UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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SECUREALERT, INC.
(Name of the Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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SECUREALERT, INC., DBA TRACKGROUP
405 South Main Street, Suite 700
Salt Lake City, Utah 84111
(801) 451-6141
April 9, 2015
Dear Stockholders:
You are cordially invited to attend the 2015 Annual Meeting of Stockholders of SecureAlert, Inc., dba Track Group (the “Annual Meeting”), which will be held at our corporate offices located at 405 South Main Street, Suite 700, Salt Lake City, Utah on May 19, 2015 at 10:00 A.M., local time.
Details of the business to be conducted at the Annual Meeting are described in the Notice of Internet Availability of Proxy Materials (the “Notice”) you received in the mail, and in this Proxy Statement. We have also made available a copy of our Annual Report on Form 10-K for the year ended September 30, 2014 (“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.
As part of our efforts to conserve environmental resources and prevent unnecessary corporate expenses, we have elected to provide access to our proxy materials over the Internet, rather than mailing paper copies. Our management believes that providing our proxy materials over the Internet increases the ability of our stockholders to access the information they need, while lowering the costs of our Annual Meeting and conserving natural resources.
Regardless of whether you plan to attend the Annual Meeting in person, please read the accompanying Proxy Statement and then vote by Internet, telephone or e-mail as promptly as possible. Please refer to the Notice for instructions on submitting your vote. 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,
Gordon O. Jesperson
General Counsel
SECUREALERT, INC.
150 West Civic Center Drive, Suite 100
Sandy, Utah 84070
NOTICE OF ANNUAL MEETING OF SHAREHOLDERSSTOCKHOLDERS
TO BE HELD
May 19, 2015
To the ShareholdersStockholders of SecureAlert, Inc.:
The annual meeting (the “Annual Meeting”)NOTICE IS HEREBY GIVEN that the Annual Meeting of shareholdersStockholders of SecureAlert,Secure Alert, Inc., a Utah corporation, (the “Company”) will be held on Tuesday, May 19, 2015, at the Company’s10:00 A.M. (local time), at our offices located at 150 West Civic Center Drive,405 South Main Street, Suite 100, Sandy,700, Salt Lake City, Utah 84070, on Thursday, February 28, 2013, at 11:00 a.m., Mountain Standard Time. The meeting will be convened84111, for the following purposes:
| | (1)1. | To elect six director nominees described in the Proxy Statementfour directors to serve until the next2015 Annual Meeting of ShareholdersStockholders or until their successors are duly elected and the electionqualified; |
| 2. | approve an amendment to and qualificationrestatement of their successors;our Articles of Incorporation to change our corporate name from “SecureAlert, Inc.” to “Track Group, Inc.” (the “Amended and Restated Articles”); |
| | (2)3. | To approve an amendment and restatement of the Company’s 2012 Equity Incentive Award Plan (the “Reverse Split Amendment”“Plan”) to our Articles of Incorporation to effect, in the discretion of our Board of Directors, a reverse stock split of common stock at any time prior to next year’s Annual Meeting of Shareholders at a reverse split ratio in the range of between 1-for-200 and 1-for-400, which specific ratio will be determined by our Board of Directors (the “Reverse Stock Split”). The Reverse Split Amendment will not be implemented and the Reverse Stock Split will not occur unless the Board of Directors determines that it is in the best interests of the Company and its shareholders to implement the Reverse Stock Split. |
| (3) | To approve an amendment to our Articles of Incorporation (the “Authorized Share Reduction Amendment”) to decreaseincrease the number of shares of Common Stock thatcommon stock authorized for issuance thereunder by the Company is authorized to issue from 1,250,000,000 to 15,000,000 shares. The Authorized Share Reduction Amendment will not be implementedgreater of 700,000 or 7% of the issued and the decrease in authorizedoutstanding shares of Common Stock will not occur unless the Reverse Stock Split is approved by shareholders and implemented by the Board of Directors;Company’s common stock (the “Plan Amendment”); |
| | (4)4. | Toto consider an advisory vote on executive compensation;compensation paid to the Company’s Named Executive Officers; |
| | (5)5. | To consider an advisory vote on the frequency of future advisory votes on executive compensation; |
| (6) | Toto ratify the selectionappointment of Hansen Barnett & Maxwell, P.C.Eide Bailly, LLP as our independent registered public accountantauditors for the fiscal year endedending September 30, 2013;2015; and |
| | (7)6. | Toto transact such other business as may properly come before the Annual Meetingannual meeting and at any adjournmentsadjournment or postponement thereof. |
Only holdersThese matters are more fully discussed in the attached Proxy Statement.
We have elected to provide access to this year’s proxy materials primarily over the Internet under the Securities and Exchange Commission’s (the “SEC”) “notice and access” rules. We believe that this process expedites stockholders’ receipt of recordproxy materials, while lowering the costs of our Annual Meeting and conserving natural resources. On or about April 9, 2015, we mailed a Notice of Internet Availability of Proxy Materials (the “Notice”) to each of our stockholders entitled to notice of and to vote at the Company’s Common StockAnnual Meeting. This Notice contained instructions on how to access the attached Proxy Statement, our 2014 Annual Report on Form 10-K (“Annual Report”), and how to vote via the Internet, telephone and e-mail. The Notice also included instructions on how you can receive a paper copy of your proxy materials. The Proxy Statement and the Company’s Series D Convertible Preferred Stock at theAnnual Report both are available online at: www.astproxyportal.com/ast/18188.
The close of business on JanuaryApril 2, 2013 are2015 (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 shares of our common stock 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 these stockholders will be available for examination by any of our stockholders for purposes pertaining to the Annual Meeting at our corporate offices, 405 South Main Street, Suite 700, Salt Lake City, Utah, 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.
Even ifWhether or not you now expect to attend in person, we urge you to vote your shares as promptly as possible by Internet, telephone or e-mail, so that your shares may be represented and voted at the Annual Meeting, youMeeting. If your shares are requested to mark, sign, date, and returnheld in the accompanying proxy card by faxname of a bank, broker or by mail. If you attendother fiduciary, please follow the Annual Meeting, you may vote in person, whether or not you have sent in your proxy. A proxy may be revoked at any time prior toinstructions on the voting thereof.
instruction card furnished by the record holder.
By Order of the Board of Directors
/s/ Gordon Jesperson
Gordon Jesperson, Corporate Secretary
Sandy, Utah
December 19, 2012
This Notice of 2013 Annual Meeting and the attached Proxy Statement dated December19, 2012 should be read in combination with the Company’s annual report on Form 10-K, for the fiscal year ended September 30, 2012. Collectively, these documents contain all of the information and disclosures required in connection with the 2013 Annual Meeting of Shareholders. Copies of all these materials can be found at www.securealert.com/sec_filings/2013annualmeeting.
Our Board of Directors unanimously recommends that you vote “FOR” Proposal Nos. 1, 2, 3, 4, and 5, each of which are described in detail in the accompanying Proxy Statement.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON MAY 19, 2015. THE ANNUAL REPORT AND PROXY STATEMENT ARE AVAILABLE ONLINE AT: WWW.ASTPROXYPORTAL.COM/AST/18188.
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| By Order of the Board of Directors, |
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| Guy Dubois |
| Executive Committee Member, Acting Chief Executive Officer |
Salt Lake City, Utah
April 9, 2015
SECUREALERT, INC., DBA TRACKGROUP
150 West Civic Center Drive, Suite 100405 SOUTH MAIN STREET, SUITE 700
Sandy, Utah 84070SALT LAKE CITY, UTAH 84111
PROXY STATEMENT
December 19, 2012
General
This Proxy Statement is furnished to the shareholders of SecureAlert, Inc., a Utah corporation (the “Company”) in connection with the solicitation on behalf ofby the Board of Directors (the “Board”“Board”) of SecureAlert Inc., dba Track Group, a Utah corporation (the “Company,” “we,” “us,” or “our”), of proxies for use at the annual meetingAnnual Meeting of shareholders (the “Annual Meeting”)Stockholders of the Company to be held at the Company’s offices located at 150 West Civic Center Drive,405 South Main Street, Suite 100, Sandy,700, Salt Lake City, Utah 84070,84111, on Thursday, February 28, 2013Tuesday, May 19, 2015, at 11:10:00 a.m. (local time), Mountain Standard Time, and at any adjournments thereof.
This Proxy Statement and the enclosed form of proxy, together with a copy of the Company’s Annual Report on Form 10-K for the year ended September 30, 2012, (“Annual Report”) are first being made available to shareholders onadjournment or about January 16, 2013, and the cost of soliciting proxies in the enclosed form will be borne by the Company. Proxies may be solicited by personal interview, telephone, facsimile and electronic means. Banks, brokerage houses and other nominees or fiduciaries have been requested to forward the soliciting material to their principals and to obtain authorization for the execution of proxies, and the Company will, upon request, reimburse them for their expenses in so acting.
Important Notice of Internet Availability of Proxy Statement and Related Materials
postponement thereof (the “As permitted by the federal securities laws, we are making this Proxy Statement and our Annual Report available to our shareholders primarily via the Internet instead of mailing printed copies of these materials to each shareholder. On or about January 16, 2013, we intend to mail to our shareholders (other than those who previously requested electronic or paper delivery) a Notice of Internet Availability, or “Notice,” containing instructions on how to access these materials, including the Proxy Statement and Annual Report. This Proxy Statement and the Annual Report are available on the Internet at: www.securealert.com/sec_filings/2013annualmeeting.
Although you may have received a Notice by mail, you will not receive a printed copy of the Annual Meeting materials by mail unless you request printed materials. If you wish to receive printed materials, you should follow the instructions for requesting such materials contained in the Notice.
QUESTIONS AND ANSWERS ABOUT THE PROXY
MATERIALS AND OUR 2013 ANNUAL MEETING
Q: What is the purpose of the Annual Meeting?
A: This is the Annual Meeting of Shareholders held pursuant to our Bylaws and the Utah Revised Business Corporations Act. The Annual Meeting is being held to permit our shareholders to consider and vote upon:”).
(1) the election of six directors to serve until the next Annual Meeting of Shareholders and until their successors are duly elected;Who Can Vote
(2) the approval of an amendment to our Articles of Incorporation to effect, in the discretion of our Board of Directors, a reverse stock split of Common Stock at any time prior to next year’s annual meeting of shareholders at a reverse split ratio in the rate of between 1-for-200 and 1-for-400, which specific ratio will be determined by our Board of Directors (the “Reverse Stock Split”) and which, when effected, will reduce the number of shares of our Common Stock then outstanding (the “Reverse Stock Split Amendment”);
(3) approval of an amendment to our Articles of Incorporation to decrease the number of shares of Common Stock that the Company is authorized to issue from 1,250,000,000 to 15,000,000 shares to be implemented only if the Reverse Stock Split is approved by shareholders and implemented by the Board of Directors (the “Authorized Share Reduction Amendment”);
(4) an advisory vote on executive compensation;
(5) an advisory vote on the frequency of future advisory votes on executive compensation; and
(6) the ratification of the selection of Hansen Barnett & Maxwell, P.C. as our independent registered public accountant for the fiscal year ending September 30, 2013.
Q: What is the Board’s Recommendation regarding these proposals?
A: The Board’s recommendations are set forth together with a description of the proposals in this Proxy Statement. In summary, the Board recommends that you vote:
• FOR the election of the director nominees named in this Proxy Statement to serve on our Board as described under “Election of Directors;”
• FOR the approval of the Reverse Stock Split Amendment (see Proposal No. 2);
• FOR the approval of the Authorized Share Reduction Amendment. The amendment will not be implemented and the decrease in authorized shares of Common Stock will not occur unless the Reverse Stock Split is approved by shareholders and implemented by the Board of Directors (see Proposal No. 3);
• FOR the approval, on an advisory basis, of the compensation of the named executive officers as disclosed in this Proxy Statement (Proposal No. 4);
• FOR the approval, on an advisory basis, that future advisory votes on executive compensation occur every three years (Proposal No. 5); and
• FOR the ratification of the selection of Hansen Barnett & Maxwell, P.C. as our independent registered public accountant for the year ending September 30, 2013 (see Proposal No. 6).
Q: Who is entitled to vote at the Annual Meeting?
A: Only holdersStockholders of record of shares of Common Stock and holders of record of shares of Series D Preferred Stock as ofat the close of business (5:00 p.m., Eastern Standard Time) on JanuaryApril 2, 2013, the record date fixed by the Board2015 (the “Record Date”“Record Date”), will be are entitled to receive notice of and to vote at the Annual Meeting. As of November 30, 2012, there were 640,088,850 shares of Common Stock issued and outstanding and 48,763 shares of Series D Preferred stock issued and outstanding and convertible into 292,578,000 shares of Common Stock, for a total of 932,666,850 Common Stock equivalents available to vote.
Q: What shares can I vote?
A: You may vote all shares of SecureAlert Common Stock and all shares of SecureAlert Series D Preferred Stock owned by you as of the close of business on the Record Date. You may castDate, the Company had 10,131,629 shares of common stock issued and outstanding. Each holder of common stock is entitled to one vote perfor each share of Common Stock that you held on the Record Date. Each share of Series D Preferred Stock will vote on an as-converted basis at the conversion rate of 6,000 shares of Common Stock. A list of shareholders entitled to vote at the Annual Meeting will be available during ordinary business hours at the Company’s principal executive offices located at 150 W Civic Center Drive, Suite 100, Sandy, Utah 84070, for a period of at least 10 days prior to the Annual Meeting and at the Annual Meeting.
Q: How can I vote my shares?
A: You can vote your shares using one of the following methods:
· Vote through the Internet at www.proxyvote.com using the instructions included in the Notice of Internet Availability, the proxy card, or voting instruction card;
· Vote by telephone using the instructions on the proxy card or voting instruction card if you received a paper copy of the proxy materials;
· Complete and return a written proxy or voting instruction card using the proxy card or voting instruction card if you received a paper copy of the proxy materials; or
· Attend and vote in person at the meeting. If your shares are held in street or account name by a broker and you intend to vote in person at the meeting, you will need a copy of your account statement and verification from your broker that you were the beneficial owner of the shares in the account as of the Record Date.
Internet and telephone voting are available 24 hours a day, and if you use one of those methods, you do not need to return a proxy or voting instruction card. Unless you are planning to vote in person at the Annual Meeting, your vote must be received by 11:59 p.m. Eastern Standard Time, on February 27, 2013.
Even if you submit your vote by one of the first three methods mentioned above, you may still vote at the meeting if you are the record holder of your shares or hold a legal proxy from the record holder. Your vote at the Annual Meeting will constitute a revocation of your earlier proxy or voting instructions.
Q: How will my shares be voted if I return a blank proxy card?
A: If you send in your proxy card, but do not specify how you want to vote your shares, your shares will be voted by the named proxies as follows:
| (1) | FOR approval of the election of the director nominees named in this Proxy Statement to serve on our Board described under “Election of Directors”; |
| (2) | FOR approval of the Reverse Stock Amendment to our Articles of Incorporation to effect, in the discretion of our Board of Directors, the Reverse Stock Split; |
| (3) | FOR approval of the Authorized Share Reduction Amendment; |
| (4) | FOR approval on an advisory basis of the compensation of the named executive officers, as disclosed herein; |
| (5) | FOR approval on an advisory basis of shareholder advisory votes on executive compensation every three years; |
| (6) | FOR the ratification of the selection of Hansen Barnett & Maxwell, P.C. as our independent registered public accountant for the year ending September 30, 2013; and |
| (7) | In the discretion of the persons named in the enclosed proxy, on any other matters that may properly come before the Annual Meeting. |
Q: What happens if additional matters are presented at the Annual Meeting?
A: Other than the six proposals described in this Proxy Statement, we are not aware of any other business to be acted upon at the Annual Meeting. If you grant a proxy, the persons named as proxy holders, Chad Olsen, Chief Financial Officer and Gordon O. Jesperson, General Counsel, will have the discretion to vote your shares on any additional matters properly presented for a vote at the Annual Meeting.
Q: Who will count the votes?
A: A representative of the Company will be appointed at the Annual Meeting to tabulate the votes and act as Inspector of Elections.
Q: Where can I find the voting results of the Annual Meeting?
A: We will announce preliminary voting results at the Annual Meeting and publish final results in a Current Report on Form 8-K filed with the Securities and Exchange Commission within four business days following the Annual Meeting. In addition, a report of the final votes will be made available on our corporate website at www.securealert.com.
Q: Who will bear the cost of soliciting votes for the Annual Meeting?
A: The solicitation of proxies will be conducted primarily by mail, and the Company will bear all attendant costs. These costs will include the expense of preparing and mailing proxy solicitation materials for the Meeting and reimbursements paid to brokerage firms and others for their expenses incurred in forwarding solicitation materials regarding the Annual Meeting to beneficial owners of our Common Stock. We may conduct further solicitation personally, telephonically, through the Internet or by facsimile through our officers, directors and employees, none of whom will receive additional compensation for assisting with the solicitation. We may generate other expenses in connection with the solicitation of proxies for the Annual Meeting, which we will pay.
Q: May I propose matters for consideration at next year’s Annual Meeting or nominate individuals to serve as directors?
A: Yes. If you wish to propose a matter for consideration at the next Annual Meeting of Shareholders or if you wish to nominate a person for election as a director of the Company, see the information set forth in “Shareholder Proposals” below.
Q: What do I need for admission to the Annual Meeting?
A: You are entitled to attend the Annual Meeting only if you are a shareholder of record or a beneficial owner as of the Record Date, or you hold a valid proxy for the Annual Meeting from a shareholder of record. You should be prepared to present photo identification for admittance. If you are the shareholder of record, your name will be verified against the list of shareholders of record prior to your being admitted to the Annual Meeting. If you hold your shares in street name, you must provide proof of beneficial ownership on the Record Date, such as a brokerage account statement showing that you owned SecureAlert stock as of the Record Date, a copy of the Voting Instruction Form provided by your broker, bank or other nominee, or other similar evidence of ownership as of the Record Date. If you do not provide photo identification or comply with the other procedures outlined above upon request, you will not be admitted to the Annual Meeting.
QUORUM AND VOTING REQUIREMENTS
Quorum Requirement
A majority of the votes of a voting group entitled to be cast at the Annual Meeting on all matters constitutes a quorum of that voting group. If you submit a properly completed proxy or if you appear at the Annual Meeting to vote in person, your shares will be considered part of the quorum. Directions to withhold authority to vote for any director, abstentions and broker non-votes (described below) will be counted to determine if a quorum for the transaction of business is present. Once a quorum is present, voting on specific proposals may proceed. If less than a quorum of our shares is represented at the Annual Meeting, a majority of the shares actually represented may adjourn the meeting without further notice for a period not to exceed 30 days at any one adjournment. At such adjourned meeting at which a quorum is present or represented, any business may be transacted which might have been transacted at the Annual Meeting as originally notified. Once a share is represented for any purpose at the Annual Meeting, including the purpose of determining that a quorum exists, it is deemed present for quorum purposes for the remainder of the meeting and any adjournment thereof, unless a new record date is set for the adjourned meeting. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of shareholders so that less than a quorum remains.
Record Date and Voting Power
The Company has fixed the close of business (5:00 p.m. Eastern Standard Time) on January 2, 2013 as the “Record Date” to determine those shares eligible to vote at the Annual Meeting. Only persons holding shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”) or Series D Convertible Preferred Stock (“Series D Preferred Stock”) as of January 2, 2013, are entitled to vote at the meeting. On November 30, 2012, there were 640,088,850 shares of Common Stock issued and outstanding and 48,763 shares of Series D Preferred Stock issued and outstanding. At the Annual Meeting, each share of Common Stock of the Company is entitled to one vote per share. Each share of Series D Preferred Stock when voted as a class is entitled to one vote per share and when voted with the Common Stock, on an as-converted basis, votes at the conversion rate of 6,000 shares of Common Stock. Voting on an as-converted basis with the Common Stock, the holders of the Series D Preferred Stock as a class hold the equivalent of 292,578,000 shares of Common Stock, out of a total of 932,666,850 common share equivalents available to vote.
Vote Required
Assuming the presence of a quorum, the affirmative vote of (1) a plurality of the votes cast at the Annual Meeting (in person or by proxy) is required for the election of directors, (cumulative voting is not allowed), (2) holders of a majority of the Common Stock present at the Annual Meeting (in person or by proxy) and entitled to vote is required to approve the proposals regarding the Reverse Stock Split and the Authorized Share Reduction Amendments, as well as the ratification of the selection of Hansen Barnett & Maxwell, P.C. as our independent registered public accounting firm.
The advisory vote on executive compensation will be decided by the affirmative vote of a majority of the shares, present in person or represented by proxy, and entitled to vote at the Annual Meeting. The advisory vote on executive compensation is a non-binding advisory vote; however, the Compensation Committee and Board of Directors intend to consider the outcome of the vote when considering future executive compensation decisions. Abstentions will be considered shares entitled to vote in the tabulation of votes cast on this proposal, and will have the same effect as negative votes. Broker non-votes are not counted for the purpose of determining whether a matter has been approved.
The advisory vote on the frequency of the advisory vote on executive compensation will be decided by the alternative receiving the affirmative vote of the highest number of shares, present in person or represented by proxy, and entitled to vote at the Annual Meeting. Because the advisory vote on the frequency of the advisory vote on executive compensation is a non-binding advisory vote, the Board may decide that it is in the best interests of shareholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option approved by the shareholders.
Effect of Abstentions and Broker Non-Votes
Because the election of directors is determined on the basis of a plurality of the votes cast, abstentions have no effect on the election of directors. However, because the approval of a majority of shares present and entitled to vote is required to approve the adoption of the two amendments to our Articles of Incorporation and the ratification of the selection of our independent registered public accounting firm, abstentions have the same effect as a vote against these proposals.
If you hold shares through a broker or other nominee, your broker or nominee is permitted to exercise voting discretion only with respect to certain, routine matters. Broker non-votes are shares held by brokers or other nominees that do not have discretionary voting authority with respect to a matter and have not received specific voting instructions from the beneficial owner. Broker non-votes will be counted for purposes of establishing a quorum but will otherwise have no effect on the outcome of the vote on any of the matters presented for your vote, except as described above.
How You Can Vote
We have elected to provide access to this year’s proxy materials primarily over the Internet under the Securities and Exchange Commission’s “notice and access” rules. On or about April 9, 2015, we mailed a Notice of Internet Availability of Proxy Materials (the “Notice”) to each of our stockholders entitled to notice of and to vote at the Annual Meeting. This Notice contained instructions on how to access this Proxy Statement, our 2014 Annual Report on Form 10-K (“Annual Report”) and how to vote via the Internet, telephone and e-mail. You canmay also vote your shares using one of the following methods:
| · | Vote through the Internet at www.proxyvote.com using the instructions included in the Notice of Internet Availability, the proxy card, or voting instruction card;
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| · | Vote by telephone using the instructions on the proxy card or voting instruction card if you received a paper copy of the proxy materials; |
| · | Complete and return a written proxy or voting instruction card using the proxy card or voting instruction card if you received a paper copy of the proxy materials; or |
| · | Attend and vote in person at the meeting. If your shares are held in street or account name by a broker and you intend to vote in person at the meeting, you will need a copy of your account statement and verification from your broker that you were the beneficial owner of the shares in the account as of the Record Date. |
Internet and telephone voting are available 24 hours a day, and if you use one of those methods, you do not need to return a proxy or voting instruction card. Unless you are planning to vote in person at the Annual Meeting either in person or by proxy. Submitting a proxy will not affect your right to vote your shares if you attend the Annual Meeting and want to vote in person. The Notice also included instructions on how you can receive a paper copy of your proxy materials. The Proxy Statement and the Annual Report both are available online at: www.astproxyportal.com/18188.
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 return your proxy without specifying how the shares represented thereby are to be voted, the proxy will be voted (i) FOR the election of four directors nominated by our Board, (ii) FOR an amendment to the Company’s Articles of Incorporation, as amended, to change the Company’s corporate name from SecureAlert, Inc. to Track Group, Inc. (the “Amended and Restated Articles”); (iii) FOR an amendment and restatement of the Company’s 2012 Equity Incentive Award Plan (the “Plan”) to increase the number of shares of common stock authorized for issuance thereunder by the greater of 700,000 or 7% of the issued and outstanding shares of the Company’s common stock on the day of the Annual Meeting (the “Plan Amendment”); (iv) FOR the advisory vote to approve executive compensation paid to the Company’s Named Executive Officers (the "Say-on-Pay" Proposal); (v) FOR ratification of the appointment of Eide Bailly , LLP as our independent auditors for the year ended September 30, 2015; and (vi) 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 holds your shares, broker or other institution, you will receive instructions from the holder of record that you must follow for your shares to be received by 11:59 p.m. Eastern Standard Time, on February 27, 2013.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.
Even ifBrokers 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, the approval of the Amended and Restated Articles, the Plan Amendment and the Say-on-Pay Proposals 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 submitcan instruct your broker on how to vote byyour shares.
Revocation of Proxies
Stockholders of record can revoke their proxies at any time before they are exercised in any one of the first three methods mentioned above, you may still voteways:
by voting in person at the meeting if you areAnnual Meeting;
by submitting written notice of revocation to the record holderSecretary of yourthe 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, there must be a quorum, meaning a majority of the shares or hold a legal proxy from the record holder. Yourof our common stock issued and outstanding and entitled to vote at the Annual Meeting will constitutemust be present, either in person or by proxy. If you submit a revocation of your earlier proxy or voting instructions.
You May Revoke or Change Your Vote
You may revoke a proxy at any time prior to its exercise by filing with the Secretary of the Company a written revocation or a dulyproperly executed proxy, bearing a later date. A shareholder who votes in personregardless of whether you abstain from voting on one or more matters, your shares will be counted as present at the Annual Meeting infor the purpose of establishing a manner inconsistent with a proxy previously filed on the shareholder’s behalfquorum. Shares that constitute broker non-votes will also be deemed to have revoked such proxycounted as it relates to the matter voted upon in person. Attendancepresent 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: Amended and Restated Articles. For the approval of the Amended and Restated Articles to change our name from “SecureAlert, Inc.” to “Track Group, Inc.”, the number of votes cast “FOR” must exceed the number of votes cast “AGAINST”;
Proposal No. 3: Plan Amendment. For the approval of the Plan Amendment to increase the number of shares of common stock authorized for issuance under the Plan by the greater of 700,000 or 7% of the issued and outstanding shares of the Company’s common stock on the day of the Annual Meeting, the number of votes cast “FOR” must exceed the number of votes cast “AGAINST”;
Proposal No. 4: 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 the compensation paid to the Company’s Named Executive Officers; and
Proposal No. 5: Ratification of Appointment of Auditors. To ratify the appointment of Eide Bailly, LLP as our independent auditors for the fiscal year ending September 30, 2015, the number of votes cast “FOR” must exceed the number of votes cast “AGAINST” this Proposal. A properly executed proxy marked “ABSTAIN” will not inbe voted, although it will be counted as present and entitled to vote for purposes of itself constitute a revocationthe Proposal. Accordingly, an abstention will have the effect of a proxy.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.
We will bear the entire cost of solicitation, including the preparation, assembly, printing and mailing of this Proxy Statement, the proxy and any additional solicitation materials furnished to the stockholders. Copies of any solicitation materials will be furnished to brokerage houses, fiduciaries and custodians holding shares 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.
PROPOSAL NO. 1 –
ELECTION OF DIRECTORS
General
The Company’s Articles of Incorporation provide that the Board shall consist of a minimum of three and a maximum of nine directors.directors, with the exact number to be set by resolution of the Board of Directors. The Board currently consists of ninesix members: Messrs. David P. Hanlon,Guy Dubois, David S. Boone, Rene Klinkhammer, Dan Mabey, Antonio J. Rodriquez, Larry G. Schafran, George F. Schmitt and Winfried Kunz, and Guy Dubois.
Kunz. The Board has fixed the number of directors to be elected at the Annual Meeting at six.four. Messrs. Klinkhammer, Mabey, Schmitt and Kunz will not stand for re-election, and the existing Board of Directors has approved of the nomination of the following four individuals for election to the Board of Directors at the Annual Meeting: Guy Dubois, David S. Boone, Dirk van Daele and Genaro Luna. Messrs. van Daele and Luna do not currently serve on the Board of Directors.
Each directornominee elected at the Annual Meeting will hold office for a one-year term until the next Annual Meeting of Shareholders or until his 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 the present Board to fill such vacancy, or for the balance of those nominees named without nomination of a substitute, and the Board may be reduced accordingly. The Board 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
The Board recommends a vote “FOR” the election of each nominee set forth below.
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. EachTwo of the nominees isare currently serving on our Board of Directors and all sixfour have been nominated by the Nominating Committee of thecurrent Board of Directors.
George F. As discussed above, Messrs. Schmitt,
Principal Occupation: CEO – MBTH Technology Holdings
Age 69
Director since 2011
Mr. Schmitt is a director Kunz, Klinkhammer and CEOMabey, each of MBTH Technology Holdings. He has held this position since December, 2010. Mr. Schmitt is also a director of XG Technology, Inc. a publicly traded company, Kentrox and Calient. Mr. Schmitt previously served as a director of TeleAtlas, Objective Systems Integrators, Omnipoint and LHS Group. Mr. Schmitt is a principal of Sierra Sunset II, LLC and serves as a Trustee of St. Mary’s College. Previously, Mr. Schmitt was CEO and a director of espire communications which filed Chapter 11 bankruptcy 10 years ago. In addition, Mr. Schmitt has served as a director of many privately held companies including Voice Objects, Knowledge Adventure, Jungo and Cybergate, among others. Mr. Schmitt has also served as Financial Vice President of Pacific Telesis and chaired the audit committee of Objective Systems Integrations and TeleATLAS. Mr. Schmitt received an M.S. in Management from Stanford University, where he was a Sloan Fellow, and a B.A. in Political Science from Saint Mary’s College. The Nominating Committee recognizes the benefit toare currently on the Board of Directors, and toare not standing for reelection at the Companyannual meeting of Mr. Schmitt’s service as a member of the boards of directors of various companies and his extensive experience in the telecommunications industry.stockholders.
| Name | | Served as Director
Since | | Age | | Principal Business Experience |
| | | | | | | |
| Guy Dubois | | 2012 | | 57 | | Guy Dubois has served as our Chairman since February 2013, and became a director in December 2012. Mr. Dubois is a director of Singapore-based Tetra House Pte. Ltd., a provider of consulting and advisory services worldwide; and a director of RNTS Media NV, a Luxembourg listed digital content developer and mobile application advertising monetization platform provider. Mr. Dubois is a former director and CEO of Gategroup AG, and 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. Mr. Dubois also 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 current Board of Directors 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 of Directors. |
| | | | | | | |
| David S. Boone | | 2011 | | 55 | | David S. Boone became a director of the Company on December 21, 2011. He has served in executive roles with a variety of publicly traded and start-up organizations including Kraft General Foods, Sears, PepsiCo, Safeway and Belo Corporation, as well as serving as the CFO of Intira Corporation and CEO of Paranet Solutions, LLC. In addition, he has served as a consultant with the Boston Consulting Group. Mr. Boone was CEO, President and Director of American CareSource Holdings from 2005 to 2011, a NASDAQ traded company. He was the 2009 Ernst and Young Entrepreneur of the Year winner for Health Care in the Southwest Region. Mr. Boone serves on a number of private company boards and serves on the board of the Texas Kidney Foundation. Mr. Boone graduated from the University of Illinois, cum laude, in 1983 majoring in accounting. Mr. Boone is a Certified Public Accountant. He received his master’s degree in business administration from Harvard Business School in 1989. In considering Mr. Boone as a director of the Company, the current Board of Directors reviewed his extensive financial expertise and experience. In addition, Mr. Boone's public company senior management and board experience, and the leadership he has shown in his positions with prior companies and as a director of the Company, were considered important factors in the determination of the current Board of Directors. |
Winfried Kunz
Principal Occupation: Managing Partner – Asecon GmbH
Age 47
Director since 2011| Name | | Served as Director
Since | | Age | | Principal Business Experience |
| | | | | | |
| | Not applicable | | 54 | | Mr. van Daele, a resident of Switzerland, is currently a principal of Anoa Capital SA, a Luxembourg investment advisory company focused on advisory services for direct lending and acquisition of secondary loan portfolios. Mr. van Daele has served in that capacity since January 2010. Prior to joining Anoa Capital SA, Mr. van Daele was the Managing Director and Head of Global Finance, Asia Pacific (Singapore) for Union Bank of Switzerland, having served in that capacity since July 1998. He received his Master of Arts in Economics at the University of Louvain (Belgium) in 1984. In considering Mr. van Daele’s nomination, the Board of Directors believed his extensive international finance, banking and senior management experience would assist in the Board’s deliberations as the Company expands operations internationally and finances its growth. |
| | | | | | |
| | Not applicable | | 46 | | Mr. Luna is currently the Chief Executive Officer of GLAC Security Consulting, Technology and Risk Control, and has served in that capacity since 2012. Previously, Mr. Luna served as the Secretary of Public Security of Mexico, appointed by then-President Calderon, serving in that capacity from 2006 to 2012. Prior to his appointment by President Calderon, Mr. Luna was the Director of the Federal Bureau of Investigation, Attorney General of the Republic of Mexico, having served in that capacity since 2000. He is a recent graduate of the University of Miami, having received a Master of Business Administration in 2015. In considering Mr. Luna’s nomination, the Board considered his extensive experience in security and intelligence matters working in Mexico, as well as with agencies in the U.S., Spain, Israel, France Colombia and Japan, and believes that his experience will assist the Company in executing its expansion plans internationally. |
Board Meetings and Committees
The Board met eight times during the year ended September 30, 2014 and all incumbent directors attended at least 75% of Switzerland and has studied Business Administration and Economics from 1984 -1989 at the Universities in Munich and Cologne. In 1985 he started working as a system analyst and from 1987 – 1998 as a management consultant for German, British and American companies in the information technology business, where he served in executive positions. Mr. Kunz worked as an executive at Precision Software Ltd., Contract Software International Inc., and Symantec Corp. For more than 15 years, Mr. Kunz has worked as an independent consultant and managing partneraggregate number of Asecon GmbH, a company he founded in 1997, developing and implementing investor innovative business models for residential properties with a focus in Munich for his own portfolio and for third parties. For more than 10 years he has been a consultant to JK Wohnbau GmbH, a Munich-based real estate developer, where he served as COO from 2009 until the company’s initial public offering in 2010. For the last two years, Mr. Kunz has worked with SecureAlert as an investor. In nominating Mr. Kunz, the Board of Directors recognizes his extensive experience in the information technology industry and his international business expertise, as well as his finance and operational expertise.
Guy Dubois
Principal Occupation: Director – Tetra House Pte. Ltd.
Age 54
Director since 2012
Mr. Dubois is a Director at Singapore-based Tetra House Pte. Ltd., that provides consulting and advisory services worldwide. Mr. Dubois was Chief Executive Officer of gategroup AG from September 2008 until April 2011. He previously held the positions of President, Executive Vice President Finance and Administration, Chief Administrative Officer and Chief Financial Officer of Gate Gourmet Holding LLC. He has served as a managermeetings of the Board of Managers of Gate Gourmet Holding LLC from March 2007 until April 2011 and as a member of the committees on which such directors served. The Board encourages the directors to attend our annual meetings of gategroup AG from February 2008 until April 2011. Prior to joining Gate Gourmet in July 2003, Mr. Dubois was Vice President Finance, Administration, Demand and Supply Chain for Roche’s Vitamins Inc. in New Jersey from 2000 to 2003. Prior to which he was Area Manager, Finance and Administration for Roche’s Vitamins Asia-Pacific Pte. Ltd. in Singapore from 1997 to 1999, and Finance Manager from 1995 to 1997. Mr. Dubois worked in corporate finance for Hoffman-La Roche in 1994. Mr. Dubois also served on the European Organization for Nuclear Research (CERN) team in Switzerland in various roles, including Treasurer and Chief Accountant, Manager General Accounting and Financial Accountant from 1989 to 1994. He also worked with IBM in Sweden from 1984 to 1988 as Product Support Specialist for Financial Applications. He attended the Limburg Business School in Diepenbeek, Belgium, and has a degree in Financial Science and Accountancy. Mr. Duboisstockholders when stockholder participation is a Belgian citizen. expected.
Independent Directors
The Board believes that a majority of its members should be independent directors. The Board has determined that, other than Mr. Dubois’ financialDubois, all of its current directors, as well as each of the nominees for election, are independent directors as defined by the rules and operational experience will be a tremendous asset toregulations of the Company as a memberNASDAQ Stock Market.
The members of the Audit Committee and Compensation Committee of the Board each meet the independence standards established by the NASDAQ Stock Market and the U.S. Securities and Exchange Commission (the “SEC”) for audit committees and compensation committees. In addition, the Board has determined that of Directors.
Mr. Dubois’ appointmentthe current directors, Messrs. Boone, Schmitt and Kunz each satisfy the definition of an “audit committee financial expert” under SEC rules and regulations, as well as nominees to the Board of Directors is partDirk van Daele and Genaro Luna. These designations do not impose any duties, obligations or liabilities that are greater than those generally imposed as members of a potential financing arrangement with Sapinda Asia Ltd. (“Sapinda”) whereby Sapinda will loan funds to the Registrant. A requirement of the proposed financing arrangement with Sapinda is the appointment of a representative of Tetra House Pte. Ltd., which is owned by Mr. Dubois.
An executive of gategroup holdings AG, an airline catering company headquartered in Switzerland, was convicted in a Danish court in September 2012 of fraud and embezzlement involving company assets. Mr. Dubois, who was Chief Executive Officer of the company at the time the executive committed the acts leading to her conviction, voluntarily resigned from gategroup holdings AG in 2011. The Zurich State Prosecutor initiated an investigation in 2011 focused on whether other individuals, including Mr. Dubois were aware of or benefitted personally from the fraud and embezzlement that occurred. Mr. Dubois, who has indicated he was unaware of any of these activities at the time they were being committed, has been cooperating with that investigation.
Rene Klinkhammer
Principal Occupation: Director for Sapinda Deutschland GmbH
Age 32
Director since 2010
Mr. Klinkhammer is a resident of Germany. He graduated from European Business School, Oestrich-Winkel, Germany, in 2004, with an MBA-equivalent degree in business administration. His majors were Banking, Finance and International Management. After graduating, Mr. Klinkhammer joined Deutsche Bank’s Investment Banking Division as an analyst in the Corporate Finance Advisory Group, specializing in mergers and acquisitions, along with debt and equity financing transactions for larger German clients of the bank. In 2007, Mr. Klinkhammer joined Sapinda Group, a privately-owned investment company with offices in Amsterdam, Berlin, London and other major cities around the world. For the past five years, Mr. Klinkhammer has worked with the Company as both an investor and advisor. Mr. Klinkhammer is a member of the Compensation Committee of our Board of Directors. The Nominating Committee considered Mr. Klinkhammer’s finance background to be an important qualification for his service as a member of the Board.
Dan L. Mabey
Principal Occupation: President of Bighorn Oil and Gas
Age 62
Director since 2011
Mr. Mabey is the President of Bighorn Oil and Gas, an energy development company (Casper Wyoming), and he has served in both public and private company leadership positions in the high-tech industry including President of 1-2-1 View digital signage company (Singapore), Chief Operating Officer and Director of In Media Corporation IPTV service company (California), President of Interactive Devices, Inc. a video compression company (Folsom, California) and Vice President of Broadcast International, a satellite broadcast company ( Salt Lake City, Utah). From 1990 until 2002, Mr. Mabey was Director of the State of Utah Department of Economic Development International Business Development Office, growing Utah exports from $700 million to $3.6 billion a year. He helped recruit the 2002 Winter Olympics, and managed international business development for the games. Throughout his career, Mr. Mabey has been active in civic and community organizations and is the recipient of numerous service awards. He is also the co-inventor or lead inventor on six patents and the sole inventor of a seventh. Mr. Mabey received a Masters of Public Administration (MPA) degree from Idaho State University in 1978 and a B.A. degree from Boise State University in 1974. Mr. Mabey is a member of the Nominating Committee. The Board of Directors considers Mr. Mabey's extensive international business experience to be an important qualification for his continuing service as a Board member.
David S. Boone
Principal Occupation: President and CEO of Paranet Solutions
Age 52
Director since 2011
Mr. Boone was recently appointed CEO of paranet Solutions in Dallas, Texas. Mr. Boone has served in executive roles with a variety of publicly traded and start-up organizations including Kraft General Foods, Sears, PepsiCo, Safeway and Belo Corporation, as well as serving as the CFO of Intira Corporation. In addition, he has served as a consultant with the Boston Consulting Group. Mr. Boone served as CEO, President and Director of American CareSource Holdings from 2005 to 2011, a NASDAQ traded company. In addition, he was the 2009 Ernst and Young Entrepreneur of the Year winner for Health Care in the Southwest Region. Mr. Boone serves on a number of private company Boards and serves on the Board of the Texas Kidney Foundation. Mr. Boone graduated from the University of Illinois, cum laude, in 1983 majoring in accounting. Mr. Boone is a Certified Public Accountant. He received his master’s degree in business administration from Harvard in 1989. Mr. Boone serves on the Audit Committee and chairs the Finance Committee of our Board of Directors. The Nominating Committee considers Mr. Boone’s financial experience and business experience to be an important qualification for his service on the Board, and the Audit and Finance Committees.
Director Qualifications
In nominating individuals to become membersdesignation as audit committee financial expert does not affect the duties, obligations or liability of any other member of the Company’s Board of Directors,Audit Committee or the Nominating Committee of the Board of Directors strives to achieve Board participation that represents a diverse mix of skills, qualifications, experience, perspectives, talents, backgrounds and education that will assist the Board of Directors in fulfilling its responsibilities, oversee management’s execution of strategic objectives, and represent the interests of all of the Company’s shareholders.
As of the date of this Proxy Statement, our Common Stock is not listed on any exchange and we are not currently subject to corporate governance standards of listed companies, which require, among other things, that the majority of the Board of Directors be independent. While we are not currently subject to corporate governance standards relating to the independence of our directors, we choose to define an “independent” director in accordance with the NASDAQ Capital Market’s requirements for independent directors (Marketplace Rule 5605(a)(2)), which includes a series of objective tests, such as that the director is not an employee of the Company and has not engaged in various types of business dealings with the Company. Three of the six members of the Company’s Board of Directors, if elected, will be considered “independent directors” as such term is defined in NASDAQ Rule 4200(a)(15). These independent directors include David Boone, Winfried Kunz, and George Schmitt.
Further information about the Company’s corporate governance practices, the responsibilities and functioning of the Board and its committees, director compensation and related party transactions is found throughout this Proxy Statement.
If any nominee should decline or be unable to serve for any reason, votes will instead be cast for a substitute nominee designated by the Board. The Board has no reason to believe that any nominee will decline to be a candidate or, if elected, will be unable or unwilling to serve. The Company’s directors are elected by a plurality vote. Unless authority is withheld, the persons named in the enclosed proxy will vote the shares represented by the proxies received for the election of the six (6) nominees named above. The directors elected will serve one-year terms until the next Annual Meeting of Shareholders and their respective successors are elected or appointed and qualified.
BIOGRAPHY OF CHIEF FINANCIAL OFFICER
Chad D. Olsen
Principal Occupation: Chief Financial Officer
Age 41
Mr. Olsen became our Chief Financial Officer in 2010. Prior to his appointment as Chief Financial Officer, Mr. Olsen served as our corporate controller from 2001. From 1992 to 1997, Mr. Olsen worked in the banking and investment industry where he assisted clients with tax, investment and banking services. From 1997 to 2001, Mr. Olsen worked with a certified public accounting firm performing tax, auditing, and business advisory services. Additionally, Mr. Olsen owned and operated his own accounting practice performing tax, accounting, and consulting services. Mr. Olsen received a Bachelor of Science Degree in Accounting from Brigham Young University.
BOARD OF DIRECTORS AND COMMITTEES
Election and Meetings
Directors currently hold office until the next Annual Meeting of Shareholders and until their successors have been elected or appointed and duly qualified. Executive officers are appointed by the Board of Directors and hold office until their successors are appointed and duly qualified. Vacancies on the Board which are created by the retirement, resignation or removal of a director may be filled by the vote of the remaining members of the Board, with such new director serving the remainder of the term or until his/her successor shall be elected and qualify.
The Board of Directors is elected by and is accountable to our shareholders. The Board establishes policy and provides strategic direction, oversight, and control. The Board met 24 times during fiscal year 2012. All directors attended at least 75 percent of the meetings of the Board and the committees of the Board of Directors, of which they are members.
Director Independence
The current members of our Board of Directors are David Boone, Guy Dubois, David P. Hanlon, Rene Klinkhammer, Winfried Kunz, Dan Mabey, Antonio Rodriquez, Larry G. Schafran, and George Schmitt. The Board of Directors has determined that the following current members of the Board are independent directors, in accordance with the director independence standards of the NASDAQ Stock Market, including NASDAQ Rule 4200(a)(15): David Boone, David P. Hanlon, Winfried Kunz, Antonio Rodriquez, Larry G. Schafran and George Schmitt. The independent directors meet from time to time in executive session. The Board has not appointed a lead independent director. Messrs. Hanlon, Rodriquez, and Schafran are retiring from the Board and the Nominating Committee has put forward six nominees (Messrs. Boone, Dubois, Kunz, Mabey, Klinkhammer and Schmitt), effectively reducing the size of the Board from nine members to six members. If elected, the following will be considered independent directors: David Boone, Winfried Kunz and George Schmitt.
Board Committees and Charters
The Board of Directors has a separately-designatedthree standing committees: the Audit Committee, Compensation Committee, Executive Committee, Oversight Committee and Nominating and Corporate Governance Committee. These committees assist the Board of Directors to perform its responsibilities and make informed decisions.
Audit Committee
The primary duties of the Audit Committee are to oversee (i) management’s conduct of the Company’sour financial reporting process, including reviewing the financial reports and other financial information provided by the Company, and reviewing the Company’sour systems of internal accounting and financial controls, (ii) the Company’sour independent auditors’ qualifications and independence and the audit and non-audit services provided to the Company, and (iii) the engagement and performance of the Company’sour independent auditors. The Audit Committee assists the Board in providing oversight as to the Company’sof our financial and related activities, including capital market transactions. The Audit Committee has a charter, a copy of which is available on the Company’sour website at www.securealert.comwww.trackgrp.com.
The Audit Committee meets with our Chief Financial Officer and with our independent registered public accounting firm and evaluates the responses by the Chief Financial Officer both to the facts presented and to the judgments made by our independent registered public accounting firm. The Audit Committee met four times during fiscal year 20122014 and all members of the Audit Committee attended at least 75 percent75% of the committee’sCommittee’s meetings.
Members of the Audit Committee during 2012 were Larry Schafran (Chairman), Georgecurrently consist of Messrs. Boone, Schmitt and David Boone.
Kunz. However, as Messrs. Schmitt and Kunz are not standing for re-election at the Annual Meeting, in the event Messrs. van Daele and Luna are elected to the Company’s Board of Directors, the Board currently intends to appoint both Messrs. van Daele and Luna to the Audit Committee. Each member of the Audit Committee, as well as Messrs. van Daele and Luna, satisfies, according to the full Board of Directors, the definition of independent director as established in the NASDAQ Listing Standards. All of the members of the Audit CommitteeStock Market Rules and are financially literate. In accordance with Section 407 of the Sarbanes-Oxley Act of 2002, the Board of Directors designated Mr. SchafranDavid S. Boone as the Audit Committee’s “Audit Committee Financial Expert” as defined by the applicable regulations promulgated by the Securities and Exchange Commission. Mr. Schafran is not a nominee for director at the Annual Meeting and will step down at the time his successor is elected, at which time the Board will designate another “Audit Committee Financial Expert.”
Executive Committee
The Executive Committee members are Winfried Kunz and George Schmitt. The Executive Committee was established by the Board of Directors upon the departure of the Company’s Chief Executive Officer in October 2012. Until such time as a new Chief Executive Officer has been identified and hired by the Company, the Executive Committee will work with management to exercise the executive authority within the Company. The Executive Committee meets as needed, typically weekly.SEC.
OversightThe Audit Committee
The Oversight Committee members are Winfried Kunz, George Schmitt reviewed and Guy Dubois. The Oversight Committee was establisheddiscussed the matters required by United States auditing standards required by the Public Company Accounting Oversight Board of Directors in February 2012(“PCAOB”) and our audited financial statements for the fiscal year ended September 30, 2014 with Messrs. Kunzmanagement and Schmitt as members. Mr. Dubois was appointed toour independent registered public accounting firm. The Audit Committee has received the committee in November 2012, when he became a member ofwritten disclosures and the letter from our independent registered public accounting firm required by Independence Standards Board of Directors, fillingNo. 1, and the vacancy createdAudit Committee has discussed with the resignation of John L. Hastings, III, in October 2012. The primary duties ofindependent registered public accounting firm the Oversight Committee are to oversee operations, assist management with cash management, expense reductions, capital needs and oversight of all management activities. The Oversight Committee meets as needed, typically bi-monthly.independent registered public accounting firm's independence.
Compensation Committee
TheMembers of the Compensation Committee is chaired by Mr. Kunz.currently consist of Messrs. Mabey, Boone, and Schmitt. However, as Messrs. Mabey and Schmitt are not standing for re-election at the Annual Meeting, in the event Messrs. van Daele and KlinkhammerLuna are also memberselected to the Company’s Board of Directors, the Board intends to appoint both Messrs. van Daele and Luna to the Compensation Committee. The Compensation Committee met two times during fiscal year 2012. Members2014. The Board of Directors appoints members of the Compensation CommitteeCommittee. Messrs. Mabey, Boone, and Schmitt are appointedindependent directors, and, if elected, Messrs. van Daele and Luna will be independent directors, as determined by the Board of Directors. Mr. Kunz and Mr. Schmitt are independent directors under applicableDirectors in accordance with the NASDAQ rules.Stock Market Rules, including Rule 5605(d)(2)(A). The Compensation Committee is governed by a charter approved by the Board of Directors, a copy of which is available on the Company’s website www.securealert.comwww.trackgrp.com.
The Compensation Committee has responsibility for developing and maintaining an executive compensation policy that creates a direct relationship between pay levels and corporate performance and returns to shareholders.stockholders. The Committee 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 shareholder value, rewards superior performance, and is justified by the returns available to shareholders.stockholders.
The Compensation Committee also acts on behalf of the Board of Directors in administering compensation plans approved by the Board, in a manner consistent with the terms of such plans (including, as applicable, the granting of stock options, restricted stock, stock units and other awards, the review of performance goals established before the start of the relevant plan year, and the determination of performance compared to the goals at the end of the plan year). The Committee reviews and makes recommendations to the Board with respect to new compensation incentive plans and equity-based plans; reviews and recommends the compensation of the Company’s directors to the full Board for approval; and reviews and makes recommendations to the Board on changes in major benefit programs of executive officers of the Company.
Nominating and Corporate Governance Committee
Winfried Kunz Mr. Schmitt currently serves as the chair of the Nominating and Corporate Governance Committee. Larry SchafranMessrs. Kunz and Dan MabeyKlinkhammer also currently serve as members of this committee.Committee. However, as Messrs. Schmitt, Kunz and Klinkhammer are not standing for re-election at the Annual Meeting, in the event Messrs. van Daele and Luna are elected to the Company’s Board of Directors, the Board intends to appoint both Messrs. van Daele and Luna to the Nominating and Corporate Governance Committee. The Nominating Committee has the responsibility for identifying and recommending candidates to fill vacant and newly created Board positions, setting corporate governance guidelines regarding director qualifications and responsibilities, and planning for senior management succession.
The Nominating and Corporate Governance Committee did not separately recommend the appointment of Messrs. Luna and van Daele to the Board of Directors, which nominations were instead unanimously approved by the full Board of Directors.
The Nominating and Corporate Governance Committee is required to review the qualifications and backgrounds of all directors and nominees (without regard to whether a nominee has been recommended by shareholders)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 Meetingannual meeting of Shareholders,stockholders, or, in the case of a vacancy on the Board of Directors, recommend a director to be elected by the Board to fill such vacancy. The Nominating and Corporate Governance Committee held three meetingsone meeting during fiscal 2012. Mr. Schafran will2014. The Nominating and Corporate Governance Committee’s charter is available on our website, www.trackgrp.com.
Director Nominations
The Board nominates directors for election at each annual meeting of stockholders and appoints new directors to fill vacancies when they arise. The Nominating and Corporate Governance Committee has the responsibility to identify, evaluate, recruit and recommend qualified candidates to the Board for such nomination or appointment. The Nominating and Corporate Governance Committee did not separately recommend the appointment of Messrs. Luna and van Daele to the Board of Directors, which nominations were instead unanimously approved by the full Board of Directors.
In addition, the Company’s Bylaws contain provisions that address the process by which a stockholder may nominate an individual to stand for election to the Board at the Annual Meeting.Company’s annual meeting of stockholders. In order to nominate a candidate for director, a stockholder must give timely notice in writing to the Secretary of the Company and otherwise comply with the provisions of the Company’s Bylaws. Information required by the Company’s Bylaws to be in the notice include: the name, contact information and share ownership information for the candidate and the person making the nomination and other information about the nominee that must be disclosed in proxy solicitations under Section 14 of the Securities Exchange Act of 1934 and its related rules and regulations. The Nominating and Corporate Governance Committee may also require any proposed nominee to furnish such other information as may reasonably be required by the Nominating and Corporate Governance Committee to determine the eligibility of such proposed nominee to serve as director of the Company. The recommendation should be sent to: Secretary, SecureAlert, Inc., 405 South Main Street, Suite 700, Salt Lake City, Utah 84111. You can obtain a copy of the Company’s Bylaws by writing to the Secretary at this address.
Stockholder Communications
If you wish to communicate with the Board, you may send your communication in writing to: Secretary, SecureAlert, Inc., 405 South Main Street, Suite 700, Salt Lake City, Utah 84111. You must include your name and address in the written communication and indicate whether you are a stockholder of the Company. The Secretary will review any communication received from a stockholder, and all material and appropriate communications from stockholders will be forwarded to the appropriate director or directors or committee of the Board based on the subject matter.
Code of Ethics
We have established a Code of Business Ethics that applies to our officers, directors and employees. The Code of Business 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 will post on our website, www.securealert.comwww.trackgrp.com, any amendments to or waivers from a provision of our Code of Business Ethics that applies 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 Ethics.
Board Leadership Structure
Although the Board believes in the separation of the roles of Chief Executive Officer and Chairman of the Board in recognition of the differences between the two roles, currently the Executive Committee of the Board of Directors is the acting Chief Executive Officer of the Company and Mr. Dubois, who is Chairman of the Board of Directors, serves on that Committee. The Executive Committee is responsible for setting the strategic direction of the Company and the day-to-day leadership and performance of the Company, while the Chairman of the Board provides guidance to the Executive Committee and sets the agenda for the Board meetings and presides over meetings of the Board. The Board believes it should be able to freely select the Chairman of the Board based on criteria that it deems to be in the best interest of the Company and its stockholders, and therefore one person may, in the future, serve as both the Chief Executive Officer and Chairman of the Board.
Board Role in Risk Assessment
Management, in consultation with outside professionals, as applicable, identifies risks associated with the Company’s operations, strategies and financial statements. Risk assessment is also performed through periodic reports received by the Audit Committee from management, counsel and the Company’s independent registered public accountants relating to risk assessment and management. Audit Committee members meet privately in executive sessions with representatives of the Company’s independent registered public accountants. The Board also provides risk oversight through its periodic reviews of the financial and operational performance of the Company.
PROPOSAL NO. 2
AMENDMENT TO ARTICLES OF INCORPORATION TO CHANGE THE COMPANY’S NAME
Compensation Committee InterlocksOur Board of Directors has adopted resolutions approving, declaring advisable and Insider Participationrecommending that our stockholders approve an amendment to and restatement of our Articles of Incorporation to change our corporate name from “SecureAlert, Inc.” to “Track Group, Inc.” If approved, the change to our corporate name will become effective upon the filing of a certificate of amendment with the Utah Secretary of State. We currently plan to file the Amended and Restated Articles as soon as reasonably practicable after receiving approval of the amendment from our stockholders. However, the Board of Directors has reserved the right to abandon the proposed amendment if, at any time before the filing of the certificate of amendment, it determines that changing our name is no longer in the best interests of the Company or our stockholders.
If this Proposal is approved, Article I of our Articles of Incorporation will be amended to reflect our new corporate name. The proposed amendment and restatement of our Articles of Incorporation is set forth in its entirety in Appendix A to this Proxy Statement.
Purpose of and Rationale for the Amended and Restated Articles
The purpose of the proposed name change is to align our corporate name more closely with our vision as a leading provider of offender tracking technologies. As the Company continues to expand its products, services and locations, our Board of Directors believes that the proposed name change will build and foster the Company’s unparalleled dedication to offering innovative technologies and tracking capabilities, and will be beneficial to our stockholders because our customers will associate the name “Track Group, Inc.” with a more focused objective.
Effect of Proposed Amendment
If approved by our stockholders, the Amended and Restated Articles and the change to our corporate name will not affect the validity of any of our existing stock certificates that bear the name “SecureAlert, Inc.” Stockholders with certificated shares may continue to hold existing certificates, and the number of shares represented by those certificates will remain unchanged the Amended and Restated Articles. New stock certificates that are issued after the Amended and Restated Articles of Incorporation are filed with the Utah Secretary of State will bear the name “Track Group, Inc.”
Currently our common stock is quoted on the OTCQB under the symbol “SCRA” If the proposed Amended and Restated Articles are approved, we will request a CUSIP number and new ticker symbol based on our new name. Under the rules of the OTC QB, we cannot make any requests for a particular symbol and, as a result, we will not know what our new symbol will be until it has been assigned by the Financial Industry Regulatory Authority (“FINRA”).
If this Proposal is not approved, the proposed Amended and Restated Articles will not become effective and our name will remain unchanged.
Under Utah law, the number of votes FOR must exceed the number of votes AGAINST to approve this Proposal. Abstentions and broker non-votes will no effect on the outcome of this Proposal. Broker non-votes are counted towards a quorum, but are not counted for any purpose in determining whether this Proposal has been approved. Unless otherwise instructed on the proxy or unless authority to vote is withheld, shares represented by executed proxies will be voted “FOR” the adoption of the Amended and Restated Articles.
Board of Directors Recommendation
The Compensation Committee is comprisedBoard recommends that you vote “FOR” the amendment to and restatement of Messrs. Klinkhammer, Kunzout Articles of Incorporation to change our name from “SecureAlert, Inc.” to “Track Group, Inc.”
PROPOSAL NO. 3
AMENDMENT TO OUR 2012 EQUITY INCENTIVE AWARD PLAN
Background of Plan and Schmitt. Messrs. Kunz and Schmitt have been determinedPurpose of the Plan Amendment
The Plan was first adopted by the Board of Directors to be independent directors. No memberon September 26, 2011, and authorized a total of 18.0 million shares of our common stock for issuance thereunder, which number was reduced to 90,000 shares following a one-for- 200 reverse split of our common stock on February 28, 2013. As of March 30, 2015, 80,320 shares of common stock have been issued under the Plan. Accordingly, the Board of Directors has approved the Plan Amendment, subject to approval by the Company’s stockholders, to increase the number of shares available for issuance under the Plan to by the greater of 700,000 or 7% of the issued and outstanding shares of common stock on the day of the Annual Meeting.
Summary Description of the Plan
The Plan is intended to (i) encourage ownership of shares by our employees and directors and certain consultants to the Company; (ii) induce them to work for the benefit of the Company; and (iii) provide additional incentive for such persons to promote the success of the Company.
The Compensation Committee isof the Board of Directors will administer the Plan, which permits the granting of equity awards to purchase up to 90,000 shares of common stock, which number will increase to by the greater of 700,000 or 7% of the issued and outstanding shares of common stock on the day of the Annual Meeting.
The Plan permits the Compensation Committee to grant various types of equity awards, including incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights, performance shares, performance stock units, stock payments, deferred stock, restricted stock units, other stock-based awards, and performance-based awards to eligible individuals.
The Compensation Committee of the Board of Directors will administer the Plan. The Compensation Committee may delegate to a currentcommittee of one or former officermore members of the Board the authority to grant or employeeamend awards to participants other than senior executives of the Company who are subject to Section 16 of the Exchange Act, or employees who are “covered employees” within the meaning of Section 162(m) (“Section 162(m)”) of the Internal Revenue Code (the “Code”). The Compensation Committee includes at least two directors, each of whom qualifies as a non-employee director pursuant to Rule 16b-3 of the Exchange Act, and an “outside director" pursuant to Section 162(m).
The Compensation Committee will have the exclusive authority to administer the Plan, including the power to determine eligibility, the types and sizes of awards, the price and timing of awards and the acceleration or waiver of any vesting restriction, provided that the Compensation Committee will not have the authority to accelerate vesting or waive the forfeiture of its subsidiaries,any performance-based awards.
Persons eligible to participate in the Plan include non-employee members of the Board, consultants to the Company, and no director or executive officerall of the employees of the Company is a director or executive officerand its subsidiaries, as determined by the Compensation Committee.
The Plan provides for the grant of anyincentive stock options and nonqualified stock options, restricted stock, stock appreciation rights, performance shares, performance stock units, dividend equivalents, stock payments, deferred stock, restricted stock units, other corporation that has a director or executive officer who is also a directorstock-based awards and performance-based awards.
Stock options, including incentive stock options, as defined under Section 422 of the Company.
Risk Oversight
Our Board has overall responsibility for the oversight of risk management at our Company. Day-to-day risk management is the responsibility of management, which has implemented processes to identify, assess, manageCode, and monitor risks that face our Company. Our Board, either as a whole or through its Committees, regularly discusses with management our major risk exposures, their potential impact on our Company, and the steps we take to monitor and control such exposures.
While our Board has general oversight responsibility for risk at our Company, the Board has delegated some of its risk oversight dutiesnonqualified stock options may be granted pursuant to the various Board committees.Plan. The Nominatingoption exercise price of all stock options granted pursuant to the Plan will be at least 100% of the fair market value of the common stock on the date of grant. Stock options may be exercised as determined by the Compensation Committee, oversees risks related to corporate governance.but in no event after the tenth anniversary of the date of grant. The Audit Committee is responsible for generally reviewing and discussingaggregate fair market value of the Company’s policies and guidelinesshares with respect to which options intended to be incentive stock options are exercisable for the first time by an employee in any calendar year may not exceed $100,000, or such other amount as the Code provides.
Restricted stock may be granted pursuant to the Plan. A restricted stock award is the grant of shares of common stock that is nontransferable and may be subject to substantial risk assessmentof forfeiture until specific conditions are met. Conditions may be based on continuing employment or achieving performance goals. During the period of restriction, participants holding shares of restricted stock may have full voting and risk management. It focuses on the management of financial risk exposure and oversees financial statement compliance and control environment risk exposure overseeing policiesdividend rights with respect to financial risk assessment.such shares. The Auditrestrictions will lapse in accordance with a schedule or other conditions determined by the Compensation Committee.
A stock appreciation right (“SAR”) is the right to receive payment of an amount equal to the excess of the fair market value of a share of common stock on the date of exercise of the SAR over the fair market value of a share of common stock on the date of grant of the SAR. Payments will be made by the Company in cash or common stock.
The other types of awards that may be granted under the Plan include performance shares, performance stock units, deferred stock, restricted stock units, and other stock-based awards.
Changes in Capital Structure
In the event of a stock dividend, stock split, combination or exchange of shares, merger, consolidation, spin-off, recapitalization, distribution of assets or any other corporate event affecting the common stock or the share price of the common stock in a manner that causes dilution or enlargement of benefits or potential benefits under the Plan, then the Compensation Committee also considers financial risk management including, risks relatingmay make proportionate adjustments to: (i) the aggregate number of, and types of, shares of stock subject to liquidity, accessthe Plan, (ii) the terms and conditions of any outstanding awards (including any applicable performance targets) and (iii) the grant or exercise price for any outstanding awards.
In addition, in such a case or in the event of any unusual or nonrecurring transactions or events affecting the Company or of changes in applicable laws, the Compensation Committee, may, subject to capitalthe terms of the Plan, take any of the following actions if it determines that such action is appropriate in order to prevent the dilution or enlargement of benefits or potential benefits intended to be made available under the Plan or with respect to any award: (i) provide for either the termination, purchase or replacement of the awards, (ii) provide that the awards shall be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and macroeconomic trendskind of shares and risks. prices, (iii) make adjustments in the number and type of shares of stock (or other securities or property) subject to outstanding awards and/or in the terms and conditions of (including the exercise price), and the criteria included in, outstanding awards which may be granted in the future, (iv) provide for the acceleration of vesting or exercisability of the awards and (v) provide that the awards cannot vest or be exercised after the event that triggers the action.
Amendment and Termination
The Compensation Committee, assists the Board in overseeing the managementsubject to approval of risks arising from our compensation policies, and programs related to assessment, selection, succession planning, training and development of executives of the Company. Each of the Board committees reviews these risks and then discusses the process and results with the full Board of Directors.Directors, may terminate, amend, or modify the Plan at any time; provided, however, that stockholder approval must be obtained for any amendment to the extent necessary or desirable to comply with any applicable law, regulation or stock exchange rule, to increase the number of shares available under the Plan, to extend the exercise period for an option beyond ten years from the date of grant or to allow a material increase in the benefits or change the eligibility requirements under the Plan. In addition, without approval of the Company's stockholders, no option may be amended to reduce the per share exercise price of the shares subject to such option below the per share exercise price as of the date the option was granted and, except to the extent permitted by the Plan in connection with changes in the Company's capital structure, no option may be granted in exchange for, or in connection with, the cancellation or surrender of an option having a higher per share exercise price.
In no event may an award be granted pursuant to the Plan on or after the tenth anniversary of the effectiveness of the Plan.
EXECUTIVE COMPENSATIONFederal Income Tax Consequences
Our former President, Chief Operating Officer,The tax consequences of the Plan under current federal law are summarized in the following discussion, which deals with the general tax principles applicable to the Plan, and Chief Executive Officer, Mr. Hastings, was paidis intended for general information only. Alternative minimum tax and state and local income taxes are not discussed. Tax laws are complex and subject to change and may vary depending on individual circumstances and from locality to locality. The tax information summarized is not tax advice.
Nonqualified Stock Options. For federal income tax purposes, an optionee generally will not recognize taxable income on the grant of a base annual salarynonqualified stock option (“NQSO”) under the Plan, but upon the exercise of $360,000. Mr. Hastings resigned froman NQSO will recognize ordinary income, and the Company in October 2012.generally will be entitled to a deduction. The amount of income recognized (and the amount generally deductible by the Company) generally will be equal to the excess, if any, of the fair market value of the shares at the time of exercise over the aggregate exercise price paid for the shares, regardless of whether the exercise price is paid in cash or in shares or other property. An optionee's basis for the stock for purposes of determining his or her gain or loss upon a subsequent disposition of the shares generally will be the fair market value of the stock on the date of exercise of the NQSO, and any subsequent gain or loss will generally be taxable as capital gains or losses.
Incentive Stock Options. An optionee generally will not recognize taxable income upon either the grant or exercise of an Incentive Stock Option (“ISO”); however, the amount by which the fair market value of the shares at the time of exercise exceeds the exercise price will be an "item of tax preference" for the optionee for purposes of the alternative minimum tax. Generally, upon the sale or other taxable disposition of the shares of the common stock acquired upon exercise of an ISO, the optionee will recognize income taxable as capital gains in an amount equal to the excess, if any, of the amount realized in such disposition over the option exercise price, provided that no disposition of the shares has taken place within either (a) two years from the date of grant of the ISO or (b) one year from the date of exercise. If the shares of common stock are sold or otherwise disposed of before the end of the one-year and two-year periods specified above, the difference between the ISO exercise price and the fair market value of the shares on the date of exercise generally will be taxable as ordinary income; the balance of the amount realized from such disposition, if any, generally will be taxed as capital gain. If the shares of common stock are disposed of before the expiration of the one-year and two-year periods and the amount realized is less than the fair market value of the shares at the date of exercise, the optionee's ordinary income generally is limited to excess, if any, of the amount realized in such disposition over the option exercise price paid. The Company (or other employer corporation) generally will be entitled to a tax deduction with respect to an ISO only to the extent the optionee has ordinary income upon sale or other disposition of the shares of common stock.
Stock Appreciation Rights. No taxable income is generally recognized upon the receipt of an SAR, but upon exercise of the SAR the fair market value of the shares (or cash in lieu of shares) received generally will be taxable as ordinary income to the recipient in the year of such exercise. The Company generally will be entitled to a compensation deduction for the amount the recipient recognizes as ordinary income.
Restricted Stock and Deferred Stock. A participant to whom restricted or deferred stock is issued generally will not recognize taxable income upon such issuance and the Company generally will not then be entitled to a deduction, unless, in the case of restricted stock, an election is made under Section 83(b) of the Code. However, when restrictions on shares of restricted stock lapse, such that the shares are no longer subject to a substantial risk of forfeiture, the employee generally will recognize ordinary income and the Company generally will be entitled to a deduction for an amount equal to the excess of the fair market value of the shares at the date such restrictions lapse over the purchase price therefore. Similarly, when deferred stock vests and is issued to the employee, the employee generally will recognize ordinary income and the Company generally will be entitled to a deduction for the amount equal to the fair market value of the shares at the date of issuance. If an election is made under Section 83(b) with respect to restricted stock, the employee generally will recognize ordinary income at the date of issuance equal to the excess, if any, of the fair market value of the shares at that date over the purchase price therefore and the Company will be entitled to a deduction for the same amount. The Code does not permit a Section 83(b) election to be made with respect to deferred stock.
Dividend Equivalents. A recipient of a dividend equivalent award generally will not recognize taxable income at the time of grant, and the Company will not be entitled to a deduction at that time. When a dividend equivalent is paid, the participant generally will recognize ordinary income, and the Company will be entitled to a corresponding deduction
Performance Awards. A participant who has been granted a performance award generally will not recognize taxable income at the time of grant, and the Company will not be entitled to a deduction at that time. When an award is paid, whether in cash or common stock, the participant generally will recognize ordinary income, and the Company will be entitled to a corresponding deduction.
Stock Payments. A participant who receives a stock payment in lieu of a cash payment that would otherwise have been made will generally be taxed as if the cash payment has been received, and the Company generally will be entitled to a deduction for the same amount.
Section 162(m) Limitation. In general, under Section 162(m), income tax deductions of publicly held corporations may be limited to the extent total compensation (including base salary, was determined after negotiations between Mr. Hastingsannual bonus, stock option exercises, transfers of property and our Compensation Committee. Factors consideredbenefits paid under nonqualified retirement plans) for certain executive officers exceeds $1 million (less the amount of any “excess parachute payments” as defined in determining Mr. Hastings’ base salary included his backgroundSection 280G of the Code) in any one year. However, under Section 162(m), the industries in which we operate; his educationaldeduction limit does not apply to certain “performance-based compensation.
Under Section 162(m), stock options and work background, and reviewsSARs will satisfy the “performance-based compensation” exception if the awards of sample salaries at companiesthe options or SARs are made by a committee of comparable size and industry.
Effective September 30, 2011, the Board of Directors consisting solely of two or more “outside directors,” the plan sets the maximum number of shares that can be granted warrants to purchase 69,000,000 shares of Common Stockany person within a specified period, and the compensation is based solely on an increase in the stock price after the grant date (i.e., the option or SAR exercise price is equal to executivesor greater than the fair market value of the stock subject to the award on the grant date). Other types of awards may only qualify as “performance-based compensation” if such awards are granted or payable only to the recipients based upon the attainment of objectively determinable and pre-established performance targets established by a qualifying committee of the Board and related to performance goals approved by the Company's stockholders.
The Plan has been designed in order to permit the Compensation Committee to grant stock options and SARs that will qualify as “performance-based compensation” under Section 162(m). In addition, in order to permit Awards other than stock options and SARs to qualify as “performance-based compensation,” the Plan allows the Compensation Committee to designate as “Section 162(m) Participants” employees whose compensation for a given fiscal year may be subject to the limit on deductible compensation imposed by Section 162(m). The Compensation Committee may grant awards to Section 162(m) Participants that vest or become exercisable upon the attainment of specific performance targets that are related to one or more of the performance goals set forth in the Plan. The Company's stockholders are also being asked in this Proposal to approve the performance goals established in the Plan.
Awards Granted Under the Plan
Because grants under the Plan are subject to the discretion of the Compensation Committee, awards under the Plan that may be made in the future are not determinable. Future exercise prices for options granted under the Plan are also not determinable because they will be based upon the fair market value of the Company’s common stock on the date of grant.
The following table discloses all awards granted to the persons or groups specified below under the current version of the Plan as of our most recently completed fiscal year ended September 30, 2014:
Awards Granted Pursuant to the 2012 Equity Incentive Award Plan
| Name and Position | | Number of Stock Options | | | Number of Shares of Restricted Stock | | Dollar Value ($) | |
| | | | | | | | | | |
John Merrill Chief Financial Officer | | | - | | | | - | | | $ | - | |
| | | | | | | | | | | | | |
| Total- Executive Officers | | | - | | | | - | | | $ | - | |
| | | | | | | | | | | | | |
Directors, as a group (1) | | | 14,988 | | | | 16,490 | | | $ | 291,233 | |
| | | | | | | | | | | | | |
Employees, as a group (1) | | | 30,000 | | | | 18,842 | | | $ | 686,617 | |
| | | | | | | | | | | | | |
| Total | | | 44,988 | | | | 35,332 | | | $ | 977,850 | |
| (1) | Excludes the Company’s executive officers. |
The affirmative “FOR” vote of a majority of the shares present in person or by proxy and entitled to vote is necessary for approval of the amendment to the Company’s 2012 Equity Incentive Award Plan. Broker non-votes are counted towards a quorum, but are not counted for any purpose in determining whether this Proposal has been approved. Unless otherwise instructed on the proxy or unless authority to vote is withheld, shares represented by executed proxies will be voted “FOR” the adoption of the Plan Amendment.
Board of Directors Recommendation
The Board recommends a vote “FOR” an amendment to our 2012 Equity Incentive Award Plan.
PROPOSAL NO. 4
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Company’s executive compensation program is designed to attract, motivate and retain a talented team of executives. The Company including Mr. Hastingsseeks to accomplish this goal in a way that rewards performance that is aligned with its stockholders’ long-term interests. The Company believes that its executive compensation program achieves this goal and othersis strongly aligned with the long-term interests of its stockholders.
Pursuant to Section 14A of the Exchange Act, the Company is submitting a proposal to its stockholders for an advisory vote on the compensation of its 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 the Company’s named executive officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of the named executive officers.
Accordingly, the following resolution is submitted for stockholders for approval:
RESOLVED, that the stockholders of SecureAlert, Inc., dba Track Group, 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 May 19, 2015, pursuant to Item 402 of Regulation S-K, the accompanying tabular disclosure regarding named executive officer compensation and managers. the corresponding narrative disclosure and footnotes.
As an advisory vote, this Proposal is not binding. However, the Compensation Committee, which is responsible for designing and administering the Company’s executive compensation program, values the opinions expressed by stockholders in their vote on this Proposal and will consider the outcome of September 30, 2012, warrantsthe vote when making future compensation decisions for named executive officers.
The affirmative “FOR” vote must exceed the number of votes “AGAINST: to purchase 32,500,000approve this non-binding matter. Broker non-votes are counted towards a quorum, but are not counted for any purpose in determining whether this Proposal has been approved. Unless otherwise instructed on the proxy or unless authority to vote is withheld, shares represented by executed proxies will be voted “FOR” this Proposal.
The number of Common Stock, previously issuedvotes FOR must exceed the number of votes AGAINST to approve this non-binding matter. Abstentions and vested and unvested warrants held by executivesbroker non-votes will no effect on the outcome of this Proposal.
Board of Directors Recommendation
The Board recommends that stockholders vote “FOR” the advisory resolution above, approving of the compensation paid to purchase 36,500,000 shares were cancelled. These warrants were granted to encourage retention of management and employees and to motivate them through stock appreciation.the Company’s named executive officers.
PROPOSAL NO. 5
DuringRATIFICATION OF THE APPOINTMENT OF
EIDE BAILLY, LLP TO SERVE AS OUR
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE CURRENT FISCAL YEAR
The 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.
The Board of Directors may terminate the appointment of Eide Bailly as the Company’s independent registered public accounting firm without the approval of the stockholders whenever the Board of Directors deems such termination necessary or appropriate.
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
Audit services consist of the audit of the annual consolidated financial statements of us, and other services related to filings and registration statements filed by us and our subsidiaries and other pertinent matters. Hansen Barnett & Maxwell, P.C. (“HBM”) served as our independent auditors for most of fiscal year 2013, for which we paid approximately $49,750. HBM resigned as our independent registered public accounting firm on September 23, 2013. We appointed Eide Bailly as our independent registered public accounting firm on September 24, 2013. We paid Eide Bailly approximately $162,500 and $50,000 for audit services for the year ended September 30, 2014 and 2013, respectively.
Tax Fees, Audit Related Fees, and All Other Fees
HBM provided tax services to us for fiscal year 2013, for which we paid approximately $16,750. The Audit Committee of the Board of Directors considered and authorized all services provided by HBM. No tax services were provided to us during the fiscal year ended September 30, 2012,2013 by Eide Bailly. The Company paid Eide Bailly $9,064 in audit related fees for the year ended September 30, 2013. The Company cancelled unvested warrants heldpaid Eide Bailly $16,230 and $13,231 for tax and audit related fees during the year ended September 30, 2014, respectively.
Our Audit Committee considered that the work done for us in fiscal year 2013 and 2014 by six executivesHBM and by Eide Bailly was compatible with maintaining the independence of each of those firms.
Required Vote
Ratification of the Company, including Mr. Hastings,selection of Eide Bailly as the Company’s independent auditors for the purchasefiscal year ending September 30, 2015 requires the affirmative vote of 36,500,000a majority of the shares present or represented by proxy and entitled to vote at the Annual Meeting. Under Utah law and the Company’s Articles of Common Stock,Incorporation and in turn issuedBylaws, an abstention will have the same legal effect as a totalvote against the ratification of 24,340,000 restrictedEide Bailly and each broker non-vote will reduce the absolute number, but not the percentage, of affirmative votes necessary for approval of the ratification. Unless otherwise instructed on the proxy or unless authority to vote is withheld, shares represented by executed proxies will be voted “FOR” the ratification of Common StockEide Bailly as the Company’s independent auditors for the fiscal year ending September 30, 2015.
Board of Directors Recommendation
The 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, 2015.
EXECUTIVE OFFICERS
The Company’s executive officers are appointed by the Board on an annual basis and serve at the discretion of the Board, subject to the executives, which resultedterms of any employment agreements they may have with the Company. The following is a brief description of the present and past business experience of each of the Company’s current executive officers.
| Name | | Age | | Position |
Executive Committee of Board of Directors | | | | Principal Executive Officer |
| | | | |
The Executive Committee of the Board of Directors was established to act temporarily in a totalthe principal executive officer function following the resignation of vested warrants for the purchase of 32,500,000 shares of Common Stock held by such executives as of September 30, 2012.
Upon Mr. Hastings’ resignation asour Chief Executive Officer in October 2012, the Board formed an Executive Committee consisting of Messrs. Schmitt and Kunz to fill the role of Chief Executive Officer on an interim basis. The2012. Current members of the Executive Committee are not compensated beyond normalGuy Dubois and David S. Boone. Biographies for Messrs. Dubois and Boone appear under heading director compensation for their service on the Executive Committee.biographical information as stated above.
12John R. Merrill was appointed to Chief Financial Officer in April 2014. Mr. Merrill has held a variety of financial roles within public and private organizations including United Health Group, Clear Channel, IMG, and Sports Authority. From 2013 to 2014, Mr. Merrill was the CFO of TenXNetworks and IPVidTech.com, a start-up network hardware and business intelligence provider. From 2010 to 2013, Mr. Merrill worked as an advisor in the healthcare technology industry facilitating due diligence and integration of certain acquired companies. Prior to 2010, Mr. Merrill was the CFO of Park City Group, Inc. (NASDAQ: PCYG) and Prescient Applied Intelligence, Inc. (OTCQB: PPID) software-as-a-service providers of supply chain solutions for both retailers and their suppliers. He began his career with KPMG and holds a Bachelors and a Master’s in Accounting from the University of South Florida.
EXECUTIVE COMPENSATION
Set out in the following summary compensation table are the particulars of compensation paid to the following persons for our fiscal years ended September 30, 2014 and 2013:
Summary Compensation Table
The following table summarizes the total compensation paid or earned by our principal executive officer who served during the year ended September 30, 2012, and two other most highly compensated executive officers whose compensation was more than $100,000 in the most recent fiscal year (the “Named Executive Officers”) and who served in the capacities indicated as of September 30, 2012. Note that the Company paid no compensation in the form of non-equity incentive plan compensation and nonqualified deferred compensation to any Named Executive in any period and those columns are omitted from the following table.
| ( a ) | | | ( b ) | | ( c ) | | | ( d ) | | | | ( e ) | | | | ( f ) | | | ( g ) | | ( h ) |
| Name and | | | | | | | | | | | | | | | | | | | | All Other | | | |
| Principal | | | | | Salary | | | Bonus | | | | Stock Awards | | | Option Awards | | Compensation | | Total |
| Position | | | Year | | ( $ ) | | | ( $) | | | | ( $) | | | | ($ ) | | | ($ ) | | ($ ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| John L. Hastings, III (1) | | | 2012 | | $ 360,000 | | $ | - | | | $ | 372,000 | | | $ | 1,297,055 | | | $ | 120,075 | | | $ | 2,149,130 | |
| Chief Executive Officer, | | | 2011 | | $ 325,000 | | $ | 27,000 | | | $ | 137,500 | | | $ | 477,350 | | | $ | 237,919 | | | $ | 1,204,769 | |
| President, and | | | | | | | | | | | | | | | | | | | | | | | | | |
| Chief Operating Officer | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Chad D. Olsen (2) | | | 2012 | | $ 192,000 | | $ | 35,000 | | | $ | 124,000 | | | $ | 432,352 | | | $ | 42,195 | | | $ | 825,547 | |
| Chief Financial Officer | | | 2011 | | $ 165,000 | | $ | 4,000 | | | $ | - | | | $ | 159,117 | | | $ | 26,511 | | | $ | 354,628 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Bernadette Suckel (3) | | | 2012 | | $ 168,000 | | $ | 35,000 | | | $ | 77,500 | | | $ | 270,219 | | | $ | 7,950 | | | $ | 558,669 | |
| Managing Director Global | | 2011 | | $ 125,400 | | $ | 2,000 | | | $ | - | | | $ | 99,448 | | | $ | 10,653 | | | $ | 237,501 | |
| Customer Service | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | our principal executive officer, consisting of the executive committee of the Board of Directors; and |
| | (1) | Mr. Hastings was our Chief Executive Officer from July 2011 until October 2012. During that period he also served as our President (from June 2008) and our Chief Operating Officer (from November 2008). Column (e) includes 12,000,000 shares of Common Stock, valued on the date of grant at $372,000 and 275 shares of Series D Preferred Stock, valued on the date of grant at $137,500 issued to Mr. Hastings during the fiscal years ended September 30, 2012 and 2011, respectively. These shares have been pledged as security by Mr. Hastings for a loan made to him by an officer of the Company. Column (f) includes the fair value on the date of grant of certain common stock purchase warrants granted to Mr. Hastings in the years indicated. As of September 30, 2012, the intrinsic value of these warrants was $0. Of the amounts indicated for fiscal year 2012, $676,248 was attributable to the cancellation and return of warrants to the Company by Mr. Hastings. Column (g) includes $120,075 of additional compensation paid by us for services and benefits on behalf of Mr. Hastings as part of his deferred sign-on package which was paid over the past three years, as well as payments for paid-time off, health, dental, vision, and life insurance. |
| (b) | (2) | Mr. Olsen became our Chief Financial Officer in January 2010. Prior to his appointmentmost highly compensated executive officer who was serving as Chief Financial Officer, Mr. Olsen was our controller. Column (e) includes 4,000,000 sharesan executive officer at the end of Common Stock valued on the date of grant at $124,000, issued to Mr. Olsen during the fiscal year ended September 30, 2012. Column (f) includes2014 who had total compensation exceeding $100,000 (together, with the fair value onprincipal executive officer, the date“Named Executive Officers”); and |
| |
| (c) | an additional individual 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 grantthe most recently completed financial year. |
| Name and | | | Salary | | | Bonus | | | Stock Awards | | | Option Awards | | | All Other Compensation | | | Total | |
| Principal Position | Year | | ( $ ) | | | ( $ ) | | | ( $ ) | | | ( $ ) | | | ( $ ) | | | ( $ ) | |
| | | | | | | | | | | | | | | | | | | | |
Guy Dubois (1) | 2014 | | $ | - | | | $ | - | | | $ | - | | | $ | 346,276 | | | $ | - | | | $ | 346,276 | |
Chairman and Acting Principal Executive Officer | 2013 | | $ | - | | | $ | - | | | $ | - | | | $ | 335,687 | | | $ | - | | | $ | 335,687 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Chad D. Olsen (2) | 2014 | | $ | 325,056 | | | $ | - | | | $ | - | | | $ | - | | | $ | 32,515 | | | $ | 357,571 | |
| Former Chief Financial Officer | 2013 | | $ | 192,000 | | | $ | - | | | $ | - | | | $ | - | | | $ | 8,740 | | | $ | 200,740 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
John R. Merrill (3) | 2014 | | $ | 79,615 | | | $ | - | | | $ | - | | | $ | - | | | $ | 12,613 | | | $ | 92,228 | |
| Chief Financial Officer | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Bernadette Suckel (4) | 2014 | | $ | 211,048 | | | $ | - | | | $ | - | | | $ | - | | | $ | 15,995 | | | $ | 227,043 | |
Former Managing Director Global Customer Service | 2013 | | $ | 168,000 | | | $ | - | | | $ | - | | | $ | - | | | $ | 8,061 | | | $ | 176,061 | |
| (1) | Mr. Dubois has been a member of certain common stock purchase warrants granted to the Executive Committee since October 2012 and currently serves as Chairman of the Board of Directors. |
| (2) | Mr. Olsen in the years indicated. As of September 30, 2012, the intrinsic value of these warrants was $0. Of the amount indicated for fiscal year 2012, $225,561 was attributable to the cancellation and return of warrants to the Company by Mr. Olsen. Column (g)served as our Chief Financial Officer from January 2010 through April 2014. The total column includes additional compensation for paid-time off, health, dental, life and vision insurance. |
| (3) | (3)Mr. Merrill has served as our Chief Financial Officer since April 2014. The total column includes additional compensation for paid-time off, health, dental, life and vision insurance. |
| (4) | Mrs. Suckel has served as Managing Director of Global Customer Service and Account Management of the Company sincefrom June 2008. Column (e) includes 2,500,000 shares of Common Stock valued on the date of grant at $77,500, issued to Mrs. Suckel during the fiscal year ended September 30, 2012. Column (f) includes the fair value on the date of grant of certain common stock purchase warrants granted to Mrs. Suckel during the fiscal years indicated. As of September 30, 2012, the intrinsic value of these warrants was $0. Of the amount indicated for fiscal year 2012, $140,975 was attributable to the cancellation and return of warrants to the Company by Mrs. Suckel. Column (g)2008 through June 2014. The total column includes additional compensation for health, dental, life and vision insurance.insurance |
Narrative Disclosure to the Executive Compensation Table
Compensation Paid to the Members of the Executive Committee
Member of the Executive Committee and acting principal executive officer, Guy Dubois, was granted warrants equal to $300,326 for his additional work as a director and member of the Board’s Executive Committee during the fiscal year ended September 30, 2014 consisting of warrants to purchase 51,576 shares of common stock at an exercise price of $17.45 per share. These warrants vest in equal monthly increments over a period of one year or immediately upon the hiring of a new Chief Executive Officer. These warrants were valued at the date of grant using the Black-Scholes model. The Board of Directors has not determined a timeline for the hiring of a new Chief Executive Officer.
Merrill Employment Agreement
On November 19, 2014, the Company entered into a two-year employment agreement with John Merrill, our Chief Financial Officer (the “Merrill Employment Agreement”). Under the terms and conditions of the Merrill Employment Agreement, Mr. Merrill will receive an annual base salary of $180,000 and is eligible to participate in the Company’s Employee Bonus Plan and 2012 Equity Incentive Award Plan, wherein Mr. Merrill may earn a variable cash bonus and/or shares of the Company’s common stock based on individual performance and achieving specific Company milestones. Mr. Merrill is also entitled to participate in such life insurance, disability, medical, dental, retirement plans and other programs as may be made generally available from time to time by the Company for the benefit of similarly situated employees or its employees generally.
Outstanding Equity Awards at September 30, 2014
The following table discloses outstanding stock option awards and warrants held by each of the Named Executive Officers at September 30, 2014
Outstanding Equity Awards at Fiscal Year-End 20122014
| Name | | Number of securities underlying unexercised options (#) exercisable | | | Number of securities underlying unexercised options (#) exercisable | | | Equity incentive plan awards: Number of underlying unexercised unearned options (#) | | | Option exercise price ($) | | 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 | | | | - | | | | - | | | $ | 12.580 | | 3/21/2015 | | | - | | | | - | | | | - | | | | - | |
| | | | 64,665 | | | | - | | | | - | | | $ | 9.000 | | 4/15/2015 | | | - | | | | - | | | | - | | | | - | |
| | | | 4,083 | | | | - | | | | - | | | $ | 14.700 | | 6/30/2015 | | | - | | | | - | | | | - | | | | - | |
| | | | 2,280 | | | | - | | | | - | | | $ | 19.460 | | 9/30/2015 | | | - | | | | - | | | | - | | | | - | |
| | | | 2,344 | | | | - | | | | - | | | $ | 19.290 | | 12/31/2015 | | | - | | | | - | | | | - | | | | - | |
| | | | 2,432 | | | | - | | | | - | | | $ | 18.750 | | 3/31/2016 | | | - | | | | - | | | | - | | | | - | |
| | | | 51,576 | | | | | | | | | | | $ | 17.450 | | 6/2/2016 | | | | | | | | | | | | | | | | |
| | | | 2,647 | | | | | | | | | | | $ | 15.450 | | 6/30/2016 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Chad D. Olsen | | | - | | | | - | | | | - | | | | - | | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| John R. Merrill | | | - | | | | - | | | | - | | | | - | | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Bernadette Suckel | | | - | | | | - | | | | - | | | | - | | | | | - | | | | - | | | | - | | | | - | |
| 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 ($) | | Option expiration date | | Number of shares or units of stock that have not vested (#) | | | Markest value of shares or units of stock that have not vested ($) | | | Equity incentive plan awards: Number of Unearned shares, units or other rights that have not vested (#) | | | Equity incentice plan awards: Market or Payout value of unearned shares, units or other rights that have not vested ($) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| John L. Hastings III | 1,250,000 | | | | - | | | | - | | | $ | 0.075 | | 6/23/13 | | | - | | | | - | | | | - | | | | - | |
| | | | 250,000 | | | | - | | | | - | | | $ | 0.075 | | 1/15/14 | | | - | | | | - | | | | - | | | | - | |
| | | | 18,000,000 | | | | - | | | | - | | | $ | 0.083 | | 9/29/14 | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Chad D. Olsen | | | 1,518,000 | | | | - | | | | - | | | $ | 0.075 | | 4/30/13 | | | - | | | | - | | | | - | | | | - | |
| | | | 200,000 | | | | - | | | | - | | | $ | 0.075 | | 1/15/14 | | | - | | | | - | | | | - | | | | - | |
| | | | 25,000 | | | | - | | | | - | | | $ | 0.075 | | 3/14/14 | | | - | | | | - | | | | - | | | | - | |
| | | | 653,380 | | | | - | | | | 64,620 | | | $ | 0.075 | | 9/29/15 | | | - | | | | - | | | | - | | | | - | |
| | | | 6,000,000 | | | | - | | | | - | | | $ | 0.083 | | 9/29/14 | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Bernadette Suckel | 100,000 | | | | - | | | | - | | | $ | 1.55 | | 6/8/13 | | | - | | | | - | | | | - | | | | - | |
| | | | 200,000 | | | | - | | | | - | | | $ | 0.30 | | 1/15/14 | | | - | | | | - | | | | - | | | | - | |
| | | | 3,750,000 | | | | - | | | | - | | | $ | 0.083 | | 9/29/14 | | | - | | | | - | | | | - | | | | - | |
| | | | 637,000 | | | | - | | | | 63,000 | | | $ | 0.15 | | 9/29/15 | | | - | | | | - | | | | - | | | | - | |
No options or warrants held by executive officers or directors were exercised during the fiscal years ended September 30, 2012 and 2011.
Employment Agreements
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our officers, directors, and persons who beneficially own more than ten percent of our common stock to file reports of ownership and changes in ownership with the SEC. Officers, directors, and greater-than-ten-percent stockholders are also required by the SEC to furnish us with copies of all Section 16(a) forms that they file.
Based solely upon a review of these forms that were furnished to us, we believe that all reports required to be filed by these individuals and persons under Section 16(a) were filed during fiscal year 2014 and that such filings were timely except the following:
| · Mr. Klinkhammer, a director, filed one late Form 4 reporting one transaction |
| · Mr. Schmitt, a director, filed three late Form 4s reporting three transactions |
| · Mr. Dubois, a director, filed one late Form 4 reporting one transaction |
| · Mr. Boone, a director, filed one late Form 4 reporting one transaction |
| · Mr. Mabey, a director, filed two late Form 4s reporting two transactions |
| · Mr. Kunz, a director, filed two late Form 4s reporting two transactions |
DIRECTOR COMPENSATION
We have no employment agreements with any executive officers.
COMPENSATION OF DIRECTORS
We do not pay any compensation to our employee directors for their service on the Board. However, we do pay our non-employee directors as indicated below.
The table below summarizes the compensation paid by us to our non-employee directors for the fiscal year ended September 30, 2012:2014:
| | | Fees earned | | | Stock awards | | | Option awards | | | Total | |
| Name | | ($)* | | | ($) | | | ($) | | | ($) | |
| | | | | | | | | | | | | |
| Winfried Kunz | | $ | 15,000 | | | $ | 15,000 | | | $ | 15,000 | | | $ | 45,000 | |
| George F. Schmitt | | $ | 15,000 | | | $ | 22,500 | | | $ | 8,991 | | | $ | 46,491 | |
| Rene Klinkhammer | | $ | 15,000 | | | $ | 30,000 | | | $ | - | | | $ | 45,000 | |
| David S. Boone | | $ | 30,000 | | | $ | 30,000 | | | $ | 30,000 | | | $ | 90,000 | |
| Dan L. Mabey | | $ | 15,000 | | | $ | 29,833 | | | $ | - | | | $ | 44,833 | |
| Guy Dubois | | $ | 30,000 | | | $ | - | | | $ | 346,276 | | | $ | 376,276 | |
*Fees earned by our non-employee directors will be paid in common stock or options to purchase common stock at the option of the director. A liability for these fees was included with accrued expenses at September 30, 2014.
| (a) | | | (b) | | (c) | | (d) | | (e) |
| | | | Fees earned | | Stock awards | | Option awards | | Total |
| Name | | | ($) | | ($) | | ($) | | ($) |
| | | | | | | | | | | | | | | | | |
| David P. Hanlon | | $ | 37,500 | | | $ | - | | | $ | - | | | $ | 37,500 | |
| Winfried Kunz | | $ | 27,500 | | | $ | - | | | $ | - | | | $ | 27,500 | |
| George F. Schmitt | | $ | 27,500 | | | $ | - | | | $ | - | | | $ | 27,500 | |
| Larry G. Schafran | | $ | 37,500 | | | $ | - | | | $ | - | | | $ | 37,500 | |
| Rene Klinkhammer | | $ | 37,500 | | | $ | - | | | $ | - | | | $ | 37,500 | |
| David S. Boone | | $ | 27,500 | | | $ | - | | | $ | - | | | $ | 27,500 | |
| Dan Mabey | | $ | 27,500 | | | $ | - | | | $ | - | | | $ | 27,500 | |
| Antonio J. Rodriquez | | $ | 27,500 | | | $ | - | | | $ | - | | | $ | 27,500 | |
| Robert Childers | | $ | 15,000 | | | $ | - | | | $ | - | | | $ | 15,000 | |
| | | | | | | | | | | | | | | | | |
From October 2013 through May 2014, we accrued $2,500 per month, which amount was increased to $5,000 per month in June 2014, for each director to be issued in shares of common stock valued on the last date of the quarter. Alternatively, any director may elect to receive warrants with an exercise price at the current market price at the date of grant in the amount of three times the amount had the director elected to take shares, valued at the date of grant using the Black-Scholes valuation method. Additionally, the Chairman and Chairman of the Audit Committee accrue $10,000 per month rather than $5,000. Mr. Dubois became a director in December 2012 and our Chairman on February 28, 2013.
The Company accrued $5,000 per month for each director from October 1, 2011 to December 31, 2011. Effective January 1, 2012, the Board of Directors reduced the monthly fees to $2,500 per month for each director. As of September 30, 2012, the fees reported under Column B were earned, but not paid.
The table below summarizes outstanding warrants previously issued to directors for compensation as of September 30, 2012:
| | | | Grant | | | Expiration | | Exercise | | | Number of | | Compensation |
| Name | | | Date | | | Date | | Price | | | Options | | Expense |
| | | | | | | | | | | | | | | | | | | | | |
| Rene Klinkhammer | 1/20/10 | | | | 1/19/15 | | | $ | 0.13 | | | | 200,000 | | | $ | 21,036 | |
| | | | | | | | | | | | | | | | | | | | | |
| David Hanlon | | 7/14/08 | | | | 7/13/13 | | | $ | 0.13 | | | | 459,000 | | | $ | 23,530 | |
| | | | 1/20/10 | | | | 1/19/15 | | | $ | 0.13 | | | | 250,000 | | | $ | 26,295 | |
| | | | 10/7/11 | | | | 10/6/14 | | | $ | 0.0833 | | | | 1,200,000 | | | $ | 33,358 | |
| | | | | | | | | | | | | | | | | | | | | |
| Robert Childers | 7/14/08 | | | | 7/13/13 | | | $ | 0.13 | | | | 610,000 | | | $ | 31,271 | |
| | | | 1/20/10 | | | | 1/19/15 | | | $ | 0.13 | | | | 250,000 | | | $ | 26,295 | |
| | | | 10/7/11 | | | | 10/6/14 | | | $ | 0.0833 | | | | 1,200,000 | | | $ | 33,358 | |
| | | | | | | | | | | | | | | | | | | | | |
| Larry Schafran | | 12/5/07 | | | | 12/4/12 | | | $ | 0.13 | | | | 50,000 | | | $ | 3,894 | |
| | | | 7/14/08 | | | | 7/13/13 | | | $ | 0.13 | | | | 610,000 | | | $ | 31,271 | |
| | | | 1/20/10 | | | | 1/19/15 | | | $ | 0.13 | | | | 250,000 | | | $ | 26,295 | |
| | | | 10/7/11 | | | | 10/6/14 | | | $ | 0.0833 | | | | 1,200,000 | | | $ | 33,358 | |
| | | | | | | | | | | | | | | | | | | | | |
ReimbursementThe following table lists the warrants to purchase shares of Expenses
The Company reimburses travel expensescommon stock held by each of members for their attendance at Board meetings.
Compensation Risks Assessment
As required by rules adopted by the SEC, management has made an assessmentour directors as of the Company’s 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 the Company. 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, the Company has determined that its compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
| | Grant | | Expiration | | Exercise | | | Number of | | | Compensation | |
| Name | Date | | Date | | Price | | | Options | | | Expense | |
| | | | | | | | | | | | | |
| Winfried Kunz | 3/22/13 | | 3/21/15 | | $ | 12.58 | | | | 8,943 | | | $ | 43,809 | |
| | 7/1/13 | | 6/30/15 | | $ | 14.70 | | | | 2,040 | | | $ | 11,811 | |
| | 10/1/13 | | 9/30/15 | | $ | 19.46 | | | | 1,140 | | | $ | 8,991 | |
| | 1/2/14 | | 12/31/15 | | $ | 19.29 | | | | 1,172 | | | $ | 6,007 | |
| | | | | | | | | | | | | | | | |
| George F. Schmitt | 3/22/13 | | 3/21/15 | | $ | 12.58 | | | | 8,943 | | | $ | 43,809 | |
| | 7/1/13 | | 6/30/15 | | $ | 14.70 | | | | 2,040 | | | $ | 11,811 | |
| | 10/1/13 | | 9/30/15 | | $ | 19.46 | | | | 1,140 | | | $ | 8,991 | |
| | | | | | | | | | | | | | | | |
| Guy Dubois | 3/22/13 | | 3/21/15 | | $ | 12.58 | | | | 2,385 | | | $ | 11,682 | |
| | 4/16/13 | | 4/15/15 | | $ | 9.00 | | | | 64,665 | | | $ | 285,003 | |
| | 7/1/13 | | 6/30/15 | | $ | 14.70 | | | | 4,083 | | | $ | 23,640 | |
| | 10/1/13 | | 9/30/15 | | $ | 19.46 | | | | 2,280 | | | $ | 17,982 | |
| | 1/2/14 | | 12/31/15 | | $ | 19.29 | | | | 2,344 | | | $ | 12,014 | |
| | 4/1/14 | | 3/31/16 | | $ | 18.75 | | | | 2,432 | | | $ | 8,684 | |
| | 6/3/14 | | 6/2/16 | | $ | 17.45 | | | | 51,576 | | | $ | 300,326 | |
| | 7/1/14 | | 6/30/16 | | $ | 15.45 | | | | 2,647 | | | $ | 7,270 | |
| | | | | | | | | | | | | | | | |
| David S. Boone | 3/22/13 | | 3/21/15 | | $ | 12.58 | | | | 8,943 | | | $ | 43,809 | |
| | 7/1/13 | | 6/30/15 | | $ | 14.70 | | | | 4,083 | | | $ | 23,640 | |
| | 10/1/13 | | 9/30/15 | | $ | 19.46 | | | | 2,280 | | | $ | 17,982 | |
| | 1/2/14 | | 12/31/15 | | $ | 19.29 | | | | 2,344 | | | $ | 12,014 | |
| | | | | | | | | | | | | | | | |
| Dan L. Mabey | 3/22/13 | | 3/21/15 | | $ | 12.58 | | | | 8,943 | | | $ | 43,809 | |
| | | | | | | | | | | | | | | | |
| Rene Klinkhammer | 1/20/10 | | 1/19/15 | | $ | 26.00 | | | | 1,000 | | | $ | 21,036 | |
| | 3/22/13 | | 3/21/15 | | $ | 12.58 | | | | 8,943 | | | $ | 43,809 | |
| | 7/1/13 | | 6/30/15 | | $ | 14.70 | | | | 2,040 | | | $ | 11,811 | |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
We have two classes of voting securities issued and outstanding: our Common Stock and our Series D Preferred Stock. The following table presents information regarding beneficial ownership as of December 10, 2012March 30, 2015 (the “Table Date”“Table Date”), of all classes of our voting securitiescommon stock by (1)(i) each shareholder known to us to be the beneficial owner of more than five percent of any class of our voting securities; (2)common stock; (ii) each of our Named Executive Officers; (3)Officers serving as of the Table Date; (iii) each of our directors serving as of the Table Date; and each new director nominee; and (4)(iv) all of our executive officers and directors/nomineesdirectors as a group.
We have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission (“SEC”).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, theThe applicable percentage ownership is based on 640,088,85010,150,167 shares of Common Stockcommon stock issued and outstanding and 48,763 shares of Series D Preferred Stock issued and outstanding, convertible into 292,578,000 shares of Common Stock. In computing the number of shares of Common Stock and Series D Preferred Stock beneficially owned by a person and the applicable percentage ownership of that person, we deemed outstanding shares of Common Stock or Series D Preferred Stock subject to warrants and options held by that person that are currently exercisable or exercisable within 60 daysas of the Table Date. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person.
Beneficial ownership representing less than one percent of the issued and outstanding shares of a class is denoted with an asterisk (“*”). Holders of Common Stockcommon stock are entitled to one vote per share and holders of Series D Preferred Stock are entitled to 6,000 votes per share and vote with the Common shareholders on an as-converted basis. share.
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| | | Title or Class of Securities: | | | | | | | |
| | | | | | | | | | | | | |
| Name and Address of | | Common Stock | | | Series D Preferred Stock | |
| Beneficial Owner (1) | | Shares | | | % | | | Shares | | | % | |
| | | | | | | | | | | | | |
| 5% Beneficial Owners: | | | | | | | | | | | | |
| Sapinda Asia Limited (2) | | | 120,029,514 | | | | 18.8 | % | | | - | | | | * | |
| Borinquen Container Corp (3) | | | 104,914,420 | | | | 15.8 | % | | | 3,900 | | | | 8.0 | % |
| Advance Technology Investors, LLC (4) | | | 91,474,382 | | | | 13.1 | % | | | 9,264 | | | | 19.0 | % |
| Kofler Ventures, S.a.r.1. (5) | | | 60,756,061 | | | | 8.7 | % | | | 6,000 | | | | 12.3 | % |
| David G. Derrick (6) | | | 42,457,829 | | | | 6.5 | % | | | 5,778 | | | | 11.8 | % |
| | | | | | | | | | | | | | | | | |
| Directors and Named Executive Officers: | | | | | | | | | | | | | | | | |
| George Schmitt (7) | | | 22,572,222 | | | | 3.5 | % | | | - | | | | * | |
| Chad D. Olsen (8) | | | 14,223,803 | | | | 2.2 | % | | | 172 | | | | * | |
| David P. Hanlon (9) | | | 3,077,047 | | | | * | | | | 115 | | | | * | |
| Larry G. Schafran (10) | | | 3,226,515 | | | | * | | | | 110 | | | | * | |
| Rene Klinkhammer (11) | | | 2,611,451 | | | | * | | | | 255 | | | | * | |
| Dan Mabey (12) | | | 1,000 | | | | * | | | | - | | | | * | |
| Guy Dubois (13) | | | 104,914,420 | | | | 15.8 | % | | | 3,900 | | | | 8.0 | % |
| David S. Boone | | | - | | | | * | | | | - | | | | * | |
| Winfried Kunz | | | - | | | | * | | | | - | | | | * | |
| Antonio J. Rodriquez | | | - | | | | * | | | | - | | | | * | |
| | | | | | | | | | | | | | | | | |
| All directors and executive officers as a group | | | | | | | | | | | | | | | | |
| (10 persons) | | | 150,626,458 | | | | 22.2 | % | | | 4,552 | | | | 9.3 | % |
| Name and Address of | | Common Stock | |
Beneficial Owner (1) | | Shares | | | % | |
| | | | | | | |
| 5% Beneficial Owners: | | | | | | |
Sapinda Asia Limited (2) | | | 5,127,853 | | | | 51 | % |
Safety Invest S.A., Compartment Secure I (3) | | | 1,890,697 | | | | 19 | % |
| | | | | | | | | |
| Directors and Named Executive Officers: | | | | | | | | |
David S. Boone (4) | | | 24,339 | | | | * | |
Guy Dubois (5) | | | 147,400 | | | | 1 | % |
Rene Klinkhammer (6) | | | 17,098 | | | | * | |
Winfried Kunz (7) | | | 15,793 | | | | * | |
Dan Mabey (8) | | | 16,436 | | | | * | |
George F. Schmitt (9) | | | 24,641 | | | | * | |
| John R. Merrill | | | - | | | | * | |
| | | | | | | | | |
All directors and executive officers as a group (7 persons) | | | 245,707 | | | | 2 | % |
| 1)(1) | Except as otherwise indicated, the business address for these beneficial owners is c/o the Company, 150 West Civic Center Drive,405 South Main Street, Suite 100, Sandy,700, Salt Lake City, Utah 84070.84111. |
| (2) | 2) | Includes 31,140,625 shares of Common Stock and 88,888,889 shares of Common Stock issuable upon the conversion of debentures in the principal amount of $2,000,000. Excluded from the table above are $3,700,000 in debentures that may be convertible into 164,444,444 shares of common stock after March 1, 2013. Address is Rooms 803-4, 8F, Hang Seng Bank Building, 200 Hennessy Road, Wanchai, Hong Kong. Based on a Form 4 filed by Sapinda Asia Limited on November 5, 2013. |
| (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. |
| (4) | 3) | Mr. Boone is a director and a member of the Board of Directors’ executive committee. Includes 23,400,0006,689 shares of Common Stock issuable upon conversion of 3,900 shares of Series D Preferred Stock and 81,514,420 shares of Common Stock. According to a Stock Purchase and Royalty Agreement, Borinquen Container Corp has agreed to sell all its shares to Tetra-House Pte, Ltd., an entity controlled by Mr. Dubois. Address is P.O. Box 145170, Arecibo, Puerto Rico 00614. |
| 4) | Includes 54,300,000 shares of Common Stock issuable upon conversion of 9,050 shares of Series D Preferred and 35,112,146 shares of Common Stock. Includes 438,591 shares of Common Stock owned of record by Dina Weidman, 32,001 shares of Common Stock owned of record by Steven Weidman, and 306,590 shares of Common Stock owned of record by U/W Mark Weidman Trust. Additionally, includes 642,000 shares of Common Stock issuable upon conversion of 107 shares of Series D Preferred Stock owned of record by Dina Weidman and 642,000 shares of Common Stock issuable upon conversion of 107 shares of Series D Preferred Stock owned of record by Steven C. Weidman. Address is 154 Rock Hill Road, Spring Valley, NY 10977. |
| 5) | Includes 5,556,061 shares owned of record by Kofler Ventures, S.a.r.l. and vestedcommon stock purchase warrants for the purchases of 19,200,000 shares of Common Stock, as well as 36,000,000 shares of Common Stock issuable upon conversion of 6,000 shares of Series D Preferred Stock owned of record by Kofler Ventures, S.a.r.l. Address is R.C.S. Luxembourg B-0090554, 412F, route d’Esch, L-2086 Luxembourg. |
| 6) | Amount indicated includes 5,094,766 shares owned of record by Mr. Derrick, 1,695,063 shares held in the name of ADP Management, and vested warrants for the purchase of 1,000,000 shares of Common Stock. Also includes 22,668,000 shares of Common Stock issuable upon conversion of 3,778 shares of Series D Preferred Stock owned of record by Mr. Derrick and 12,000,000 shares of Common Stock issuable upon conversion of 2,000 shares of Series D Preferred Stock owned of record by JBD Management, LLC. Address is 1401 N. Highway 89, Suite 240, Farmington, Utah 84025. |
| 7) | Mr. Schmitt is a director. Amount indicated includes 350,000 shares of Common Stock owned of record and 22,222,22217,650 shares of Common Stock issuable upon the conversion of a debenture in the principal amount of $500,000. |
| 8) | Mr. Olsen is our Chief Financial Officer. Common Stock beneficially owned includes 4,795,423 shares owned of record by Mr. Olsen and 8,396,380 shares issuable upon exercise of vestedcommon stock purchase warrants, as well as 1,032,000 shares of Common Stock issuable upon conversion of 172 shares of Series D Preferred Stock. |
| 9) | Mr. Hanlon is a director. Amount indicated includes 478,047 shares of Common Stock owned of record by David P. Hanlon Living Trust and 1,909,000 shares issuable upon exercise of warrants, as well as 690,000 shares of Common Stock issuable upon conversion of 115 shares of Series D Preferred Stock. |
| 10) | Mr. Schafran is a director. Common Stock includes 456,515 shares owned of record by Mr. Schafran and 2,110,000 shares of Common Stock issuable upon exercise of stock purchase warrants, as well as 660,000 shares of Common Stock issuable upon conversion of 110 shares of Series D Preferred Stock. |
| 11) | Mr. Klinkhammer is a director. Includes 881,451 shares of Common Stock owned of record, 1,530,000 shares of Common Stock issuable upon conversion of 255 shares of Series D Preferred and 200,000 shares of Common Stock issuable upon exercise of stock purchase warrants. |
| (5) | 12)Mr. Dubois is a director and Chairman of the Board of Directors; he is also a member of the executive committee of the Board of Directors. Includes 147,400 shares of common stock issuable upon exercise of stock purchase warrants. |
| (6) | Mr. Klinkhammer is a director. Includes 6,115 shares of common stock owned of record and 10,983 shares of common stock issuable upon exercise of stock purchase warrants. |
| |
| (7) | Mr. Kunz is a director. Includes 2,498 shares of common stock owned of record and 13,295 shares of common stock issuable upon exercise of stock purchase warrants. |
| |
| (8) | Mr. Mabey is a director. Amount indicated includes 1,000 shares of Common Stock owned of record by Mr. Mabey. |
| 13) | Mr. Dubois is a director. Shares indicated are subject to a Stock Purchase and Royalty Agreement, pursuant to which Tetra House Pte, Ltd., an entity controlled by Mr. Dubois, has the right to purchase 81,514,420 shares of the Company’s common and 3,900 Series D Preferred stock convertible into 23,400,000Includes 7,493 shares of common stock currently held by Borinquen Container Corp.owned of record and 8,943 shares of common stock issuable upon exercise of stock purchase warrants. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) requires our officers, directors, and persons who beneficially own more than 10 percent of our Common Stock to file reports of ownership and changes in ownership with the SEC. Officers, directors, and greater-than-ten-percent shareholders 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, and based on representations made by certain persons who were subject to this obligation that such filings were not required to be made, we believe that all reports required to be filed by these individuals and persons under Section 16(a) were filed during fiscal year 2012, and that such filings were timely except the following:
| | · | Mr. Hanlon, a director, filed one late Form 4 to report one transaction; and |
| ·(9) | Mr. Schmitt is a director, filed one late Form 4 to report three transactions.director. Includes 12,518 shares of common stock owned of record and 12,123 shares of common stock issuable upon exercise of stock purchase warrants. |
| · | Borinquen Container Corporation filed six late Form 4s to report six transactions. |
Certain Relationships and Related Transactions
The Company entered into certain transactions with related parties during the fiscal year ended September 30, 2012. These transactions consist mainly of financing transactions and consulting arrangements. Transactions with related parties are reviewed and approved by the independent and disinterested members of the Board of Directors.
| | | 2012 | | | 2011 | |
| | | | | | | |
| Note payable in connection with the redemption of a royalty agreement for $10,768,555. | | | | | | |
| The note requires installment payments and matured November 2012. The note is | | | | | | |
| currently in default. | | $ | 10,050,027 | | | $ | - | |
| | | | | | | | | |
| Note payable in connection with the purchase of the remaining ownership of Midwest | | | | | | | | |
| Monitoring & Surveillance, Inc. The payments are due quarterly ending in September | | | | | | | | |
| 2013. The Company imputed interest since the note has no stated interest rate, resulting in | | | | | | | | |
| a debt discount balance as of September 30, 2012 and 2011 of $11,398 and $32,524, | | | | | | | | |
| respectively. The note was paid off subsequent to September 30, 2012 through the | | | | | | | | |
| sale of Midwest Monitoring & Surveillance, Inc. | | | 138,602 | | | | 192,476 | |
| | | | | | | | | |
| Note payable in connection with the purchase of the remaining ownership of Court | | | | | | | | |
| Programs, Inc., interest at 12% per annum, with monthly payments of $10,000. The note | | | | | | | | |
| matured November 2012 and is currently in default. | | | 46,694 | | | | 139,272 | |
| | | | | | | | | |
| The Company received $500,000 from Mr. Derrick, a shareholder and former officer. | | | | | | | | |
| The terms of this financing have not been determined as of the date of this Report. | | | 500,000 | | | | - | |
| | | | | | | | | |
| Convertible debenture with an interest rate of 8% per annum. The debenture matures | | | | | | | | |
| December 17, 2012 and is secured by the domestic patents of the Company. The | | | | | | | | |
| debenture may be converted into shares of common stock at a rate of $0.0225 per share. | | | | | | | | |
| The debenture is currently in default. | | | 500,000 | | | | - | |
| | | | | | | | | |
| Convertible debenture with an interest rate of 8% per annum. The debenture matures | | | | | | | | |
| December 17, 2012 and is secured by the domestic patents of the Company. The | | | | | | | | |
| debenture may be converted into shares of common stock at a rate of $0.0225 per share. | | | | | | | | |
| The debenture is currently in default. | | | 2,000,000 | | | | - | |
| | | | | | | | | |
| The Company received $1,900,000 through the issuance of convertible debentures | | | | | | | | |
| with an interest rate of 8% per annum. The debentures mature on June 17, 2014. This | | | | | | | | |
| debenture may convert into shares of common stock at a rate of $0.0225 per share. | | | | | | | | |
| A debt discount of $633,333 was recorded to reflect a beneficial conversion feature. | | | | | | | | |
| As of September 30, 2012, the remaining debt discount was $611,308. | | | 1,288,692 | | | | - | |
| | | | | | | | | |
| The Company entered into a Loan a Security Agreement with an entity under which | | | | | | | | |
| the Company could borrow up to $8,000,000 on a line of credit. Both the Company | | | | | | | | |
| and the Lender agreed to terminate the agreement and enter into an agreement to | | | | | | | | |
| raise additional equity on behalf of the Company through the sale of Series D | | | | | | | | |
| Preferred stock. The loan was paid back and the line of credit was closed. | | | - | | | | 500,000 | |
| | | | | | | | | |
| Note payable with an interest rate of 16% per annum and matured in November 2011. | | | - | | | | 40,000 | |
| | | | | | | | | |
| Total related-party debt obligations | | | 14,524,015 | | | | 871,748 | |
| Less current portion | | | (12,793,303 | ) | | | (754,896 | ) |
| Long-term debt, net of current portion | | $ | 1,730,712 | | | $ | 116,852 | |
Other Related-Party Transactions
Notes #1 and #2
During the year ended September 30, 2012, the Company borrowed $2,000,000 from a significant shareholder, Borinquen Container Corp., under two notes payable. The first note was unsecured and the second was secured by $1,530,000 of leased equipment and $1,529,808 of accounts receivable from an international customer. The notes bore interest of 15% per annum and the Company accrued a $50,000 origination fee. During the fiscal year ended 30, 2012, the Company paid $1,018,082 to pay in full all outstanding principal and accrued interest on the first note and $1,037,544 to pay in full all outstanding principal and accrued interest on the second note.
Note #3
During the year ended September 30, 2012, the Company borrowed $50,000 from its then Chief Executive Officer, John Hastings, under an unsecured promissory note. The note bore interest of 15% per annum and was paid in full prior to September 30, 2012. In connection with this loan, the Company paid a $5,000 origination fee and agreed to re-price outstanding warrants and options previously granted to Mr. Hastings to an exercise price of $0.075 per share, valued at $15,237 and recorded as interest expense. The value of $15,237 was calculated based upon the following assumptions: volatility ranging from 100.02% to 109.24%, risk-free rate of 0.22%, exercise price of $0.075, and market price of Common Stock on grant date of $0.074.
Notes #4 and 5
During the year ended September 30, 2012, the Company borrowed $250,000 from its Chief Financial Officer, Chad Olsen, under two unsecured promissory notes payable. The notes bore interest of 15% per annum and were paid in full prior to September 30, 2012. The Company paid $15,000 in loan origination fees and agreed to re-price outstanding warrants and options previously granted to Mr. Olsen and other individuals to an exercise price of $0.075 per share, valued at $24,723 and recorded as interest expense. The value of $24,723 was calculated based upon the following assumptions: volatility ranging from 76.69% to 119.56%, risk-free rate ranging from 0.22% to 0.37%, exercise price of $0.075, and market price of Common Stock on grant date ranging from $0.074 to $0.075 per share.
Note #6
During the year ended September 30, 2012, the Company borrowed $180,000 from Rene Klinkhammer, one of its directors, under an unsecured promissory note payable. The note bore interest of 10 percent per annum and the Company paid $193,220 of principal and interest to settle the note in full prior to September 30, 2012. Included in the payoff of $193,220 is $9,000 in loan origination fees.
PROPOSAL NO. 2 – APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION TO EFFECT REVERSE STOCK SPLIT
Overview
Our Board of Directors has unanimously adopted a resolution approving, declaring advisable and recommending to the shareholders for their approval, a proposal to grant discretionary authority to our Board of Directors to amend the Company’s Articles of Incorporation to effect a Reverse Stock Split of our issued and outstanding Common Stock at any time prior to our next Annual Meeting of Shareholders, at any whole number ratio between one-for-two hundred and one-for-four hundred (1-for-200 to 1-for-400), with the exact exchange ratio and timing of the Reverse Stock Split (if at all) to be determined at the discretion of the Board of Directors (the “Reverse Stock Split Amendment”).
If this proposal is approved by the shareholders, our Board of Directors will be granted the discretionary authority to select any whole number ratio between 1-for-200 to 1-for-400 for the Reverse Stock Split, and will be authorized to file the Reverse Stock Split Amendment and effect the Reverse Stock Split at any time prior to our next Annual Meeting of Shareholders, but no later than December 31, 2013, with the exact exchange ratio and timing of the Reverse Stock Split (if at all) to be determined at the discretion of the Board of Directors. Our Board of Directors’ decision whether or not (and when) to file the Amendment and effect the Reverse Stock Split (and at what whole number ratio to effect the Reverse Stock Split) will also be based on a number of factors, including market conditions, existing and anticipated trading prices for our Common Stock and the listing requirements of a national stock exchange or the NASDAQ Capital Market.
Shareholder approval is being sought to implement the Reverse Stock Split Amendment and effect the Reverse Stock Split in order to provide our Board of Directors with the flexibility to determine the ultimate exchange ratio of the Reverse Stock Split based upon the best interests of the Company and its shareholders. If the shareholders approve the Reverse Stock Split Amendment and Reverse Stock Split, the Company reserves the right not to file the Reverse Stock Split Amendment and effect the Reverse Stock Split if our Board of Directors does not deem it to be in the best interests of the Company and its shareholders. The form of the Reverse Stock Split Amendment to the Company’s Articles of Incorporation to effect the Reverse Stock Split is attached to this proxy statement as Appendix I.
The Company believes that the availability of a range of reverse stock split ratios will provide it with the flexibility to implement the Reverse Stock Split in a manner designed to maximize the anticipated benefits for the Company and its shareholders. In determining which ratio to implement, if any, following the receipt of shareholder approval, our Board may consider, among other things, factors such as:
the historical trading price and trading volume of our Common Stock;
the then prevailing trading price and trading volume of our Common Stock and the anticipated impact of the Reverse Stock Split on the trading market for our Common Stock;
the Company’s ability to facilitate the listing of our Common Stock on the NASDAQ Capital Market or a national exchange; and
prevailing general market and economic conditions.
The Board, in its discretion, may elect, at any time prior to next year’s Annual Meeting of Shareholders, to implement the Reverse Stock Split Amendment and effect the Reverse Stock Split at a ratio within the range set forth above upon receipt of shareholder approval, or none of them if the Board determines in its discretion not to proceed with the Reverse Stock Split.
Reasons for Reverse Stock Split
The Board proposes to effect, and believes that shareholders should authorize, the Reverse Stock Split for the following reasons:
The Reverse Stock Split would allow a broader range of institutions and other investors to invest in our Common Stock, such as funds that are prohibited from buying stock whose price is below a certain threshold, potentially increasing trading volume and liquidity. Further, the Reverse Stock Split would help increase broker interest in shares of our Common Stock as their policies can discourage them from recommending companies with lower stock prices. Because of the trading volatility often associated with lower-priced stocks, many brokerage houses and institutional investors have adopted internal policies and practices that either prohibit or discourage them from investing in such stocks or recommending them to their customers. Additionally, because brokers’ commissions on transactions in lower-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the current average price per share of our Common Stock can result in individual shareholders paying transaction costs representing a higher percentage of their total share value than would be the case if the stock price were substantially higher.
Our Board believes that the increase in the stock price expected to result from the Reverse Stock Split could decrease price volatility, as small changes in the price of our Common Stock currently result in relatively large percentage changes in the stock price.
Our Common Stock is traded on the OTC Bulletin Board. The OTC Bulletin Board is an inter-dealer, over-the-counter market that provides significantly less liquidity than national securities exchanges, such as The NASDAQ Stock Market. We would like to have the flexibility in the future to consider listing our Common Stock on the NASDAQ Stock Market or on another national stock exchange, but we do not currently meet the listing requirements for The NASDAQ Stock Market or any other national stock exchange. Most national stock exchanges maintain minimum share price requirements to determine a security’s eligibility for listing on the stock exchange. For example, in order to list our Common Stock on The NASDAQ Capital Market, we would be required to have a minimum bid price of $4.00 per share.
As of December 17, 2012, the closing price of our Common Stock, as listed on the OTC Bulletin Board, was $0.058 per share. While the Reverse Stock Split may not increase our stock price to $4.00 per share immediately, our Board believes that the Reverse Stock Split may make it easier for the Company to achieve that level in the future, thereby facilitating listing of our Common Stock on the NASDAQ Stock Market or on another national stock exchange.
Possible Disadvantages of Reverse Stock Split
The Board believes that the potential advantages of the Reverse Stock Split significantly outweigh any disadvantages that may result. The following are possible disadvantages of the Reverse Stock Split:
Although our Board expects that the Reverse Stock Split will result in an increase in the price of our Common Stock, the effect of the Reverse Stock Split cannot be predicted with certainty. Other factors, such as the Company’s financial results, market conditions and the market perception of the Company’s business may adversely affect our stock price. As a result, there can be no assurance that the Reverse Stock Split, if completed, will result in the intended benefits described above; that the stock price will increase following the Reverse Stock Split; or that the stock price will not decrease in the future.
Because the Reverse Stock Split will reduce the number of shares of our Common Stock available in the public market, the trading market for such securities may be harmed, particularly if the stock price does not increase as a result of the Reverse Stock Split. The Reverse Stock Split will reduce the number of shares outstanding, including the number of shares in the public float (i.e. the shares that trade on the public markets). A reduction in the public float could reduce the amount of trading in our shares of Common Stock.
Effects of Reverse Stock Split
General
If the Reverse Stock Split is approved and implemented, the principal effects will be to decrease the number of outstanding shares of the Company’s Common Stock based on the reverse stock split ratio selected by the Board and an increase in the per share price of the Common Stock. As of November 30, 2012, approximately 640,088,850 shares of our Common Stock were issued and outstanding and 48,763 shares of Series D Preferred Stock were issued and outstanding convertible into 292,578,000 shares of Common Stock, for a total of 932,666,850 common share equivalents. Without taking into account fractional shares that will be rounded up to the nearest whole share as described below, based on this number of shares issued and outstanding and, for illustrative purposes only, assuming a reverse split ratio of 1-for-200, the Company would have approximately 4,663,334 shares outstanding immediately following the completion of the Reverse Stock Split; a reverse split ratio of 1-for-400 shares would reduce the number of issued and outstanding shares of Common Stock to 2,331,667.
With respect to holders of our Series D Preferred Stock, if the Reverse Stock Split is effected, the conversion price of the Series D Preferred Stock (i.e., the ratio at which the Series D Preferred Stock converts into shares of our Common Stock) will be proportionately adjusted such that holders will be entitled to receive the number of shares of Common Stock which they would have been entitled to had the Series D Preferred Stock been converted immediately prior to implementing the Reverse Stock Split. As a result, while our preferred shareholders will still own the same number of shares of Series D Preferred Stock, such shares will be convertible into a smaller number of shares of our Common Stock. The specific number of shares of Common Stock into which shares of Series D Preferred Stock will be convertible following effectiveness of the Reverse Stock Split will depend on the reverse stock split ratio selected by the Board.
The proposed Reverse Stock Split will affect all of our shareholders (common or preferred) uniformly and will not affect any shareholder’s percentage ownership interest in the Company except to the extent that the Reverse Stock Split results in any of our shareholders owning a fractional share. The proposed Reverse Stock Split will not affect voting rights and other rights and preferences of our shareholders (common or preferred), nor will it affect the number of our shareholders of record.
The amendment to our Articles of Incorporation to effect the Reverse Stock Split will not proportionately change the number of authorized shares of our Common Stock or Series D Preferred Stock; unless, the amendment to decrease the authorized shares is also approved by the shareholders. As a result, with respect to each class of capital stock, one of the effects of the Reverse Stock Split, if implemented, will be to effectively increase the proportion of authorized shares, which are unissued relative to those which are issued. This could result in us being able to issue more shares without further shareholder approval.
Effectiveness of Reverse Stock Split
The Reverse Stock Split Amendment and Reverse Stock Split, if approved by our shareholders, would become effective upon the filing and effectiveness of an amendment to the Company’s Articles of Incorporation. However, the exact timing of the filing of the amendment will be determined by the Board based on its evaluation as to when such action will be the most advantageous to the Company and its shareholders, if at all. Accordingly, the Board reserves the right, notwithstanding shareholder approval and without further action by the shareholders, to elect not to proceed with the Reverse Stock Split if, at any time prior to filing the Reverse Stock Split Amendment, the Board, in its sole discretion, determines that it is no longer in the Company’s best interests and the best interests of its shareholders to proceed with the Reverse Stock Split. If the Board fails to implement the Reverse Stock Split by next year’s annual meeting, shareholder approval would be required again prior to implementing any Reverse Stock Split.
Effect on Stock Certificates
Shareholders are not required to send in their current certificates for exchange. Following the Reverse Stock Split, each stock certificate representing issued and outstanding shares of our Common Stock will represent a fewer number of shares, as adjusted appropriately based on the Reverse Stock Split ratio selected by our Board. For example, a stock certificate evidencing 1,000 shares of Common Stock will, upon effectiveness of the Reverse Stock Split, represent five shares of Common Stock (assuming that the Board effects the Reverse Stock Split at a 1-for-200 ratio). With respect to holders of our Series D Preferred Stock, if the Reverse Stock Split is effected, the conversion price of the Series D Preferred Stock (i.e., the ratio at which the Series D Preferred Stock converts into shares of our Common Stock) will be proportionately adjusted such that holders will be entitled to receive the number of shares of Common Stock which they would have been entitled to had the Series D Preferred Stock been converted immediately prior to implementing the Reverse Stock Split. As a result, while you will still own the same number of shares of Series D Preferred Stock, such shares will be convertible into a smaller number of shares of our Common Stock. The specific number of shares of Common Stock into which your Series D Preferred Stock will be convertible following effectiveness of the Reverse Stock Split will depend on the reverse stock split ratio selected by the Board.
Effect on Company’s Stock Grants and Warrants
As of November 30, 2012, approximately 99,756,493 shares of our Common Stock were subject to the exercise of outstanding stock options/warrants and other awards, and approximately 12,000,000 additional shares were reserved and available for issuance pursuant to future awards.
Under these plans, the number of shares reserved and available for issuance and the number, exercise price, grant price or purchase price of shares subject to outstanding awards will be proportionately adjusted based on the reverse split ratio selected by the Board if the Reverse Stock Split is affected. As a result, using the above data as of November 30, 2012, and assuming for illustrative purposes only that a 1-for-200 Reverse Stock Split is effected, the number of shares issuable upon exercise or vesting of outstanding awards would be adjusted from 99,756,493 to 498,783, (subject to increase as and when awards made under the stock plans expire or are forfeited and are returned in accordance with the terms of the plans). If a 1-for-400 Reverse Stock Split is effected, the number of shares issuable upon exercise or vesting of outstanding awards would be 249,392.
For individual holders, the number of shares subject to outstanding awards would be reduced by a factor of 200 (or 400, as the case may be) and, in the case of outstanding stock options, the exercise price per share would be increased by a multiple of 200 (or 400), such that upon an exercise, the aggregate exercise price payable by the optionee to the Company would remain the same. For example, an outstanding stock option for 5,000 shares of Common Stock, exercisable at $0.10 per share, would be adjusted as a result of a 1-for-200 split ratio into an option exercisable for 25 shares of Common Stock at an exercise price of $20 per share. If the 1-for-400 ratio is used, the same option would be exercisable for 12.5 shares of Common Stock, at an exercise price of $40 per share. In connection with the proposed Reverse Stock Split, the number of shares of our Common Stock issuable upon exercise of outstanding stock awards will be rounded to the nearest whole share and no cash payment will be made in respect of such rounding. The proposed Reverse Stock Split will have a similar effect upon our outstanding warrants.
Reducing the number of outstanding shares of our Common Stock through the Reverse Stock Split is intended, absent other factors, to increase the per share market price of our Common Stock. However, other factors, such as our financial results, market conditions and the market perception of our business may adversely affect the market price of our Common Stock. As a result, there can be no assurance that the Reverse Stock Split, if completed, will result in the intended benefits described above, that the market price of our Common Stock will increase following the Reverse Stock Split, that the market price of our Common Stock will not decrease in the future, or that we will otherwise be able to comply with applicable listing requirements. Moreover, some investors may view the Reverse Stock Split negatively since it reduces the number of shares of Common Stock available in the public market.
Depending on the exact reverse stock split ratio chosen by our Board of Directors, the number of shares of Common Stock issued and outstanding would be reduced, and the number of shares of unreserved authorized Common Stock available for future issuance would be increased, as the Company is not asking the shareholders to authorize the reduction of the number of authorized shares of Common Stock as part of the Reverse Stock Split proposal. The table below shows the number of (a) shares issued and outstanding, (b) unissued shares which are authorized and reserved for issuance (representing outstanding and available stock options and warrants), and (c) unissued shares which are authorized but not reserved for issuance, in each case after giving effect to the implementation of the Reverse Stock Split at specified ratios from 1 for 200 to 1 for 400 (in 50-share increments), based on the Company’s outstanding Common Stock on the Record Date. The exact number of shares would be determined by the number of outstanding shares on the date the Reverse Stock Split was effected, and the exact reverse stock split ratio would be determined by the Board of Directors, in its sole discretion, at any ratio deemed advisable between 1 for 200 and 1 for 400.
| | Shares of Common Stock |
| Reverse Stock Split Ratio | Shares Issued and Outstanding | Unissued Shares Authorized and Reserved for Issuance | Unissued Shares Authorized but Unreserved |
| One-For-Two Hundred (1:200) | 3,200,444 | 2,628,339 | 9,171,217 |
| One-For-Two Hundred Fifty (1:250) | 2,560,355 | 2,102,671 | 10,336,973 |
| One-For-Three Hundred (1:300) | 2,133,630 | 1,752,226 | 11,114,144 |
| One-For-Three Hundred Fifty (1:350) | 1,828,825 | 1,501,908 | 11,669,267 |
| One-For-Four Hundred (1:400) | 1,600,222 | 1,314,170 | 12,085,608 |
The Company has no present plans, proposals or arrangements to issue the additional authorized shares of its Common Stock at this time, other than (a) 99,756,493 shares reserved for issuance in connection with outstanding warrants and options, (b) 12,000,000 shares reserved for issuance under the 2012 Stock Option Plan (the “2012 Plan”), and (c) 292,578,000 shares reserved for issuance upon conversion of 48,763 shares of Series D Preferred Stock. These share amounts are provided on a pre-proposed reverse stock split basis. Therefore, the share amounts authorized will also be subject to adjustment if, and to the extent that, the Reverse Stock Split is implemented.The Board of Directors does not intend to seek shareholder approval of any future issuances of authorized Common Stock unless required by the laws of Utah, the Company’s state of incorporation, our Bylaws, or listing requirements of any applicable exchange.
Fractional Shares
We will not issue any fractional shares of Common Stock to holders of our Common Stock in connection with the Reverse Stock Split. Instead, with respect to any fractional share resulting from the Reverse Stock Split, and subject to applicable law, we will round up such fractional share to the nearest whole share.
Effect on Registered and Beneficial Holders
If the Reverse Stock Split is implemented, the Company intends to treat beneficial holders (i.e., shareholders who hold their shares in “street name” through a bank, broker or other nominee) in the same manner as registered shareholders whose shares are registered in their names. Banks, brokers or other nominees will be instructed to effect the Reverse Stock Split for their beneficial holders holding shares in “street name”. However, these banks, brokers or other nominees may have their own procedures for processing the Reverse Stock Split. Shareholders who hold shares with a bank, broker or other nominee and have questions in this regard are encouraged to contact their bank, broker or other nominee.
No Dissenters’ Rights
Under Utah law, the Company’s shareholders are not entitled to dissenter’s rights or appraisal rights with respect to the Reverse Stock Split Amendment and the Reverse Stock Split described in this proposal.
Certain Federal Income Tax Consequences of Reverse Stock Split
The following is a general summary of certain U.S. federal income tax consequences of the Reverse Stock Split that may be relevant to shareholders. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated thereunder, published administrative rulings and judicial decisions as of the date hereof, all of which may change, possibly with retroactive effect, resulting in U.S. federal income tax consequences that may differ from those discussed below. This summary does not purport to be complete and does not address all aspects of federal income taxation that may be relevant to shareholders in light of their particular circumstances or to shareholders that may be subject to special tax rules. In addition, this summary does not address the tax consequences arising under the laws of any foreign, state or local jurisdiction and U.S. federal tax consequences other than federal income taxation.
The Company has not sought, and will not seek, an opinion of counsel or a ruling from the Internal Revenue Service (“IRS”) regarding the United States federal income tax consequences of the Reverse Stock Split and there can be no assurance the IRS will not challenge the statements and conclusions set forth below or that a court would not sustain any such challenge. EACH SHAREHOLDER SHOULD CONSULT SUCH HOLDER’S TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT TO SUCH SHAREHOLDER.
The Reverse Stock Split should constitute a “recapitalization” for U.S. federal income tax purposes. As a result, a shareholder generally should not recognize gain or loss upon the Reverse Stock Split. A shareholder’s aggregate tax basis in the shares of the Common Stock received pursuant to the Reverse Stock Split should equal the aggregate tax basis of the shares of the Common Stock surrendered (excluding the effect of any fractional shares that are rounded up, if at all), and such shareholder’s holding period in the shares of the Common Stock received should include the holding period in the shares of the Common Stock surrendered. Treasury regulations promulgated under the Code provide detailed rules for allocating the tax basis and holding period of the shares of the Common Stock surrendered to the shares of the Common Stock received pursuant to the Reverse Stock Split. Shareholders who acquired their shares of Common Stock on different dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares.
Recommendation of the Board of Directors
The Board of directors recommends shareholder approval of the Reverse Stock Split Amendment. Proxies received pursuant to this solicitation will be voted FOR the approval of the Reverse Stock Split Amendment, unless the shareholder has specified in the proxy that his, her or its shares are to be voted against the approval of the Reverse Stock Split and the Reverse Stock Split Amendment.
PROPOSAL NO. 3 – APPROVAL OF THE AMENDMENT TO THE COMPANY’S
AMENDED AND RESTATED ARTICLES OF INCORPORATION
TO EFFECT THE AUTHORIZED COMMON STOCK REDUCTION
FROM 1,250,000,000 TO 15,000,000 SHARES
General Description of Proposal
The Board of Directors has approved a proposed amendment to the Articles of Incorporation of the Company, that would reduce the number of shares of Common Stock the Company is authorized to issue; provided that Proposal No. 2 above is approved by the shareholders and the Reverse Stock Split is implemented by the Board of Directors (the “Authorized Share Reduction Amendment”). If adopted, this amendment would reduce the number of authorized shares of Common Stock from 1,250,000,000 to 15,000,000 shares. The proposed Authorized Share Reduction Amendment to the Articles of Incorporation of the Company is included in the attached Appendix I.
Approval of each of the Authorized Share Reduction Proposal and the Reverse Stock Split Amendment is conditioned upon the approval of the other proposal. If either of these proposals is not approved, then the other proposal will automatically be deemed to not have been approved, regardless of the number of shares actually voted “FOR” that proposal. The Board will not amend our Articles of Incorporation to effect the Reverse Stock Split or to reduce the number of authorized shares of Common Stock unless each of Proposal No. 2 and Proposal No. 3 is approved.
If the Reverse Stock Split Amendment and the Authorized Share Reduction Amendment Proposals are each approved by shareholders, the Board of Directors will have the sole authority to determine whether or not to implement the Reverse Stock Split at any time prior to the next Annual Meeting of Shareholders. To the extent the Board of Directors implements the Reverse Stock Split, the Board of Directors would simultaneously implement the Authorized Share Reduction by filing a corresponding amendment to our Articles of Incorporation with the State of Utah.
Purpose of the Authorized Share Reduction
The principal purpose of decreasing the number of authorized shares of Common Stock is to reduce the potential for substantial dilution to the shareholders as a result of a change in the Company’s capital structure after implementation of the Reverse Stock Split.
Principal Effects of the Authorized Share Reduction
“Authorized” shares represent the number of shares of Common Stock that the Company is permitted to issue under its Articles of Incorporation. The decrease in the number of authorized shares of Common Stock would result in fewer shares of authorized but unissued shares of Common Stock being available for future issuance. This would decrease the number of shares of Common Stock available for issuance for various purposes such as to raise capital, to make acquisitions, and to compensate employees. Given that there will be a reduction in the number of outstanding shares of Common Stock through implementation of the Reverse Stock Split, the Company believes that it will continue to have sufficient excess authorized shares of Common Stock to meet business needs as they arise, to take advantage of favorable opportunities and to respond to a changing corporate environment.
Effectiveness of Amendment and Vote Required
If the proposed Authorized Share Reduction Amendment is adopted, it will become effective upon the filing of articles of amendment to our Amended and Restated Articles of Incorporation with the Utah Division of Corporations. This amendment will only be filed upon completion of a Reverse Stock Split as approved by shareholders and implemented by the Board of Directors. The Authorized Share Reduction Amendment to the Articles of Incorporation requires the affirmative vote of a majority of the shares present and entitled to vote at the annual meeting.
Recommendation
FOR THE FOREGOING REASONS THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE AUTHORIZED SHARE REDUCTION AMENDMENT TO EFFECT THE AUTHORIZED SHARE REDUCTION.
PROPOSAL NO. 4: ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Company’s executive compensation program is designed to attract, motivate and retain a talented team of executives. The Company seeks to accomplish this goal in a way that rewards performance that is aligned with its shareholders’ long-term interests. The Company believes that its executive compensation program achieves this goal and is strongly aligned with the long-term interests of its shareholders.
Pursuant to Section 14A of the Exchange Act, the Company is submitting a proposal to its shareholders for an advisory vote on the compensation of its named executive officers. This proposal, commonly known as a “say-on-pay” proposal, is a non-binding vote, but gives shareholders the opportunity to express their views on the compensation of the Company’s named executive officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of the named executive officers.
Accordingly, the following resolution is submitted for shareholder vote at the Annual Meeting:
RESOLVED, that the shareholders of SecureAlert, 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 February 28, 2013, pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, 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, the Compensation Committee, which is responsible for designing and administering the Company’s executive compensation program, values the opinions expressed by shareholders in their vote on this proposal and will consider the outcome of the vote when making future compensation decisions for named executive officers.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT.
PROPOSAL 5: ADVISORY VOTE ON THE FREQUENCY OF
FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATIONCERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Pursuant to Section 14A Royalty Agreement
On August 4, 2011, with an effective date of July 1, 2011, we entered into an agreement (the “Royalty Agreement”) with Borinquen Container Corp., a corporation organized under the laws of the Exchange Act,Commonwealth of Puerto Rico (“Borinquen”) to purchase Borinquen’s wholly-owned subsidiary, International Surveillance Services Corporation, a Puerto Rico corporation (“ISS”) in consideration of 310,000 shares of our common stock, valued at the market price on the date of the Royalty Agreement at $16.40 per share, or $5,084,000. We also agreed to pay to Borinquen quarterly royalty payments in an amount equal to 20% of our net revenues from the sale or lease of our monitoring devices and monitoring services within a territory comprised of South and Central America, the Caribbean, Spain and Portugal, for a term of 20 years. On February 1, 2013, we redeemed and terminated this royalty obligation in February 2013 for a total cost of $13.0 million using the proceeds of a $16.7 million loan from a related party, Sapinda Asia Limited (“Sapinda Asia”). In addition to the $13.0 million used to terminate the Royalty Agreement, we used the remaining $3.7 million as operating capital during the 2013 fiscal year. On September 30, 2013, Sapinda Asia converted all outstanding principal and interest under the loan, totaling $17,576,627, into 3,905,917 shares of common stock at a rate of $4.50 per share.
On February 1, 2013, the Company is submittingentered into a proposalrevolving loan agreement with Sapinda Asia (the “Revolving Loan”). Under this arrangement, the Company may borrow up to its shareholders$1,200,000 at an interest rate of 3% per annum for unused funds and 10% per annum for borrowed funds. On October 24, 2013, the Company drew down the full $1,200,000 for use in a performance bond as required under a contract with an advisory vote as to whetherinternational customer. The loan initially matured in June 2014. However, the shareholder advisory vote to approvematurity date of the compensation of our named executive officers – Proposal No.4 above – should occur every one, two or three years. You may cast your vote by choosing one year, two years or three years or you may abstain from voting when you vote for the resolution set forth below.note was extended and now matures in December 2015.
Related-Party Promissory Note
RESOLVED, thatOn November 19, 2013, the highest numberCompany borrowed $1,500,000 from Sapinda Asia. The unsecured note bears interest at a rate of votes cast by8% per annum and initially matured on November 18, 2014. However, the shareholdersmaturity date of SecureAlert, Inc. forthe note was extended to November 19, 2015. As of September 30, 2014, the Company owed $1,500,000 of principal and $43,726 of accrued interest on the note.
Related-Party Service Agreement
During the fiscal year ended September 30, 2013, the Company entered into an agreement with Paranet Solutions, LLC to provide the following options shall beprimary services: (i) procurement of hardware and software necessary to ensure that vital databases are available in the preferred frequency with which SecureAlert, Inc. is to hold an advisory vote onevent of a disaster (backup and disaster recovery system); and (ii) providing the approvalsecurity of all data and the integrity of such data against all loss of data, misappropriation of data by Paranet, its employees and affiliates. David S. Boone, a director and member of the compensationCompany’s Executive Committee, was the Chief Executive Officer of its named executive officers included in the Proxy Statement: (a) yearly or (b) every two years or (c) every three years.Paranet until August 2014.
After carefulAs consideration the Board of Directors recommends that future advisory votes on executive compensation occur every three years (triennially). The 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 shareholders 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 shareholders by allowing them an appropriate timeframe to evaluate the Company’s performance and overall effectiveness of the executive compensation program. |
For the foregoing reasons,these services, the Company encourages its shareholdersagreed to evaluatepay Paranet $4,500 per month, and during the Company’s executive compensation programs over a multi-year horizon and to review its named executive officers’ compensation over the past three fiscal years as reported in the Summary Compensation Table above. In addition,year ended September 30, 2014 the Company believes that a triennial advisory vote on executive compensation reflects the appropriate time framepaid $461,223 to Paranet. The arrangement can be terminated by either party for the Compensation Committee and the Board of Directors to evaluate the results of the most recent advisory vote on executive compensation, to discuss the implications of that vote with shareholdersany reason upon ninety (90) days written notice to the extent needed, to develop and implement any adjustments to its executive compensation programs that may be appropriate in light of a past advisory vote on executive compensation, and for shareholders to see and evaluate the Compensation Committee’s actions in context. In this regard, because the advisory vote on executive compensation occurs after the Company has implemented its executive compensation programs for the current year, and because the different elements of compensation are designed to operate in an integrated manner and to complement one another, the Company expects that in certain cases it may not be appropriate or feasible to fully address and respond to any one year’s advisory vote on executive compensation by the time of the following year’s Annual Meeting of Shareholders.
Shareholders will be able to specify one of four choices for this proposal on the proxy card: three years, two years, one year or abstain. Shareholders are not voting to approve or disapprove the Board’s recommendation. This advisory vote on the frequency of future advisory votes on executive compensation is non-binding on the Board of Directors. Notwithstanding the Board’s recommendation and the outcome of the shareholder vote, the Board may in the future decide to conduct advisory votes on a more or less frequent basis and may vary its practice based on factors such as discussions with shareholders and the adoption of material changes to compensation programs.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE TO CONDUCT FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION EVERY THREE YEARS.
PROPOSAL NO. 6 – RATIFICATION OF SELECTION OF
HANSEN BARNETT & MAXWELL, P.C.Facility Agreement
AS INDEPENDENT REGISTERED PUBLIC ACCOUNTANT
On January 3, 2014, we entered into an unsecured Facility Agreement with Tetra House Pte. Ltd., a related-party entity, controlled by our Chairman, Guy Dubois. Under this agreement, we may borrow up to $25,000,000 for working capital and acquisitions purposes. The Audit Committeeloan bears interest at a rate of 8% per annum, payable in arrears semi-annually, with all principal and accrued and unpaid interest due on January 3, 2016. In addition, we agreed to pay Tetra House an arrangement fee equal to 3% of the aggregate maximum amount under the loan. On January 14, 2014 Tetra House assigned the Facility Agreement to Conrent Invest S.A. Since January 3, 2014, we have borrowed $25,000,000 under the Facility Agreement. The borrowed funds have been used for acquisitions and for general corporate purposes. The Facility Agreement was reviewed and approved by disinterested and independent members of the Board of Directors, has selected Hansen, Barnett & Maxwell P.C. (“Hansen Barnett”) as the Company’s Independent Registered Public Accounting Firm for the fiscal year ending September 30, 2013David S. Boone, Winfried Kunz, Dan L. Mabey and has further directed that management submit the selection of our Independent Registered Public Accounting Firm for ratification by the shareholders at the Annual Meeting. Hansen Barnett has audited the Company’s financial statements since September 2006. Representatives of Hansen Barnett are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.George F. Schmitt.
Neither the Company’s Bylaws nor other governing documents or law require shareholder ratification of the selection of Hansen Barnett as the Company’s Independent Registered Public Accounting Firm. However, the Audit Committee of the Board is submitting the selection of Hansen Barnett to the shareholders for ratification as a matter of good corporate practice. If the shareholders fail to ratify the selection, the Audit Committee of the Board will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee of the Board in its discretion may direct the appointment of a different Independent Registered Public Accounting Firm at any time during the year if they determine that such a change would be in the best interests of the Company and its shareholders.
The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the annual meeting will be required to ratify the selection of Hansen Barnett. Abstentions will be counted toward the tabulation of votes cast on proposals presented to the shareholders and will have the same effect as negative votes. Broker non-votes are counted towards a quorum, but are not counted for any purpose in determining whether this matter has been approved.
Independent Registered Public Accounting Firm FeesAdditional Related-Party Transactions and Summary of All Related-Party Obligations
Audit Fees| | | 2014 | | | 2013 | |
| | | | | | | |
Loan from a significant shareholder with an interest rate of 8% per annum. Principal and interest due at maturity on December 30, 2015. | | $ | 1,200,000 | | | $ | - | |
| | | | | | | | | |
Promissory note with a significant shareholder with an interest rate of 8% per annum. Principal and interest due at maturity on November 19, 2015. | | | 1,500,000 | | | | - | |
| | | | | | | | | |
Convertible debenture of $16,700,000 from a significant shareholder with an interest rate of 8% per annum. On September 30, 2013, $16,640,000 plus accrued interest of | | | - | | | | 60,000 | |
| | | | | | | | | |
| Total related-party debt obligations | | | 2,700,000 | | | | 60,000 | |
| Less current portion | | | - | | | | (60,000 | ) |
| Long-term debt, net of current portion | | $ | 2,700,000 | | | $ | - | |
Audit services consist of the audit of the annual consolidated financial statements of us, and other services related to filings and registration statements filed by us and our subsidiaries and other pertinent matters. Audit fees paid to Hansen Barnett for fiscal years 2012 and 2011 totaled approximately $147,000 and $144,000, respectively.
Tax Fees, Audit Related Fees, and All Other Fees
Hansen Barnett had not provided any consulting services (including tax consulting and compliance services or any financial information systems design and implementation services) to us in fiscal years 2012 and 2011. Subsequent to year end, Hansen Barnett was engaged to perform tax compliance services for the Company.
The Audit Committee of the Board of Directors considered and authorized all services provided by Hansen Barnett.
Auditor Independence
Our Audit Committee considered that the work done for us in fiscal 2011 by Hansen Barnett was compatible with maintaining Hansen Barnett’s independence.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees our financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. The directors who serve on the Audit Committee are all independent for purposes of applicable Securities and Exchange Commission (“SEC”) rules. The Audit Committee operates under a written charter that has been adopted by the Board of Directors.
We have reviewed
STOCKHOLDER PROPOSALS FOR THE 2015 ANNUAL MEETING
Stockholder proposals that are intended to be presented by stockholders at the Company’s 2016 Annual Meeting of Stockholders must be received by the Secretary of the Company no later than December 12, 2015 in order that they may be included, if appropriate, in the Company’s proxy statement and discussed with management our audited financial statements asform of andproxy relating to that meeting. A stockholder proposal not included in the Company’s proxy statement for the fiscal year ended September2016 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 2016 Annual Meeting of Stockholders is changed by more than 30 2011. We have discussed with our independent registereddays 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 accountant, Hansen Barnett & Maxwell, P.C.,announcement of the matters that are required todate of such meeting is first made.
PAYMENT OF COSTS
The expense of printing and mailing proxy materials and the solicitation of proxies will be discussed by U.S. Auditing Standards as establishedborne by the Auditing Standards BoardCompany. In addition to the solicitation of proxies by mail, solicitation may be made by proxy solicitors, directors, officers and other employees of the American Institute of Certified Public Accountants, which includes a reviewCompany by personal interview, telephone, facsimile or other means. No additional compensation will be paid to directors, officers or employees of the findingsCompany for such solicitation. The Company will reimburse brokerage firms and others for their reasonable expenses in forwarding solicitation materials to beneficial owners of the independent registered public accountant during its examinationcommon 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 our financial statements.
Webrokers 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 reviewedwould prefer to receive a separate set of the Company’s proxy materials, please notify your broker or direct a written disclosures and the letter from Hansen Barnett & Maxwell, P.C., which is required by Independence Standard No. 1, Independence Discussions with Audit Committees, as amended, by the Independence Standards Board, and we have discussed with Hansen Barnett & Maxwell, P.C. their independence under such standards. We have concluded that the independent registered public accountant is independent from us and our management.
Based on our review and discussions referred to above, we have recommendedrequest to the BoardCompany, Attn: Investor Relations Department, 405 South Main Street, Suite 700, Salt Lake City, Utah 84111, or by calling (801) 451-6141. The Company undertakes to deliver promptly, upon any such oral or written request, a separate copy of Directors that our audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2011, for filing with the SEC.
Submitted by the membersits 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 Audit Committee:
Larry Schafran (Chairman)
David Boone
George Schmitt
Vote Required
ApprovalCompany’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 appointment of the Independent Registered Public Accounting Firm requires the affirmative vote of a majority of the shares present and entitled to voteCompany at the annual meeting.above address or phone number.
THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THE SELECTION OF HANSEN BARNETT & MAXWELL, P.C. AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
OTHER MATTERS
Shareholder Proposals
Proposals by shareholders for possible inclusion in the Company’s proxy materials for presentationThe Company knows of no other business that will be presented at the nextAnnual Meeting. If any other business is properly brought before the Annual Meeting, of Shareholders must be received by the Secretary of the Company no later than January 30, 2013. In addition, the proxyit is intended that proxies solicited by the Board of Directors for the next Annual Meeting of Shareholders will confer discretionary authority to vote on any shareholder proposal presented at that meeting, unless the Company is provided with the notice of such proposal no later than 45 days prior to first anniversary of the proxy mailing date in 2012. Any shareholder wishing to present a nomination for the office of director must do so in writing deliveredthis Proxy Statement, if validly signed, dated and returned to the Company, at least 90 days and not more than 120 days prior to the first anniversary of the preceding year’s annual meeting, and that written notice must meet certain other requirements.
A shareholder’s notice to the Secretary shall set forth (i) as to each person whom the shareholder proposes to nominate for election or reelection as a director (A) the name, age, business address and residence address of such person, (B) the principal occupation or employment of such person, (C) the class and number of shares of the Company which are beneficially owned by such person on the date of such shareholder’s notice, and (D) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act, or any successor statute thereto (including without limitation such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (ii) as to the shareholder giving the notice (A) the name and address, as they appear on the Company’s (or its agent’s) books, of such shareholder and any other shareholders known by such shareholder to be supporting such nominee(s), (B) the class and number of shares of the Company which are beneficially owned by such shareholder on the date of such shareholder’s notice, and (C) a representation that the shareholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; and (iii) a description of all arrangements or understandings between the shareholder and each nominee and other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder.
Communications to the Board of Directors
Our Board of Directors maintains a process for shareholders and interested parties to communicate with the Board. Shareholders may write to the Board of Directors, c/o Gordon O. Jesperson, General Counsel and Corporate Secretary, SecureAlert, Inc., 150 West Civic Center Drive, Suite 100, Sandy, Utah 84070. Communications addressed to individual Board members and clearly marked as shareholder communications will be forwarded by the Corporate Secretary unopened to the individual addressees. Any communications addressed only to the Board of Directors and clearly marked as shareholder communications will be forwarded by the Corporate Secretary unopened to the Nominating Committee.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the information and reporting requirements of the Exchange Act under which we file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any materials we have filed with the SEC at the SEC’s public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public from the SEC’s Internet website at http://www.sec.gov.
You may request a copy of any of our filings with the SEC at no cost, by writing, e-mailing, or telephoning us at the following address, e-mail address or phone number:
SecureAlert, Inc.
150 West Civic Center Drive, Suite 100
Sandy, Utah 84070
Attention: Chad D. Olsen, Chief Financial Officer
colsen@securealert.com; (801) 451-6141
THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE ANNUAL MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS DATED DECEMBER 18, 2012. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO SHAREHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
PROXY – SECUREALERT, INC.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF SECUREALERT, INC.
Chad D. Olsen or Gordon O. Jesperson, or any of them, each with the power of substitution, are hereby authorized to represent and vote on the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the annual meeting of shareholders to be held on February 28, 2013, and any adjournments thereof.
This proxy, when properly executed, will be voted in accordance with the manner directed herein byjudgment of the undersigned shareholder. If no directions are given, this proxy will be voted forpersons holding the matters set forth below. The proxy holders named will vote in their discretion on any other matter that may properly come before the meeting.proxies.
Whether or not you intend to be present at the Annual Meeting, the Company urges you to return your signed proxy promptly.
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1. ELECTION OF FOUR DIRECTORS – The Board of Directors recommends a vote FOR the listed nominees. | | |
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| | FOR | WITHHOLD | | FOR | WITHHOLD | | |
David Boone
George F. Schmitt
Dan Mabey
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[ ]
| [ ]
[ ]
[ ]
| Winfried Kunz
Guy Dubois
Rene Klinkhammer
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[ ]
[ ]
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[ ]
[ ]
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2. | ADOPTION OF AMENDMENT TO ARTICLES OF INCORPORATION TO EFFECT REVERSE STOCK SPLIT AT ANY TIME BEFORE NEXT YEAR’S ANNUAL MEETING OF SHAREHOLDERS AT A REVERSE SPLIT RATIO IN THE RANGE OF 1-FOR-200 AND 1-FOR-400, WHICH SPECIFIC RATIO WILL BE DETERMINED BY OUR BOARD OF DIRECTORS. The Board of Directors recommends a vote FOR the proposal | |
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| FOR | AGAINST | ABSTAIN | |
[ ] | [ ] | [ ] | |
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3. | ADOPTION OF AMENDMENT TO ARTICLES OF INCORPORATION TO DECREASE THE NUMBER OF SHARES OF COMMON STOCK THAT THE COMPANY IS AUTHORIZED TO ISSUE FROM 1,250,000,000 TO 15,000,000 SHARES. THE AMENDMENT WILL NOT BE IMPLEMENTED AND THE DECREASE IN AUTHORIZED SHARES OF COMMON STOCK WILL NOT OCCUR UNLESS THE REVERSE STOCK SPLIT IS APPROVED AND IMPLEMENTED BY THE BOARD OF DIRECTORS. The Board of Directors recommends a vote FOR the proposal. | |
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| FOR | AGAINST | ABSTAIN | |
[ ] | [ ] | [ ] | |
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4. | RESOLVED, THAT THE SHAREHOLDERS OF SECUREALERT, 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 JANUARY 16, 2013, PURSUANT TO ITEM 402 OF REGULATION S-K, INCLUDING THE COMPENSATION DISCUSSION AND ANALYSIS, THE ACCOMPANYING TABULAR DISCLOSURE REGARDING NAMED EXECUTIVE OFFICER COMPENSATION AND THE CORRESPONDING NARRATIVE DISCLOSURE AND FOOTNOTES. The Board of Directors recommends a vote FOR the resolution. | |
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| FOR | AGAINST | ABSTAIN | |
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5. | RESOLVED, THAT THE HIGHEST NUMBER OF VOTES CAST BY THE SHAREHOLDERS OF SECUREALERT, INC. FOR THE FOLLOWING OPTIONS SHALL BE THE PREFERRED FREQUENCY WITH WHICH SECUREALERT, INC. IS TO HOLD AN ADVISORY VOTE ON THE APPROVAL OF THE COMPENSATION OF ITS NAMED EXECUTIVE OFFICERS INCLUDED IN THE PROXY STATEMENT: (A) YEARLY, OR (B) EVERY TWO YEARS OR (C) EVERY THREE YEARS. TheBy Order of the Board of Directors recommends such a vote be held every three years (triennially). |
April 9, 2015 | | |
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| Annually
(1 Year)
| Bi-Annually
(2 Years)
| Tri-Annually
(3 Years)
| AbstainGuy Dubois |
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| FOR | FOR | FOR | |
| [ ] | [ ] | [ ] | [ ] |
| | Executive Committee Member, Acting Chief Executive Officer |
The Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2014 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 405 South Main Street, Suite 700, Salt Lake City, Utah 84111, Attention: Investor Relations Department. The request must include a representation by the stockholder that as of April 2, 2015 the stockholder was entitled to vote at the Annual Meeting.
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6. | RATIFICATION OF SELECTION OF HANSEN, BARNETT & MAXWELL AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE COMPANY. The Board of Directors recommends a vote FOR the proposal. | |
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| FOR | AGAINST | ABSTAIN | |
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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: www.astproxyportal.com/ast/18188.
7. | In their discretion, to transact such other business as may properly come before the meeting and any adjournments thereof. |
AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR INSTRUCTIONS TO BE EXECUTED.
NOTE: Please sign exactly as name(s) EXACTLY as your name(s) appear(s) on the Notice of Internet Availability. All joint holders must sign. When signing as attorney, trustee, executor, administrator, guardian or corporate officer, please provide your FULL title.
Signature 1 – Please keep
Signature within the box
| Signature 2 – Please keep
Signature within the box
| Date (mm/dd/yyyy) |
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Please mark, sign, date and return this proxy promptly by faxing to _____ or mailing to ________.
APPENDIX IA
ARTICLES OF AMENDMENT
AMENDED AND RESTATED
TO THE ARTICLES OF INCORPORATION
OF
SECUREALERT, INC.
Pursuant toSecureAlert, Inc. (the “Corporation”), does hereby amend and restate its Articles of Incorporation, as amended, in their entirety in accordance with the provisions of Section 16-10a-1006 of the Utah Revised Business Corporation Act, as amended, (the "Act"“Act”), the undersigned, being the duly elected and acting Secretary of SecureAlert, Inc., a Utah corporation (the "Corporation") hereby declares and certifies as follows:
1. ARTICLE I
NAME
The name of the Corporation is SecureAlert,Track Group, Inc.
2. ARTICLE II
PURPOSES AND POWERS
The shareholdersCorporation is organized to engage in any and all lawful acts, activities and pursuits for which corporations may presently or hereafter be organized under the Act. The Corporation shall have all powers allowed by law, including, without limitation, those powers described in Section 16-10a-302 of the Corporation, in a meeting duly convened on February 28, 2013, approved the following amendments to the Articles of Incorporation, as heretofore amended:Act.
ARTICLE III
AUTHORIZED SHARES
FIRST: The first paragraph of "Article III, Capital Stock," is hereby amended by substituting the following paragraph in its place:
"The Corporation is authorized to issue two classes of shares to be designated, respectively, "Common Stock"the “Common Stock” and "Preferredthe “Preferred Stock."” The total number of shares of Common Stock authorized to be issued is fifteen million (15,000,000) and the total number of shares of Preferred Stock authorized to be issued is twenty million (20,000,000). The Common Stock and the Preferred Stock shall each have a par value of $0.0001 per share."
SECOND: Upon the filing of these Articles of Amendment to the Articles of Incorporation, eachEach outstanding share of the Common Stock and Preferred Stock of the Corporation issued and outstanding immediately prior to these Articles of Amendment, without further action, will be automatically split and converted into [STATE RATIO] ([1/XXX) of one (1) share of fully paid and nonassessable shares of Common Stock of the Corporation (the “Reverse Stock Split”). No fractional shares shall be issued upon the Reverse Stock Split; rather, each fractional share resulting from the Reverse Stock Split shall be rounded up to the nearest whole number. Each outstanding stock certificate of the Corporation, whichheld prior to the filing of these Amended and Restated Articles of Amendment represented one or more shares of Common Stock,Incorporation (the “Restated Articles”) shall immediately after such filing represent that same number of shares of Common Stock equal to the productor Preferred Stock respectively. These Restated Articles do not provide for an exchange, reclassification, or cancellation of (x) the number ofissued shares of Commonthe Corporation.
The Corporation’s previously authorized and designated Series A, Series B, Series C and Series D Convertible Preferred Stock represented onhave been redeemed, converted, and/or cancelled and such certificates divided by (y) [NUMBER OF SHARES] ([XXX]) (such adjusted shares,Convertible Preferred Stock Designations are of no further effect and no longer valid or existing as of the “Reclassified Shares”), with any resulting fractional shares rounded up toadoption and filing of these Restated Articles.
ARTICLE IV
REGISTERED OFFICE AND AGENT
The address of the nearest whole share as set forth above. Any options, warrants or other purchase rights, any conversion rights under debt instrumentsregistered office of the Corporation in the State of Utah is 111 East Broadway, Suite 900, Salt Lake City, UT 84111. The name of its registered agent at such address is DJP Corporate Services Salt Lake.
ARTICLE V
LIMITATION ON LIABILITY
Within the meaning of and any conversion rights under issued and outstanding Preferred Stockin accordance with Section 16-10a-841 of the Act:
A. No director of the Corporation which priorshall be personally liable to the filingCorporation or its shareholders for monetary damages for any action taken or any failure to take any action as a director, except as provided in this ARTICLE V.
B. The limitation of these Articlesliability contemplated in this ARTICLE V shall not extend to (a) the amount of Amendment representeda financial benefit received by a director to which he or she is not entitled, (b) an intentional infliction of harm on the right to acquire oneCorporation or more sharesits shareholders, (c) a violation of Section 16-10a-842 of the Corporation’s Common Stock, shall immediately after such filing represent the right to acquire one-XXXX (1/XXX)Act, or (d) an intentional violation of one (1) share of the Corporation’s Common Stock for each share of the Corporation’s Common Stock that such option, warrant or other purchase right previously represented the right to acquire. The exercise price of such options, warrants and purchase rights shall be adjusted by multiplying the existing exercise price by XXXXXX (XXX).criminal law.
The number
C. Any repeal or modification of authorized shares of Preferred Stockthis ARTICLE V by the shareholders of the Corporation and the par valueshall not adversely affect any right or protection of both the Common Stock and the Preferred Stocka director of the Corporation are not affected by these Articlesexisting at the time of Amendment.such repeal or modification.
TheD. Without limitation, this ARTICLE V shall be applied and interpreted, and shall be deemed to incorporate, any provision of the Act, as the same exists on the date hereof or may hereafter be amended, as well as any applicable interpretation of Utah law, so that personal liability of directors and officers of the Corporation shall, upon the request of each record holder of a certificate representing shares of Common Stock issued and outstanding immediately prior to the filing of these Articles of AmendmentCorporation or its shareholders, or to any third person, shall be eliminated or limited to the Articles of Incorporation, issue and deliverfullest extent as from time to such holder in exchange for such certificate a new certificate or certificates representing the Reclassified Shares.”time permitted by Utah law.
ARTICLE VI
ADOPTION OF ARTICLES
4. The amendments specified aboveforegoing Restated Articles were adopted asduly approved by all of September __, 2012, by the Board of Directors of the Corporation at a meeting duly convened for such purpose,of the Board of Directors on ______________, 2015, and by a majority vote at a meeting the Shareholders of all issued and outstanding voting securities the Corporation on May 19, 2015, in accordanceconformity with the requirements of the Act and the Bylaws of the Corporation. The Board of Directors unanimously recommended approvalAt the time of the amendment by the shareholdersadoption of the Corporation.
5. The foregoing amendments to theRestated Articles, of Incorporation of the Corporation had one class of stock outstanding, designated as Common Stock and _______________ (_________) Common Stock shares were authorizedissued and approved pursuant to section 16-10a-1003outstanding, all of the Act by a vote of the majority of the Corporation’s shareholderswhich were entitled to vote at an Annual Meeting of the shareholders of the Corporation as follows:
(a) The number of issued and outstanding shares of Common Stock, voting as a class and entitled to vote on the foregoing amendment to the Articles of Incorporation was [NUMBER] of which [NUMBER] shares were represented in person or by proxy at the Annual Meeting, constituting a quorum of such issued and outstanding shares.
(b)thereon. The number of shares of Common Stock that voted atto approve the Annual Meeting in personforegoing Restated Articles was ____________, or by proxy in favor____% of the First Amendment listed above was [NUMBER]. A total of [NUMBER] shares of Common Stock voted against such Amendment, and [NUMBER] shares abstained. The number of shares of Common Stock voted in favor of the First Amendment was sufficient to authorize the adoption and the filing of these Articles of Amendment.
(c) The number of shares of Common Stock voted at the Annual Meeting in person or by proxy in favor of the Second Amendment listed above was [NUMBER]. A total of [NUMBER] shares of Common Stock voted against such Amendment and [NUMBER] shares abstained. The number of shares of Common Stock voted in favor of the Second Amendment was sufficient to authorize the adoption of the Amendment and the filing of these Articles of Amendment.
(d) The number of issued and outstanding shares, of Series D Preferred present atwhich is sufficient for the meeting and entitled to vote onapproval of the foregoing amendments to theRestated Articles.
IN WITNESS WHEREOF, these Amended and Restated Articles of Incorporation was [NUMBER]are executed as of which [NUMBER] shares voted for, and [NUMBER] shares voted against the First Amendment referenced above, which was sufficient to approve the adoption and the filing___ day of these Articles of Amendment.______________, 2015.
TRACK GROUP, INC.
| | By: ________________________________ |
| Name: ______________________________ |
| Title: _______________________________ |
(e) The number of issued and outstanding shares of Series D Preferred present at the meeting and entitled to vote on the foregoing amendments to the Articles of Incorporation was [NUMBER] of which [NUMBER] shares voted for, and [NUMBER]shares voted against the Second Amendment referenced above, with [NUMBER] shares abstaining, which was sufficient to approve the adoption and the filing of these Articles of Amendment.
(f) The number of issued and outstanding shares of Common Stock, on an as-converted basis, present at the Annual Meeting and entitled to vote on the foregoing amendment to the Articles of Incorporation was [NUMBER] of which [NUMBER] shares voted for, and [NUMBER]shares voted against the First Amendment referenced above, with [NUMBER] shares abstaining, which was sufficient to approve the adoption of such Amendment and the filing of these Articles of Amendment. In addition, [NUMBER] shares voted for, and [NUMBER] shares voted against the Second Amendment referenced above, with [NUMBER] shares abstaining, which was sufficient to approve the adoption of such Amendment and the filing of these Articles of Amendment to the Articles of Incorporation.
(g) No other class of stock was entitled to vote on the foregoing amendment.
Such votes cast were sufficient for approval of the two amendments.
IN WITNESS WHEREOF, this Amendment to the Articles of Incorporation of the Corporation is executed this __ day of March 2013.
| | SecureAlert, Inc., |
| | a Utah corporation |
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| By | |
| | Gordon O. Jesperson, Corporate Secretary |
