UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Schedule 14A
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant | ||||
Filed by a party other than the Registrant |
Check the appropriate box: |
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Preliminary Proxy Statement | ||
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
☑ | Definitive Proxy Statement – | |
☐ | Definitive Additional Materials | |
☐ | Soliciting Material Pursuant to § 240.14a-12 |
NATURAL HEALTH TRENDS CORP. | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
Payment of Filing Fee (Check the appropriate box): |
☑ | No fee required | |||
☐ | Fee paid previously with preliminary materials | |||
☐ | Fee computed on table | |||
NATURAL HEALTH TRENDS CORP.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 2020
To the Stockholders of Natural Health Trends Corp.:
The 20202023 annual meeting of stockholders of Natural Health Trends Corp. (the “Company”) will be held on May 14, 2020,16, 2023, beginning at 9:00 a.m. local time, at The Ritz-Carlton, Rancho Mirage, 68900 Frank Sinatra Drive, Rancho Mirage,the Company's office located at 19745 Colima Rd., Suite 8, Rowland Heights, CA 92270.91748. At the meeting, the holders of the Company’s outstanding common stock will act on the following matters:
Election of five (5)four (4) directors to the Board of Directors of the Company to serve until the next annual meeting of the Company’s stockholders
Ratification of the appointment of Marcum LLP as independent registered public accounting firm for the Company for fiscalthe year ending December 31, 20202023
All holders of record of shares of the Company’s common stock at the close of business on March 18, 202020, 2023 are entitled to vote at the meeting and any postponements or adjournments of the meeting.
We are using Securities and Exchange Commission rules that allow the Company to furnish proxy materials on the Internet to stockholders of the Company. Consequently, stockholders will not automatically receive paper copies of our proxy materials. We are instead sending to stockholders a Notice of Internet Availability of Proxy Materials with instructions for accessing the proxy materials, including our proxy statement and Annual Report on Form 10-K, and for voting via the Internet. The electronic delivery of our proxy materials will reduce our printing and mailing costs and any environmental impact.
The Notice of Internet Availability of Proxy Materials identifies the date, time and location of the annual meeting; the matters to be acted upon at the meeting and the Board of Directors’ recommendation with regard to each matter; a toll-free telephone number, an e-mail address, and a website where shareholders can request a paper or e-mail copy of our proxy materials, including our Annual Report on Form 10-K, proxy statement and a proxy card, free of charge.
We currently intend to hold our annual meeting in person. However, we are monitoring the coronavirus (COVID-19) outbreak and related precautions,situation and it may become necessary or advisable to change the date, time, location and/or means of holding the annual meeting (including by means of remote communication). Any such change will be announced via press release and website posting, as well as the filing of additional proxy materials with the Securities and Exchange Commission.
By Order Of The Board Of Directors, | |
/s/ Timothy S. Davidson | |
April | Timothy S. Davidson |
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE EXERCISE YOUR VOTING RIGHTS. THE PROXY STATEMENT IS FIRST BEING SENT OR GIVEN TO THE COMPANY’S STOCKHOLDERS ON OR ABOUT APRIL 2, 2020.3, 2023.
Page | |
ABOUT THE MEETING | |
What is the purpose of the meeting? | |
Who is entitled to vote at the meeting? | |
What are the voting rights of the holders of the Company’s common stock? | |
Who can attend the meeting and where is it being held? | |
Why did I initially receive a Notice of | |
How can I elect the manner in which I will receive proxy materials in the future? | |
How do I vote? | |
How may my broker, bank or other agent vote my shares if I fail to provide timely directions? | |
Can I change my vote or revoke my proxy? | |
What constitutes a quorum? | |
What are the Board of Directors’ recommendations? | |
What vote is required to approve each item? | |
What types of expenses will the Company incur? | |
STOCK OWNERSHIP | |
Who are the owners of the Company’s stock? | |
Were there any delinquent Section 16(a) reports during | |
GOVERNANCE OF THE COMPANY | |
Who are the current members of the Board of Directors and on which committees do they serve? | |
Who is the Chairman of the Board of Directors? | |
Which directors are considered independent? | |
How often did the Board of Directors meet during fiscal | |
What is the role of the Board of Directors’ Audit, Compensation, and Nominating and Corporate Governance Committees? | |
What is the composition of the Board of Directors? | 7 |
What is the Board of Directors’ role in risk oversight? | |
How are directors compensated? | 8 |
How do stockholders communicate with the Board of Directors? | |
Are Company employees or directors permitted to engage in hedging transactions? | |
Does the Company have a Code of Ethics? | |
INFORMATION ABOUT EXECUTIVE OFFICERS | |
REPORT OF THE AUDIT COMMITTEE | |
EQUITY COMPENSATION PLAN INFORMATION | |
COMPENSATION OF NAMED EXECUTIVE OFFICERS AND DIRECTORS | |
Summary Named Executive Officer Compensation Information | |
Named Executive Officer Compensation Arrangements |
Pay Versus Performance Information | 12 |
Severance and Post-Termination Payment Arrangements | 14 |
Director Compensation | 15 |
ITEM ONE: ELECTION OF DIRECTORS | 16 |
Biographical Summaries of Nominees for the Board of Directors | 16 |
ITEM TWO: RATIFICATION OF THE APPOINTMENT OF MARCUM LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE COMPANY FOR | 17 |
Audit and Other Professional Fees | 17 |
Pre-Approval Policies and Procedures for Audit and Non-Audit Services | 17 |
OTHER MATTERS | 18 |
ADDITIONAL INFORMATION | 18 |
Stockholder Proposals for the | 18 |
HOUSEHOLDING INFORMATION | 18 |
NATURAL HEALTH TRENDS CORP.
PROXY STATEMENT
This proxy statement contains information related to the annual meeting of stockholdersstockholders of Natural Health Trends Corp. (“the Company”) to be held on May 14, 202016, 2023 beginning at 9:00 a.m. local time, at The Ritz-Carlton, Rancho Mirage, 68900 Frank Sinatra Drive, Rancho Mirage,the Company's office located at 19745 Colima Rd., Suite 8, Rowland Heights, CA 92270, 91748, and at any postponements or adjournments thereof. This proxy statement is first being made available to stockholders on or about April 2, 2020.
ABOUT THE MEETING
What is the purpose of the meeting?
At the annual meeting, stockholders will act upon the matters outlined in the Notice of Annual Meeting of Stockholders included with this proxy statement.
Who is entitled to vote at the meeting?
Only stockholders of record at the close of business on March 18, 2020,20, 2023, the record date for the meeting, are entitled to receive notice of and to participate in the annual meeting. If you were a stockholder of record on that date, you will be entitled to vote all of the shares that you held on that date at the meeting, or any postponements or adjournments of the meeting.
What are the voting rights of the holders of the Company’s common stock?
Each outstanding share of the Company’s common stock will be entitled to one vote on each matter considered at the meeting. Cumulative voting in the election of directors is prohibited by the Company’s certificate of incorporation.
Who can attend the meeting and where is it being held?
All stockholders as of the record date, or their duly appointed proxies, may attend the meeting. The meeting is being held at the location identified above. To obtain directions to attend the meeting in person, please contact the Company at +852-3107-0800.
We currently intend to hold our annual meeting in person. However, we are monitoring the coronavirus (COVID-19) outbreak and related precautions,situation and it may become necessary or advisable to change the date, time, location and/or means of holding the annual meeting (including by means of remote communication). Any such change will be announced via press release and website posting, as well as the filing of additional proxy materials with the Securities and Exchange Commission.
Why did I initially receive a Notice of Internet Availability regarding proxy materialsof Proxy Materials instead of a full set of proxy materials?
Pursuant to rules adopted by the Securities and Exchange Commission, we have elected to provide access to our proxy materials over the Internet to our stockholders. Accordingly, a Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”) was or will be sent to many of our stockholders providing notice of the annual meeting and enabling stockholders to access our proxy materials on the website referred to in the Notice of Internet Availability of Proxy Materials (“Notice of Availability of Proxy Materials”) or request to receive free of charge a printed set of the proxy materials, including the Notice of Annual Meeting, our 20192022 Annual Report on Form 10-K, this proxy statement and a proxy card. Instructions on how to access the proxy materials over the Internet or to request a printed copy are set out in the Notice of Internet Availability.Availability of Proxy Materials. Those stockholders that previously requested to receive our proxy materials in printed or electronic form will receive such proxy materials in lieu of the Notice of Internet Availability.
How can I elect the manner in which I will receive proxy materials in the future?
All stockholders may request to receive proxy materials in printed form by mail or electronically by e-mail on an ongoing basis by following the instructions in the Notice of Internet Availability or proxy materials.of Proxy Materials. The Company encourages stockholders to take advantage of the availability of the proxy materials on the Internet in order to help reduce printing and mailing costs and any environmental impact.
By Mail: | If you complete and properly sign the accompanying form of proxy card and return it to the indicated address, it will be voted as you direct. |
In Person: | If you are a registered stockholder and attend the meeting, you may vote in person at the meeting. If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, you must obtain a valid legal proxy from your broker, bank or other agent to vote in person at the meeting. |
Via Internet: | Log on to http://www.proxyvote.com and follow the on-screen instructions. |
Note: Please also refer to the specific instructions set forth in the Notice of Internet Availability of Proxy Materials or, if you requested to receive our proxy materials in printed or electronic form, in the proxy materials.
How may my broker, bank or other agent vote my shares if I fail to provide timely directions?
Brokers, banks or other agents holding shares of common stock in street name for customers are generally required to vote such shares in the manner directed by their customers. In the absence of timely directions, your broker, bank or other agent will have discretion to vote your shares on the “routine” matters to be voted upon at the meeting — the proposal to ratify the appointment of Marcum LLP (Item Two) and the proposal to amend the Company’s certificate of incorporation (Item Three). Your broker maydoes not have discretion to vote on the election of directors (Item One) absent direction from you.
Can I change my vote or revoke my proxy?
Yes. You can change your vote or revoke your proxy. If you are a registered stockholder, you may revoke your proxy in any one of four ways.
You may send a written notice that you are revoking your proxy to the Company's Corporate Secretary at the Company’s principal executive offices located at Units 1205-07, 12F, Mira Place Tower A, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong, Attention: Timothy S. Davidson.
You may timely grant another proxy via the Internet.
You may submit another properly completed proxy card with a later date.
You may attend the annual meeting and vote in person. Simply attending the annual meeting will not, by itself, revoke your proxy.
Your most current proxy, whether submitted by proxy card, via the Internet or in person, is the one that is counted.
If your shares are held by your broker, bank or other agent, you should follow the instructions provided by your broker, bank or other agent.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a majority of the aggregate voting power of the stock outstanding on the record date will constitute a quorum, permitting the stockholders to act upon the matters outlined in the Notice of Annual Meeting of Stockholders. As of the record date, 11,422,53911,520,439 shares of common stock, representing the same number of votes, were outstanding. Thus, the presence of the holders of common stock representing at least 5,711,2705,760,220 shares of common stock will be required to establish a quorum.
A proxy submitted by a stockholder may indicate that all or a portion of the shares represented by the proxy are not being voted (“stockholder withholding”) with respect to a particular matter. Similarly, a broker may not be permitted to vote stock (“broker non-vote”) held in street name on a particular matter in the absence of instructions from the beneficial owner of the stock. See above under the caption “How may my broker, bank or other agent vote my shares if I fail to provide timely directions?” The shares subject to a proxy that are not being voted on a particular matter because of either stockholder withholding or broker non-vote will count for purposes of determining the presence of a quorum. Abstentions are also counted in the determination of a quorum.
Unless you give other instructions on your returned proxy, the persons named as proxy holders on the proxy will vote in accordance with the recommendations of the Board of Directors. The Board of Directors’ recommendations are set forth together with the description of each item in this proxy statement. In summary, the Board of Directors recommends a vote:
• | for election of the nominated slate of Directors (see Item One); |
• | for ratification of the appointment of Marcum LLP as independent registered public accounting firm for the Company for the year ending December 31, 2023 (see Item Two). |
With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, in their own discretion.
What vote is required to approve each item?
Election of Directors.
The affirmative vote of a plurality of the votes of the shares present in person or represented by proxy and entitled to vote on the election of directors at the meeting (Item One). You may vote “for” or “withhold” on each of the nominees for election as a director. Any shares not voted “for” a particular nominee (whether as a result of “withhold” votes or broker non-votes) will not be counted in such nominee’s favor and will have no direct effect on the outcome of the election.Ratification of Independent Registered Public Accounting Firm.
For the ratification of the appointment of Marcum LLP as independent registered public accounting firm for the Company forWhat types of expenses will the Company incur?
The expense of preparing, printing and mailing proxy materials and the Notice of Internet Availability of Proxy Materials, as well as all expenses of soliciting proxies, will be borne by the Company. In addition to the use of the mails, proxies may be solicited by officers and directors and regular employees of the Company, without additional remuneration, by personal interaction, telephone, telegraph or facsimile transmission. The Company may elect to engage a proxy solicitation firm to solicit stockholders to vote or grant a proxy with respect to the proposals contained in this proxy statement. The Company will request brokers, banks, nominees, custodians, fiduciaries and other agents to forward proxy materials to the beneficial owners of shares of common stock held of record and will provide reimbursements for the cost of forwarding the material in accordance with customary charges.
STOCK OWNERSHIP
Who are the owners of the Company’s stock?
The following table shows the amount of the Company’s common stock beneficially owned (unless otherwise indicated) as of March 18, 202020, 2023 by (i) each stockholder known to us to be the beneficial owner of more than 5% of the Company’s common stock, (ii) each director or director nominee, (iii) each of the Company’s named executive officers and (iv) all executive officers and directors as a group. Beneficial ownership is determined in accordance with the rules and regulations of the Securities and Exchange Commission and generally includes those persons who have voting or investment power with respect to the securities. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of the Company’s common stock beneficially owned by them.
Name and Address of Beneficial Owner (1) | Amount and Nature of Beneficial Ownership (2) | Percent of Class (2) | ||||
Executive Officers and Directors: | ||||||
Chris T. Sharng | 886,645 | (3) | 7.8 | % | ||
Timothy S. Davidson | 391,100 | (4) | 3.4 | % | ||
George K. Broady | 690,099 | (5) | 6.0 | % | ||
Yiu T. Chan | — | — | ||||
Kin Y. Chung | 3,058 | * | ||||
Randall A. Mason | 252,733 | (6) | 2.2 | % | ||
All executive officers and directors as a group (6 persons) | 2,223,635 | (7) | 19.5 | % | ||
Non-Executive Stockholders Beneficially Owning 5% or More | ||||||
The Jane Eleanor Broady Irrevocable Trust | 2,245,128 | (8) | 19.7 | % | ||
Renaissance Technologies LLC | 891,017 | (9) | 7.8 | % |
Name and Address of Beneficial Owner (1) |
| Amount and Nature of Beneficial Ownership (2) |
| Percent of Class (2) | ||
Executive Officers and Directors: |
|
|
|
| ||
Chris T. Sharng |
| 886,645 |
| 7.7 | % | |
Timothy S. Davidson |
| 391,100 |
| 3.4 | % | |
Yiu T. Chan |
| — |
| — | ||
Randall A. Mason |
| 252,733 | (3) | 2.2 | % | |
Ching C. Wong |
| — |
| — |
| |
All executive officers and directors as a group (5 persons) |
| 1,530,478 |
| 13.3 | % | |
Non-Executive Stockholders Beneficially Owning 5% or More: |
|
|
|
| ||
Eleanor Jane Broady 2012 Irrevocable Trust |
| 2,245,128 | (4) | 19.5 | % | |
Renaissance Technologies LLC |
| 717,982 | (5) | 6.2 | % | |
George K. Broady 2012 Irrevocable Trust | 690,099 | (6) | 6.0 | % |
_______________________
(1) |
Unless otherwise indicated, the address of each beneficial owner is c/o Natural Health Trends Corp., Units 1205-07, 12F, Mira Place Tower A, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong. |
(2) | Any securities not outstanding that are subject to conversion privileges exercisable within 60 days of March |
(3) | Includes |
(4) |
Eleanor Jane |
(5) | The information regarding the beneficial ownership of Renaissance Technologies LLC (“RTC”) is based on the Schedule 13G filed jointly with Renaissance Technologies Holdings Corporation (“RTHC”) with the Securities and Exchange Commission on February 13, | |
(6) | George K. Broady, a former director of the Company, is the current trustee and a beneficiary of the George K. Broady 2012 Irrevocable Trust. The George K. Broady 2012 Irrevocable Trust pledged 570,390 shares to secure a line of credit. The Company understands that five individuals are currently named successor co-trustees to the George K. Broady 2012 Irrevocable Trust (and that in the event such successor co-trustees commence serving as co-trustees, they must act jointly through a majority in order to take action under the terms of the trust, including the exercise of voting or investment powers with respect to the Company’s common stock held by the trust); provided, that it is further understood that Mr. Broady could elect at any time to change the designation of successor co-trustees to the trust. |
Were there any delinquent Section 16(a) reports during 2019?
Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than ten percent (10%) of a registered class of the Company’s equity securities, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. To the Company’s knowledge, based solely on its review of electronic filings with the Securities and Exchange Commission and any written representations received by the Company from persons required to make filings under Section 16(a), all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were satisfied.
GOVERNANCE OF THE COMPANY
Who are the current members of the Board of Directors and on which committees do they serve?
The members of the Board of Directors on the date of this proxy statement and the committees of the Board of Directors on which they serve are identified below.
Director | Age | Audit Committee | Compensation Committee | |||||
Nominating and Corporate Governance Committee | ||||||||
Yiu T. Chan | 56 | M | C | M | ||||
Randall A. Mason | C | — | ||||||
Ching C. Wong | 64 | M | M | C | ||||
Chris T. Sharng | 59 | — | — | — |
M = Member
C = Chair
Who is the Chairman of the Board of Directors?
Mr. Mason has served as Chairman of the Board of Directors since March 2006. The Chairman of the Board of Directors organizes the work of the Board of Directors and ensures that the Board of Directors has access to sufficient information to enable the Board of Directors to carry out its functions, including monitoring the Company’s performance and the performance of management. In carrying out this role, the Chairman, among other things, presides over all meetings of the Board of Directors, establishes the annual agenda of the Board of Directors, established the agendas of each meeting in consultation with the President, and oversees the distribution of information to directors.
Which directors are considered independent?
The Board of Directors has adopted the requirements in Nasdaq Marketplace Rule 5605(a)(2) as its standard in determining the “independence” of members of its Board of Directors. The Board of Directors has determined that each of the following individuals who are nominated for election as a director qualifies as an “independent director” under this standard:
Yiu T. Chan
Randall A. Mason
Ching C. Wong
Subject to applicable exemptions, the Company applies the foregoing Nasdaq standard for determining the “independence” of each member of its Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee. The Board of Directors has determined that all of the members of each such Committee qualifies as “independent.” Further, the Board of Directors has separately determined that each member of the Audit Committee meets the criteria for independence set forth in Rule 10A-3(b)(1) promulgated under the Exchange Act, as required for service on the Audit Committee.
The Board of Directors met or acted by unanimous written consent a total of 1411 times during the fiscal year ended December 31, 2019,2022, and each director attended at least seventy-five percent (75%) of these meetings. As described below, the Company’s Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee each met or acted by unanimous written consent a number of times during the fiscal year ended December 31, 2019. During2022, and the members of each such fiscal year, a special committee attended at least seventy-five percent (75%) of the Board of Directors comprised solely of the Company’s independent directors met seven times; this specialsuch committee has since been dissolved.
What is the role of the Board of Directors’ Audit, Compensation, and Nominating and Corporate Governance Committees?
Audit Committee.
Mr. Mason serves as Chairman of the Audit Committee, and Messrs. Chan andThe functions of the Audit Committee are set forth in the Audit Committee Charter as approved by the Board of Directors and as posted on our website at
www.naturalhealthtrendscorp.com. In general, these responsibilities include meeting with the internal financial staff of the Company and the independent registered public accounting firm engaged by the Company to review (i) the scope and findings of the annual audit, (ii) quarterly financial statements, (iii) accounting policies and procedures and (iv) the internal controls employed by the Company. The Audit Committee is also directly and solely responsible for the appointment, retention, compensation, oversight and termination of the Company’s independent registered public accounting firm. The Audit Committee’s findings and recommendations are reported to management and the Board of Directors for appropriate action.Compensation Committee.
The Compensation Committee operates pursuant to a charter approved by the Board of Directors, a copy of which is posted on our website at www.naturalhealthtrendscorp.com. The members of our Compensation Committee areNominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee (the “Nominating Committee”) operates pursuant to a charter approved by our Board of Directors, a copy of which is posted on our website at www.naturalhealthtrendscorp.com. The members of the Nominating Committee are Randall A.Messrs. Mason, Yiu T.Wong and Chan, and Kin Y. Chung, with Mr. MasonWong serving as Chairman of the Nominating Committee. Each of the members of the Nominating Committee qualifies as an “independent director” within the meaning of the Nasdaq Marketplace Rules. The Nominating Committee considers and makes recommendations to the Board of Directors with respect to the size and composition of the Board of Directors and identifies potential candidates to serve as directors. The Nominating Committee identifies candidates to the Board of Directors by introduction from management, members of the Board of Directors, employees or other sources and stockholders that satisfy the Company’s policy and Bylaw provisions regarding stockholder recommended candidates. The Nominating Committee does not evaluate director candidates recommended by stockholders differently than director candidates recommended by other sources. The Nominating Committee met or acted by unanimous written consent one time during the fiscal year ended December 31, 2019.2022.
A stockholder wishing to nominate an individual for election to the Board of Directors or to otherwise submit a candidate for consideration by the Nominating Committee must comply with the advance notice provisions set forth in our Bylaws, which are generally described in this proxy statement under the caption “Additional Information—Stockholder Proposals for the 20212024 Annual Meeting of Stockholders.” These provisions require the timely submission of information concerning the nominee or candidate, as well as information as to the stockholder’s ownership of our common stock.
In considering Board of Director candidates, the Nominating Committee takes into consideration the Company’s “New Director Candidates” factors (as set forth in the charter of the Nominating Committee), the Company’s policy regarding stockholder-recommended director candidates as set forth above, selection criteria recommended by stockholders, and all other factors that they deem appropriate, including, but not limited to, the individual’s judgment, skill, integrity, and experience with businesses and other organizations of comparable size, industry knowledge, the interplay of the candidates experience with the experience of the existing members of the Board of Directors, the number of other public and private company boards on which the candidate serves and diversity, of age, gender, ethnicity, and such other factors as it deems appropriate given the current needs of the Board of Directors and the Company to maintain a balance of knowledge, experience, background, and capability. At this time, the Nominating Committee does not have a specific process for assessing the effectiveness of its consideration of diversity in director candidates, but believes that the diversity reflected in the composition of its Board of Directors is appropriate given the nature of the Company’s business. For each new or vacant position on the Board of Directors, the charter of the Nominating Committee provides that the Nominating Committee shall ensure that a diverse slate of candidates is identified and evaluated. In evaluating whether an incumbent director should be nominated for re-election to the Board of Directors, the Nominating Committee takes into consideration the same factors established for other director candidates and also takes into account the incumbent director’s performance as a member of the Board of Directors.
The Nominating Committee hasdid not receivedreceive, on or prior to the applicable annual deadline, a candidate recommendation from any stockholder (or group of stockholders) that beneficially owns more than five percent of the Company’s common stock.
What is the composition of the Board of Directors?
As described above, the Nominating Committee takes diversity considerations into account when evaluating Board of Director candidates. Recently adopted Nasdaq Rule 5605(f) requires each listed company that has five or fewer board members to have, or explain why it does not have, at least one diverse director on the board. Inasmuch as our current Board of Directors includes a number of diverse directors within the meaning of the Nasdaq Rule, the composition of our Board of Directors is in compliance with the Nasdaq diversity requirement. The table below highlights certain features of the composition of our Board of Directors. Each of the categories listed in the below table has the meaning used in Nasdaq Rule 5605(f).
BOARD DIVERSITY MATRIX
(As of April 3, 2023)
Total number of directors | 4 | |||||||
Female | Male | Non-Binary | Did Not Disclose Gender | |||||
Part I: Gender Identity | ||||||||
Directors | — | 4 | — | — | ||||
Part II: Demographic Background | ||||||||
African American or Black | — | — | — | — | ||||
Alaskan Native or Native American | — | — | — | — | ||||
Asian | — | 3 | — | — | ||||
Hispanic or Latinx | — | — | — | — | ||||
Native Hawaiian or Pacific Islander | — | — | — | — | ||||
White | — | 1 | — | — | ||||
Two or more races or ethnicities | — | — | — | — | ||||
LGBTQ+ | — | |||||||
Did not disclose demographic background | — |
What is the Board of Directors’ role in risk oversight?
Our Board of Directors has responsibility for the oversight of risks that could affect the Company. This oversight is conducted primarily through the Board of Directors with respect to significant matters, including the strategic direction of the Company, and by the various committees of the Board of Directors in accordance with their charters. The Board of Directors continually works, with the input of its committees and of the Company’s management to assess and analyze the most likely areas of future risk for the Company. Directors also have complete and open access to all of our employees and are free to, and do, communicate directly with our management. In addition to our formal compliance efforts, the Board of Directors encourages management to promote a corporate culture that incorporates risk management into the Company’s corporate strategy and day-to-day business operations.
Our employee director did not receive compensation for his service as director. Information with respect to the compensation of the non-employee members of our Board of Directors is set forth below under the caption “Compensation of Named Executive Officers and Directors—Director Compensation.”
How do stockholders communicate with the Board of Directors?
Stockholders or other interested parties wishing to communicate with the Board of Directors, the independent directors as a group, or any individual director may do so in writing by sending an e-mail to compliance@nhtglobal.com, or by mail to Natural Health Trends Corp. at the address of its headquarters (Units 1205-07, 12F, Mira Place Tower A, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong, Attention: Timothy S. Davidson). Complaints or concerns that appear to involve Mr. Davidson may be directed to the Chairman of the Audit Committee at audit.chair@nhtglobal.com. Complaints relating to the Company’s accounting, internal accounting controls or auditing matters, and concerns regarding questionable accounting or auditing matters are referred to the Chairman of the Audit Committee. Alternatively, any such complaints or concerns may be submitted anonymously at
www.lighthouse-services.com/nhtglobal. Other Board communications are referred to the Chairman of the Board of Directors, provided that advertisements, solicitations for periodical or other subscriptions, and similar communications generally are not forwarded. The Company held an annual stockholders meeting onAre Company employees or directors permitted to engage in hedging transactions?
No. The Company’s Insider Trading Policy prohibits employees and directors from entering into hedging transactions or similar arrangements with respect to the Company’s stock.
Does the Company have a Code of Ethics?
The Company has a Worldwide Code of Business Conduct (the “Code”) that applies to our employees, officers (including our principal executive officer and principal financial officer) and directors. The Code is intended to establish standards necessary to deter wrongdoing and to promote compliance with applicable governmental laws, rules and regulations, and honest and ethical conduct. The Code covers many areas of professional conduct, including conflicts of interest, financial reporting and disclosure, protection of Company assets and confidentiality. Employees have an obligation to promptly report any known or suspected violation of the Code without fear of retaliation. The Company has made the Code available on its website at
https://ir.naturalhealthtrendscorp.com/governance-docs. Waiver of any provision of the Code for executive officers and directors may only be granted by the Board of Directors and any such waiver or any modification of the Code relating to such individuals will be disclosed by the Company on its website at https://ir.naturalhealthtrendscorp.com.INFORMATION ABOUT EXECUTIVE OFFICERS
Certain information concerning executive officers of the Company is set forth below:
Name | Age | |||
Position(s) with the Company | ||||
Chris T. Sharng | 59 | President | ||
Timothy S. Davidson | 52 | Chief Financial Officer, Senior Vice President and Corporate Secretary |
Chris T. Sharng.
Mr. Sharng has served as President of the Company since February 2007, and as a director since March 2012. He served as Executive Vice President and Chief Financial Officer of the Company from August 2004 to February 2007. Mr. Sharng also performed the functions of the principal executive officer of the Company from April 2006 to August 2006. From March 2006 to August 2006, Mr. Sharng served as a member of the Company’s Executive Management Committee, which was charged with managing the Company’s day-to-day operations while a search was conducted for a new chief executive officer for the Company. From March 2004 through July 2004, Mr. Sharng was the Chief Financial Officer of NorthPole Limited, a privately held Hong Kong-based manufacturer and distributor of outdoor recreational equipment. From October 2000 through February 2004, Mr. Sharng was the Senior Vice President and Chief Financial Officer of Ultrak Inc., which changed its name to American Building Control Inc. in 2002, a Texas-based, publicly traded company listed on The NASDAQ Stock Market that designed and manufactured security systems and products. From March 1989 through July 2000, Mr. Sharng worked at Mattel, Inc., most recently as the Vice President of International Finance. Mr. Sharng has an MBA from Columbia University and received his bachelor degree from National Taiwan University.Timothy S. Davidson.
Mr. Davidson has served as the Company’s Chief Financial Officer and Senior Vice President since February 2007, and as the Company’s Corporate Secretary since January 2014. He previously served as the Company’s Chief Accounting Officer from September 2004 to February 2007. From March 2001 to September 2004, Mr. Davidson was Corporate Controller for a telecommunications company, Celion Networks, Inc., located in Richardson, Texas. From February 2000 to February 2001, Mr. Davidson was Manager of Financial Reporting for another Dallas-based telecommunications company, IP Communications, Inc. From December 1994 through January 2000, Mr. Davidson was employed by Arthur Andersen, LLP, most recently as an Audit Manager. Mr. Davidson has a master degree in professional accounting from the University of Texas at Austin and received his bachelor degree from Texas A&M University at Commerce.The following Report of the Audit Committee does not constitute soliciting material and shall not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent the Company specifically incorporates this Report of the Audit Committee by reference therein.
We have reviewed and discussed the consolidated financial statements of the Company set forth at Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 20192022 with management of the Company and Marcum LLP (“Marcum”).
We have discussed with Marcum the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the Securities and Exchange Commission.
We have received the written disclosures and the letter from Marcum required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the audit committee concerning independence, and have also discussed with Marcum that firm’s independence. The Audit Committee has concluded that Marcum’s services provided to the Company are compatible with Marcum’s independence.
Based on our review and discussions with management of the Company and Marcum referred to above, we recommended to the Board of Directors that the consolidated financial statements of the Company be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
It is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s consolidated financial statements are complete and accurate and in accordance with accounting principles generally accepted in the United States of America; that is the responsibility of management and the Company’s independent registered public accounting firm. In giving its recommendation to the Board of Directors, the Audit Committee has relied on (i) management’s representation that such financial statements have been prepared with integrity and objectivity and in conformity with accounting principles generally accepted in the United States of America and (ii) the reports of the Company’s independent registered public accounting firm with respect to such financial statements.
Members of the Audit Committee of the Board of Directors
Randall A. Mason (Chairman)
Yiu T. Chan
Ching C. Wong
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information regarding all compensation plans under which the Company's equity securities were authorized for issuance as of December 31, 2019:
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | ||||||||||
Equity compensation plans approved by security holders | — | $ | — | 1,219,583 | |||||||||
Equity compensation plans not approved by security holders | — | $ | — | — | |||||||||
Total | — | $ | |||||||||||
— | 1,219,583 |
The foregoing securities remaining available for issuance were reserved under the Company's 2016 Equity Incentive Plan.
COMPENSATION OF NAMED EXECUTIVE OFFICERS AND DIRECTORS
Summary Named Executive Officer Compensation Information
The following table provides information concerning the compensation for the years ended December 31, 20192022 and 20182021 of our principal executive officer and one other executive officer (collectively, the “named executive officers”):
SUMMARY COMPENSATION TABLE
Name and Principal Position | Year | Salary ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | |||||||||
Chris T. Sharng, President | 2019 | 1,000,000 | — | 393,444 | (3) | 1,393,444 | ||||||||
2018 | 1,000,000 | 125,000 | (1) | 414,801 | (4) | 1,539,801 | ||||||||
Timothy S. Davidson, Chief Financial Officer, Senior Vice President and Corporate Secretary | 2019 | 350,000 | — | 170,863 | (5) | 520,863 | ||||||||
2018 | 350,000 | 200,000 | (2) | 165,424 | (6) | 715,424 |
Name and Principal Position |
| Year |
| Salary ($) |
| Bonus ($) | Stock Awards ($)(1) |
| All Other Compensation ($)(2) |
| Total ($) | |||||
Chris T. Sharng, President |
| 2022 |
| 1,000,000 |
| — | 359,492 |
| 13,725 |
| 1,373,217 | |||||
|
| 2021 |
| 1,000,000 |
| — | 432,442 |
| 13,050 |
| 1,445,492 | |||||
Timothy S. Davidson, Chief Financial Officer, Senior Vice President and Corporate Secretary |
| 2022 |
| 393,270 |
| 41,169 | 120,320 |
| 13,725 |
| 568,484 | |||||
|
| 2021 |
| 350,000 |
| 32,000 | 144,757 |
| 13,050 |
| 539,807 |
_______________________
(1) |
(2) | The amounts in |
Named Executive Officer Compensation Arrangements
Chris T. Sharng. The Company is a party to an employment agreement with Mr. Sharng that provides for a base annual salary and also entitlesprovides that Mr. Sharng is eligible or entitled to participate in our incentive plans (including our equity incentive plan)plans) and other standard U.S. employee benefit programs. Mr. Sharng’sSharng was paid a base annual salary was raised toof $1,000,000 effective January 1, 2016. While neither Mr. Sharng nor any other Company employee was designated byin each of 2022 and 2021. On March 15, 2021, the Compensation Committee to participate in the Annual Plan in 2019, Mr. Sharng did participate in the Annual Plan in 2018. In 2018, Mr. Sharng was eligible to receive awards under the Annual Plan based on the extent to which the Company achieved Net Sales and “Adjusted EBITDA” performance goals set by the Compensation Committee at the outset of the year, along with several key metrics established by the Compensation Committee that specifically applied to Mr. Sharng; for purposes of the Annual Plan (and the Long-Term Plan described below), the Company defines “Adjusted EBITDA” as net income before interest, taxes, depreciation expense, amortization expense, and incentive compensation expense. The individual metrics included the amount of Mr. Sharng’s annual salary compared to that of other participants in the Annual Plan, as well as “performance goal weightings” that were designed to incentivize Mr. Sharng to achieve each performance goal to varying degrees. For example, in 2018 the Compensation Committee established for Mr. Sharng a performance goal weighting of 75% for achievement of the Net Sales performance goal and 25% for achievement of the Adjusted EBITDA performance goal, as it sought to place relatively greater emphasis on incentivizing Mr. Sharng to achieve the Net Sales performance goal. The Company achieved 80% of the Net Sales performance goal and 68% of the Adjusted EBITDA performance goal in 2018. Accordingly, and after determining in its discretion to reduce the amount otherwise payablegranted 124,850 phantom shares to Mr. Sharng under the AnnualCompany’s Phantom Equity Plan (the “Phantom Equity Plan”). The phantom shares entitled Mr. Sharng to receive a cash payment equal to the fair market value of an equal number of shares of the Company’s common stock upon the close of a vesting period, subject to a maximum payment value of $12.00 per phantom share. The phantom shares vested in eight equal three-month vesting increments, subject to the satisfaction of both a time-based vesting condition and a performance vesting condition.Both of these vesting conditions were deemed satisfied on the grant date for the initial vesting increment, and were satisfied for each of the following three performance periods in 2021 and the first performance period in 2022. The time-based vesting condition was also satisfied for the final three performance periods in 2022. The award agreement under which the phantom shares were awarded to Mr. Sharng was amended for each of the final three performance periods in 2022 to provide that the performance criteria for the related vesting condition shall be deemed satisfied, as the Compensation Committee awardednoted that the fact that the performance criteria were not achieved for the relevant performance periods was due to extraordinary business circumstances in China that were clearly beyond the Company’s control. Awards of aggregate fair value of $359,492 and $432,442 were made to Mr. Sharng $125,000 in 2018. Awards under the AnnualPhantom Equity Plan are paid in the year following the conclusionfor each of the annual performance period to which the award relates (the “Distribution Year”), with one-third of the total award payable in a single lump sum no later than the last day of February of the Distribution Year,2022 and 2021, respectively, and the remainder paid in equal installments over the remainder of the Distribution Year in accordance with the Company’s applicable local payroll practices.
Timothy S. Davidson. The Company is a party to an employment agreement with Mr. Davidson that provides for a base annual salary and also entitlesprovides that Mr. Davidson is eligible or entitled to participate in our incentive plans (including our equity incentive plan)plans) and other standard U.S. employee benefit programs. Mr. Davidson’sDavidson was paid a base annual salary of $350,000 in 2021. Mr. Davidson's base annual salary was raised to $350,000$400,000 effective January 1, 2016. While neitherFebruary 7, 2022. The Compensation Committee awarded discretionary cash bonuses to Mr. Davidson in 2022 of $16,800 as a quarantine allowance and $24,369 as a special project stipend. The Compensation Committee awarded a discretionary cash bonus of $32,000 to Mr. Davidson in 2021 based on his strong annual performance during that year. On March 15, 2021, the Compensation Committee granted 41,788 phantom shares to Mr. Davidson under the Phantom Equity Plan. The phantom shares entitled Mr. Davidson to receive a cash payment equal to the fair market value of an equal number of shares of the Company’s common stock upon the close of a vesting period, subject to a maximum payment value of $12.00 per phantom share. The phantom shares vested in eight equal three-month vesting increments, subject to the satisfaction of both a time-based vesting condition and a performance vesting condition. Both of these vesting conditions were deemed satisfied on the grant date for the initial vesting increment, and were satisfied for each of the following three performance periods in 2021 and the first performance period in 2022. The time-based vesting condition was also satisfied for the final three performance periods in 2022. The award agreement under which the phantom shares were awarded to Mr. Davidson was amended for each of the final three performance periods in 2022 to provide that the performance criteria for the related vesting condition shall be deemed satisfied, as the Compensation Committee noted that the fact that the performance criteria were not achieved for the relevant performance periods was due to extraordinary business circumstances in China that were clearly beyond the Company’s control. Awards of aggregate fair value of $120,320 and $144,757 were made to Mr. Davidson under the Phantom Equity Plan for each of 2022 and 2021, respectively, and the phantom shares granted to Mr. Davidson on March 15, 2021 are now fully vested. Neither Mr. Davidson nor any other Company employee was designated by the Compensation Committee to participate in the Annual Plan in 2019, Mr. Davidson did participate in the Annual Plan in 2018. In 2018, Mr. Davidson was eligible to receive awards under the Annual Plan based on the extent to which the Company achieved Net Sales and “Adjusted EBITDA” performance goals set by the Compensation Committee at the outset of the year, along with several key metrics established by the Compensation Committee that specifically applied to Mr. Davidson. The individual metrics included the amount of Mr. Davidson’s annual salary compared to that of other participants in the Annual Plan, as well as “performance goal weightings” that were designed to incentivize Mr. Davidson to achieve each performance goal to varying degrees. For example, in 2018 the Compensation Committee established for Mr. Davidson a performance goal weighting of 60% for achievement of the Net Sales performance goal and 40% for achievement of the Adjusted EBITDA performance goal, as it sought to place relatively greater emphasis on incentivizing Mr. Davidson to achieve the Adjusted EBITDA performance goal (as compared to Mr. Sharng’s performance goal weightings of 75% for achievement of the Net Sales performance goal and 25% for achievement of the Adjusted EBITDA performance goal). The Company achieved 80% of the Net Sales performance goal and 68% of the Adjusted EBITDA performance goal in 2018. Accordingly, and after determining in its discretion to reduce the amount otherwise payable to Mr. Davidson under the Annual Plan, the Compensation Committee awarded Mr. Davidson $75,000 in 2018. Awards under the Annual Plan are paid in the year following the conclusion of the annual performance period to which the award relates (the “Distribution Year”), with one-third of the total award payable in a single lump sum no later than the last day of February of the Distribution Year, and the remainder paid in equal installments over the remainder of the Distribution Year in accordance with the Company’s applicable local payroll practices.
Pay Versus Performance Information
Pay Versus Performance Table.The following table provides information concerning outstanding equity awards to our named executive officers that remained subject to vesting atfor the years ending December 31, 2019.
Name | Number of Shares of Stock That Have Not Vested (1) | Market Value of Shares of Stock That Have Not Vested(2) | |||||
Chris T. Sharng | 341,343 | $ | 1,836,425 | ||||
Timothy S. Davidson | 133,020 | $ | 715,648 |