”Pursuant to the Stone Amended Agreement, commencing with fiscal year 2019, Mr. Stone is eligible to receive annual cash incentives by attainment of revenue and earnings goals set by the independent Compensation Committee of the Board of Directors of the Company, after consultation with Mr. Stone, which will be based on a Board approved annual operating plan. The applicable goals will have three increasingly higher levels of revenue and earnings. The annual cash incentives will be for up to 25%, 50% or 100% of Mr. Stone’s base salary ($500,000 for fiscal year 2019) based on the level of goal achievement. Even if revenue and earnings goals are fully achieved within any given level, 20% of the applicable bonus opportunity is in the Pursuant
sole discretion of the Compensation Committee based on exceptional results in compliance, operations and other areas the Committee deems appropriate. For fiscal year 2019 and pursuant to the Stone Amended Agreement, Mr. Stone
is eligible to receive an annual incentive bonus of up to 30% of his salary for fiscal year 2017 and 50% of his salary for fiscal year 2018, subject to satisfaction of certain performance-related milestones for the respective period specified in the Stone Amended Agreement, and at the discretion of the Compensation Committee, up to an additional 70% of his salary for fiscal year 2017 and 50% of his salary for fiscal year 2018 based on extraordinary financial and business performance. Mr. Stone may receive an additional bonus of 50% of base salary for fiscal years 2017 and 2018 if the performance-related milestones for the respective period are exceeded by 50%. The milestones for fiscal year 2017 were based on the Company's achievement of Adjusted EBITDA and revenue targets. The milestones for fiscal year 2018 are based on revenue and the Company's achievement of non-GAAP measures of consolidated earnings such as EBITDA or Adjusted EBITDA, as further specified in the Stone Amended Agreement.Pursuant to the Garrison Employment Agreement, at the discretion of the Compensation Committee, Mr. Garrison, is eligible to receivereceived a $222,700 performance bonus based on corporate and personal performance criteria as specified indetailed above. Bonus amount paid was determined based on attainment of the non-equity incentive compensation plan at 85%, and based on achievement of nearly all the revenue target and at least 77% of the EBITDA target. The bonus amount paid also included payout of the 20% discretionary component.
Pursuant to the Garrison
Employment Agreement.Amended Agreement, Mr. Garrison has a new bonus structure, which replaces his prior bonus structure commencing with fiscal year 2019. Mr. Garrison is eligible to receive annual cash incentives by attainment of revenue and earnings goals set by the independent Compensation Committee of the Board of Directors of the Company, after consultation with Mr. Garrison, which will be based on a Board approved annual operating plan. The
corporate performance criteriaapplicable goals will have three increasingly higher levels of revenue and earnings. The annual cash incentives will be for up to 25%, 50% or 100% of Mr. Garrison’s base salary ($325,000 for fiscal year
ended March 31, 2017, were2019) based on
previously budgeted Companythe level of goal achievement. Even if revenue and
Adjusted EBITDA targets. A similar structure applies for the balanceearnings goals are fully achieved within any given level, 20% of the
termapplicable bonus opportunity is in the sole discretion of
the Garrison Employment Agreement, except that the Compensation Committee
may use, insteadbased on exceptional results in compliance, operations and other areas the Committee deems appropriate. For fiscal year 2019 and pursuant to the Garrison Amended Agreement, Mr. Garrison received a $144,800 performance bonus based on corporate and personal performance criteria as detailed above. Bonus amount paid was determined based on attainment of
Adjusted EBITDA, a different measure that it determines to be the
most important earnings measure used publicly by the Company (for example, EBITDA without adjustment)non-equity incentive compensation plan at 85%, and
willbased on achievement of nearly all the revenue target and at least 77% of the EBITDA target. The bonus amount paid also
determineincluded payout of the
target level of revenue and of such earnings measure. The Compensation Committee will first consult with Mr. Garrison prior to making such determinations.20% discretionary component.
See "SUMMARY COMPENSATION TABLE" for details on bonuses earned by our named executive officers.
Equity and Equity-Based Compensation. We believe that stock options and other forms of equity or equity-based compensation are an important long-term incentive for our executive officers and other employees and generally align officer interest with that of our stockholders. They are intended to further our emphasis on pay-for-performance. Pursuant to the terms of the Stone Amended Agreement, commencing with fiscal year 2019, Mr. Stone is eligible to receive long term incentive (LTI) equity grants each fiscal year for a number of shares that is within the sole discretion of the Committee. Each annual LTI grant is to consist of time vesting and performance vesting restricted common stock units. Performance vesting LTI awards are to be contingent on achievement of three year revenue and EBITDA goals, based on three increasingly higher levels of attainment established by the Compensation Committee, after discussion with Mr. Stone, based on a Board approved three year operating plan. The highest level of attainment would require revenue and EBITDA of at least 200% of the applicable revenue and EBITDA goals set by the Compensation Committee. Time vesting LTI awards are to vest over three years after grant and any such awards that have not vested prior to any termination of Mr. Stone’s employment shall terminate. Any performance vesting awards will be earned on the third anniversary of the grant date, based on performance attainment, provided Mr. Stone is employed through such date. Except in connection with terminations without cause or for good reason, if Mr. Stone’s employment with the Company terminates prior to the third anniversary of the applicable grant date, performance vesting units shall not vest and shall terminate immediately upon such termination of employment. Any performance vesting units shall be subject to a negative discretion clawback up into two years after the vesting date in connection with financial restatements or certain actions constituting cause. During such two year period any underlying shares are subject to a lock up.
Pursuant to the Garrison Amended Agreement, commencing with fiscal year 2019, Mr. Garrison is eligible to receive long term incentive (LTI) equity grants each fiscal year for a number of shares that is within the sole discretion of the Committee. Each annual LTI grant is to consist of time vesting and performance vesting restricted common stock units. Performance vesting LTI awards are to be contingent on achievement of three year revenue and EBITDA goals, based on three increasingly higher levels of attainment established by the Compensation Committee, after discussion with Mr. Garrison, based on a Board approved three year operating plan. The highest level of attainment would require revenue and EBITDA of at least 200% of the applicable revenue and EBITDA goals set by the Compensation Committee. Time vesting awards are to vest over three years after grant and any such awards that have not vested prior to any termination of Mr. Garrison’s employment shall terminate. Any performance vesting awards will be earned on the third anniversary of the grant date, based on performance attainment, provided Mr. Garrison is employed through such date. Except in connection with terminations without cause or for good reason, if Mr. Garrison’s employment with the Company terminates prior to the third anniversary of the applicable grant date, performance vesting units shall not vest and shall terminate immediately upon such termination of employment. Any performance vesting units shall be subject to a negative discretion clawback up into two years after the vesting date in connection with financial restatements or certain actions constituting cause. During such two year period any underlying shares are subject to a lock up.
For fiscal year 2019, we awarded Mr. Stone and Mr. Garrison time vesting and performance vesting restricted stock units. The time-vesting restricted stock units ("RSUs") of 72,674 shares for Mr. Stone and 43,605 shares for Mr. Garrison, respectively,
vest over three years, with one-third of the RSUs vesting on the first anniversary of the grant date of June 10, 2019, and the balance vesting proportionately each month during the remaining two years beginning on July 10, 2019 through June 10, 2021. The performance stock units ("PSUs") with target share numbers of 72,674 shares for Mr. Stone and 43,605 shares for Mr. Garrison, respectively, become earned and vested based upon the level of satisfaction of certain performance criteria (other than the price of Issuer's common stock), the results of which will be determined after the close of fiscal year 2021. The actual number of shares ultimately deliverable to Mr. Stone stock options to purchase up to an aggregate of 100,000 shares of our common stock with a grant date fair value of $82,000. The Company awarded toand Mr. Garrison pursuantunder the PSUs ranging from 0 to 145,349 and 0 to 87,210, respectively, depending upon the Garrison Employment Agreement, stock optionsextent to purchase up to an aggregate of 450,000 shares of our common stock with a grant date fair value of $436,500. which the performance criteria are satisfied.
For fiscal year
2017 service and performance,2019, we awarded
to Mr. Stone, Mr. GarrisonMs. Collins and Mr. Wesch stock options to purchase up to an aggregate of
247,500, 135,000,100,000 shares and
111,67540,000 shares of our common stock, respectively, with grant date fair values of
$111,687, $60,920,$100,448 and
$59,354,$40,179, respectively.
We do not have any formal plan or obligation that requires us to award equity or equity-based compensation to any executive officer on specified dates. The authority to make equity or equity-based awards to our executive officers rests with our full Board, based upon recommendations made by the Compensation Committee, or by the Compensation Committee acting alone. The Compensation Committee considers the input of our chief executive officer in setting the compensation of our other executive officers, including in the determination of appropriate levels of equity or equity-based grants.
Other Benefits and Perquisites. Our executive officers participate in the health and dental coverage, life insurance, paid vacation and holidays, 401(k) retirement savings plans and other programs that are generally available to all of the Company’s employees. The provision of any additional perquisites to each of the named executive officers is subject to review by the Compensation Committee. We value perquisites at their incremental cost to us in accordance with SEC regulations.
We believe that the benefits and perquisites we provide to our named executive officers are within competitive practice and customary for executives in keysimilar positions at comparable companies. Such benefits and perquisites serve our objective of offering competitive compensation that allows us to continue to attract, retain and motivate highly talented people to these critical positions, ultimately providing a substantial benefit to our stockholders.
Impact
CEO Pay Ratio - 2019
The fiscal year 2019 annual total compensation of Accountingour CEO was $980,593 (as set forth in the "SUMMARY COMPENSATION TABLE" below), the fiscal year 2019 annual total compensation of our median compensated employee was $112,575, and the ratio of these amounts is 9 to 1.
We determined our median compensated employee by using base salary, bonuses, commissions, and grant date fair value of equity awards granted to employees in fiscal year 2019. We applied this measure to our global employee population as of the last day of our 2019 fiscal year and annualized base salaries for permanent full-time and part-time employees that did not work the full year. Once we determined our median compensated employee using these measures, we calculated the employee’s 2019 annual total compensation using the same methodology that is used to calculate our CEO’s annual total compensation in the table entitled “SUMMARY COMPENSATION TABLE.”
Tax
TreatmentsDeduction of Executive Compensation
Section 162(m) of the Internal Revenue Code (the “Code”) prohibitslimits the corporate tax deduction for compensation paid to any one
named executive officer by publicly held companies like us from deducting certainto $1,000,000 each tax year. For fiscal year 2019 and later fiscal
years, this limitation applies to compensation paid to any oneor with respect to anyone who had been a named executive officer in excess
fiscal year 2018 or any later fiscal year, even if the individual is not a named executive officer in the year for which deduction
would be taken. Prior to fiscal year 2019, this deduction limitation did not apply to compensation that met certain requirements
to be considered performance-based. As a result of $1,000,000 during the tax year. However,amendments made to Section 162(m) provides that,by the Tax Cuts and Jobs Act of 2017,
performance-based compensation is now included in compensation subject to the extent$1 million annual deduction limitation,
subject to certain exceptions for performance-based compensation granted before November 3, 2017.
Non-statutory stock options granted under our 2011 Equity Incentive Plan were intended to qualify as performance-based
compensation that compensation is based exempt from the deduction limitation under Section 162(m), and we believe that our stock options granted
on or before November 2, 2017, and not modified thereafter, will continue to so qualify. However, as a result of the attainmentrecent tax
law change, income recognized in fiscal year 2019 and later fiscal years on exercise of performance goals set byoptions granted after November 2, 2017,
will not be exempt from the
Compensation Committee pursuant to plans approved by the Company’s stockholders, the compensation is not included for purposes of arriving at the $1,000,000. Section 162(m) federal tax deduction limitation.
The Company, through the Compensation Committee, intends to attempt to qualify executive compensation as tax deductible to the extent feasible and where it believes it is in our best interests and in the best interests of our stockholders. However, the Compensation Committee does not intend to permit this arbitrary tax provision to distort the effective development and execution of our compensation program. Thus, the Compensation Committee is permitted and will continue to exercise discretion in those instances in which mechanistic approaches necessary to satisfy tax law considerations could compromise the interests of our stockholders. In addition, because of the uncertainties associated with the application and interpretation of Section 162(m) and the regulations issued thereunder, there can be no assurance that compensation intended to satisfy the requirements for deductibility under Section 162(m) will in fact be deductible.
The performance criteria used by the Compensation Committee in determining annual incentive bonuses for our executive officers have not been approved by the Company's stockholders, and, therefore, such bonuses are not considered to be performance-based compensation that may be excluded from the Section 162(m) deduction limitation.
Compensation Risk Management
As part of its annual review of our executive compensation program, the Compensation Committee reviews with management the design and operation of our incentive compensation arrangements for senior management, including executive officers, to determine if such programs might encourage inappropriate risk-taking that could have a material adverse effect on the Company. The Compensation Committee considers, among other things, the features of the Company’s compensation program that are designed to mitigate compensation-related risk, such as the performance objectives and target levels for incentive awards (which are based on overall Company performance), and our compensation recoupment policy. The Compensation Committee also considers our internal control structure which, among other things, limits the number of persons authorized to execute material agreements
and requires approval of our board of directors for matters outside of the ordinary course and our whistle blower program. Based upon the above, the Compensation Committee has concluded that any risks arising from the Company’s compensation plans, policies and practices are not reasonably likely to have a material adverse effect on the Company.
Impact of Shareholder Advisory Vote
At our
20172019 annual meeting, our stockholders approved, in a non-binding advisory vote, our executive compensation with 92% of the shares present, in person or by proxy, and entitled to vote thereon affirmatively giving their approval (with broker non-votes having no effect on the vote). Accordingly, we believe that this vote
confirmsaffirms the appropriateness of our executive compensation philosophy and policies, as currently adopted and implemented, and we intend to continue such philosophy and policies.
THE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The information contained in this Compensation Committee Report shall not be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing (except to the extent that we specifically incorporate this information by reference) and shall not otherwise be deemed “soliciting material” or “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act (except to the extent that we specifically request that this information be treated as soliciting material or specifically incorporate this information by reference).
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
December [_], 2017 |
| |
July 29, 2019 | Members of the Compensation Committee |
| |
| Jeffrey Karish (Chairman) |
| Mohan S. Gyani |
| Christopher Rogers |
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee members whose names appear on the Compensation Committee Report above were committee members during all of fiscal year
2017.2019. No member of the Compensation Committee is or has been an executive officer of the Company or had any relationships requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships and related party transactions. None of the Company’s executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity that has or had one or more executive officers who served as a director or member of the Company's Compensation Committee during the fiscal year ended March 31,
2017.2019.SUMMARY COMPENSATION TABLE
The following compensation table sets forth
information concerning aggregatefor fiscal years 2019, 2018 and 2017 the base salary and other compensation
earned by or paid toof our (i)
the individual serving as our Chief Executive Officer,
during our fiscal year ended March 31, 2017, (ii)
the individual serving as our Chief Financial Officer,
during(iii) our
fiscal year ended March 31, 2017, (iii) the individual serving asChief Technology Officer, and (iv) our
acting Chief Accounting
Officer during our fiscal year ended March 31, 2017, and (iv) one additional most highly compensated individual who formerly served as our Chief Financial Officer during our fiscal year ended March 31, 2017.Officer. We refer to these individuals, collectively, as our “named executive officers”.
Position(1) | | Fiscal Year Ended March 31, | | | Salary ($) | | | Bonus ($) | | | Stock Awards ($) | | | Option Awards (2) ($) | | | All Other Compensation ($) | | | Total ($) | |
William G. Stone III (3) | | | 2017 | | | | 500,000 | | | | 100,000 | | | | - | | | | 193,687 | | | | 14,772 | | | | 808,459 | |
Chief Executive Officer | | | 2016 | | | | 500,000 | | | | - | | | | - | | | | 213,500 | | | | 2,541 | | | | 716,041 | |
| | | 2015 | | | | 424,375 | | | | 188,000 | | | | - | | | | 1,029,500 | | | | 25,625 | | | | 1,667,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Barrett Garrison (4) | | | 2017 | | | | 167,115 | | | | - | | | | - | | | | 497,420 | | | | 21,895 | | | | 686,430 | |
Executive Vice President and Chief Financial Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
David Wesch (5) | | | 2017 | | | | 142,500 | | | | - | | | | - | | | | 59,354 | | | | 4,957 | | | | 206,811 | |
Acting Chief Accounting Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Andrew Schleimer (6) | | | 2017 | | | | 183,489 | | | | - | | | | - | | | | - | | | | 33,318 | | | | 216,807 | |
Former Executive Vice President and Chief Financial Officer | | | 2016 | | | | 341,667 | | | | 113,173 | | | | - | | | | 128,100 | | | | 2,667 | | | | 585,607 | |
| | | 2015 | | | | 219,423 | | | | 137,500 | | | | - | | | | 1,137,000 | | | | 25,652 | | | | 1,519,575 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
Position(1) | | Fiscal Year Ended March 31, | | Salary ($) | | Bonus ($) | | Non-Equity Incentive Plan Compensation | | Stock Awards ($) | | Option Awards (2) ($) | | All Other Compensation ($) | | Total ($) |
William G. Stone III (3) Chief Executive Officer | | 2019 | | 500,000 |
| | — |
| | 222,700 |
| | 250,000 |
| | — |
| | 7,893 |
| | 980,593 |
|
| 2018 | | 500,000 |
| | 100,000 |
| | 350,000 |
| | — |
| | — |
| | 17,240 |
| | 967,240 |
|
| 2017 | | 500,000 |
| | 100,000 |
| | — |
| | — |
| | 193,687 |
| | 14,772 |
| | 808,459 |
|
| | | | | | | | | | | | | | | | |
Barrett Garrison (4) Executive Vice President and Chief Financial Officer | | 2019 | | 313,542 |
| | — |
| | 144,800 |
| | 150,000 |
| | — |
| | 15,402 |
| | 623,744 |
|
| 2018 | | 300,000 |
| | — |
| | 210,000 |
| | — |
| | 66,090 |
| | 20,381 |
| | 596,471 |
|
| 2017 | | 167,115 |
| | — |
| | — |
| | — |
| | 497,420 |
| | 21,895 |
| | 686,430 |
|
| | | | | | | | | | | | | | | | |
Christine Collins (5) Chief Technology Officer | | 2019 | | 275,000 |
| | 125,000 |
| | — |
| | — |
| | 100,448 |
| | 10,673 |
| | 511,121 |
|
| 2018 | | 10,577 |
| | — |
| | — |
| | — |
| | 270,287 |
| | 1,376 |
| | 282,240 |
|
| | | | | | | | | | | | | | | | |
David Wesch (6) Chief Accounting Officer | | 2019 | | 150,000 |
| | 24,000 |
| | — |
| | — |
| | 40,179 |
| | 2,097 |
| | 216,276 |
|
| 2018 | | 150,000 |
| | 30,000 |
| | — |
| | — |
| | 33,045 |
| | 4,807 |
| | 217,852 |
|
| 2017 | | 142,500 |
| | — |
| | — |
| | — |
| | 59,354 |
| | 4,957 |
| | 206,811 |
|
| | | | | | | | | | | | | | | | |
| |
(1) | The Company determined there were no other individuals within the Company who met the requirements for disclosure. |
| |
(2) | The amounts in the “Option Awards” column relate to awards of stock options made under the Company’s Amended and Restated 2011 Equity Incentive Plan (the "Equity Incentive Plan"). With respect to each stock option grant, the amounts disclosed generally reflect the fair value of the option award as of the grant date for all options issued in the respective fiscal year, in accordance with FASB ASC Topic 718 “Compensation-Stock Compensation.” Generally, ASC Topic 718 “Compensation-Stock Compensation” requires the full grant-date fair value of a stock option award to be amortized and recognized as compensation cost over the service period that relates to the award. Note 4, “Summary of Significant Accounting Policies,” in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended March 31, 20172019 sets forth the relevant assumptions used to determine the valuation of our stock option awards. Vesting schedules for unvested stock grants for each officer are described below under “Narrative Disclosure to Summary Compensation Table.” |
| |
(3) | During the fiscal year ended March 31, 2017,2019, Mr. Stone was granted stock options on May 26, 2016 and February 2, 2017, to purchase 100,000 and 247,500awarded RSUs for 72,674 shares of our common stock totaling $125,000 in value that vest over three years, with one-third of the Company, respectively, withRSUs vesting on the first anniversary of the grant date fair values of $82,000June 10, 2019, and $111,687, respectively. Alsowith the balance vesting proportionately each month during the remaining two years beginning on July 10, 2019 through June 10, 2021. For fiscal year ended March 31, 2017, in connection2019 performance, we awarded to Mr. Stone PSUs for a target number of 72,674 shares of our common stock having a value of $125,000, with the Stone Amended Agreement, Mr. Stone received a one-time $100,000 signing bonus. Mr. Stone did not receive aactual number of shares to be issued ranging from 0 to 145,349 based upon satisfaction of certain performance bonus incriteria (other than the price of Issuer's common stock) determined after the close of fiscal year 2017 due to his bonus targets not being met.2021. During the fiscal year ended March 31, 2016,2019, Mr. Stone received a $222,700 performance bonus based on corporate and personal performance criteria. During the fiscal year ended |
March 31, 2018, Mr. Stone received a $350,000 performance bonus based on corporate and personal performance criteria and a $100,000 signing bonus in connection with the Second Amendment entered into on March 16, 2018. During the fiscal year ended March 31, 2017, Mr. Stone was granted stock options on May 26, 2016 and February 2, 2017, to purchase 100,000 and 247,500 shares of common stock of the Company, respectively, with grant date fair values of $82,000 and $111,687, respectively. Also during fiscal year ended March 31, 2017, in connection with the Stone Amended Agreement, Mr. Stone received a one-time $100,000 signing bonus. Mr. Stone did not receive a performance bonus in fiscal year 2017 due to his bonus targets not being met. Amounts under "All Other Compensation" represent Company paid health benefits and 401K employer matching contributions.
| |
(4) | During the fiscal year ended March 31, 2019, Mr. Garrison was awarded RSUs for 43,605 shares of our common stock totaling $75,000 in value that vest over three years, with one-third of the RSUs vesting on the first anniversary of the grant date of June 10, 2019, and with the balance vesting proportionately each month during the remaining two years beginning on July 10, 2019 through June 10, 2021. For fiscal year 2019 performance, we awarded to Mr. Garrison PSUs for a target number of 43,605 shares of our common stock having a value of $75,000 with the actual number of shares to be issued ranging from 0 to 87,210 based upon satisfaction of certain performance criteria (other than the price of Issuer's common stock) determined after the close of fiscal year 2021. During the fiscal year ended March 31, 2019, Mr. Garrison received a $144,800 performance bonus based on corporate and personal performance criteria. During the fiscal year ended March 31, 2018, Mr. Garrison received a $210,000 performance bonus based on corporate and personal performance criteria, and was awarded stock options on December 9, 2015 to purchase 175,000100,000 shares of the Company's common stock with a grant date fair value of $213,500.$66,090. During the fiscal year ended March 31, 2015, Mr. Stone received a $100,000 signing bonus in connection with his employment agreement as our chief executive officer. Mr. Stone was also awarded, and the Company recorded, a bonus of $88,000 for the fiscal year ended March 31, 2015, but it was reversed in a subsequent period based on the Company’s subsequent performance. During the fiscal year ended March 31, 2015, Mr. Stone was awarded stock options on July 8, 2014 and September 10, 2014, to purchase 200,000 and 50,000 shares of common stock of the Company, respectively, with grant date fair values of $758,000 and $271,500, respectively. Amounts under "All Other Compensation" represent Company paid health benefits. |
| (4) | Mr. Garrison was appointed as our Executive Vice President and Chief Financial Officer on August 31, 2016, effective as of September 12, 2016. Pursuant to the Garrison Employment Agrement, on September 12, 2016,2017, Mr. Garrison was awarded stock options to purchase 450,000 shares of our common stock with a grant date fair value of $436,500. On February 2, 2017, Mr. Garrison was awarded$436,500 and stock options to purchase 135,000 shares of the Company's common stock with a grant date fair value of $60,920. Pursuant to the Garrison Employment Agreement, in the discretion of the Compensation Committee, Mr. Garrison is eligible to receive an annual performance bonus of up to 50% of his base salary. Mr. Garrison's bonus opportunity is based on corporate and personal performance criteria. The corporate performance criteria, forDuring the fiscal year ended March 31, 2017, were based on previously budgeted Company revenue and Adjusted EBITDA targets.2018, Mr. Garrison was awarded stock options to purchase 100,000 shares of the Company's common stock with a grant date fair value of $66,090. During fiscal year 2017, Mr. Garrison did not receive a performance bonus due to his bonus targets not being met. A similar structure applies for the balance of the term of the Garrison Employment Agreement, except that, instead of Adjusted EBITDA, the Compensation Committee may use a difference measure that it determines to be the most important earnings measure used publicly by the Company (for example, EBITDA without adjustment), and will also determine the target level of revenue and of such earnings measure. The Compensation Committee will first consult with Mr. Garrison prior to making any such determinations. Amounts under "All Other compensation" represent Company paid health benefits of $6,434and 401K employer matching contributions for each fiscal year and relocation expense reimbursement of $15,461.$15,461 for fiscal year 2017. |
| |
(5) | Mr. WeschMs. Collins was appointed our acting Chief AccountingTechnology Officer on March 19, 2018. During the fiscal year ended March 31, 2019, Ms. Collins received a $125,000 performance bonus based on corporate and personal performance criteria, and was awarded stock options on June 14, 2016.7, 2018 to purchase 100,000 shares of the Company's common stock with a grant date fair value of $100,448. During the fiscal year ended March 31, 2018, the Company awarded to Ms. Collins, pursuant to her joining the Company, stock options to purchase up to an aggregate of 250,000 shares of our common stock with a grant date fair value of $270,287. Amounts under "All Other Compensation" represent Company paid health benefits and 401K employer matching contributions. |
| |
(6) | During the fiscal year ended March 31, 2019, Mr. Wesch received a $24,000 performance bonus based on corporate and personal performance criteria, and was awarded stock options to purchase 40,000 shares of the Company's common stock with a grant date fair value of $40,179. During the fiscal year ended March 31, 2018, Mr. Wesch received a $30,000 performance bonus based on corporate and personal performance criteria, and was awarded stock options to purchase 50,000 shares of the Company's common stock with a grant date fair value of $33,045. During the fiscal year ended March 31, 2017, Mr. Wesch was awarded stock options on June 9, 2016, November 2, 2016, January 10, 2017 and February 2, 2017 to purchase 30,000, 25,000, 20,000, and 36,675 shares of the Company's common stock, respectively, with grant date fair values of $23,700, $10,212, $8,892, and $16,550, respectively. Amounts under "All Other Compensation" represent Company paid health benefits. |
| (6) | Mr. Schleimer's employment with the Company ended on September 12, 2016, upon which all unvested options immediately expired and vested options were cancelled. Amounts under "All Other Compensation" represent Company paid health benefits of $7,242 and vacation payout of $26,076. |
NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE
Employment Agreement with William G. Stone III
CEO Employment Agreement . On September 9, 2014, we entered into an employment agreement (the "Stone Employment Agreement") pursuant to which Mr. Stone became the Chief Executive Officer of the Company on October 2, 2014. In connection with this employment agreement, Mr. Stone received a one-time $100,000 signing bonus. Pursuant to the Stone Employment Agreement, which has been amended as described below, Mr. Stone received a salary of $500,000 per year and was eligible for a performance bonus. Also in connection with entering into the Stone Employment Agreement, the vesting (but not the exercise price) of the 200,000 options granted to Mr. Stone on July 8, 2014 was adjusted,
so that 50,000 options vested on the one-year anniversary of the original grant date (i.e., July 8, 2015), 150,000 options currently vest on a monthly basis over the three years following the first anniversary of the grant date, and
all unvested options vest immediately upon a change of control of the Company. The estimated incremental fair value associated with the 50,000 options was less than $10,000. In addition, on the effective date of the Stone Employment Agreement, Mr. Stone was awarded stock options to purchase
an additional 50,000 shares of common stock of the Company at an exercise price equal to the closing price of the Company’s common stock on September 10,
2014 under the Equity Incentive Plan, which vest as follows: 12,5002014. All of such stock options
vested on the one-year anniversary of the grant date, 37,500 options currently vest on a monthly basis over the three years following the first anniversary of the grant date, and all unvested options will vest immediately upon a change of control of the Company.
CEO Amended Employment Agreement Amendment. On May 26, 2016, we entered into an amendment to the Stone Employment Agreement, which extendsextended the term of the Stone Employment Agreement until March 31, 2018. Mr. Stone received a one-time $100,000 signing bonus and is eligible for a performance bonus opportunities of 30% of salary for fiscal year 2017 and 50% of salary for fiscal year 2018 based on the following criteria:
| · | Mr. Stone was eligible to receive ameeting Adjusted EBITDA and revenue targets, with additional bonus opportunities of 30% of his salary earned with respect to the period starting April 1, 2016 through March 31, 2017 ("Year 2 Period"), if both the FY2017 Adjusted EBITDA target and the 2017 revenue target were achieved; and a bonus of up to an additional 70% of his salary earned with respect to the Year 2 Period, in the sole discretion of the Compensation Committee based on extraordinary financial and business performance of the Company during the Year 2 Period (beyond the level required to achieve the bonus of 30% of his salary for the Year 2 Period). The Compensation Committee also authorized an additional 50% of base salary “Extraordinary Bonus” if the Company exceeded targeted revenues and Adjusted EBITDA by 50% relative to the targets approved by the Board for FY2017 . |
| · | Mr. Stone is eligible to receive a bonus of 50% of his salary earned with respect to period starting April 1, 2017 through March 31, 2018 ("Year 3 Period"), if both of the Year 3 Period targets are achieved; plus a bonus of up to an additional 50% of his salary earned with respect to the Year 3 Period, in the sole discretion of the Compensation Committee based on extraordinary financial and business performance of the Company during the Year 3 Period (beyond the level required to achieve the bonus of 50% of his salary for the Year 3 Period). The Compensation Committee also authorized an additional 50% of base salary “Extraordinary Bonus” if the Company exceeds targeted revenues and adjusted EBITDA by 50%. |
Achievement of targets will be determined promptly after the Company's annual financial statements for the fiscal year 2017 and 50% of salary for the applicable period have been publicly issued and certified by the Company's auditors. Any interpretative issues in reconciling adjusted EBITDA or a public earnings measure to audited numbers (a) be resolved as much as possiblefiscal year 2018 based on the Company's publicly filed reconciliationsextraordinary financial and business performance of the same and (b) as to any other questions will be determined in the reasonable discretion of the Compensation Committee after good faith discussion with Mr. Stone. Bonus targets that have not been achieved toCompany (beyond the level required to achieve the base bonus). The Compensation Committee also authorized an additional 50% of base salary “Extraordinary Bonus” if the Company exceeded targeted revenues and Adjusted EBITDA by the above criteria will not entitle Mr. Stone to a pro-rated bonus.
50% in either fiscal year.
In connection with entering into the
Stone Amended Agreement,amendment on May 26, 2016, Mr. Stone was awarded stock options under the Equity Incentive Plan to purchase 100,000 shares of common stock of the Company at an exercise price equal to the closing price of the Company’s common stock on May 26, 2016. Such stock options vest as follows: 25,000 options vested on the one-year anniversary of the grant date, 75,000 options currently vest on a monthly basis over the three years following the first anniversary of the grant date (four year total vesting), and all unvested options shall vest immediately upon a change of control of the Company.
CEO Second Amendment to Employment Agreement. On March 16, 2018, the Company entered into a second amendment to the employment agreement with Mr. Stone originally entered into on September 9, 2014 and previously amended on May 26, 2016 (the Second Amendment). The Second Amendment replaced the fixed term of employment, which would otherwise have expired on March 31, 2018, with an at-will arrangement without a definite term. In addition, the Second Amendment: (i) establishes a new incentive compensation structure for future fiscal years consisting of annual cash and long term equity incentives described further below; (ii) provides pro-ration of certain annual cash and long term equity incentives in connection with payments for termination by the Company without cause or by Mr. Stone for good reason and changes the duration of severance payments to Mr. Stone in connection with such types of terminations following a change of control; and (iii) provides for a $100,000 signing payment to Mr. Stone.
The new bonus structure replaces the existing bonus structure commencing for the fiscal year ended March 31, 2019 and generally provides for annual cash incentives and long term equity incentives. The annual cash incentives require attainment of revenue and earnings goals set by the independent Compensation Committee of the Board of Directors of the Company, after consultation with Mr. Stone, which are to be based on a Board approved annual operating plan. The applicable goals will have three increasingly higher levels of revenue and earnings. The annual cash incentives will be for up to 25%, 50% or 100% of Mr. Stone’s base salary (currently $500,000 annually) based on the level of goal achievement. Even if revenue and earnings goals are fully achieved within any given level, 20% of the applicable bonus opportunity is in the sole discretion of the Compensation Committee based on exceptional results in compliance, operations and other areas the Committee deems appropriate.
The amount of any long term incentive (LTI) equity grants is within the sole discretion of the Committee in all cases, but if granted, would be structured to consist of time vesting and performance vesting restricted common stock units. Any LTI awards would be contingent on achievement of three year revenue and EBITDA goals, based on three increasingly higher levels of attainment established by the Compensation Committee, after discussion with Mr. Stone, based on a Board approved three year operating plan. The highest level of attainment would require revenue and EBITDA of at least 200% of the applicable revenue and EBITDA goals set by the Compensation Committee. Any time vesting awards will vest over three years after grant and any such awards that have not vested prior to any termination of Mr. Stone’s employment shall terminate. Any performance vesting awards will be earned on the third anniversary of the grant date provided Mr. Stone is employed through such date. Except in
connection with terminations without cause or for good reason, if Mr. Stone’s employment with the Company terminates prior to the third anniversary of the applicable grant date, performance vesting units shall not vest and shall terminate immediately upon such termination of employment. Any performance vesting units shall be subject to a negative discretion clawback up into two years after the vesting date in connection with financial restatements or certain actions constituting cause. During such two year period any underlying shares are subject to a lock up.
The foregoing summaries of the Stone Employment Agreement and amendments thereto do not purport to summarize all terms and are subject to, and qualified in their entirety by, the full text of the Stone Employment Agreement and such amendments, which have been filed as exhibits to the Form 8-K filed on September 15, 2014, June 1, 2016, and March 21, 2018.
Employment Agreement with Barrett Garrison
CFO Employment Agreement
On August 31, 2016, the Company entered into thean employment agreement (the Garrison Employment AgreementAgreement) with Barrett Garrison as Executive Vice President and Chief Financial Officer with a start date of September 12, 2016.
CFO Amended Employment Agreement (the Garrison Amended Agreement). On September 7, 2018, the Company entered into the Garrison Amended Agreement to the employment agreement with Mr. Garrison originally entered into on August 31, 2016. The annual salary of our CFO Barrett Garrison increased to $325,000 in connection with the Garrison Amended Agreement. The Garrison Amended Agreement replaces the fixed term of the Garrison Employment Agreement, haswhich would otherwise expire on September 12, 2018, with an at-will arrangement without a two yeardefinite term. In addition, the Garrison Amended Agreement: (i) establishes a new incentive compensation structure for future fiscal years consisting of annual cash and long term equity incentives described further below; (ii) provides pro-ration of certain annual cash and long term equity incentives in connection with equity, salary and bonus compensation components.Forpayments for termination by the salary component,Company without cause or by Mr. Garrison receives an annual salaryfor good reason and changes the duration of $300,000. For the bonus component,severance payments to Mr. Garrison is eligible to receive an annual performancein connection with such types of terminations following a change of control.
The new bonus of up to 50% of his base salary. Mr. Garrison’sstructure replaces the existing bonus opportunity is based on corporate performance criteria, and personal performance criteria in the discretion of the Compensation Committee of the Company. The corporate performance criteria,structure commencing for the fiscal year ended March 31, 2017, were2019 and generally provides for annual cash incentives and long term equity incentives. The annual cash incentives will require attainment of revenue and earnings goals set by the independent Compensation Committee of the Board of Directors of the Company, after consultation with Mr. Garrison, which will be based on previously budgeted Companya Board approved annual operating plan. The applicable goals will have three increasingly higher levels of revenue and Adjusted EBITDA targets. A similar structure appliesearnings. The annual cash incentives will be for up to 25%, 50% or 100% of Mr. Garrison’s base salary based on the balancelevel of goal achievement. Even if revenue and earnings goals are fully achieved within any given level, 20% of the applicable bonus opportunity is in the sole discretion of the Compensation Committee based on exceptional results in compliance, operations and other areas the Committee deems appropriate.
The amount of any long term incentive (LTI) equity grants is within the sole discretion of the Committee in all cases, but if granted, would be structured to consist of time vesting and performance vesting restricted common stock units. Any LTI awards would be contingent on achievement of three year revenue and EBITDA goals, based on three increasingly higher levels of attainment established by the Compensation Committee, after discussion with Mr. Garrison, based on a Board approved three year operating plan. The highest level of attainment would require revenue and EBITDA of at least 200% of the applicable revenue and EBITDA goals set by the Compensation Committee. Any time vesting awards will vest over three years after grant and any such awards that have not vested prior to any termination of Mr. Garrison’s employment shall terminate. Any performance vesting awards will be earned on the third anniversary of the grant date provided Mr. Garrison is employed through such date. Except in connection with terminations without cause or for good reason, if Mr. Garrison’s employment with the Company terminates prior to the third anniversary of the applicable grant date, performance vesting units shall not vest and shall terminate immediately upon such termination of employment. Any performance vesting units shall be subject to a negative discretion clawback up into two years after the vesting date in connection with financial restatements or certain actions constituting cause. During such two year period any underlying shares are subject to a lock up.
Except as provided in the Garrison Amended Agreement, and for technical and conforming changes, the Garrison Employment Agreement remains unchanged. The foregoing summaries of the Garrison Amended Agreement do not purport to summarize all terms and are subject to, and qualified in their entirety by, the full text of the Garrison Employment Agreement
except that, instead of Adjusted EBITDA,and the
Compensation Committee may use a different measure that it determines to be the most important earnings measure used publicly by the Company (for example, EBITDA without adjustment), and will also determine the target level of revenue and of such earnings measure. The Compensation Committee will first consult with Mr. Garrison
prior to making such determinations.For the equity component, Mr. Garrison was awarded stock options on September 12, 2016, under the Equity Incentive Plan to purchase 450,000 shares of the Company's common stock at the closing price on the Start Date. The options vest over a three year termAmended Agreement, which have been filed as follows: 150,000 options vested on the first anniversary of his start date and 12,500 options currently vest on a monthly basis over the following two years (three year total vesting). In the event of a change of control, all unvested options will vest immediately. A change of control means the sale of all or substantially all of the assets of the Company, a merger or reorganization in which the Company’s equity holders own less than 50% of the voting power after such transaction, or upon the sale of equity securities representing 50% or more of the voting power of or economic interest in the Company.
Also pursuantexhibits to the Garrison Employment Agreement, the Company reimbursed Mr. Garrison $15,461 for expenses incurred in relocating his principal personal residence to Austin, Texas. The Garrison Employment Agreement also contains customary provisions regarding intellectual property, confidentiality,Forms 8-K filed August 31, 2016 and non-solicitation and indemnification.
In the event Mr. Garrison is terminated without cause or if he were to voluntarily resign for good reason, each as defined below under “Termination Provisions & Potential Payments Upon Termination or Change of Control,” he would be entitled to receive his salary for the balance of the term, continuation of any executive health and group health plan benefits to the extent authorized by COBRA, a pro-rata portion of any bonus that would have been earned through the termination date, and, finally, acceleration of vesting of a pro-rata portion of any options that would have vested had his vesting occurred a monthly basis, advanced to the next month. Upon death, the Company will have no further obligation to Mr. Garrison except accrued compensation. If Mr. Garrison becomes disabled so he is unable to perform the essential functions of his existing position with or without reasonable accommodation, the board of directors may remove him from any responsibilities and/or reassign him to another position for the remainder of the term of the agreement or during the period of such disability and he will continue to receive his full salary and benefits for a period of time equal to 12 months. If the disability continues beyond the 12 month period, then Mr. Garrison’s employment may be terminated. “Disability” means a written determination, as certified by at least two duly licensed and qualified physicians, one of which is approved by the board of directors and one of which is approved by the officer, that he suffers from a physical or mental impairment that renders him unable to perform his regular personal duties under the agreement and that such impairment can reasonably be expected to continue for a period of six consecutive months or for shorter periods aggregating 180 days in any 12 month period.
GRANTS OF PLAN-BASED AWARDS DURING FISCAL YEAR ENDED MARCH 31,
20172019
The following table sets forth certain information about plan-based awards that we made to the named executive officers during the fiscal year ended March 31,
2017.Name | | Grant Date | | Option Awards: Number of Shares underlying options (#)(1) | | | Exercise price of option awards ($/Share) | | | Grant date Fair Value of Stock & Option Awards ($)(1) | |
William G. Stone III | | 2/2/2017 | | | 247,500 | (2) | | | 0.71 | | | | 111,687 | |
Chief Executive Officer | | 5/26/2016 | | | 100,000 | (3) | | | 1.06 | | | | 82,300 | |
| | | | | | | | | | | | | | |
Barrett Garrison | | 2/2/2017 | | | 135,000 | (4) | | | 0.71 | | | | 60,920 | |
Executive Vice President and Chief Financial Officer | | 9/12/2016 | | | 450,000 | (5) | | | 1.37 | | | | 436,500 | |
| | | | | | | | | | | | | | |
David Wesch | | 2/2/2017 | | | 36,675 | (6) | | | 0.71 | | | | 16,550 | |
Acting Chief Accounting Officer | | 1/10/2017 | | | 20,000 | (7) | | | 0.70 | | | | 8,892 | |
| | 11/2/2016 | | | 25,000 | (8) | | | 0.65 | | | | 10,212 | |
| | 6/9/2016 | | | 30,000 | (9) | | | 1.04 | | | | 23,550 | |
2019. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Grant Date | | Estimated future payouts under non-equity incentive plan awards | | Estimated future payouts under equity incentive plan awards | | All other stock awards: Number of shares of stock or units (#) | | Option Awards: Number of Shares Underlying Options (#)(1) | | Exercise Price of Option Awards ($/Share) | | Grant date Fair Value of Stock & Option Awards ($)(1) |
| | | | Threshold ($) | Target ($) | Maximum ($) | | Threshold (#) | Target (#) | Maximum (#) | | | | | | | | |
William G. Stone III Chief Executive Officer | | 6/7/2018 | | 125,000 |
| 250,000 |
| 500,000 |
| | — |
| — |
| — |
| | — |
| | — |
| | — |
| | — |
|
| | 6/10/2018 | | — |
| — |
| — |
| | 36,337 |
| 72,675 (4) |
| 145,349 |
| | — |
| | — |
| | — |
| | 125,000 |
|
| | 6/10/2018 | | — |
| — |
| — |
| | — |
| — |
| — |
| | 72,675 (5) |
| | — |
| | — |
| | 125,000 |
|
| | | | | | | | | | | | | | | | | | |
Barrett Garrison Executive Vice President and Chief Financial Officer | | 6/7/2018 | | 81,250 |
| 162,500 |
| 325,000 |
| | — |
| — |
| — |
| | — |
| | — |
| | — |
| | — |
|
| | 6/10/2018 | | — |
| — |
| — |
| | 21,803 |
| 43,605 (4) |
| 87,210 |
| | — |
| | — |
| | — |
| | 75,000 |
|
| | 6/10/2018 | | — |
| — |
| — |
| | — |
| — |
| — |
| | 43,605 (5) |
| | — |
| | — |
| | 75,000 |
|
| | | | | | | | | | | | | | | | | | |
Christine Collins Chief Technology Officer | | 6/7/2018 | | — |
| — |
| — |
| | — |
| — |
| — |
| | — |
| | 100,000 |
| | 1.68 |
| | 100,448 |
|
| | | | | | | | | | | | | | | | | | |
David Wesch Chief Accounting Officer | | 6/7/2018 | | — |
| — |
| — |
| | — |
| — |
| — |
| | — |
| | 40,000 |
| | 1.68 |
| | 40,179 |
|
| | | | | | | | | | | | | | | | | | |
| |
(1) | The value of a stock option award is based on the fair market value as of the grant date of such award determined pursuant to ASC 718. The exercise price for all options granted to the named executive officers is 100% of the fair market value of the shares on the grant date. The value of equity incentive plan awards or PSUs and other stock awards or RSUs is based on the Company's closing stock price on June 10, 2018 at $1.72. Value of PSUs is tied to satisfaction of certain performance criteria (other than the price of Issuer's common stock) determined after the close of FY2021. For PSUs the Company has assumed an attainment of the target amount. |
| |
(2) | The options granted on February 2, 2017 vest as follows: 123,750 optionsJune 7, 2018 will vest on the 24-month anniversarymonthly in increments of the grant date,2,777 options for 36 months and 123,750 will vest on the 48-month anniversary of the grant date to become fully vested on February 2,June 7, 2021. All unvested options granted will vest immediately upon a change of control of the Company. |
| |
(3) | The options granted on May 26, 2016June 7, 2018 will vest as follows: 25,000monthly in increments of 1,111 options vested on the one-year anniversary of the grant date,for 36 months and 75,000 options currently vest on a monthly basis over the three years following the first anniversary of the grant date to become fully vested on May 26, 2020. All unvested options will vest immediately upon a change of control of the Company. |
| (4) | The options granted on February 2, 2017 vest as follows: 67,500 options will vest on the 24-month anniversary of the grant date, and 67,500 will vest on the 48-month anniversary of the grant date to become fully vested on February 2,June 7, 2021. All unvested options granted will vest immediately upon a change of control of the Company. |
| |
(4) | The stock awards are comprised entirely of PSUs. The PSUs vest on June 10, 2021 for a number of shares based upon satisfaction of certain financial performance criteria during the three fiscal year period ended March 31, 2021. |
| |
(5) | The options granted on September 12, 2016 vest as follows: 150,000 options vested on the one-year anniversarystock awards are comprised entirely of RSUs. One-third of the grant date, then 12,500 options currentlyRSUs vest on a monthly basis over the two years following the first anniversary of the grant date, to become fully vested on September 12,which is June 10, 2019. All unvested options willThe balance vest immediately upon a change of control ofproportionately each month during the Company.remaining two years beginning July 10, 2019 through June 10, 2021. |
| (6) | The options granted on February 2, 2017 vest as follows: 18,338 options will vest on the 24-month anniversary of the grant date, and 18,338 options will vest on on the 48-month anniversary of the grant date to become fully vested on February 2, 2021. All unvested options will vest immediately upon a change of control of the Company. |
| (7) | Options vest monthly in increments of 555 options for 36 months. All unvested options will vest immediately upon a change of control of the Company. |
| (8) | Options vest monthly in increments of 694 options for 36 months. All unvested options will vest immediately upon a change of control of the Company. |
| (9) | Options vest monthly in increments of 833 options for 36 months. All unvested options will vest immediately upon a change of control of the Company. |
OUTSTANDING EQUITY AWARDS AT MARCH 31,
20172019
The following table presents information regarding outstanding options and unvested stock awards held by our named executive officers as of March 31,
2017. | | Option Awards |
Name | | Grant Date | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Option Exercise Price ($) | | | Option Expiration Date |
William G. Stone III(1) | | 2/2/2017 | | | - | | | | 247,500 | | | | 0.71 | | | 2/2/2027 |
Chief Executive Officer | | 5/26/2016 | | | - | | | | 100,000 | | | | 1.06 | | | 5/26/2026 |
| | 12/9/2015 | | | - | | | | 175,000 | | | | 1.43 | | | 12/9/2025 |
| | 9/10/2014 | | | 31,250 | | | | 18,750 | | | | 5.89 | | | 9/10/2024 |
| | 7/8/2014 | | | 133,333 | | | | 66,667 | | | | 4.11 | | | 7/8/2024 |
| | 11/25/2013 | | | 300,000 | | | | - | | | | 2.54 | | | 11/25/2023 |
| | | | | | | | | | | | | | | | |
Barrett Garrison(2) | | 2/2/2017 | | | - | | | | 135,000 | | | | 0.71 | | | 2/2/2027 |
Executive Vice President and Chief Financial Officer | | 9/12/2016 | | | - | | | | 450,000 | | | | 1.37 | | | 9/12/2026 |
| | | | | | | | | | | | | | | | |
David Wesch(3) | | 2/2/2017 | | | - | | | | 36,675 | | | | 0.71 | | | 2/2/2027 |
Acting Chief Accounting Officer | | 1/10/2017 | | | 1,110 | | | | 18,890 | | | | 0.70 | | | 1/10/2027 |
| | 11/2/2016 | | | 2,778 | | | | 22,222 | | | | 0.65 | | | 11/2/2026 |
| | 6/9/2016 | | | 7,500 | | | | 22,500 | | | | 1.04 | | | 6/9/2026 |
| | 12/9/2015 | | | - | | | | 12,250 | | | | 1.43 | | | 12/9/2025 |
| | 8/3/2015 | | | 5,278 | | | | 4,722 | | | | 2.56 | | | 8/3/2025 |
| | 5/29/2015 | | | 15,278 | | | | 9,722 | | | | 4.18 | | | 5/29/2025 |
2019. |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
Name | | Grant Date | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Option Exercise Price ($) | | Option Expiration Date | | Number of shares or units of stock that have not vested (#) | | Market value of shares or units of stock that have not vested ($) | | Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#) | | Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($) |
William G. Stone III (1) Chief Executive Officer | | 6/10/2018 | | — |
| | — |
| | — |
| | — |
| | 72,675 |
| | 125,000 |
| | — |
| | — |
|
| 6/10/2018 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 72,675 |
| | 125,000 |
|
| 2/2/2017 | | 123,750 |
| | 123,750 |
| | 0.71 |
| | 2/2/2027 |
| | — |
| | — |
| | — |
| | — |
|
| 5/26/2016 | | 70,833 |
| | 29,167 |
| | 1.06 |
| | 5/26/2026 |
| | — |
| | — |
| | — |
| | — |
|
| 12/9/2015 | | 87,500 |
| | 87,500 |
| | 1.43 |
| | 12/9/2025 |
| | — |
| | — |
| | — |
| | — |
|
| 9/10/2014 | | 50,000 |
| | — |
| | 5.89 |
| | 9/10/2024 |
| | — |
| | — |
| | — |
| | — |
|
| 7/8/2014 | | 200,000 |
| | — |
| | 4.11 |
| | 7/8/2024 |
| | — |
| | — |
| | — |
| | — |
|
| 11/25/2013 | | 300,000 |
| | — |
| | 2.54 |
| | 11/25/2023 |
| | — |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | |
Barrett Garrison (2) Executive Vice President and Chief Financial Officer | | 6/10/2018 | | — |
| | — |
| | — |
| | — |
| | 43,605 |
| | 75,000 |
| | — |
| | — |
|
| 6/10/2018 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 43,605 |
| | 75,000 |
|
| 8/4/2017 | | 52,542 |
| | 47,548 |
| | 1.09 |
| | 8/4/2027 |
| | — |
| | — |
| | — |
| | — |
|
| 2/2/2017 | | 67,500 |
| | 67,500 |
| | 0.71 |
| | 2/2/2027 |
| | — |
| | — |
| | — |
| | — |
|
| 9/12/2016 | | 375,000 |
| | 75,000 |
| | 1.37 |
| | 9/12/2026 |
| | — |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | |
Christine Collins (3) Chief Technology Officer | | 6/7/2018 | | 25,000 |
| | 75,000 |
| | 1.68 |
| | 6/7/2028 |
| | — |
| | — |
| | — |
| | — |
|
| 3/19/2018 | | 83,333 |
| | 166,667 |
| | 2.38 |
| | 3/19/2028 |
| | — |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | |
David Wesch (4) Chief Accounting Officer | | 6/7/2018 | | 10,000 |
| | 30,000 |
| | 1.68 |
| | 6/7/2028 |
| | — |
| | — |
| | — |
| | — |
|
| | 8/4/2017 | | 26,271 |
| | 23,729 |
| | 1.09 |
| | 8/4/2027 |
| | — |
| | — |
| | — |
| | — |
|
| | 2/2/2017 | | 18,338 |
| | 18,337 |
| | 0.71 |
| | 2/2/2027 |
| | — |
| | — |
| | — |
| | — |
|
| | 1/10/2017 | | 14,440 |
| | 5,556 |
| | 0.70 |
| | 1/10/2027 |
| | — |
| | — |
| | — |
| | — |
|
| | 11/2/2016 | | 19,444 |
| | 5,560 |
| | 0.65 |
| | 11/2/2026 |
| | — |
| | — |
| | — |
| | — |
|
| | 6/9/2016 | | 27,500 |
| | 2,500 |
| | 1.04 |
| | 6/9/2026 |
| | — |
| | — |
| | — |
| | — |
|
| | 12/9/2015 | | 6,125 |
| | 6,125 |
| | 1.43 |
| | 12/9/2025 |
| | — |
| | — |
| | — |
| | — |
|
| | 8/3/2015 | | 10,000 |
| | — |
| | 2.56 |
| | 8/3/2025 |
| | — |
| | — |
| | — |
| | — |
|
| | 5/29/2015 | | 25,000 |
| | — |
| | 4.18 |
| | 5/29/2025 |
| | — |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | |
| |
(1) | During the fiscal year ended March 31, 2019, Mr. Stone was awarded RSUs for 72,674 shares of our common stock totaling $125,000 in value that vest over three years, with one-third of the RSUs vesting on the first anniversary of the grant date of June 10, 2019, and with the balance vesting proportionately each month during the remaining two years beginning on July 10, 2019 through June 10, 2021. For fiscal year 2019 performance, we awarded to Mr. Stone PSUs for a target number of 72,674 shares of our common stock having a value of $125,000, with the actual number of shares to be issued ranging from 0 to 145,349 based upon satisfaction of certain performance criteria (other than the price of Issuer's common stock) determined after the close of fiscal year 2021. On February 2, 2017, Mr. Stone was granted 247,500 options with an exercise price of $0.71 per share, of which 123,750 options will vestvested on the 24-month anniversary of the grant date, and 123,750 options will vest on the 48-month anniversary of the grant date to become fully vested on February 2, 2021. In connection with entering into the Stone Amended Agreementamendment entered into effective May 26, 2016, Mr. Stone was granted 100,000 options with an exercise price of $1.06, which vest as follows: 25,000 options vested on the one-year anniversary of the grant date, 75,000 options currently vest on a monthly basis over the three years following the first anniversary of the grant date. On December 9, 2015, Mr. Stone was granted 175,000 options with an exercise price of $1.43 per share, of which 87,500 options will vest |
which 87,500 options vested on the 24-month anniversary of the grant date, and 87,500 options will vest on the 48-month anniversary of the grant date to become fully vested on December 9, 2019. On September 10, 2014, Mr. Stone was granted 50,000 options with an exercise price of $5.89 per share, which vested over four years and all of which are now fully vested. On July 8, 2014, Mr. Stone was granted 200,000 stock options exercisable at the exercise price of $4.11, which are now fully vested. On November 25, 2013, Mr. Stone was granted 300,000 stock options exercisable at the price of $2.54 per share, which options are now fully vested. All unvested options granted will vest immediately upon a change of control of the Company.
| |
(2) | During the fiscal year ended March 31, 2019, Mr. Garrison was awarded RSUs for 43,605 shares of our common stock totaling $75,000 in value that vest over three years, with one-third of the grant date, and 87,500 options will vestRSUs vesting on the 48-month anniversary of the grant date to become fully vested on December 9, 2019. On September 10, 2014, Mr. Stone was granted 50,000 options with an exercise price of $5.89 per share, of which 12,500 options vested on the one-year anniversary of the grant date, and 37,500 options currently vest on a monthly basis over the three years following the first anniversary of the grant date of June 10, 2019, and with the balance vesting proportionately each month during the remaining two years beginning on July 10, 2019 through June 10, 2021. For fiscal year 2019 performance, we awarded to Mr. Garrison PSUs for a target number of 43,605 shares of our common stock having a value of $75,000 with the actual number of shares to be issued ranging from 0 to 87,210 based upon satisfaction of certain performance criteria (other than the price of Issuer's common stock) determined after the close of fiscal year 2021. On August 4, 2017, Mr. Garrison was granted 100,000 options with an exercise price of $1.09 per share, of which 33,000 options will vest on the 12-month anniversary of the grant date, and 67,000 will vest monthly in increments of 2,792 options for 24 months and become fully vested on September 10, 2018. On July 8, 2014, Mr. Stone was granted 200,000 stock options exercisable at the exercise price of $4.11. The original vesting of these 200,000 options was adjusted so that 50,000 options vested on the one-year anniversary of the original grant date (i.e., July 8, 2015), and 150,000 options currently vest on a monthly basis over the three years following such first anniversary. On November 25, 2013, Mr. Stone was granted 300,000 stock options exercisable at the price of $2.54 per share. The options are fully vested. All unvested options granted will vest immediately upon a change of control of the Company. |
| (2) | August 4, 2020. On February 2, 2017, Mr. Garrison was granted 135,000 options with an exercise price of $0.71 per share, of which 67,500 options will vest on the 24-month anniversary of the grant date, and 67,500 options will vest on the 48-month anniversary of the grant date to become fully vested on February 2, 2021. In connection with Mr. Garrison's employment agreement, on September 12, 2016 he was granted 450,000 options with an exercise price of $1.37 per share which vest as follows: 150,000 options vested on the first anniversary of the grant date, and 12,500 options currently vest on a monthly basis for the following two years to become fully vested on September 12, 2019. All unvested options granted will vest immediately upon a change of control of the Company. |
| |
(3) | On June 7, 2018 the Company awarded to Ms. Collins, pursuant to her joining the Company, stock options to purchase up to an aggregate of 100,000 shares of our common stock with a grant date fair value of $100,448 with an exercise price of $1.68 per share, of which 2,777 options will vest monthly for 36 months and become fully vested on June 7, 2021. On March 19, 2018 the Company awarded to Ms. Collins, pursuant to her joining the Company, stock options to purchase up to an aggregate of 250,000 shares of our common stock with a grant date fair value of $270,287 with an exercise price of $2.38 per share, of which 6,944 options will vest monthly for 36 months and become fully vested on March 19, 2021. All unvested options granted will vest immediately upon a change of control of the Company. |
| (3) |
(4) | On June 7, 2018 the Company awarded to Mr. Wesch stock options to purchase up to an aggregate of 40,000 shares of our common stock with a grant date fair value of $40,179 with an exercise price of $1.68 per share, of which 1,111 options will vest monthly for 36 months and become fully vested on June 7, 2021. On August 4, 2017, Mr. Wesch was granted 50,000 options with an exercise price of $1.09 per share, of which 16,500 options will vest on the 12-month anniversary of the grant date, and 33,500 will vest monthly in increments of 1,396 options for 24 months and become fully vested on August 4, 2020. On February 2, 2017, Mr. Wesch was granted 36,675 options with an exercise price of $0.71 per share, of which 18,338 options will vest on the 24-month anniversary of the grant date, and 18,338 options will vest on the 48-month anniversary of the grant date to become fully vested on February 2, 2021. On January 10, 2017, Mr. Wesch was granted 20,000 options with an exercise price of $0.70 per share which vest equally over 36 months to become fully vested on January 10, 2020. On November 2, 2016, Mr. Wesch was granted 25,000 options with an exercise price of $0.65 per share which vest equally over 36 months to become fully vested on November 2, 2019. On June 9, 2016, Mr. Wesch was granted 30,000 options with an exercise price of $1.04 per share which vest equally over 36 months to become fully vested on June 9, 2019. On December 9, 2015, Mr. Wesch was granted 12,250 options with an exercise price of $1.43 per share, of which 6,125 options vest on the 24-month anniversary of the grant date, and 6,125 options will vestvested on the 48-month anniversary of the grant date to become fully vested on December 9, 2019. On August 3, 2015, Mr. Wesch was granted 10,000 options with an exercise price of $2.56 per share, which vest equally over 36 months to becomeare now fully vested on August 3, 2018.vested. On May 29, 2016,2015, Mr. Wesch was granted 25,000 options with an exercise price of $4.18 per share, which vest equally over 36 months to becomeare now fully vested on May 29, 2019.vested. All unvested options granted will vest immediately upon a change of control of the Company. |
OPTION EXERCISES
AND STOCK VESTED DURING FISCAL YEAR ENDING MARCH 31,
20172019
None of our executive officers exercised any stock options
or had any PSUs, RSUs or other stock awards vest during fiscal year
2017.2019.
TERMINATION PROVISIONS AND POTENTIAL PAYMENTS UPON TERMINATION
The section below provides information concerning the amount of compensation payable to our named executive officers in the event of termination of such executive’s employment, including certain estimates of the amounts that would have been paid on certain dates under what we believe to be reasonable assumptions. However, the actual amounts to be paid out can only be determined at the time of such executive’s termination.
Payments Made Upon Termination Generally
Regardless of the manner in which any of our employees (including any of our executive officers) is terminated, the employee would be entitled to receive certain amounts due during such employee’s term of employment. Such amounts would include (“accrued compensation”):
| · | any unpaid salary from the date of the last payroll to the date of termination; |
| · | accrued but unpaid bonus for a previously completed yearly measurement period; |
| · | reimbursement for any properly incurred unreimbursed business expenses; |
| · | any vested benefits the executive may have under the Company’s benefit plans; and |
| · | unpaid, accrued and unused personal time off through the date of termination. |
any unpaid salary from the date of the last payroll to the date of termination;
accrued but unpaid bonus for a previously completed yearly measurement period;
reimbursement for any properly incurred unreimbursed business expenses;
any vested benefits the executive may have under the Company’s benefit plans; and
unpaid, accrued and unused personal time off through the date of termination.
In addition, an executive officer would retain the following rights:
| · | any existing rights to indemnification for prior acts through the date of termination; and |
| · | any options and equity awarded pursuant to our Equity Incentive Plan to the extent provided in that plan and the grant or award. |
any existing rights to indemnification for prior acts through the date of termination; and
any options and equity awarded pursuant to our Equity Incentive Plan to the extent provided in that plan and the grant or award.
Messrs. Stone and Garrison. As noted above under “Employment Agreements,” as of fiscal year ended March 31, 2017,2019, each of Messrs. Stone and Garrison had an employment agreement with the Company. In addition to thoseany payments that would be made upon termination noted above, these agreements provide for the additional benefits onupon certain terminationterminations as described below.Payments Made Upon Termination by Us Without Cause or by the Officer for Good Reason
If, as of March 31,
2017,2019, we had terminated Messrs. Stone’s or Garrison's employment without cause, or if the officer had terminated his employment for good reason, he would have received the following termination benefits through March 31,
2018 and September 12, 2018, respectively:2020: | |
(i) | continuation of his salary at the rate then in effect; and |
| |
(ii) | continuation of any executive health and group health plan benefits to the extent authorized by and consistent with 29 U.S.C. § 1161 et seq. (commonly known as “COBRA”), subject to payment of premiums by the Company to the extent that the Company was covering such premiums as of the termination date (if permitted by law without violation of applicable discrimination rules, or, if not, the equivalent after-tax value payable as additional severance at the same time such premiums are otherwise payable); and |
| |
(iii) | a pro-rata annual bonus through the termination date, as reasonably determined by the Compensation Committee applying the applicable contract standards and paid at the same time as a bonus would otherwise be payable under the contract; and |
| |
(iv) | acceleration of vesting of the options amended and/or granted under the contract on a pro-rata basis as if the vesting schedule had been monthly rather than annual, advanced to the next month. |
| |
(v) | acceleration of vesting of PSUs for a pro-rata portion of the target numbers of shares based upon the number of months from date of grant divided by 36. |
The Company’s liability for salary continuation pursuant to clause (i) above will not be reduced by the amount of any severance pay paid to the executive pursuant to any severance pay plan or stay bonus plan of the employer.
In order to receive such severance, the officer must execute a release of all claims and comply with the remaining confidentiality and non-solicitation provisions of his employment agreement.
“Good reason” means (i) breach by the Company of the insurance or indemnification provisions in the employment or any indemnification agreement or failure of the Company to pay any amounts or options due when due under the terms and conditions thereunder, after a
1530 day cure period; (ii) the officer is not reporting directly to the board of directors, subject to a 30 day cure period, unless the sole reason for such failure to report to the board of directors is that a change of control occurred and as a result the officer’s reporting structure in the buyer’s organization puts him at effectively the same or higher level of overall responsibility and authority (comparing the positions in each organization) as was the case immediately prior to such change of control, as reasonably determined by the board of directors prior to such change of control; or (iii) material diminution in the officer’s position, duties, authority or responsibility, without cause, subject to a 30 day cure period.
The term “cause” means (i) any act committed against the Company which involves fraud, willful misconduct, gross negligence or refusal to comply with the reasonable, legal and clear written instructions; or (ii) the conviction of, or indictment (or procedural equivalent, or guilty plea or plea of nolo contender) for (A) a felony or (B) any misdemeanor involving moral turpitude where the circumstances reasonably would have a negative impact on the Company, deceit, dishonesty or fraud; or (iii) material breach of the employment agreement; provided, however, that in each case the officer will have 15 days to cure such conduct, unless such conduct is not reasonably curable.
If Mr. Stone or Mr. Garrison
employment had been terminated without cause or
either officer had resignedterminated for good reason on March 31,
2017,2019, then pursuant to the terms of
histheir employment
agreement, heagreements, they would have received the following post-termination payments:
Name | | Base Salary ($) (1) | | | Annual Bonus ($) (2) | | | Health Plan Payments ($) (3) | | | Accelerated Vesting of Options/Restricted Stock (4) | |
William G. Stone III | | | 500,000 | | | | - | | | | 14,772 | | | | 56,925 | |
Chief Executive Officer | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Barrett Garrison | | | 435,000 | | | | - | | | | 18,445 | | | | 31,050 | |
Executive Vice President, Chief Financial Officer | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | |
| Name | | Base Salary ($) (1) | | Annual Bonus ($) (2) | | Health Plan Payments ($) (3) | | Accelerated Vesting of Options/Restricted Stock (4) (5) ($) |
| William G. Stone III Chief Executive Officer | | 500,000 |
| | 222,700 |
| | 4,764 |
| | 1,584,775 |
|
|
| | | | | | | | | |
| Barrett Garrison Executive Vice President, Chief Financial Officer | | 325,000 |
| | 144,800 |
| | 6,960 |
| | 1,576,150 |
|
| |
(1) | Mr. Stone’s payment is based on salary paid from April 1, 2017 until March 31, 2018, the end of the term of the Stone Amended Agreement.and Mr. Garrison’s payment is based on salary paid from April 1, 20172019 until September 12, 2018,March 31, 2020, due to their termination benefits continuing effective for a period starting on the endtermination date and ending on the first anniversary of the term of the Garrison Employment Agreement.termination date. |
| |
(2) | For the fiscal period ended March 31, 2019, Mr. Stone and Mr. Garrison were not eligible to receivereceived a $222,700 and $144,800, respectively, performance bonus as of March 31, 2017.based on corporate and personal performance criteria. |
| |
(3) | For Mr. Stone based on monthly payments of $615 through March 31, 2018. Forand Mr. Garrison, based on monthly payments through March 31, 2019 of $536 through September 12, 2018.$397 and $580, respectively. |
| |
(4) | For Mr. Stone, the amount is based on the difference between the exercise price of options outstanding as of March 31, 20172019 ($2.54 per share with respect to 300,000 options, $4.11 per share with respect to 200,000 options, and $5.89 per share with respect to 50,000 options, $1.43 per share with respect to 175,000 options, $1.06 per share with respect to 100,000 options, and $0.71 per share with respect to 247,500 options), and in each case the closing stock price on March 31, 20172019 of $0.94$3.50 per share. For Mr. Garrison, the amount is based on the difference between the exercise price of options outstanding as of March 31, 20172019 ($1.37 per share with respect to 450,000 options, and $0.71 per share with respect to 135,000 options, and $1.09 per share with respect to 100,000 options), and in each case the closing stock price on March 31, 20172019 of $0.94$3.50 per share. DueAccelerated vesting applies only to stock options issued to our named executive officers having |
exercise prices at or above our stock price as of March 31, 2019, as those stock options awarded with a per share exercise price below $3.50 have no intrinsic value as of March 31, 2019.
| |
(5) | With respect to RSUs for both Mr. Stone and Mr. Garrison, all unvested RSUs will terminate upon termination. With respect to PSUs for both Mr. Stone and Mr. Garrison, upon termination, acceleration of vesting of such number of PSUs that have been granted but which are then unvested, determined, for each then outstanding granted but unvested grant, by multiplying the PSUs that Executive would receive at each applicable “Target” level of performance, by a fraction, the numerator of which is the number of calendar months elapsed from the Grant Date of the applicable grant of PSUs through the Termination Date, and the denominator of which is 36 months. Total payout of PSUs upon termination of employment for Mr. Stone and Mr. Garrison would amount to $41,667 and $25,000, respectively. |
Payments Made upon Termination following a Change of Control
|
| | | | | | | | | | | | | |
| Name | | Base Salary ($) (1) | | Annual Bonus ($) (2) | | Health Plan Payments ($) (3) | | Accelerated Vesting of Options/Restricted Stock (4) (5) ($) |
| William G. Stone III Chief Executive Officer | | 750,000 |
| | 222,700 |
| | 7,146 |
| | 1,626,442 |
|
|
| | | | | | | | | |
| Barrett Garrison Executive Vice President, Chief Financial Officer | | 487,500 |
| | 144,800 |
| | 10,440 |
| | 1,601,150 |
|
| | | | | | | | | |
| Christine Collins Chief Technology Officer | | — |
| | — |
| | — |
| | 282,778 |
|
| | | | | | | | | |
| David Wesch Chief Accounting Officer | | — |
| | — |
| | — |
| | 531,431 |
|
| | | | | | | | | |
| |
(1) | Mr. Stone and Mr. Garrison’s payment is based on salary paid from April 1, 2019 until March 31, 2020, due to their termination benefits continuing for 18 months effective for a period starting on the termination date . |
| |
(2) | For the fiscal period ended March 31, 2019, Mr. Stone and Mr. Garrison received a $222,700 and $144,800, respectively, performance bonus based on corporate and personal performance criteria. |
| |
(3) | For Mr. Stone and Mr. Garrison, based on monthly payments through March 31, 2019 of $397 and $580, respectively. |
| |
(4) | For Mr. Stone, the amount is based on the difference between the exercise price of options outstanding as of March 31, 2019 ($2.54 per share with respect to 300,000 options, $4.11 per share with respect to 200,000 options, and $5.89 per share with respect to 50,000 options, $1.43 per share with respect to 175,000 options, $1.06 per share with respect to 100,000 options, and $0.71 per share with respect to 247,500 options), and in each case the closing stock price on March 31, 2019 of $3.50 per share. For Mr. Garrison, the amount is based on the difference between the exercise price of options outstanding as of March 31, 2019 ($1.37 per share with respect to 450,000 options, $0.71 per share with respect to 135,000 options, and $1.09 per share with respect to 100,000 options), and in each case the closing stock price on March 31, 2019 of $3.50 per share. Accelerated vesting applies only to stock options issued to our named executive officers having exercise prices at or above our stock price as of March 31, 2017 (with the exception of the2019, as those stock options awarded with a per share exercise price of $0.71), these optionsbelow $3.50 have no intrinsic value as of March 31, 2017.2019. |
Payments Made upon Termination following a Change of Control
| |
(5) | With respect to RSUs for both Mr. Stone and Mr. Garrison, all unvested RSUs will terminate upon termination. With respect to PSUs for both Mr. Stone and Mr. Garrison, upon termination, acceleration of vesting of such number of PSUs that have been granted but which are then unvested, determined, for each then outstanding granted but unvested grant, by multiplying the PSUs that Executive would receive at each applicable “Target” level of performance, by a fraction, the numerator of which is the number of calendar months elapsed from the Grant Date of the applicable grant of PSUs through the Termination Date, and the denominator of which is 36 months. Total payout of PSUs upon termination of employment for Mr. Stone and Mr. Garrison would amount to $41,667 and $25,000, respectively. |
Following a change of control as of March 31,
2017,2019, the unvested equity grants made to
Mr. Stone and Mr. Garrison, under each officer's respective employment agreements,Ms. Collins and to Mr. Wesch would have vested. We estimate that an acceleration under these conditions would have resulted in
$56,925, $31,050,$282,778 and
$20,485$531,431 for
Mr. Stone, Mr. GarrisonMs. Collins and Mr. Wesch, respectively, based on the difference between the exercise price of such options and the closing stock price on March 31,
20172019 of
$0.94.$3.50.
Payments Made Upon Disability and Death
Up
Upon the disability or death of either Mr. Stone or Mr. Garrison, the Company would have no further obligation to them other than payment of their accrued compensation, as described above. If either officer became disabled so that he were unable to perform the essential functions of his existing position with or without reasonable accommodation, the Board may remove him from any responsibilities and/or reassign him to another position for the remainder of the term of his respective employment agreement or during the period of such disability, and he would continue to receive his full salary and benefits for a period of time equal to 12 months. Based on medical insurance premiums as of March 31,
2017,2019, we estimate that the approximate value of the continued medical benefit payments would have been
$615$4,764 and
$536$6,960 for Mr. Stone and Mr. Garrison,
respectively, for a total of $14,772 for Mr. Stone and $18,445 for Mr. Garrison for the 12 months.respectively. If the disability were to continue beyond the 12 month period, then the officer’s employment may be terminated. “Disability” means a written determination, as certified by at least two duly licensed and qualified physicians, one of which is approved by the Board and one of which is approved by the officer, that he suffers from a physical or mental impairment that renders him unable to perform his regular personal duties under his respective employment agreement and that such impairment can reasonably be expected to continue for a period of three consecutive months or for shorter periods aggregating 90 days in any 12 month period.
The following table presents information regarding compensation paid to our directors during the fiscal year ended March 31,
2017.2019. For compensation paid to William Stone III, see "Summary Compensation Table" above.
Name | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($)(1) | | | Total ($) | |
Robert Deutschman(2) | | | 79,500 | | | | 87,000 | | | | 166,500 | |
Chris Rogers(3) | | | 53,000 | | | | 58,000 | | | | 111,000 | |
Craig Forman(4) | | | 43,725 | | | | 58,000 | | | | 101,725 | |
Jeffrey Karish(5) | | | 48,000 | | | | 55,500 | | | | 103,500 | |
Mohan S. Gyani(6) | | | 48,000 | | | | 48,000 | | | | 96,000 | |
Paul Schaeffer(7) | | | 53,000 | | | | 58,000 | | | | 111,000 | |
|
| | | | | | | | | |
Name | | Fees Earned or Paid in Cash ($) | | Stock Awards ($) (1) | | Total ($) |
Robert Deutschman (2) | | 71,250 |
| | 101,250 |
| | 172,500 |
|
Christopher Rogers (3) | | 46,875 |
| | 66,875 |
| | 113,750 |
|
Jeffrey Karish (4) | | 43,750 |
| | 63,750 |
| | 107,500 |
|
Mohan S. Gyani (5) | | 44,375 |
| | 64,375 |
| | 108,750 |
|
Paul Schaeffer (6) | | 45,000 |
| | 65,000 |
| | 110,000 |
|
Roy Chestnutt (7) | | 45,000 |
| | 65,000 |
| | 110,000 |
|
| |
(1) | The amounts in the “Stock Awards” column reflect the aggregate grant date fair value of each restricted stock award that was granted during the respective fiscal year, computed in accordance with FASB ASC Topic 718 “Compensation-Stock Compensation”. We estimated the fair value of restricted stock based on the fair value at the time of grant. The fair value for awards that are expected to vest is then amortized on a straight-line basis over the requisite service period of the award, which is generally the vesting term. The amount of expense recognized represents the expense associated with the restricted stock we expect to ultimately vest based upon an estimated rate of forfeitures; this rate of forfeitures is updated as necessary and any adjustments needed to recognize the fair value of restricted stock that actually vest or are forfeited are recorded. Note 4, “Summary of Significant Accounting Policies,” in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended March 31, 20162019 sets forth the relevant assumptions used to determine the valuation of our stock option awards. |
| |
(2) | Mr. Deutschman is the Chairman of the Board, Chairman of the Audit Committee, and a member of the Governance Committee. During the fiscal ended March 31, 2017,2019, Mr. Deutschman received quarterly cash payments totaling $79,500$71,250 and was granted a total of 79,09172,842 shares of restricted common stock on August 1, 2016,July 31, 2018, with a fair value of $1.10$1.39 per share, of which 39,54636,421 shares remained unvested as of March 31, 2017.2019. |
| |
(3) | Mr. Rogers is a director of the Company and a member of the Audit Committee and the Compensation Committee. During the fiscal year ended March 31, 2017,2019, Mr. Rogers received quarterly cash payments totaling $53,000$46,875 and was granted 52,72748,112 shares of restricted common stock on August 1, 2016,July 31, 2018, with a fair value of $1.10$1.39 per share, of which 26,36424,056 shares remained unvested as of March 31, 2017.2019. |
| (4) | Mr. Forman resigned as a director of the Company on January 27, 2017. During the fiscal year ended March 31, 2017, Mr. Forman received quarterly cash payments totaling $43,725 and was granted 52,727 shares of restricted common stock on August 1, 2016, with a fair value of $1.10 per share. Of such shares, upon Mr. Forman's resignation on January 27, 2017, 39,545 unvested shares were cancelled. |
| (5)(4) | Mr. Karish is a director of the Company and Chairman of the Compensation Committee and the Governance Committee. During the fiscal year ended March 31, 2017,2019, Mr. Karish received quarterly cash payments totaling $48,000$43,750 and was granted 50,45545,863 shares of restricted common stock on August 1, 2016,July 31, 2018, with a fair value of $1.10$1.39 per share, of which 25,22822,932 shares remained unvested as of March 31, 2017.2019. |
| (6) |
(5) | Mr. Gyani is a director of the Company, Chairman of the Governance Committee, and a member of the Compensation Committee. During the fiscal year ended March 31, 2017,2019, Mr. Gyani received quarterly cash payments totaling $48,000$44,375 and was granted 43,63646,313 shares of restricted common stock on August 1, 2016,July 31, 2018 with a fair value of $1.10$1.39 per share, of which 21,81823,156 shares remained unvested as of March 31, 2017.2019. |
| |
(6) | Mr. Schaeffer was a director of the Company and a member of the Audit Committee. During the fiscal year ended March 31, 2019, Mr. Schaeffer received quarterly cash payments totaling $45,000 and was granted 46,763 shares of restricted common stock on July 31, 2018, with a fair value of $1.39 per share. On July 2, 2019, Mr. Schaeffer resigned from the Company's Board of Directors. Mr. Schaeffer's shares which would have been vested as of our next annual meeting were fully vested as of the date of his resignation. |
| |
(7) | Mr. SchaefferChestnutt is a director of the Company and a member of the Audit Committee. During the fiscal year ended March 31, 2017,2019, Mr. SchaefferChestnutt received quarterly cash payments totaling $53,000$45,000 and was granted 52,72765,000 shares of restricted common stock on August 1, 2016,July 31, 2018 with a fair value of $1.10$1.39 per share, of which 26,36423,381 shares remained unvested as of March 31, 2017.2019. |
NARRATIVE TO DIRECTOR COMPENSATION TABLE
Non-employee director compensation for a new director is granted under the Board Member Equity Ownership and Retention Policy (the “Policy”). The Policy, which is administered by the independent Compensation Committee of the Board and can be amended by such committee, requires each non-management board member to acquire shares of the Company having a value equal to three times his or her annual cash retainer within five years, requires any employee director and the Chief Executive Officer to acquire shares of the Company having a value equal to three times his or her annual salary within five years and requires the Chief Operating Officer to acquire shares of the Company having a value equal to two times his or her annual salary within five years. Unvested restricted stock or restricted stock units and unvested stock options will not be considered when determining an individual’s stock ownership, and vested but unexercised stock options will be treated as equivalent to one-half a share. The Policy does not affect the vesting restrictions on any equity awards but supersedes any post-vesting lock-up that is currently applicable to any person covered by the Policy. Failure to meet or show sustained progress toward meeting the ownership requirements of the Policy may result in reduction in future long-term incentive grants and/or the requirement to retain all stock obtained through the vesting or exercise of equity awards.
The Company’s compensation program for the non-employee directors
prior to August 2018 is as follows: each director receives an annual cash retainer of $48,000 (payable in equal quarterly installments) plus an annual grant for restricted Company common stock under the Company’s Equity Incentive Plan having a value of $48,000 on the grant date (with quarterly vesting).
Starting in August 2018, the program is essentially the same except the cash retainer is $40,000 and the equity grant is $60,000, with acceleration of vesting of the last quarter's equity where the date of the annual meeting is before the last vesting date and the director is either not nominated or not elected at such meeting.
The director compensation program
prior to August 2018 also provides for an additional annual cash retainer of $5,000 (payable in quarterly installments) and annual grant of restricted common stock of the Company under the Equity Incentive Plan having a value of $5,000 on the grant date (with quarterly vesting) for non-employee members of the Audit Committee of the Board (other than the Chair) and an additional annual cash retainer of $7,500 (payable in quarterly installments) and annual grant of restricted common stock of the Company under the Equity Incentive Plan having a value of $7,500 on the grant date (with quarterly vesting) for a non-employee Chairman of the Audit Committee. The Chairman of the Board receives an additional cash retainer of $24,000 (payable in equal quarterly installments) plus an additional annual grant of restricted common stock of the Company under the Equity Incentive Plan having a value of $24,000. Effective August 1, 2016, the Chairman of the Compensation Committee receives an additional annual grant of restricted common stock of the Company un the Equity Incentive Plan having a value of
$7,500.In fiscal 2017, the Company issued an annual grant of restricted Company common stock under the 2011 Plan for the service period from August 1, 2015 to July 31, 2016 having a value of $5,000 on the grant date$7,500 (with quarterly vesting).
Starting in August 2018, the additional payments for
non-employee members ofmembership and chairmanship for committees are substantially the
Audit Committee ofsame with the
Board (other than the Chair) and an annual grant of restricted Company common stock under the 2011 Plan for the service period from August 1, 2015 to July 31, 2016 having a value of $7,500 on the grant date (with quarterly vesting) for a non-employeefollowing modifications: The Chairman of the Audit
Committee.Committee's additional annual cash and equity retainer are $10,000 and $10,000, respectively; members of the Compensation Committee (other than the chairman) receive additional annual payments of $3,750 (half of which is cash, and the other half of which is in stock); members of the Nominating and Governance Committee (other than the chairman) receive additional annual payments of $2,500 (half of which is cash, and half of which is in stock); the chairman of the Nominating and Governance Committee receives an additional annual payment of $5,000 (half of which is cash, and half of which is in stock); and the Chairman of the Board's additional annual payment was raised from $48,000 to $50,000 (which is split between cash and equity on a 40%/60% basis).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
As of the Record Date of November 21, 2017,July 23, 2019, there were outstanding 72,045,94083,006,306 shares of our common stock and 100,000 shares of Series A preferred stock ("Preferred Stock")Stock outstanding. The Preferred Stock is convertible into 20,000 shares of common stock and votes together with the common stock as a single class (on an as-converted basis). The following table presents information regarding the beneficial ownership of our common stock and Preferred Stock as of such date by:
Each person who beneficially owns more than five percent (5%) of the outstanding shares of our common stock;
Each director;
Each named executive officer; and
All current directors and officers as a group.
|
| | | | | |
| Common Stock |
Name and Address of Beneficial Owner (1) | Number of Shares (2) | | Percentage of Class |
Bruce Grossman (3) c/o Dillon Hill Capital LLC 200 Business Park Drive, Suite 306 Armonk, NY 10504 | 6,276,427 |
| | 7.6 | % |
Columbus Capital Management, L.L.C. (4) 350 California Street, 22nd Floor San Francisco, CA 94104 | 5,844,855 |
| | 7.0 | % |
Venrock Management VI, LLC (5) 3340 Hillview Avenue Palo Alto, CA 94304 | 4,785,160 |
| | 5.8 | % |
William Stone III | 1,880,242 |
| | 2.2 | % |
Robert Deutschman | 861,045 |
| | 1.0 | % |
Christopher Rogers | 338,161 |
| | * |
|
Jeffrey Karish | 317,124 |
| | * |
|
Mohan S. Gyani | 367,550 |
| | * |
|
Roy H. Chestnutt | 66,763 |
| | * |
|
Michelle Sterling | 1,446 |
| | * |
|
Barrett Garrison | 753,749 |
| | * |
|
Christine Collins | 166,667 |
| | * |
|
David Wesch | 182,612 |
| | * |
|
All Directors and Executive Officers as a Group (10 individuals) (6) | 4,935,359 |
| | 5.8 | % |
| · | Each person who beneficially owns more than five percent (5%) of the outstanding shares of our common stock; |
| · | Each named executive officer; and |
| · | All current directors and officers as a group. |
| | Common Stock | |
Name and Address of Beneficial Owner(1) | | Number of Shares (2) | | | Percentage of Class | |
Columbus Capital Management, L.L.C.(3) 350 California Street, 22nd Floor, San Francisco, CA 94104 | | | 5,967,401 | | | | 8.3 | % |
Trident Capital Management-VII, L.L.C.(4) 505 Hamilton Avenue, Suite 200 Palo Alto, CA 94301 | | | 5,649,864 | | | | 7.8 | % |
Venrock Management VI, LLC(5) 3340 Hillview Avenue Palo Alto, CA 94304 | | | 4,785,160 | | | | 6.6 | % |
Bruce Grossman(6) c/o Dillon Hill Capital LLC 200 Business Park Drive, Suite 306 Armonk, NY 10504 | | | 3,708,472 | | | | 5.1 | % |
William Stone III | | | 1,583,230 | | | | 2.2 | % |
Robert Deutschman(7) | | | 763,203 | | | | 1.1 | % |
Paul Schaeffer(8) | | | 666,240 | | | | | * |
Christopher Rogers | | | 290,049 | | | | | * |
Jeffrey Karish | | | 271,261 | | | | | * |
Mohan S. Gyani | | | 269,154 | | | | | * |
Barrett Garrison | | | 350,000 | | | | | * |
David Wesch | | | 68,376 | | | | | * |
All Directors and Executive Officers as a Group (8 individuals)(9) | | | 4,261,513 | | | | 5.8 | % |
| |
(1) | Except as otherwise indicated, the address of each of the persons listed above is c/o Digital Turbine, Inc., 110 San Antonio111 Nueces Street, Suite #160, Austin, TX 78701. |
| |
(2) | Pursuant to Item 403 of Regulation S-K, the number of shares listed for each individual reflects their beneficial ownership except as otherwise noted. For purposes of this table, a person or group of persons is deemed to have "beneficial ownership" of any shares that such person or group has the right to acquire within 60 days after November 21, 2017,July 23, 2019, however, such shares are not deemed outstanding for the purpose of computing the percentage ownership of any other person. Except as specifically indicated in the footnotes to this table, the persons named in this table have sole vote and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable. |
| |
(3) | Based solely on aAmendment No. 2 to Schedule 13G filed with the SEC on July 24, 2017,February 8, 2018, by Bruce Grossman. Of such shares, Mr. Grossman directly owns 24,600 shares; Dillon Hill Capital, LLC ("DHC"), of which the Mr. Grossman is the |
sole member, directly owns 1,670,135 shares; Dillon Hill Investment Company, LLC ("DHIC"), the sole member of which is a trust of which Mr. Grossman's spouse is a co-trustee, directly owns 1,861,057 shares; and Debbon Capital, L.P. ("DC"), of which Mr. Grossman is the general partner, directly owns 2,720,635 shares. By virtue of such relationships, Mr. Grossman may be deemed to have sole voting and dispositive power over a total of 4,415,370 shares owned directly by Mr. Grossman and indirectly by DHC and DC. He may be deemed to have shared voting and dispositive power over 1,861,057 shares held by DHIC.
| |
(4) | Based solely on Amendment No. 1 to Schedule 13G filed with the SEC on February 14, 2019, by Columbus Capital Management, LLC ("CCM") and Matthew D. Ockner, relating to shares of common stock held for the account of each of Columbus Capital Partners, L.P. ("CCP"), Columbus Capital QP Partners, L.P. ("CCQP") and Rovida West Coast Investments Ltd. ("RWC"), in the amounts of 2,372,900, 714,701, and 2,879,800, respectively.. CCM is the general partner of CCP and CCQP and an investment advisor to RWC. Mr. Ockner is the managing member of CCM. In such capacities, each of CCM and Mr. Ockner may be deemed to have sole voting and dispositive power over all 5,967,401the shares of common stock held for the accounts of CCP, CCQP and RWC. |
| (4) | Based solely on a Schedule 13G filed with the SEC on March 13, 2015, by Trident Capital Management-VII, L.L.C. ("TCM-VII)"), Trident Capital Fund-VII, L.P. ("Fund-VII"), and Trident Capital Fund-VII Principals Fund, L.P. ("Principals-VII"). TCM-VII has sole voting and dispositive power with respect to 5,649,864 shares; Fund-VII is the record holder of and has sole voting and dispositive power with respect to 5,493,611 shares; and Principals-VII is the record holder of and has sole voting and dispositive power with respect to 156,253 shares. TCM-VII is the sole general partner of Fund-VII and Principals-VII and may be deemed to beneficially own 5,649,864 shares. |
| (5) | Based solely on a Schedule 13G filed with the SEC on March 12, 2015, by Venrock Management VI, LLC ("VM-VI"), Venrock Partners Management VI, LLC ("VPM-VI"), Venrock Associates VI, L.P. ("VA-VI"), and Venrock Partners VI, L.P. ("VP-VI"). Of such shares, 4,436,799 shares are owned by VA-VI and 348,361 shares are owned by VP-VI. VM-VI, VPM-VI, VA-VI and VP-VI share voting and dispositive power with respect to all 4,785,160 shares. VM-VI is the general partner of VA-VI, and VPM-VI is the general partner of VP-VI. |
| (6) | Based soley on a Schedule 13G filed with the SEC on January 27, 2017, by Bruce Grossman. Of such shares, Mr. Grossman directly owns 24,600 shares; Dillon Hill Capital, LLC ("DHC"), of which the Mr. Grossman is the sole member, directly owns 625,020 shares; Dillon Hill Investment Company, LLC ("DHIC"), the sole member of which is a trust of which Mr. Grossman's spouse is a co-trustee, directly owns 1,211,057 shares; and Debbon Capital, L.P. ("DC"), of which Mr. Grossman is the general partner, directly owns 1,847,795 shares. Mr. Grossman has sole voting and dispositive power over his shares and shares held by DHC and DC, and shared voting and dispositive power over shares and warrants held by DHIC. |
| (7) | Includes 294,268 shares held by the Robert and Ellen Deutschman Family Trust, of which Mr. Deutschman is the trustee. |
| (8) | Includes 228,254 shares held by the Paul and Judy Schaeffer Living Trust for which Mr. Schaeffer serves as a trustee and disclaims beneficial ownership, except to the extent of his pecuniary interest therein. |
| (9)(6) | Includes shares issuable upon the exercise of stock options that are exercisable within 60 days of November 21, 2017,July 23, 2019, as follows: Mr. Stone, 643,750 shares; Mr. Schaeffer, 60,000842,500 shares; Mr. Gyani, 47,91775,000 shares; Mr. Garrison, 200,000586,792 shares; Ms. Collins, 166,667; and Mr. Wesch, 67,924182,160 shares. |
ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION
We are required to permit a separate non-binding stockholder vote to approve the compensation of the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission (which disclosure includes the compensation tables and narrative discussion). This vote is not intended to address any specific item of compensation or the compensation of any particular officer, but rather to provide stockholders with an opportunity to make an advisory vote with respect to the overall compensation of our named executive officers and our compensation practices. Our stockholders are provided the opportunity to make this advisory vote on executive compensation at each annual meeting.
This proposal, commonly known as a “Say-on-pay,” permits stockholders to endorse or not endorse our executive compensation through the following resolution:
“RESOLVED, that the stockholders approve, on an advisory basis, the compensation paid to the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission (which disclosure includes the compensation tables and narrative discussion).”
Because the stockholders’ vote is advisory, it will not be binding on the Board. However, the Board’s Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.
|
|
THE BOARD OF DIRECTORS RECOMMENDS AN ADVISORY VOTE “FOR ” PROPOSAL 2. |
PROPOSAL 3
APPROVAL OF THE ISSUANCE OF SHARES OF OUR COMMON STOCK ISSUABLE UPON THE CONVERSION OF 8.75% CONVERTIBLE SENIOR NOTES DUE 2020 AND EXERCISE OF WARRANTS ISSUED IN A PRIVATE PLACEMENT TRANSACTION IN SEPTEMBER 2016, AS AMENDED AND SUPPLEMENTED IN JANUARY AND MAY 2017, IN ACCORDANCE WITH NASDAQ MARKETPLACE RULES 5635(B) AND 5635(D)
General
We are asking stockholders to approve the issuance of shares of our common stock that are issuable upon the conversion of 8.75% Convertible Senior Notes due 2020 (the “Notes”) pursuant to the terms thereof and upon the exercise of warrants, which were issued in a private placement transaction in September 2016, and amended and supplemented in January and May 2017, in accordance with NASDAQ Marketplace Rules 5635(b) and 5635(d). The Notes and Warrants were materially amended and supplemented in May 2017 as described below, which necessitates that we seek this stockholder approval.
The September 2016 Private Placement Transaction
Initial Purchaser Agreement
The offer and sale of the Notes and the accompanying warrants were made pursuant to an Initial Purchaser Agreement, dated September 23, 2016 (the “Purchase Agreement”), among the Company, certain subsidiary guarantors of the Company and BTIG, LLC, as initial purchaser. The Company sold the Notes to the initial purchaser at a purchase price of 92.75% of the principal amount thereof. The initial purchaser also received an additional 250,000 warrants (the “Initial Purchaser Warrants”) on the same terms as the warrants issued with the Notes (as detailed below under “Warrant Agreement”) and has the right to receive 2.5% of any cash consideration received by the Company in connection with a future exercise of any of the warrants issued with the Notes.
The initial purchaser offered the Notes at a price equal to 100% of the principal amount thereof and the accompanying warrants to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to a limited number of institutional accredited investors within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act.
Indenture and Convertible Notes
The Notes were issued under an Indenture, dated as of September 28, 2016 (the “Initial Indenture”), as amended and supplemented by that certain first supplemental indenture dated as of January 12, 2017 (the "First Supplemental Indenture"), and that certain second supplemental indenture dated as of May 23, 2017 (the "Second Supplemental Indenture" and with the Indenture and the First Supplemental Indenture, the "Indenture"), between the Company, certain guarantors and US Bank National Association, as trustee. The Notes are senior unsecured obligations of the Company, and bear interest at a rate of 8.75% per year, payable semiannually in arrears on September 15th and March 15th of each year, beginning on March 15, 2017. The Notes are unconditionally guaranteed by certain of the Company’s wholly-owned domestic and foreign subsidiaries, and will mature on September 23, 2020, unless converted, repurchased or redeemed in accordance with their terms prior to such date.
The Notes are convertible by the holders at their option at any time prior to the close of business on the business day immediately preceding the stated maturity date, and upon conversion, the holders will receive shares of the Company’s common stock. The initial conversion rate for the Notes is 733.14 shares per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of $1.364 per share of common stock. The conversion rate and the conversion price is subject to adjustment in certain events as outlined in the Indenture.
With respect to any conversion prior to September 23, 2019, in addition to the shares deliverable upon conversion, holders of the Notes will be entitled to receive a payment equal to the remaining scheduled payments of interest that would have been made on the Notes being converted from the date of conversion until September 23, 2019 (an “Early Conversion Payment”). We may pay the Early Conversion Payment in cash or, subject to certain equity-related conditions set forth in the Indenture, in shares of our common stock.
We may redeem the Notes, for cash, in whole or in part, at any time after September 23, 2018, at a redemption price equal to $1,000 per $1,000 principal amount of the Notes to be redeemed plus accrued and unpaid interest, if any, to, but excluding, the date of redemption, plus an additional payment (payable in cash or stock) equivalent to the amount of, and subject to equivalent terms and conditions applicable for, an Early Conversion Payment had the Notes been converted on the date of redemption, if (1) the closing price of our common shares on the NASDAQ Capital Market has exceeded 200% of the conversion price then in effect (but disregarding the effect on such price from certain anti-dilution adjustments) for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending within the five trading days immediately preceding the date on which we provide the redemption notice, (2) for the 15 consecutive trading days following the last trading day on which the closing price of our common shares was equal to or greater than 200% of the conversion price in effect (but disregarding the effect on such price from certain anti-dilution adjustments) on such trading day for the purpose of the foregoing clause, the closing price of our common shares remains equal to or greater than 150% of the conversion price in effect (but disregarding the effect on such price from certain anti-dilution adjustments) on the given trading day and (3) we are in compliance with certain other equity-related conditions as set forth in the Indenture.
If we undergo a fundamental change, as described in the Indenture, holders may require us to purchase the Notes in whole or in part for cash at a price equal to 120% of the principal amount of the Notes to be purchased plus any accrued and unpaid interest, including additional interest, if any, to, but excluding, the repurchase date. Conversions that occur in connection with a fundamental changes may entitle the holder to receive an increased number of shares of common stock issuable upon such conversion, depending on the date of such fundamental change and the valuation of the Company’s common stock related thereto.
Subject to limited exceptions, the Indenture prohibits us from incurring additional indebtedness at any time while the Notes remain outstanding.
Warrants
In addition to the 250,000 warrants issued to the initial purchaser, as described above, each purchaser of the Notes also received warrants to purchase 256.60 shares of the Company's common stock for each $1,000 in Notes purchased, or up to 4,105,600 warrants in aggregate (together with the Initial Purchaser Warrants, the “Warrants”). The Warrants were issued under a Warrant Agreement, dated as of September 28, 2016 (the “Intial Warrant Agreement”), as amended by that certain First Amendment to Warrant Agreement, dated as of May 23, 2017 (the "First Amendment" and with the Initial Warrant Agreement, the "Warrant Agreement"), between Digital Turbine, Inc. and US Bank National Association, as warrant agent.
The Warrants are exercisable at an initial exercise price of $1.364 per share and will expire on September 23, 2020. The exercise price is subject to adjustment in certain events as outlined in the Warrant Agreement.
In the event of a fundamental change, as set forth in the Warrant Agreement, the holders can elect to exercise their Warrants or to receive an amount of cash under a Black-Scholes calculation of the value of such Warrants.
Use of Proceeds
The net proceeds from the offering of the Notes and Warrants were approximately $14.3 million after payment of the estimated offering expenses and the initial purchaser’s discounts and commissions. We used approximately $11 million of the net proceeds from the offering to repay secured indebtedness, consisting of approximately $3 million to Silicon Valley Bank and $8 million to North Atlantic Capital, retiring both such debts in their entirety. The remaining net proceeds were provided for general corporate purposes.
Further Information
The terms of each of the Notes, the Purchase Agreement, the Indenture, the Warrant Agreement and the related agreements, as amended and supplemented, are complex and only briefly summarized above. This summary of the terms of the offering of the Notes and Warrants and related agreements is qualified in its entirety by reference to our Current Report on Form 8-K filed with the SEC on September 29, 2016, including the exhibits attached thereto, our Current Report on Form 8-K filed with the SEC on January 23, 2017, including the exhibits attached thereto, and our Current Report on Form 8-K filed with the SEC on May 24, 2017, including the exhibits attached thereto, all of which are incorporated herein by reference. You should read this summary together with such documents.
Purpose
Our common stock is listed on the NASDAQ Capital Market (“NASDAQ”) and trades under the ticker symbol APPS. The rules governing companies with securities listed on NASDAQ require stockholder approval in connection with a transaction other than a public offering involving the sale or issuance by the issuer of common stock (or securities convertible into or exchangeable for common stock) equal to 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance for a price that is less than the greater of book or market value of the stock on the date the issuer enters into a binding agreement for the issuance of such securities.
This requirement is set forth in NASDAQ Marketplace Rule 5635(d). Based on the initial conversion price and exercise price of $1.364 per share, the issuance of the shares of our common stock issuable upon conversion of the Notes, including any Early Conversion Payment, and exercise of the Warrants, as applicable, may be deemed to involve the issuance of securities convertible into more than 20% of our common stock at a discount to the market value of our common stock on the date of execution of the binding agreement to issue such securities. In addition, NASDAQ Marketplace Rule 5635(b) requires us to obtain stockholder approval prior to the issuance of securities which will result in a “change of control” of the Company. In this regard, a change of control refers to an issuance of securities that will result in any investor or group owning, or having the right to acquire, 20% or more of the Company’s outstanding shares of common stock or voting power and such ownership or voting power would be the largest ownership position.
We are required to seek this approval even though, pursuant to the terms of the Initial Indenture, we received approval at our 2017 annual meeting of stockholders held January 10, 2017, because we materially amended and supplemented the Notes and Warrants in January and May 2017, and under NASDAQ Marketplace Rules 5635((b), a new stockholder approval is required after any such material amendment and supplement. Therefore, pursuant to the terms of the Second Supplemental Indenture, we are again required to seek stockholder approval, prior to January 30, 2018 at an annual or special meeting, of the issuance of shares of common stock received pursuant to conversion of Notes and shares underlying Warrants. We are requesting in this Proposal 3 that our stockholders approve the issuance of the common stock issuable upon conversion of the Notes, including any Early Conversion Payment, and exercise of the Warrants, in accordance with NASDAQ Marketplace Rule 5635(d), and any resulting change of control, as defined in NASDAQ Marketplace Rule 5635(b), which may result from the issuance of the common stock. The issuance of the shares of common stock issuable upon conversion of the Notes, including any Early Conversion Payment, and exercise of the Warrants, are intended to be exempt from the registration requirements of the Securities Act pursuant to the Regulation D “safe harbor” provisions of the Securities Act.
Impact on Current Stockholders if this Proposal is Approved
If our stockholders approve this proposal, the issuance of shares of common stock upon conversion of the Notes, including any Early Payment Conversion, and exercise of the Warrants would not be subject to the issuance limitation cap set forth in NASDAQ Marketplace Rule 5635(b) and Rule 5635(d).
The issuance of shares of our common stock issuable upon conversion of the Notes, including the Early Payment Conversion, and exercise of the Warrants would have a dilutive effect on current stockholders who did not participate in the offering in that the percentage ownership of the Company held by such current stockholders would decline as a result of the issuance of the common stock upon conversion of the Notes, including any Early Payment Conversion, and exercise of the Warrants. This means also that our current stockholders who did not participate in the offering would own a smaller interest in us as a result of the offering and therefore have less ability to influence significant corporate decisions requiring stockholder approval. Issuance of our common stock upon conversion of the Notes and exercise of the Warrants could also have a dilutive effect on book value per share and any future earnings per share. Dilution of equity interests could also cause prevailing market prices for our common stock to decline.
The Notes are initially convertible into our common stock at $1.364 per share, subject to adjustment in certain events as outlined in the Indenture. In addition, we have the option, subject to the satisfaction of specified equity conditions, to make any required Early Conversion Payment of future interest upon conversion of the Notes by issuing shares of common stock in lieu of cash payments. The number of shares of our common stock potentially issuable upon conversion of the originally-issued $16 million in principal amount of Notes at the $1.364 initial conversion price amounted to 11,730,240 potential shares. This does not include the issuance of any shares of common stock that may be issued in connection with any Early Conversion Payment, in which case the number of shares that may potentially be issued would be a higher amount. The conversion was calculated on the aggregate principal amount rather than based upon each individual investor’s purchase. Plus, if all of the Warrants are exercised at the initial exercise price of $1.364 per share, the Company would also issue an aggregate of 4,355,600 shares of common stock. In September 2017, $6 million of convertible notes (out of the original $16 million in convertible notes issued) have been converted into shares of our common stock.
Due to potential adjustments to the number of shares of common stock issuable upon conversion of the Notes, including our option to pay the Early Conversion Payment in shares of common stock, and exercise of the Warrants, the exact magnitude of the dilutive effect of the shares of our common stock issuable upon conversion of the Notes, including any Early Conversion Payment, and exercise of the Warrants cannot be conclusively determined. However, the dilutive effect may be material to current stockholders of the company.
Effect on Current Stockholders if this Proposal is not Approved
If our stockholders do not approve this proposal, we will not meet certain equity conditions under the Notes required for our optional redemption of the Notes or payment of the Early Conversion Payment in shares of common stock at our option. If approval is not obtained, unless the equity conditions are waived by the required number of holders of such Notes pursuant to their terms, we will not be able to exercise such optional redemption right and the holders may not be able to receive shares of common stock as payment for any Early Conversion Payment.
In addition, we are required to seek stockholder approval of this proposal on or prior to January 30, 2018 and every year thereafter until we receive stockholder approval of this proposal. We are not seeking the approval of our stockholders to authorize our entry into the Purchase Agreement and related transaction documents, as we have already entered into the Purchase Agreement and related transaction documents, which are binding obligations on us. The failure of our stockholders to approve the proposal will not negate the existing terms of the documents relating to the private placement. The Notes and Warrants issued at the closing of the private placement will remain outstanding and the terms of the Notes and Warrants will remain binding obligations of the Company. If we do not receive stockholder approval, the holders are entitled to receive cash for the number of shares of common stock issuable upon conversion of the Notes or exercise of the Warrants to the extent we are unable to issue shares of our common stock to satisfy such conversion or exercise.
Board Recommendation
In reaching its determination to approve this proposal, the Board, with advice from our management and legal advisors, considered a number of factors, including:
| · | that it is in the best interests of the Company and our stockholders that the Company have the flexibility to issue shares of our common stock upon conversion of the Notes and any Early Conversion Payment, rather than being required to pay cash in lieu of any such issuances in excess of the amount permitted under the NASDAQ Marketplace Rules; |
| · | it was the determination of the Board that the offering of the Notes and Warrants was an important event to strengthen our balance sheet; |
| · | the fact that the proceeds from the offering of the Notes and Warrants have enabled us to advance our strategic direction; |
| · | our financial condition, results of operations, cash flow and liquidity, including our outstanding debt obligations, which required us to raise additional capital for ongoing cash needs; |
| · | the fact that our management and certain of our directors had explored financing options with other potential investors and were not aware of an ability for us to obtain the financing needed for our ongoing cash needs on comparable or better terms to the Notes and Warrant, or at all; |
| · | the fact that our stockholders would have an opportunity to approve the issuance of shares issuable upon the conversion of the Notes, including any Early Conversion Payment, and exercise of the Warrants; |
| · | the fact that our stockholders who did not participate in the offering of the Notes and the value of our common stock may be diluted upon the issuance of shares of our common stock issuable upon conversion of the Notes, including any Early Conversion Payment, and exercise of the Warrants; |
| · | the fact that the conversion price for the Notes and exercise price for the Warrants on the date we entered into the Purchase Agreement was, effectively, at a discount to the market price of our common stock; and |
| · | the fees and expenses to be incurred by us in connection with the offering of the Notes and Warrants. |
In view of the variety of factors considered in connection with the evaluation of the offering of the Notes and Warrants, the issuance of shares of our common stock issuable upon the conversion of the Notes, including any Early Conversion Payment, and exercise of the Warrants and the complexity of these matters, the Board did not find it practicable to, and did not, quantify or otherwise attempt to assign any relative weight to the various factors considered. In addition, in considering the various factors, individual members of the Board may have assigned different weights to different factors.
After evaluating these factors, and based upon their knowledge of our business, financial condition and prospects, potential financing alternatives (or lack thereof), and the views of our management, the Board concluded that the offering of the Notes and Warrants and the issuance of shares of our common stock issuable upon conversion of the Notes, including any Early Conversion Payment, and exercise of the Warrants is in our best interest and in the best interests of our stockholders, and recommends that all stockholders vote “FOR” the approval of this proposal.
Vote Required
To be approved, this proposal must receive a "For" vote from the holders of a majority of the votes cast of shares of common stock and Preferred Stock, voting together as a single class on an as-converted to common stock basis, at the Annual Meeting in person or by proxy. Abstentions will be counted toward the vote total for this proposal and will have the same effect as an “Against” vote for this proposal. Shares represented by executed proxies that do not indicate a vote "For," "Against" or "Abstain" will be voted by the proxy holders "For" the adoption of the resolution. If you own shares through a bank, broker or other holder of record, you must instruct your bank, broker or other holder of record how to vote in order for them to vote your shares so that your vote can be counted on this proposal. Broker non-votes will not be counted toward the vote total for this proposal and therefore will not affect the outcome of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THIS PROPOSAL 3. |
PROPOSAL NO. 4
3
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR
20182020
Our Audit Committee has appointed SingerLewak LLP to audit our accounts for the fiscal year ending March 31,
2018.2020. Such firm, which has served as our independent registered public accounting firm since April 2009, has reported to us that none of its members has any direct financial interest or material indirect financial interest in our Company.
A proposal will be presented at the Annual Meeting to ratify the Audit Committee’s appointment of SingerLewak
LLP as our independent registered public accounting firm. Although stockholder ratification of the Audit Committee’s action in this respect is not required, our Board considers it desirable for stockholders to pass upon such appointment.
A representative of SingerLewak is expected to attend the Annual Meeting and will be afforded the opportunity to make a statement and/or respond to appropriate questions from stockholders.
Aggregate fees for professional services rendered to us by SingerLewak LLP, our independent registered public accounting firm engaged to provide audits for the fiscal years ended March 31,
20172019 and
2016,2018, were:
| | Year Ended March 31, 2017 | | | Year Ended March 31, 2016 | |
Audit fees(1) | | $ | 484,273 | | | $ | 332,978 | |
Audit related fees(2) | | | 98,120 | | | | 68,149 | |
Tax fees(3) | | | 34,326 | | | | 45,611 | |
All other fees(4) | | | - | | | | - | |
Total | | $ | 616,719 | | | $ | 446,738 | |
|
| | | | | | | |
| Year Ended March 31, 2019 | | Year Ended March 31, 2018 |
Audit fees (1) | $ | 407,235 |
| | $ | 423,199 |
|
Audit related fees (2) | 84,015 |
| | 100,608 |
|
Tax fees (3) | 55,062 |
| | 39,350 |
|
All other fees (4) | | | — |
|
Total | $ | 546,312 |
| | $ | 563,157 |
|
Policy on Pre-approval of Audit and Permissible Non-audit Services of Independent Auditors
Consistent with the SEC policies regarding auditor independence, our Audit Committee has responsibility for appointing, setting compensation and overseeing the work of the independent auditor. In recognition of this responsibility, our Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditor. Prior to engagement of the independent auditor for the next year’s audit, management will submit an aggregate of services expected to be rendered during that year for each of the following four categories of services to the Audit Committee for approval:
1. Audit services include audit work performed in the preparation of financial statements, as well as work that generally only the independent auditor can reasonably be expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards.
2. Audit-related services are for assurance and related services that are traditionally performed by the independent auditor, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements.
3. Tax services include all services performed by the independent auditor’s tax personnel except those services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning, and tax advice.
4. Other Fees are those associated with services not captured in the other categories.
| |
1. | Audit services include audit work performed in the preparation of financial statements, as well as work that generally only the independent auditor can reasonably be expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards. |
| |
2. | Audit-related services are for assurance and related services that are traditionally performed by the independent auditor, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements. |
| |
3. | Tax services include all services performed by the independent auditor’s tax personnel except those services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning, and tax advice. |
| |
4. | Other Fees are those associated with services not captured in the other categories. |
Prior to engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted and the Audit Committee requires the independent auditor and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent auditor for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging the independent auditor.
The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.
Our Audit Committee pre-approved the retention of our independent registered public accounting firm for all audit and audit-related services during fiscal years
20172019 and
2016.THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF SINGERLEWAK AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING MARCH 31, 2018.
|
39 |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF SINGERLEWAK LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING MARCH 31, 2020. |
REPORT OF AUDIT COMMITTEE
The information contained in this Audit Committee Report shall not be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing (except to the extent that we specifically incorporate this information by reference) and shall not otherwise be deemed “soliciting material” or “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934 (except to the extent that we specifically request that this information be treated as soliciting material or specifically incorporate this information by reference).
The functions of our Audit Committee (references in this section to “we” and “our” mean the Audit Committee) are primarily focused on three areas:
| · | the adequacy of the internal controls and financial reporting process of Digital Turbine, Inc. (the “Company”) and the reliability of its consolidated financial statements; |
| · | the appointment, compensation, retention and oversight of the Company’s independent registered public accounting firm; and |
| · | the Company’s compliance with legal and regulatory requirements. |
the adequacy of the internal controls and financial reporting process of Digital Turbine, Inc. (the “Company”) and the reliability of its consolidated financial statements;
the appointment, compensation, retention and oversight of the Company’s independent registered public accounting firm; and
the Company’s compliance with legal and regulatory requirements.
We operate under a written charter, which has been approved by the board of directors. The Company has made the Audit Committee charter available on its website at http://ir.digitalturbine.com/governance-docs.
We meet with management periodically to consider the adequacy of the Company’s internal controls and the objectivity of the Company’s financial reporting. We discuss these matters with the Company’s independent registered public accounting firm and with appropriate financial personnel. We periodically (at least quarterly) meet privately with both the independent registered public accounting firm and the Company’s financial personnel, each of which has unrestricted access to us. We also appoint the independent registered public accounting firm and review its performance and independence from management. In addition, we review the Company’s financing plans.
Management is responsible for the financial reporting process, including the system of internal control, and the preparation of consolidated financial statements in accordance with generally accepted accounting principles. The Company’s independent registered public accounting firm is responsible for auditing those financial statements. Our responsibility is to monitor and review these processes. However, we are not professionally engaged in the practice of accounting or auditing and are not experts in the fields of accounting or auditing, including with respect to auditor independence. We rely on, without independent verification, the information provided to us and on the representations made by management and the independent registered public accounting firm.
In this context, we held
sixfour meetings during fiscal year
2017.2019. The meetings were designed, among other things, to facilitate and encourage communication among us, management, the internal accountants and the Company’s independent registered public accounting firm for fiscal year
2017,2019, SingerLewak LLP (“SingerLewak”). We discussed with SingerLewak the overall scope and plans for their audit. We also met with SingerLewak, with and without management present, to discuss the results of their audit and quarterly reviews and the Company’s internal controls. We reviewed and discussed the audited consolidated financial statements for the fiscal year ended March 31,
20172019 with management and with SingerLewak.
We also discussed with SingerLewak the audited financial statements for fiscal year ending March 31,
2017,2019, and matters required to be discussed with audit committees under generally accepted auditing standards, including, among other things, the conduct of the audit of the Company’s consolidated financial statements, and the matters required to be discussed with the Audit Committee by applicable auditing standards of the Public Company Accounting Oversight Board.
We have received the written disclosures and the letter from SingerLewak required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountants’ communications with us concerning independence, and we discussed with SingerLewak their independence from the Company. When considering SingerLewak’s independence, we considered whether their provision of services to us beyond those rendered in connection with their audit and review of the Company’s consolidated financial statements was compatible with maintaining their independence. We also reviewed, among other things, the amount of fees paid to SingerLewak for audit and non-audit services (primarily tax services).
Based on our review and these meetings, discussions and reports, and subject to the limitations on our role and responsibilities referred to above and in the Audit Committee charter, we recommended to the Board of Directors that the Company’s audited consolidated financial statements for the fiscal year ended March 31,
20172019 be included in the Company’s annual report on Form 10-K for filing with the Securities and Exchange Commission.
December [_], 2017 |
| |
July 29, 2019 | Members of the Audit Committee |
| |
| Robert Deutschman (Chairman) |
| Christopher Rogers |
| Paul Schaeffer |
COMPLIANCE WITH SECTION 16(a) OF SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires our officers, directors, and persons owning more than ten percent of a registered class of our equity securities (“ten percent stockholders”) to file reports of ownership and changes of ownership with the SEC. To the best of our knowledge, based solely on review of the copies of such reports and amendments thereto furnished to us, we believe that during the fiscal year ended March 31,
2017,2019, all of our officers, directors, and ten percent stockholders
timely complied with all applicable filing
requirements, with the exception of David Wesch who filed one late Form 3 and two late Form 4s.requirements.
Our Board of Directors knows of no other matters to be brought before the Annual Meeting. However, if
any other
matters should comematter properly comes before the meeting,
it is the intention of each person named in theour proxy
holders are authorized to vote
on that matter in accordance with
his judgment on such matters.2019their best judgment.
2021 STOCKHOLDER PROPOSALS
Rule 14a-8 Stockholder Proposals
Stockholders are entitled to submit proposals on matters appropriate for stockholder action consistent with regulations of the SEC. In order for stockholder proposalsa proposal for theour fiscal year 20192021 annual meeting to be eligible for inclusion in our proxy statement, oura stockholder must give written notice addressed to the Corporate Secretary, must receive them at our principal offices notDigital Turbine, Inc, 111 Nueces Street, Austin, Texas 78701, no later than August [_], 2018. Such proposals should be submitted, in writing,5:00 p.m. Central Daylight Time on April 7, 2020.
Proposals Outside of Rule 14a-8; Discretionary Proxy Voting Authority
A stockholder wishing to
submit a proposal for the fiscal year 2021 annual meeting outside of SEC Rule 14a-8 may do so under Rule 14a-4 of the Exchange Act by giving written notice addressed to the Corporate Secretary, Digital Turbine, Inc.,
Attn: Corporate Secretary, 110 San Antonio111 Nueces Street,
Suite #160, Austin,
TX 78701.Stockholders wishing to submit proposals for the fiscal year 2019 annual meeting of stockholders outside of Rule 14a-8 may do so. Under Rule 14a-4 promulgated under the Exchange Act, if a proponent of a proposal that is not intended to be included in the proxy statement fails to notify us of such proposalTexas, at least than 45 days prior to the anniversary date of the mailing date of the preceding year’syear's proxy statement, whichstatement. The deadline for such submission is [___________], 2018,no later than 5:00 p.m. Central Daylight Time on June 21, 2020, or a reasonable time before we sendrelease our proxy materialsstatement for such meeting if the date of the meeting has changed by more than 30 days from the prior year, then weof stockholders will be allowedconfer discretionary authority to use our discretionary voting authority under proxies solicited by us whenvote on any stockholder proposal presented at that meeting if notice of the proposal is raised at such annual meeting of stockholders, without any discussion of the matter in the proxy statement. We werewas not notified of any stockholder proposals to be addressed at our Annual Meeting, and will therefore be allowed to use our discretionary voting authority if any stockholder proposals are raised at the Annual Meeting.
timely received by us. |
| |
| BY ORDER OF THE BOARD OF DIRECTORS |
| |
| /s/ William G. Stone III |
| William G. Stone III |
| Chief Executive Officer |
Dated: December [_], 2017
Austin, Texas
Austin, Texas
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 19, 2018
SEPTEMBER 17, 2019
The undersigned stockholder(s) of DIGITAL TURBINE, INC., a Delaware corporation (the "Company"), hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement, each dated
December [_], 2017,July 29, 2019, and hereby appoints each of William G. Stone III and Barrett Garrison, or either of them, as proxy and attorney-in-fact with full power of substitution and revocation, on behalf and in the name of the undersigned, to represent the undersigned at the Annual Meeting of Stockholders of the Company to be held on
Friday, January 19, 2018Tuesday, September 17, 2019 at
1010:00 a.m., local time, at the
Company's headquarters
of the Companylocated at
110 San Antonio111 Nueces Street,
#160, Austin, TX 78701, and at any adjournment or
postponementsadjournments thereof, and to vote all shares of capital stock that the undersigned would be entitled to vote if then and there personally present, on the matters set forth on the reverse side.
[SEE REVERSE SIDE] CONTINUED AND TO BE SIGNED ON REVERSE SIDE [SEE REVERSE SIDE]
[BACK OF PROXY]
|
|
[SEE REVERSE SIDE] CONTINUED AND TO BE SIGNED ON REVERSE SIDE [SEE REVERSE SIDE]
|
[BACK OF PROXY] |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
| x |
ý | Please mark votes as in this example |
1. TO ELECT DIRECTORS.
Nominees:
Nominees:
(1) Robert Deutschman | (2) Mohan GyaniRoy H. Chestnutt |
(3) Jeffrey KarishMohan Gyani | (4) Christopher RogersJeffrey Karish |
(5) Paul SchaefferChristopher Rogers | (6) Michelle M. Sterling |
(7) William G. Stone III | |
|
| | |
¨FOR ALL NOMINEES | ¨WITHHOLD ALL NOMINEES | ¨FOR ALL NOMINEES EXCEPT __________ |
Instructions: To withhold authority to vote for any individual nominee, mark the “For All Nominees Except” box and write that nominee’s name in the space provided above.
|
| | | |
2. To approve, in a non-binding advisory vote, the compensation of the Company's named executive officers, commonly referred to as “say-on-pay.” | ¨ | ¨ | ¨ |
3. To approve issuance of shares of the common stock of Digital Turbine, Inc. issuable upon the conversion of 8.75% convertible senior notes due 2020 and exercise of warrants issued in a private placement transaction in September 2016, as amended and supplemented in January and May 2017, in accordance with Nasdaq Marketplace Rules 5635(b) and 5635(d).
| FOR
¨
| AGAINST
¨
| ABSTAIN
¨
|
4. To ratify the selection of SingerLewak LLP as the Company's independent registered public accounting firm of for the fiscal year ending March 31, 2018.2020. | | ¨ | ¨ |
As to any other matters that may properly come before the meeting or any adjournments thereof, the proxy holders are authorized to vote in accordance with their best judgment.
|
| | |
MARK HERE FOR ADDRESS CHANGE AND NOTE AT RIGHT. | ¨ |
|
| | |
PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE MEETING. | ¨ | |
(This Proxy should be marked, dated and signed by the stockholder(s) exactly as his or her name appears hereon, and returned promptly in the enclosed envelope. Persons signing in a fiduciary capacity should so indicate. If shares are held by joint tenants or as community property, both must sign.)
|
| | | | |
Signature: | | | Date: | | |
| | | | | |
Signature: | | | Date: | | |
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED
(1) FOR THE ELECTION OF THE
SEVEN (7) DIRECTOR NOMINEES;
(2) FOR APPROVAL OF THE ADVISORY SAY-ON-PAY PROPOSAL;
FOR APPROVAL OF THE ISSUANCE OF SHARES OF COMMON STOCK ISSUABLE UPON THE CONVERSION OF 8.75% CONVERTIBLE SENIOR NOTES DUE 2020 AND
EXERCISE OF WARRANTS ISSUED IN A PRIVATE PLACEMENT TRANSACTION IN SEPTEMBER 2016, AS AMENDED AND SUPPLEMENTED IN JANUARY AND MAY 2017, IN ACCORDANCE WITH NASDAQ MARKETPLACE RULES 5635(B) AND 5635(D); AND(3) FOR RATIFICATION OF THE APPOINTMENT OF SINGERLEWAK LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF DIGITAL TURBINE, INC. FOR FISCAL YEAR MARCH 31,
2018.2020. THIS PROXY ALSO CONFERS DISCRETIONARY AUTHORITY ON THE PROXY HOLDERS TO VOTE AS TO ANY OTHER MATTERS THAT MAY BE PROPERLY BROUGHT BEFORE THE ANNUAL MEETING.