibits) without cost to
stockholders upon written request made to Investor Relations,
Envela Corporation, 13022 Preston Road, Dallas, TX 75240 or online
at our website: www.Envela.com.
|
|
|
|
By Order of the Board of Directors,
|
|
|
|
|
|
/s/ Bret A. Pedersen
|
|
|
Bret A. Pedersen
|
|
|
Chief Financial Officer
|
|
April 30, 2020
25
TABLE OF CONTENTS
PROXY STATEMENTVOTING PROCEDURES AND REVOCABILITY OF PROXIESPROPOSAL 1: ELECTION OF DIRECTORSSECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTBOARD OF DIRECTORS AND COMMITTEESEXECUTIVE OFFICERSEXECUTIVE COMPENSATIONCERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSPROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF WHITLEY PENN AS INDEPENDENT AUDITORS OF ENVELA FOR THE FISCAL YEAR ENDING DECEMBER 31, 2019PROPOSAL 3: ADJOURNMENT OF THE ANNUAL MEETING TO SOLICIT ADDITIONAL PROXIES IN FAVOR OF PROPOSALS ONE THROUGH TWOSECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEPERSONS MAKING THE SOLICITATIONOTHER MATTERS