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GLOBALSCAPE, INC.
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Notice of 2016
Annual Meeting
of Stockholders
Proxy Statement
And
Form 10-K
For the year ended December 31, 2015
| 4500 Lockhill-Selma Rd., Suite 150 | San Antonio, TX 78249 |
 |
GlobalSCAPE, Inc.
4500 Lockhill-Selma Rd, Suite 150
San Antonio, Texas 78249
(210) 308-8267
March 23, 2016
Dear Stockholders:
You are cordially invited to attend the 20162019 Annual Meeting of Stockholders (the “Annual Meeting”) of GlobalSCAPE, Inc. (“GlobalSCAPE”) to be held at GlobalSCAPE’s headquarters, located at 4500 Lockhill-Selma Road, Suite 150, San Antonio, TX 78249, on Thursday, May 5, 2016,9, 2019, at 9:00 a.m., Central Daylight Time. If you cannot attend the annual meeting,Annual Meeting, you may vote over the Internet. If you received a paper copy of the proxy materials, you may follow the instructions on the proxy card.
The agenda for this year’s annual meeting includes:
● | The election of |
● | Ratification of the |
● | Advisory |
Please refer to the Proxy Statementaccompanying proxy statement for detailed information about each of the proposals and the annual meeting.
Every stockholder vote is important. Even if you do not plan to attend the annual meeting,Annual Meeting, we hope you will vote as soon as possible. You may vote by signing your Proxy Cardproxy card and mailing it in accordance with the instructions on the card. If you prefer, you may vote over the Internet or by telephone by following the instructions on your Proxy Card.proxy card. You may revoke your proxy at any time before it is voted. You may also vote in person at the stockholders meetingAnnual Meeting if you are the stockholder of record.
Sincerely,
/s/ Matthew C. Goulet
Matthew C. Goulet
President and Chief Executive Officer
GlobalSCAPE, Inc.
4500 Lockhill-Selma Rd, Suite 150
San Antonio, Texas 78249
(210) 308-8267
NOTICE OF 2019 ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 5, 2016
To the Stockholders of GlobalSCAPE, Inc.:
The 20162019 Annual Meeting of Stockholders (the “Annual Meeting”) of GlobalSCAPE, Inc. (the “Company”) will be held at the Company’s office located at 4500 Lockhill-Selma Road, Suite 150, San Antonio, Texas 78249, on May 5, 2016,9, 2019, at 9:00 a.m., local time,Central Daylight Time, for the following purposes:
1. | To elect the following |
Dr. Thomas E. Hicks
2. | To ratify the appointment of |
3. | To approve, by advisory vote, a resolution on executive |
4. | To transact any other business that may properly come before the |
The foregoing items of business are described more fully in the Proxy Statementproxy statement accompanying this notice.
The Company’s Board of Directors has fixed the close of business on March 11, 2016,12, 2019 as the record date for determining the stockholders entitled to receive notice of, and to vote at, the Annual Meeting and any adjournment thereof.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
Your vote is important. Regardless of whether you plan to attend the Annual Meeting, we encourage you to vote your shares promptly by using the telephone or Internet, following the instructions provided in the Notice of Internet Availability of Proxy Materials, or by signing and returning the proxy card mailed to those who receive paper copies of the accompanying proxy statement.
March 23, 2016
San Antonio, Texas
By Order of the Board of Directors,
/s/ Matthew C. Goulet
Matthew C. Goulet
President and Chief Executive Officer
Important Notice Regarding Availability of
Proxy Materials For Our Annual Meeting of Stockholders to be Held On May
The proxy statement, the form of proxy card and our Annual Report on Form 10-K for the fiscal year ended December 31, 2015,2018, including consolidated financial statements, are available on the Internet at www.proxyvote.com.
GlobalSCAPE, Inc.
Proxy Statement
For
2019 Annual Meeting of Stockholders
To Be HeldOn Thursday,May 5, 2016
Table of Contents
Page | ||
PROXY STATEMENT | 1 | |
Date, Time, Place of Annual Meeting | 1 | |
Record Date, Shares Entitled to Vote, Quorum | 1 | |
Stockholders of Record and Beneficial Owners | 2 | |
Attendance and Voting by Proxy | 2 | |
Revocation of Proxy | 3 | |
Quorum; Vote Requirements | 3 | |
Important Note Regarding NYSE Rules | 4 | |
Solicitation of Proxies | 4 | |
PROPOSAL ONE ELECTION OF DIRECTORS | 4 | |
Directors with Terms Expiring in | 5 | |
Current Directors Not Standing for Re-Election | 6 | |
Executive Officers | 6 | |
Board Meetings and Attendance | 8 | |
Board Leadership Structure | 8 | |
Board Independence | 8 | |
Committees of the Board of Directors | 8 | |
Risk Management | 9 | |
Code of Ethics | 10 | |
Stockholder Communications with Board | 10 | |
Nominations | 10 | |
Composition of the Board of Directors | 11 | |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 11 | |
Equity Compensation Plan Information | 13 | |
Section 16(a) Beneficial Ownership Reporting Compliance | 13 | |
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS | 13 | |
Transactions in 2018 | 13 | |
Policy Related to Related Party Transactions | 13 | |
EXECUTIVE COMPENSATION | 14 | |
Summary Compensation Table | 14 | |
Employment Agreements and Potential Payments Upon Termination or Change in Control | 15 | |
GRANTS OF PLAN-BASED AWARDS | 17 | |
Outstanding Equity Awards at | 17 | |
Pension Benefits | 17 | |
Non-Qualified Deferred Compensation | 17 | |
Compensation of Directors | 17 | |
PROPOSAL TWO RATIFICATION OF | 20 |
PRINCIPAL AUDITOR FEES AND SERVICES | 23 | |
AUDIT COMMITTEE PRE-APPROVAL POLICY | 24 | |
AUDIT COMMITTEE | 24 | |
PROPOSAL THREE ADVISORY VOTE ON EXECUTIVE COMPENSATION | 25 | |
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING | 26 | |
AVAILABLE INFORMATION | 26 | |
OTHER MATTERS | 26 |
PROXY STATEMENT
General
This proxy statement (“Proxy StatementStatement”) is furnished in connection with the solicitation by the Board of Directors (the “Board”) of GlobalSCAPE, Inc., a Delaware corporation (“GlobalSCAPE”GlobalSCAPE,” the “Company,” “we,” “us” or the “Company”“our”), of proxies from the stockholders of GlobalSCAPE to be used at GlobalSCAPE’s 20162019 Annual Meeting of Stockholders.Stockholders (the “Annual Meeting”). In accordance with Securities and Exchange Commission (the “SEC”) rules, instead of mailing a printed copy of our Proxy Statement, annual report and other materials relating to the Annual Meeting to stockholders, we intend to mail a Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”), which advises that the proxy materials are available on the Internet to stockholders. We intend to commence distribution of the Notice of Internet Availability on or about March 23, 2016.29, 2019. Stockholders receiving a Notice of Internet Availability by mail will not receive a printed copy of proxy materials unless they so request. Instead, the Notice of Internet Availability will instruct stockholders as to how they may access and review proxy materials on the Internet. Stockholders who receive a Notice of Internet Availability by mail who prefer to receive a printed copy of our proxy materials, including a proxy card or voting instruction card, should follow the instructions for requesting these materials included in the Notice of Internet Availability.
This process is designed to expedite stockholders’ receipt of proxy materials, lower the cost of the annual meeting,Annual Meeting, and help conserve natural resources. If you previously elected to receive our proxy materials electronically, you will continue to receive these materials in that manner unless you elect otherwise. However, if you prefer to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability.
Date, Time and Place of Annual Meeting
The Annual Meeting of Stockholders will be held at 9:00 a.m., Central Daylight Time, on May 5, 2016,9, 2019, at GlobalSCAPE’s office at 4500 Lockhill-Selma Road, Suite 150, San Antonio, Texas 78249. Please call us at (210) 308-8267, ext. 5134,801-8489 if you need assistance with directions to our office.
Record Date,Date; Shares Entitled to Vote,Vote; Quorum
The Board of Directors has fixed the close of business on March 11, 2016,12, 2019 as the record date (the “Record Date”) for GlobalSCAPE stockholders entitled to notice of and to vote at the annual meeting.Annual Meeting. As of the record date,Record Date, there were 21,028,72617,187,515 shares of GlobalSCAPE common stock, par value $0.001 per share (the “Common Stock”), outstanding, which were held by approximately 1,8311,728 holders of record. Stockholders are entitled to one vote for each share of GlobalSCAPE common stockCommon Stock held as of the record date.
The holders of a majority of the outstanding shares of GlobalSCAPE common stockCommon Stock issued and entitled to vote at the annual meetingAnnual Meeting, totaling 8,593,758 shares, must be present in person or by proxy to establish a quorum for business to be conducted at the annual meeting.Annual Meeting. Whether you attend the meetingAnnual Meeting in person, complete, sign and return the proxy card or vote via the Internet or telephone, your shares will be counted as present at the meeting.Annual Meeting. Abstentions and broker non-votes are included for purposes of determining whether a quorum is present at the annual meeting.Annual Meeting. If you own shares through a bank or broker in street name, you may instruct your bank or broker how to vote your shares. A “broker non-vote” occurs when you fail to provide your bank or broker with voting instructions and the bank or broker does not have the discretionary authority to vote your shares on a particular proposal because the proposal is not a routine matter under the New York Stock Exchange rules. Please consider the following voting matters specific to each proposal on the ballot:
● | Proposal 1 (election of directors) is not considered a routine matter under New York Stock Exchange rules. Your bank or broker will not have discretionary authority to vote your shares held in street name on this |
● | Proposal 2 (ratification of the appointment of our independent registered public accounting firm) is considered a routine matter under New York Stock Exchange rules. Your bank or broker will have discretionary authority to vote your shares held in street name on |
● | Proposal 3 (advisory vote on executive compensation) is an advisory vote and must receive the affirmative vote of the holders of a majority of the total votes cast on the proposal in order to be approved. Broker non-votes are not considered votes cast “for” or “against” this proposal and will have no effect. |
If sufficient votes for approval of the matters to be considered at the annual meetingAnnual Meeting have not been received prior to the meeting date, GlobalSCAPE may postpone or adjourn the annual meetingAnnual Meeting in order to solicit additional votes. The form of proxy being solicited by this Proxy Statement provides the authority for the proxy holders, in their discretion, to vote the stockholders’ shares with respect to a postponement or adjournment of the annual meeting.Annual Meeting. At any postponed or adjourned meeting, proxies received pursuant to this Proxy Statement will be voted in the same manner described in this Proxy Statement with respect to the original meeting.
Stockholders of Record and Beneficial Owners
Many of our stockholders hold their shares through a stockbroker,broker, bank, or other agent rather than directly in their own names. Following are some distinctions between shares held of record and those owned beneficially:
● | Stockholder of Record. If your shares are registered directly in your name with our transfer agent, American Stock Transfer |
● | Beneficial Owner. If your shares are held in a stock brokerage account or by a bank, you are considered the beneficial owner of the shares held in “street name.” Access to these proxy materials is being provided by your broker or bank who is considered the stockholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker or bank on how to vote. You are also invited to attend the |
Attendance and Voting by Proxy
If you are a stockholder whose shares are registered in your name, you may vote your shares by one of the following four methods:
● | Vote in person, by attending the Annual Meeting. We can give you a proxy card or a ballot when you arrive, if requested. |
● | Vote by Internet , by going to the web address, www.proxyvote.com, and following the instructions for Internet voting. |
● | Vote by |
● | Vote by |
If your shares are held in “street name” (through a broker, bank, or other agent), you should have received a separate voting instruction form or you may vote by telephone or on the Internet as instructed by your broker, bank or bank.
PLEASE NOTE THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER AGENT AND YOU WANT TO VOTE AT THE ANNUAL MEETING, YOU MUST FIRST OBTAIN A LEGAL PROXY ISSUED IN YOUR NAME FROM THE RECORD HOLDER. YOU WILL NOT BE PERMITTED TO VOTE IN PERSON AT THE ANNUAL MEETING WITHOUT THE LEGAL PROXY.
The proxies identified on the back of the proxy card will vote the shares of which you are stockholder of record in accordance with your instructions. If you sign and return your proxy card without giving specific voting instructions, the proxies will vote your shares as follows:
● | “FOR” the nominated |
● | “FOR” the ratification of the |
● | “FOR” approval, on an advisory basis, of the compensation of GlobalSCAPE’s executives named in the Summary Compensation Table in this Proxy Statement. |
The giving of a proxy will not affect your right to vote in person if you decide to attend the meeting.
If for any reason the director nominee does not stand for election, any proxies we receive may be voted for a substitute nominee in place of the nominee who does not stand. We have no reason to expect that the director nominee will not stand for election. If any matters other than those addressed on the proxy card are properly presented for action at the Annual Meeting, the persons named in the proxy card will have the discretion to vote on those matters in their best judgment unless authorization is withheld.
Revocation of Proxy
If you are a stockholder of record, whether you vote by Internet, by telephone, or by mail, you may change or revoke your proxy before it is voted at the meetingAnnual Meeting by:
● | Submitting a new proxy card bearing a later date. |
● | Voting again by the Internet at a later time. |
● | Giving written notice before the |
● | Attending the |
Please note that your attendance at the meetingAnnual Meeting will not alone serve to revoke your proxy.
Vote Requirements
Proposal 1: Election of Directors
Directors are elected by a pluralitymajority of the votes of the holders of shares of common stockCommon Stock present in person or by proxy and entitled to vote on the election of directors. Under Delaware law, votes that are withheld from a director’s election will be counted toward a quorum but will not affect the outcome of the vote on the election of a director. AbstentionsAn abstention is treated as entitled to vote and, brokertherefore, has the same effect as voting “AGAINST” the proposal. Broker non-votes will not be taken into account in determining the outcome of the election. Unless otherwise instructed or unless authority to vote is withheld, the proxy card accompanying these materials will be voted FOR“FOR” election of each of the director nominees.
Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm
With respect to Proposal Two,2, the ratificationaffirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote is required to ratify the appointment of Weaver and Tidwell, LLP as the Company’s independent registered public accounting firm anfor the fiscal year ending December 31, 2019. An abstention is treated as entitled to vote and, therefore, has the same effect as voting “against”“AGAINST” the proposal. Since this proposal is considered a “routine” matter, brokers will be permitted to vote on behalf of their clients if no voting instructions are furnished. Unless otherwise instructed or unless authority to vote is withheld, the proxy card accompanying these materials will be voted FOR“FOR” the ratification of Padgett, Stratemann & Co., L.L.P.the appointment of Weaver and Tidwell, LLP as the Company’s independent registered public accounting firm for fiscalthe year 2016.
Proposal 3: Advisory Vote on Executive Compensation
With respect to Proposal Three,3, the advisory vote on executive compensation, an abstention from voting will have the same effect as a vote against“AGAINST” this proposal, and broker non-votes will have no effect on the outcome of this proposal. Brokers, as nominees for the beneficial owner, may not exercise discretion in voting on this matter and may only vote on this proposal as instructed by the beneficial owner of the shares. The outcome of this proposal is advisory in nature and is non-binding.
Important Note Regarding NYSE Rules
If a broker does not receive instructions from the beneficial owner of shares held in street name for certain types of proposals, the broker must indicate on the proxy that it does not have authority to vote such shares (a “broker non-vote”) as to such proposals. Under the rules of the New York Stock Exchange, if your broker does not receive instructions from you, your broker will not be able to vote your shares in the election of directors or in the advisory votes on executive compensation and the frequency of such votes in the future. directors. Therefore, it is important that you provide voting instructions to your broker.
Solicitation of Proxies
Proxies will be solicited by mail and the Internet. Proxies may also be solicited personally, or by telephone, fax, or other means by the directors, officers, and employees of GlobalSCAPE. Directors, officers, and employees soliciting proxies will receive no extra compensation but may be reimbursed for related out-of-pocket expenses. GlobalSCAPE will make arrangements with brokerage houses and other custodians, nominees, and fiduciaries to send the proxy materials to beneficial owners. GlobalSCAPE will, upon request, reimburse these brokerage houses, custodians, and other persons for their reasonable out-of-pocket expenses in doing so. GlobalSCAPE will pay the cost of solicitation of proxies.
PROPOSAL ONE
ELECTION OF DIRECTORS
GlobalSCAPE’s ArticlesAmended and Restated Certificate of Incorporation dividedivides the Board of Directors into three classes of directors serving staggered three-year terms, with one class to be elected at each annual meeting of stockholders. At this year’s meeting, twothe Annual Meeting, one Class I directors areII director is to be elected for a term of three years, to hold office until the expiration of theirhis term in 2019,2022, or until a successor shall have been qualified and elected. The nominees are Frank M. Morgan andnominee for election is Dr. Thomas E. Hicks. Mr. Morgan is currently a Class I director. Dr. Hicks, is not currently a director. Neither Mr. Morgan nor Dr. Hicks is an officer of GlobalSCAPE.
Assuming the presence of a quorum, the nominees for director who receive the most votes will be elected. The enclosed form of proxy provides a means for stockholders to vote for or to withhold authority to vote for each of the nomineesnominee for director. If a stockholder executes and returns a proxy but does not specify how the shares represented by such stockholder’s proxy are to be voted, such shares will be voted FOR the election of each of the nomineesnominee for director. In determining whether this itemproposal has received the requisite number of affirmative votes, abstentions and broker non-votes will not be counted and will have no effect.
The following table sets forth the name and age of each nominee, director and executive officer as of the mailing date of this Proxy Statement, theincluding such person’s principal occupation of the nominee during at least the past five years, the experiences and skills that led to the conclusion that each nominee and director should serve as director and, if applicable, the year he began serving as a director of GlobalSCAPE:
Name | Age | ||
Dr. Thomas E. Hicks | 71 | Dr. Hicks has |
Directors with Terms Expiring in 20172020 and 2018
Name | Age | ||
David L. Mann | 69 | Mr. Mann has been in the real estate development and home building business since his graduation from Southern Methodist University in 1975 where he earned a B.B.A. For the past twenty years, he has worked exclusively in the San Antonio, Texas market. Mr. Mann | |
| 2020. | |||
Matthew C. Goulet |
46 | |||
Mr. Goulet has served as GlobalSCAPE’s President and Chief Executive Officer and as a member of the Board of Directors since May 2016. Prior to that time, he served as GlobalSCAPE’s Chief Operating Officer was responsible for setting the strategy for their go-to-market SME initiatives and where he built their North America SME sales organization from the ground up. Mr. Goulet’s current term as a director of GlobalSCAPE expires in 2020. Mr. Goulet received a BS in Marketing from the Boston College Carroll School of Management. | |||
Robert H. Alpert | 54 | Mr. Alpert has nearly 30 years of executive and financial experience. He is the co-founder and principal of 210 Capital, LLC and the founder and general partner of RHA, Inc. He is also the Co-CEO and Chairman of the Board of P10 Holdings, Inc., an alternative asset management investment firm, Chairman of the Board of Crossroads Systems, Inc., a specialty finance holding company, and a director of Elah Holdings, Inc. Prior to founding 210 Capital, Mr. Alpert was the founder and portfolio manager of Atlas Capital Management, L.P., a long-short strategy investment adviser, from October 1995 to September 2015. Mr. Alpert was responsible for the investments and operations of Atlas. Mr. Alpert is also the co-founder of Homebuilder Capital Advisors, LLC, a real estate specialty finance company, and a director of Redpoint Insurance Group, LLC, a Texas property and casualty insurance company. Mr. Alpert received a B.A. from Princeton University in 1987 and an M.B.A. from Columbia University in 1990. Mr. Alpert’s extensive knowledge of finance and capital markets brings valuable insight to our Board. Mr. Alpert, together with C. Clark Webb and their affiliates, beneficially owns approximately 23.37% of our stock. Mr. Alpert has served as a member of the Board of Directors of the Company since June 2018 and his current term as director of GlobalSCAPE expires in 2021. | |
C. Clark Webb | 38 | Mr. Webb is Founder and Managing Member of P10 Capital Management, LLC, Co-CEO of P10 Holdings, Inc., and Co-Founder and Principal of 210 Capital, LLC. Previously, Mr. Webb was Co-Portfolio Manager of the Lafayette Street Fund, and a Partner at Select Equity Group, L.P. Mr. Webb holds a B.A. from Princeton University. Mr. Webb is currently Chairman of the Board of Elah Holdings, Inc., and a director of Crossroads Systems, Inc., and P10 Holdings, Inc. Mr. Webb brings extensive finance knowledge to our Board and, together with Robert H. Alpert and their affiliates, beneficially owns approximately 23.39% of our shares. Mr. Webb has served as a member of the Board of Directors of the Company since June 2018 and his current term as director of GlobalSCAPE expires in 2021. |
Current Directors Not Standing for Re-Election
| Name | Age | ||
Frank M. Morgan | 70 | Mr. Morgan most recently served as Executive Director for Cyber Security Operations Business Development for Mantech International Corp supporting the national security community. He also served as the Vice President and General Manager of the Information Systems Department, Intelligence Solutions Division, L-3 Communications Services Group. He held a similar position with Titan Corporation before its acquisition by L-3. He worked for BTG, Inc. (acquired by Titan Corp.) as Vice President of federal sales where he was responsible for marketing computer security products. Mr. Morgan spent 26 years in the Air Force, retiring in 1996 as a Colonel. He holds a B.S. in Aeronautical Engineering from the Air Force Academy, a M.S. in Human Resources Management from the University of Utah, and a M.A. in National Security and Strategic Studies from the Naval War College. Mr. Morgan brings extensive experience in the computer software industry to our Board. Mr. Morgan has served as a member of the Board of Directors of the Company since 2006 and his current term as a director of GlobalSCAPE expires in 2019. |
Executive Officers
Name | Age | Position | |
Karen J. Young | 55 | Chief Financial Officer | Ms. Young has served as GlobalSCAPE’s Ms. Young is a |
Name | Age | Position | |
Mark C. Hood | 54 | Vice President of Operations | Mr. Hood has served as our Vice President of Operations since August 2018. Until August 2018, he served as Executive Vice President of Crossroads Systems, Inc. From February 2015 to July 2017, he served as Executive Vice President of Corporate Development and previously served as Executive Vice President of Corporate Communications from January 2013 to January 2015. From 2009 to 2013, Mr. Hood was founder and CEO of MCH Advisors, and helped early stage technology clients design and launch sales and marketing programs in high-growth markets. From 1995 to 2009, Mr. Hood was CEO of Network Consulting Services, a master sales agency he launched to integrate services from multiple telecommunications companies. He also held Series 7, 65, and 66 securities licenses and served as General Partner of two equity investment funds. Mr. Hood serves as a director for ATRM Holdings, Inc., a manufacturer of modular buildings and provider of building supplies. Mr. Hood earned a BBA in Marketing from Sam Houston State University and a MS in Technology Commercialization from The University of Texas at Austin, McCombs School of Business. |
Michael P. Canavan | 38 | Vice President of Sales | Mr. Canavan has served at GlobalSCAPE’s Vice President of Sales since October 2017. Prior to that he served as Vice President of Global Enterprise Services since joining the Company in July 2017. As Vice President of Sales, Mr. Canavan is responsible for leading and overseeing all direct and channel sales teams for GlobalSCAPE. Mr. Canavan brings a diverse background with more than 15 years of experience in sales, engineering, and product management to GlobalSCAPE. Prior to joining GlobalSCAPE in May 2017, Mr. Canavan served multiple roles with Kaspersky Lab North America starting in May 2010. The last role he held with the organization was as Senior Vice President, Sales. In that role, he was responsible for all business-to-business sales activities in North America, including leading channel and presales system engineering organizations. Mr. Canavan has also held various roles in sales, engineering and product management at Kaspersky Lab, Trend Micro and CDW, among others. Mr. Canavan graduated from Purdue University, Krannert School of Management with a Bachelor of Science in Economics and a Bachelor of Arts in Psychology. |
David C. Mello | 55 | Vice President of Technical Services | Mr. Mello has served as Vice President of Technical Services since September 2017. He is responsible for leading the technical support, professional services, pre-sales engineering and MIS teams. Mr. Mello has more than 30 years of technical support and operations management experience and has held senior executive positions at several software and services organizations, across a variety of functional areas of responsibility. |
Name | Age | Position | |
Prior to joining GlobalSCAPE, Mr. Mello served as Senior Vice President of Support and Services at Kaspersky Lab North America, where he also served on the North America executive team and was responsible for post-sales support of both consumer and business products. Mr. Mello has also held senior level support and operations roles at BiddingforGood, Kewill Systems and DNS Worldwide, among others. Mr. Mello graduated from Bentley University with a Bachelor of Science in Computer Information Systems and an Associate in Science |
James W. Albrecht retired from his position as Chief Financial Officer of the Company on March 2, 2018. Peter S. Merkulov was terminated from the Company on October 31, 2018 in connection with the previously disclosed Reduction in Force.
Vote Required
The director nominee receiving the affirmative vote of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting will be elected as a director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF THE NOMINEE TO THE BOARD OF DIRECTORS.
Board Meetings and Attendance
During the fiscal year ended December 31, 2015,2018, the Board of Directors held five meetings and also acted by unanimous written consent three times.12 meetings. Separate from the full Board of Directors’ meetings, there were five11 Audit Committee meetings, 3 Nominating Committee meetings, and five5 Compensation Committee meetings. During 2015,2018, each director, except for Phillip M. Renfro,of our current directors attended at least 75% of all Board of Directors and applicable Committee meetings.
During 2015,2018, our directors received compensation for service to GlobalSCAPE as a director. See “Executive Compensation – Compensation of Directors.” GlobalSCAPE encourages, but does not require, directors to attend the annual meeting of stockholders. At GlobalSCAPE’s 20152018 Annual Meeting of Stockholders, all members of the Board of Directors were present other than Mr. Renfro.
Board Leadership Structure
The Board of Directors believes it is in the best interests of the Company to separate the roles of Chief Executive Officer and Chairman of the Board. This structure ensures a greater role for the directors in the oversight of management and the Company and promotes active participation of the directors in setting meeting agendas and establishing Board priorities and procedures. Further, this structure permits the Chief Executive Officer to focus on the management of the Company's day-to-day operations.
Board Independence
A majority of the Board of Directors has determined that Messers.Messrs. Alpert, Mann, Morgan, and MorganWebb and Dr. Hicks are independent as determined in accordance with the listing standards of the NYSE MKTAmerican LLC and the Securities Exchange Act.Act of 1934, as amended (the “Exchange Act”). All members of the Audit and Compensation Committees are “independent” as defined by the Securities and Exchange CommissionSEC and the listing standards of the NYSE MKTAmerican LLC.
Committees of the Board of Directors
GlobalSCAPE has standing Audit, Compensation, and CompensationNominating Committees. The Nominating Committee was established in March 2018.
The Audit Committee is a separately-designated audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee consisted of Messrs. Mann, Morgan and Morgan in 2015.Webb and Dr. Hicks during 2018. Mr. Mann was the chairman of this committee during 2015.2018. This committee met five11 times during 2015.2018. The Board of Directors has determined that Mr. Mann is an audit“audit committee financial expertexpert” as defined by SEC rules. The Audit Committee aids management in the establishment and supervision of our financial controls, evaluates the scope of the annual audit, reviews audit results, makes recommendations to our Board of Directors regarding the selection of our independent registered public accounting firm, consults with management and our independent registered public accounting firm prior to the production of financial statements to stockholders and, as appropriate, initiates inquiries into aspects of our financial affairs. The Audit Committee has authority under its charter to retain, approve fees for and terminate advisors, consultants, and agents as it deems necessary to assist in the fulfillment of its responsibilities. The Audit Committee Report, which appears in a subsequent section of this document,Proxy Statement, more fully describes the activities and responsibilities of the Audit Committee.
The Compensation Committee consisted of Messrs. Alpert, Mann, Morgan, Webb and Morgan in 2015.Dr. Hicks during 2018. Mr. Morgan was chairman of this committee during 2015.from January to October 10, 2018, when Mr. Webb was elected chairman. This committee met five5 times during 2015.2018. The Compensation Committee’s role is to establish and oversee GlobalSCAPE’s compensation and benefit plans and policies, administer its stock option plans, and review and approve annually all compensation decisions relating to GlobalSCAPE’s officers. At least annually, our President and Chief Executive Officer submits to the Compensation Committee his recommendations as to base salary, bonus and equity incentivesincentive awards for each executive officer, except himself, for the following fiscal year based upon his subjective evaluation of their individual performance. The Compensation Committee reviews and discusses the recommendations and has the sole authority to determine the base salary, bonus, and equity incentives for the President and Chief Executive Officer.
The agenda for meetings of the Compensation Committee is determined by its Chairman. At each meeting, the Compensation Committee meets in executive session.The Compensation Committee’s Chairman reports the Committee’s recommendations on executive compensation to the Board.Board of Directors. The Company’s personnel support the Compensation Committee in its duties and, along with the President and Chief Executive Officer, may be delegated authority to fulfill certain administrative duties regarding the compensation programs. The Compensation Committee has authority under its charter to retain, approve fees for and terminate advisors, consultants, and agents as it deems necessary to assist in the fulfillment of its responsibilities.
The Nominating Committee consisted of Messrs. Alpert Morgan and Webb and Dr. Hicks during 2018. The chairman of this committee is Dr. Hicks. This committee met 3 times during 2018. The primary function of the Nominating Committee is to assist the Board of Directors does not believe that it is appropriatein identifying, screening and recruiting qualified individuals to have a separate nominating committee becausebecome Board of Directors members and in determining the small sizecomposition of the Board of Directors and thatits committees by recommending nominees for election at the annual meeting of stockholders or to fill vacancies on the Board consists of a majority of independent directors. All directors participate in the consideration of director nominees.
Each of the Board’sBoard of Directors committees has a written charter. Copies of the charters are available for review on the Company’s website at www.globalscape.com on the Investor Relations page.
Risk Management
The Company has a risk management program overseen by its President and Chief Executive Officer and theits Chief Financial Officer. Material risks are identified and prioritized by management. Each prioritized risk is referred to a Board of Directors committee or the full Board of Directors for oversight.
The Board of Directors reviews information regarding the Company'sCompany’s credit, liquidity, and operations, as well as the risks associated with each. The Board of Directors also reviews and approves the annual operating budget of the Company. Because we rely on cash on hand and cash flows from operations to fund our operations, the Board of Directors as a whole devotes significant time to reviewing and approving our levels of indebtedness, contractual obligations and spending supporting our business activities. While each committee is responsible for specific risks and overseeing the management of such risks, the entire Board of Directors is regularly informed through committee reports about such risks. In addition, the Compensation Committee periodically reviews the most important risks to the Company to ensure that compensation programs do not encourage excessive risk taking.
Code of Ethics
GlobalSCAPE has adopted a Code of Ethics that applies to all of its directors, officers and employees, including theits President and Chief Executive Officer and its Chief Financial Officer. This Code is a statement of GlobalSCAPE’s high standards for ethical behavior, legal compliance, and financial disclosure. It is applicable to all directors, officers, and employees. A copy of the Code of Ethics can be found in its entirety on GlobalSCAPE’s website at www.globalscape.com.www.globalscape.com. Should there be any changes to, or waivers from, GlobalSCAPE’s Code of Ethics, those changes or waivers will be posted immediately on our website at the address noted above.
Stockholder Communications with Board
The Board of Directors has a process by which stockholders may communicate with the Board of Directors. Any stockholder desiring to communicate with the Board of Directors may do so in writing by sending a letter addressed to The Board of Directors, c/o Corporate Secretary.Secretary at the following address: 4500 Lockhill-Selma Road, Suite 150, San Antonio, Texas 78249. The Corporate Secretary has been instructed by the Board of Directors to promptly forward communications so received to the members of the Board of Directors.
Nominations
The Board of DirectorsNominating Committee is responsible for determining the slate of director nominees for election by stockholders. All director nominees arewill be approved by the BoardNominating Committee prior to annual proxy material preparation and are required to stand for election by stockholders at the next annual meeting. For positions on the Board of Directors created by a director’s leaving the Board of Directors prior to the expiration of his current term, whether due to death, resignation, or other inability to serve, Article III of the Company’s Amended and Restated Bylaws provides that a director elected by the Board of Directors to fill a vacancy shall be elected for the unexpired term of his predecessor in office.
The Board of DirectorsNominating Committee does not currently use any third-party search firm to assist in the identification or evaluation of Board member candidates. The Board of DirectorsNominating Committee may engage a third party to provide such services in the future as it deems necessary or appropriate.
The Board of Directors determinesNominating Committee will determine the required selection criteria and qualifications of director nominees based upon the needs of the Company at the time nominees are considered. A candidate must possess the ability to apply good business judgment and must be in a position to properly exercise his duties of loyalty and care. Candidates should also exhibit proven leadership capabilities, high integrity, experience with a high level of responsibility within their chosen fields, and have the ability to quickly understand complex principles of, but not limited to, business and finance. Candidates with potential conflicts of interest or who do not meet this criteria are disqualified. The Board of DirectorsNominating Committee will consider these criteria for nominees identified by the Board,Nominating Committee, by stockholders, or through some other source. When current Board members are considered for nomination for reelection, the Board of DirectorsNominating Committee also takes into consideration the member’s prior Board contributions, performance, and meeting attendance records.
The Board of DirectorsNominating Committee will consider qualified candidates that are recommended by stockholders for possible nomination. Stockholders wishing to make such a recommendation may do so by sending the following information to the Board of Directors, c/o Corporate Secretary, at the address listed above:
● | Name of the candidate with brief biographical information and résumé. |
● | Contact information for the candidate and a document evidencing the candidate’s willingness to serve as a director if elected. |
● | A signed statement as to the submitting stockholder’s current status as a stockholder and the number of shares currently held. |
Any such nomination must comply with the advance notice provisions of our Amended and Restated Bylaws. These provisions are summarized under “Stockholder Proposals to be Presented at Next Annual Meeting” in a subsequent section of this document.Proxy Statement.
The Board of Directors conductsNominating Committee will conduct a process of making a preliminary assessment of each proposed nominee based upon the résumé and biographical information, an indication of the individual’s willingness to serve and other background information. This information iswill be evaluated against the criteria set forth above as well as the specific needs of the Company at that time. Based upon a preliminary assessment of the candidate(s), those who appear best suited to meet the needs of the Company may be invited for further evaluation through a series of interviews. The Board of DirectorsNominating Committee uses the same process for evaluating all nominees, regardless of the original source of the information. The Company does not have a formal policy with regard to the consideration of diversity in identifying director nominees, but the Board of Directors strivesNominating Committee will strive to nominate directors with a variety of complementary skills so that, as a group, the Board will possess the appropriate talent, skills, and expertise to oversee the Company'sCompany’s businesses.
No candidates for director nominations were submitted to the Board of Directors by any stockholder in connection with the 2016 Annual Meeting.
Composition of the Board of Directors
The Company believes that its Board of Directors as a whole should encompass a range of talent, skill, diversity, experience and expertise enabling it to provide sound guidance with respect to the Company’s operations and business goals. In addition to considering a candidate’s background and accomplishments, candidates are reviewed in the context of the current composition of the Board of Directors and the evolving needs of the Company. The Company’s policy is to have at least a majority of its directors qualify as “independent” as determined in accordance with the listing standards of the NYSE MKTAmerican LLC and Rule 10A-3 of the Exchange Act. The Board of Directors identifiesNominating Committee will identify candidates for election to the Board of Directors and reviewsreview their skills, characteristics and experience.
The Board of Directors seeksNominating Committee will seek directors with strong reputations, high integrity and experience in areas relevant to the strategy and operations of the Company, particularly in the high technology industry and areas involving complex business and financial dealings. The Board of Directors alsoNominating Committee believes that each nominee and current director also has other key attributes that are important to an effective board including the ability to engage management in a constructive and collaborative fashion and a diversity of background, experience and thought.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding ownership of our common stockCommon Stock as of March 11, 2016,the Record Date, by (i) each person known by GlobalSCAPE to be the beneficial owner of more than 5% of the outstanding shares of common stock,Common Stock, (ii) each director and director nominee of GlobalSCAPE, (iii) the President and Chief Executive Officer, (iv) each of the other named executive officers, as described below, of GlobalSCAPE, and (v) all executive officers and directors of GlobalSCAPE as a group. Unless otherwise indicated in the footnotes below, each of the named persons has sole voting and investment power with respect to the shares shown as beneficially owned.
Applicable percentage ownership is based on 21,028,72617,187,515 shares of common stockCommon Stock outstanding at March 11, 2016.as of the Record Date. In computing the number of shares of common stockCommon Stock beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all shares of common stockCommon Stock subject to options or restricted stock held by that person that are currently exercisable or will vest or are exercisable within 60 days of March 11, 2016.the Record Date.
Shares Beneficially Owned as of March 12, 2019 | |||||||||||||||||||||||||
Name of Beneficial Owner |
Common Shares Currently Owned (# of shares) | Common Shares That May Be Acquired By Exercise of Stock Options (# of shares) | Total Common Shares Held (# of shares) | Additional Common Shares That May Be Acquired within 60 Days of March 12, 2019 (# of shares) | Total Beneficial Ownership (# of shares) | Percentage of Class | |||||||||||||||||||
210/GSB Acquisition Partners, LLC et. al. | 3,768,900 | (1) | - | 3,768,900 | - | 3,768,900 | 21.93 | % | |||||||||||||||||
C. Clark Webb | 4,020,407 | (2) | - | 4,020,407 | - | 4,020,407 | 23.39 | % | |||||||||||||||||
Robert H. Alpert | 4,016,545 | (3) | - | 4,016,545 | - | 4,016,545 | 23.37 | % | |||||||||||||||||
Thomas W. Brown | 1,545,368 | (4) | - | 1,545,368 | - | 1,545,368 | 8.99 | % | |||||||||||||||||
BLR Partners LP et. al. | 1,051,000 | (5) | - | 1,051,000 | - | 1,051,000 | 6.11 | % | |||||||||||||||||
Renaissance Technologies LLC | 1,042,100 | (6) | - | 1,042,100 | - | 1,042,100 | 6.06 | % | |||||||||||||||||
David L. Mann | 1,256,566 | (7) | - | 1,256,566 | - | 1,256,566 | 7.31 | % | |||||||||||||||||
Frank M. Morgan | 120,122 | - | 120,122 | - | 120,122 | * | |||||||||||||||||||
Dr. Thomas G. Hicks | 60,000 | - | 60,000 | - | 60,000 | * | |||||||||||||||||||
Matthew C. Goulet | 17,000 | (8) | 506,990 | 523,990 | - | 523,990 | 2.96 | % | |||||||||||||||||
Michael P. Canavan | - | 33,083 | 33,083 | - | 33,083 | * | |||||||||||||||||||
David C. Mello | - | 24,998 | 24,998 | - | 24,998 | * | |||||||||||||||||||
All current directors and executive officers as a group (10 persons) | 583,704 | 6,315,444 | - | 6,315,444 | 35.54 | % | |||||||||||||||||||
*Less than one percent |
(1) Based on information set forth in Schedule 13D/A (Amendment No. 4) filed on September 28, 2018 (the “Schedule 13D”), 210/GSB Acquisition Partners, LLC (“GSB Acquisition”) holds directly 3,768,900 shares of Common Stock of GlobalSCAPE. GSB Acquisition is managed by its sole member, 210 Capital, LLC (“210 Capital”), which is managed by its members Covenant RHA Partners, L.P. (“RHA Partners”) and CCW/LAW Holdings, LLC (“CCW Holdings”). C. Clark Webb has the power to direct the affairs of CCW Holdings as its sole member. RHA Partners is managed by its general partner RHA Investments, Inc. (“RHA Investments”), and Robert H. Alpert has the power to direct the affairs of RHA Investments as its President and sole shareholder. Accordingly, GSB Acquisition may be deemed to share voting and dispositive power with 210 Capital, RHA Partners, CCW Holdings, RHA Investments, Mr. Alpert and Mr. Webb over the shares of the Company’s Common Stock that it holds. The address of GSB Acquisition and Messrs. Webb and Alpert is 8214 Westchester Drive, Suite 950, Dallas, Texas 75225. |
(2) In addition to the 3,768,900 shares of Common Stock owned by GSB Acquisition, Mr. Webb holds directly 251,507 shares of common stock. Mr. Webb has sole voting and dispositive power over the 251,507 shares of Common Stock that he holds directly. |
(3) In addition to the 3,768,900 shares of Common Stock owned by GSB Acquisition, Atlas Capital Management, L.P. (“ACM”) holds directly 227,645 shares of Common Stock and Mr. Alpert holds directly 20,000 shares of Common Stock. ACM is managed by its general parter, RHA Investments. Accordingly, Mr. Alpert may be deemed to share voting and dispositive power with RHA Investments over the 227,645 shares of Common Stock owned by ACM. |
(4) Includes 650 shares owned by Mr. Brown’s spouse. Mr. Brown disclaims beneficial ownership of the shares owned by his spouse. |
(5) Based on the information set forth in a Schedule 13G filed on February 8, 2019 by BLR Partners LP, a Texas limited partnership (“BLR Partners”), BLRPart, LP, a Texas limited partnership (“BLRPart GP”), BLRGP Inc., a Texas S corporation (“BLRGP”), Fondren Management, LP, a Texas limited partnership (“Fondren Management”), FMLP Inc., a Texas S corporation (“FMLP”), The Radoff Family Foundation, a Texas non-profit corporation ("Radoff Foundation") and Bradley L. Radoff (collectively, the “BLR Reporting Persons”), BLR Partners directly owns 1,021,000 shares of Common Stock of GlobalSCAPE and each of BLRPart GP, as the general partner of BLR Partners, BLRGP, as the general partner of BLRPart GP, Fondren Management, as the investment manager of BLR Partners, FMLP, as the general partner of Fondren Management, and Mr. Radoff, as the sole shareholder and sole director of each of BLRGP and FMLP, may be deemed the beneficial owner of the 1,021,000 shares owned by BLR Partners, each with sole voting and dispositive power. Radoff Foundation directly owns 30,000 shares of Common Stock and Mr. Radoff, as a director of Radoff Foundation, may also be deemed the beneficial owner of the 30,000 shares owned by the Radoff Foundation. |
(6) Based on the information set forth in a Schedule 13G filed on February 12, 2019 by Renaissance Technologies, LLC, a Delaware corporation. |
(7) Mr. Mann has pledged 750,000 shares to secure his obligations under a personal loan. |
(8) Includes 2,000 shares owned by Mr. Goulet's minor children. |
Except as otherwise provided in the footnotes above, the address of the beneficial owners listed in the table below, the address of Wellington Management Group LLPabove is 280 Congress Street, Boston, Massachusetts, 02210. The address of all other beneficial owners listed in the table below is c/o GlobalSCAPE, Inc., 4500 Lockhill-Selma Rd, Suite 150, San Antonio, Texas, 78249.
| Shares Beneficially Owned as of March 11, 2016 | ||||||||||||||||||||||||
| Additional | ||||||||||||||||||||||||
| Common Shares | Common Shares | |||||||||||||||||||||||
| Common | That May Be | That May Be | ||||||||||||||||||||||
| Shares | Acquired By | Acquired within | Total | |||||||||||||||||||||
| Currently | Exercise of | Total Common | 60 Days of | Beneficial | Percentage | |||||||||||||||||||
| Owned | Stock Options | Shares Held | March 11, 2016 | Ownership | of | |||||||||||||||||||
| Name of Beneficial Owner | (# of shares) | (# of shares) | (# of shares) | (# of shares) | (# of shares) | Class | ||||||||||||||||||
| Thomas W. Brown | 5,560,393 | (1) (2) | 60,000 | 5,620,393 | - | 5,620,393 | 26.65 | % | ||||||||||||||||
| Wellington Management Group LLP | 1,816,900 | (3) | - | 1,816,900 | - | 1,816,900 | 8.64 | % | ||||||||||||||||
| David L. Mann | 1,606,971 | (2) | 60,000 | 1,666,971 | - | 1,666,971 | 7.90 | % | ||||||||||||||||
| Phillip M. Renfro | 99,495 | (2) | 60,000 | 159,495 | - | 159,495 | 0.76 | % | ||||||||||||||||
| Frank M. Morgan | 127,875 | (2) | 20,000 | 147,875 | - | 147,875 | 0.70 | % | ||||||||||||||||
| James L. Bindseil | - | 224,000 | 224,000 | - | 224,000 | 1.05 | % | |||||||||||||||||
| James W. Albrecht, Jr. | - | 174,750 | 174,750 | - | 174,750 | 0.82 | % | |||||||||||||||||
| Matthew C. Goulet | 2,000 | (4) | 90,750 | 92,750 | - | 92,750 | 0.44 | % | ||||||||||||||||
| Greg Hoffer | 100 | 33,000 | 33,100 | - | 33,100 | 0.16 | % | |||||||||||||||||
All directors and executive officers as a group (7 persons) | 8,084,234 | - | 8,084,234 | 38.45 | % | |||||||||||||||||||
Equity Compensation Plan Information
The following table provides aggregate information regarding grants under all equity compensation plans of GlobalSCAPE through December 31, 2015.
| Plan Category | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Available for Future Issuance under Equity Compensation Plans (Excluding securities Reflected in Column (A)) | |||||||||
| (A) | (B) | (C) | ||||||||||
| Equity compensation plans approved by security holders | 2,091,325 | $ | 2.45 | 1,345,590 | ||||||||
2018.
Plan Category | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Available for Future Issuance under Equity Compensation Plans (Excluding securities Reflected in Column (A) | |||||||||
(A) | (B) | (C) | ||||||||||
Equity compensation plans approved by security holders | 2,536,320 | $ | 3.53 | 3,473,667 | ||||||||
Section 16(a) Beneficial Ownership Reporting Compliance
GlobalSCAPE believes, based solely on its review of the copies of Section 16(a) forms furnished to it and written representations from executive officers and directors (and its ten percent stockholders), that all Section 16(a) filing requirements were fulfilled on a timely basis during the fiscal year ended December 31, 2018, except that David Mann reported a sale of 16,551 sharesfor one late report on November 5, 2015, on a Form 4 filedby Dr. Hicks reporting one transaction, one late report on November 10, 2015, which wasForm 4 by Mr. Canavan reporting three transactions and certain late Form 4 transactions by one day.
In making this disclosure, GlobalSCAPE has relied solely on written representations of its directors and executive officers (and its ten percent stockholders) and copies of the reports that they have filed with the SEC.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Transactions in 2015
We did not have any other related-party transactions in 2015.
Policy Related to Related PersonParty Transactions
Our Board of Directors has adopted a formal, written related-person transaction approval policy, setting forth GlobalSCAPE’s policies and procedures for the review, approval, or ratification of “related-person transactions.” For these purposes, a “related person” is a director, nominee for director, executive officer, or holder of more than 5% of our common stock,Common Stock, or any immediate family member of any of the foregoing. This policy applies to any financial transaction, arrangement, or relationship or any series of similar financial transactions, arrangements, or relationships in which GlobalSCAPE is a participant and in which a related person has a direct or indirect interest, other than the following:
● | Payment of compensation by GlobalSCAPE to a related |
● | Transactions available to all employees or all stockholders on the same terms. |
● | Purchases of products or services from GlobalSCAPE in the ordinary course of business at the same price and on the same terms as offered to our other customers, regardless of whether the transactions are required to be reported in GlobalSCAPE’s filings with the SEC. |
● | Transactions, which when aggregated with the amount of all other transactions between the related person and GlobalSCAPE, involve less than $5,000 in a fiscal year. |
Our Audit Committee is required to approve any related-person transaction subject to this policy before commencement of the related-person transaction, provided that if the related-person transaction is identified after it commences, it shall be brought to the Audit Committee for ratification, amendment, or rescission. The Chairman of our Audit Committee has the authority to approve or take other actions with respect to any related-person transaction that arises, or first becomes known, between meetings of the Audit Committee, provided that any action by the Chairman must be reported to our Audit Committee at its next regularly scheduled meeting.
Our Audit Committee will analyze the following factors, in addition to any other factors the members of the Audit Committee deem appropriate, in determining whether to approve a related-person transaction:
● | Whether the terms are fair to GlobalSCAPE. |
● | Whether the transaction is material to GlobalSCAPE. |
● | The role the related person has played in arranging the related-person transaction. |
● | The structure of the related-person transaction. |
● | The interest of all related persons in the related-person transaction. |
Our Audit Committee may, in its sole discretion, approve or deny any related-person transaction. Approval of a related-person transaction may be conditioned upon GlobalSCAPEGlobalSCAPE’s and the related personparty’s following certain procedures designated by the Audit Committee.
EXECUTIVE COMPENSATION
Summary Compensation Table below, whom we sometimes refer
The following table summarizes compensation that GlobalSCAPE paid during the fiscal years ended December 31, 2018 and 2017 to as our named executive officers, or NEOs, and places in perspective the data presented in the tables and narrative that follow.
| Salary | Bonus | Option Awards (1) | Non-Equity Incentive Plan Compensation | All Other Compensation (3) | Total | |||||||||||||||||||||
| James L. Bindseil | 2015 | $ | 247,700 | $ | - | $ | 104,654 | $ | 106,304 | $ | 22,362 | $ | 481,020 | |||||||||||||
| President and Chief | 2014 | 240,000 | - | 62,165 | 123,268 | 19,651 | 445,084 | |||||||||||||||||||
| Executive Officer | ||||||||||||||||||||||||||
| James W. Albrecht, Jr. | 2015 | 236,900 | - | 104,654 | 101,874 | 23,900 | 467,328 | |||||||||||||||||||
| Chief Financial Officer | 2014 | 230,000 | - | - | 118,132 | 19,439 | 367,571 | |||||||||||||||||||
| Mathew C. Goulet | ||||||||||||||||||||||||||
| Senior Vice President of Sales | 2015 | 206,542 | - | 104,654 | 259,361 | (2) | 23,329 | 593,884 | ||||||||||||||||||
| and Marketing | 2014 | 171,154 | - | 31,174 | 171,855 | (2) | 40,093 | 414,276 | ||||||||||||||||||
Salary | Bonus | Option Awards (1) | Non-Equity Incentive Plan Compensation | All Other Compensation (2) | Total | ||||||||||||||||||||
Mathew C. Goulet | 2018 | 375,000 | 131,250 | 512,805 | - | 102,919 | 1,121,974 | ||||||||||||||||||
President and Chief Executive Officer | 2017 | 375,000 | 81,580 | 296,413 | - | 76,178 | 829,171 | ||||||||||||||||||
Michael P. Canavan | 2018 | 235,000 | - | 87,221 | 122,052 | 22,165 | 466,438 | ||||||||||||||||||
Vice President of Sales (3) | 2017 | 137,500 | - | 205,992 | 29,459 | 1,875 | 374,826 | ||||||||||||||||||
David C. Mello | 2018 | 242,400 | 36,360 | 130,831 | 36,360 | 22,252 | 468,203 | ||||||||||||||||||
Vice President of Technical Services (4) | 2017 | 65,262 | 7,459 | 127,883 | 1,454 | 1,653 | 203,711 | ||||||||||||||||||
(1) | These amounts represent the aggregate grant date fair value of stock option awards for fiscal years |
(2) |
Primarily |
| Executive | Percentage of Salary to Total Compensation | Percentage of Annual Cash Incentive Payment to Total Compensation(1) | ||||||
| James L. Bindseil | 51.5 | % | 22.1 | % | ||||
| James W. Albrecht, Jr. | 50.7 | % | 21.8 | % | ||||
| Matthew C. Goulet | 34.8 | % | 43.7 | % | ||||
(3) | Mr. Canavan was hired on July 10, 2017. |
(4) | Mr. Mello was hired on September 18, 2017. |
Employment Agreements and Potential Payments Upon Termination or Change in Control
GlobalSCAPE has entered into employment agreements with each of our named executive officersMessrs. Goulet, Canavan, and Mello pursuant to which each will receive compensation as determined from time to time by the Board of Directors in its sole discretion.
Absent a Change in Control, these agreements for Messer’s Bindseil, Albrecht and Goulet do not provide for any minimum term of employment. Each agreement is currently in force through March 31, 2017. In the event there is a Change in Control but they are not terminatedwithout a termination in connection with that event, a one year employment term commences as of the date of the Change in Control. Each agreement automatically renews on each subsequent annual anniversary date for an additional one year period unless the agreement is cancelled by the Company at least 90 days prior to the end of any such one year term. These agreements do not provide for any payment to them in the event of termination, except that if their employment is terminated in connection with a Change in Control, the Company will pay them an amount equal to their annual base salary which the Company may, at its option, pay as a lump sum.
A Change in Control occurs under these employment agreements upon the occurrence of any of the following:
● | Any “person” or “group” (as such terms are used in Section 13(d) and 14(d) of the |
● | Any person or group makes a tender offer or an exchange offer for 50% or more of the combined voting power of the Company's then outstanding securities. |
● | At any time during any period of twelve consecutive months, individuals who at the beginning of such period constituted a majority of the Board of Directors (“Incumbent Directors”) of the Company cease for any reason other than death to constitute a majority of the board; provided, however, that an individual who becomes a member of the Board subsequent to the beginning of the 12-month period, shall be deemed to have satisfied such 12-month requirement and shall be deemed an Incumbent Director if such Director was elected by or on the recommendation of, or with the approval of, at least two-thirds of the Directors who then qualified as Incumbent Directors either actually (because they were Directors at the beginning of such period) or whose election was approved by two-thirds of the Incumbent Directors; if any such individual initially assumes office as a result of or in connection with either an actual or threatened solicitation with respect to the election of Directors (as such terms are used in Rule 14a-12(c) of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitations of proxies or consents by or on behalf of a person other than a member of the Board, then such individual shall not be considered an Incumbent Director. |
● | The Company consolidates, merges or exchanges securities with any other entity where the stockholders of the Company immediately before the effective time of such transaction beneficially own, immediately after the effective time of such transaction, less than 50% of the combined voting power of the outstanding securities of the entity resulting from such a transaction. |
● | Any person or group acquires all or substantially all of the Company’s assets. |
All of our employment agreements provide for termination without any further payments due if the termination is for “cause”, with that term defined to include any one of the following events:
● | Employee substantially fails to perform his duties with the Company (other than any such failure resulting from his incapacity due to disability or any such actual or anticipated failure resulting from termination by employee for Good Reason, as defined below) after a written demand for substantial performance is delivered to employee by the Board, which specifically identifies the manner in which the Board believes that employee has not substantially performed his duties. |
● | Employee engages in conduct which is demonstrably and materially injurious to the Company or any of its affiliates, monetarily or otherwise. |
● | Employee commits fraud, bribery, embezzlement or other material dishonesty with respect to the business of the Company or any of its affiliates, or the Company discovers that employee has committed any such act in the past with respect to a previous employer. |
● | Employee is indicted for any felony or any criminal act involving moral turpitude, or the Company discovers that employee has been convicted of any such act in the past. |
● | Employee commits a material breach of any of the covenants, representations, terms or provisions of the employment agreement. |
● | Employee violates any instructions or policies of the Company with respect to the operation of its business or affairs that causes material harm, economic or otherwise, to the Company. |
● | Employee uses illegal drugs. |
“Good Reason,” as used above, means, without the officer’s express written consent, any of the following:
● | The material failure by the Company, without employee’s consent, to pay to employee any portion of his current compensation within ten (10) days of the date any such compensation payment is due. |
● | The Company commits a material breach of any of the covenants, representations, terms or provisions of the employment agreement, and such breach is not cured within thirty (30) days after written notice thereof to the Company, which notice shall identify in reasonable detail the nature of the breach and |
● | Any material diminution of employee’s title, function, duties, authority or responsibilities, including reporting requirements. |
● | A reduction in |
● | A material reduction in the employee benefits that are in effect from time to time for employee. |
● | A relocation of the employee’s principal place of employment to a location which is beyond a 50 mile radius from San Antonio, Texas. |
If any lump sum payment to a named executive officerNamed Executive Officer would individually or together with any other amounts paid or payable constitute an “excess parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, and applicable regulations thereunder, the amounts to be paid will be increased so that each named executive officer,Named Executive Officer, as the case may be, will be entitled to receive the amount of compensation provided in his contract after payment of the tax imposed by Section 280G.
In the event of a Change in Control, unvested options to purchase our common stock that have been awarded to our NEOs will become fully vested.
The table below contains information concerning termination and changeChange in controlControl payments to each of our named executive officersNamed Executive Officers as if the event occurred on December 31, 2015.
| Name & Principal Position | Benefit | Before Change in Control Termination Without Cause or for Good Reason | After Change in Control Termination Without Cause or for Good Reason | ||||||||
| James L. Bindseil | Severance | $ | - | $ | 247,200 | ||||||
| President and Chief Executive Officer | Option Acceleration | (1) | not applicable | 177,043 | |||||||
| James W. Albrecht, Jr. | Severance | 236,900 | |||||||||
| Chief Financial Officer | Option Acceleration | (1) | not applicable | 60,750 | |||||||
| Matthew C. Goulet | Severance | - | 210,000 | ||||||||
| Vice President of Sales | Option Acceleration | (1) | not applicable | 151,285 | |||||||
Name & Principal Position | Benefit | Before Change in Control | After Change in Control Termination Without Cause or for Good Reason | ||||||
Matthew C. Goulet | Severance | not applicable | $ | 375,000 | |||||
President and Chief Executive Officer | Option Acceleration | (1) | not applicable | 344,150 | |||||
Michael P. Canavan | Severance | not applicable | 235,000 | ||||||
Vice President of Sales | Option Acceleration | (1) | not applicable | - | |||||
David C. Mello | Severance | not applicable | 242,400 | ||||||
Vice President of Technical Services | Option Acceleration | (1) | not applicable | 57,001 | |||||
(1) | The option acceleration amount is the intrinsic value of equity awards minus the exercise price. This intrinsic value is based upon the closing price for a share of our common stock of |
GRANTS OF PLAN-BASED AWARDS
| All Other Option Awards: Number of | Per Share Exercise or | Grant date fair value | ||||||||||||||||||||||||
Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($) (1) | Securities Underlying | Base Price of Option | of stock and option | |||||||||||||||||||||||
| Grant Date | Threshold | Target | Maximum | Options | Awards ($) | awards ($)(2) | ||||||||||||||||||||
| James L. Bindseil | 3/24/2015 | - | $ | 86,520 | Unlimited | - | - | - | ||||||||||||||||||
| James L. Bindseil | 2/9/2015 | n/a | n/a | n/a | 75,000 | $ | 3.20 | $ | 104,654 | |||||||||||||||||
| James W. Albrecht, Jr. | 3/24/2015 | - | $ | 82,915 | Unlimited | - | - | - | ||||||||||||||||||
| James W. Albrecht, Jr. | 2/9/2015 | n/a | n/a | n/a | 75,000 | $ | 3.20 | $ | 104,654 | |||||||||||||||||
| Matthew C. Goulet | 3/24/2015 | $ | - | $ | 7,700 | (3) | Unlimited | - | - | - | ||||||||||||||||
| Matthew C. Goulet | 2/9/2015 | n/a | n/a | n/a | 75,000 | $ | 3.20 | $ | 104,654 | |||||||||||||||||
Outstanding Equity Awards at Fiscal Year-End
The table below contains certain information concerning outstanding option awards at December 31, 2015,2018 for our named executive officers
| OPTION AWARDS | ||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price Per Share ($) | Option Expiration Date | ||||||||||
| James L. Bindseil | ||||||||||||||
| President and Chief Operating Officer | 75,000 | - | $ | 2.38 | 8/16/2020 | |||||||||
| 10,000 | - | $ | 2.10 | 1/3/2021 | ||||||||||
| 40,000 | - | $ | 1.70 | 1/3/2022 | ||||||||||
| 49,500 | 25,500 | $ | 1.65 | 6/10/2023 | ||||||||||
| 8,250 | 16,750 | $ | 2.35 | 1/2/2024 | ||||||||||
| 8,250 | 16,750 | $ | 2.32 | 12/5/2024 | ||||||||||
| - | 75,000 | $ | 3.20 | 2/9/2025 | ||||||||||
| James W. Albrecht, Jr. | ||||||||||||||
| Chief Financial Officer | 150,000 | - | $ | 2.10 | 7/10/2022 | |||||||||
| - | 75,000 | $ | 3.20 | 2/9/2025 | ||||||||||
| Matthew C. Goulet | ||||||||||||||
| Chief Operating Officer | 49,500 | 25,500 | $ | 1.55 | 9/9/2023 | |||||||||
| 8,250 | 16,750 | $ | 2.35 | 1/2/2024 | ||||||||||
| - | 75,000 | $ | 3.20 | 2/9/2025 | ||||||||||
OPTION AWARDS | |||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price Per Share ($) | Option Expiration Date | |||||||||
Matthew C. Goulet | |||||||||||||
President and Chief Operating Officer | 75,000 | - | $ | 1.55 | 9/9/2023 | ||||||||
| 25,000 | - | $ | 2.35 | 1/2/2024 | |||||||||
| 75,000 | - | $ | 3.20 | 2/9/2025 | |||||||||
| 66,000 | 34,000 | $ | 3.52 | 2/1/2026 | |||||||||
| 66,660 | 33,340 | $ | 3.53 | 5/16/2026 | |||||||||
| 33,330 | 16,670 | $ | 3.50 | 6/2/2026 | |||||||||
| 66,000 | 134,000 | $ | 3.73 | 2/8/2027 | |||||||||
| - | 250,000 | $ | 4.06 | 10/10/2028 | |||||||||
| - | 100,000 | $ | 3.90 | 10/29/2028 | |||||||||
Michael P. Canavan | |||||||||||||
Vice President of Sales | 24,750 | 50,250 | $ | 5.28 | 7/10/2027 | ||||||||
| 8,333 | 16,667 | $ | 3.89 | 8/23/2027 | |||||||||
| - | 50,000 | $ | 4.06 | 10/10/2028 | |||||||||
David C. Mello | |||||||||||||
Vice President of Technical Services | 24,998 | 50,002 | $ | 3.97 | 9/18/2027 | ||||||||
| - | 24,996 | $ | 4.06 | 10/10/2028 | |||||||||
| - | 50,004 | $ | 4.06 | 10/10/2028 | |||||||||
Pension Benefits
GlobalSCAPE does not sponsor any pension benefit plans. None of the NEOs contribute to such a plan.
Non-Qualified Deferred Compensation
GlobalSCAPE does not sponsor any non-qualified defined compensation plans or other non-qualified deferred compensation plans.
Compensation of Directors
The Board of Directors has the authority to determine the amount of compensation to be paid to its members for their services as directors and committee members and to reimburse directors for their expenses incurred in attending meetings.
Our non-employee directors receivereceived the following cash compensation:
Cash compensation from January through April 2019
● | Base monthly retainer: |
o | Board Chairman (Mr. Brown) - $5,000 per month |
o | All other Board members - $2,000 per month |
● | Committee chair monthly retainer (Messrs. Mann and Morgan) - $1,000 per month |
● | Attendance at Board or committee meetings - $1,000 per meeting |
Cash compensation from May through December 2019
● | Base monthly retainer: |
o | Board Chairman through September (Mr. Brown) - $6,500 per month |
o | Board Chairman from October through December (Mr. Alpert) - $6,500 per month |
o | All other Board member - $5,500 per month |
Mr. Bindseil,Goulet, an employee of the Company, does not receive a monthly retainer or attendance fees for his service on the Board.
We also provide stock-based compensation to our directors under the GlobalSCAPE, Inc. 2015 Non-Employee Directors Long-Term Equity Incentive Plan, or the 2015 Directors Plan, and previously under the 2006 GlobalSCAPE, Inc. 2006 Non-Employee Directors Long-Term Equity Incentive Plan, or the 2006 Directors Plan. Under the 2015 Directors Plan, a maximum of 500,000 shares of GlobalSCAPE common stockCommon Stock may be awarded. As of March 11, 2016, options to purchase a total of 140,00012, 2019, 160,000 shares were outstanding under the 2006 Directors Plan and 60,000 shares were outstanding under the GlobalSCAPE, Inc. 2000 Stock Option Plan. As of March 11, 2016, 80,000 shares of restricted common stock were issued and outstandingreserved for issuance under the 2015 Directors Plan for which the restrictions lapse in May 2016 provided the owner of those restricted shares meets the continuing service requirement at that time.
The 2015 Directors Plan is administered by the Compensation Committee of the Board of Directors which sets the exercise price, term, and other conditions applicable to each stock option granted under the Plan.plan. Stock options awarded under this plan shall have an exercise share price of no less than 100% of the fair market value on the date of the award while the option terms and vesting schedules are at the discretion of the Compensation Committee. The 2015 Directors Plan provides that each year, at the first regular meeting of the Board of Directors immediately following GlobalSCAPE’s annual stockholder’sstockholders’ meeting, each non-employee director shall be granted or issued maximum awards of either (1) a grant of an option to purchase 20,000 shares of our common stockCommon Stock or (2) the issuance of 20,000 shares of restricted common stockCommon Stock for participation in Board and Committee meetings during the previous calendar year. In 2015,2018, the Compensation Committee granted 20,000 shares of restricted stock to each director except for Mr. Bindseil,Goulet, who received no such shares as a result of his being an employee of the Company. The restrictions on this restricted stock lapse in May 2016 providedOctober 2019.
Effective April 1, 2018, the owner of those restricted shares meetsbase monthly retainer we pay to the continuing service requirement at that time.Board Chairman increased from $5,000 per month to $6,500 per month and the base monthly retainer we pay to all other non-employee Board members increased from $2,000 per month to $5,500 per month. Also effective April 1, 2018, we no longer pay the $1,000 per month committee chair retainer nor the $1,000 per meeting attendance fee.
The following table sets forth a summary of compensation for the fiscal year ended December 31, 20152018 that GlobalSCAPE paid to each director. GlobalSCAPE does not sponsor a pension benefits plan, a non-qualified deferred compensation plan or a non-equity incentive plan for our directors and, accordingly, these columns have been omitted from the following table:
| Name | Fees Earned or Paid in Cash | Stock Awards (1) | All Other Compensation (2) | Total | ||||||||||||
| Thomas W. Brown | $ | 60,000 | $ | 66,800 | $ | 13,335 | $ | 140,135 | ||||||||
| David L. Mann | $ | 51,000 | $ | 66,800 | $ | 13,335 | $ | 131,135 | ||||||||
| Frank M. Morgan | $ | 51,000 | $ | 66,800 | $ | 658 | $ | 118,458 | ||||||||
| Phillip M. Renfro | $ | 25,000 | $ | 66,800 | $ | 6,172 | $ | 97,972 | ||||||||
Name | Fees Earned or Paid in Cash | Stock Awards (1) | Stock Option Awards | All Other Compensation (2) | Total | |||||||||||||||
Robert H. Alpert | $ | 40,500 | $ | - | $ | - | $ | - | 40,500 | |||||||||||
Thomas W. Brown | 59,000 | 74,400 | - | 14,434 | 147,834 | |||||||||||||||
David L. Mann | 70,000 | 74,400 | - | 59,265 | 203,665 | |||||||||||||||
Frank M. Morgan | 70,000 | 74,400 | - | 864 | 145,264 | |||||||||||||||
Thomas E. Hicks | 68,000 | 74,400 | - | - | 142,400 | |||||||||||||||
C. Clark Webb | 38,500 | - | - | - | 38,500 | |||||||||||||||
(1) | These amounts represent the aggregate grant date fair value of restricted stock awards for the |
(2) | These amounts represent health insurance |
As of December 31, 2015,2018, stock options issued to our directors that had not been exercised and restricted stock awards for which the restrictionrestrictions had not yet lapsed as of that date are as follows:
Name | Outstanding Stock Options Not Exercised | Restricted Stock Awards | ||||||
Robert H. Alpert | - | 20,000 | ||||||
Thomas W. Brown | - | - | ||||||
David L. Mann | - | 20,000 | ||||||
Frank M. Morgan | - | 20,000 | ||||||
Thomas E. Hicks | - | 20,000 | ||||||
Clark C. Webb | - | 20,000 | ||||||
| Name | Outstanding Stock Options Not Exercised | Restricted Stock Awards | ||||||
| Thomas W. Brown | 60,000 | 20,000 | ||||||
| David L. Mann | 60,000 | 20,000 | ||||||
| Frank M. Morgan | 20,000 | 20,000 | ||||||
| Phillip M. Renfro | 60,000 | 20,000 | ||||||
PROPOSAL TWO
RATIFICATION OF
PUBLIC ACCOUNTING FIRM
GlobalSCAPE’s Audit Committee has selected Padgett, Stratemann & Co., L.L.P., or “Padgett Stratemann”,appointed Weaver and Tidwell, LLP (“Weaver”) to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2016.2019. Although stockholder ratification is not required, the Board of Directors has directed that the selectionappointment of Padgett StratemannWeaver be submitted to the stockholders for ratification at the annual meeting.Annual Meeting.
Weaver provided audit services to GlobalSCAPE for the year ended December 31, 2018. A representative of Padgett StratemannWeaver will not be present at the annual meeting.Annual Meeting, will have an opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions.
On October 19, 2016, Padgett Stratemann & Co., L.L.P. (“Padgett”) resigned as our independent registered public accounting firm as a result of the partners of Padgett becoming partners of RSM US LLP (“RSM”). On October 19, 2016, the Audit Committee appointed RSM to serve as our independent registered public accounting firm for the year ended December 31, 2016. The decision to engage RSM was approved by the Audit Committee.
During 2014 and 2015 and through October 19, 2016, the Company (or someone on its behalf) had not consulted with RSM with respect to: (i) the application of accounting principles to a specified transaction, either completed or proposed; (ii) the type of audit opinion that might be rendered on the Company’s financial statements, and RSM did not provide either a written report or oral advice to the Company that RSM concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue; or (iii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
Effective on March 27, 2017, RSM was dismissed as the Company’s independent registered public accounting firm. The Audit Committee approved this dismissal.
RSM performed the audit of our consolidated financial statements as of and for the year ended December 31, 2016 (the “2016 Financial Statements”). In connection with the preparation of the 2016 Financial Statements, the Company changed certain accounting methods and the classification and presentation of its business activities in its financial statements. To ensure comparability between periods, the Company revised the 2015 Financial Statements (as defined below) to conform them to the method of presentation in the 2016 Financial Statements. For more information, please see Note 2 of the notes to our consolidated financial statements included in our Form 10-K/A for the year ended December 31, 2016, filed with the SEC on June 14, 2018.
On March 27, 2017, the Company announced that the Audit Committee had approved the appointment of BDO USA, LLP (“BDO”) as its independent registered public accounting firm to audit the Company’s financial statements subject to completion of its standard client acceptance procedures.
Effective as of April 11, 2017, BDO notified the Company that it had completed such client acceptance procedures. On April 12, 2017, the Audit Committee formally engaged BDO as the Company’s independent registered public accounting firm to audit the Company’s financial statements.
During 2015 and 2016 and through April 12, 2017, the Company (or someone on its behalf) had not consulted with BDO with respect to: (i) the application of accounting principles to a specified transaction, either completed or proposed; (ii) the type of audit opinion that might be rendered on the Company’s financial statements; or (iii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
On August 1, 2017, the Company informed BDO that it had been dismissed as the Company’s independent registered public accounting firm. The Audit Committee approved this dismissal. BDO did not issue any audit reports during the period of its engagement.
On August 2, 2017, GlobalSCAPE received a letter (the “10A Letter”) from BDO in accordance with Section 10A(b)(2) of the Exchange Act.
In the 10A Letter, BDO advised that on or around July 6, 2017 BDO was contacted by David Mann, the Audit Committee Chairman, who provided information about conduct that in BDO’s view indicated an illegal act, as defined by Section 10A of the Exchange Act, may have occurred. BDO stated in the 10A Letter that BDO was informed that the Company had learned of the subject conduct in May of 2017 and had already engaged the Company’s corporate outside counsel, along with forensic accountants, to conduct an investigation into the conduct and that additional information would be provided as the investigation continued. In a separate communication to the Audit Committee Chairman on July 6, 2017, BDO advised GlobalSCAPE of both its and BDO’s obligations under Section 10A of the Exchange Act and auditing standards of the Public Company Accounting Oversight Board, and that BDO would recommend that the Audit Committee engage independent counsel to conduct the investigation, which BDO defined as counsel who had not previously performed substantial work for the Company. BDO communicated that it did not believe the counsel GlobalSCAPE had engaged met that definition due to GlobalSCAPE’s historical working relationship with them.
BDO stated in the 10A Letter that additional information related to the conduct under investigation was provided to BDO by GlobalSCAPE’s corporate outside counsel on July 10, 2017, noting that employees of the Company had entered into “side agreements” with customers of the Company in December 2016 which increased revenue recorded, and accounts receivable, by amounts that had not been fully quantified at that time. BDO was engaged by GlobalSCAPE on April 12, 2017, and was not the Company’s independent registered public accounting firm during the period in which the misconduct was alleged to have occurred.
BDO stated in the 10A Letter that in a discussion with the Audit Committee Chairman on July 10, 2017, BDO discussed its request for the Company to engage other counsel to lead the investigation, and was told that the Company considered the engaged counsel to be independent. BDO stated in the 10A Letter that during that discussion BDO detailed the reasons for its concern, and that BDO viewed the Company’s failure to engage alternate legal counsel as a failure to take timely and appropriate remedial action as defined by Section 10A(b)(2)(B) of the Exchange Act, where absent action by the Company, BDO would not be in a position to assess the adequacy of the investigation, which BDO would consider a disagreement with the Company as it would limit the scope of BDO’s audit, warranting either a departure from its standard report or resignation from the audit engagement. In the 10A Letter, BDO stated that since July 10, 2017, in response to multiple requests by BDO, the Audit Committee reiterated their position that they would continue the investigation being performed by their corporate outside counsel, who they believe were sufficiently independent.
In the 10A Letter, BDO stated its belief that the Company had not been forthcoming with details regarding the investigation or the conclusions, if any, reached by counsel and the Company about the conduct at issue. In the 10A Letter, BDO stated that due to the lack of details that BDO had been provided regarding the investigation, and its dismissal as the Company’s independent registered public accounting firm, it was unable to determine whether it was likely that an illegal act had occurred, and whether the impact of any misstatements resulting from the alleged misconduct had a material impact on the Company’s consolidated financial statements. In the 10A Letter, BDO stated that based on the limited information BDO had been provided, it believed that it was possible that the conduct could have had a material effect on the Company’s consolidated financial statements that had been filed with the SEC, or that were expected to be filed in the foreseeable future. In the 10A Letter, BDO stated that it had been informed but had not confirmed that, at its urging in its communications with the Company on July 6, 2017, the Company had advised its prior auditor of the investigation. In the 10A Letter, BDO also stated that it did not believe senior management had taken timely and appropriate remedial action in response to the conduct, in particular by not having the investigation performed by counsel with no prior affiliation with the Company and by not sharing information from the investigation with BDO on a timely basis. In the 10A Letter, BDO also stated that the failure to take timely and appropriate remedial action may have either warranted a departure from a standard report or warranted BDO’s resignation, had BDO not been terminated.
As a result of the 10A Letter, on August 3, 2017, GlobalSCAPE filed a notice pursuant to Section 10A of the Exchange Act (the “Notice”) with the SEC. In the Notice, GlobalSCAPE notified the SEC of the 10A Letter received from BDO.
During the period from April 12, 2017 until the date of BDO’s dismissal and through August 7, 2017, the date of our Current Report on Form 8-K disclosing our receipt of the 10A Letter, except for the matters described above, there were no disagreements between the Company and BDO on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of BDO, would have caused BDO to make reference to the subject matter of the disagreement in its report on the Company’s financial statements for such year. On August 2, 2017, BDO reported that it considered the use of non-independent counsel to lead the investigation described above to be a material weakness in internal control over financial reporting, as such counsel could be influenced by the Company’s existing relationship with such counsel. During the period from April 12, 2017 until the date of BDO’s dismissal and through August 7, 2017, there were no other reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.
Effective on August 1, 2017, the Audit Committee approved the appointment of Weaver as its independent registered public accounting firm to audit the Company’s financial statements as of and for the year ended December 31, 2017. During the two most recent fiscal years prior to such appointment and through August 1, 2017, the Company (or someone on its behalf) had not consulted with Weaver with respect to: (i) the application of accounting principles to a specified transaction, either completed or proposed; (ii) the type of audit opinion that might be rendered on the Company’s financial statements; or (iii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
On November 20, 2017, the Chairman of the Audit Committee was orally informed by RSM that RSM was withdrawing from its engagement by the Audit Committee to reissue its audit report on the 2016 Financial Statements. On November 21, 2017, RSM delivered a withdrawal letter to the Chairman of the Audit Committee. In its withdrawal letter, RSM stated that (x) as of November 21, 2017, it had not completed the audit procedures necessary to reissue its report on the 2016 Financial Statements and (y) based on the information the Audit Committee provided from its internal investigation, RSM had concluded that, in its professional judgment, it could no longer rely on management’s representations, which the Company has concluded is a “reportable event” as defined in Item 304(a)(1)(v) of Regulation S-K.
The audit report originally issued by RSM on the 2016 Financial Statements, when previously filed, did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles. However, as previously disclosed in our Current Report on Form 8-K filed on August 7, 2017 (the “August 8-K”), the 2016 Financial Statements included in our Annual Report on Form 10-K originally filed on March 27, 2017 (the “Original 2016 10-K Filing”), including the auditor’s report on the 2016 Financial Statements included in the Original 2016 10-K Filing, should no longer be relied upon in light of the restatement of certain of our consolidated financial statements. In connection with the audit of the 2016 Financial Statements and through the date of RSM’s dismissal on March 27, 2017, there were: (i) no disagreements between the Company and RSM on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of RSM, would have caused RSM to make reference to the subject matter of the disagreement in their report on the Company’s financial statements for such year, and (ii) no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K. During the period from August 15, 2017, when RSM was re-engaged to reissue its audit report on the restated 2016 Financial Statements until November 21, 2017, there were: (i) no disagreements between the Company and RSM on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of RSM, would have caused RSM to make reference to the subject matter of the disagreement in their report on the Company’s financial statements for such year, and (ii) except as set forth above, no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.
On December 1, 2017, the Chairman of the Audit Committee received a letter from Padgett in which Padgett stated that based on the circumstances described in the August 8-K surrounding the dismissal of BDO as the Company’s independent registered public accounting firm and the previously disclosed withdrawal of RSM from its engagement by the Audit Committee to reissue its audit report on the restated 2016 Financial Statements, and based on the fact that management at that time was substantially the same as the management in place in 2015, Padgett had concluded that it could not rely on management’s representations that would be necessary for Padgett to complete the audit procedures necessary to issue consents to the inclusion of its audit report on our consolidated financial statements as of and for the year ended December 31, 2015 (the “2015 Financial Statements”) in the Company’s filings or transactions after the date of the letter. Padgett also stated in its letter that (1) it was not at that time aware of whether any of the circumstances described in the August 8-K with respect to the 2016 Financial Statements could have been applicable to the Company’s 2015 Financial Statements, and (2) it had not reached a conclusion as to whether it was necessary for Padgett to withdraw its audit report on the 2015 Financial Statements. The Company has concluded that this is a “reportable event” as defined in Item 304(a)(1)(v) of Regulation S-K.
The audit report originally issued by Padgett on the 2015 Financial Statements, when previously filed, did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles. In connection with the audit of the 2015 Financial Statements and through the date of Padgett’s resignation as the Company’s independent registered public accounting firm on October 19, 2016 as a result of the partners of Padgett becoming partners of RSM, there were: (i) no disagreements between the Company and Padgett on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Padgett, would have caused Padgett to make reference to the subject matter of the disagreement in its report on the Company’s financial statements for such year, and (ii) no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K. During the period from October 19, 2016 until December 1, 2017, there were: (i) no disagreements between the Company and Padgett on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Padgett, would have caused Padgett to make reference to the subject matter of the disagreement in its report on the Company’s financial statements for such year, and (ii) except as set forth above, no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.
Effective on December 13, 2017, the Audit Committee expanded the initial appointment of Weaver as the Company’s independent registered public accounting firm with respect to the audit of the Company’s financial statements for the year ended December 31, 2017 to also include serving as the Company’s independent registered public accounting firm with respect to the audit of the 2015 Financial Statements and the 2016 Financial Statements. In connection with the expansion of the initial appointment of Weaver to include serving as the Company’s independent registered public accounting firm with respect to the audit of 2015 Financial Statements and the 2016 Financial Statements, the Audit Committee made Weaver aware of the matters discussed by RSM and Padgett in their communications to the Chairman of the Audit Committee.
Vote Required
The affirmative vote of the holders of a majority of the votes castshares present in person or by proxy and entitled to vote is required to ratify the selectionappointment of Padgett Stratemann.Weaver as GlobalSCAPE’s independent registered public accounting firm for the fiscal year ending December 31, 2019. In the event the stockholders fail to ratify the appointment, the Board of Directors may reconsider its appointment for this year. Even if the appointment is ratified, the Board of Directors, in its discretion, may, if circumstances dictate, direct the appointment of a different independent registered public accounting firm at any time during the year, if the Board of Directors determines that such a change would be in the Company’s and its stockholders’ best interests.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE SELECTIONAPPOINTMENT OF PADGETT, STRATEMANN & CO., L.L.P.WEAVER AND TIDWELL, LLP AS GLOBALSCAPE’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2016.
PRINCIPAL AUDITOR FEES AND SERVICES
Audit Fees
The aggregateaudit fees billed for professional services providedduring 2018 and 2017 by Padgett, Stratemann & Co., L.L.P. in connection with their audit of our consolidated financial statements as of December 31, 2014 and 2015, and for the years then ended and for their reviews of the condensed financial statements included in our Quarterly Reports on Form 10-Q during the years ended December 31, 2014 and 2015, were $149,000 and $181,000 respectively. The aggregate fees billed for professional services provided by Grant Thornton LLP, or “Grant Thornton” (the Company’s predecessor independent registered public accounting firm), in connection withfirms were as follows:
● | For their review of our condensed consolidated financial statements included in our Form 10-Qs for the first and second fiscal quarters of 2017, we paid $27,414 to BDO. |
● | For their review of our condensed consolidated financial statements included in our Form 10-Qs for the first three fiscal quarters of 2017, we paid $60,000 to Weaver. |
● | For their audit of our consolidated financial statements as of December 31, 2017, and for the year then ended, included in our Form 10-K, we paid $45,000 to Weaver. |
● | For their audit of our consolidated financial statements as of December 31, 2014, 2015, and 2016, and for the years then ended, included in our Form 10-K, we paid $10,000 to RSM. |
● | For their audit of our consolidated financial statements as of December 31, 2015 and 2016, and for the years then ended, included in our Form 10-K, we paid $379,254 to Weaver. |
● | For their reviews of our condensed consolidated financial statements included in our Form 10-Qs for the first three fiscal quarters of 2017, we paid $29,116 to Weaver. |
● | For their audit of our consolidated financial statements as of December 31, 2017, and for the year then ended, included in our Form 10-K, we paid $225,654 to Weaver. |
● | For their review of our condensed consolidated financial statements included in our Form 10 Qs for the first, second, and third fiscal quarters of 2018, we paid $91,193 to Weaver. |
● | For their audit of our consolidated financial statements as of December 31, 2018, and for the year then ended, included in our Form 10-K, we paid $25,000 to Weaver. |
● | For their audit of our internal control over financial reporting for our consolidated financial statements as of December 31, 2017, and for the year then ended, we paid $112,664 to Weaver. |
● | For their audit of our internal control over financial reporting for our consolidated financial statements as of December 31, 2018, and for the year then ended, we paid $60,000 to Weaver. |
The audit fees billed through March 12, 2019 by our independent registered public accounting firm were as follows:
● | For their audit of our consolidated financial statements as of December 31, 2018, and for the year then ended, included in our Form 10-K, we paid $125,000 to Weaver. |
● | For their audit of our internal control over financial reporting for our consolidated financial statements as of December 31, 2018, and for the year then ended, we paid $110,000 to Weaver. |
Tax Fees and All Other Fees
Other than the condensed financial statements included in our Quarterly Reports on Form 10-Q during the year ended December 31, 2014, were $72,000.
The Audit Committee has considered whether the services provided forand noted that Weaver, BDO, Padgett and RSM have not rendered any non-audit services are compatible with maintainingto the independence of Padgett Stratemann or Grant Thornton andCompany. Accordingly, the Audit Committee has concluded that the independence of such firmthose firms has been maintained.
AUDIT COMMITTEE PRE-APPROVAL POLICY
The Audit Committee’s policy is to pre-approve all audit, audit-related and non-audit services provided by the independent auditors.registered public accounting firm. These services may include audit services, audit-related services, tax services, and other services. The Audit Committee may also pre-approve particular services on a case-by-case basis. The independent auditors areregistered public accounting firm is required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditorsregistered public accounting firm in accordance with such pre-approval. The Audit Committee may also delegate pre-approval authority to one or more of its members. Such member(s) must report any decisions to the Audit Committee at the next scheduled meeting.
AUDIT COMMITTEE REPORT
The Audit Committee reviews GlobalSCAPE’s 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 system of internal controls. The Audit Committee is responsible for engaging the independent auditorsregistered public accounting firm to perform an independent audit of GlobalSCAPE’s consolidated financial statements in accordance with generally accepted accounting principles and to issue reports thereon. The Committee reviews and oversees these processes, including oversight of:
● | The integrity of GlobalSCAPE’s financial statements. |
● | GlobalSCAPE’s independent |
● | The performance of GlobalSCAPE’s independent |
● | GlobalSCAPE’s compliance with legal and regulatory requirements. |
In this context, the Committee hereby reports as follows:
● | The Audit Committee has reviewed and discussed the audited financial statements with GlobalSCAPE’s management. |
● | The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by the Statement on Auditing Standards No. |
● | The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by the |
● | Based on the review and discussions referred to in previous paragraphs, the Audit Committee recommended to the Board, and the Board |
This report is submitted by the members of the Audit Committee.
David L. Mann (Chairman of the Audit Committee)
Frank M. Morgan
Thomas E. Hicks
C. Clark Webb
PROPOSAL THREE
ADVISORY VOTE ON EXECUTIVE COMPENSATION
GlobalSCAPE asks that you indicate your support for our executive compensation policies and practices as described in our Compensation Discussion and Analysis, accompanying tables and related narrative contained in this Proxy Statement. Your vote is advisory and will not be binding on the Board of Directors; however, the Board of Directors will review the voting results and take them into consideration when making future decisions regarding executive compensation.
The Compensation Committee is responsible for executive compensation and works to structure a compensation plan that reflects GlobalSCAPE’s underlying compensation philosophy of aligning the interests of our executive officers with those of our stockholders. Key elements of this philosophy are:
● | Establishing base salaries that are competitive with the companies in our comparative group, within GlobalSCAPE’s budgetary constraints and commensurate with GlobalSCAPE’s salary structure. |
● | Rewarding our NEOs for outstanding, Company-wide performance as reflected by financial measures, such as sales revenue or net income, or other goals, such as the consummation of an acquisition and product delivery as well as customer and employee satisfaction and compliance with regulatory requirements. |
● | Providing equity-based incentives for our NEOs to ensure that they are motivated over the long term to respond to GlobalSCAPE’s business challenges and opportunities as owners rather than just as employees. |
The Board of Directors recommends a vote “FOR” the following resolution:
RESOLVED: That the stockholders approve, on an advisory basis, the compensation of GlobalSCAPE’s executives named in the Summary Compensation Table, as disclosed in this Proxy Statement pursuant to the executive compensation disclosure rules of the Securities and Exchange Commission, which disclosure includes the Compensation Discussion and Analysis, the compensation tables and other executive compensation disclosures and related material set forth in this Proxy Statement.
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
You may submit proposals for consideration at future stockholder meetings.meetings in accordance with SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in Company-sponsored proxy materials. For a stockholder proposal to be considered for inclusion in our Proxy Statement for the annual meetingAnnual Meeting next year, the Corporate Secretary must receive the written proposal at our principal executive offices no later than November 23, 2016. Such proposals also must comply with SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in Company-sponsored proxy materials.30, 2019. Proposals should be addressed to:
GlobalSCAPE, Inc.
Attn: Corporate Secretary
4500 Lockhill-Selma Rd, Suite 150
San Antonio, TX 78249
For a stockholder proposal that is not intended to be included in our Proxy Statement under Rule 14a-8, the stockholder must provide the information required by our Bylaws and give timely notice to the Corporate Secretary in accordance with our Bylaws, which, in general, require that the notice be received by the Corporate Secretary as follows:
If the date of the stockholder meeting is moved more than 30 days after the anniversary of our annual meeting for the prior year, then notice of a stockholder proposal that is not intended to be included in our Proxy Statement under Rule 14a-8 must be received no later than the 10th day following the date on which a notice of the date of the annual meeting is mailed or the date of the meeting is publicly announced.
AVAILABLE INFORMATION
We are a reporting company under the Securities Exchange Act of 1934, as amended, and file annual, quarterly, and special reports and other information with the SEC. You may read and copy any material that we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain more information about the SEC’s Public Reference Room by calling 1-800-SEC-0330. The SEC also maintains an Internet site that contains all of these reports and other information regarding our Company and other issuers that file electronically with the SEC at http://www.sec.gov. We also post links to our SEC filings at our web site at http://www.globalscape.com.
You may request a copy of GlobalSCAPE’s annual, quarterly, and current reports, Proxy Statements,proxy statements, and other information at no cost, including our annual report on Form 10-K, including financial statements and schedules thereto, for the year ended December 31, 2015,2018, by writing or telephoning GlobalSCAPE at the following address:
GlobalSCAPE, Inc.
Attn: Chief Financial Officer
4500 Lockhill-Selma Rd., Suite 150
San Antonio, Texas 78249
(210) 308-8267
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not know of any other matter that will be brought before the annual meeting.Annual Meeting. However, if any other matter properly comes before the annual meeting,Annual Meeting, or any adjournment thereof, the person or persons voting the proxies will vote on such matters in accordance with their best judgment and discretion.
By Order of the Board of Directors,
/s/ Matthew C. Goulet
Matthew C. Goulet
President and Chief Executive Officer
March 23, 2016
San Antonio, TX