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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [
]
Check the appropriate box:
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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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[X]
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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)
Payment of Filing Fee (Check the appropriate box):
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[X]
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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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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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200 E. 5
th
Avenue, Suite 100
Naperville, Illinois 60563
(877) 260-2010
March 27, 2019
Dear Stockholders:
You are cordially invited to attend the 2019
Annual Meeting of Stockholders (the “
Annual
Meeting
”) of Track Group,
Inc. (the “
Company
”), which will be held at our corporate
offices located at 200 E. 5
th
Avenue, Suite 100, Naperville,
Illinois, on May 9, 2019 at 2:30 P.M., local
time.
Details of the business to be conducted at the
Annual Meeting are described in the attached Notice of Annual
Meeting and this Proxy Statement. We have also provided a copy of
our Annual Report on Form 10-K for the year ended September 30,
2018 (“
Annual
Report
”) along with this
Proxy Statement. We encourage you to read our Annual Report. It
includes our audited financial statements and provides information
about our business and services.
In order for us to have
an efficient Annual Meeting, please either submit your vote online
by following the instructions on the enclosed proxy card, or sign,
date and return the enclosed proxy promptly in the accompanying
reply envelope. If you are able to attend the Annual Meeting and
wish to change your proxy vote, you may do so simply by voting in
person at the Annual Meeting.
Regardless of whether you plan to attend the
Annual Meeting in person,
please read the accompanying
Proxy Statement and then submit your vote as promptly as
possible.
Voting promptly
will save us additional expense in soliciting proxies and will
ensure that your shares are represented at the Annual
Meeting.
Our
Board of Directors has unanimously approved the proposals set forth
in the Proxy Statement and we recommend that you vote in favor of
each such proposal.
We
look forward to seeing you at the Annual Meeting.
Sincerely,
Guy
Dubois
Chairman
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YOUR VOTE IS IMPORTANT
All stockholders are cordially invited to attend the Annual Meeting
in person. However, to ensure your representation at the Annual
Meeting, you are urged to vote online or complete, sign, date and
return, in the enclosed postage paid envelope, the enclosed proxy
card as soon as possible. Returning your proxy will help us assure
that a quorum will be present at the Annual Meeting and avoid the
additional expense of duplicate proxy solicitations. Any
stockholder attending the Annual Meeting may vote in person, even
if he or she has returned a proxy.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
May 9, 2019
To the Stockholders of Track Group, Inc.:
NOTICE IS HEREBY GIVEN that the 2019 Annual
Meeting of Stockholders (the “
Annual
Meeting
”) of Track Group,
Inc., a Delaware corporation (the “
Company
”), will be held on May 9, 2019, at 2:30
P.M. (local time), at our offices located at 200 E.
5
th
Avenue, Suite 100, Naperville,
Illinois, for the following purposes:
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1.
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To elect three directors to serve until our 2020 Annual Meeting of
Stockholders, or until their successors are duly elected and
qualified;
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2.
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To consider a non-binding, advisory vote on executive compensation
paid to our named executive officers;
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3.
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To consider a non-binding, advisory vote on the frequency of future
advisory votes on executive compensation paid to our named
executive officers;
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4.
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To ratify the appointment of Eide Bailly, LLP as our independent
auditors for the fiscal year ending September 30, 2019;
and
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5.
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To transact such other business as may properly come before the
Annual Meeting and any adjournment or postponement
thereof.
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These
matters are more fully discussed in the attached Proxy
Statement.
The close of business on March 26, 2019 (the
“
Record Date
”) has been fixed as the Record Date for the
determination of stockholders entitled to notice of, and to vote
at, the Annual Meeting or any adjournments or postponements
thereof. Only holders of record of our common stock, par value
$0.0001, at the close of business on the Record Date are entitled
to notice of, and to vote at the Annual Meeting. A complete list of
stockholders entitled to vote at the Annual Meeting will be
available for examination by any of our stockholders for purposes
pertaining to the Annual Meeting at our corporate offices, 200 E.
5
th
Avenue, Suite 100, Naperville,
Illinois, during normal business hours for a period of
ten days prior to the Annual Meeting, and at the time and
place of the Annual Meeting. We are providing a copy of our
Annual Report on Form 10-K for the year ended September 30, 2018
with the accompanying Proxy Statement.
Whether or not you expect to
attend in person, we urge you to vote your shares as promptly as
possible by either submitting your vote online by following the
instructions on the enclosed proxy card, or by signing and
returning the enclosed proxy card in the postage-paid envelope
provided, so that your shares may be represented and voted at the
Annual Meeting.
If your shares
are held in the name of a bank, broker or other fiduciary, please
follow the instructions on the voting instruction card furnished by
the record holder.
Our Board of Directors unanimously recommends that you vote
“FOR” the Annual Meeting Proposal Nos. 1, 2 and 4, and
in favor of our recommendation set forth in Proposal No. 3, all of
which Proposals are described in detail in the accompanying Proxy
Statement.
IMPORTANT NOTICE REGARDING THE
AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE
HELD ON MAY 9, 2019 - THE ANNUAL REPORT AND PROXY STATEMENT ARE
AVAILABLE ONLINE AT:
http://www.astproxyportal.com/ast/18188.
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By Order of the Board of Directors,
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Guy Dubois
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Chairman
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Naperville, Illinois
March 27, 2019
200 E. 5
th
Avenue, Suite 100
Naperville, Illinois 60563
(877) 260-2010
PROXY STATEMENT
General
This Proxy Statement is furnished in connection
with the solicitation by the Board of Directors (the
“
Board
”) of Track Group, Inc., a Delaware
corporation (the “
Company
,” “
we
,” “
us
,” or “
our
”), of proxies for use at our 2019 Annual
Meeting of Stockholders to be held at our offices located at 200 E.
5
th
Avenue, Suite 100, Naperville,
Illinois, on Tuesday, May 9, 2019, at 2:30 P.M. (local time), and
at any adjournment or postponement thereof (the
“
Annual
Meeting
”). The Proxy
Statement, the enclosed proxy card and a copy of our Annual Report
on Form 10-K for the year ended September 30, 2018 (the
“
Annual
Report
”) are first being
mailed to stockholders entitled to vote on or about March 29,
2019.
The
proxy materials are also available free of charge on the internet
at our
website www.trackgrp.com
under
the Investor Tab.
Who Can Vote
Stockholders of record at the close of business on
March 26, 2019 (the “
Record Date
”) are entitled to notice of and to vote at
the Annual Meeting. As of the close of business on the Record Date,
the Company had 11,401,650 shares of common stock, par value
$0.0001 per share (“
Common
Stock
”), issued and
outstanding. Each holder of Common Stock is entitled to one vote
for each share held as of the Record Date.
How You Can Vote
Stoc
kholders are
invited to attend the Annual Meeting in person to vote on the
proposals described in this Proxy Statement. However, stockholders
do not need to attend the Annual Meeting to vote. Instead,
stockholders may submit their vote online by following the
instructions on the enclosed proxy card, or by simply completing,
signing and returning the enclosed proxy card.
If your proxy is properly returned to the Company,
the shares represented thereby will be voted at the Annual Meeting
in accordance with the instructions specified thereon. If you
return your proxy without specifying how the shares represented
thereby are to be voted, the proxy will be voted (i)
FOR
the election of three directors
nominated by our Board to serve until our 2020 Annual Meeting of
Stockholders, or until their successors are duly elected and
qualified, (ii)
FOR
the approval, on an advisory basis, of the
compensation paid to our named executive officers (the
“
Say-on-Pay
Proposal
”); (iii)
FOR
the approval, on an advisory basis,
that future advisory votes on executive compensation shall occur
every three years (the “
Say-on-Frequency
Proposal
”), (iv)
FOR
ratification of the appointment of
Eide Bailly, LLP as our independent auditors for the year
ended September 30, 2019; and (v) at the discretion of the proxy
holders on any other matter that may properly come before the
Annual Meeting or any adjournment or postponement
thereof.
If
a bank, broker or other institution holds your shares, you will
receive instructions from the holder of record that you must follow
in order for your shares to be voted.
Broker Non-Votes
A
“broker non-vote” occurs when a nominee (typically a
broker or bank) holding shares for a beneficial owner (typically
referred to as shares being held in “street name”)
submits a proxy for the Annual Meeting, but does not vote on a
particular proposal because the nominee has not received voting
instructions from the beneficial owner and does not have
discretionary authority to vote the shares with respect to that
proposal.
Brokers
and other nominees may vote on “routine” proposals on
behalf of beneficial owners who have not furnished voting
instructions, subject to the rules applicable to broker nominees
concerning transmission of proxy materials to beneficial owners,
and subject to any proxy voting policies and procedures of those
firms. The ratification of the independent registered public
accountants, for example, is a routine proposal. Brokers and other
nominees may not vote on “non-routine” proposals,
unless they have received voting instructions from the beneficial
owner. The election of directors, Say-on-Pay Proposal and
Say-on-Frequency Proposal are considered “non-routine”
proposals. This means that brokers and other firms must obtain
voting instructions from the beneficial owner to vote on these
matters; otherwise they will not be able to cast a vote for these
“non-routine” proposals. If your shares are held in the
name of a broker, bank or other nominee, please follow their voting
instructions so you can instruct your broker on how to vote your
shares.
-1-
Revocation of Proxies
Stockholders
of record can revoke their proxies at any time before they are
exercised in any one of three ways:
●
by
voting in person at the Annual Meeting;
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by
submitting written notice of revocation to the Secretary of the
Company prior to the Annual Meeting; or
●
by
submitting another proxy bearing a later date that is properly
executed prior to or at the Annual Meeting.
Quorum
In
order for any business to be conducted at the Annual Meeting, a
quorum must be present. The presence at the Annual Meeting, either
in person or by proxy, of holders of our Common Stock entitled to
vote and representing at least a majority of our outstanding voting
power will constitute a quorum for the transaction of business. If
you submit a properly executed proxy, regardless of whether you
abstain from voting on one or more matters, your shares will be
counted as present at the Annual Meeting for the purpose of
establishing a quorum. Shares that constitute broker non-votes will
also be counted as present at the Annual Meeting for the purpose of
establishing a quorum. If a quorum is not present at the scheduled
time of the Annual Meeting, the stockholders who are present may
adjourn the Annual Meeting until a quorum is present. The time and
place of the adjourned Annual Meeting will be announced at the time
the adjournment is taken, and no other notice will be given. An
adjournment will have no effect on the business that may be
conducted at the Annual Meeting.
Vote Required for Approval
Proposal No.
1
:
Election of
Directors
. Directors are
elected by a plurality vote. This means the director nominees who
receive the highest number of affirmative votes cast at the Annual
Meeting, up to the number of directors to be elected, will be
elected as directors. Abstentions and broker non-votes will have no
effect on the outcome of the election of the
directors.
Proposal
No. 2: Advisory Vote to Approve Executive
Compensation.
This advisory vote is
not binding on us, our Board of Directors, or management. The
number of votes cast “FOR” must exceed the number of
votes cast “AGAINST” this Proposal to approve, on an
advisory basis, the compensation paid to our named executive
officers.
Abstentions and
broker non-votes will have no effect on the outcome of the vote for
this Proposal.
Proposal
No. 3: Advisory Vote on the Frequency of the Advisory Vote on
Executive Compensation.
This advisory vote is
not binding on us, our Board of Directors or management. The
approval of the frequency of the advisory vote on executive
compensation requires the favorable vote of a majority of votes
cast unless none of the three frequency choices receives a
majority, in which case the choice that receives the plurality of
votes cast will be considered approved. For this Proposal, the
proxy card provides spaces for a stockholder to vote for the option
of every one year, two years or three years as the frequency with
which stockholders will have an advisory vote on executive
compensation, or to abstain. Abstentions and broker non-votes will
have no effect on the outcome of the vote for this Proposal. The
Board of Directors may decide that it is in the best interest of
our stockholders and the Company to hold future executive
compensation advisory votes more or less frequently, but will in no
case hold them less frequently than every three
years.
Proposal
No. 4: Ratification of Appointment of
Auditors.
To ratify the
appointment of Eide Bailly, LLP as our independent auditors for the
fiscal year ending September 30, 2019, the number of votes cast
“FOR” must exceed the number of votes cast
“AGAINST” this Proposal.
A properly executed proxy marked
“ABSTAIN” will not be voted, although it will be
counted as present and entitled to vote for purposes of the
Proposal. Accordingly, an abstention will have the
effect of a vote against this Proposal. A broker or other nominee
will generally have discretionary authority to vote on this
Proposal because it is considered a routine matter, and therefore
we do not expect broker non-votes with respect to this Proposal.
However, any broker non-votes received will have no effect on the
outcome of this Proposal.
Solicitation
We
will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy
Statement, our Annual Report, the proxy and any additional
solicitation materials furnished to our stockholders. Copies of any
solicitation materials will be furnished to brokerage houses,
fiduciaries and custodians holding shares of Common Stock in their
names that are beneficially owned by others so that they may
forward this solicitation material to such beneficial owners. In
addition, we may reimburse such persons for their costs in
forwarding the solicitation materials to such beneficial owners.
The original solicitation of proxies by mail may be supplemented by
a solicitation by telephone, facsimile or other means by our
directors, officers or employees. No additional compensation will
be paid to these individuals for any such services. Except as
described above, we do not presently intend to solicit proxies
other than by mail and telephone.
-2-
PROPOSAL NO. 1
ELECTION OF DIRECTORS
General
Our Certificate of Incorporation provides that
the
number of directors
that constitute our entire Board of Directors shall be fixed from
time to time by resolution adopted by a majority of our entire
Board.
A director elected
by our Board of Directors to fill a vacancy shall serve for the
remainder of the term of that director and until the
director’s successor is duly elected and qualified. Our Board
of Directors has nominated the following three individuals for
election to our Board of Directors at the Annual Meeting: Guy
Dubois, Karen Macleod and Karim Sehnaoui.
Each
nominee, if elected at the Annual Meeting, will hold office 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. If any such person is unable
or unwilling to serve as a nominee for the office of director at
the date of the Annual Meeting or any postponement or adjournment
thereof, the proxies may be voted for a substitute nominee
designated by the proxy holders or by our present Board of
Directors to fill such vacancy, or for the balance of those
nominees named without nomination of a substitute, and our Board of
Directors may be reduced accordingly. Our Board of Directors
has no reason to believe that any of such nominees will be
unwilling or unable to serve if elected as a director.
Required Vote
Directors
are elected by a plurality vote. This means that the nominees for
directors who receive the highest number of affirmative votes cast
at the Annual Meeting, up to the number of directors to be elected,
will be elected as directors. Abstentions and broker non-votes will
have no effect on the outcome of the election of the
directors.
Board of Directors Recommendation
Our Board of Directors recommends a vote “
FOR
” the election of each nominee set forth
below.
Nominee Biographies
Following
are the names and ages of each nominee for election as a director,
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.
-3-
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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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60
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Mr. Dubois,
became a director in December 2012,
and has served as our Chairman since February 2013. In addition,
Mr. Dubois served as our Chief Executive Officer from
September 2016 to December 2017. Mr. Dubois is the Founder and
Chairman of Singapore-based Tetra House Pte. Ltd., a provider of
bespoke consulting and advisory services out of Singapore,
Luxemburg, and most recently launched CIRCLO
3
in the United Kingdom. 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.
In considering Mr. Dubois as a director of the Company, the Board
reviewed his extensive financial and management expertise and
experience. In addition, Mr. Dubois’ public company senior
management and board experience, and the leadership he has shown in
his positions with prior companies, were considered important
factors in the determination of the current Board, as well as the
fact that he served as the Company’s Chief Executive Officer
for approximately a year.
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Karen Macleod
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2016
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55
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Karen 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 to 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.
In considering Ms. Macleod’s nomination, our 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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40
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Karim 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-
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.
Our
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 our
Board of Directors may 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, our Bylaws contain provisions that
address the process by which a stockholder may nominate an
individual to stand for election to our Board of Directors at our
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 our Bylaws. Information required by our 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. Our Board of Directors 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 our Bylaws by writing to
the Secretary at this address.
Board Meetings
Directors
hold office until the next annual meeting of the stockholders or
until their successors have been elected or appointed and duly
qualified. Vacancies on our Board that are created by the
retirement, resignation or removal of a director, may be filled by
the vote of the remaining members of our Board, with such new
director serving the remainder of the term or until his/her
successor shall be elected and qualified.
Our
Board of Directors is elected by and is accountable to our
stockholders. Our Board establishes policy and provides
strategic direction, oversight, and control. Our Board met
eleven times during the year ended September 30, 2018 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.
Board Committees and Charters
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 our Board of Directors, leaving Guy
Dubois, Karim Sehnaoui and Karen Macleod as the remaining directors
on our Board. Certain disclosure that follows regarding corporate
governance refers to our Board of Directors and corporate
governance policies and procedures prior to the resignation of the
Former Directors, and does not reflect our corporate governance
policies and procedures subsequent to such
resignations.
Our
Board of Directors had three standing committees prior to the
resignation of the Former Directors: the Audit Committee,
Compensation Committee, and Nominating and Corporate Governance
Committee. These committees assisted our 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, our Board no longer has an acting
Audit Committee, Compensation Committee, or Nominating and
Corporate Governance Committee. Instead, our Board of Directors
administers the duties of the Audit Committee, Compensation and
Nominating and Corporate Governance Committees.
-5-
Audit Committee
Prior to May 31, 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 Controller
and with our independent registered public accounting firm and
evaluated the responses by our Chief Financial Officer, both to the
facts presented and to the judgments made by our independent
registered public accounting firm. The Audit Committee met
three times during the 2018 fiscal year prior to May 31, 2018, and
all members of the Audit Committee attended at least 75% of the
committee’s meetings.
Prior
to May 31, 2018, 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
by the OTCQX Marketplace Rules, and were financially
literate. In accordance with Section 407 of the Sarbanes-Oxley
Act of 2002, our 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.
Our full Board of Directors 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, 2018 with management and our
independent registered public accounting firm. Our Board of
Directors received the written disclosures and the letter from our
independent registered public accounting firm required by
Independence Standards Board No. 1, and discussed with the
independent registered public accounting firm the independent
registered public accounting firm’s
independence.
Compensation Committee
Prior
to May 31, 2018, we had a separately designated standing
Compensation Committee. The 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 by
the OTCQX Marketplace Rules. The Compensation Committee met
one time during the 2018 fiscal year prior to May 31, 2018, and all
members of the Compensation Committee attended at least 75% of the
committee’s meetings.
Currently,
our entire Board of Directors serves in the capacity as a
compensation committee. As such, our 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. Our
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, our Board
of Directors administers compensation plans in a manner consistent
with the terms of such plans (including, as applicable, the grant
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).
Nominating and Corporate Governance Committee
Prior
to May 31, 2018, we had a separately designated standing Nominating
and Corporate Governance Committee. Messrs. van Daele, Boone and
Johnson served as members of our Nominating and Corporate
Governance Committee. Currently, our entire Board of Directors
serves in the capacity as a nominating and corporate governance
committee. As such, our entire Board of Directors has the
responsibility for identifying and recommending candidates to fill
vacant any newly created Board positions, setting corporate
governance guidelines regarding director qualifications and
responsibilities, and planning for senior management
succession.
Currently,
our full Board of Directors is required to review the
qualifications and backgrounds of all directors and nominees
(without regard to whether a nominee has been recommended by
stockholders), as well as the overall composition of the Board of
Directors, and recommend a slate of directors to be nominated for
election at the annual meeting of stockholders, or, in the case of
a vacancy on our Board of Directors, elect a new director to fill
such vacancy. The Nominating and Corporate Governance
Committee held one meeting during the 2018 fiscal year prior to May
31, 2018.
-6-
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.
Subsequent to the year ended September 30, 2018, in March 2019 the
Board re-evaluated Mr. Dubois’ independence, and determined
that Mr. Dubois qualified as an independent director as defined by
the rules and regulations of the OTCQX Marketplace as of such
date.
Our Board has determined that Mr. Dubois and Ms.
Macleod are currently the Company’s independent directors as
defined by the rules and regulations of the OTCQX Marketplace. In
addition, our Board of Directors has determined that of its current
directors, Ms. Macleod satisfies the definition of an “audit
committee financial expert” under Securities and Exchange
Commission (“
SEC
”) rules and regulations. These designations
do not impose any duties, obligations or liabilities that are
greater than those generally imposed as members of our Board, and
the designation as an audit committee financial expert does not
affect the duties, obligations or liability of any other member of
our Board of Directors.
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. At that time, our Board believed that
his combined role was most advantageous to the Company and our
stockholders. 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. Mr.
Dubois continues to serve as Chairman of the Board.
In
addition to Mr. Cassell’s and Mr. Dubois’ leadership,
the Board of Directors 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 Board from
management, counsel and the Company’s independent registered
public accountants relating to risk assessment and management. Our
Board of Directors meets privately in executive sessions with
representatives of the Company’s independent registered
public accountants. Our Board or Directors also provides risk
oversight through its periodic reviews of the financial and
operational performance of the Company.
Indemnification of Officers and Directors
As
permitted by Delaware law, the Company will indemnify its
directors and officers against expenses and liabilities they
incur to defend, settle, or satisfy any civil or
criminal action brought against them on account of
their being or having been Company directors or officers
unless, in any such action, they are adjudged to have acted
with gross negligence or willful
misconduct.
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.
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.
-7-
PROPOSAL NO. 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Our
executive compensation program is designed to attract, motivate and
retain a talented team of executives. We seek to accomplish this
goal in a way that rewards performance that is aligned with our
stockholders’ long-term interests. We believe that our
executive compensation program achieves this goal and is strongly
aligned with the long-term interests of our
stockholders.
Pursuant
to Section 14A of the Exchange Act, we are submitting a proposal to
our stockholders for an advisory vote on the compensation of our
named executive officers. This Proposal, commonly known as a
“say-on-pay” proposal, is a non-binding vote, but gives
stockholders the opportunity to express their views on the
compensation of our named executive officers. This vote is not
intended to address any specific item of compensation, but rather
the overall compensation of our named executive
officers.
Accordingly,
the following resolution is submitted for stockholders for
approval:
RESOLVED
, that the stockholders of Track Group, Inc.
approve, on an advisory basis, the compensation of its named
executive officers as disclosed in the Proxy Statement for the
Annual Meeting, to be held on May 9, 2019, pursuant to Item 402 of
Regulation S-K, the accompanying tabular disclosure regarding named
executive officer compensation and the corresponding narrative
disclosure and footnotes.
As
an advisory vote, this Proposal is not binding. However, our Board
of Directors, which is responsible for designing and administering
our executive compensation program, values the opinions expressed
by stockholders in their vote on this Proposal and will consider
the outcome of the vote when making future compensation decisions
for named executive officers.
Vote Required
The
affirmative “FOR” vote must exceed the number of votes
“AGAINST” to approve this non-binding matter. Unless
otherwise instructed on the proxy or unless authority to vote is
withheld, shares represented by executed proxies will be voted
“FOR” this Proposal. Abstentions and broker non-votes
will have no effect on the outcome of the vote for this
Proposal.
Board of Directors Recommendation
Our Board of Directors recommends that stockholders vote
“
FOR
” the advisory resolution above, approving
of the compensation paid to our named executive
officers.
-8-
EXECUTIVE OFFICERS
Our
executive officers are appointed by our Board of Directors 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 our current executive
officers.
|
Name
|
|
Age
|
|
Position
|
|
Derek Cassell
|
|
45
|
|
Chief Executive Officer
|
|
Peter
K. Poli
|
|
57
|
|
Chief Financial Officer
|
Derek Cassell
joined the Company 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 our President 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.
Peter K. Poli
has served as our Chief Financial
Officer since January 2017. In addition, he has served as the Chief
Financial Officer and Treasurer of Emerge Monitoring, Inc.,
Secretary and Treasurer of Track Group – Puerto Rico, Inc.,
Secretary of Track Group Analytics, Limited and Manager of Emerge
Monitoring LLC, all of which are subsidiaries of the Company, since
May 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.
-9-
EXECUTIVE COMPENSATION
The
following discussion relates to the compensation of our
“named executive officers.”
Summary Compensation Table
The following summary
compensation table sets forth the compensation paid to the
following persons for our fiscal years ended September 30, 2017 and
2018
:
(a)
our
principal executive officer;
(b)
our
other two most highly compensated executive officers who were
serving as executive officers at the end of the fiscal year ended
September 30, 2018 and who had total compensation exceeding
$100,000; and
(c)
additional individuals for whom disclosure would
have been provided under (b) but for the fact that the individual
was not serving as an executive officer at the end of the most
recently completed financial year (together, the “
Named Executive
Officers
”).
|
Name and
Principal Position
|
Year
|
Salary
|
Bonus
|
Stock Awards
|
Option Awards
|
All Other Compensation
|
Total
|
|
|
|
($)
|
($)
|
($)
(1)
|
($)
(2)
|
($)
|
($)
|
|
Guy Dubois
(3)
|
2018
|
$
-
|
$
60,000
|
$
350,000
(4)
|
$
-
|
$
50,000
|
$
460,000
|
|
Chairman and Former Executive Chairman
|
2017
|
$
-
|
$
-
|
$
100,000
(4)
|
$
-
|
$
-
|
$
100,000
|
|
|
|
|
|
|
|
|
|
|
Derek Cassell
(5)
|
2018
|
$
266,923
|
$
30,000
|
$
315,000
|
$
-
|
$
-
|
$
611,923
|
|
Chief Executive Officer and Former President
|
2017
|
$
224,454
|
$
-
|
$
193,846
|
$
-
|
351
(6)
|
$
418,651
|
|
|
|
|
|
|
|
|
|
|
Peter
Poli
|
2018
|
$
247,692
|
$
22,500
|
$
157,500
|
$
-
|
$
-
|
$
427,692
|
|
Chief Financial Officer
|
2017
|
$
175,384
|
$
-
|
$
-
|
$
134,318
|
$
-
|
$
309,702
|
|
(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.
|
|
|
|
|
(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, 2018 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)
|
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 our Board of Directors.
Mr. Dubois does not
have an employment agreement, nor did he when serving as the
Company’s Executive Chairman.
|
|
|
|
| (4) |
$25,000 and $0 of Mr. Dubois’ stock award payments had been
accrued, but not yet issued as of September 30, 2017 and 2018,
respectively, and $25,000 of Mr. Dubois’ cash compensation
had not been paid at September 30, 2018.
|
|
|
|
|
(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)
|
Consists of a health club membership for Mr. Cassell.
|
-10-
Narrative Disclosure to the Summary Compensation Table
Compensation Paid to our Former Executive Chairman
Our former principal executive officer, Guy
Dubois, was granted 51,746 sh
ares of Company 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.
Mr.
Dubois was granted 41,293 shares of Common Stock, equal to $50,000,
and $50,000 in cash payments for his work as Chairman
of the Board of the Company during the fiscal year
ended September 30, 2018, of which $25,000 of cash payments had not
been paid as of September 30, 2018. In addition, Mr. Dubois
received a $60,000 cash bonus and 241,935 shares of Common Stock
equal to $300,000 for services provided to the Company in his
former role as Executive Chairman.
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 vested on January 1,
2019. If the Company terminates Mr. Poli’s employment as a
result of an involuntary termination, he would receive an amount
equal to 12 months base salary, plus
any annual bonus deemed to be vested and
earned.
An amendment to the
Poli Employment Agreement was approved at a Board meeting on
December 13, 2017, and such amendment was executed on January 3,
2018.
Pursuant to 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;
and (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.
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 received 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 vested on
March 30, 2018. If the Company terminates Mr. Cassel’s
employment as a result of an involuntary termination, he would
receive an amount equal to 12 months base salary, plus
any annual bonus deemed to be vested
and earned.
A second amendment to
the Cassell Employment Agreement was approved at a Board meeting
held on December 13, 2017, and such amendment was executed 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 Chief
Executive Officer 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 $275,000 per year; (ii) a 50%
increase in his annual bonus effective for bonus plan year 2018 and
thereafter; (iii) the issuance of 300,000 unregistered restricted
shares of the Company’s Common Stock, which shall vest
annually in increments of 100,000 beginning January 1, 2018; and
(iv) in the event of a change of control, Mr. Cassell shall be
entitled to a cash payment equal to one year’s salary, plus
all restricted stock, warrants and options previously issued to Mr.
Cassell shall become immediately vested and
exercisable.
-11-
Outstanding Equity Awards at September 30, 2018
The
following table discloses outstanding shares, stock option awards
and warrants held by each of the Named Executive Officers as of
September 30, 2018:
Outstanding Equity Awards at Fiscal Year-End 2018
|
Name
|
Number of securities underlying unexercised options (#)
exercisable
|
Number of securities underlying unexercised options (#)
unexercisable
|
Equity incentive plan awards: Number of underlying unexercised
unearned options (#)
|
Option exercise price ($)
(1)
|
Option
expiration
date
|
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
|
-
|
-
|
$
1.24
|
3/21/2022
|
-
|
-
|
-
|
-
|
|
|
64,665
|
-
|
-
|
$
1.24
|
4/14/2022
|
-
|
-
|
-
|
-
|
|
|
4,083
|
-
|
-
|
$
1.24
|
6/30/2022
|
-
|
-
|
-
|
-
|
|
|
2,280
|
-
|
-
|
$
1.24
|
9/30/2022
|
-
|
-
|
-
|
-
|
|
|
2,344
|
-
|
-
|
$
1.24
|
12/31/2023
|
-
|
-
|
-
|
-
|
|
|
2,432
|
-
|
-
|
$
1.24
|
3/31/2023
|
-
|
-
|
-
|
-
|
|
|
51,576
|
-
|
-
|
$
1.24
|
6/02/2023
|
-
|
-
|
-
|
-
|
|
|
2,647
|
-
|
-
|
$
1.24
|
6/30/2023
|
-
|
-
|
-
|
-
|
|
|
14,988
|
-
|
-
|
$
1.24
|
1/27/2022
|
-
|
-
|
-
|
-
|
|
|
8,868
|
-
|
-
|
$
1.24
|
4/20/2022
|
-
|
-
|
-
|
-
|
|
|
113,310
|
-
|
-
|
$
1.24
|
8/14/2022
|
-
|
-
|
-
|
-
|
|
|
8,571
|
-
|
-
|
$
1.24
|
9/30/2022
|
-
|
-
|
-
|
-
|
|
|
12,676
|
-
|
-
|
$
1.24
|
10/14/2022
|
-
|
-
|
-
|
-
|
|
|
15,126
|
-
|
-
|
$
1.24
|
1/15/2023
|
-
|
-
|
-
|
-
|
|
|
14,286
|
-
|
-
|
$
1.24
|
3/31/2023
|
-
|
-
|
-
|
-
|
|
|
18,000
|
-
|
-
|
$
1.24
|
6/30/2023
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Poli
|
50,000
|
50,000
(2)
|
-
|
$
1.24
|
1/1/2022
|
-
|
-
|
-
|
-
|
|
|
-
|
-
|
-
|
-
|
-
|
50,000
(3)
|
$
52,500
|
-
|
-
|
|
|
-
|
-
|
-
|
-
|
-
|
50,000
(4)
|
$
52,500
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Derek Cassell
|
-
|
-
|
-
|
-
|
-
|
100,000
(3)
|
$
105,000
|
-
|
-
|
|
|
|
|
|
|
|
100,000
(4)
|
$
105,000
|
-
|
-
|
(1)
On
November 30, 2017, the Board of Directors approved the repricing of
the exercise price of all outstanding stock options and warrants
held by the Company’s officers and directors on such date. As
such, all of the stock options reported in this table that were
outstanding at November 30, 2017 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)
Such
options vested on January 1, 2019, subsequent to the year ended
September 30, 2018.
(3)
Such
shares vested on January 1, 2019, subsequent to the year ended
September 30, 2018.
(4)
Such
shares vest on January 1, 2020.
-12-
Compliance with Section 16(a) of the Exchange Act
Section
16(a) of the Securities 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 fiscal year 2018
and that such filings were timely except the
following:
●
Dr. Ray Johnson, a
former director, filed two Form 4s reporting an aggregate of five
late transaction;
●
Peter Poli, our
Chief Financial Officer, filed a Form 4 reporting one late
transaction;
●
Dirk van Daele, a
former director, filed two Form 4s reporting an aggregate of four
late transactions;
●
Guy Dubois, a
director and our former Chief Executive Officer, filed a Form 4
reporting sixteen late transactions;
●
David Boone, a
former director, filed a Form 4 reporting seven late transactions;
and
●
Karen Macleod, a
former director, filed a Form 4 reporting five late
transactions.
DIRECTOR COMPENSATION
During the fiscal year ended September 30,
2018, each of our non-employee directors received $25,000 per
quarter for serving on the Board of Directors, which fees
were
payable in (i) cash,
(ii) Common Stock valued at the current market price at the date of
the grant, or (iii) warrants with an exercise price at the current
market price at the date of grant; all grants of warrants were
valued at the date of grant using the Black-Scholes valuation
method
.
The
members of our Board of Directors are also eligible for
reimbursement of their expenses incurred in attending Board
meetings in accordance with our policies.
The
following table sets forth the compensation awarded to, earned by,
or paid to each person who served as a director during the fiscal
year ended September 30, 2018, including the Former Directors, each
of whom resigned effective May 31, 2018, other than any director
who also served as an executive officer:
|
|
Stock Awards
|
Warrant Awards
|
Cash
|
Total Fees Earned
|
|
Name
(1)
|
($)
|
($)
|
($)
|
($)
|
|
|
|
|
|
|
|
David
Boone
|
$
50,000
|
$
-
|
$
25,000
|
$
75,000
|
|
Karen
Macleod
|
$
50,000
|
$
-
|
$
50,000
|
$
100,000
|
|
Dirk
van Daele
|
$
50,000
|
$
-
|
$
25,000
|
$
75,000
|
|
Dr. Ray
Johnson
|
$
-
|
$
50,000
|
$
25,000
|
$
75,000
|
|
Eric
Rosenblum
|
$
50,000
|
$
-
|
$
25,000
|
$
75,000
|
|
Karim
Sehnaoui
|
$
14,722
|
$
-
|
$
50,000
|
$
64,722
|
(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.
-13-
Director Warrants
The following table
lists the warrants to purchase shares of Common Stock held by each
of our non-employee directors as of
March 26
, 2019, all of which
were granted in connection with their services as
directors:
|
Name
|
Grant
Date
|
Expiration
Date
|
Exercise
Price
|
Number of
Warrants
|
Compensation
Expense
|
|
|
|
|
|
|
|
|
Guy Dubois
(1)
|
3/22/13
|
3/21/22
|
$
1.24
|
2,385
|
$
11,682
|
|
|
4/16/13
|
4/14/22
|
$
1.24
|
64,665
|
$
285,003
|
|
|
7/1/13
|
6/30/22
|
$
1.24
|
4,083
|
$
23,640
|
|
|
10/1/13
|
9/30/22
|
$
1.24
|
2,280
|
$
17,982
|
|
|
1/2/14
|
12/31/23
|
$
1.24
|
2,344
|
$
12,014
|
|
|
4/1/14
|
3/31/23
|
$
1.24
|
2,432
|
$
8,684
|
|
|
6/3/14
|
6/02/23
|
$
1.24
|
51,576
|
$
300,326
|
|
|
7/1/14
|
6/30/23
|
$
1.24
|
2,647
|
$
7,270
|
|
|
1/27/14
|
1/27/22
|
$
1.24
|
14,988
|
$
61,918
|
|
|
4/20/15
|
4/20/22
|
$
1.24
|
8,868
|
$
27,464
|
|
|
8/14/15
|
8/14/22
|
$
1.24
|
113,310
|
$
300,000
|
|
|
10/1/15
|
9/30/22
|
$
1.24
|
8,571
|
$
25,114
|
|
|
10/15/15
|
10/14/22
|
$
1.24
|
12,676
|
$
25,859
|
|
|
1/15/16
|
1/15/23
|
$
1.24
|
15,126
|
$
45,008
|
|
|
4/1/16
|
3/31/23
|
$
1.24
|
14,286
|
$
47,572
|
|
|
7/1/16
|
6/30/23
|
$
1.24
|
18,000
|
$
53,454
|
|
|
|
|
|
|
|
|
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
|
(1)
Mr.
Dubois served as the Company’s Chief Executive Officer from
September 2016 until December 31, 2017. Effective January 1, 2018
he resigned from such position and is now Chairman of the Board of
Directors.
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.
-14-
PROPOSAL 3: ADVISORY VOTE ON THE FREQUENCY OF
FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
Pursuant
to the Dodd-Frank Wall Street Reform and Consumer Protection Act,
at least once every six years we are required to submit for
stockholder vote a non-binding resolution to determine whether the
advisory stockholder vote on executive compensation described in
Proposal 2 above shall occur every one, two or three
years.
After
careful consideration, our Board of Directors recommends that
future advisory votes on executive compensation occur every three
years (triennially). Our Board of Directors believes that this
frequency is appropriate for a number of reasons,
including:
●
A triennial vote
aligns with the three-year performance periods under the typical
performance-vesting restricted stock, warrants and options granted
to executive officers, including the named executive officers,
which are designed to incentivize and reward performance over a
multi-year period, and will allow stockholders to more
appropriately evaluate this and other compensation policies,
practices and programs in relation to the Company’s long-term
performance; and
●
A triennial vote
encourages a longer-term view of compensation by stockholders by
allowing them an appropriate timeframe to evaluate the
Company’s performance and overall effectiveness of the
executive compensation program.
The
proxy card provides stockholders with four choices (every one, two
or three years, or abstain). Stockholders are not voting to approve
or disapprove our Board’s recommendation.
The
frequency vote is non-binding. Stockholder approval of a one, two
or three-year frequency vote will not require us to implement an
advisory vote on executive compensation every one, two or three
years. The final decision on the frequency of the advisory vote on
executive compensation remains with our Board of
Directors.
Our
Board of Directors values the opinions of our stockholders as
expressed through their votes and other communications. Although
the resolution is non-binding, our Board will carefully consider
the outcome of the frequency vote and other communications from
stockholders when making future decisions regarding the frequency
of say-on-pay votes.
Vote Required
The approval of the frequency of the advisory vote on executive
compensation requires the favorable vote of a majority of votes
cast unless none of the three frequency choices receives a
majority, in which case the choice that receives the plurality of
votes cast will be considered approved. For this Proposal, the
proxy card provides spaces for a stockholder to vote for the option
of every one year, two years or three years as the frequency with
which stockholders will have an advisory vote on executive
compensation, or to abstain. Abstentions and broker non-votes will
have no effect on the outcome of the vote for this
Proposal.
Board of Directors Recommendation
Our Board of Directors recommends that stockholders vote to
conduct advisory votes on executive compensation every three
years.
-15-
PROPOSAL NO. 4
RATIFICATION OF THE APPOINTMENT OF
EIDE BAILLY, LLP TO SERVE AS OUR
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE CURRENT FISCAL
YEAR
Our Board of Directors has appointed Eide
Bailly, LLP (“
Eide Bailly
”) as our independent registered public
accounting firm for the current fiscal year and hereby recommends
that the stockholders ratify such appointment.
Our
Board of Directors may terminate the appointment of Eide Bailly as
our independent registered public accounting firm without the
approval of the stockholders whenever our Board of Directors deems
such termination necessary or appropriate.
Representatives
of Eide Bailly will be present at the Annual Meeting, or available
by telephone, and will have an opportunity to make a statement if
they so desire and to respond to appropriate questions from
stockholders.
Principal Accountant Fees and Services
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 our
annual financial statements for the years ended September 30, 2018
and 2017 and fees and other expenses for other services rendered
during those periods.
|
|
2018
|
2017
|
|
Audit Fees
(1)
|
$
174,179
|
$
162,420
|
|
Audit-Related Fees
(2)
|
$
6,862
|
$
6,141
|
|
Tax Fees
(3)
|
$
20,200
|
$
20,728
|
|
All Other Fees
(4)
|
$
28,400
|
$
21,661
|
|
Total
|
$
229,641
|
$
210,950
|
|
(1)
|
Audit services in 2018 and 2017 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.
|
Audit Committee Pre-Approval Policies and Procedures
Prior
to May 31, 2018, our former Audit Committee had, and subsequent to
such date our entire Board of Directors has, established
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 our full Board
of Directors approved the foregoing audit and permissible non-audit
services provided by Eide Bailly in fiscal 2018. Such procedures
govern the ways in which the Audit Committee pre-approved, and our
full Board of Directors now pre-approves, audit and various
categories of non-audit services that the auditor provides to the
Company. Services that have not received pre-approval must
receive specific approval of the Audit Committee, or our full Board
for fiscal 2018.
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no changes in or disagreements
with accountants on accounting and financial
disclosure.
Auditor Independence
Our
Audit Committee and our full Board considered that the work done
for us in fiscal year 2017 and 2018, respectively, by Eide
Bailly was compatible with maintaining Eide Bailly’s
independence.
-16-
Report of the Audit Committee of the Board of
Directors
Date: December 19, 2018
The full Board, serving in the capacity of the
Company’s Audit Committee, has 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, 2018. The Board has 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
Board with the written disclosures and the letter required by the
applicable requirements of the PCAOB regarding the independent
auditor’s communication with the Board concerning
independence. The Board 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 Board determined
that the audited financial statements should be included in our
Annual Report on Form 10-K for the year ended September 30,
2018.
|
|
Respectfully Submitted,
Guy
Dubois
Karen Macleod
Karim Sehnaoui
|
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.
Required Vote
To ratify the
appointment of Eide Bailly, LLP as our independent auditors for the
fiscal year ending September 30, 2019, the number of votes cast
“FOR” must exceed the number of votes cast
“AGAINST” this Proposal.
A properly executed proxy marked
“ABSTAIN” will not be voted, although it will be
counted as present and entitled to vote for purposes of the
Proposal. Accordingly, an abstention will have the effect of a
vote against this Proposal. A broker or other nominee will
generally have discretionary authority to vote on this Proposal
because it is considered a routine matter, and therefore we do not
expect broker non-votes with respect to this Proposal. However, any
broker non-votes received will have no effect on the outcome of
this Proposal.
Board of Directors Recommendation
Our Board of Directors recommends that stockholders vote
“FOR” the ratification of the selection of Eide Bailly,
LLP as the Company’s independent auditors for the fiscal year
ending September 30, 2019.
-17-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security
Ownership of Certain Beneficial Owners
The following table presents information regarding
beneficial ownership as of March 26, 2019 (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 Named Executive
Officers and directors serving as of the Table Date 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 our 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
|
%
|
|
|
|
|
|
5% Beneficial Owners:
|
|
|
|
ETS Limited
(2)
|
4,871,745
|
43
%
|
|
Safety Invest S.A., Compartment Secure I
(3)
|
1,740,697
|
15
%
|
|
Conrent Invest S.A.
(4)
|
591,378
|
5
%
|
|
|
|
|
|
Directors and Named Executive Officers:
|
|
|
|
Guy Dubois
(5)
|
653,568
|
6
%
|
|
Peter Poli
(6)
|
233,640
|
2
%
|
|
Derek Cassell
(7)
|
317,209
|
3
%
|
|
Karen Macleod
(8)
|
94,939
|
1
%
|
|
Karim Sehnaoui
(9)
|
14,021
|
1
%
|
|
All
directors and executive officers as a group
(5
persons)
|
1,313,377
|
12
%
|
(1)
Except as otherwise indicated, the business
address for these beneficial owners is c/o the Company, 200 E.
5
th
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 Amendment No. 1 to Schedule 13D filed by Safety on March 20,
2019.
(4)
Address is
283, Route d’Arlon L-8011
Strassen R.C.S. Luxembourg B 170.360. Holding information is based
on an American Stock Transfer & Title Company - Institutional
ownership with underlying beneficial owners report, dated January
7, 2019.
(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 March 26,
2019.
(6)
Holdings
consist of 133,640 shares of Common Stock and 100,000 shares of
Common Stock issuable upon exercise of stock purchase warrants,
exercisable within 60 days of March 26, 2019.
(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 March 26,
2019.
(9)
Holdings
include 14,021 shares of Common Stock owned of record.
-18-
Securities Authorized for Issuance Under Equity Compensation
Plans
The
following table provides information as of September 30, 2018
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)
|
|
|
|
|
|
|
Equity
compensation plans approved by security holders
|
615,655
|
$
1.61
|
27,218
|
|
|
|
|
|
|
Equity
compensation plans not approved by security holders
|
68,604
|
1.15
|
-
|
|
|
|
|
|
|
Total
|
685,259
|
$
1.56
|
27,218
|
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.
On July 19, 2018 the
Company and Conrent, amended the facility agreement again, thereby
(i) extending the Maturity Date to the earlier of either April 1,
2019 or the date upon which the Outstanding Principal Amount, as
defined therein, is repaid by the Company, and (ii) provided that
in the event of a Change of Control, as defined therein, Conrent
shall immediately cancel the facility and declare the Outstanding
Principal Amount, together with unpaid interest, immediately due
and payable.
-19-
Subsequent
to the year ended September 30, 2018, on November 14, 2018, the
Company requested that Conrent further extend the maturity of the
Amended Facility Agreement from April 1, 2019 to April 1, 2020. On
December 3, 2018, Conrent agreed to convene meetings of the
Noteholders and subsequently issued a notice of a meeting of
Noteholders for each series of Notes, which meetings were held on
January 16, 2019. Conrent notified the Company (via
telephone), that the Noteholders agreed to extend the maturity of
the Amended Facility Agreement to April 1, 2020, subject to the
signing of a written agreement, which occurred on February 24,
2019.
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 March
26, 2019, 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.
The Company,
however, was entitled to elect to satisfy any outstanding
obligations under the Sapinda Loan Agreement prior to the Maturity
Date without penalties or fees.
On March 13, 2017, the
Company and
Sapinda
entered into an
agreement to amend the Sapinda Loan Agreement
(“
Amendment
Number One
”). Amendment
Number One extended the maturity date of all loans made pursuant to
the
Sapinda Loan Agreement
to September 30, 2020. In addition, Amendment Number One eliminated
the requirement that the Company pay Sapinda the
3%
interest, and forgave
the 3% interest due to Sapinda for all undrawn funds under
the
Sapinda Loan Agreement
through the Execution Date. Further, Amendment Number One provided
that all Lender Penalties accrued under the
Sapinda Loan Agreement
through the Execution Date were forgiven. Per Amendment Number One,
Lender Penalties began to accrue again because Sapinda failed to
fund the amount of $1.5 million on or before March 31, 2017. The
Company formally notified Sapinda of the breach by letter dated
April 4, 2017. The Company is again accruing Lender Penalties,
amounting to $725,000 at
March 26,
2019, under Section 6.3
of the
Sapinda Loan Agreement,
as amended, and the Company intends to offset Lender Penalties
against future payments due.
We did not draw on this line of credit, nor did we
pay any interest during or subsequent to the year ended September
30, 2018. The undrawn balance of this line of credit at March 26,
2019 was $1,600,356.
Further advances under
the
Sapinda Loan Agreement
are not currently expected to be forthcoming, and therefore no
assurances can be given that the Company will obtain additional
funds to which it is entitled under the
Sapinda Loan Agreement,
or that the penalties accruing will ever be
paid.
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 year ended September 30, 2017 based on the
achievement of certain milestones. There were no shares of Company
stock payable during the year ended September 30, 2018. Changes in
the stock payable liability are shown below:
|
|
Sept. 30,
2017
|
|
Beginning
balance
|
$
3,289,879
|
|
Payment
of shares for achieving performance milestones
|
(75,939
)
|
|
Adjustment
to Track Group Analytics stock payable
|
(213,940
)
|
|
Adjustment
to GPS Global stock payable
|
(3,000,000
)
|
|
Ending
balance
|
$
-
|
Additional Related-Party Transactions and Summary of All
Related-Party Obligations
|
|
Sept. 30,
2018
|
Sept. 30,
2017
|
|
|
|
|
|
Related
party loan with an interest rate of 8% per annum for undrawn and
borrowed funds. 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 disinterested and independent members of the
Company’s Board of Directors.
-20-
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 2020 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. A stockholder proposal not included in the
Company’s proxy statement for the 2020 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
the proxy statement was released to stockholders in connection with
the previous year’s annual meeting of stockholders. However,
if the date of the 2020 Annual Meeting of Stockholders is changed
by more than 30 days from the date of this year’s Annual
Meeting, the Company must receive the stockholder’s notice no
later than the close of business on (i) the 90th day prior to
such annual meeting and (ii) the seventh day following the day
on which public announcement of the date of such meeting is first
made.
PAYMENT OF COSTS
The
expense of printing and mailing proxy materials and the
solicitation of proxies will be borne by the Company. In addition
to the solicitation of proxies by mail, solicitation may be made by
proxy solicitors, directors, officers and other employees of the
Company by personal interview, telephone, facsimile or other means.
No additional compensation will be paid to directors, officers or
employees of the Company for such solicitation. The Company will
reimburse brokerage firms and others for their reasonable expenses
in forwarding solicitation materials to beneficial owners of its
Common Stock.
HOUSEHOLDING OF PROXY MATERIALS
The
SEC has adopted rules that permit companies and intermediaries
(e.g., brokers) to satisfy the delivery requirements for proxy
statements and annual reports with respect to two or more
stockholders sharing the same address by delivering a single proxy
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 proxy materials. A single set of the
Company’s proxy 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 proxy
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 proxy 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 proxy 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-
OTHER MATTERS
The
Company knows of no other business that will be presented at the
Annual Meeting. If any other business is properly brought before
the Annual Meeting, it is intended that proxies solicited by this
Proxy Statement, if validly signed, dated and returned to the
Company, will be voted in accordance with the judgment of the
persons holding the proxies.
Whether
or not you intend to be present at the Annual Meeting, the Company
urges you to return your signed proxy promptly.
|
|
|
|
|
|
|
By Order of the Board of Directors,
|
|
March
27
, 2019
|
|
|
|
|
|
Guy Dubois
|
|
|
|
Chairman
|
The Company’s Annual Report on Form 10-K for
the fiscal year ended September 30, 2018 has been mailed with this
Proxy Statement. The Company will provide copies of exhibits to
that report, but will charge a reasonable fee per page to any
requesting stockholder. Any such request should be addressed to the
Company at 200 E. 5
th
Avenue, Suite 100, Naperville,
Illinois 60563, Attention: Investor Relations Department. The
request must include a representation by the stockholder that as of
March 26, 2019, the stockholder was entitled to vote at the Annual
Meeting.
Copies of the Annual Report on
Form 10-K and the exhibits thereto may also be obtained through the
SEC’s web site at
www.sec.gov
and
at:
http://www.astproxyportal.com/ast/18188
.
-22-
TRACK GROUP, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD
OF TRACK GROUP, INC. FOR THE 2019 ANNUAL MEETING OF
STOCKHOLDERS
The undersigned revokes all previous proxies and
constitutes and appoints Guy Dubois as his or her true and lawful
agent and proxy with full power of substitution in each, to
represent and to vote on behalf of the undersigned all of the
shares of common stock of Track Group, Inc. (the
“
Company
”) which the undersigned is entitled to vote
at the Company’s 2019 Annual Meeting of Stockholders, to be
held at the Company’s corporate office, located at 200 E.
5
th
Avenue, Suite 100, Naperville,
Illinois, on May 9, 2019 at 2:30 P.M., local time, and at any
adjournment(s) or postponement(s) thereof, upon the following
proposals more fully described in the Notice of Annual Meeting of
Stockholders and Proxy Statement for the Annual Meeting (receipt of
which is hereby acknowledged).
This
proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made,
this proxy will be voted FOR each of the director nominees named in
Proposal No. 1, and FOR Proposal Nos. 2 and 4, each of which
have been proposed by our Board, and in his or her discretion,
upon other matters as may properly come before the Annual Meeting.
If no direction is made, this proxy will be voted in favor of
holding an advisory vote on executive compensation every THREE
YEARS.
The
Company’s Board of Directors recommends that stockholders
vote as follows:
●
Proposal
No. 1 – Vote FOR each of the director nominees listed in
Proposal No. 1
●
Proposal
No. 2 – Vote FOR the advisory resolution included in Proposal
No. 2, approving the compensation paid to our named executive
officers
●
Proposal
No. 3 – Vote in favor of conducting an advisory vote on
approving compensation paid to our named executive officers every
THREE YEARS
●
Proposal
No. 4 – Vote FOR the ratification of the selection of Eide
Bailly, LLP as the Company’s independent auditors for the
fiscal year ending September 30, 2019
(continued and to be signed on reverse side)
|
|
|
☒ Please
mark your votes as indicated in this example.
|
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|
||||||||||||||||
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||||||||||||||||
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|||||||||||||||||
|
1.
|
|
ELECTION
OF DIRECTORS
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
Nominees
:
|
FOR
|
|
WITHHELD
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
01
|
Guy
Dubois
|
☐
|
|
☐
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
02
|
Karen
Macleod
|
☐
|
|
☐
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
03
|
Karim
Sehnaoui
|
☐
|
|
☐
|
|
|
|
|
|
||||||
|
|
|
|
|
|
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|
|
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|
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|
||||||||
|
2.
|
|
AN ADVISORY VOTE REGARDING THE APPROVAL OF COMPENSATION PAID TO OUR
NAMED EXECUTIVE OFFICERS
|
|
|
|
|
|
|
|
FOR
☐
|
|
AGAINST
☐
|
|
ABSTAIN
☐
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
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|
||||||
|
3.
|
|
AN ADVISORY VOTE REGARDING THE FREQUENCY OF FUTURE ADVISORY VOTES
ON COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS
|
|
|
|
|
|
1 YEAR
☐
|
|
2
YEARS
☐
|
|
3 YEARS
☐
|
|
ABSTAIN
☐
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
||||||
|
4.
|
|
RATIFYING
THE APPOINTMENT OF EIDE BAILLY, LLP AS TRACK GROUP,
INC’S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING
SEPTEMBER 30, 2019
|
|
|
|
|
|
|
|
FOR
☐
|
|
AGAINST
☐
|
|
ABSTAIN
☐
|
|
||||||
|
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||||||
|
|
|
IN HIS
OR HER DISCRETION, THE PROXY IS AUTHORIZED TO VOTE UPON OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING.
|
|
|
|
|
|||||||||||||||
|
☐
|
|
I WILL
ATTEND THE ANNUAL MEETING.
|
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING
THE ENCLOSED ENVELOPE.
|
Signature
of Stockholder ___________________ Signature of Stockholder
____________________
IF
HELD
JOINTLY
|
|
Dated: ____________________________________
|
Note: This proxy must be signed exactly as
the name appears hereon. When shares are held by joint tenants,
both should sign. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as
such. If the signer is a partnership, please sign in partnership
name by authorized person.
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