TRACK GROUP, INC.
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
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Confidential, For Use of the Commission Only (as permitted by Rule
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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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Track Group, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Date Filed:
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200 E. 5
th
Avenue, Suite 100
Naperville, Illinois 60563
(877) 260-2010
NOTICE OF CONSENT SOLICITATION
July 13, 2018
Dear Track Group, Inc. Stockholder:
Notice is hereby given that Track Group, Inc., a
Delaware corporation (the “
Company
” or “
we
”), is seeking the written consent of
stockholders holding a majority of the Company’s outstanding
common stock, par value $0.0001 per share
(“
Common
Stock
”), to authorize and
approve the following proposals (together, the
“
Proposals
”):
1.
To
elect Guy Dubois, Karen Macleod and Karim Sehnaoui as directors of
the Company, each to serve a one-year term until the next annual
meeting of stockholders or until their successor is duly elected;
and
2.
To ratify the appointment of Eide Bailly, LLP as our independent
auditors for the fiscal year ending September 30,
2018.
The Board previously approved resolutions to (i) nominate Messrs.
Dubois and Sehnaoui, and Ms. Macleod as directors, and (ii) appoint
Eide Bailly, LLP as the Company’s independent auditors for
the fiscal year ending September 30, 2018.
In order to save the expense associated with
holding an annual meeting of the Company’s stockholders, the
Company’s Board of Directors has elected to obtain
stockholder approval of the Proposals by written consent
(“
Written
Consent
”) in lieu of an
annual meeting of stockholders, pursuant to Sections 211 and 228 of
the Delaware General Corporation Law. The close of business on July
6, 2018 has been fixed as the record date
(“
Record Date
”) for the determination of holders of
shares of our Common Stock entitled to receive notice of, and the
discretion to approve, the Proposals.
This solicitation is being made on the terms and
subject to the conditions set forth in the accompanying Consent
Solicitation Statement and form of Written Consent that is attached
to the Consent Solicitation Statement. The Board of Directors
requests that you sign, date and return the Written Consent in the
enclosed envelope (or submit your consent by email) as soon as
possible. To be counted, your properly completed Written Consent
must be received before 5:00 p.m. Central Time, on August 13, 2018
(the “
Expiration
Date
”), subject to early
termination of, or extension of the Expiration Date at the
discretion of our Board of Directors.
Failure
to submit the Written Consent by any stockholder of record as of
the Record Date will have the same effect as a vote against the
Proposals. We recommend that all stockholders consent to the
Proposals by marking the box titled “FOR” with respect
to the Proposals and submitting the Written Consent by one of the
methods set forth in the attached form of Written Consent. If you
sign and send in the Written Consent form but do not indicate how
you want to vote as to the Proposals, your consent form will be
treated as a consent “FOR” the Proposals.
The
actions to be taken pursuant to the Written Consent will be taken
as soon as practicable and at such time that we receive properly
executed Written Consents approving the Proposals set forth herein
from the stockholders holding a majority of the outstanding shares
of our Common Stock as of the Record Date.
Please
return the enclosed written consent to us no later than 5:00 p.m.
Central Time, on August 13, 2018 via email to
peter.poli@trackgrp.com, or via mail to:
Track
Group, Inc.
Attn:
Corporate Secretary
200 E. 5
th
Avenue, Suite 100
Naperville,
Illinois 60563
By order of the Board of Directors,
Guy Dubois
Chairman
200 E. 5
th
Avenue, Suite 100
Naperville, Illinois 60563
Tel. (877) 260-2010
_____________________________________________________________________________________________
CONSENT SOLICITATION STATEMENT
_____________________________________________________________________________________________
This Consent Solicitation Statement is being
furnished to you as a holder of shares of common stock, par value
$0.0001 (“
Common
Stock
”), of Track Group,
Inc., a Delaware corporation (the “
Company
”), in connection with the solicitation of
written consents of the stockholders of the Company for approval of
the following proposals (together, the “
Proposals
”):
1.
To
elect Guy Dubois, Karen Macleod and Karim Sehnaoui as directors of
the Company, each to serve a one-year term until the next annual
meeting of stockholders or until their successor is duly elected;
and
2.
To ratify the appointment of Eide Bailly, LLP as our independent
auditors for the fiscal year ending September 30,
2018.
In
this Consent Solicitation Statement, all references to the
“Company,” “we,” “us” or
“our” refer to Track Group, Inc.
Our Board of Directors has elected to seek
stockholder approval of the Proposals by written consent
(“
Written
Consent
”) in lieu of an
annual meeting of stockholders in order to eliminate the costs and
management time involved in holding an annual meeting of
stockholders. Written Consents are being solicited from
stockholders of record as July 6, 2018, the record date set in
connection with this Consent Solicitation Statement (the
“
Record Date
”), pursuant to Sections 211 and 228 of the
Delaware General Corporation Code (the “
DGCL
”).
Who May Consent
This Consent Solicitation Statement, the attached
form of Written Consent and our Annual Report on Form 10-K for the
year ended September 30, 2017 (the “
Annual
Report
”) are being mailed
to those eligible stockholders on or about July 13,
2018.
As
of the Record Date, we had 11,401,650 shares of Common Stock issued
and outstanding, each of which are entitled to act with respect to
this Consent Solicitation.
Stockholders who wish to
consent to the Proposals must return the attached form of Written
Consent either by mail or email on or before 5:00 p.m. Central Time
on August 13, 2018 (the “
Expiration
Date
”)
. The Company expressly reserves the right, in its
sole discretion and regardless of whether any of the conditions of
the Consent Solicitation have been satisfied, subject to applicable
law, at any time prior to Expiration Date, to (i) terminate
the Consent Solicitation for any reason, including if the consent
of stockholders holding a majority of the Company’s
outstanding shares has been received; (ii) waive any of the
conditions to the Consent Solicitation; or (iii) amend the terms of
the Consent Solicitation.
- 1 -
Stockholders
who wish to consent must deliver their properly completed and
executed Written Consents to the Corporate Secretary of the Company
in accordance with the instructions set forth in the attached form
of Written Consent. The Company reserves the right (but is not
obligated) to accept any Written Consent received by any other
reasonable means or in any form that reasonably evidences the
giving of consent to the approval of the
Proposals.
IF YOU HOLD YOUR STOCK IN “STREET NAME,” YOU MUST
INSTRUCT YOUR BROKER OR NOMINEE TO APPROVE THE PROPOSALS. IF YOU
FAIL TO DO SO, YOUR BROKER OR NOMINEE MAY NOT RETURN THE WRITTEN
CONSENT. Any beneficial owner of the Company who is not a record
holder must arrange with the person who is the record holder or
such record holder’s assignee or nominee to: (i) execute and
deliver a Written Consent on behalf of such beneficial owner; or
(ii) deliver a proxy so that such beneficial owner can execute and
deliver a Written Consent on its own behalf.
Requests
for copies of this Consent Solicitation Statement should be
directed to Track Group, Inc. at the address or telephone number
set forth above.
We
will act as tabulation agent for this Consent Solicitation
Statement. If you have any questions regarding your form of Written
Consent, please contact us directly at (877) 260-2010.
Consent Required
Pursuant
to Section 228 of the DGCL, approval of each of the Proposals
requires the affirmative vote or written consent of holders of a
majority of the issued and outstanding shares of our Common Stock
entitled to vote thereon.
Stockholder
approval of the Proposals will be effective upon receipt by us of
affirmative Written Consents, not previously revoked, representing
at least 5,700,826 votes, or a majority of votes that may be cast
by our issued and outstanding voting securities as of the Record
Date. Accordingly, abstentions from submitting your Written Consent
will have the same effect of disapproving the
Proposals.
Revocation of Consents
You
may withdraw or change your Written Consent at any time prior to
the Expiration Date by submitting a written notice of revocation to
the Company’s Corporate Secretary at the address set forth
above. A notice of revocation or withdrawal must specify the record
stockholder’s name and the number of shares being
withdrawn. After the Expiration Date, all written consents
previously executed and delivered and not revoked will become
irrevocable.
Absence of Appraisal Rights
Stockholders who abstain from consenting to the
approval of the Proposals, or who withhold consent of the
Proposals, do not have the right to an appraisal of their shares of
Common Stock or any similar dissenters’ rights under the
Delaware General Corporation Law, our Certificate of Incorporation
(“
Charter
”) or our Bylaws.
Expenses of this Solicitation
This
solicitation is being made by our Board of Directors and
management, and we will bear the entire cost of the solicitation,
including preparation, printing and mailing costs. Written Consents
will be solicited principally through the mail, but our directors,
officers and employees may solicit Written Consents personally, by
phone or by e-mail. Arrangements will be made with brokerage firms
and other custodians, nominees and fiduciaries to forward these
consent solicitation materials to stockholders whose shares of
Common Stock are held of record by such entities, and we will
reimburse suck brokerage firms, custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred by them
in connection herewith. In addition, we may pay for and utilize the
services of individuals or companies we do not regularly employ in
connection with this consent solicitation, if management determines
it advisable.
- 2 -
PROPOSALS TO BE ACTED UPON BY STOCKHOLDERS:
___________________________________
PROPOSAL NO. 1
ELECTION OF DIRECTORS
General
Our
Charter provides that the number of directors that constitute the
entire Board shall be fixed from time to time by resolution adopted
by a majority of the entire Board of Directors. A director
elected by the Board to fill a vacancy shall serve for the
remainder of the term of that director and until the
director’s successor is elected and qualified. Directors
elected by stockholders shall serve for a one-year term until the
next annual meeting of stockholders or until their successor is
duly elected, unless prior thereto the director resigns or the
director’s office becomes vacant by reason of death or other
cause.
Required Consents
Pursuant
to Section 228 of the DGCL, the election of each director nominee
requires written consents from holders of record of at least a
majority of the outstanding shares of our Common Stock on the
Record Date who are entitled to submit consents. If a nominee for
the Board of Directors does not receive the affirmative vote of a
majority of the outstanding shares of our Common Stock pursuant to
this Consent Solicitation Statement, then under the DGCL and the
Company’s Bylaws, he or she will continue to serve until the
earliest of the next annual meeting of stockholders, his successor
is elected and qualified, or his resignation or
removal.
In
addition to the voting requirements set forth in Section 228 of the
DGCL, Section 211(b) of the DGCL permits stockholders of a Delaware
corporation to, in lieu of an annual meeting, act by written
consent to elect the corporation’s directors if (i) such
consent is unanimous or (ii) if all of the directorships to which
directors could be elected at an annual meeting are vacant and
filled by such action.
Each of our current directors, Messrs. Dubois and
Sehnaoui and Ms. Macleod (the “
Directors
”), shall resign from their positions as
directors on the Company’s Board of Directors, effective
immediately prior to the receipt and acceptance by the Company of
that number of Written Consents required to approve the Proposals.
As a result, all of the directorships of the Company shall be
vacant at such time that approval of the election of directors by
written consent takes effect, as required by Section 211(b) of the
DGCL. Should the Company not receive Written Consents affirmatively
voting in favor of the re-election of any of the foregoing
Directors, such Director shall not resign, and shall continue to
hold his or her position as a director on our Board until the
earliest of next annual meeting of stockholders or until his or her
successor is duly elected, unless prior thereto the Director
resigns or the Director’s office becomes vacant by reason of
death or other cause.
Board of Directors Recommendation
The
Board of Directors recommends you consent to the election of each
of Guy Dubois, Karen Macleod and Karim Sehnaoui as directors of the
Company, to hold such position until the earliest of next annual
meeting of stockholders or until his or her successor is duly
elected, unless prior thereto the Director resigns or the
Director’s office becomes vacant by reason of death or other
cause.
Director Nominees
Following are the names and ages of each director
nominee, the principal occupation of each, the year in which each
was first elected or nominated as a director of the Company (if
applicable), the business experience of each nominee for at least
the past five years, and certain other information concerning each
of the nominees.
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Name
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Served as
Director Since
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Age
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Principal Business Experience
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Guy Dubois
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2012
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59
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Guy Dubois
became a director in
December 2012, and has served as our Chairman since February 2013.
Mr. Dubois also served as a member of the Company’s Executive
Committee from October 2012 to September 2016, and was appointed to
serve as Chief Executive Officer of the Company in September 2016,
which position he held through December 31, 2017. Mr. Dubois is a
director of Singapore-based Tetra House Pte. Ltd., a provider of
consulting and advisory services worldwide. Mr. Dubois is a former
director and chief executive officer of Gategroup AG, and also
previously held various executive leadership roles at Gate Gourmet
Holding LLC. Mr. Dubois has held executive management positions at
Roche Vitamins Inc. in New Jersey, as well as regional management
roles in that firm’s Asia Pacific operations. Mr. Dubois also
served the European Organization for Nuclear Research (CERN) team
in Switzerland in various roles, including treasurer and chief
accountant. Additionally, Mr. Dubois worked with IBM in Sweden as
Product Support Specialist for Financial Applications. A Belgian
citizen, Mr. Dubois holds a degree in financial science and
accountancy from the Limburg Business School in Diepenbeek,
Belgium.
When considering Mr. Dubois as a director of the Company, the Board
reviewed his extensive financial and management expertise and
experience, as well as the fact that he served as the
Company’s CEO for approximately 4 years.
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Karen Macleod
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2016
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54
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Ms.
Macleod
became a director of the Company in
January 2016 and currently serves as chief executive officer of
Arete Group LLC, a professional services firm. Prior to Arete
Group, Ms. Macleod was President of Tatum LLC, a New York-based
professional services firm owned by Randstad, from 2011 to 2014,
and was a co-founder of Resources Connection (NASDAQ:RECN), now
known as RGP, a multinational professional services firm founded as
a division of Deloitte in June 1996. Ms. Macleod served in several
positions for RGP, including as a director from 1999 to 2009 and
President, North America from 2004 to 2009. Prior to RGP, Ms.
Macleod held several positions in the audit department of Deloitte
from 1985 to 1994. Ms. Macleod served as a director for A-Connect
(Schweiz) AG, a privately held, Swiss-based global
professional services firm, from 2014-2016, and was a director for
Overland Solutions from 2006 to 2013. Currently, Ms. Macleod is
serving as a director on the Board of the FWA (Financial
Women’s Association) in New York, and is a member of their
audit committee. Ms. Macleod holds a Bachelor of Science in
Business/Managerial Economics from the University of California,
Santa Barbara.
The Board believes Ms. Macleod’s senior public company
leadership experience along with her finance and accounting
background are important to the ongoing growth of the Company and
corporate governance excellence.
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Karim Sehnaoui
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2018
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39
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Mr. Sehnaoui became a director of the Company in February 2018. Mr.
Sehnaoui is an entrepreneur and investment professional, who
specializes in private equity, venture capital, and corporate
finance. Currently, he serves as General Manager of the Reference
Group SARL, a boutique financial advisory firm based in Geneva,
Switzerland, which position he has held since October 2017, and as
a Director of ETS Limited. In addition, Mr. Sehnaoui is the founder
and current Managing Director of Elham Management and Investment
Group, an investment firm founded in 2011 that is dedicated to
sustainable strategic investing. From 2012 to 2016, Mr. Sehnaoui
taught graduate level finance courses as a visiting Assistant
Professor at MSB Mediterranean School of Business in Tunisia. Prior
to that, Mr. Sehnaoui spent several years in investment banking and
private equity, serving as Acting Chief Investment Officer of Abu
Dhabi Investment House PJSC and General Manager for Abu Dhabi
Investment House S.A., and Business Development Director at Ithmaar
Bank. Mr. Sehnaoui is currently a member of the Supervisory Board
of Fyber N.V. (FRA: FBEN), an advertising technology company. Mr.
Sehnaoui holds Bachelor’s and Master’s degrees in Civil
Engineering from McGill University in Montreal, Canada, and was a
Global Leadership Fellow at the World Economic Forum in Geneva,
Switzerland from 2005 to 2007.
The Board’s decision to appoint Mr. Sehnaoui as a director of
the Company was made in connection with ETS Limited becoming the
Company’s largest shareholder of record. The Board also
believes Mr. Sehnaoui’s senior leadership experience, along
with his private equity and venture capital background, are
important to the ongoing growth of the Company and corporate
governance.
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- 4 -
CORPORATE GOVERNANCE
Subsequent to the year ended September 30, 2017,
and effective May 31, 2018, David Boone, Dirk van Daele, Eric
Rosenblum and Ray Johnson (together, the
“
Former
Directors
”) resigned from
their positions as directors on the Company’s Board of
Directors, leaving Guy Dubois, Karim Sehnaoui and Karen Macleod as
the remaining directors on our Board. Certain disclosure which
follows regarding corporate governance refer to the Company’s
Board of Directors and corporate governance policies and procedures
prior to the resignation of the Former Directors, and do not
reflect the Company’s corporate governance policies and
procedures subsequent to such resignations.
Board Meetings and Committees
The
Board met six times during the year ended September 30, 2017 and
all incumbent directors attended at least 75% of the aggregate
number of meetings of the Board and of the committees on which such
directors served.
Independent Directors
Prior
to the resignations of Messrs. Boone, van Daele, Rosenblum and
Johnson, the Company had determined that, other than Messrs. Dubois
and Sehnaoui, all of its then directors were independent directors
as defined by the rules and regulations of the NASDAQ Stock
Market.
The Board has determined that Ms. Macleod is
currently the Company’s sole independent director as defined
by the rules and regulations of the NASDAQ Stock Market. Ms.
Macleod meets the independence standards established by the NASDAQ
Stock Market and the U.S. Securities and Exchange Commission (the
“
SEC
”). In addition, the Board has determined
that of its current directors, Ms. Macleod satisfies the definition
of an “audit committee financial expert” under SEC
rules and regulations. These designations do not impose any duties,
obligations or liabilities that are greater than those generally
imposed as members of the Board, and the designation as an audit
committee financial expert does not affect the duties, obligations
or liability of any other member of the Board.
- 5 -
Board Committees and Charters
The
Board of Directors had three standing committees as of the year
ended September 30, 2017: the Audit Committee, Compensation
Committee, and Nominating and Corporate Governance
Committee. These committees assisted the Board of Directors to
perform its responsibilities and make informed
decisions.
Effective
May 31, 2018, as a result of the resignation of Messrs. Boone, van
Daele, Rosenblum and Johnson, the Board no longer has an acting
Audit Committee, Compensation Committee, or Nominating and
Corporate Governance Committee. Instead, the full Board of
Directors administers the duties of the Audit Committee,
Compensation and Nominating and Corporate Governance
Committees.
Audit Committee
As of the year ended September 30, 2018, we had a
separately designated standing Audit Committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. The
primary duties of the Audit Committee were to oversee (i)
management’s conduct related to our financial reporting
process, including reviewing the financial reports and other
financial information provided by the Company, and reviewing our
systems of internal accounting and financial controls, (ii) our
independent auditors’ qualifications and independence and the
audit and non-audit services provided to the Company, and (iii) the
engagement and performance of our independent auditors. The
Audit Committee assisted the Board in providing oversight of our
financial and related activities, including capital market
transactions. The Audit Committee had a charter, a copy of which is
available on our website at
www.trackgrp.com
.
The
Audit Committee met with our Chief Financial Officer and with our
independent registered public accounting firm and evaluated the
responses by the Chief Financial Officer, both to the facts
presented and to the judgments made by our independent registered
public accounting firm. The Audit Committee met four times
during the 2017 fiscal year and all members of the Audit Committee
attended at least 75% of the Committee’s
meetings.
As
of the year ended September 30, 2017, the Members of the Audit
Committee consisted of Ms. Macleod, Mr. Rosenblum and Mr. van
Daele. Each member of the Audit Committee, satisfied, as determined
by the full Board of Directors, the definition of independent
director as established in the NASDAQ Stock Market Rules and were
financially literate. In accordance with Section 407 of the
Sarbanes-Oxley Act of 2002, the Board of Directors designated Ms.
Macleod as the Audit Committee’s “audit committee
financial expert” as defined by the applicable regulations
promulgated by the SEC. Currently, the entire Board of
Directors serves in the capacity as an Audit
Committee.
The Audit Committee reviewed and discussed the
matters required by United States auditing standards required by
the Public Company Accounting Oversight Board (the
“
PCAOB
”) and our audited financial statements for
the fiscal year ended September 30, 2017 with management and our
independent registered public accounting firm. The Audit Committee
received the written disclosures and the letter from our
independent registered public accounting firm required by
Independence Standards Board No. 1, and the Audit Committee
discussed with the independent registered public accounting firm
the independent registered public accounting firm's
independence.
Compensation Committee
As
of the year ended September 30, 2017, members of the Compensation
Committee consisted of Dr. Johnson and Mr. Rosenblum, both of whom
were determined to be independent directors in accordance with the
NASDAQ Stock Market Rules, including Rule 5605(d)(2)(A). The
Compensation Committee met twice during the 2017 fiscal
year.
Currently,
the entire Board of Directors serves in the capacity as a
Compensation Committee. As such, the entire Board of Directors has
the responsibility for developing and maintaining an executive
compensation policy that creates a direct relationship between pay
levels and corporate performance and returns to stockholders. The
Board monitors the results of such policy to assure that the
compensation payable to our executive officers provides overall
competitive pay levels, creates proper incentives to enhance
stockholder value, rewards superior performance, and is justified
by the returns available to stockholders. Additionally, the Board
administers compensation plans in a manner consistent with the
terms of such plans (including, as applicable, the granting of
stock options, restricted stock, stock units and other awards, the
review of performance goals established before the start of the
relevant plan year, and the determination of performance compared
to the goals at the end of the plan year).
- 6 -
Currently,
Ms. Macleod serves as the sole independent director, as determined
by the Board of Directors in accordance with the NASDAQ Stock
Market Rules, including Rule 5605(d)(2)(A).
Nominating and Corporate Governance Committee
As
of the year ended September 30, 2017, Messrs. van Daele, Boone and
Dr. Johnson served as members of our Nominating and Corporate
Governance Committee. Currently, the entire Board of Directors
serves in the capacity as a Nominating Committee. As such, the
entire Board of Directors has the responsibility for identifying
and recommending candidates to fill vacant and newly created Board
positions, setting corporate governance guidelines regarding
director qualifications and responsibilities, and planning for
senior management succession.
Director Nominations
The
Board nominates directors for election at each annual meeting of
stockholders and appoints new directors to fill vacancies when they
arise, and has the responsibility to identify, evaluate and recruit
qualified candidates to the Board for such nomination or
appointment.
The
Board of Directors identifies director nominees by first
considering those current members of the Board who are willing to
continue service. Current members of the Board with skills and
experience that are relevant to our business and who are willing to
continue service are considered for re-nomination, balancing the
value of continuity of service by existing members of the Board
with that of obtaining a new perspective. Nominees for director are
selected by a majority of the members of the Board of Directors.
Although the Company does not have a formal diversity policy, in
considering the suitability of director nominees, the Board
considers such factors as it deems appropriate to develop a Board
that is diverse in nature and comprised of experienced and seasoned
advisors. Factors considered by the Board include judgment,
knowledge, skill, diversity, integrity, experience with businesses
and other organizations of comparable size, including experience in
the software and/or technology industries, software, intellectual
property, business, finance, administration or public service, the
relevance of a candidate’s experience to our needs and
experience of other Board members, experience with accounting rules
and practices, the desire to balance the considerable benefit of
continuity with the periodic injection of the fresh perspective
provided by new members, and the extent to which a candidate would
be a desirable addition to the Board and any committees of the
Board.
A
stockholder who wishes to suggest a prospective nominee for the
Board should notify the Secretary of the Company in writing with
any supporting material the stockholder considers appropriate.
Nominees suggested by stockholders are considered in the same way
as nominees suggested from other sources.
In addition, the Company’s Bylaws contain
provisions that address the process by which a stockholder may
nominate an individual to stand for election to the Board at the
Company’s annual meeting of stockholders. In order to
nominate a candidate for director, a stockholder must give timely
notice in writing to the Secretary of the Company and otherwise
comply with the provisions of the Company’s Bylaws.
Information required by the Company’s Bylaws to be in the
notice include: the name, contact information and share ownership
information for the candidate and the person making the nomination,
and other information about the nominee that must be disclosed in
proxy solicitations under Section 14 of the Securities
Exchange Act of 1934, as amended (the “
Exchange
Act
”) and its related
rules and regulations. The Board may also require any proposed
nominee to furnish such other information as may reasonably be
required by the Board to determine the eligibility of such proposed
nominee to serve as director of the Company. The recommendation
should be sent to: Secretary, Track Group, Inc., 200 E.
5
th
Avenue, Suite 100, Naperville,
Illinois 60563. You can obtain a copy of the Company’s Bylaws
by writing to the Secretary at this address.
- 7 -
Stockholder Communications
If you wish to communicate with the Board, you may
send your communication in writing to: Secretary, Track Group,
Inc., 200 E. 5
th
Avenue, Suite 100, Naperville,
Illinois 60563. You must include your name and address in the
written communication and indicate whether you are a stockholder of
the Company. The Secretary will review any communication received
from a stockholder, and all material and appropriate communications
from stockholders will be forwarded to the appropriate director or
directors or committee of the Board based on the subject
matter.
Code of Business Conduct and Ethics
We have established a Code of Business Conduct and
Ethics that applies to our officers, directors and
employees. The Code of Business Conduct and Ethics contains
general guidelines for conducting our business consistent with the
highest standards of business ethics, and is intended to qualify as
a “code of ethics” within the meaning of Section 406 of
the Sarbanes-Oxley Act of 2002 and the rules promulgated
thereunder. We have posted our Code of Business Conduct and
Ethics on our website,
www.trackgrp.com,
and
will post any amendments to or waivers from a provision of our Code
of Business Conduct and Ethics that apply to our principal
executive officer, principal financial officer, principal
accounting officer, controller or persons performing similar
functions and that relates to any element of the Code of Business
Conduct and Ethics.
Board Leadership Structure
Our
Board of Directors has discretion to determine whether to separate
or combine the roles of Chief Executive Officer and Chairman of the
Board. Guy Dubois served in both roles from September 11, 2016
through December 31, 2017. Our Board believed that his combined
role was most advantageous to the Company and our stockholders, as
Mr. Dubois possesses in-depth knowledge of the issues,
opportunities and risks facing us, our business and our industry
and was best positioned to fulfill the responsibilities of our
Chief Executive Officer, as well as the Chairman’s
responsibility to develop meeting agendas that focus the
Board’s time and attention on the most critical matters and
to facilitate constructive dialogue among Board members on
strategic issues. Effective January 1, 2018, the Board of
Directors promoted the President of the Company, Mr. Derek Cassell,
to the role of Chief Executive Officer, and thereby separated the
roles of Chief Executive Officer and Chairman of the
Board.
In
addition to Mr. Dubois’ and Mr. Cassell’s leadership,
the Board maintains effective independent oversight through a
number of governance practices, including, open and direct
communication with management, input on meeting agendas, and
regular executive sessions.
Board Role in Risk Assessment
Management,
in consultation with outside professionals, as applicable,
identifies risks associated with the Company’s operations,
strategies and financial statements. Risk assessment is also
performed through periodic reports received by the Audit Committee
from management, counsel and the Company’s independent
registered public accountants relating to risk assessment and
management. Audit Committee members meet privately in executive
sessions with representatives of the Company’s independent
registered public accountants. The Board also provides risk
oversight through its periodic reviews of the financial and
operational performance of the Company.
- 8 -
PROPOSAL NO. 2
RATIFICATION OF THE APPOINTMENT OF
EIDE BAILLY, LLP TO SERVE AS OUR
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDED SEPTEMBER 30,
2018
The Board of Directors has appointed Eide
Bailly, LLP (“
Eide Bailly
”) as our independent registered public
accounting firm for the fiscal year ended September 30, 2018 and
hereby recommends that the stockholders ratify such
appointment.
The
Board of Directors may terminate the appointment of Eide Bailly as
the Company’s independent registered public accounting firm
without the approval of the stockholders whenever the Board of
Directors deems such termination necessary or
appropriate.
Required Consents
Pursuant
to Section 228 of the DGCL, the ratification of the selection of
Eide Bailly as the Company’s independent auditors for the
fiscal year ending September 30, 2018 requires written consents
from holders of record of at least a majority of the outstanding
shares of our Common Stock on the Record Date who are entitled to
submit consents.
Board of Directors Recommendation
The Board of Directors recommends you consent to
the ratification of the selection of Eide Bailly, LLP
(“
Eide Bailly
”) as the Company’s independent
auditors for the fiscal year ending September 30,
2018.
Independent Auditor
During
the years ended September 30, 2017 and 16, Eide Bailly served
as our independent registered public accounting firm.
The
following table presents approximate aggregate fees and other
expenses for professional services rendered by Eide Bailly, our
independent registered public accounting firm, for the audit of the
Company’s annual financial statements for the years ended
September 30, 2017 and 2016 and fees and other expenses for other
services rendered during those periods.
|
|
2017
|
2016
|
|
|
|
|
|
Audit Fees
(1)
|
$
162,420
|
$
155,552
|
|
Audit-Related Fees
(2)
|
$
6,141
|
$
1,863
|
|
Tax Fees
(3)
|
$
20,728
|
$
24,415
|
|
All Other Fees
(4)
|
$
21,661
|
$
-
|
|
Total
|
$
210,950
|
$
181,830
|
|
(1)
|
Audit services in 2017 and 2016 consisted of the audit of our
annual consolidated financial statements, and other services
related to filings and registration statements filed by us and our
subsidiaries, and other pertinent matters. Eide Bailly has served
as our independent registered public accounting firm since
September 24, 2013.
|
|
(2)
|
Audit-related fees consisted of travel costs related to our annual
audit.
|
|
(3)
|
For permissible professional services related to income tax return
preparation and compliance.
|
|
(4)
|
All other fees are related to the preparation of the
Company’s Affordable Care Act forms and examination of the
401(k) financial statements.
|
- 9 -
Audit Committee Pre-Approval Policies and Procedures
The
Audit Committee has established its pre-approval policies and
procedures, pursuant to which the Audit Committee approved the
foregoing audit and permissible non-audit services provided by Eide
Bailly in fiscal 2017 and 2016. Such procedures govern the ways in
which the Audit Committee pre-approves audit and various categories
of non-audit services that the auditor provides to the
Company. Services which have not received pre-approval must
receive specific approval of the Audit Committee. The Audit
Committee is to be informed of each such engagement in a timely
manner, and such procedures do not include delegation of the Audit
Committee’s responsibilities to management.
Auditor Independence
Our
Audit Committee considered that the work done for us in fiscal year
2017 and 2016 by Eide Bailly was compatible with maintaining
Eide Bailly’s independence.
Report of the Audit Committee of the Board of
Directors
Date: September 30, 2017
The Audit Committee reviewed and discussed with
management and
Eide Bailly,
LLP
, our independent registered
public accounting firm, the audited consolidated financial
statements in the Track Group, Inc. Annual Report on Form
10-K for the year ended September 30, 2017. The Audit Committee
also discussed with
Eide Bailly, LLP
those matters required to be discussed
by Public Company Accounting Oversight Board
(“
PCAOB
”) Auditing Standard No.
61.
Eide Bailly, LLP
also provided the Audit Committee with
the written disclosures and the letter required by the applicable
requirements of the PCAOB regarding the independent auditor’s
communication with the Audit Committee concerning independence. The
Audit Committee has discussed with the registered public accounting
firm their independence from our Company.
Based
on its discussions with management and the registered public
accounting firm, and its review of the representations and
information provided by management and the registered public
accounting firm, including as set forth above, the members of the
Audit Committee as of September 30, 2017, as set forth below,
recommended to our Board of Directors that the audited financial
statements be included in our Annual Report on Form 10-K for the
year ended September 30, 2017.
|
|
Respectfully Submitted,
Eric Rosenblum
Dirk Karel J. van Daele
Karen Macleod
|
|
|
|
The information contained above under the caption
“
Report of the Audit Committee
of the Board of Directors
” shall not be deemed to be soliciting
material or to be filed with the SEC, nor shall such information be
incorporated by reference into any future filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act
of 1934, as amended, except to the extent that we specifically
incorporate it by reference into such filing.
- 10 -
EXECUTIVE COMPENSATION
The
Company’s executive officers are appointed by the Board on an
annual basis and serve at the discretion of the Board, subject to
the terms of any employment agreements they may have with the
Company. The following is a brief description of the present and
past business experience of each of the Company’s current
executive officers.
|
Name
|
|
Age
|
|
Position
|
|
Derek Cassell
|
|
44
|
|
Chief Executive Officer and former President
|
|
Guy Dubois
|
|
59
|
|
Chairman and former Chief Executive Officer
|
|
Peter K. Poli
|
|
56
|
|
Chief Financial Officer
|
Derek
Cassell
joined Track Group
in June 2014 through the strategic acquisition of Emerge
Monitoring, at which time he was appointed Divisional President,
Americas. Mr. Cassell was appointed to serve as President of Track
Group in December 2016 and was promoted to the role of Chief
Executive Officer effective January 1, 2018. From September 2008
until June 2014, Mr. Cassell served as an Executive Vice President
of Emerge Monitoring, which was part of the Bankers Surety Team.
Mr. Cassell has over 20 years of experience providing correctional
solutions to the criminal justice industry. His previous positions
include Director of Operations for ADT Correctional Services,
Director of Customer Support for G4S Justice Services, and National
Sales and Marketing Manager for ElmoTech Inc. He holds a Criminal
Justice Degree from Henry Ford College in Dearborn Heights,
Michigan.
Guy
Dubois.
Mr. Dubois’
biography appears on page 4 of this Consent Solicitation
Statement.
Peter K.
Poli
has served as our
Chief Financial Officer since January 2017. Before joining the
Company, Mr. Poli served as the Chief Financial Officer of Grand
Banks Yachts Limited from August 18, 2004 through December 31,
2015. In addition, he served as an Executive Director of Grand
Banks Yachts from March 31, 2008 through October 28, 2015. Prior to
his time with Grand Banks Yachts Limited, Mr. Poli served as the
Chief Financial Officer for Acumen Fund Inc., I-Works Inc.,
and as Vice President and Chief Financial Officer of FTD.COM. Mr.
Poli also spent nine years as an Investment Banker with Dean Witter
Reynolds, Inc. and served as the CFO of a wholly-owned subsidiary
of Morgan Stanley Dean Witter from 1997 to 1999. In addition, Mr.
Poli served as an Independent Director of Leapnet, Inc. from 2000
to 2002. Mr. Poli earned a Bachelor of Art in Economics and
Engineering from Brown University in 1983 and an MBA from Harvard
Business School in 1987.
- 11 -
Compensation of Our Executive Officers
The following Summary
Compensation Table sets forth the compensation paid to the
following persons for our fiscal years ended September 30, 2016 and
2017
:
(a)
our
principal executive officer;
(b)
our most highly compensated executive officers who
were serving as executive officers at the end of the fiscal year
ended September 30, 2017 and who had total compensation exceeding
$100,000 (together, with the principal executive officer, the
“
Named Executive
Officers
”);
and
(c)
additional
individuals for whom disclosure would have been provided under (b)
but for the fact that the individual was not serving as an
executive officer at the end of the most recently completed
financial year.
|
Name and
|
|
Salary
|
Bonus
|
Stock Awards
|
Option Awards
|
All Other Compensation
|
Total
|
|
Principal Position
|
Year
|
($)
|
($)
|
($)
(1)
|
($)
(2)
|
($)
(3)
|
($)
|
|
|
|
|
|
|
|
|
|
|
Guy Dubois
(4)
|
2017
|
-
|
-
|
$
100,000
|
-
|
-
|
$
100,000
|
|
Chairman and Former Chief Executive Officer
|
2016
|
-
|
-
|
$
30,000
|
$
170,182
|
-
|
$
200,182
|
|
|
|
|
|
|
|
|
|
|
Derek Cassell
(5)
|
2017
|
$
224,454
|
-
|
$
193,846
|
-
|
$
351
|
$
418,651
|
|
Chief Executive Officer and Former President
|
2016
|
$
206,076
|
-
|
$
42,500
|
-
|
-
|
$
248,576
|
|
|
|
|
|
|
|
|
|
|
Peter Poli
(6)
|
2017
|
$
175,384
|
-
|
-
|
$
134,318
|
-
|
$
309,702
|
|
Chief Financial Officer
|
2016
|
-
|
-
|
-
|
-
|
-
|
-
|
|
(1)
|
This
column represents the
grant date fair value in accordance with ASC 718. These amounts do
not represent the actual value that may be realized by the named
executive officers. $25,000 of Mr. Dubois’ stock award
payment had been accrued, but had not yet been issued as of
September 30, 2017.
|
|
(2)
|
This column represents the grant date fair value in accordance with
ASC 718. Please refer to the section labeled
“Stock-Based Compensation” found within Note 2,
“Summary of Significant Accounting Policies,” in the
Notes to Consolidated Financial Statements included in our Annual
Report on Form 10-K filed on December 19, 2017 for the
relevant assumptions used to determine the compensation cost of our
stock option awards. These amounts do not represent the actual
value, if any, that may be realized by the named executive
officers.
|
|
(3)
|
All other compensation includes health club membership for Mr.
Cassell.
|
|
(4)
|
Mr. Dubois served as a member of the Executive Committee from
October 2012 to September 2016, and as the Chief Executive Officer
from September 2016 to December 2017. He currently serves as the
Chairman of the Board of Directors.
|
|
(5)
|
On January 1, 2018, Mr. Cassell was appointed as the
Company’s Chief Executive Officer. Mr. Cassell previously
served as the Company’s President from December 19, 2016 to
January 1, 2018.
|
|
(6)
|
Mr. Poli began serving as our Chief Financial Officer on January 3,
2017 and, as such, did not receive any compensation from the
Company during fiscal 2016.
|
Narrative Disclosure to the Summary Compensation Table
Compensation Paid to our Chief Executive Officer
Our former principal executive officer, Guy
Dubois, was granted 51,746 sh
ares of Common Stock,
equal
to $100,000, for his
work as Chairman of the Board of the Company during the fiscal year
ended September 30, 2017, $25,000 of which had been accrued, but
had not yet been issued as of September 30, 2017. Mr. Dubois did
not receive any compensation during the fiscal year ended September
30, 2017 for his services as the Chief Executive Officer of the
Company.
- 12 -
Poli Employment Agreement
On December 12, 2016,
the Company entered into a three-year employment agreement with Mr.
Poli (the “
Poli
Employment
Agreement
”). Under the
terms and conditions of the Poli Employment Agreement, Mr. Poli
began receiving a base salary equal to $240,000 per annum beginning
in January 2017, and received an option to purchase 100,000 shares
of the Company’s Common Stock at an exercise price per share
equal to the closing price of the Company’s Common Stock on
the date approved by the Board. One-half of this option vested on
January 1, 2018, and the remaining one-half is scheduled to vest on
January 1, 2019.
Subsequent to the 2017
fiscal year end, an amendment to the Poli Employment Agreement was
approved at Board meeting on December 13, 2017. Such amendment was
signed on January 3, 2018.
Under
the terms of the Poli Agreement, as amended (the
“
Poli
Amendment
”), effective
January 1, 2018, Mr. Poli’s employment was extended three
years, and shall automatically renew for successive one year
periods thereafter unless either party provides the other with
notice of its intent not to renew the Poli Agreement at least six
months prior to termination. In addition, the Poli Amendment
provides: (i) an increase in Mr. Poli’s base salary to
$250,000 per year; (ii) the issuance of 150,000 unregistered
restricted shares of the Company’s Common Stock, which shall
vest annually in increments of 50,000 beginning January 1, 2018;
(iii) in the event of a change of control, Mr. Poli shall be
entitled to a cash payment equal to one year’s salary, plus
all restricted stock, warrants and options previously issued to Mr.
Poli shall become immediately vested and exercisable; and (iv) for
purposes of any severance due Mr. Poli upon his involuntary
termination, any annual bonus due Mr. Poli shall be deemed to be
vested and earned.
Cassell Employment Agreement
On December 1, 2016,
the Company entered into an employment agreement with Mr. Cassell,
which was subsequently amended on February 13, 2017 (the
“
Cassell
Employment
Agreement
”). Under the
terms and conditions of the Cassell Employment Agreement, Mr.
Cassell receives a base salary equal to $240,000 per annum, and
received 60,000 unregistered restricted shares of the
Company’s Common Stock. One-half of these shares vested
immediately upon issuance, and the remaining one-half is scheduled
to vest on March 30, 2018.
Subsequent to the 2017
fiscal year end, a second amendment to the Cassell Employment
Agreement was approved at Board meeting held on December 13, 2017.
Such amendment was signed on January 4, 2018. Under the terms of
the Cassell Agreement, as amended (the “
Cassell
Amendment
”), effective
January 1, 2018, Mr. Cassell was promoted from President to CEO of
the Company, a position which he shall hold until December 31,
2020, unless earlier terminated or extended. Should Mr. Cassell
elect to voluntarily terminate his employment with the Company, he
must provide written notice of his intent to do so at least 180
days prior to terminating his employment.
In addition, the Cassell Amendment provides:
(i) an increase in Mr. Cassell’s base salary to $275,000 per
year; (ii) a 50% increase in his annual bonus effective for bonus
plan year 2018 and thereafter; (iii) subject to Board approval, the
issuance of 300,000 unregistered restricted shares of the
Company’s Common Stock, which shall vest annually in
increments of 100,000 beginning January 1, 2018; (iv) in the event
of a change of control, Mr. Cassell shall be entitled to a cash
payment equal to one year’s salary, plus all restricted
stock, warrants and options previously issued to Mr. Cassell shall
become immediately vested and exercisable; and (v) for purposes of
any severance due Mr. Cassell upon his involuntary termination, any
annual bonus due Mr. Cassell shall be deemed to be vested and
earned.
Outstanding Equity Awards at September 30, 2017
The
following table discloses outstanding stock option awards and
warrants held by each of the Named Executive Officers as of
September 30, 2017:
- 13 -
Outstanding Equity Awards at Fiscal Year-End 2017
|
Name
|
Number
of securities underlying unexercised options (#)
exercisable
|
Number
of securities underlying unexercised options (#)
unexercisable
|
Equity
incentive plan awards: Number of underlying unexercised unearned
options (#)
|
Option
exercise price ($) (1) |
Option
expiration
date
(2)
|
Number of shares or units of stock that have not vested
(#)
|
Market
value of shares or units of stock that have not vested
($)
|
Equity
incentive plan awards: Number of Unearned shares, units or other
rights that have not vested (#)
|
Equity
incentive plan awards: Market or Payout value of unearned shares,
units or other rights that have not vested ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guy
Dubois
|
2,385
|
-
|
-
|
$
12.58
|
3/21/2022
|
-
|
-
|
-
|
-
|
|
|
64,665
|
-
|
-
|
$
9.00
|
4/14/2022
|
-
|
-
|
-
|
-
|
|
|
4,083
|
-
|
-
|
$
14.70
|
6/30/2022
|
-
|
-
|
-
|
-
|
|
|
2,280
|
-
|
-
|
$
19.46
|
9/30/2022
|
-
|
-
|
-
|
-
|
|
|
2,344
|
-
|
-
|
$
19.29
|
12/31/2023
|
-
|
-
|
-
|
-
|
|
|
2,432
|
-
|
-
|
$
18.75
|
3/31/2023
|
-
|
-
|
-
|
-
|
|
|
51,576
|
-
|
-
|
$
17.45
|
6/02/2023
|
-
|
-
|
-
|
-
|
|
|
2,647
|
-
|
-
|
$
15.45
|
6/30/2023
|
-
|
-
|
-
|
-
|
|
|
14,988
|
-
|
-
|
$
12.01
|
1/27/2022
|
-
|
-
|
-
|
-
|
|
|
8,868
|
-
|
-
|
$
10.15
|
4/20/2022
|
-
|
-
|
-
|
-
|
|
|
113,310
|
-
|
-
|
$
9.65
|
8/14/2022
|
-
|
-
|
-
|
-
|
|
|
8,571
|
-
|
-
|
$
10.50
|
9/30/2022
|
-
|
-
|
-
|
-
|
|
|
12,676
|
-
|
-
|
$
5.95
|
10/14/2022
|
-
|
-
|
-
|
-
|
|
|
15,126
|
-
|
-
|
$
5.95
|
1/15/2023
|
-
|
-
|
-
|
-
|
|
|
14,286
|
-
|
-
|
$
6.30
|
3/31/2023
|
-
|
-
|
-
|
-
|
|
|
18,000
|
-
|
-
|
$
5.00
|
6/30/2023
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
11,468
(3)
|
16,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter
Poli
|
50,000
|
50,000
(4)
|
-
|
$
3.75
|
1/1/2022
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Derek
Cassell
|
-
|
-
|
-
|
-
|
-
|
30,000
(5)
|
42,900
|
-
|
-
|
|
(1)
|
This table reports the exercise prices of the stock options
reported therein as of September 30, 2017. However, on November 30,
2017, the Board of Directors approved of the repricing of all
outstanding stock options and warrants currently held by the
Company’s officers and directors. As such, all of the stock
options reported in this table now have an exercise price of $1.24,
the closing price of the Company’s Common Stock as reported
by the OTCQX Marketplace on November 30, 2017.
|
||||||||
|
(2)
|
On May 11, 2017, the Board of Directors extended the warrant
expiration date of current board members and certain employees by 5
years. The dates included in this table reflect the expiration
dates after such extension.
|
||||||||
|
(3)
|
Represents
the number of shares,
equaling $25,000, which have not yet been issued to Mr. Dubois for
his services on the Board for the quarter ended September 30,
2017.
|
||||||||
|
(4)
|
Such shares are scheduled to vest on January 1, 2019.
|
||||||||
|
(5)
|
Such shares are scheduled to vest on March 30, 2018.
|
||||||||
- 14 -
DIRECTOR COMPENSATION
During the fiscal year ended September 30, 2017,
each of our non-employee directors received $25,000 per quarter for
serving on the Board of Directors, which fees
were
payable in (i) cash,
(ii) Common Stock valued at the current market price at the date of
the grant, or (iii) warrants with an exercise price at the current
market price at the date of grant; all grants of warrants were
valued at the date of grant using the Black-Scholes valuation
method
. For four of the five
directors,
$25,000 of Common Stock
and warrant awards had been accrued, but had not yet been issued,
as of September 30, 2017.
The
members of the Board of Directors are also eligible for
reimbursement of their expenses incurred in attending Board
meetings in accordance with our policies.
The
following table sets forth the compensation awarded to, earned by,
or paid to each person who served as a director during the fiscal
year ended September 30, 2017, other than a director who also
served as an executive officer:
|
|
Fees earned
|
Stock awards
|
Warrant awards
|
Cash
|
Total
|
|
Name
(1)
|
($)
(2)
|
($)
|
($)
|
($)
|
($)
|
|
|
|
|
|
|
|
|
David
Boone
|
$
100,000
|
$
100,000
|
-
|
-
|
$
100,000
|
|
Karen
Macleod
|
$
100,000
|
-
|
$
100,000
|
-
|
$
100,000
|
|
Dirk
van Daele
|
$
100,000
|
$
75,000
|
-
|
$
25,000
|
$
100,000
|
|
Dr.
Ray Johnson
|
$
100,000
|
-
|
$
100,000
|
-
|
$
100,000
|
|
Eric
Rosenblum
|
$
100,000
|
$
100,000
|
-
|
-
|
$
100,000
|
|
(1)
|
As discussed above, Messrs. Boone, van Daele, Rosenblum and Johnson
resigned from their positions as directors on the Company’s
Board of Directors effective May 31, 2018. Additionally, Mr.
Sehnaoui was appointed to serve as a director on the Board on
February 7, 2018.
|
|
(2)
|
Fees earned by our non-employee directors were paid in cash,
Common Stock or warrants at the option of the director. A liability
of $100,000 for certain of these fees, which have not yet been
issued
,
was included in the Company’s accrued
expenses at September 30, 2017.
|
- 15 -
Director Warrants
The following table lists the warrants to purchase shares of Common
Stock held by each of our non-employee directors as of
January 16, 2018, all of which were granted in connection with
their services as directors:
|
|
Grant
|
Expiration
|
Exercise
|
Number of
|
Compensation
|
|
Name
|
Date
|
Date
(1)
|
Price
(2)
|
Warrants
|
Expense
|
|
|
|
|
|
|
|
|
David
S. Boone
|
3/22/13
|
3/21/22
|
$
1.24
|
8,943
|
$
62,580
|
|
7/1/13
|
6/30/22
|
$
1.24
|
4,083
|
$
32,275
|
|
|
10/1/13
|
9/30/22
|
$
1.24
|
2,280
|
$
22,775
|
|
|
1/2/14
|
12/31/23
|
$
1.24
|
2,344
|
$
16,305
|
|
|
10/15/15
|
10/14/22
|
$
1.24
|
12,676
|
$
50,943
|
|
|
1/15/16
|
1/15/23
|
$
1.24
|
15,126
|
$
73,039
|
|
|
7/1/16
|
6/30/23
|
$
1.24
|
18,000
|
$
80,310
|
|
|
Karen
Macleod
|
7/1/16
|
6/30/23
|
$
1.24
|
9,000
|
$
37,154
|
|
9/30/16
|
9/30/21
|
$
1.15
|
3,529
|
$
15,000
|
|
|
10/1/16
|
9/30/21
|
$
1.15
|
5,882
|
$
25,000
|
|
|
1/1/17
|
12/31/21
|
$
1.15
|
9,191
|
$
25,000
|
|
|
4/1/17
|
3/31/22
|
$
1.15
|
12,195
|
$
25,000
|
|
|
7/1/17
(3)
|
6/30/22
|
$
1.15
|
13,812
|
$
25,000
|
|
|
10/1/17
(3)
|
9/30/22
|
$
1.15
|
21,008
|
$
25,000
|
|
|
1/1/18
(3)
|
12/31/22
|
$
1.05
|
33,784
|
$
25,000
|
|
|
|
|
|
|
||
|
Dirk
van Daele
|
10/15/15
|
10/14/22
|
$
1.24
|
6,338
|
$
29,690
|
|
1/15/16
|
1/15/23
|
$
1.24
|
7,563
|
$
36,520
|
|
|
7/1/16
|
6/30/23
|
$
1.24
|
9,000
|
$
40,155
|
|
|
|
|
|
|
||
|
Dr.
Ray Johnson
|
10/1/16
|
9/30/21
|
$
1.24
|
5,882
|
$
32,904
|
|
1/1/17
|
12/31/21
|
$
1.24
|
9,191
|
$
34,454
|
|
|
4/1/17
|
3/31/22
|
$
1.24
|
12,195
|
$
25,744
|
|
|
7/1/17
|
6/30/22
|
$
1.24
|
13,812
|
$
25,554
|
|
|
10/1/17
|
9/30/22
|
$
1.24
|
21,008
|
$
25,000
|
|
|
1/1/2018
|
12/31/22
|
$
1.05
|
33,784
|
$
25,000
|
|
|
(1)
|
Reflects the expiration dates following the expiration date
modification of the warrants reported herein, as approved by the
Board of Directors on May 11, 2017.
|
|
(2)
|
Reflects the exercise prices following the repricing of the
warrants reported herein, as approved by the Board of Directors on
November 30, 2017 and January 26, 2018.
|
|
(3)
|
On January 26, 2018, at the request of Ms. Macleod, these warrants
were exchanged for an aggregate amount of 52,761 share of Common
Stock.
|
*Compensation paid to Mr. Dubois, the Company’s former Chief
Executive Officer and current Chairman of the Board of Directors,
during the year ended September 30, 2017 is reflected in the
Executive Compensation Table above.
- 16 -
Securities Authorized for Issuance Under Equity Compensation
Plans
The
following table provides information as of September 30, 2017
regarding equity compensation plans approved by our security
holders and equity compensation plans that have not been approved
by our security holders:
|
Plan category
|
Number of securities to be issued upon exercise of outstanding
options, warrants and rights
|
Weighted-average exercise price of outstanding options,
warrants and rights
|
Number of securities remaining available for future issuance under
equity compensation plans (excluding securities reflected in column
(a))
|
|
|
(a)
|
(b)
|
(c)
|
|
Equity
compensation plans approved by security holders
|
488,011
|
$
8.51
|
38,292
|
|
|
|
|
|
|
Equity
compensation plans not approved by security holders
|
59,684
(1)
|
-
|
-
|
|
|
|
|
|
|
Total
|
547,695
|
$
8.51
|
38,292
|
|
(1)
|
This excludes 966,691 warrants and shares of Common Stock awarded
subsequent to September 30, 2017, 906,092 of which warrants and
shares were issued on May 1, 2018.
|
Compensation Risks Assessment
As
required by rules adopted by the SEC, management has made an
assessment of our compensation policies and practices with respect
to all employees to determine whether risks arising from those
policies and practices are reasonably likely to have a material
adverse effect on us. In doing so, management considered various
features and elements of the compensation policies and practices
that discourage excessive or unnecessary risk taking. As a result
of the assessment, we have determined that our compensation
policies and practices do not create risks that are reasonably
likely to have material adverse effects.
- 17 -
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Related-Party Loan Agreements
Amended and Restated Facility Agreement and Debt Exchange Agreement
with Conrent Invest, S.A
.
On July 14, 2015, the
Company entered into an Amended and Restated Facility Agreement
(the “
Amended
Facility Agreement
”) with Conrent
Invest S.A., a public limited liability company incorporated under
the laws of the Grand Duchy of Luxembourg
(“
Conrent
”),
pursuant to which the Company may borrow up to $29.4 million of
unsecured debt, which accrues interest at a rate of 8% per annum
and matures on July 31, 2018. The Amended Facility Agreement also
provides the Company with a voluntary prepayment option, wherein
the Company may pay the amounts borrowed under the debt facility,
including all accrued but unpaid interest, prior to the maturity
date without any penalty or prepayment fee.
On October 9, 2017, the
Company entered into a Debt Exchange Agreement with Conrent
regarding total debt and unpaid interest of approximately $34.7
million due under the Amended Facility Agreement as of October 31,
2017 (the “
Debt
”)
(the “
Debt
Exchange
”). The Debt
Exchange called for the Company to exchange newly issued shares of
preferred stock for the entire Debt subject to approval by the
investors who purchased securities from Conrent to finance the Debt
(the “
Noteholders
”).
On November 2, 2017, Conrent convened a meeting of the Noteholders
to approve the Debt Exchange; however, the quorum required to
approve the Debt Exchange was not achieved.
On February 26, 2018, the Company proposed that
the maturity date of the Amended Facility Agreement be extended
from July 31, 2018 to April 1, 2019. On April 26, 2018, the
Noteholders approved the extension of the Facility Agreement from
July 31, 2018 to April 1, 2019, subject to the satisfaction of
certain conditions (the “
Debt
Extension
”). On June 14,
2018, the Company received a letter from Conrent acknowledging that
certain conditions had been met, and indicating that Conrent would
proceed with the Debt Extension.
Management is currently
negotiating with Conrent regarding the terms of a debt extension
agreement with the objective of reaching an agreement acceptable to
both Conrent and the Noteholders before the Debt matures on July
31, 2018.
Conrent
Loan Agreement.
On May 1,
2016, the Company entered into an unsecured Loan Agreement with
Conrent, acting with respect to its Compartment Safety III
(the “
Conrent Loan
Agreement
”). Pursuant to its terms, available
borrowing capacity under the Conrent Loan Agreement was $5.0
million; however, due to the failure of the lender to satisfy
certain conditions precedent to its obligation to fund, the Company
had not received funds under the Conrent Loan Agreement as of July
13, 2018, and no proceeds thereunder are
anticipated.
Sapinda Loan Agreement
. On September 25,
2015, the Company entered into a loan agreement with one of the
Company’s related parties, Sapinda Asia Limited
(“
Sapinda
”),
to provide the Company with a $5.0 million line of credit that
accrues interest at a rate of 3% per annum for undrawn funds and 8%
per annum for borrowed funds (the “
Sapinda
Loan Agreement
”). Pursuant to
the terms and conditions of the Sapinda Loan Agreement, available
funds could be drawn down at the Company’s request at any
time until the loan agreement matured on September 30, 2017, when
all borrowed funds, plus all accrued but unpaid interest became due
and payable.
On March 13, 2017, the
Company and
Sapinda
entered into an
agreement to amend the Sapinda Loan Agreement
(“
Amendment
Number One
”). Amendment
Number One extends the maturity date of all loans made pursuant to
the Sapinda Loan Agreement to September 30, 2020. In addition, we
began accruing penalties because Sapinda had not funded the
remaining amount of approximately $1.5 million available on the
loan on or before March 31, 2017. The penalties totaled
approximately $469,000 as of July 13, 2018, and the daily penalties
currently exceed the daily interest due Sapinda.
Further advances under
the Loan Agreement are not currently expected to be
forthcoming.
- 18 -
Stock Payable – Related Party
In connection with certain acquisitions during fiscal 2014 and
2015, the Company recognized a liability for stock payable to the
sellers of the entities acquired. In conjunction with the
respective purchase agreements, shares of the Company’s stock
were payable during the years ended September 30, 2017 and 2016
based on the achievement of certain milestones. Changes in the
stock payable liability are shown below:
|
|
Sept. 30,
2017
|
Sept. 30,
2016
|
|
Beginning
balance
|
$
3,289,879
|
$
3,501,410
|
|
Payment
of shares for achieving performance milestones
|
(75,939
)
|
(211,531
)
|
|
Adjustment
to Track Group Analytics stock payable
|
(213,940
)
|
-
|
|
Adjustment
to GPS Global stock payable
|
(3,000,000
)
|
-
|
|
Ending
balance
|
-
|
$
3,289,879
|
Additional Related-Party Transactions and Summary of All
Related-Party Obligations
|
|
Sept. 30,
2017
|
Sept. 30,
2016
|
|
Related
party loan with an interest rate of 3% and 8% per annum for undrawn
and borrowed funds, respectively. Principal and interest due
September 30, 2020.
|
$
3,399,644
|
$
3,399,644
|
|
Total
related-party debt obligations
|
$
3,399,644
|
$
3,399,644
|
Each
of the foregoing related-party transactions was reviewed and
approved by those disinterested and independent members of the
Company’s Board of Directors who served at the time of the
foregoing transactions.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section
16(a) of the Exchange Act requires our officers, directors, and
persons who beneficially own more than ten percent of our Common
Stock to file reports of ownership and changes in ownership with
the SEC. Officers, directors, and greater-than-ten-percent
stockholders are also required by the SEC to furnish us with copies
of all Section 16(a) forms that they file.
Based
solely upon a review of these forms that were furnished to us, we
believe that all reports required to be filed by these individuals
and persons under Section 16(a) were filed during the year ended
September 30, 2017 and that such filings were timely except the
following:
|
●
|
Mr. Poli, our Chief Financial Officer, filed a Form 4 reporting one
late transaction;
|
|
●
|
Mr. Boone, a member of our Board of Directors during the year ended
September 30, 2017, filed a Form 4 reporting four late
transactions; and
|
|
●
|
Mr. van Daele, a member of our Board of Directors during the year
ended September 30, 2017, filed a Form 4 reporting one late
transaction.
|
- 19 -
BENEFICIAL OWNERSHIP OF EQUITY SECURITIES
Security Ownership of Certain Beneficial Owners
The following table presents information regarding
beneficial ownership as of July 12, 2018 (the
“
Table Date
”), of our Common Stock by (i) each
stockholder known to us to be the beneficial owner of more than
five percent of our Common Stock; (ii) each of our Named Executive
Officers serving as of the Table Date; (iii) each of our directors
serving as of the Table Date; and (iv) all of our executive
officers and directors as a group.
We
have determined beneficial ownership in accordance with the rules
of the SEC. Except as indicated by the footnotes below, we
believe, based on the information furnished to us, that the persons
and entities named in the table below have sole voting and
dispositive power with respect to all securities they beneficially
own. As of the Table Date, the applicable percentage ownership
is based on 11,401,650 shares of Common Stock issued and
outstanding.
Beneficial
ownership representing less than one percent of the issued and
outstanding shares of a class is denoted with an asterisk (*).
Holders of common stock are entitled to one vote per
share.
|
Name and Address of
|
Common Stock
|
|
|
Beneficial Owner
(1)
|
Shares
|
%
|
|
ETS Limited
(2)
|
4,871,745
|
42.7
%
|
|
Safety Invest S.A., Compartment Secure
I
(3)
|
1,740,697
|
15.3
%
|
|
Advance Technology Investors LLC
(4)
|
540,865
|
4.8
%
|
|
|
|
|
|
Directors and Named Executive Officers:
|
|
|
|
Guy Dubois
(5)
|
653,568
|
5.4
%
|
|
Peter Poli
(6)
|
183,640
|
1.6
%
|
|
Derek Cassell
(7)
|
317,209
|
2.8
%
|
|
Karen Macleod
(8)
|
94,939
|
*
|
|
Karim Sehnaoui
(9)
|
14,021
|
*
|
|
All
directors and executive officers as a group
(6
persons)
|
1,263,377
|
9.8
%
|
|
(1)
|
Except as otherwise indicated, the business address for these
beneficial owners is c/o the Company, 200 E. 5th Avenue, Suite 100,
Naperville, Illinois 60563.
|
|
(2)
|
Address is c/o Mourant Ozannes Corporate Services (Cayman) Limited,
94 Solaris Avenue, Camana Bay, PO Box 1348, Grand Cayman KY1-1108,
Cayman Islands. Holding information is based on Amendment No.
2 to Schedule 13D filed by ADS Securities LLC on February 9,
2018.
|
|
(3)
|
Secure I is a compartment of Safety Invest S.A.
(“
Safety
”), a company established under the
Luxembourg Securitization Law and incorporated as a
“société anonyme” under the laws of the Grand
Duchy of Luxembourg whose principal business is to enter into one
or more securitization transactions. Holding information is based
on the Company records.
|
|
(4)
|
Address is 154 Rock Hill Road, Spring Valley, New York 10977.
Holding information is based on Company records.
|
|
(5)
|
Holdings consist of 315,331 shares of Common Stock owned of
record and 338,237 shares of Common Stock issuable upon exercise of
stock purchase warrants, exercisable within 60 days of July 12,
2018.
|
|
(6)
|
Holdings consist of 133,640 shares of Common Stock and 50,000
shares of Common Stock issuable upon exercise of stock purchase
warrants, exercisable within 60 days of July 12, 2018.
|
|
(7)
|
Holdings include 317,209 shares of Common Stock owned of
record.
|
|
(8)
|
Holdings includes 55,142 shares of Common Stock owned of
record and 39,797 shares of Common Stock issuable upon exercise of
stock purchase warrants, exercisable within 60 days of July 12,
2018.
|
|
(9)
|
Holdings include 14,021 shares of Common Stock owned of
record.
|
- 20 -
WHERE YOU CAN FIND MORE INFORMATION
We
file annual, quarterly and special reports, proxy statements and
other information with the SEC. The periodic reports and other
information we have filed with the SEC, may be inspected and copied
at the SEC’s Public Reference Room at 100 F Street, N.E.,
Washington DC 20549. You may obtain information as to the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains a Web site that contains reports, proxy
statements and other information about issuers, like the Company,
who file electronically with the SEC. The address of that site is
www.sec.gov. Copies of these documents may also be obtained by
writing our secretary at the address specified above.
STOCKHOLDER PROPOSALS FOR THE 2019 ANNUAL MEETING
Pursuant
to Rule 14a-8 under the Exchange Act, stockholder proposals to be
included in our next proxy statement must be received by us at our
principal executive offices no later than 90 days nor more than 120
days prior to the first anniversary of the preceding year’s
annual meeting, or in this case, the first anniversary of the date
of mailing of this Consent Solicitation Statement. A stockholder
proposal not included in the Company’s proxy statement for
the 2019 annual meeting of stockholders will be ineligible for
presentation at the meeting unless the stockholder gives timely
notice of the proposal in writing to the Secretary of the Company
at the principal executive offices of the Company and otherwise
complies with the provisions of the Company’s Bylaws. To be
timely, the Bylaws provide that the Company must have received the
stockholder’s notice not less than 90 days nor more than 120
days in advance of the date that this Consent Solicitation
Statement is first mailed to stockholders. However, in the event
that the date of the 2019 annual meeting of stockholders is
advanced or delayed by more than thirty (30) days from the
first anniversary of the date that this Consent Solicitation
Statement is first mailed to stockholders, a timely notice by the
stockholder must be delivered no earlier than 120 days prior to the
first anniversary of the notice of mailing of this Consent
Solicitation Statement and not later than the close of business on
the later of (i) the 90th day prior to the date of mailing of this
Consent Solicitation Statement or (ii) the tenth day following the
day on which public announcement of the date of mailing of the
notice for the 2019 annual meeting of stockholders is first made.
The Company reserves the right to reject, rule out of order or take
other appropriate action with respect to any proposal that does not
comply with these and other applicable requirements.
DISTRIBUTION AND COSTS AND HOUSEHOLDING OF SOLICITATION
MATERIALS
We
will pay the cost of preparing, printing and distributing this
Consent Solicitation Statement and the accompanying Annual
Report.
The
SEC has adopted rules that permit companies and intermediaries
(e.g., brokers) to satisfy the delivery requirements for consent
solicitation statements and annual reports with respect to two or
more stockholders sharing the same address by delivering a single
consent solicitation statement and annual report addressed to those
stockholders. This process, which is commonly referred to as
“householding,” potentially means extra convenience for
stockholders and cost savings for companies.
A number of brokers with account holders who are
stockholders of the Company will be “householding” the
Company’s consent solicitation materials. A single set of the
Company’s consent solicitation materials 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 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 set of the Company’s consent
solicitation materials, please notify your broker or direct a
written request to the Company, Attn: Investor Relations
Department, 200 E. 5
th
Avenue, Suite 100, Naperville,
Illinois 60563, or by calling (877) 260-2010. The Company
undertakes to deliver promptly, upon any such oral or written
request, a separate copy of its consent solicitation materials to a
stockholder at a shared address to which a single copy of these
documents was delivered. Stockholders who currently receive
multiple copies of the Company’s consent solicitation
materials at their address and would like to request
“householding” of their communications should contact
their broker, bank or other nominee, or contact the Company at the
above address or phone number.
- 21 -
|
|
TRACK GROUP, INC.
WRITTEN CONSENT SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF TRACK GROUP, INC.
The undersigned hereby acknowledges receipt of a
copy of the accompanying Notice of Consent Solicitation Statement,
the Consent Solicitation Statement and the Annual Report on Form
10-K for the year ended September 30, 2017 of Track Group, Inc.
(the “
Company
”) dated July 13, 2018 and hereby revokes
any consent or consents heretofore given. This consent may be
revoked at any time before 5:00 p.m. (Central Time), on August 13,
2018, unless the solicitation period is shortened or extended by
the Company in its sole discretion (“
Expiration
Date
”). The undersigned,
as holder of shares of the Company’s common stock, par value
$0.0001 per share (“
Common
Stock
”), hereby takes the
following actions without an annual meeting of stockholders,
pursuant to Sections 211 and 228 of the Delaware General
Corporations Code, with respect to all shares of Common Stock held
by him, her or it as follows:
|
|
|
[X] Please mark your votes as indicated in this
example.
|
|||||||||||
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
CONSENT (FOR)
|
|
CONSENT WITHELD (AGAINST)
|
|
ABSTAIN
|
|
|
|
|
APPROVAL OF THE ELECTION OF THE FOLLOWING INDIVIDUALS AS MEMBERS OF
OUR BOARD OF DIRECTORS, TO SERVE UNTIL THE NEXT ANNUAL MEETING OF
STOCKHOLDERS OR UNTIL THEIR RESPECTIVE SUCCESSORS ARE ELECTED AND
QUALIFIED, OR UNTIL THEIR EARLIER RESIGNATION OR
REMOVAL:
|
|
|
|
|
|
|
|
|
|
|
|
|
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Guy Dubois
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Karen Macleod
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Karim Sehnaoui
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APPROVAL OF THE RATIFICATION OF THE APPOINTMENT OF EIDE BAILLY, LLP
TO SERVE AS THE COMPANY’S REGISTERED PUBLIC ACCOUNTING FIRM
FOR THE YEAR ENDED SEPTEMBER 30, 2018
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This Written Consent, when properly executed and returned to the
Company, will be voted in the manner directed herein by the
undersigned. IF NO DIRECTION IS MADE FOR THE PROPOSAL, THIS
CONSENT, IF SO EXECUTED AND RETURNED, WILL BE VOTED FOR THE
PROPOSAL. When shares of Common Stock are held by joint tenants,
both should sign. When signing as attorney, executor,
administrator, trustee or guardian, give full legal title as such.
If a corporation, sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership
name by authorized person.
ALL CONSENTS MUST BE RECEIVED BY 5:00 P.M. CENTRAL TIME, ON THE
EXPIRATION DATE.
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IMPORTANT:
This Consent
Card must be signed exactly as your name appears hereon. If more
than one name appears, all persons so designated should sign.
Attorneys, executors, administrators, trustees and guardians should
indicate their capacities. If the signer is a corporation, please
print full corporate name and indicate capacity of duly authorized
officer executing on behalf of the corporation. If the signer is a
partnership, please print full partnership name and indicate
capacity of duly authorized person executing on behalf of the
partnership.
Dated: ________________________, ______
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(Print Name of Stockholder)
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(Signature of Stockholder)
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(Second Signature if held jointly)
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IMPORTANT: PLEASE COMPLETE, SIGN, AND DATE YOUR WRITTEN CONSENT
PROMPTLY
RETURN IT IN THE ENVELOPE PROVIDED TO:
Track Group, Inc.
Attn: Corporate Secretary
200 E. 5
th
Avenue, Suite 100
Naperville, Illinois 60563
Your executed written consent can also be sent via email in PDF
form to peter.poli@trackgrp.com.
Your written consent should be received by the Company on or before
August 13, 2018.
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