LIGHTPATH TECHNOLOGIES INC
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No. )
Filed
by the Registrant
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Filed
by a Party other than the Registrant
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Check
the appropriate box:
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☐
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Preliminary
Proxy Statement
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Confidential,
For use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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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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LIGHTPATH TECHNOLOGIES, INC.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
Payment
of Filing Fee (Check the appropriate box):
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No fee
required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(set forth the amount on
which the filing fee is calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid
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Fee
paid previously with preliminary materials:
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
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(1)
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Amount
previously paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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LightPath Technologies, Inc.
Annual Meeting of Stockholders
November 14, 2019
Notice and Proxy Statement
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On Thursday, November 14, 2019
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Dear Fellow
LightPath Stockholders:
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October 1,
2019
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It is
our pleasure to invite you to this year’s Annual Meeting of
the Stockholders of LightPath Technologies, Inc. The meeting will
be held on Thursday, November 14, 2019 at 11:00 a.m. EDT at the
Hyatt Regency Orlando International Airport Hotel. The address is
9300 Airport Boulevard, Orlando, Florida 32827. The purpose of the
Annual Meeting is to vote on the following:
1.
To elect Class I
directors to our Company’s Board of Directors;
2.
To hold a
stockholder advisory vote on the compensation of our named
executive officers disclosed in this Proxy Statement under the
section titled “Executive Compensation,” including the
compensation tables and other narrative executive compensation
disclosures therein, required by Item 402 of Securities and
Exchange Commission Regulation S-K (the “say-on-pay
vote”);
3.
To ratify the
selection of Moore Stephens Lovelace, P.A. (“Moore Stephens
Lovelace”), as our independent registered public accounting
firm; and
4.
To transact such
other business as may properly come before the Annual Meeting or
any postponement or adjournment thereof.
You
will also have the opportunity to hear what has happened in our
business in the past year and to ask questions.
Only
stockholders of record at the close of business on September 18,
2019 will be entitled to receive notice of and to vote at the
Annual Meeting or any postponement or adjournment thereof. The
enclosed Notice and Proxy Statement contain details concerning the
foregoing items and any other business to be conducted at the
Annual Meeting, as well as information on how to vote your shares.
Other detailed information about us and our operations, including
our audited financial statements, are included in our Annual Report
on Form 10-K (the “Annual Report”), a copy of which is
enclosed. We urge you to read and consider these documents
carefully.
Your
vote is very important. Whether or not you expect to attend the
Annual Meeting, we urge you to cast your vote and submit your proxy
in advance of the Annual Meeting. You can vote in person at the
Annual Meeting or by internet, telephone, or mail as
follows:
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By Internet
Visit
www.AALvote.com/LPTH
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By Phone
Call
the telephone number on your proxy card, voting instruction form,
or notice
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By Mail
Sign,
date, and return the enclosed proxy card or voting instruction
form
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In Person
Attend
the Annual Meeting in Orlando
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/s/ J. James Gaynor
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/s/ Robert Ripp
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J.
James Gaynor
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Robert
Ripp
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President
& Chief Executive Officer, Director
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Chairman
of the Board
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2603 Challenger Tech Court, Suite 100 * Orlando, Florida USA 32826
* 407-382-4003
1
LIGHTPATH TECHNOLOGIES, INC.
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To be held November 14, 2019
This
Proxy Statement, and the enclosed proxy card, is solicited by the
Board of Directors (the “Board”) of LightPath
Technologies, Inc., a Delaware corporation, for use at the Annual
Meeting of Stockholders (the “Annual Meeting”) to be
held Thursday, November 14, 2019 at 11:00 a.m. EDT, or at any
adjournments or postponements thereof, for the purposes set forth
in the accompanying Notice of Annual Meeting of Stockholders. The
Annual Meeting will be held at 11:00 a.m. EDT at the Hyatt Regency
Orlando International Airport Hotel located at 9300 Airport
Boulevard, Orlando, Florida 32827.
References in this
Proxy Statement to “LightPath,” “we,”
“us,” “our,” or the “Company”
refers to LightPath Technologies, Inc.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 14,
2019
.
This
Proxy Statement, the enclosed proxy card, and the Annual Report for
the fiscal year ended on June 30, 2019 are all available on our
website at
www.lightpath.com
.
With respect to the Annual Meeting and all of our future
stockholder meetings, please contact Donald Retreage at
1-800-472-3486 ext. 329, or
dretreage@lightpath.com
,
to request a copy of the proxy statement, annual report, or proxy
card, or to obtain directions to such meeting.
What is a proxy?
A proxy
is your legal designation of another person to vote the stock you
own and are entitled to vote. The person you designate is your
“proxy,” and, by submitting a proxy card, you give the
proxy the authority to vote your shares. We have designated Robert
Ripp, Chairman of the Board, as proxy for the Annual
Meeting.
Why am I receiving these materials?
You are
receiving this Proxy Statement and the enclosed proxy card because
our Board is soliciting your proxy to vote at the Annual Meeting
for the purposes set forth herein. This Proxy Statement provides
you with information on the matters to be voted on at the Annual
Meeting as well as instructions on how to vote.
We
intend to mail this Proxy Statement and accompanying proxy card on
or about October 1, 2019 to all stockholders of record entitled to
vote at the Annual Meeting.
Who can vote at the Annual Meeting?
You can
vote if, as of the close of business on September 18, 2019 (the
“Record Date”), you were a stockholder of record of the
Company’s Class A common stock, par value $0.01 per share
(the “Class A common stock”), our only class of common
stock issued and outstanding. On the Record Date, there were
25,827,265 shares of Class A common stock issued and
outstanding.
Stockholder of Record: Shares Registered in Your Name
If on
the Record Date, your shares were registered directly in your name
with our transfer agent, Computershare Trust Company, N.A., then
you are a stockholder of record. As a stockholder of record, you
may vote in person at the Annual Meeting or vote by proxy. Whether
or not you plan to attend the Annual Meeting, we urge you to vote
by written proxy, telephone, or the Internet to ensure your vote is
counted. Even if you vote by proxy, you may still vote in person if
you are able to attend the Annual Meeting.
2
Beneficial Owner: Shares Registered in the Name of a Broker or
Bank
If on
the Record Date, your shares were held in an account at a brokerage
firm, bank, dealer, or other similar organization, then you are the
beneficial owner of shares held in “street name” and
these proxy materials are being forwarded to you by that
organization. The organization holding your account is considered
the stockholder of record for purposes of voting at the Annual
Meeting. As a beneficial owner, you have the right to direct your
broker or other agent on how to vote the shares in your account. If
you do not direct your broker how to vote your shares, the broker
will be entitled to vote the shares with respect to
“discretionary” items but will not be permitted to vote
the shares with respect to “non-discretionary” items
(resulting in a “broker non-vote”). The ratification of
the appointment of our independent registered public accounting
firm under Proposal 3 is a “discretionary” matter. The
election of directors under Proposal 1, and the advisory say-on-pay
vote under Proposal 2 are “non-discretionary”
items.
You are
also invited to attend the Annual M
eeting. However, since you are not the stockholder
of record, you may not vote your shares in person at the Annual
Meeting unless you request and obtain a valid proxy from your
broker or other agent.
How many votes do I have?
On each
matter to be voted upon, you have one vote for each share of Class
A common stock you owned as of the Record Date.
What am I voting on?
The
following matters are scheduled for the Annual Meeting: (i) the
election of three Class I directors to our Board; (ii) an advisory
say-on-pay vote; and (iii) the ratification of the selection of
Moore Stephens Lovelace as our independent registered public
accounting firm. A vote may also be held on any other business as
may properly come before the Annual Meeting or any postponement or
adjournment thereof, although there is no other business
anticipated to come before the Annual Meeting.
What are my voting choices for each of the items to be voted on at
the Annual Meeting?
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Proposal
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Board
Recommendation
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Voting
Choices
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Vote Required
for Adoption
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Effect of
Abstentions
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Effect of Broker
Non-Votes
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1 – Election of Director Nominees
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FOR
each nominee
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●
Vote
“For” any or all of the nominees listed
●
Vote
“Withhold” to withhold your vote for any or all of the
nominees listed
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Plurality
of the votes of the shares present in person or by proxy and
entitled to vote at the Annual Meeting
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No
effect
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No
effect
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2 – Approval of the compensation of our named executive
officers
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FOR
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●
Vote
“For” the approval of the compensation of our named
executive officers
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Vote
“Against” the approval of the compensation of our named
executive officers
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Abstain from voting
on this proposal
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Approved,
on a non-binding advisory basis, if a majority of the shares
present in person or represented by proxy and entitled to vote
support the proposal
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Treated
as votes against proposal
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No
effect
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3 – Ratification of the appointment of Moore Stephens
Lovelace as our independent registered public accounting
firm
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FOR
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●
Vote
“For” the ratification of the appointment
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Vote
“Against” the ratification of the
appointment
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Abstain from voting
on this proposal
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Approved,
on a non-binding advisory basis, if a majority of the shares
present in person or represented by proxy and entitled to vote
support the proposal
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Treated
as votes against proposal
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Brokers
have discretion to vote
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3
How do I vote?
Stockholder of Record: Shares Registered in Your Name
If you
are a stockholder of record, you may vote using the following
methods:
●
In
Person.
To vote in person, come to the Annual Meeting and we
will give you a ballot when you arrive.
●
By Internet or Telephone.
To vote by
proxy via the Internet, simply follow the instructions described on
the notice or proxy card. To vote by proxy via the telephone within
the United States and Canada, use the toll-free number on the
notice or proxy card.
●
By Mail.
To vote by mail using the proxy
card, simply complete, sign, and date the enclosed proxy card and
return it promptly in the envelope provided. If you return your
signed proxy card to us before the Annual Meeting, we will vote
your shares as you direct.
Whether
or not you plan to attend the meeting, we urge you to vote by proxy
to ensure your vote is counted. You may still attend the meeting
and vote in person if you have already voted by proxy.
Beneficial Owner: Shares Registered in the Name of Broker or
Bank
If you
are a beneficial owner of shares registered in the name of your
broker, bank, or other agent, you can vote as follows:
●
In Person.
To vote in person at the
Annual Meeting, you must obtain a valid proxy from your broker,
bank, or other agent. Follow the instructions from your broker or
bank included with these proxy materials, or contact your broker or
bank to request a proxy form.
●
By Internet or Telephone.
You may vote
through the Internet or by telephone only if your broker, bank, or
other agent makes these methods available, in which case the
instructions will be included with the proxy
materials.
●
By Mail.
You should have received a
proxy card and voting instructions with these proxy materials from
the broker, bank, or other agent holding your shares rather than
from us. To vote by mail, simply complete and mail the proxy card
or voting instruction form to ensure that your vote is
counted.
What if I am a stockholder of record and return a proxy card but do
not make specific choices?
You
should specify your choice for each matter on the proxy card. If
you return a signed and dated proxy card without marking any voting
selections, your shares will be voted:
●
FOR the nominees
listed under Proposal 1;
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FOR the
compensation of our named executive officers under Proposal 2;
and
●
FOR the
ratification of Moore Stephens Lovelace as our independent
registered public accounting firm under Proposal 3.
If any
other matter is properly presented at the meeting, your proxy (the
individual named on your proxy card) will vote your shares using
his or her best judgment.
4
What if I am a beneficial owner and do not give voting instructions
to my broker?
If you
fail to complete a proxy card or provide your broker with voting
instructions at least ten days before the meeting, your broker will
be unable to vote on the non-discretionary matters. Your broker may
use his or her discretion to cast a vote on any other routine or
discretionary matter.
Who is paying for this proxy solicitation?
We will
pay for the entire cost of soliciting proxies. In addition to these
mailed proxy materials, our directors, officers, and employees may
also solicit proxies by mail, in person, by telephone, or by other
means of communication. Directors, officers, and employees will not
be paid any additional compensation for soliciting proxies. We will
also reimburse brokerage firms, banks, and other agents for the
cost of forwarding proxy materials to beneficial
owners.
What does it mean if I receive more than one proxy
card?
If you
receive more than one proxy card, your shares are registered in
more than one name or are registered in different accounts. Please
complete, sign, and return
each
proxy card to ensure that all of
your shares are voted.
What is “householding”?
The
Securities and Exchange Commission (the “SEC”) has
adopted rules that permit companies and intermediaries such as
brokers to satisfy the delivery requirements for proxy statements
with respect to two or more security holders sharing the same
address by delivering a single proxy statement addressed to those
security holders. This process, which is commonly referred to as
“householding,” potentially means convenience for
security holders and cost savings for companies.
A
number of brokers with account holders who are LightPath
stockholders will be “householding” our proxy
materials. A single proxy statement will be delivered to multiple
stockholders sharing an address unless contrary instructions have
been received from the affected stockholders. Once you have
received notice from your broker or us that they will be
“householding” communications to your address,
“householding” will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in “householding” and would
prefer to receive a separate proxy statement, please notify your
broker and also notify us by sending your written request to
Investor Relations, LightPath Technologies, Inc., 2603 Challenger
Tech Court, Suite 100, Orlando, Florida USA 32826 or by calling
Investor Relations at 407-382-4003, ext. 314. Stockholders who
currently receive multiple copies of the proxy statement at their
address and would like to request “householding” of
their communications should also contact their broker and notify us
in writing or by telephone.
Can I revoke or change my vote after submitting my
proxy?
Yes.
You can revoke your proxy at any time before the final vote at the
Annual Meeting. You may revoke your proxy by:
●
submitting a new
proxy with a later date;
●
sending written
notice of revocation to our Corporate Secretary at 2603 Challenger
Tech Court, Suite 100, Orlando, Florida USA 32826 in time for her
to receive it before the Annual Meeting; or
●
voting in person at
the Annual Meeting. Simply attending the meeting will not, by
itself, revoke your proxy.
Who will count votes?
Votes
will be counted by the inspector of elections appointed for the
Annual Meeting. The inspector of elections will also determine the
number of shares outstanding, the voting power of each, the number
of shares represented at the Annual Meeting, the existence of a
quorum, and whether or not the proxies and ballots are valid and
effective.
What is the quorum requirement?
A
majority of the issued and outstanding shares of Class A common
stock entitled to vote must be present at the Annual Meeting (in
person or represented by proxy) in order for us to hold the Annual
Meeting and conduct business. This is called a quorum. On the
record date, there were 25,827,265 outstanding shares of Class A
common stock (including all restricted stock awards at such date)
entitled to vote. Thus, 12,913,633 shares must be present at the
Annual Meeting (in person or represented by proxy) to have a
quorum.
Your
shares will be counted towards the quorum only if you submit a
valid proxy or vote in person at the Annual Meeting. Abstentions
and broker non-votes will be counted towards the quorum
requirement. If there is no quorum, a majority of the shares
entitled to vote and present at the Annual Meeting (in person or
represented by proxy) may adjourn the meeting to another
date.
5
How can I find out the results of the voting at the Annual
Meeting?
We will
announce preliminary voting results at the Annual Meeting. We will
report the final voting results in a Current Report on Form 8-K
filed with the SEC within four business days following such results
becoming final.
When are stockholder proposals for the Fiscal 2021 Annual Meeting
due?
Stockholders
interested in presenting a proposal to be considered for inclusion
in next year’s proxy statement and form of proxy may do so by
following the procedures prescribed in Rule 14a-8 under the
Securities Exchange Act of 1934, as amended (the “Securities
Exchange Act”), and our Bylaws. To be considered for
inclusion, stockholder proposals must be submitted in writing to
the Corporate Secretary, LightPath Technologies, Inc., 2603
Challenger Tech Court, Suite 100, Orlando, Florida USA 32826 before
June 3, 2020, which is 120 calendar days prior to the anniversary
of the mailing date of this Proxy Statement, and must be in
compliance with all applicable laws and regulations.
If a
stockholder wishes to present a proposal at the fiscal 2021 annual
meeting, but the proposal is not intended to be included in the
Company’s proxy statement relating to the meeting, or
nominate a director for election at the fiscal 2021 annual meeting,
the stockholder must give advance notice to the Company prior to
the deadline for such meeting determined in accordance with our
Bylaws (the “Bylaw Deadline”). Under our Bylaws, in
order for a proposal to be timely, it must be received by us no
earlier than 120 days prior to the anniversary of the fiscal 2020
Annual Meeting, or July 17, 2020, and no later than 90 days prior
to the anniversary date of the fiscal 2020 Annual Meeting, or
August 16, 2020. If a stockholder gives notice of such a proposal
after the Bylaw Deadline, the stockholder will not be permitted to
present the proposal to the stockholders for a vote at the meeting
or nominate a director for election at the meeting.
If a
stockholder fails to meet these deadlines or fails to satisfy the
requirements of SEC Rule 14a-4, the persons named as proxies will
be allowed to use their discretionary voting authority to vote on
any such proposal or nomination as they determine appropriate if
and when the matter is raised at the fiscal 2021 annual
meeting.
How do I get a copy of the exhibits filed with our Annual
Report?
A copy
of our Annual Report for the fiscal year ended June 30, 2019, and
consolidated financial statements, were provided to you with this
Proxy Statement. We will provide copies of the exhibits filed with
our Annual Report upon written request if you are a stockholder as
of the Record Date. Requests for such copies should be directed to
Investor Relations at 2603 Challenger Tech Court, Suite 100,
Orlando, Florida USA 32826. In addition, copies of all of our
electronically filed exhibits may be reviewed and printed from the
SEC website at
http://www.sec.gov
.
6
PROPOSAL 1 – ELECTION OF DIRECTORS
What Am I Voting On?
Stockholders are
being asked to elect three Class I directors, Robert Ripp, Dr.
Joseph Menaker, and Darcie Peck to serve for a term ending at the
third successive annual meeting of stockholders following this
Annual Meeting, or until their successors have been duly elected
and qualified. Mr. Ripp and Dr. Menaker are current members of the
Board.
If any
of the nominees becomes unable or unwilling to serve as a director
before the Annual Meeting, an event which is not presently
anticipated, the individual named as proxy on the proxy card may
exercise discretionary authority to vote for substitute nominees
proposed by the Board, or, if no substitute is selected by the
Board prior to or at the Annual Meeting, for a motion to reduce the
present membership of the Board to the number of nominees
available.
Voting Recommendation
FOR
the election of each Class I
director nominee.
Board and Committee Composition
Currently, we have
eight directors with each director serving until his successor is
elected and qualified. Our Board is divided into three classes,
denoted as Class I, Class II, and Class III, serving staggered
three-year terms with one class elected at the annual meeting of
stockholders. The Class III directors’ term expires at the
annual meeting of stockholders proposed to be held in fiscal 2021.
The Class II directors’ term expires at the annual meeting of
stockholders proposed to be held in fiscal 2022. The Class I
directors’ term expires at this Annual Meeting.
The
table below lists each current director, each such director’s
committee memberships, the chairman of each Board committee, and
each such director’s class.
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Name
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Audit
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Compensation
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Finance
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Nominating & Corporate Governance
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Class
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Robert Ripp
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☒
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☒
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☒
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I
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J. James Gaynor
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I
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Joseph Menaker
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☒
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I
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Sohail Khan
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☒
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☒
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☒
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II
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Steven Brueck
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☒
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II
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M. Scott Faris
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☒
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☒
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II
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Louis Leeburg
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☒
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☒
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☒
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III
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Craig Dunham
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☒
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III
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Committee Chairman:
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Leeburg
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Ripp
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Khan
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Ripp
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7
Biographical and Related Information – Director Nominees,
Continuing Directors, and Executive Officers
The
following is an overview of the biographical information for each
of our director nominees, continuing directors, and executive
officers, including their age, the year they became directors or
officers, their principal occupations or employment for at least
the past five years, and certain of their other
directorships.
8
Class II Directors
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Sohail
Khan, 65
Director
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Mr.
Khan has served as one of our directors since February 2005. Since
September 2017, he has served as the managing partner of K5
Innovations, a technology consulting venture. He also served in
such role from July 2011 to April 2013. He served as the President
and Chief Executive Officer of ViSX Systems Inc., a pioneer and
leader in media processing semiconductor solutions for video over
IP streaming solutions from September 2015 until the company was
acquired by Pixelworks in August 2017. From May 2013 to July 2014,
he served as the Chief Executive Officer and a director of
Lilliputian Systems, a developer of portable power products for
consumer electronics. He was the President and Chief Executive
Officer and a member of the board of directors of SiGe
Semiconductor (“SiGe”), a leader in silicon-based radio
frequency front-end solutions from April 2007 until it was acquired
by Skyworks Solutions Inc. in June 2011. Prior to SiGe, Mr. Khan
was Entrepreneur in Residence and Operating Partner of Bessemer
Venture Partners, a venture capital group focused on technology
investments. Mr. Khan received a Bachelor of Science in Electrical
Engineering from the University of Engineering and Technology in
Pakistan. Additionally, he received a Master’s of Business
Administration from the University of California at Berkeley. Mr.
Khan previously served on the board of directors and audit
committee of Intersil Corporation, a public company, from October
2014 to March 2017, and the board of directors of VIXS Systems,
Inc., a public company, until the acquisition by Renesas &
Pixelworks in August 2017. Mr. Khan’s experience in venture
financing, specifically technology investments, is an invaluable
asset Mr. Khan contributes to the Board composition. In addition,
Mr. Khan’s significant 35 years of experience in executive
management, particularly with respect to technology businesses,
profit and loss management, mergers and acquisitions, and capital
raising, as well as his background in engineering qualifies him for
service as one of our directors.
|
|
Dr.
Steven Brueck, 75
Director
|
|
Dr.
Brueck has served as one of our directors since July 2001. Since
July 2016, he has served as Vice President and Chief Scientific
Officer at Armonica Technologies, Inc., a venture capital-backed
company formed to commercialize his University of New Mexico
patents in nanofluidics and long-read DNA sequencing. He is a
Distinguished Professor, Emeritus of Electrical and Computer
Engineering and of Physics at the University of New Mexico in
Albuquerque, New Mexico, which he joined in 1985. Although he
retired in 2014, he remains active as a University of New Mexico
Research Professor. From 1986 to 2013, he served as Director of the
Center for High Technology Materials. Since 2016, he has served on
the Scientific Advisory Committee for the Center for Integrated
Nanotechnologies of Sandia National Laboratories. He is a graduate
of Columbia University with a Bachelor of Science degree in
Electrical Engineering and a graduate of the Massachusetts
Institute of Technology where he received his Master’s and
Doctorate of Science degrees in Electrical Engineering. Dr. Brueck
is a fellow of The Optical Society of America, the Institute of
Electrical and Electronics Engineers, the American Association for
the Advancement of Science, and the National Academy of Inventors.
Dr. Brueck’s expertise in optics and optics applications, as
well as his extensive fifty years of research experience in optics,
lasers, detectors, lithography, nonlinear optics, and related
fields qualify him for service as one of our
directors.
|
|
|
|
|
|
M.
Scott Faris, 54
Director
|
|
Mr.
Faris has served as a director of the Company since December 2011.
Mr. Faris is an experienced entrepreneur with almost two decades of
operating, venture-financing, and commercialization experience,
involving more than 20 start-up and emerging-growth technology
companies. In September 2016, Mr. Faris was named the Chief
Business Officer of Luminar Technologies, Inc., a leading developer
of autonomous vehicle systems technologies including Lidar sensor
suites. In June 2013, Mr. Faris founded Aerosonix, Inc. (formerly
MicroVapor Devices, LLC), a privately held developer and
manufacturer of advanced medical devices, and served as its Chief
Executive Officer until August 2016 and has served as Chairman of
the board of directors since June 2013. In 2002, Mr. Faris also
founded the Astralis Group, a strategy advisor that provides
consulting to start-up companies and, since 2004, Mr. Faris has
served as its Chief Executive Officer. In August 2007, Mr. Faris
founded Planar Energy, a company that developed transformational
ceramic solid-state battery technology and products, and served as
its Chief Executive Officer until June 2013. Planar Energy is a
spin-out of the U.S. Department of Energy’s National
Renewable Energy Laboratory. From October 2004 to June 2007, Mr.
Faris was a partner with Corporate IP Ventures (formerly known as
MetaTech Ventures), an early stage venture fund specializing in
defense technologies. Mr. Faris also previously served as the
Chairman and Chief Executive Officer of Waveguide Solutions, a
developer of planar optical light wave circuit and micro system
products, and as a director and Chief Operating Officer of Ocean
Optics, Inc., a precision-optical-component and
fiber-optic-instrument spin-out of the University of South Florida.
Mr. Faris was also the founder and Chief Executive Officer of
Enterprise Corporation, a technology accelerator, served as a
director of the Florida Seed Capital Fund and Technology
Commercialization at the Center for Microelectronics Research, and
the chairman of the Metro Orlando EDC. Mr. Faris received a
Bachelor of Science degree in Management Information Systems from
Penn State University in 1988. Mr. Faris is currently on the board
of directors of Aerosonix, Inc., a private company. Mr.
Faris’s significant experience in executive management
positions at various optical component companies, his experience in
the commercialization of optical and opto-electronic component
technology, and his background in optics, technology, and venture
capital qualify him for service as one of our
directors.
|
9
Class III Directors
|
Louis
Leeburg, 65
Director
|
|
Mr.
Leeburg has served as one of our directors since May 1996. Mr.
Leeburg is currently a self-employed business consultant. Since
1993, Mr. Leeburg has served as the senior financial advisor of The
Fetzer Institute, and before that, he served as the Vice President
for Finance. Mr. Leeburg was an audit manager for Price Waterhouse
& Co. until 1980. He is a member of Financial Foundation
Officers Group and the chairman and trustee for the John E. Fetzer
Memorial Trust Fund. Mr. Leeburg received a Bachelor of Science
degree in Accounting from Arizona State University.
Mr. Leeburg has a broad range of experience in accounting and
financial matters. His expertise gained in various roles in
financial management and investment oversight for over thirty
years, coupled with his knowledge gained as a certified public
accountant, add invaluable knowledge to our Board and qualify him
for service as one of our directors.
|
|
Craig
Dunham, 63
Director
|
|
Mr.
Dunham has served as one of our directors since April 2016, and
prior to his appointment to the Board, he served as a consultant to
the Board beginning in March 2014. Since April 2015, he has been
providing business and M&A consulting. From May 2011 until
March 2015, Mr. Dunham served as the Chief Executive Officer of
Applied Pulsed Power Inc. (“APP”), a pulsed power
components and systems company near Ithaca, New York. Mr. Dunham
currently serves as a director of APP. From 2004 until 2011, Mr.
Dunham was President, Chief Executive Officer and director of
Dynasil Corporation of America (“Dynasil”), a company
which was previously listed on the Nasdaq Capital Market until
August 2019, and now is quoted on the OTC Markets Group,
Inc.’s Pink Open Market. He continues to be a director at
Dynasil and is a member of their audit committee. Prior to joining
Dynasil, Mr. Dunham spent approximately one year partnering with a
private equity group to pursue acquisitions of mid-market
manufacturing companies. From 2000 to 2003, he was Vice
President/General Manager of the Tubular Division at Kimble Glass
Corporation. From 1979 to 2000, he held progressively increasing
leadership responsibilities at Corning Incorporated
(“Corning”) in manufacturing, engineering, commercial,
and general management positions. At Corning, Mr. Dunham delivered
results in various glass and ceramics businesses including optics
and photonics businesses. Mr. Dunham earned a Bachelor of Science
degree in Mechanical Engineering and a Master’s degree in
Business Administration from Cornell University. Mr. Dunham’s
expertise in executive leadership, financial, strategic planning,
operations and management, business acumen, optics/photonics market
knowledge, and knowledge of the acquisitions process, qualifies him
for service as one of our directors.
|
Executive Officers Who Do Not Serve as Directors
|
Donald
O. Retreage, Jr., 65
Chief
Financial Officer
|
|
Mr.
Retreage was appointed Chief Financial Officer on June 18, 2018. He
most recently served as Senior Vice President of Houser Logistics
from April 2017 to June 2018, where he was responsible for aligning
strategic initiatives with corporate targets for customer service,
revenue, and cost control. Prior to that, during a portion of 2017,
Mr. Retreage was a Financial Specialist at Robert Half /
Accountemps, and from October 2016 to January 2017, Mr. Retreage
served as a Senior Business Consultant for International Services
Inc., during which he worked with business owners to develop
management processes, practices, and policies to drive
profitability and grow businesses. From 2008 to 2015, Mr. Retreage
served as Deputy Managing Director & Financial Director at
Seaboard Management Corporation, a division of Seaboard
Corporation. He received a Bachelor of Science in Business
Administration, Accounting and Finance from University of Louisiana
at Lafayette. Mr. Retreage is experienced in directing
international business operations and aligning strategic
initiatives with corporate targets for revenue, cost control, and
employee development and engagement.
|
|
|
|
|
|
Alan
Symmons, 47
Chief
Operating Officer
|
|
Mr.
Symmons was appointed Chief Operating Officer, a newly created
position, effective July 8, 2019. Mr. Symmons previously served as
our Executive Vice President of Operations since January 2015, and
prior to that, he served as our Vice President of Corporate
Engineering from August 2010 until January 2015, our Director of
Engineering from December 2008 to August 2010, and our
Opto-Mechanical Manager from October 2006 to December 2008. Prior
to joining us, Mr. Symmons was an Engineering Manager for Aurora
Optical, a subsidiary of Multi-Fineline Electronix
(“MFLEX”), dedicated to the manufacture of cell phone
camera modules. From 2000 to 2006, Mr. Symmons worked for Applied
Image Group – Optics (“AIG/O”), a recognized
leader in precision injection molded plastic optical components and
assemblies, working up to Engineering Manager. AIG/O was purchased
by MFLEX in 2006. Prior to 2000, Mr. Symmons held engineering
positions at Ryobi N.A., SatCon Technologies, and General Dynamics.
Mr. Symmons has a Bachelor of Science degree in Mechanical
Engineering from Rensselaer Polytechnic Institute and a
Master’s degree in Business Administration from the Eller
School of Management at the University of Arizona.
|
10
CORPORATE GOVERNANCE
Meetings of the Board and its Committees
The
Board has an Audit Committee, a Compensation Committee, Nominating
and Corporate Governance Committee, and a Finance Committee. The
entire Board met eight times, including telephonic meetings, during
fiscal 2019. All eight directors attended 100% of the Board
meetings. Messrs. Ripp, Khan, Leeburg, and Dunham and Drs. Menaker
and Brueck attended 100% of the meetings held by committees of the
Board on which they served. Mr. Faris attended 100% of the meetings
held by the Audit Committee and 50% of the meetings held by the
Finance Committee. All of the then-elected directors attended the
fiscal 2019 Annual Meeting of Stockholders on November 15,
2018.
It is
our policy that all of our directors are required to make a
concerted and conscientious effort to attend our annual
stockholders’ meeting in each year during which that director
serves as a member of the Board.
Audit Committee.
The
Audit Committee, which consists of Dr. Steven Brueck, M. Scott
Faris, Craig Dunham, and Louis Leeburg (Chairman), met four times
during fiscal 2019. The meetings included discussions with
management and with our independent registered public accounting
firm to discuss our interim and annual financial statements and our
annual report, and the effectiveness of our financial and
accounting functions and organization.
The
Audit Committee acts pursuant to a written charter adopted by the
Board, a copy of which is available on our website at
www.lightpath.com
under the “Investor” tab. The Audit Committee’s
responsibilities include, among others, engaging and terminating
our independent registered public accounting firm, oversight of the
independent registered public accounting firm
,
and determining the compensation for
their engagement(s). The Board has determined that the Audit
Committee is comprised entirely of independent members as defined
under applicable listing standards set out by the SEC and The
Nasdaq Capital Market (the “NCM”). The Board has also
determined that three members of the Audit Committee, Mr. Leeburg,
Mr. Faris, and Mr. Dunham, are “audit committee financial
experts” as defined by SEC rules and qualify as independent
in accordance with the NCM rules. Mr. Leeburg’s, Mr.
Faris’, and Mr. Dunham’s respective business experience
that qualifies each director to be determined as “audit
committee financial expert” is described above.
Compensation
Committee.
The Compensation Committee, which consisted of
Robert Ripp (Chairman), Sohail Khan, and Louis Leeburg, met three
times during fiscal 2019. The Compensation Committee acts pursuant
to a written charter adopted by the Board, a copy of which is
available on our website at
www.lightpath.com
under the “Investor” tab.
The
Compensation Committee is responsible for establishing,
implementing, and continually monitoring our compensation policies
and philosophy, including administering our 2018 Omnibus Incentive
Plan (the “Incentive Plan”), pursuant to which
incentive awards, including stock options, are granted to our
directors, executive officers, and key employees. The Compensation
Committee is responsible for determining executive compensation,
including approving recommendations regarding equity awards to all
of our executive officers. However, the Compensation Committee does
rely on the annual reviews made by the Chief Executive Officer with
respect to the performance of each of our other executive officers.
The conclusions reached, and recommendations made based on these
reviews, including with respect to salary adjustments and annual
award amounts, are presented to the Compensation Committee. The
Compensation Committee can exercise its discretion in modifying any
recommended adjustments or awards to executive officers. In the
case of the Chief Executive Officer, compensation is determined
solely based on the review conducted by the Compensation
Committee.
The
Compensation Committee also annually reviews director compensation
to ensure non-employee directors are adequately compensated for the
time expended in fulfilling their duties to us, as well as the
skill-level required by us of members of the Board. After the
Compensation Committee completes their annual review, they make
recommendations to the Board regarding director
compensation.
The
Compensation Committee regularly engages Meridian Consulting
Partners, LLC (the “Consultant”), as a compensation
consultant, to assist with the Compensation Committee’s
responsibilities related to our executive compensation program and
the director compensation program. The Compensation Committee plans
to engage the Consultant every two years to review and make
recommendations on the Company’s executive compensation
plans. During fiscal 2019, the Compensation Committee engaged the
Consultant to provide recommendations with respect to our executive
compensation program as compared with ten peer companies (the
“Peer Group”), which consist of companies that are
similar in size by either revenue or market capitalization. These
recommendations updated previous recommendations the Consultant
provided in the spring of 2017. Pursuant to the Compensation
Committee’s request, the Consultant collected executive and
director compensation information for the “Peer Group, which
allowed the Compensation Committee to compare components of our
compensation program to that of the Peer Group for compensation
trends and implications. The companies included in the Peer Group
are as follows: Digital Ally, Inc., LRAD Corp., CyberOptics
Corporation, CUI Global, Inc., Wireless Telecom Group, Inc., Luna
Innovations Incorporated, Frequency Electronics, Inc., Dynasil,
Nanophase Technologies Corporation, and Giga-tronics Incorporated.
The Compensation Committee reviewed and discussed the Peer Group
information with the Consultant, and determined that the Company
should strive to set compensation levels for executive officers and
directors at or near the 50
th
percentile relative
to the Peer Group’s compensation levels.
The
Compensation Committee has engaged the Consultant for fiscal 2020
for the purpose of providing market data and analysis from the Peer
Group with regard to termination treatment of and benefits for
their executive officers and directors. The analysis includes
review of equity and cash compensation for executive officers
regarding change of control agreements, severance plans, and the
handling of equity for executive officers and directors upon
retirement, death, or disability. The Consultant will make
recommendations to the Compensation Committee regarding termination
treatment and benefits at the conclusion of their
work.
No
services were provided by the Consultant during fiscal 2018.
However, in determining the form and amount of compensation to be
paid to the named executive officers for fiscal 2018, the
Compensation Committee considered the information gathered by and
recommended by the Consultant in fiscal 2017. The Compensation
Committee evaluated the independence of the Consultant at the time
of engagement and determined that the Consultant was independent
pursuant to the factors set forth in Section 10C-1 of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”).
11
Finance Committee.
The Finance Committee, which consists of Sohail Khan (Chairman),
Robert Ripp, M. Scott Faris, and Dr. Joseph Menaker met twice
during fiscal 2019. The Finance Committee acts pursuant to a
written charter adopted by the Board, a copy of which is available
on our website at
www.lightpath.com
under the “Investor” tab. The Finance Committee
oversees our financial management, including overseeing our
strategic and transactional planning and activities, global
financing, capital structure objectives and plans, insurance
programs, tax structure, and investment program and
policies.
Nominating and Corporate
Governance Committee.
The Nominating and Corporate
Governance Committee, which consists of Robert Ripp (Chairman),
Sohail Khan, and Louis Leeburg, met three times during fiscal 2019.
The Nominating and Corporate Governance Committee acts pursuant to
a written charter adopted by the Board, a copy of which is
available on our website at
www.lightpath.com
under the “Investor” tab. The Nominating and Corporate
Governance Committee carries out the responsibilities delegated by
the Board relating to our director nominations process and
procedures, and developing, maintaining, and monitoring compliance
with the Company’s corporate governance policies, guidelines,
and activities. During fiscal 2019, the Nominating and Corporate
Governance Committee began discussing whether it should establish
retirement guidelines for our executive officers and
directors.
All
current committee members are expected to be reappointed to the
same committees at the Board meeting to be held immediately
following the Annual Meeting. If Ms. Peck is elected as a Class I
director at the Annual Meeting, the Board expects to appoint her to
serve on the Audit Committee.
Nominations Process and Criteria
The
Nominating and Corporate Governance Committee determines the
qualifications, qualities, skills, and other expertise required to
be a director and to develop, and recommend to the Board for its
approval, criteria to be considered in selecting nominees for
director. The Committee and the Board believe that at this time, it
is unnecessary to adopt criteria for the selection of directors.
Instead, the Committee and the Board believes that the desirable
background of a new individual member of the Board may change over
time and that a thoughtful, thorough selection process is more
important than adopting criteria for directors.
They
will also identify, recruit, and screen candidates for the Board,
consistent with criteria approved by the Board. The Committee and
Board is fully open to utilizing whatever methodology is efficient
in identifying new, qualified directors when needed, including
industry contacts of our directors or professional search firms.
The Committee also considers any director candidates recommended by
our stockholders pursuant to the procedures described in this Proxy
Statement and any nominations of director candidates validly made
by stockholders in accordance with applicable laws, rules, and
regulations, and the provisions of our charter
documents.
In
fiscal 2019, the Board began considering potential director
candidates in light of the Board’s potential adoption of term
limits and other anticipated director retirements. Potential
candidates were solicited from members of the Board, and
individuals personally known to the members of our Board. Ms. Peck
was identified and interviewed by several members of the Board. She
has also served as a consultant to the Board since May 2019. Based
on her experience and her contributions as a consultant, the Board
believes Ms. Peck is a qualified candidate for election to the
Board. Ms. Peck has been nominated to the Board as a Class I
director to replace the vacancy created by Mr. Gaynor’s
decision to not be considered for reelection as a result of his
intention to retire in June 2020 from all positions held with us.
Her nomination is recommended by the Nominating and Corporate
Governance Committee and has been approved by the
Board.
There
were no fees paid or due to third parties in fiscal 2019 to
identify or evaluate, or to assist in evaluating or identifying,
potential director nominees.
Any
stockholder wishing to propose that a person be nominated for or
appointed to the Board may submit such a proposal, according to the
procedure described in the stockholder proposal section on page 6
of this Proxy Statement, to:
Corporate
Secretary
LightPath
Technologies, Inc.
2603
Challenger Tech Court, Suite 100
Orlando,
Florida 32826
The
Corporate Secretary will promptly forward any such correspondence
to the Chairman of the Nominating and Corporate Governance
Committee for review and consideration by the Nominating and
Corporate Governance Committee in accordance with the criteria
described above.
12
Director Independence
In
accordance with NCM and SEC rules, the Board affirmatively
determines the independence of each director and director nominee
in accordance with guidelines it has adopted, which include all
elements of independence set forth in the NCM listing standards.
Based on these standards, the Board has determined that each of the
following non-employee directors serving during fiscal 2019 is
independent and has no relationship with us, except as one of our
directors and stockholders.
|
Robert
Ripp
|
Sohail
Khan
|
|
Steven
Brueck
|
Louis
Leeburg
|
|
M.
Scott Faris
|
Craig
Dunham
|
The
Board also determined that Darcie Peck, nominated to serve as a
Class I director to be elected at the Annual Meeting, is also
independent in accordance with these standards. Based on these
standards, the Board determined J. James Gaynor and Dr. Joseph
Menaker, currently Class I directors, were not
independent.
All of
the members of the Audit, Nominating and Corporate Governance, and
Compensation Committees are also independent.
The
Board approved an Amended and Restated Code of Business Conduct and
Ethics (the “Code”) on April 28, 2016. The Code applies
to all of our employees, officers, and directors, including our
principal executive officers, principal financial officers, and
principal accounting officer or controller, or persons performing
similar functions. The Board also approved an Amended and Restated
Code of Business Conduct and Ethics for Senior Financial Officers
(the “Senior Financial Officer Code”), which applies to
our Chief Executive Officer, Chief Financial Officer, principal
accounting officer, controller, accounting manager, and persons
performing similar functions. Copies of the Code and the Senior
Financial Officer Code are available on our website at
www.lightpath.com
,
under the “Investor” tab, or may be obtained free of
charge by writing to: Corporate Secretary, LightPath Technologies,
Inc., 2603 Challenger Tech Court, Suite 100, Orlando, Florida
32826.
Related Party Transactions
When
we are contemplating entering into any transaction in which any
executive officer, director, director nominee, or any family member
of the foregoing would have any direct or indirect interest,
regardless of the amount involved, the terms of such transaction
have to be presented to the Audit Committee (other than any
interested director) for approval or disapproval. Neither the Audit
Committee nor the Board have adopted a written policy for reviewing
related party transactions but when presented with such
transaction, the transaction is discussed by the Audit Committee
and documented in its meeting minutes.
The
Code also requires our employees, officers, and directors to
provide prompt and full disclosure of all potential conflicts of
interest to the appropriate person. These conflicts of interest may
be specific to the individual or may extend to his or her family
members. Any officer who has a conflict of interest with respect to
any matter is required to disclose the matter to our Chief
Executive Officer or, in the case of the Chief Executive Officer,
to the Chairman of the Audit Committee. All other employees are
required to make prompt and full disclosure of any conflict of
interest to his or her immediate supervisor, who will then make
prompt and full disclosure to our Chief Executive Officer.
Directors are required to disclose any conflict of interests to the
Chairman of the Audit Committee and are prohibited from voting on
any matter(s) in which they have a conflict of interest. In
addition, directors and executive officers are required to disclose
in an annual questionnaire, any current or proposed conflict of
interests (including related party transactions).
From
the period beginning July 1, 2018 and ending October 1, 2019, there
were no current or proposed related party
transactions.
Board of Directors Leadership Structure and Role in Risk
Oversight
Board Leadership Structure
Our
Board has chosen to separate the positions of Chairman and Chief
Executive Officer, with Mr. Robert Ripp serving as Chairman
and Mr. J. James Gaynor serving as President and Chief
Executive Officer. As President and Chief Executive Officer,
Mr. Gaynor is responsible for our day-to-day leadership and
performance, with the Board being responsible for setting our
strategic direction, as well as overseeing and advising our
management. The Board believes that the current independent
leadership of the Board by our non-executive Chairman enhances the
effectiveness of its oversight of management and provides a
perspective that is separate and distinct from that of
management.
13
Role of the Board in Risk Oversight
Our
Board is responsible for the oversight of our operational risk
management process. Our Board has delegated authority for
addressing certain risks, and accessing the steps management has
taken to monitor, control, and report such risks, to our Audit and
Finance Committees. Such risks include risks relating to execution
of our growth strategy, the effects of the contracting in the
global economy and general financial condition and outlook on
customer purchases, component inventory supply, or ability to
expand our partner network, communication with investors, certain
actions of our competitors, the protection of our intellectual
property, sufficiency of our capital, inventory investment and risk
of obsolescence, security of information systems and data,
integration of new information systems, credit risk, product
liability, and costs of reliance on external advisors. The Audit or
Finance Committee, as applicable, then reports such risks as
appropriate to the Board. The Board initiates discussions with
appropriate members of our senior management if, after discussion
of such risks, the Board determines that such risks raise questions
or concerns about the status of operational risks then facing
us.
Our
Board relies on our Compensation Committee to address significant
risk exposures we face with respect to compensation, including
risks relating to retention of key employees, protection of partner
relationships, management succession, and benefit costs, and, when
appropriate, reports these risks to the full Board.
Stockholder Communications with the Board
Stockholders and
other parties interested in communicating directly with the Board,
a committee of the Board, or any individual director, may do so by
sending a written communication to the attention of the intended
recipient(s) in care of the Corporate Secretary, LightPath
Technologies, Inc., 2603 Challenger Tech Court, Suite 100, Orlando,
Florida USA 32826. The Corporate Secretary will forward all
appropriate communications to the Chairman of the Audit
Committee.
14
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth, as of September 18, 2019, the number
and percentage of outstanding shares of our Class A common stock,
owned by: (i) each of our directors (which includes all nominees),
(ii) each of the named executive officers, (iii) our directors and
named executive officers as a group, and (iv) each person known by
us to be the beneficial owner of more than 5% of our outstanding
Class A common stock. The number of shares of Class A common stock
outstanding as of September 18, 2019 was 25,827,265.
The
number of shares beneficially owned by each director, named
executive officer, and greater than 5% beneficial owner is
determined under SEC rules, and the information is not necessarily
indicative of the beneficial ownership for any other purpose. Under
such rules, beneficial ownership includes any shares to which the
individual has the sole or shared voting power or investment power
and also any shares which the individual has the right to acquire
within 60 days of September 18, 2019, through the exercise of any
stock option or other right to purchase, such as a warrant. Unless
otherwise indicated, each person has sole investment and voting
power (or shares such power with his or her spouse) with respect to
the shares set forth in the following table. In certain instances,
the number of shares listed may include, in addition to shares
owned directly, shares held by the spouse or children of the
person, or by a trust or estate of which the person is a trustee or
an executor or in which the person may have a beneficial interest.
The table that follows is based upon information supplied in a
questionnaire completed by each named executive officer and
director and stockholders beneficially owning greater than 5% of
our Class A common stock.
|
|
Securities
|
|
|||
|
|
Class A
Common Stock
|
|
|
|
|
|
Name
and Address (1)(10)
|
Restricted
(2)
|
Unrestricted
|
Options
|
Amount
of Shares of Class A Common Stock Beneficially
Owned
|
Percent Owned
(%)
|
|
Robert
Ripp, Director
|
348,954
|
775,000
|
—
|
1,123,954
(3)
|
4.3
%
|
|
Louis
Leeburg, Director
|
348,954
|
102,691
|
—
|
451,645
(4)
|
1.7
%
|
|
Sohail
Khan, Director
|
350,154
|
20,661
|
—
|
370,815
|
1.4
%
|
|
Dr.
Steven Brueck, Director
|
348,954
|
79,870
|
—
|
428,824
(5)
|
1.6
%
|
|
M.
Scott Faris, Director
|
248,254
|
—
|
—
|
248,254
|
1.0
%
|
|
Craig
Dunham, Director
|
157,794
|
33,000
|
—
|
190,794
|
*
|
|
Dr.
Joseph Menaker, Director
|
32,787
|
483,604
|
—
|
516,391
|
2.0
%
|
|
J.
James Gaynor, President, CEO & Director
|
8,452
|
193,991
|
501,606
|
704,049
(6)
|
2.7
%
|
|
Donald
Retreage, Jr., CFO
|
—
|
—
|
2,500
|
2,500
(7)
|
*
|
|
Alan
Symmons, COO
|
3,019
|
22,101
|
190,184
|
215,304
(8)
|
*
|
|
All directors and named executive officers currently holding office
as a group (10 persons)
|
1,847,322
|
1,710,918
|
694,290
|
4,252,530
|
15.0
%
|
|
|
|
|
|
|
|
|
Darcie
Peck, Nominee for Director
|
—
|
—
|
—
|
—
|
0.0
%
|
|
Pudong
Science and Technology Investment (Cayman) Co., Ltd.
|
—
|
2,270,026
|
—
|
2,270,026
(9)
|
8.8
%
|
*Less
than 1%
15
Notes:
(1)
Except as otherwise
noted, each of the parties listed above has sole voting and
investment power over the securities listed. The address for all
directors and officers is “in care of” LightPath
Technologies, Inc., 2603 Challenger Tech Court, Suite 100, Orlando,
Florida 32826. The address for Pudong Science and Technology
(Cayman) Co. Ltd., as filed on a Schedule 13G filed on November 28,
2017, is 46F, Building 1, Lujiazui Century Financial Plaza, No. 729
South Yanggao Road, Pudong, Shanghai 200127, People’s
Republic of China.
(2)
Restricted stock
units (“RSUs”) awarded to our directors vest over three
years. All directors have elected to defer receipt of the vested
shares until after they leave the Board, either by reason of
resignation, termination, or otherwise. Therefore, these vested
shares remain unissued. All of the director’s unvested RSUs
will vest upon such director’s resignation or termination
from the Board. The amounts of restricted stock set forth above
reflects both vested and unvested shares included in the RSU
awards. The amounts of vested shares for each director, other than
Mr. Gaynor, are as follows: Mr. Ripp – 321,677, Mr. Leeburg
– 321,677, Mr. Khan – 322,877, Dr. Brueck –
321,677, Mr. Faris – 220,977, Mr. Dunham – 130,517, and
Dr. Menaker – 10,929.
(3)
Does not include
7,812 shares of Class A common stock, which are owned by trusts for
Mr. Ripp's adult children and for which he disclaims beneficial
ownership.
(4)
Includes 92,691
shares of Class A common stock, which are held jointly with his
wife and for which he shares voting and investment
power.
(5)
Includes 70,870
shares of Class A common stock held by a family trust for which he
shares voting and investment power.
(6)
Includes 501,606
shares of Class A common stock with respect to which Mr. Gaynor has
the right to acquire. Mr. Gaynor holds options that are currently
exercisable for an aggregate of 501,616 shares of Class A common
stock. This amount does not include 33,267 shares of Class A common
stock underlying options and RSUs that remain
unvested.
(7)
Includes 2,500
shares of Class A common stock with respect to which Mr. Retreage
has the right to acquire. Specifically, Mr. Retreage holds options
that are currently exercisable for an aggregate of 2,500 shares of
Class A common stock. This amount does not include 7,500 shares of
Class A common stock underlying options that remain
unvested.
(8)
Includes 190,184
shares of Class A common stock with respect to which Mr. Symmons
has the right to acquire. Mr. Symmons holds options that are
currently exercisable for an aggregate of 190,184 shares of Class A
common stock. This amount does not include 11,881 shares of Class A
common stock underlying options and RSUs that remain
unvested.
(9)
Pudong Science and
Technology Investment (Cayman) Co., Ltd. is wholly owned by
Shanghai Pudong Science and Technology Investment Co., Ltd., and
for purposes hereof is also deemed as a beneficial owner of the
shares.
(10)
Dorothy
Cipolla, our former Vice President and Executive Director of
Compliance, separated from us in July 2019. Ms. Cipolla is not
considered a named executive officer for fiscal 2019 because, even
if she was still serving as an executive officer at the end of
fiscal 2019, she would not have qualified as one of our two most
highly compensated executive officers. Accordingly, Ms. Cipolla is
not included above.
Change-in-Control Arrangements
We do
not know of any arrangements, which may, at a subsequent date,
result in a change in control.
Delinquent Section 16(a) Reports
Section
16(a) of the Securities Exchange Act, requires that our directors
and executive officers, and persons who beneficially own more than
10% of our common stock (referred to herein as the “Reporting
Persons”) file with the SEC various reports as to their
ownership of and activities relating to our Class A common stock.
To the best of our knowledge, all Reporting Persons complied on a
timely basis with all filing requirements applicable to them with
respect to transactions during our most recent fiscal year. In
making these statements, we have relied solely on our review of
copies of the reports furnished to us, representations that no
other reports were required, and other knowledge relating to
transactions involving the Reporting Persons.
16
EXECUTIVE COMPENSATION
Compensation Philosophy and Objectives
Our
compensation policy is designed to attract and retain qualified key
executive officers critical to our achievement of reaching and
maintaining profitability and positive cash flow, and subsequently
our growth and long-term success. To attract, retain, and motivate
the executive officers to accomplish our business strategy, the
Compensation Committee establishes our executive compensation
policies and oversees our executive compensation
practices.
The
Compensation Committee believes that the most effective executive
compensation program is one that is designed to recognize the
achievement of our specific short-term and long-term goals, and
which aligns executives’ interests with those of the
stockholders by rewarding performance that meets or exceeds
established goals, with the ultimate objective of improving
stockholder value.
It is
the objective of the Compensation Committee to have a portion of
each named executive officer’s compensation contingent upon
our performance as well as upon the individual’s personal
performance. Accordingly, each named executive officer’s
compensation package is comprised of two elements: (i) base salary,
which reflects individual performance and expertise and (ii)
short-term and long-term incentive awards, which are tied to the
achievement of certain performance goals that the Compensation
Committee establishes from time to time. The Compensation Committee
has structured compensation of our named executive officers to
incentivize achievement of our business goals and reward our named
executive officers for achieving such goals.
The
Compensation Committee also evaluates our compensation program to
ensure that we maintain the ability to attract and retain superior
employees in key positions and that compensation provided to key
employees remains competitive relative to the compensation paid to
similarly situated executive officers.
In
accordance with the advisory “say-on-frequency” vote of
our stockholders at the fiscal 2017 annual meeting of stockholders,
held in January 2017, and as approved by the Board, we will include
an annual advisory “say-on-pay” vote in our proxy
statement, including this Proxy Statement for the fiscal 2020
Annual Meeting. Our next required stockholder advisory
“say-on-frequency” vote will occur at our fiscal 2023
annual stockholders’ meeting. The most recent
“say-on-pay” advisory vote occurred at the fiscal 2019
annual meeting, at which our stockholders approved, on an advisory
basis, the compensation of our named executive
officers.
Setting Executive Compensation
In
making compensation decisions, the Compensation Committee relies on
the following:
●
the annual reviews
made by the Chief Executive Officer with respect to the performance
of each of our other named executive officers;
●
the annual review
conducted by the Compensation Committee with respect to the
performance of the Chief Executive Officer;
●
compensation paid
to executive officers of other manufacturing companies similar in
size and scope as us and our competitors; and
●
our annual
performance with respect to our short-term and long-term strategic
plan.
There
is no pre-established policy or target for the allocation between
either cash and non-cash or short-term and long-term incentive
compensation. Rather, the Compensation Committee annually reviews
information to determine the appropriate level and mix of incentive
compensation when determining our executive compensation plan.
Based on these factors, the Compensation Committee makes
compensation decisions, including salary adjustments, annual
short-term cash incentive awards, and long-term equity incentive
awards for our named executive officers.
Retirement Benefits
We
offer a qualified 401(k) defined contribution plan. The ability of
named executive officers to participate fully in this plan is
limited under the requirements of the Internal Revenue Code of
1986, as amended, and the Employment Retirement Income Security Act
of 1974, as amended. We currently match 100% of the first 2% of
employee contributions.
17
Executive Compensation and Risk
Although a
substantial portion of the compensation paid to our named executive
officers is performance-based, we believe our executive
compensation programs do not encourage excessive and unnecessary
risk-taking by our named executive officers because these programs
are designed to encourage our named executive officers to remain
focused on both our short-term and long-term operation and
financial goals. We achieve this balance through a combination of
elements in our overall compensation plans, including: (i) elements
that reward different aspects of short-term and long-term
performance; (ii) incentive compensation that rewards performance
on a variety of different measures; and (iii) cash awards and stock
option awards, to encourage alignment with the interests of
stockholders.
Executive Officer Stock Ownership Requirements
Effective as of
January 1, 2016, our Board established certain guidelines requiring
that each of our executive officers acquire and maintain a minimum
level of ownership of our securities during the period in which he
or she is an executive officer. The Board modified the minimum
level of ownership in fiscal 2018. As modified, the guidelines set
the target ownership level at five times the annual base salary for
our Chief Executive Officer and three times the annual base salary
for each of our other executive officers, as measured at fiscal
year-end. The Board reviews the target ownership levels on an
annual basis to determine whether such target ownership levels
should be increased.
For
purposes of determining ownership levels, all forms of equity and
derivative securities, including stock, stock options, restricted
stock, and RSUs, count towards satisfaction of the ownership
guidelines; however, with respect to any stock option award, only
the number of shares equal to (i) the difference between the
closing price of the Class A common stock as reported on the NCM at
the end of the fiscal year and the exercise price of the stock
option multiplied by (ii) the number of shares underlying the stock
option, then (iii) divided by the closing price of the Class A
common stock as reported on the NCM at the end of the fiscal year,
are included for purposes of determining whether the stock
ownership target is met. For example, if an officer is awarded a
stock option of 100 shares of Class A common stock, with an
exercise price of $1.00 per share, and the closing price of the
Class A common stock as reported on the NCM on June 30, 2019 is
$2.00, the number of shares of Class A common stock included from
such stock option award for purposes of meeting the stock ownership
target is 50 shares.
The
Board may grant waivers of the guidelines in the event of financial
hardship or other good cause. Once an executive officer attains his
or her required stock ownership level, he or she will remain in
compliance with the guidelines despite future changes in the stock
price and base salary, as long as the executive officer’s
holdings do not decline below the number of shares owned at the
time the required stock ownership level was met. Each executive
officer will have until December 31, 2021, or five years after his
or her date of becoming an executive officer, whichever is later,
to meet the required ownership level.
The
named executive officers did not meet their respective ownership
targets as of June 30, 2019. The levels of ownership as of June 30,
2019 were negatively impacted, as compared to June 30, 2018,
because of the decrease in the closing market price per share of
our Class A common stock at the end of fiscal 2019.
|
Name
|
Class A common
stock
|
Stock Options
(1)
|
Restricted Stock
Units
|
Total Amount of
Shares of Class A Common Stock Beneficially
Owned
|
Stock Price at June
30, 2019
|
Market Value at
June 30, 2019
|
Base
Salary
|
% of
Salary
|
|
J. James
Gaynor
|
193,991
|
—
|
8,452
|
202,443
|
$
0.91
|
$
184,223
|
$
315,000
|
58
%
|
|
Donald O. Retreage,
Jr.
|
—
|
—
|
—
|
—
|
$
0.91
|
$
-
|
$
200,000
|
0
%
|
|
Alan
Symmons
|
22,101
|
175
|
3,019
|
25,295
|
$
0.91
|
$
23,018
|
$
210,000
|
11
%
|
(1)
Does not include
stock options with an exercise price that exceeds the closing stock
price as of June 30, 2019.
2019 Incentive Program
Our
fiscal 2019 incentive program has two key components: (i) the
Short-Term Incentive (“STI”) program, and (ii) the
Long-Term Incentive (“LTI”) program. The STI program is
comprised of awards based on our achievement of specific fiscal
2019 financial objectives (the “2019 STI Award”). The
LTI program is comprised of (i) an individual discretionary stock
option award, based on an executive officer’s achievement of
individual goals evaluated over a one-year performance period (the
“2019 LTI Discretionary Award”), which goals were set
prior to the beginning of fiscal 2019, and (ii) a corporate
performance-based equity award based on the achievement of
pre-established financial performance metrics evaluated over a
three-year performance period (the “2019 LTI Multi-Year
Award” and, together with the 2019 LTI Discretionary Award,
the “2019 LTI Awards”). The metrics for the 2019 LTI
Multi-Year Award were set prior to the beginning of fiscal 2019 for
the three-year period beginning on July 1, 2018 through June 30,
2021.
Our
incentive program includes different levels of bonus opportunity
based on a participant’s position with the Company. For
fiscal 2019, Mr. Gaynor was the only “level one”
participant and Mr. Retreage and Mr. Symmons were “level
two” participants. Bonus opportunities for level one and
level two participants for fiscal 2019 were calculated by applying
designated portions of their respective bonus pool amounts, which
were set by the Compensation Committee, to formulas for each of the
components of the STI and LTI programs, as applicable.
18
The
Compensation Committee determined that achievement of the 2019 STI
Award could be paid 50% in cash and 50% in RSUs; however, the
Compensation Committee retained the discretion to adjust the
allocation of the 2019 STI Award between cash and RSUs prior to
payment.
STI Program
The
2019 STI Award was based on the following financial objectives: (i)
revenue growth over that of the prior fiscal year (the
“Revenue Component”); (ii) EBITDA growth (which is
earnings before income, taxes, depreciation, and amortization) (the
“EBITDA Component”); and (iii) return on assets
(adjusted to exclude the effect of goodwill) (the “ROA
Component”). The Revenue Component was weighted at 20%, the
EBITDA Component was weighted at 40%, and the ROA Component was
weighted at 40%. Each component of the 2019 STI Award is evaluated
independently of the other components, and the 2019 LTI Awards are
evaluated independently of the 2019 STI Award.
In
April 2019, based on our year-to-date financial performance as
compared to our fiscal 2019 projetions, the Compensation Committee
revised the financial components of the 2019 STI Award and the
respective targets, in order to incentivize the participants to
recover any portion of the then-anticipated shortfall of the
initial Revenue Component target and the initial EBITDA Component
target. If the revised targets were met for the Revenue Component
and the EBITDA Component, the Compensation Committee would have
then considered the achievement of certain operational and business
development objectives set for each named executive in determining
the payout amount of the 2019 STI Award. Based on the revisions to
the financial components of the 2019 STI Award, participants were
not eligible to earn a portion of the 2019 STI Award based on the
ROA Component. The revisions to the 2019 STI Award also decreased
the overall bonus pool amount available for the 2019 STI Awards.
Based on our fiscal 2019 financial performance, we did not meet the
revised 2019 STI Award program targets; thus none of our named
executive officers earned the 2019 STI Award.
Revenue Component
The
maximum bonus pool amount with respect to the Revenue Component of
the 2019 STI Award, as revised, was $43,000, $16,000, and $17,000
for Mr. Gaynor, Mr. Retreage, and Mr. Symmons, respectively (for
each participant, the “Revenue Pool Amount”). Based on
the revisions to the 2019 STI Award, participants would only earn
the Revenue Component if we achieved the revised target of 8% of
year-over-year growth in fiscal 2019. If we achieved the revised
target of 8% of year-over-year revenue growth in fiscal 2019, then
participants would be entitled to a bonus award under the Revenue
Component equal to such participant’s Revenue Pool Amount
multiplied by the quotient of the actual revenue growth percentage
divided by the initial target of 15%.
Our
revenue in fiscal 2019 increased by 4%, as compared to fiscal 2018.
Accordingly, the target was not met, and the participants did not
earn any portion of the Revenue Component of the 2019 STI
Award.
EBITDA Component
In
order for our participants to earn a bonus with respect to the
EBITDA Component, we had to meet or exceed a minimum EBITDA margin
target established by the Compensation Committee for fiscal 2019.
The EBITDA margin was calculated by dividing the fiscal 2019 EBITDA
by the fiscal 2019 revenues. Based on the revisions to the 2019 STI
Award, participants would be entitled to the following amounts for
each percentage point above 15% of EBITDA margin: $14,664, $5,456,
and $5,797 for Mr. Gaynor, Mr. Retreage, and Mr. Symmons,
respectively.
We did
not exceed an EBITDA margin of 15% for fiscal 2019. Accordingly,
the participants did not earn the EBITDA Component of the 2019 STI
Award.
LTI Program
The
2019 LTI Awards are comprised of two components: (i) the 2019 LTI
Discreationary Award and (ii) the 2019 LTI Multi-Year
Award.
2019 LTI Discretionary Award
The
2019 LTI Discretionary Award is an individual discretionary stock
option award made by our Compensation Committee that is based on
each executive officer’s achievement of certain individual
goals approved by the Compensation Committee for fiscal 2019. In
order to determine a participant’s 2019 LTI Discretionary
Award bonus opportunity, the portion of such participant’s
bonus pool amount applicable to the 2019 LTI Awards calculation
($125,000 in the case of Mr. Gaynor, $50,000 in the case of Mr.
Retreage, and $50,000 in the case of Mr. Symmons), was multiplied
by 40%. Thus, the bonus opportunity for the 2019 LTI Discretionary
Award was $50,000, $20,000, and $20,000 for Mr. Gaynor, Mr.
Retreage, and Mr. Symmons, respectively. Participants can earn any
portion of the bonus opportunity for the 2019 LTI Discretionary
Award. The Compensation Committee determined that if earned, the
2019 LTI Discretionary Award would be paid as a stock option, with
one-third of the shares of Class A common stock underlying the
stock option vesting on each of the first, second, and third
anniversaries of the grant date. The Compensation Committee
determined that if awarded, the exercise price would be set at the
greater of the then-current market price of our Class A common
stock, or the book value per share of our Class A common stock as
of June 30, 2019.
19
At the
end of fiscal 2019, our Chief Executive Officer provided an
executive summary to the Compensation Committee, which summarized
each named executive officer’s achievements with respect to
their individual goals, which were based on certain operational,
strategic, and business development objectives. After review and
consideration, the Compensation Committee determined that Mr.
Retreage and Mr. Symmons would be eligible for a portion of the
2019 LTI Discretionary Award. Based on this review of our Chief
Executive Officer’s executive summary, and after considering
Mr. Retreage’s and Mr. Symmons’ individual achievements
during fiscal 2019, the Compensation Committee determined that Mr.
Retreage earned a portion of his 2019 LTI Discretionary Award in an
amount equal to $8,200 and Mr. Symmons earned a portion of his 2019
LTI Discretionary Award in an amount equal to $10,000. The
Compensation Committee determined that Mr. Gaynor was not eligible
to receive any portion of his 2019 LTI Discretionary Award. The
2019 LTI Discretionary Award will be paid as a stock option grant,
which will vest in three equal annual installments beginning on the
first anniversary of the grant date and will have an exercise price
equal to the book value per share of our Class A common stock as of
June 30, 2019, which was $1.28. The dollar amount of the award will
be divided by the Black-Scholes-Merton value per share to determine
the number of shares underlying the stock options granted. We
expect to grant the stock options in November 2019.
2019 LTI Multi-Year Award
The
2019 LTI Multi-Year Award is a corporate performance-based equity
award based on the achievement of pre-established financial
performance metrics over a three-year performance period. In order
to determine a participant’s 2019 LTI Multi-Year Award bonus
opportunity, the portion of such participant’s bonus pool
amount applicable to the 2019 LTI Awards calculation ($125,000 in
the case of Mr. Gaynor, $50,000 in the case of Mr. Retreage, and
$50,000 in the case of Mr. Symmons), was multiplied by 60%. Thus,
the bonus opportunity for the 2019 LTI Multi-Year Award was
$75,000, $30,000, and $30,000 for Mr. Gaynor, Mr. Retreage, and Mr.
Symmons, respectively.
The
performance metrics upon which the 2019 LTI Multi-Year Award was
based are as follows: (i) revenue (the “LT Revenue
Component”); (ii) book value per share of Class A common
stock (the “LT Book Value Component”); and (iii) EBITDA
margin (the “LT EBITDA Component”). The Compensation
Committee set a target for each component for each year during the
three-year period (July 1, 2018 through June 30, 2021). Each
performance component is valued at “one point” for each
year during the three-year period. For each performance component
for which the target is achieved, the participants each earn
“one point.” Thus, the LT Revenue Component is worth
one point per year during the three-year performance period, the LT
Book Value Component is worth one point per year during the
three-year performance period, and the LT EBITDA Component is worth
one point per year during the three-year performance
period.
The
payout opportunity based on the number of total points earned
during the three-year performance period is shown in the table
below.
|
Number of Points
Earned
|
Percentage of
Payout of the 2019 LT Multi-Year Award
|
|
0-3
|
0%
|
|
4
|
50%
|
|
5
|
60%
|
|
6
|
75%
|
|
7
|
100%
|
|
8
|
110%
|
|
9
|
125%
|
Each
component of the 2019 LTI Multi-Year Award is evaluated
independently of the other components during each year of the
performance. The Compensation Committee determined that if earned
at the end of the three-year performance period, the 2019 LTI
Multi-Year Award would be paid as RSUs.
LT Revenue Component – Fiscal 2019 (Year 1)
The
Compensation Committee set the LT Revenue Component for fiscal 2019
at $37.3 million, which represents year-over-year revenue growth of
15%, compared to fiscal 2018. Our total revenue for fiscal 2019 was
less than the target; thus, the participants did not earn a point
for the LT Revenue Component in fiscal 2019.
LT Book Value Component – Fiscal 2019 (Year 1)
The
Compensation Committee set the LT Book Value Component for fiscal
2019 at $1.50 book value per share of Class A common stock. Our
book value per share of Class A common stock for fiscal 2019 was
$1.28; thus, the participants did not earn a point for the LT Book
Value Component in fiscal 2019.
LT EBITDA Component – Fiscal 2019 (Year 1)
The
Compensation Committee set the LT EBITDA Component for fiscal 2019
at an EBITDA margin of 19%. Our EBITDA margin for fiscal 2019 was
less than the target; thus, the participants did not earn a point
for the LT EBITDA Component in fiscal 2019.
20
2018 Incentive Program
Our
fiscal 2018 incentive program has two key components: (i) the STI
program and (ii) the LTI program. The STI program is comprised of
awards based on our achievement of specific fiscal 2018 financial
objectives (the “2018 STI Award”), which were set prior
to the beginning of fiscal 2018. The LTI program was comprised of
(i) a discretionary stock option award, based on achievement of
subjective larger corporate goals evaluated over a one-year
performance period (the “2018 LTI Annual Award”), which
goals were set prior to the beginning of fiscal 2018 and (ii) an
equity award based on the achievement of pre-established financial
performance metrics evaluated over a three-year performance period
beginning on July 1, 2017 through June 30, 2020 (the “2018
LTI Multi-Year Award” and, together with the 2018 LTI Annual
Award, the “2018 LTI Awards”), which metrics were set
prior to the beginning of fiscal 2018.
Our
incentive program included different levels of bonus opportunity
based on a participant’s position with the Company. For
fiscal 2018, Mr. Gaynor was the only “level one”
participant and Mr. Symmons was a “level two”
participant. Mr. Retreage did not participate in our fiscal 2018
incentive program because he was hired as our Chief Financial
Officer in June 2018. Bonus opportunities for level one and level
two participants for fiscal 2018 were calculated by applying
designated portions of their respective bonus pool amounts, which
were set by the Compensation Committee, to formulas for each of the
components of the STI and LTI programs.
For
fiscal 2018, (i) Mr. Gaynor’s bonus pool amount for the 2018
STI Award was set at $215,000 and his bonus pool amount for the
2018 LTI Awards was set at $125,000; and (ii) Mr. Symmons’
bonus pool amount for the 2018 STI Award was set at $85,000 and his
bonus pool amount for the 2018 LTI Awards was set at
$50,000.
STI Program
In
order to determine a participant’s 2018 STI Award, the
portion of such participant’s bonus pool amount applicable to
the 2018 STI Award calculation ($215,000 in the case of Mr. Gaynor
and $85,000 in the case of Mr. Symmons), was multiplied by
approximately 33.3% and the product was used as a baseline for
determining the bonus for each component of the 2018 STI Award
(“2018 STI Baseline”). The 2018 STI Baseline for each
of the components was $71,595 and $28,305 for Mr. Gaynor and Mr.
Symmons, respectively.
Our
fiscal 2018 financial objectives upon which the 2018 STI Award was
based were as follows: (i) revenue growth over that of the prior
fiscal year (the “2018 Revenue Component”); (ii)
adjusted EBITDA growth (which is earnings before income, taxes,
depreciation, and amortization, as adjusted to exclude the effect
of the non-cash income or expense associated with the
mark-to-market adjustments related to our June 2012 warrants) (the
“2018 Adjusted EBITDA Component”); and (iii) return on
assets (adjusted to exclude the effect of goodwill and the non-cash
income or expense associated with the mark-to-market adjustments to
our June 2012 warrants) (the “2018 ROA Component”).
Each component of the 2018 STI Award is evaluated independently of
the other components, and the 2018 LTI Awards are evaluated
independently of the 2018 STI Award.
The
Compensation Committee determined that achievement of the 2018 STI
Award would be paid 50% in cash and 50% in RSUs; however, the
Compensation Committee retained the discretion to adjust the
allocation of the 2018 STI Award between cash and RSUs prior to
payment. As discussed below, since we did not achieve any of the
components of the 2018 STI Award in fiscal 2018, none of the
participants earned the 2018 STI Award.
2018 Revenue Component
The
2018 Revenue Component was based on our achievement of
year-over-year revenue growth of at least 12% in fiscal 2018. The
Compensation Committee determined that, for purposes of the
year-over-year comparison, revenue for fiscal 2017 would be
adjusted to include revenues generated by ISP as if the acquisition
occurred on July 1, 2016, instead of December 21, 2016, resulting
in the inclusion of revenues generated by ISP, on a pro forma
basis, for the entire fiscal year 2017. If we achieved or exceeded
the target of 12% of year-over-year growth in fiscal 2018, our
participants would be entitled to a bonus award under the 2018
Revenue Component equal to such participant’s 2018 STI
Baseline multiplied by the sum of (i) 100% plus (ii) the sum of the
actual year-over-year growth in total revenues less the target of
12%.
Without
the pro forma adjustment to revenue in fiscal 2017, our revenue in
fiscal 2018 increased by 15%, as compared to fiscal 2017. However,
with the pro forma adjustment to revenue in fiscal 2017 (to include
ISP’s revenue, on a pro forma basis, for the entire fiscal
year 2017), we had no year-over-year revenue growth, compared to
the fiscal 2017. Accordingly, the target was not met, and the
participants did not earn the 2018 Revenue Component of the 2018
STI Award.
2018 Adjusted EBITDA Component
In
order for our participants to earn a bonus with respect to the 2018
Adjusted EBITDA Component, we had to meet or exceed a minimum
adjusted EBITDA margin target established by the Compensation
Committee for fiscal 2018. The adjusted EBITDA margin was
calculated by dividing the fiscal 2018 adjusted EBITDA by the
fiscal 2018 revenues and the target was set at 28% for fiscal 2018.
If our adjusted EBITDA margin for fiscal 2018 equaled or exceeded
the target, then each participant would earn a bonus equal to such
participant’s 2018 STI Baseline multiplied by the sum of (i)
100% plus (ii) the percentage that adjusted EBITDA for fiscal 2018
exceeded adjusted EBITDA for fiscal 2017, up to a maximum growth
rate of 50%. If we did not achieve at least the adjusted EBITDA
margin target, or there was no growth year-over-year in adjusted
EBITDA, our participants would not earn a bonus with respect to the
2018 Adjusted EBITDA Component.
We did
not meet the adjusted EBITDA margin target for fiscal 2018.
Accordingly, the participants did not earn the 2018 Adjusted EBITDA
Component of the 2018 STI Award.
21
2018 ROA Component
The
2018 ROA Component was based on achieving a return on assets target
of at least 16% for fiscal 2018. If the return on assets for fiscal
2018 equaled or exceeded the target, then the participants would be
entitled to a bonus award under the 2018 ROA Component equal to
such participant’s 2018 STI Baseline multiplied by 100%. For
fiscal 2018, the actual return on assets equaled 2%, which did not
meet the target. Accordingly, the participants did not earn the
2018 ROA Component of the 2018 STI Award.
The
following table sets forth (i) each participant’s 2018 STI
Award bonus pool amount for fiscal 2018, (ii) the 2018 STI Baseline
dollar amount, used in the calculation of the 2018 STI Award bonus,
and (iii) the amount earned for each component of the 2018 STI
Award:
|
|
|
|
Bonus
Award Earned
|
||
|
Participant
|
Total
2018STI Award Bonus Pool($)
|
Baseline
for EachComponent of 2018 STI Award($)
|
Revenue($)
|
AdjustedEBITDA($)
|
ROA($)
|
|
J. James Gaynor
|
215,000
|
71,595
|
0
|
0
|
0
|
|
Alan Symmons
|
85,000
|
28,305
|
0
|
0
|
0
|
LTI Program
The
2018 LTI Awards are comprised of two components: (i) the 2018 LTI
Annual Award and (ii) the 2018 LTI Multi-Year Award.
2018 LTI Annual Award
The
2018 LTI Annual Award is a discretionary award made by our
Compensation Committee that was based on the achievement of certain
corporate goals set by the Compensation Committee for fiscal 2018.
In order to determine a participant’s 2018 LTI Annual Award
bonus opportunity, the portion of such participant’s bonus
pool amount applicable to the 2018 LTI Awards calculation ($125,000
in the case of Mr. Gaynor and $50,000 in the case of Mr. Symmons),
was multiplied by 40%. Thus, the bonus opportunity for the 2018 LTI
Annual Award was $50,000 and $20,000 for Mr. Gaynor and Mr.
Symmons, respectively. Participants can earn any portion of the
bonus opportunity for the 2018 LTI Annual Award. The Compensation
Committee determined that if earned, the 2018 LTI Annual Award
would be paid as a stock option, subject to a with one-third of the
stock option vesting on each of the first, second, and third
anniversaries of the grant date.
For
fiscal 2018, the corporate goals were: (i) complete the full
integration of ISP and meet the planned ISP revenue goal for fiscal
2018, (ii) fully deploy the Visual ERP system to include
ISP’s Latvia facility in Riga, Latvia, (iii) implement
capacity increases at LPOIZ’s facility in Zhenjiang, China
and ISP’s Latvia’s facility in Riga, Latvia to support
planned infrared growth, including increasing coating capacity for
germanium at LPOIZ’s facility, fully qualifying our new BD6
germanium-free coating, expanding our diamond turning capacity, and
improving our diamond turning productivity at ISP Latvia’s
facility, and (iv) ensure tooling manufacturing in Orlando is
increased to meet growing demand particularly for infrared
products.
At the
end of fiscal 2018, our Chief Executive Officer provided an
executive summary to the Compensation Committee, which summarized
our achievements with respect to the corporate goals. The
Compensation Committee determined whether the corporate goals were
met and whether 2018 LTI Annual Awards would be made.
After
reviewing our Chief Executive Officer’s executive summary,
the Compensation Committee determined that each participant
partially met the corporate goals established for the 2018 LTI
Annual Award. Accordingly, the Compensation Committee granted a
stock option award with a value of $7,500 and $3,000 for Mr. Gaynor
and Mr. Symmons, respectively. The stock option awards had an
exercise price equal to 115% of the then-current market price at
the date of issuance, or $2.10. The stock option awards are subject
to a three-year vesting period.
2018 LTI Multi-Year Award
The
2018 LTI Multi-Year Award is an equity award based on the
achievement of pre-established financial performance metrics over a
three-year performance period. In order to determine a
participant’s 2018 LTI Multi-Year Award bonus opportunity,
the portion of such participant’s bonus pool amount
applicable to the 2018 LTI Awards calculation ($125,000 in the case
of Mr. Gaynor and $50,000 in the case of Mr. Symmons), was
multiplied by 60%. Thus, the bonus opportunity for the 2018 LTI
Multi-Year Award was $75,000 and $30,000 for Mr. Gaynor and Mr.
Symmons, respectively. Mr. Retreage is not eligible to participate
in the 2018 LTI Multi-Year Award.
The
performance metrics upon which the 2018 LTI Multi-Year Award was
based are as follows: (i) LT Revenue Component; (ii) LT Book Value
Component; and (iii) LT EBITDA Component. The Compensation
Committee set a target for each component for each year during the
three-year period (July 1, 2017 through June 30, 2020). Each
performance component was valued at “one point” for
each year during the three-year period. For each performance
component for which the target is achieved, the participants each
earn “one point.” Thus, the LT Revenue Component is
worth one point per year during the three-year performance period,
the LT Book Value Component is worth one point per year during the
three-year performance period, and the LT EBITDA Component is worth
one point per year during the three-year performance
period.
22
The
payout opportunity based on the number of total points earned
during the three-year performance period is shown in the table
below.
|
Number of Points
Earned
|
Percentage of
Payout of the 2018 LT Multi-Year Award
|
|
0-3
|
0%
|
|
4
|
50%
|
|
5
|
60%
|
|
6
|
75%
|
|
7
|
100%
|
|
8
|
110%
|
|
9
|
125%
|
Each
component of the 2018 LTI Multi-Year Award is evaluated
independently of the other components during each year of the
performance. The Compensation Committee determined that if earned
at the end of the three-year performance period, the 2018 LTI
Multi-Year Award would be paid as RSUs.
LT Revenue Component – Fiscal 2018 (Year 1)
The
Compensation Committee set the LT Revenue Component for fiscal 2018
at $38.5 million, which represents year-over-year revenue growth of
12%, compared to fiscal 2017. The Compensation Committee determined
that, for purposes of the year-over-year comparison, revenue for
fiscal 2017 would be adjusted to include revenues generated by ISP
as if the acquisition occurred on July 1, 2016, instead of December
21, 2016, resulting in the inclusion of revenues generated by ISP,
on a pro forma basis, for the entire fiscal year 2017. Our total
revenue for fiscal 2018 was less than the target; thus, the
participants did not earn a point for the LT Revenue Component in
fiscal 2018.
LT Revenue Component – Fiscal 2019 (Year 2)
The
Compensation Committee set the LT Revenue Component for fiscal 2019
at $46.2 million, which represents year-over-year revenue growth of
20%, compared to fiscal 2018. Our total revenue for fiscal 2019 was
less than the target; thus, the participants did not earn a point
for the LT Revenue Component in fiscal 2019.
LT Book Value Component – Fiscal 2018 (Year 1)
The
Compensation Committee set the LT Book Value Component for fiscal
2018 at $1.20 book value per share of Class A common stock. Our
book value per share of Class A common stock for fiscal 2018 was
$1.37; thus, the participants each earned one point.
LT Book Value Component – Fiscal 2019 (Year 2)
The
Compensation Committee set the LT Book Value Component for fiscal
2019 at $1.55 book value per share of Class A common stock. Our
book value per share of Class A common stock for fiscal 2019 was
$1.28; thus, the participants did not earn a point for the LT
Revenue Component in fiscal 2019.
LT EBITDA Component – Fiscal 2018 (Year 1)
The
Compensation Committee set the LT EBITDA Component for fiscal 2018
at an adjusted EBITDA margin of 28%. Our adjusted EBITDA margin for
fiscal 2018 was less than the target; thus, the participants did
not earn a point for the LT EBITDA Component in fiscal
2018.
LT EBITDA Component – Fiscal 2019 (Year 2)
The
Compensation Committee set the LT EBITDA Component for fiscal 2019
at an adjusted EBITDA margin of 30%. Our adjusted EBITDA margin for
fiscal 2019 was less than the target; thus, the participants did
not earn a point for the LT EBITDA Component in fiscal
2018.
23
Summary Compensation Table
The following table sets forth certain
compensation awarded to, earned by or paid to (i) our Chief
Executive Officer and (ii) our two other most highly compensated
executive officers serving as executive officers at the end of
fiscal 2019. We did not have any individuals for whom disclosure
would have been required but for the fact that the individual was
not serving as an executive officer as of the end of fiscal
2019.
Dorothy Cipolla, our
former Vice President and Executive Director of Compliance,
separated from us in July 2019. Ms. Cipolla is not considered a
named executive officer for fiscal 2019 because, even if she was
still serving as an executive officer at the end of fiscal 2019,
she would not have qualified as one of our two most highly
compensated executive officers.
|
|
|
|
Option
|
All
Other
|
|
|
|
Fiscal
|
Salary
|
Awards
|
Compensation
|
Total
|
|
Name
and Position
|
Year
|
($)
|
($)
(2)
|
($)
(3)
|
($)
|
|
(a)
|
(b)
|
(c)
|
(f)
|
(i)
|
(j)
|
|
J. James
Gaynor
|
2019
|
315,000
(4)
|
—
|
18,771
|
333,771
|
|
President &
Chief Executive Officer
|
2018
|
315,000
(4)
|
7,500
(5)
|
14,383
|
336,883
|
|
Donald O. Retreage,
Jr.
|
2019
|
200,000
|
8,200
(7)
|
33,052
|
241,252
|
|
Chief Financial
Officer
|
2018
|
7,692
(6)
|
8,823
|
—
|
16,515
|
|
Alan
Symmons
|
2019
|
210,000
(8)
|
10,000
(7)
|
17,077
|
237,077
|
|
Chief Operating
Officer
|
2018
|
210,000
(8)
|
3,000
(5)
|
42,465
|
255,465
|
Notes:
(1)
For valuation
assumptions on stock awards refer to note 10 to the Consolidated
Financial Statements of our Annual Report on Form 10-K for fiscal
2019. The disclosed amounts reflect the fair value of the RSU
awards that were earned during the fiscal years ended June 30,
2019 and 2018 in accordance with FASB ASC Topic 718.
(2)
For valuation
assumptions on stock option awards refer to note 10 to the
Consolidated Financial Statements of our Annual Report on Form 10-K
for fiscal 2019. The disclosed amounts reflect the fair value of
the stock option awards that were earned during the fiscal years
ended June 30, 2019 and 2018 in accordance with FASB ASC Topic
718.
(3)
For fiscal 2019 and
2018, the nature of these compensatory items includes our
contribution toward the premium costs for employee and dependent
medical, life, and disability income insurances, benefits generally
available to our employees, vacation buyout, and the
Company’s match on contributions under the 401k plan. The
amounts for Mr. Retreage in fiscal 2019 include $22,488 for
relocation assistance. The amounts for Mr. Symmons in fiscal 2018
include $25,900 for undocumented living expenses when he was
general manager of ISP’s New York facility.
(4)
Mr. Gaynor’s
base salary was 94% of his total compensation for fiscal 2019 and
94% of his total compensation for fiscal 2018.
(5)
Based on the
achievement of certain criteria set by the Compensation Committee,
the named executive officers did not earn their respective 2018 STI
Awards during fiscal 2018. However, the named executive officers
partially earned their respective 2018 LTI Annual Awards, which
will be paid as stock options. Even though the LTI Annual Awards
were earned in fiscal 2018, the awards will not be granted until
fiscal 2019. For additional information, please see
“Discussion of Summary Compensation Table of Named Executive
Officers” below.
(6)
Mr. Retreage was
appointed as Chief Financial Officer effective June 18, 2018,
therefore his compensation for fiscal 2018 was pro-rated for the
period from his hire date to June 30, 2018. Mr. Retreage’s
base salary was 86% of his total compensation for fiscal 2019 and
47% of his total compensation for fiscal 2018.
(7)
Based on the
achievement of certain criteria set by the Compensation Committee,
the named executive officers did not earn their respective 2019 STI
Awards during fiscal 2019. However, certain named executive
officers partially earned their respective 2019 LTI Discretionary
Awards, which will be paid as stock options. Even though the 2019
LTI Discretionary Awards were earned in fiscal 2019, the awards
will not be granted until fiscal 2020. For additional information,
please see “Discussion of Summary Compensation Table of Named
Executive Officers” below.
(8)
Mr. Symmons’
base salary was 92% of his total compensation for fiscal 2019 and
82% of his total compensation for fiscal 2018.
24
Narrative Discussion of Summary Compensation Table of Executive
Officers
The
following is a narrative discussion of the material information
that we believe is necessary to understand the information is
disclosed in the foregoing Summary Compensation Table. The
following narrative disclosure is separated into sections, with a
separate section for each of our named executive
officers.
With
respect to fiscal 2019, each named executive officer received a
base salary and was eligible for a 2019 STI Award, a 2019 LTI
Discretionary Award, and a 2019 LTI Multi-Year Award. Information
on the specific components of executive compensation for fiscal
2019 can be found above under the heading “2019 Incentive
Program.” With respect to fiscal 2018, Messrs. Gaynor and
Symmons received a base salary and a 2018 LTI Annual Award and was
eligible for a 2018 STI Award and 2018 LTI Multi-Year Award. Mr.
Retreage solely received a base salary for fiscal 2018 as he was
hired as our Chief Financial Officer in June 2018. Information on
the specific components of executive compensation for fiscal 2018
can be found above under the heading “2018 Incentive
Program.”
Additional details
regarding the stock options granted to each named executive officer
is set forth below.
J. James Gaynor
|
Stock Option Grants (1)
|
Compensation
Expense (2)
|
||||||
|
Grant
Date
|
Number of
Shares
|
Number of Vested
Shares
|
Actual Fiscal
2018
|
Actual Fiscal
2019
|
Projected Fiscal
2020
|
Projected Fiscal
2021
|
Projected Fiscal
2022
|
|
|
$
|
$
|
$
|
$
|
$
|
||
|
10/31/2013
|
50,000
|
50,000
(3)
|
$
2,192
|
$
-
|
$
-
|
$
-
|
$
-
|
|
10/30/2014
|
50,000
|
50,000
(3)
|
8,439
|
2,109
|
-
|
-
|
-
|
|
10/29/2015
|
23,000
|
17,250
(3)
|
4,194
|
4,194
|
1,048
|
-
|
-
|
|
10/26/2017
|
28,795
|
9,598
(5)
|
73,500
|
-
|
-
|
-
|
-
|
|
11/15/2018
|
6,092
|
6,092
(4)
|
-
|
7,497
|
-
|
-
|
-
|
|
|
|
|
$
88,325
|
$
13,800
|
$
1,048
|
$
-
|
$
-
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
|
|
|
|
|
|
|
|
10/26/2017
|
25,354
|
8,451
(6)
|
$
93,556
|
$
-
|
$
-
|
$
-
|
$
-
|
(1)
This table includes
the stock options award of 177,978 shares that Mr. Gaynor earned
during fiscal 2016, but was granted during fiscal 2017, based on
the achievement of certain performance goals in fiscal 2016. This
table includes the restricted stock unit award of 25,354 shares and
stock option awards of 28,795 shares that Mr. Gaynor earned during
fiscal 2017, but was granted during fiscal 2018, based on the
achievement of certain performance goals in fiscal
2017.
(2)
Compensation
expense for grants of stock options is recognized or expected to be
recognized in accordance with ASC Topic 718, Stock
Compensation.
(3)
Represents the
number of shares vested as of June 30, 2019. One-fourth of the
stock option shares vests on each of the first, second, third and
fourth anniversaries of the grant date.
(4)
Represents the
number of shares vested as of June 30, 2019. Stock options granted
as part of the incentive bonus program vested
immediately.
(5)
Represents the
number of shares vested as of June 30, 2019. Stock options granted
as part of the incentive bonus program vests on each of the first,
second and third anniversaries of the grant date.
(6)
Represents the
number of shares vested as of June 30, 2019. RSUs granted as part
of the incentive bonus program vests on each of the first, second
and third anniversaries of the grant date.
25
Donald Retreage
|
Stock Option Grants
|
|
Compensation
Expense (2)
|
|||||
|
Grant
Date
|
Number of
Shares
|
Number of Vested
Shares (1)
|
Actual Fiscal
2018
|
Actual Fiscal
2019
|
Projected Fiscal
2020
|
Projected Fiscal
2021
|
Projected Fiscal
2022
|
|
6/15/2018
|
10,000
|
2,500
|
$
184
|
$
2,206
|
$
2,206
|
$
2,206
|
$
2,021
|
(1)
The number of
shares vested are as of June 30, 2019. One-fourth of the stock
option shares vests on each of the first, second, third and fourth
anniversaries of the grant date.
(2)
Compensation
expense for grants of stock options is recognized or expected to be
recognized in accordance with ASC Topic 718, Stock
Compensation.
Alan Symmons
|
Stock Option Grants
(1)
|
|
Compensation
Expense (2)
|
|||||
|
Grant
Date
|
Number of
Shares
|
Number of Vested
Shares
|
Actual Fiscal
2018
|
Actual Fiscal
2019
|
Projected Fiscal
2020
|
Projected Fiscal
2021
|
Projected Fiscal
2022
|
|
10/31/2013
|
15,000
|
15,000
(3)
|
$
658
|
$
-
|
$
-
|
$
-
|
$
-
|
|
10/30/2014
|
15,000
|
11,250
(3)
|
2,532
|
633
|
-
|
-
|
-
|
|
1/12/2015
|
10,000
|
10,000
(3)
|
1,569
|
784
|
-
|
-
|
-
|
|
10/29/2015
|
7,000
|
5,250
(3)
|
1,276
|
1,276
|
318
|
-
|
-
|
|
10/26/2017
|
10,284
|
10,284
(5)
|
26,250
|
-
|
-
|
-
|
-
|
|
11/15/2018
|
2,437
|
-
(4)
|
-
|
2,999
|
-
|
-
|
-
|
|
|
|
|
$
32,285
|
$
5,692
|
$
318
|
$
-
|
$
-
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
|
|
|
|
|
|
|
|
10/26/2017
|
9,055
|
3,018
(6)
|
$
33,413
|
$
-
|
$
-
|
$
-
|
$
-
|
(1)
This table includes
the stock options award of 63,563 shares that Mr. Symmons earned
during fiscal 2016, but that was granted during fiscal 2017, based
on the achievement of certain performance goals in fiscal 2016.
This table includes the RSU award of 9,055 shares and stock option
awards of 10,284 shares that Mr. Symmons earned during fiscal 2017,
but was granted during fiscal 2018, based on the achievement of
certain performance goals in fiscal 2017.
(2)
Compensation
expense for grants of stock options is recognized or expected to be
recognized in accordance with ASC Topic 718, Stock
Compensation.
(3)
Represents the
number of shares vested as of June 30, 2019. One-fourth of the
stock option shares vests on each of the first, second, third and
fourth anniversaries of the grant date.
(4)
Represents the
number of shares vested as of June 30, 2019. Stock options granted
as part of the incentive bonus program vested
immediately.
(5)
Represents the
number of shares vested as of June 30, 2019. Stock options granted
as part of the incentive bonus program vests on each of the first,
second and third anniversaries of the grant date.
(6)
Represents the
number of shares vested as of June 30, 2019. RSUs granted as part
of the incentive bonus program vests on each of the first, second
and third anniversaries of the grant date.
26
Potential Payments Upon Termination or
Change-of-Control
Mr.
Gaynor is our only named executive officer entitled to any payments
upon termination. If Mr. Gaynor is terminated without cause, he is
entitled to a severance payment equal to three months’
salary, as well as three months’ paid COBRA
benefits.
Certain
of our named executive officers are entitled to certain payments in
the event of a change-of-control. Mr. Gaynor’s right to
receive certain payments in the event of a change-of-control are
set forth in his letter agreement with us dated June 10, 2008 (the
“Employment Agreement”). Mr. Symmons’ right to
receive certain payments in the event of a change-of-control were
awarded to him by our Compensation Committee. Mr. Retreage does not
have any right to receive a payment in the event of a
change-of-control. The following table sets forth the potential
payments due to Mr. Gaynor and Mr. Symmons upon a
change-of-control.
|
|
Amount of Payment
Upon
|
|
Executive
Officer
|
a
Change-of-Control
|
|
J. James Gaynor
(1)(2)
|
$
630,000
|
|
Alan Symmons
(3)
|
$
52,500
|
(1)
Mr. Gaynor’s
Employment Agreement defines a change-of-control as any of the
following transactions occurring:
●
Our stockholders
approve an agreement providing for a sale, lease, or other
disposition of all or substantially all of our assets and the
transactions contemplated by such agreement are
consummated;
●
A merger or a
consolidation in which we are not the surviving entity, if our
stockholders immediately prior to such transaction fails to possess
direct or indirect beneficial ownership of more than fifty percent
(50%) of the voting power of the securities of the surviving entity
immediately following such transaction (or if the surviving entity
is a controlled subsidiary of another entity, then the required
beneficial ownership is determined with respect to the securities
of that entity that controls the surviving corporation and is not
itself a controlled subsidiary of any other entity);
●
Any person acquires
the beneficial ownership of securities of the Company representing
at least fifty-one percent (51%) of the combined voting power
entitled to vote in the election of directors; and
●
The individuals
who, as of the date of the Employment Agreement, are members of the
Board (the “Incumbent Board”) cease for any reason to
constitute at least fifty percent (50%) of the Board, except that
if the election of or nomination for election by the stockholders
of any new director was approved by a vote of at least fifty
percent (50%) of the Incumbent Board, such new director shall be
deemed to be a member of the Incumbent Board.
Notwithstanding the
foregoing, a public offering of our Class A common stock shall not
be considered a change-of-control.
(2) Mr.
Gaynor is entitled to twenty-four months’ compensation in the
event of a change-of-control. Payments made pursuant to a
change-of-control to Mr. Gaynor would be paid in a lump sum
and would only be paid out in the event Mr. Gaynor was no
longer employed by us. All of Mr. Gaynor’s unvested stock
options immediately vest upon a change-of-control.
(3) Mr.
Symmons is entitled to three months’ compensation in the
event of a change-of-control. Payments made pursuant to a
change-of-control to Mr. Symmons would occur according to our
normal payroll schedule and would only be paid out in the event he
was no longer employed by us.
27
Outstanding
Equity Awards at Fiscal Year-End
|
|
Options
Awards
|
|
|
|
|
|
|
(b)
|
(c)
|
|
|
|
|
|
Number
of
|
Number
of
|
|
|
|
|
|
Securities
|
Securities
|
|
|
|
|
|
Underlying
|
Underlying
|
(e)
|
|
(f)
|
|
|
Unexercised
|
Unexercised
|
Option
|
|
Option
|
|
(a)
|
Options
(#)
|
Options
(#)
|
Exercise
|
Vesting
|
Expiration
|
|
Name
|
Exercisable
|
Unexercisable
|
Price
($)
|
Schedule
|
Date
|
|
|
|
|
|
|
|
|
J. James Gaynor
(1)
|
50,000
|
—
|
$
2.66
|
25%/yr for 4
yrs
|
2/4/2020
|
|
|
25,000
|
—
|
$
2.69
|
25%/yr for 4
yrs
|
11/3/2020
|
|
|
40,000
|
—
|
$
1.39
|
25%/yr for 4
yrs
|
10/27/2021
|
|
|
20,000
|
—
|
$
0.98
|
25%/yr for 4
yrs
|
10/25/2022
|
|
|
50,000
|
—
|
$
1.41
|
25%/yr for 4
yrs
|
10/31/2023
|
|
|
50,000
|
—
|
$
1.37
|
25%/yr for 4
yrs
|
10/30/2024
|
|
|
17,250
|
5,750
|
$
1.48
|
25%/yr for 4
yrs
|
10/29/2025
|
|
|
55,556
|
—
|
$
1.48
|
immediate
|
10/29/2025
|
|
|
30,436
|
30,434
|
$
1.78
|
25%/yr for 4
yrs
|
10/27/2026
|
|
|
117,108
|
—
|
$
1.56
|
immediate
|
10/27/2026
|
|
|
9,598
|
19,197
|
$
4.24
|
33%/yr for 3
yrs
|
10/26/2027
|
|
|
6,092
|
—
|
$
2.10
|
immediate
|
11/15/2028
|
|
Donald Retreage,
Jr. (2)
|
2,500
|
7,500
|
$
2.13
|
25%/yr for 4
yrs
|
6/18/2028
|
|
Alan Symmons
(3)
|
10,000
|
—
|
$
2.66
|
25%/yr for 4
yrs
|
2/4/2020
|
|
|
7,000
|
—
|
$
2.69
|
25%/yr for 4
yrs
|
11/3/2020
|
|
|
12,500
|
—
|
$
1.39
|
25%/yr for 4
yrs
|
10/27/2021
|
|
|
12,500
|
—
|
$
0.98
|
25%/yr for 4
yrs
|
10/25/2022
|
|
|
4,000
|
—
|
$
0.87
|
25%/yr for 4
yrs
|
1/31/2023
|
|
|
15,000
|
—
|
$
1.41
|
25%/yr for 4
yrs
|
10/31/2023
|
|
|
15,000
|
—
|
$
1.37
|
25%/yr for 4
yrs
|
10/30/2024
|
|
|
10,000
|
—
|
$
1.27
|
25%/yr for 4
yrs
|
1/12/2025
|
|
|
29,762
|
—
|
$
1.48
|
immediate
|
10/29/2025
|
|
|
5,250
|
1,750
|
$
1.48
|
25%/yr for 4
yrs
|
10/29/2025
|
|
|
41,824
|
—
|
$
1.56
|
immediate
|
10/27/2026
|
|
|
10,870
|
10,869
|
$
1.78
|
25%/yr for 4
yrs
|
10/27/2026
|
|
|
3,428
|
6,856
|
$
4.24
|
33%/yr for 3
yrs
|
10/26/2027
|
|
|
2,437
|
—
|
$
2.10
|
immediate
|
11/15/2028
|
(1)
This table does not
include the RSU award, representing 25,354 shares of Class A common
stock, which Mr. Gaynor earned based on the achievement of certain
performance goals in fiscal 2017. RSUs granted as part of the
incentive bonus program vest on each of the first, second, and
third anniversaries of the grant date. As of June 30, 2019, Mr.
Gaynor has unvested RSUs of 16,903 related to this
grant.
(2)
This table does not
include the stock option award equal to $8,200 that Mr. Retreage
earned based on the achievement of certain performance goals in
fiscal 2019.
(3)
This table does not
include the stock option award equal to $10,000 that Mr. Symmons
earned based on the achievement of certain performance goals in
fiscal 2019. This table also does not include the RSU award,
representing 9,055 shares of Class A common stock, which Mr.
Symmons earned based on the achievement of certain performance
goals in fiscal 2017. RSUs granted as part of the incentive bonus
program vest on each of the first, second, and third anniversaries
of the grant date. As of June 30, 2019, Mr. Symmons has unvested
RSUs of 6,037 related to this grant.
The
stock options were issued pursuant to the Incentive Plan or the
Amended and Restated Omnibus Incentive Plan, as applicable, and
have a ten-year life. The options will terminate 90 days after
termination of employment, or in the case of termination due to
death or permanent disability, the options will terminate one year
after the date of termination.
28
DIRECTOR COMPENSATION
Director
Compensation
The
table below summarizes the compensation paid by us to non-employee
directors for fiscal 2019.
|
|
Fees Earned or
|
Stock
|
All
Other
|
|
|
|
Paid in
Cash
|
Awards
|
Compensation
|
Total
|
|
Name
(1)
|
($)(2)
|
($)(3)
|
($)
|
($)
|
|
(a)
|
(b)
|
(c)
|
(g)
|
(h)
|
|
Robert
Ripp
|
$
100,000
|
$
60,000
|
$
-
|
$
160,000
|
|
Sohail
Khan
|
$
40,000
|
$
60,000
|
$
-
|
$
100,000
|
|
Dr. Steven
Brueck
|
$
36,000
|
$
60,000
|
$
-
|
$
96,000
|
|
Louis
Leeburg
|
$
44,000
|
$
60,000
|
$
-
|
$
104,000
|
|
M. Scott
Faris
|
$
36,000
|
$
60,000
|
$
-
|
$
96,000
|
|
Craig
Dunham
|
$
36,000
|
$
60,000
|
$
-
|
$
96,000
|
|
Joseph
Menaker
|
$
36,000
|
$
60,000
|
$
-
|
$
96,000
|
|
(1)
|
J.
James Gaynor, our President and Chief Executive Officer during
fiscal 2019, is not included in this table as he was an employee,
and, thus, received no compensation for his services as a director.
The compensation received by Mr. Gaynor as an employee is
disclosed in the Summary Compensation Table on page
24.
|
|
(2)
|
Total
fees earned for fiscal 2019 includes all fees earned, including
earned but unpaid fees. The amounts of unpaid fees for each
director are as follows: Mr. Ripp - $25,000, Mr. Leeburg - $11,000,
Dr. Brueck - $9,000, Mr. Khan - $10,000, Mr. Faris - $9,000, Mr.
Dunham - $9,000, and Dr. Menaker - $9,000.
|
|
(3)
|
Reflects
the fair value amount for RSUs granted for the fiscal year ended
June 30, 2019 in accordance with ASC Topic 718.
|
Discussion of the Summary Compensation Table of
Directors
The
following is a discussion of the material information that we
believe is necessary to understand the information disclosed in the
Summary Compensation Table. We use a combination of cash and
stock-based incentive compensation to attract and retain qualified
candidates to serve on our Board. In setting director compensation,
we consider the significant amount of time that directors expend in
fulfilling their duties as a director as well as the skill-level
required by us of members of our Board. For fiscal 2019, the cash
and stock-based incentive compensation awarded to directors
remained at the same levels set in fiscal 2018. The annual cash
portion of the directors’ compensation remained at $36,000
and the annual value of restricted stock awards remained at
$60,000.
29
Cash Compensation Paid to Board Members
During
fiscal 2019, directors received a monthly retainer of $3,000 per
month. There are no meeting attendance fees paid unless, by action
of the Board, such fees are deemed advisable due to a special
project or other effort requiring extra-normal commitment of time
and effort. Additionally, fees are paid to the Chairman of the
Board and Committee Chairmen for their additional responsibilities
in overseeing their respective functions. The following table sets
forth the annual fees paid to each director for fiscal
2019:
|
Name
|
Board
Fee
|
Chairman
Fee
|
Committee
Chair Fee
|
Total
Fees Earned for Fiscal Year 2019
|
|
Robert
Ripp
|
$
36,000
|
$
60,000
|
$
4,000
|
$
100,000
|
|
J.
James Gaynor (1)
|
$
-
|
|
|
$
-
|
|
Dr.
Joseph Menaker
|
$
36,000
|
|
|
$
36,000
|
|
Sohail
Khan
|
$
36,000
|
|
$
4,000
|
$
40,000
|
|
Dr.
Steven Brueck
|
$
36,000
|
|
|
$
36,000
|
|
M.
Scott Faris
|
$
36,000
|
|
|
$
36,000
|
|
Louis
Leeburg
|
$
36,000
|
|
$
8,000
|
$
44,000
|
|
Craig
Dunham
|
$
36,000
|
|
|
$
36,000
|
(1)
Mr. Gaynor did not
receive any compensation for his service as a director because he
is also an employee.
Stock Option/Restricted Stock Program
All
directors are eligible to receive equity incentives under the
Incentive Plan, including stock options, restricted stock awards,
or RSUs. In fiscal 2019, the following directors received grants
under the Incentive Plan:
|
|
RSUs
|
||
|
Name of Director (1)
|
Number of Units
Granted
|
Grant
Date
|
Fair Value Price
Per Share
|
|
Dr.
Steven Brueck
|
32,787
|
11/15/2018
|
$
1.83
|
|
Sohail
Khan
|
32,787
|
11/15/2018
|
$
1.83
|
|
Louis
Leeburg
|
32,787
|
11/15/2018
|
$
1.83
|
|
Robert
Ripp
|
32,787
|
11/15/2018
|
$
1.83
|
|
M.
Scott Faris
|
32,787
|
11/15/2018
|
$
1.83
|
|
Craig
Dunham
|
32,787
|
11/15/2018
|
$
1.83
|
|
Dr. Joseph
Menaker
|
32,787
|
11/15/2018
|
$
1.83
|
|
|
229,509
|
|
|
(1)
Mr. Gaynor did not
receive any compensation for his service as a director because he
is also an employee.
30
Additional details
regarding the RSUs granted to each director, other than Mr. Gaynor,
is set forth below.
|
RSUs
|
Compensation
Expense (1)
|
||||||
|
Grant
Date
|
Number
of
Shares
|
Number of Vested
Shares (2)
|
Actual Fiscal
2018
|
Actual Fiscal
2019
|
Projected Fiscal
2020
|
Projected Fiscal
2021
|
Projected Fiscal
2022
|
|
10/30/2014
|
36,500
|
36,500
|
$
4,151
|
$
-
|
$
-
|
$
-
|
$
-
|
|
10/29/2015
|
33,785
|
33,785
|
16,668
|
4,165
|
-
|
-
|
-
|
|
10/27/2016
|
38,462
|
25,641
|
20,001
|
19,999
|
4,998
|
-
|
-
|
|
10/26/2017
|
16,260
|
5,420
|
15,011
|
20,000
|
19,992
|
4,996
|
-
|
|
11/15/2018
|
32,787
|
-
|
-
|
13,335
|
20,000
|
20,000
|
6,665
|
|
|
|
|
$
55,830
|
$
57,499
|
$
44,991
|
$
24,996
|
$
6,665
|
Positions:
Chairman of the
Board, Compensation Committee Chairman, Nominating & Corporate
Governance
Committee
Chairman
Committees:
Compensation,
Finance and Nominating & Corporate Governance
Committees
(1)
Compensation
expense for grants of RSUs is recognized or expected to be
recognized in accordance with ASC Topic 718, Stock
Compensation.
(2)
The number of
shares vested are as of June 30, 2019. One-third of the RSU shares
vests on each of the first, second and third anniversaries of the
grant date.
Sohail
Khan
|
RSUs
|
Compensation
Expense (1)
|
||||||
|
Grant
Date
|
Number of
Shares
|
Number of Vested
Shares (2)
|
Actual Fiscal
2018
|
Actual Fiscal
2019
|
Projected Fiscal
2020
|
Projected Fiscal
2021
|
Projected Fiscal
2022
|
|
10/30/2014
|
36,500
|
36,500
|
$
4,151
|
$
-
|
$
-
|
$
-
|
$
-
|
|
10/29/2015
|
33,785
|
33,785
|
16,668
|
4,165
|
-
|
-
|
-
|
|
10/27/2016
|
38,462
|
25,641
|
20,001
|
19,999
|
4,998
|
-
|
-
|
|
10/26/2017
|
16,260
|
5,420
|
15,011
|
20,000
|
19,992
|
4,996
|
-
|
|
11/15/2018
|
32,787
|
-
|
-
|
13,335
|
20,000
|
20,000
|
6,665
|
|
|
|
|
$
55,830
|
$
57,499
|
$
44,991
|
$
24,996
|
$
6,665
|
31
Positions:
Finance Committee
Chairman
Committees:
Finance,
Compensation and Nominating & Corporate Governance
Committees
(1)
Compensation
expense for grants of RSUs is recognized or expected to be
recognized in accordance with ASC Topic 718, Stock
Compensation.
(2)
The number of
shares vested are as of June 30, 2019. One-third of the RSU shares
vests on each of the first, second and third anniversaries of the
grant date.
Dr. Steven Brueck
|
RSUs
|
Compensation
Expense (1)
|
||||||
|
Grant
Date
|
Number of
Shares
|
Number of Vested
Shares (2)
|
Actual Fiscal
2018
|
Actual Fiscal
2019
|
Projected Fiscal
2020
|
Projected Fiscal
2021
|
Projected Fiscal
2022
|
|
10/30/2014
|
36,500
|
36,500
|
$
4,151
|
$
-
|
$
-
|
$
-
|
$
-
|
|
10/29/2015
|
33,785
|
33,785
|
16,668
|
4,165
|
-
|
-
|
-
|
|
10/27/2016
|
38,462
|
25,641
|
20,001
|
19,999
|
4,998
|
-
|
-
|
|
10/26/2017
|
16,260
|
5,420
|
15,011
|
20,000
|
19,992
|
4,996
|
-
|
|
11/15/2018
|
32,787
|
-
|
-
|
13,335
|
20,000
|
20,000
|
6,665
|
|
|
|
|
$
55,830
|
$
57,499
|
$
44,991
|
$
24,996
|
$
6,665
|
Committees:
Audit
Committee
(1)
Compensation
expense for grants of RSUs is recognized or expected to be
recognized in accordance with ASC Topic 718, Stock
Compensation.
(2)
The number of
shares vested are as of June 30, 2019. One-third of the RSU shares
vests on each of the first, second and third anniversaries of the
grant date.
Louis Leeburg
|
RSUs
|
Compensation
Expense (1)
|
||||||
|
Grant
Date
|
Number of
Shares
|
Number of Vested
Shares (2)
|
Actual Fiscal
2018
|
Actual Fiscal
2019
|
Projected Fiscal
2020
|
Projected Fiscal
2021
|
Projected Fiscal
2022
|
|
10/30/2014
|
36,500
|
36,500
|
$
4,151
|
$
-
|
$
-
|
$
-
|
$
-
|
|
10/29/2015
|
33,785
|
33,785
|
16,668
|
4,165
|
-
|
-
|
-
|
|
10/27/2016
|
38,462
|
25,641
|
20,001
|
19,999
|
4,998
|
-
|
-
|
|
10/26/2017
|
16,260
|
5,420
|
15,011
|
20,000
|
19,992
|
4,996
|
-
|
|
11/15/2018
|
32,787
|
-
|
-
|
13,335
|
20,000
|
20,000
|
6,665
|
|
|
|
|
$
55,830
|
$
57,499
|
$
44,991
|
$
24,996
|
$
6,665
|
Positions:
Audit Committee
Chairman
Committees:
Audit, Compensation
and Nominating & Corporate Governance Committees
(1)
Compensation
expense for grants of RSUs is recognized or expected to be
recognized in accordance with ASC Topic 718, Stock
Compensation.
(2)
The number of
shares vested are as of June 30, 2019. One-third of the RSU shares
vests on each of the first, second and third anniversaries of the
grant date.
32
M. Scott Faris
|
RSUs
|
Compensation
Expense (1)
|
||||||
|
Grant
Date
|
Number of
Shares
|
Number of Vested
Shares (2)
|
Actual Fiscal
2018
|
Actual Fiscal
2019
|
Projected Fiscal
2020
|
Projected Fiscal
2021
|
Projected Fiscal
2022
|
|
10/30/2014
|
36,500
|
36,500
|
$
4,151
|
$
-
|
$
-
|
$
-
|
$
-
|
|
10/29/2015
|
33,785
|
33,785
|
16,668
|
4,165
|
-
|
-
|
-
|
|
10/27/2016
|
38,462
|
25,641
|
20,001
|
19,999
|
4,998
|
-
|
-
|
|
10/26/2017
|
16,260
|
5,420
|
15,011
|
20,000
|
19,992
|
4,996
|
-
|
|
11/15/2018
|
32,787
|
-
|
-
|
13,335
|
20,000
|
20,000
|
6,665
|
|
|
|
|
$
55,830
|
$
57,499
|
$
44,991
|
$
24,996
|
$
6,665
|
Committees:
Audit and Finance
Committees
(1)
Compensation
expense for grants of RSUs is recognized or expected to be
recognized in accordance with ASC Topic 718, Stock
Compensation.
(2)
The number of
shares vested are as of June 30, 2019. One-third of the RSU shares
vests on each of the first, second and third anniversaries of the
grant date.
Craig Dunham (1)
|
RSUs
|
Compensation
Expense (2)
|
||||||
|
Grant
Date
|
Number of
Shares
|
Number of Vested
Shares (3)
|
Actual Fiscal
2018
|
Actual Fiscal
2019
|
Projected Fiscal
2020
|
Projected Fiscal
2021
|
Projected Fiscal
2022
|
|
10/30/2014
|
36,500
|
36,500
|
$
4,151
|
$
-
|
$
-
|
$
-
|
$
-
|
|
10/29/2015
|
33,785
|
33,785
|
16,668
|
4,165
|
-
|
-
|
-
|
|
10/27/2016
|
38,462
|
25,641
|
20,001
|
19,999
|
4,998
|
-
|
-
|
|
10/26/2017
|
16,260
|
5,420
|
15,011
|
20,000
|
19,992
|
4,996
|
-
|
|
11/15/2018
|
32,787
|
-
|
-
|
13,335
|
20,000
|
20,000
|
6,665
|
|
|
|
|
$
55,830
|
$
57,499
|
$
44,991
|
$
24,996
|
$
6,665
|
Committees:
Audit
Committee
(1)
Mr. Dunham served
as a consultant to the Board from March 2014 until April 2016. In
April 2016, he was appointed as a director. During the time period
Mr. Dunham served as a consultant to the Board, he earned
compensation equivalent to the compensation paid to the directors.
The amounts disclosed include the compensation he earned as a
consultant and director.
(2)
Compensation
expense for grants of RSUs is recognized or expected to be
recognized in accordance with ASC Topic 718, Stock
Compensation.
(3)
The number of
shares vested are as of June 30, 2019. One-third of the RSU shares
vests on each of the first, second and third anniversaries of the
grant date.
33
Dr. Joseph Menaker (1)
|
RSUs
|
Compensation
Expense (2)
|
||||||
|
Grant
Date
|
Number of
Shares
|
Number of Vested
Shares (3)
|
Actual Fiscal
2018
|
Actual Fiscal
2019
|
Projected Fiscal
2020
|
Projected Fiscal
2021
|
Projected Fiscal
2022
|
|
11/15/2018
|
25,354
|
-
|
$
-
|
$
13,335
|
$
20,000
|
$
20,000
|
$
6,665
|
Committees:
Finance
Committee
(1)
Dr. Menaker served
as a consultant to the Board from March 2018 until November 2018,
when he was appointed as a director. During the time period Dr.
Menaker served as a consultant to the Board, he earned compensation
equivalent to the compensation paid to the directors. The amounts
disclosed include the compensation he earned as a consultant and
director.
(2)
Compensation
expense for grants of RSUs is recognized or expected to be
recognized in accordance with ASC Topic 718, Stock
Compensation.
(3)
The number of
shares vested are as of June 30, 2019. One-third of the RSU shares
vests on each of the first, second and third anniversaries of the
grant date.
34
EQUITY COMPENSATION PLAN INFORMATION
Equity Compensation Plan Information
The
following table sets forth as of June 30, 2019, the end of our
most recent fiscal year, information regarding (i) all
compensation plans previously approved by our stockholders and
(ii) all compensation plans not previously approved by our
stockholders:
|
Plan
category
|
Number of
securities to be issued upon exercise of outstanding options,
warrants and rights
|
Weighted average
exercise and grant price of outstanding options, warrants and
rights
|
Number of
securities remaining available for future
issuance
|
|
Equity compensation
plans approved by security holders
|
2,844,451
(1)
|
$
1.82
(2)
|
1,416,691
|
|
Equity compensation
plans not approved by security holders
|
—
|
—
|
—
|
(1)
Represents the
number of underlying shares of Class A common stock associated with
outstanding stock options and outstanding RSUs that have been
granted, but not yet issued, pursuant to either the Amended and
Restated Omnibus Incentive Plan or the Incentive Plan, as
applicable.
(2)
Represents
weighted-average exercise price of stock options outstanding under
the Amended and Restated Omnibus Incentive Plan or the Incentive
Plan, as applicable. The weighted-average exercise price does not
include the RSU awards.
35
PROPOSAL 2 – ADVISORY VOTE TO APPROVE EXECUTIVE
COMPENSATION
What Am I Voting On?
Stockholders are
being asked to approve, on a non-binding, advisory basis, the
compensation of our named executive officers.
Voting Recommendation
FOR
the non-binding, advisory vote to
approve the executive compensation of our named executive officers
disclosed in this Proxy Statement under the section titled
“executive compensation,” including the compensation
tables and other narrative execution compensation disclosures
therein, required by Item 402 of SEC Regulation S-K.
Summary
We
believe executive compensation is an important matter for our
stockholders. A fundamental principle of our executive compensation
philosophy and practice continues to be to pay for performance. An
executive officer’s compensation package is comprised of two
components: (i) a base salary, which reflects individual
performance and expertise and (ii) short-term and long-term
incentive awards, tied to the achievement of certain performance
goals that the Compensation Committee establishes from time to time
for us. We believe that this type of compensation program is
consistent with our strategy, competitive practice, sound corporate
governance principles, and stockholder interests and concerns. We
urge you to read this Proxy Statement for additional details on our
executive compensation, including our compensation philosophy and
objectives and the fiscal 2019 compensation of the named executive
officers.
This
proposal, commonly known as a “say-on-pay” proposal,
gives you as a stockholder the opportunity to endorse or not
endorse our executive pay philosophy, policies, and procedures.
This vote is intended to provide an overall assessment of our
executive compensation program rather than focus on any specific
item of compensation. Given the information provided above and
elsewhere in this Proxy Statement, the Board asks you to approve
the following resolution:
“RESOLVED
, that the
Company’s stockholders approve the compensation of the
Company’s named executive officers described in the Proxy
Statement under the section titled “Executive
Compensation”, including the compensation tables and other
narrative executive compensation disclosures therein, required by
Item 402 of Regulation S-K.”
As an
advisory vote, this proposal is non-binding on us. However, the
Board and the Compensation Committee value the opinions of our
stockholders and will consider the outcome of the vote when making
future compensation decisions for our named executive
officers.
36
PROPOSAL 3 – RATIFICATION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
What Am I Voting On?
It is
the responsibility of the Audit Committee to select and retain our
independent registered public accounting firms. Our Audit Committee
has appointed Moore Stephens Lovelace, as our independent
registered public accounting firm for our fiscal year ending
June 30, 2020. Although stockholder ratification of the Audit
Committee’s selection of our independent registered public
accounting firm is not required by our Bylaws or otherwise, we are
submitting the selection of Moore Stephens Lovelace to stockholder
ratification so that our stockholders may participate in this
important corporate decision. If not ratified, the Audit Committee
will reconsider the selection, although the Audit Committee will
not be required to select different independent registered public
accounting firm for us.
Representatives of
Moore Stephens Lovelace will be present at the Annual Meeting and
will have an opportunity to make a statement and respond to
questions from stockholders present at the meeting.
Voting Recommendation
FOR
the ratification of the appointment
of Moore Stephens Lovelace as our independent registered public
accounting firm.
Change in Independent Registered Public Accounting
Firm
As
previously disclosed by us in a Current Report on Form 8-K filed on
December 8, 2017 with the SEC, the Audit Committee conducted a
competitive process to determine our independent registered public
accounting firm for the fiscal year ending June 30, 2018. We
invited several independent registered public accounting firms to
participate in this process, including our then-current independent
registered public accounting firm for our fiscal years ended June
30, 2017 and 2016. Following a review of proposals from the firms
that participated in the process, on December 4, 2017, the Audit
Committee approved, and the Board ratified the Audit
Committee’s approval of, the dismissal of our then-current
independent registered public accounting firm BDO USA LLP
(“BDO”), our independent registered public accounting
firm for the fiscal years ended June 30, 2017 and 2016. On the same
date, the Audit Committee engaged Moore Stephens Lovelace, an
independent member of the Moore Stephens International Limited
association network of firms, as the new independent registered
public accounting firm for the fiscal year ending June 30, 2018.
Moore Stephens Lovelace’s engagement was ratified by the
Board.
BDO’s reports
on our consolidated financial statements as of and for the fiscal
years ended June 30, 2017 and 2016 did not contain an adverse
opinion or disclaimer of opinion, nor were they modified or
qualified as to uncertainty, audit scope, or accounting principles.
During the fiscal years ended June 30, 2017 and 2016, and the
subsequent interim periods through December 4, 2017, there were no
disagreements within the meaning of Item 304(a)(1)(iv) of
Regulation S-K and the related instructions between us and BDO on
any matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of BDO, would
have caused BDO to make reference in connection with its opinion to
the subject matter of the disagreement.
As
previously reported and as discussed under Item 9A of our Annual
Report on Form 10-K for the fiscal year ended June 30, 2017,
management did not identify any material weaknesses in our internal
control over financial reporting. There are no reportable events
under Item 304(a)(1)(v) of Regulation S-K promulgated under the
Exchange Act that occurred during the fiscal years ended June 30,
2017 and 2016 and through December 4, 2017.
Prior
to engaging Moore Stephens Lovelace, we did not consult with Moore
Stephens Lovelace regarding (a) the application of accounting
principles to a specific completed or contemplated transaction
regarding the type of audit opinions that might be rendered by
Moore Stephens Lovelace on our financial statements, and Moore
Stephens Lovelace did not provide any written or oral advice that
was an important factor considered by us in reaching a decision as
to any such accounting, auditing, or financial reporting issue, or
(b) a disagreement or reportable event as described under Item
304(a)(2)(11) of Regulation S-K.
The
report of independent registered public accounting firm issued by
BDO regarding our financial statements for the fiscal year ended
June 30, 2017 and 2016 did not contain any adverse opinion or
disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope, or accounting principles.
37
Audit Fees
The
following table presents fees paid or to be paid for professional
audit services rendered by Moore Stephens Lovelace and BDO for the
audit of our annual financial statements during the years ended
June 30, 2019 and 2018, review of financial statements included in
our quarterly reports during the years ended June 30, 2019 and
2018, and fees billed for other services rendered:
|
|
Fiscal
2019
|
Fiscal
2018
|
|
|
|
Moore Stephens
Lovelace
|
Moore Stephens
Lovelace
|
BDO
|
|
Audit Fees
(1)
|
$
152,200
|
$
140,000
|
$
10,000
|
|
Audit-Related Fees
(2)
|
|
|
30,000
|
|
Tax Fees
(3)
|
20,000
|
20,000
|
|
|
All Other Fees
(4)
|
2,925
|
|
|
|
Total
All Fees
|
$
175,125
|
$
160,000
|
$
40,000
|
(1)
Audit Fees
consisted of fees billed for professional services rendered for the
audit of our annual financial statements and review of the interim
financial statements included in quarterly reports, and review of
other documents filed with the SEC within those fiscal
years.
(2)
Audit-related fees
in fiscal 2018 pertained to work performed related to BDO’s
consent to incorporate by reference their report dated September
14, 2017 related to the consolidated financial statements for the
year ended June 30, 2017, which were included in our 2018 Annual
Report on Form 10-K.
(3)
Tax fees consisted
of fees billed for professional services rendered for the
preparation and filing of our annual tax returns.
(4)
All Other Fees
consist of fees billed for professional services rendered for
tax-related research.
The
Audit Committee has adopted policies and procedures to oversee the
external audit process including engagement letters, estimated fees
and solely pre-approving all permitted audit and non-audit work
performed by Moore Stephens Lovelace, as applicable.
The Audit Committee has
pre-approved all fees for audit, audit-related and non-audit work
performed.
AUDIT COMMITTEE REPORT
The
Audit Committee is responsible for, among other things, reviewing
and discussing the Company’s audited financial statements
with management, discussing with our independent registered public
accounting firm information relating to its judgments about the
quality of our accounting principles, recommending to the Board
that we include the audited financial statements in our Annual
Report, and overseeing compliance with the SEC requirements for
disclosure of auditors’ services and activities.
Review of Audited Financial Statements
The
Audit Committee reviewed our financial statements for the fiscal
year ended June 30, 2019, as audited by Moore Stephens Lovelace our
independent registered public accounting firm, and discussed these
financial statements with management. In addition, the Audit
Committee has discussed with Moore Stephens Lovelace the matters
required to be discussed by Auditing Standards No. 1301,
Communications with Audit
Committees,
as adopted by the Public Company Accounting
Oversight Board (“PCAOB”), as may be modified or
supplemented. Furthermore, the Audit Committee has received the
written disclosures and the letter from Moore Stephens Lovelace
required by the Independence Standards Board Standard No. 1, as may
be modified or supplemented, and has discussed with BDO its
independence.
Generally, the
members of the Audit Committee are not professionally engaged in
the practice of auditing or accounting and are not experts in the
fields of accounting or auditing, or in determining auditor
independence. However, the Board has determined that each member of
the Audit Committee meets the independence criteria set forth in
the applicable rules of the NCM and the SEC, and that three members
of the Audit Committee, Mr. Leeburg, Mr. Faris, and Mr.
Dunham, qualify as “audit committee financial experts”
as defined by SEC rules. Members of the Audit Committee rely,
without independent verification, on the information provided to
them and on the representations made by management. Accordingly,
the Audit Committee's oversight does not currently provide an
independent basis to determine that management has maintained
procedures designed to assure compliance with accounting standards
and applicable laws and regulations.
Recommendation
Based
upon the foregoing review and discussion, the Audit Committee
recommended to the Board that the audited financial statements for
the fiscal year ended June 30, 2019, be included in our Annual
Report for such fiscal year.
Audit Committee:
Louis
Leeburg, Chairman
Dr.
Steven Brueck
M.
Scott Faris
Craig
Dunham
38
OTHER BUSINESS
The
Board is not aware of any other business to be considered or acted
upon at the Annual Meeting other than that for which notice is
provided in this Proxy Statement and the accompanying notice. In
the event any other matters properly come before the Annual
Meeting, it is expected that the shares represented by proxy will
be voted with respect thereto in accordance with the judgment of
the persons voting them.
2019 ANNUAL REPORT ON FORM 10-K
Copies
of our Annual Report for fiscal 2019, which contains our Form 10-K
for the fiscal year ended June 30, 2019, and consolidated financial
statements, as filed with the SEC, have been included in this
mailing. Additional copies may be obtained without charge to
stockholders upon written request to Investor Relations at 2603
Challenger Tech Court, Suite 100, Orlando, Florida USA 32826. In
addition, copies of this document, the Annual Report and all other
documents filed electronically by us may be reviewed and printed
from the SEC’s website at:
http://www.sec.gov
.
By
Order of the Board of Directors,
J. James Gaynor
President &
Chief Executive Officer
Orlando,
Florida
October
1, 2019
39
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