Attached files
| file | filename |
|---|---|
| EX-31.2 - EXHIBIT 31.2 - RiceBran Technologies | ex31_2.htm |
| EX-31.1 - EXHIBIT 31.1 - RiceBran Technologies | ex31_1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
Amendment No. 1
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the year ended December 31, 2019
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission File Number 001-36245
RiceBran Technologies
(Exact name of registrant as specified in its Charter)
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California
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87-0673375
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(State of Incorporation)
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(I.R.S. Employer Identification No.)
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1330 Lake Robbins Drive, Suite 250
The Woodlands, TX
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77380
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrant’s Telephone Number, Including Area Code: (281) 675-2421
Securities registered under Section 12(b) of the Exchange Act:
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Title of each class
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Trading symbol
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Name of each exchange on which registered
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Common Stock, no par value per share
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RIBT
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The NASDAQ Capital Market
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Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions
of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☒
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Smaller reporting company ☒
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Emerging growth company ☐
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended). YES ☐ NO ☒
As of June 30, 2019, the aggregate market value of our common stock held by non-affiliates was approximately $70.1 million calculated by using the closing price
of the common stock on such date on NASDAQ Capital Market of $2.91 per share.
As of March 24, 2020, there were 40,074,483 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
None
EXPLANATORY NOTE
We are filing this Amendment No. 1 on Form 10-K/A to amend our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on March 24, 2020 (Original Filing),
to include the information required by Part III of Form 10-K. The Part III information was previously omitted from the Original Filing in reliance on General Instruction G(3) to Form 10-K, which permits the information in the above referenced items
to be incorporated in the Form 10-K by reference from our definitive proxy statement if such statement is filed no later than 120 days after our fiscal year-end. The information required by Items 10-14 of Part III is no longer being incorporated by
reference to the proxy statement relating to our 2020 Annual Meeting of Shareholders. The reference on the cover of the Original Filing to the incorporation by reference to portions of our definitive proxy statement into Part III of the Original
Filing is hereby deleted. This Amendment No. 1 is not intended to update any other information presented in the Original Filing. In addition, as required by Rule 12b-15 promulgated under the Securities Exchange Act of 1934, as amended, new
certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Company’s principal executive officer and principal financial officer are filed herewith as exhibits to this Amendment No.1. Because no financial statements have been
included in this Amendment No. 1 and this Amendment No. 1 does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation S-K, paragraphs 3, 4, and 5 of the certifications have been omitted.
FORM 10-K/A
Amendment No. 1
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PART III
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Item 10.
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3 | ||
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Item 11.
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7
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Item 12.
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15
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Item 13.
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16
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Item 14.
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17
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PART IV
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Item 15.
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18
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PART III
Directors and Executive Officers
The following table sets forth the names and ages of our current board of directors, our executive officers and the principal offices and positions held by each person.
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Name
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Age
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Position
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Brent R. Rystrom
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56
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Chief Executive Officer, President and Director
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Todd T. Mitchell
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53
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Chief Financial Officer and Secretary
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Brent D. Rosenthal (1)(2)(3)(4)
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48
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Chairman of the Board of Directors
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Ari Gendason (2)(3)(4)
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45
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Vice-Chairman of the Board of Directors
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Peter G. Bradley (4)
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60
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Director
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Beth L. Bronner (1)(2)(3)
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68
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Director
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David Chemerow (1)(4)
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68
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Director
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Current member of the Audit Committee.
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Current member of the Compensation Committee.
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Current member of the Nominating and Governance Committee.
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Current member of the Executive Committee.
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Brent R. Rystrom has served as our director and as our chief executive officer since October 2018. He served as our chief
operating officer from January 2018 to October 2018 and as our chief financial officer from March 2017 to October 2018. Mr. Rystrom brings over 25 years of business finance experience, including over 20 years of service as a director of research
and senior financial analyst for several investment banking firms, including Piper Jaffray and Feltl & Company. From 2009 until March 2017, Mr. Rystrom served as director of research for Feltl & Company, a regional investment banking firm
headquartered in Minnesota, where he managed research, institutional sales, and trading departments while providing research coverage on consumer products, retail and agriculture companies ranging from micro to large capitalization. Over his 11
years of service at Piper Jaffray, he was named a Wall Street Journal “Best on the Street” analyst and a “Top 10” Retailing Industry Analyst from Reuters. Since 1997, Mr. Rystrom has also successfully acquired and managed a large portfolio of
personal agricultural real estate assets, and from 2011 through 2015, he served on the customer advisory board of AgStar (now part of Compeer Financial), a $10 billion agricultural bank based in Minnesota. Mr. Rystrom holds a degree in Business
Finance from St. Thomas University. The Board believes that Mr. Rystrom’s experience and financial background, including his investment banking experience, coupled with his
tenure as our chief financial officer and chief executive officer, are the attributes, skills, experiences and qualifications that allow Mr. Rystrom to make a valuable contribution as one of our directors.
Brent D. Rosenthal has served as a director and non-executive chairman of the board since July 2016. Mr. Rosenthal is the founder
of Mountain Hawk Capital Partners, LLC, an investment fund focused on small and micro-cap equities in the food and technology media telecom (TMT) industries. Mr. Rosenthal also serves as chairman of the board of directors of Comscore (NASDAQ:
SCOR) and as an advisor to the board of directors of FLYHT Aerospace Solutions Ltd. (OTCX: FLYLF). Previously, Mr. Rosenthal was an advisor to the board of directors of Park City Group (NASDAQ: PCYG), a food safety and supply chain software
company from 2015 to 2018. Mr. Rosenthal was a partner in affiliates of W.R. Huff Asset Management where he worked from 2002 to 2016. Mr. Rosenthal served on the board of directors of Rentrak (NASDAQ: RENT) from 2008 to 2016 and as non-executive
chairman of the board from 2011 to 2016. He also served on the boards of directors of four privately-held Hispanic food companies. Earlier in his career, Mr. Rosenthal was director of mergers and acquisitions for RSL Communications Ltd. and
served emerging media companies for Deloitte. Mr. Rosenthal is an inactive certified public accountant. Mr. Rosenthal earned his Bachelor of Science degree from Lehigh University and Master of Business Administration degree from the S.C. Johnson
Graduate School of Management at Cornell University. The Board believes that Mr. Rosenthal’s experience investing in the food industry, independent board experience and business acumen are the attributes, skills, experiences and qualifications
that allow Mr. Rosenthal to make a valuable contribution as one of our directors. Mr. Rosenthal was appointed as chairman of the board and director under the terms of a July 2016 settlement agreement with LF-RB Management, LLC and certain
other parties, referenced “Related Party Transactions” in Item 13.
Ari Gendason has served as non-executive vice-chairman of the board since December 2019 and as a director since July 2016. Mr.
Gendason is senior vice president and chief investment officer at Continental Grain Company, a privately held global food and agriculture company. He has been with Continental Grain Company since 2004. At Continental Grain, Mr. Gendason has
focused on investing in multiple sectors in the food and agriculture supply chain including protein production, agricultural processing, food manufacturing, restaurants and agricultural commodities. He is a member of the board of directors of
Wayne Farms LLC. Mr. Gendason was formerly an associate at VantagePoint Venture Partners, an associate at Greenbridge Capital, an associate at RSL Communications and an investment banking analyst at CIBC Oppenheimer. Mr. Gendason received both
his Bachelor of Science degree in finance and accounting and his Master of Business Administration degree in finance from The Wharton School of the University of Pennsylvania. The Board believes that Mr. Gendason’s extensive experience, business
knowledge and financial expertise are the attributes, skills, experiences and qualifications that allow Mr. Gendason to make a valuable contribution as one of our directors. Mr. Gendason was appointed director under the terms of a July 2016
settlement agreement with LF-RB Management, LLC and certain other parties referenced “Related Party Transactions” in Item 13. Mr. Gendason is also Continental Grain Company’s designee to our board as also
referenced “Related Party Transactions” in Item 13.
Peter G. Bradley is a global business leader with more than 23 years of experience as an executive in consumer foods, dietary supplements, food ingredients and
specialty chemicals. Mr. Bradley has been a principal at Ingredient Insights (Insights), a strategic consulting business focused in food ingredients and specialty materials geared toward mergers and acquisitions activity, supporting new start-ups
and providing diligence support for institutional investors since 2017. He has been an operating partner at Arbor Investments, a specialized private equity firm that focuses exclusively on acquiring premier companies in the food, beverage and
related industries since 2019. From 2016 to 2017, as chairman of the board of Novel Ingredients (Novel), a technology driven provider of value-added ingredients and finished products to the U.S. dietary supplement industry, Mr. Bradley spearheaded
the entry into finished consumer products and successfully guided Novel through the process that culminated in its acquisition by Innophos Holdings, Inc. (Innophos) in August 2017. As chief executive officer of Novel from 2014 to 2016, he guided
Novel’s transition from an owner-managed business into a successful private equity portfolio company. From 2009 to 2013, Mr. Bradley was chief executive officer of Warwick International Group, a specialty chemical company manufacturing bleach
activator for the global home care industry and distributing specialty chemicals in Southern Europe and Asia. Prior to Warwick, Mr. Bradley was with Sensient Technologies Corporation (NYSE: SXT), in various executive management positions from 2003
to 2009. Mr. Bradley holds a bachelor’s degree in Business Studies from Manchester University (Finance and Marketing Majors) and a Post Graduate Diploma in Marketing from Manchester Business School. The Board believes that Mr. Bradley’s extensive
experience in consumer foods, dietary supplements and food ingredients coupled with his history of successful expansion into new markets are the attributes, skills, experiences and qualifications that allow Mr. Bradley to make a valuable contribution
as one of our directors.
Beth L. Bronner has served as a director since July 2016. Ms. Bronner is an independent investor and was managing director at
Mistral Equity Partners, a private equity firm that specializes in the consumer and food sector from 2006 to 2015. Ms. Bronner also has served as president of Revlon Professional, North America, president of the health division at Sunbeam, vice
president, consumer market/business markets at AT&T, and senior vice president and chief marketing officer of the consumer/retail business at Citibank. Ms. Bronner also served as global chief marketing officer of Beam Spirits and Wine. Ms.
Bronner is a former member of the board of directors of Jamba, Inc. (2009 to 2012) (NASDAQ: JMBA), Assurant, Inc. (1994 to 2011) (AIZ/NYSE) and Hain Celestial Group, Inc. (1993 to 2010) (NASDAQ: HAIN). Ms. Bronner is a member of The Committee of
200 International Women’s Forum and The Chicago Network. She currently serves on the boards of several not-for-profit organizations including the President’s Advisory Council of Vassar College. Ms. Bronner received a Bachelor of Arts degree
from Vassar College and a Master of Business Administration degree from The University of Chicago. The Board believes that Ms. Bronner’s experience (i) in change management, business turnaround, organization restructuring high-performance team
building and brand building (ii) her experience as a senior executive and private equity investor and (iii) service on the boards of several multi-billion dollar companies are the attributes, skills, experiences and qualifications that allow Ms.
Bronner to make a valuable contribution as one of our directors. Ms. Bronner was appointed director under the terms of a July 2016 settlement agreement with LF-RB Management, LLC and certain other parties referenced “Related Party
Transactions” in Item 13.
David Chemerow has served as a director since October 2018. From August 2016 to September
2017, Mr. Chemerow served as the chief financial officer and treasurer of Comscore, Inc., a digital data and analytics company, and from January 2016 to August 2016, Mr. Chemerow served as the chief revenue officer of Comscore, Inc. Mr. Chemerow
served as the chief operating officer and chief financial officer of Rentrak Corporation, a media measurement and advanced consumer targeting company, from October 2009 until Rentrak Corporation was merged into comScore, Inc. in January 2016.
Prior to 2009, Mr. Chemerow served in senior executive roles in several companies. Mr. Chemerow previously served as the non-executive chairman of the Board of Playboy Enterprises, Inc. and is a member of the board of directors of Dunham’s
Athleisure Corporation, a sporting goods retailer. Mr. Chemerow serves on the board of The Martha’s Vineyard Playhouse, a non-profit theatre. Mr. Chemerow is a member and board leadership fellow of the National Association of Corporate
Directors. Mr. Chemerow is a graduate of Dartmouth College and holds an MBA from The Amos Tuck School. The Board believes that Mr. Chemerow’s extensive experience, business knowledge and experience as CFO of several public companies are the
attributes, skills, experiences and qualifications that allow Mr. Chemerow to make a valuable contribution as one of our directors.
Todd T. Mitchell has served as our chief financial officer since July 2019 and our executive vice president from May 2019 to June 2019. From 2015 until 2019,
Mr. Mitchell served as chief financial officer of the Park City Group, Inc. (NASDAQ: PCYG). Mr. Mitchell served as a director of research for Brean Capital LLC from 2012 to 2015, after working as a research analyst at various Wall Street firms for
12 years, focusing on technology companies. Mr. Mitchell earned a Master of Business Administration and a Master of Economics from George Washington University, and a Bachelor of Arts from Vassar College.
Role of the Board; Corporate Governance Matters
Board Leadership Structure
The Board does not have a policy, one way or the other, with respect to whether the same person should serve as both the chief executive officer and chairman of the board or, if the roles are separate, whether the
chairman should be selected from the nonemployee directors or should be an employee. The Board believes that it should have the flexibility to make these determinations at any given point in time in the way that it believes best to provide
appropriate leadership for the Company at that time. Currently, Mr. Rosenthal, an independent director, serves as chairman of the Board.
Risk Oversight
Our Board of Directors is currently comprised of six (6) directors, five of whom are independent. The Board has four standing committees with separate chairs - Audit, Compensation,
Nominating and Governance, and Executive. A majority of the members of each standing committee are independent directors. Our Audit Committee is responsible for overseeing risk management and on at least an annual basis reviews and discusses with
management policies and systems pursuant to which management addresses risk, including risks associated with our audit, financial reporting, internal control, disclosure control, legal and regulatory compliance, and investment policies. Our Audit
Committee also serves as the contact point for employees to report corporate compliance issues. Our Audit Committee regularly reviews with our Board any issues that arise in connection with such topics. Our full Board regularly engages in
discussions of risk management to assess major risks facing the Company and review options for their mitigation. Each of our Board committees also considers the risk within its area of responsibilities. For example, our Compensation Committee
periodically reviews enterprise risks to ensure that our compensation programs do not encourage excessive risk-taking and our Nominating and Governance Committee oversees risks related to governance issues.
Board Independence
Our Board annually determines the independence of each director, based on the independence criteria set forth in the listing standards of the Marketplace Rules of NASDAQ. In making its determinations, the Board
considers all relevant facts and circumstances brought to its attention as well as information provided by the directors and a review of any relevant transactions or relationships between each director or any member of his or her family, and the
Company, its senior management or our independent registered public accounting firm. Based on its review, the Board determined that Peter G. Bradley, Beth L. Bronner, David Chemerow, Ari Gendason and Brent D. Rosenthal are each independent under
the NASDAQ criteria for independent board members.
Board Committees
During 2019, the Board held nine (9) meetings and each current director attended at least 75% of those meetings during the period that he or she was a director. Our Board and its committees set schedules to meet
throughout the year and also can hold special meetings and act by written consent from time to time, as appropriate. Our Board has delegated various responsibilities and authority to its committees as generally described below. The committees will
regularly report on their activities and actions to the Board.
Audit Committee
The Audit Committee, which has been established in accordance with Section 3(a)(58)(A) of the Exchange Act, assists the Board in its general oversight of our financial reporting, internal controls,
and audit functions, and is directly responsible for the appointment, compensation and oversight of the work of our independent registered public accounting firm. The members of the Audit Committee are Beth L. Bronner, David Chemerow and Brent D.
Rosenthal. Each member of the Audit Committee is independent under Nasdaq’s independence standards for audit committee members. The Board has determined that each member of the Audit committee is an “audit committee financial expert”, as defined
by the rules of the SEC. The charter of the Audit Committee is available on our website at www.ricebrantech.com on the Investor Relations page. The Audit Committee met ten times in 2019 and each current director attended at least 75% of those
meetings during the period that he or she was a committee member.
Compensation Committee
The Compensation Committee establishes our executive compensation policy, determines the salary and bonuses of our executive officers and recommends to the Board stock option grants for our executive
officers. The members of the Compensation Committee are Beth L. Bronner, Ari Gendason and Brent D. Rosenthal and each member is independent under Nasdaq’s independence standards for compensation committee members. Our chief executive officer
often makes recommendations to the Compensation Committee and the Board concerning compensation of other executive officers. The Compensation Committee seeks input on certain compensation policies from the chief executive officer. The charter of
the Compensation Committee is available on our website at www.ricebrantech.com on the Investor Relations page.
In fulfilling its duties and responsibilities, the Compensation Committee seeks periodic input, advice and recommendations from various sources, including our Board of Directors, our executive officers and the
Compensation Committee's independent executive compensation consultant. The Committee at all times exercises independent discretion in its executive compensation decisions. The Compensation Committee met three (3) times in 2019 and each current
director attended at least 75% of those meetings during the period that he or she was a committee member.
The Compensation Committee, through its outside legal counsel, has engaged Mercer, a leading global independent human resources and compensation consulting firm,
to provide assistance and guidance to the Compensation Committee on executive officer and director compensation matters. Use of this outside consultant is an important component of the compensation setting process, as it will further enable the
Compensation Committee to make informed decisions based on market data and practices. Mercer reports directly to the Compensation Committee. The Compensation Committee has sole authority for the appointment, removal, replacement, compensation,
and oversight of Mercer for executive officer and director compensation matters.
Nominating and Governance Committee
The Nominating and Governance Committee is responsible for matters relating to the corporate governance of our Company and the nomination of members of the Board and committees thereof. The members
of the Nominating and Governance Committee are Beth L. Bronner, Ari Gendason and Brent D. Rosenthal, and each member is independent under Nasdaq’s independence standards. The charter of the Nominating and Governance Committee is available on our
website at www.ricebrantech.com on the Investor Relations page. The Nominating and Governance Committee met three (3) times in 2019 and each current director attended at least 75% of those meetings during the period that he was a committee member.
In evaluating potential candidates for membership on the Board, the Nominating and Governance Committee may consider such factors as it deems appropriate. These factors may include judgment, skill, diversity,
integrity, experience with businesses and other organizations of comparable size, the interplay of the candidate’s experience with the experience of other Board members and the extent to which the candidate would be a desirable addition to the Board
and any committees of the Board. While the Nominating and Governance Committee has not established any specific minimum qualifications for director nominees, the Nominating and Governance Committee believes that demonstrated leadership, as well as
significant years of service in an area of endeavor such as business, law, public service, related industry or academia, is a desirable qualification for service as our director. Upon the identification of a qualified candidate, the Nominating and
Governance Committee selects, or recommends for consideration by the full Board, the nominee for the election of directors to the Board.
Although we do not have a formal policy in place, we consider diversity, among other factors, to identify our nominees for the Board. We view diversity broadly to include diversity of experience, skills and viewpoint
as well as more traditional diversity concepts. In sum, we strive to assemble a diverse Board that is strong in its collective knowledge and that also consists of individuals who bring a variety of complementary attributes and skills to the Board
such that the Board, taken as a whole, has the necessary and appropriate skills and experience to provide an enriched environment. The needs of the Board and the factors that the Nominating and Governance Committee considers in evaluating candidates
are reassessed on an annual basis, when the committee’s charter is reviewed.
The Nominating and Governance Committee will consider nominees recommended by shareholders. Any shareholder may make recommendations to the Nominating and Governance Committee for membership on the Board by sending a
written statement of the qualifications of the recommended individual to: Secretary, RiceBran Technologies, 1330 Lake Robbins Drive, Suite 250, The Woodlands, Texas 77380. Such recommendations should be received no later than sixty (60) days prior
to the annual meeting for which the shareholder wishes his or her recommendation to be considered. The Board will evaluate candidates recommended by shareholders on the same basis as it evaluates other candidates, including the following criteria:
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Directors should be of the highest ethical character and share values that reflect positively on themselves and us.
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Directors should have reputations, both personal and professional, consistent with our image and reputation.
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Directors should be highly accomplished in their respective fields, with superior credentials and recognition.
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The fact that a proposed director nominee meets some or all of the above criteria will not obligate the Nominating and Governance Committee to nominate or recommend the candidate for election to the Board in the proxy
materials.
Executive Committee
The Executive Committee will (i) advise and assist the management with respect to operational matters, including sales, marketing, and other strategic initiatives as approved and directed by the Board (ii) take such
actions as may be directed by the Board from time to time and (iii) exercise most Board powers during periods between Board meetings. In performing its responsibilities, the Executive Committee will have the authority to obtain advice, reports or
opinions from internal or external counsel and expert advisors, including director search firms. The members of the Executive Committee are Peter G. Bradley, David Chemerow, Ari Gendason and Brent D. Rosenthal.
Code of Business Conduct and Ethics
Our Board has adopted a Code of Business Conduct and Ethics that applies to all of our directors, officers and employees. Any waivers of any provision of this code for our directors or officers may be granted only by
the Board or a committee appointed by the Board. Any waivers of any provisions of this code for an employee or a representative may be granted only by our chief executive officer or principal accounting officer. We will provide any person, without
charge, a copy of this Code. Requests for a copy of the code may be made by writing to RiceBran Technologies at 1330 Lake Robbins Drive, Suite 250, The Woodlands, Texas 77380, Attention: Secretary.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, requires our directors, our executive officers and beneficial owners of more than 10% of a registered class of our equity
securities to file with the SEC, initial reports of ownership and reports of changes in ownership of our Common Stock and other equity securities. Directors, executive officers and greater than 10% beneficial owners are required by SEC regulation to
furnish us with copies of all Section 16(a) reports they file. Based solely on the review of the copies of such forms furnished to us and written representations that no other reports were required, we believe that all reporting requirements under
Section 16(a) for the fiscal year ended December 31, 2019, were met in a timely manner by the directors, executive officers and greater than 10% beneficial owners, except the following forms were filed late: one Form 4 for Continental Grain Company
reporting the exercise of a common stock warrant a Form 4 reporting one purchase of common stock for each of Beth L Bronner and Peter G. Bradley, one Form 4 reporting one option grant and one common stock grant for each of Brent R. Rystrom and Dennis
A. Dykes, one Form 4 reporting one common stock grant for each of Baruch Halpern and David Goldman, one Form 4 reporting a common stock sale for David Goldman, and one Form 3 reporting initial beneficial ownership of Peter G. Bradley.
Compensation Philosophy
Our Compensation Committee is charged with the evaluation of the compensation of our executive officers and to assure that they are compensated effectively in a manner consistent with our compensation strategy and
resources, competitive practice, and the requirements of the appropriate regulatory bodies.
Our compensation philosophy has the following basic components: (i) establish competitive base salaries to attract qualified talent, and (ii) evaluate performance and grant performance-based bonuses that may include
equity and cash components. We try to establish executive compensation base salaries to allow us to remain competitive in our industry and to attract and retain executives of a high caliber. Similarly, we try to align a component of annual
compensation to performance and achievement of our objectives in an effort to retain highly motivated executives who are focused on performance. We review other public reports and consider the compensation paid to executives at similarly situated
companies, both within and outside of our industry, when determining and evaluating our compensation philosophy and compensation levels. Our performance, including, but not limited to, earnings, revenue growth, cash flow, and continuous
improvement initiatives, is a significant part of our evaluation and compensation levels.
In 2019, the Compensation Committee engaged Mercer (through outside legal counsel) to benchmark the compensation of executive officers and gather market information regarding short and long-term incentive practices.
Comparable market data was gathered from published surveys and a peer group of publicly-traded companies similar in size and industry to the Company. After review and consideration of the Mercer report, the Board’s Compensation Committee approved
the recommendations made regarding both the cash and equity compensation. The information provided to the Compensation Committee was utilized and continues to be utilized to set appropriate pay levels and long-term incentive awards for executive
officers. The Compensation Committee consults with Mercer when considering changes to executive compensation.
Summary Compensation Table
The following table sets forth all compensation awarded, earned or paid for services rendered to us in all capacities during fiscal year 2019 and 2018 to (i) each person who served as our chief executive officer during
fiscal 2019; (ii) the two most highly compensated officers other than the chief executive officer who were serving as executive officers at the end of fiscal 2019 and whose total compensation for such year exceeded $100,000; and (iii) up to two
additional individuals for whom disclosures would have been provided in this table, but for the fact that such persons were not serving as executive officers as of the end of fiscal 2019 (sometimes referred to collectively as the “named executive
officers”).
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Name and Principal Position (1)
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Year
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Salary
($) (1)
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Bonus
($)
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Option
Awards
($) (2)
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Stock
Awards
($)(2)(3)
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Nonequity
Incentive Plan
Compensation
($)
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All Other
Compensation
($) (4)
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Total
($)
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Brent R. Rystrom, Chief Executive Officer and President
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2019
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335,000
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-
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134,666
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52,624
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-
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8,250
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530,540
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2018
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263,308
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140,000
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328,410
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160,255
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-
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45,951
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937,924
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Todd T. Mitchell, Chief Financial Officer
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2019
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134,673
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26,000
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132,000
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98,750
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-
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12,169
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403,592
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2018
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-
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-
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-
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-
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-
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-
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-
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Dennis A. Dykes, former Chief Financial Officer
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2019
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105,000
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-
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109,174
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20,766
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-
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43,651
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278,591
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2018
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171,539
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85,600
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212,112
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210,300
|
-
|
27,567
|
707,118
|
|||||||||||||||||||||||
| (1) |
As discussed further in the “Narrative Disclosure to the Summary Compensation Table” the named executive officers held various positions in 2019 and 2018. Mr. Mitchell began employment in May 2019. Mr. Dykes’s employment terminated in
June 2019.
|
| (2) |
Option and stock awards are reported at grant date fair value, if awarded in the period, and at incremental fair value, if modified in the period. The assumptions used to calculate the fair value of option awards are set forth in the notes
to our consolidated financial statements included in our Annual Report on Form 10-K for 2019.
|
| (3) |
Stock awards include shares of Common Stock and restricted stock units (RSUs) granted under the 2014 Plan.
|
| (4) |
All other compensation consists of the amounts for the years indicated:
|
|
2019
|
||||||||||||
|
Mr. Rystrom
|
Mr. Mitchell
|
Mr. Dykes
|
||||||||||
|
($)
|
($)
|
($)
|
||||||||||
|
401(k) safe harbor contribution
|
8,250
|
2,169
|
7,840
|
|||||||||
|
Unused vacation paid at termination
|
-
|
-
|
35,811
|
|||||||||
|
Relocation cost reimbursements
|
-
|
10,000
|
-
|
|||||||||
|
Total
|
8,250
|
12,169
|
43,651
|
|||||||||
|
2018
|
||||||||||||
|
Mr. Rystrom
|
Mr. Mitchell
|
Mr. Dykes
|
||||||||||
|
($)
|
($)
|
($)
|
||||||||||
|
401(k) safe harbor contribution
|
8,250
|
-
|
6,226
|
|||||||||
|
Relocation cost reimbursements
|
37,701
|
-
|
21,341
|
|||||||||
|
Total
|
45,951
|
-
|
27,567
|
|||||||||
Narrative Disclosure to the Summary Compensation Table
The following is a brief description of the compensation arrangements we have with each of the named executive officers and other compensation. All the Common
Stock, stock option and RSU grants described below were made pursuant to the 2014 Plan.
Brent R. Rystrom, Chief Executive Officer and President
Mr. Rystrom began employment and was appointed chief financial officer in March 2017. In January 2018, Mr. Rystrom was also appointed chief operating officer. Effective in October 2018, he was appointed chief
executive officer. Mr. Rystrom’s initial annual salary was $200,000, increased to $225,000 in January 2018, increased to $274,000 in October 2018 and increased to $335,000 in January 2019.
In March 2017, we entered into an employment agreement with Mr. Rystrom which was amended and restated in October 2018. The term of Mr. Rystrom’s employment agreement renews
automatically for successive one-year terms unless either party notifies the other party in writing at least ninety (90) days prior to the expiration of the then-effective term of such party’s intention not to renew the agreement. Mr.
Rystrom received a signing fee of $25,000 and we agreed to reimburse Mr. Rystrom for relocation expenses up to $40,000.
Mr. Rystrom is currently eligible to participate in any bonus program that we adopted applicable to our senior officers. Mr. Rystrom is eligible to earn an annual cash bonus of up to 60% of his annual salary based
upon satisfaction of corporate and individual goals as determined by our Compensation Committee. Mr. Rystrom earned an annual bonus of $80,000 for 2017, which was paid in 2018. Mr. Rystrom earned an annual bonus of $140,000 for 2018, which was paid
in 2019.
In April 2017, the Board granted Mr. Rystrom a stock option to purchase up to 60,000 shares of Common Stock at an exercise price of $0.85 per share, which vests and becomes exercisable in four equal annual installments
ending April 6, 2021.
In June 2017, the Board granted Mr. Rystrom RSUs on 425,000 shares of Common Stock which were cancelled as to 255,000 shares in January 2018 and as to 170,000 shares in March 2020. The 425,000 shares of Common Stock
subject to the 2017 RSUs vested based upon a vesting price equal to the volume weighted average trading price of our Common Stock over sixty-five consecutive trading days. Each RSU’s shares vested (i) 10% if the vesting price equals or exceeds $5.00
per share, (ii) 30% if the vesting price equals or exceeds $10.00 per share and (iv) 60% if the vesting price equals or exceeds $15.00 per share.
In July 2017, the Board granted Mr. Rystrom 13,354 shares of Common Stock.
In January 2018, the Board granted Mr. Rystrom a stock option to purchase up to 44,507 shares of Common Stock at an exercise price of $1.42 per share, which vests and becomes exercisable in four equal annual
installments ending January 24, 2022.
In January 2018, the Board granted Mr. Rystrom 11,127 shares of Common Stock.
In October 2018, the Board granted Mr. Rystrom a stock option to purchase up to 150,000 shares of Common Stock at an exercise price of $2.86 per share, which vests and becomes exercisable in four equal annual
installments ending October 1, 2022.
In October 2018, the Board granted Mr. Rystrom additional RSUs which were cancelled in March 2020. The 330,000 shares of Common Stock subject to the RSUs vested based upon a vesting price equal to the volume weighted
average trading price of our common stock over sixty-five consecutive trading days. The RSU shares vested as to (i) 7,500 shares if the vesting price equals or exceeds $5.00 per share, (ii) 22,500 shares if the vesting price equals or exceeds $10.00
per share and (iii) 300,000 shares on the later of (a) October 1, 2019 and (b) the date the vesting price equals or exceeds $15.00 per share.
In January 2019, the Board granted Mr. Rystrom 16,343 shares of Common Stock.
In January 2019, the Board granted Mr. Rystrom a stock option to purchase up to 65,372 shares of Common Stock at an exercise price of $3.28 per share, which vests and becomes exercisable in four equal annual
installments ending January 29, 2023.
In January 2020, the Board granted Mr. Rystrom a stock option to purchase up to 258,455 shares of Common Stock at an exercise price of $1.23 per share, which vests and becomes exercisable in four equal annual
installments ending January 28, 2024.
In March 2020, the Board granted Mr. Rystrom a stock option to purchase up to 40,000 shares of Common Stock at an exercise price of $1.11 per share, which vests and becomes exercisable in four equal annual installments
ending March 31, 2024.
Todd T. Mitchell, Chief Financial Officer
Mr. Mitchell was initially employed by us in May 2019 and was appointed chief financial officer effective June 30, 2019. Mr. Mitchell’s initial and current annual salary is $235,000.
In May 2019, we entered into an employment agreement with Mr. Mitchell. The term of Mr. Mitchell’s employment agreement renews automatically for successive one-year terms unless either party notifies
the other party in writing at least ninety (90) days prior to the expiration of the then-effective term of such party’s intention not to renew the agreement. Mr. Mitchell is eligible to participate in any bonus program that we adopted applicable to
our senior officers. We agreed to pay Mr. Mitchell $10,000 for relocation expenses.
Mr. Mitchell is currently eligible to earn an annual cash bonus of up to 45% of his annual salary based upon satisfaction of corporate and individual goals as determined by our
Compensation Committee. Mr. Mitchell earned an annual bonus of $26,000 for 2019, which was paid in 2020.
In May 2019, the Board granted Mr. Mitchell a stock option to purchase up to 75,000 shares of Common Stock at an exercise price of $2.90 per share, which vests and becomes exercisable as to 25% of the option shares on
May 28, 2020, and as to the remainder of the options shares in thirty-six equal monthly installments ending May 28, 2023.
In May 2019, the Board granted Mr. Mitchell RSUs which were cancelled in March 2020. The 125,000 shares of Common Stock subject to the RSUs vested based upon a vesting price equal to the volume weighted average
trading price of our common stock over sixty-five consecutive trading days. The RSU shares vested as to (i) 12,500 shares if the vesting price equals or exceeds $5.00 per share, (ii) 37,500 shares if the vesting price equals or exceeds $10.00 per
share and (iii) 75,000 shares on the later of (a) October 1, 2019 and (b) the date the vesting price equals or exceeds $15.00 per share.
In January 2020, the Board granted Mr. Mitchell a stock option to purchase up to 86,200 shares of Common Stock at an exercise price of $1.23 per share, which vests and becomes exercisable in four equal annual
installments ending January 28, 2024.
In March 2020, the Board granted Mr. Mitchell a stock option to purchase up to 22,000 shares of Common Stock at an exercise price of $1.11 per share, which vests and becomes exercisable in four equal annual
installments ending March 31, 2024.
Dennis A. Dykes, former Chief Financial Officer
Mr. Dykes was initially employed by us in May 2014 and was appointed chief financial officer effective October 2018. Mr. Dykes served as chief accounting officer from June 2017 to October 2018, vice
president of accounting and compliance from May 2015 to June 2017. Mr. Dykes’s annual salary was $130,000 in 2017 until it increased to $142,000 in June 2017. Mr. Dykes’s salary increased to $160,000 in January 2018, $210,000 in October 2018 and
$235,000 in January 2019. Mr. Dykes employment terminated effective June 30, 2019.
In October 2018, we entered into an employment agreement with Mr. Dykes. The term of Mr. Dykes’s employment agreement renewed automatically for successive one-year terms unless either party notifies
the other party in writing at least ninety (90) days prior to the expiration of the then-effective term of such party’s intention not to renew the agreement. Mr. Dykes was eligible to participate in any bonus program that we adopted applicable to
our senior officers.
Mr. Dykes was eligible to earn an annual cash bonus of up to 45% of his annual salary based upon satisfaction of corporate and individual goals as determined by our Compensation
Committee. Mr. Dykes earned an annual bonus of $15,000 for 2017 and an additional stay bonus of $20,000 in 2017, which were paid in 2018. Mr. Dykes earned an annual bonus of $85,600 for 2018, which was paid in 2019.
In April 2017, the Board granted Mr. Dykes a stock option to purchase up to 20,000 shares of Common Stock at an exercise price of $0.85 per share, which vested and became exercisable in four equal annual installments
ending April 6, 2021, until the board approved accelerating the vesting of the option in June 2019.
In June 2017, the Board granted Mr. Dykes a stock option to purchase up to 10,000 shares of Common Stock at an exercise price of $0.91 per share, which vested and became exercisable in four equal annual installments
ending June 21, 2021, until the board approved accelerating the vesting of the option in June 2019.
In July 2017, the Board granted Mr. Dykes 10,492 shares of Common Stock.
In January 2018, the Board granted Mr. Dykes a stock option to purchase up to 22,607 shares of Common Stock at an exercise price of $1.42 per share, which vested and became exercisable in four equal annual installments
ending January 24, 2022, until the board approved accelerating the vesting of the option in June 2019.
In January 2018, the Board granted Mr. Dykes 5,652 shares of Common Stock.
In October 2018, the Board granted Mr. Dykes a stock option to purchase up to 100,000 shares of Common Stock at an exercise price of $2.86 per share which, prior to being forfeited as a result of Mr. Dykes’s
termination of employment, vested and became exercisable in four equal annual installments ending October 1, 2022.
In October 2018, the Board granted Mr. Dykes RSUs which were forfeited in June 2019 upon the termination of Mr. Dykes’s employment. The 250,000 shares of Common Stock subject to the RSUs vested based upon a vesting
price equal to the volume weighted average trading price of our common stock over sixty-five consecutive trading days. The RSU shares vested as to (i) 25,000 shares if the vesting price equals or exceeds $5.00 per share, (ii) 75,000 shares if the
vesting price equals or exceeds $10.00 per share and (iii) 150,000 shares on the later of (a) October 1, 2019 and (b) the date the vesting price equals or exceeds $15.00 per share.
In January 2019, the Board granted Mr. Dykes 6,449 shares of Common Stock.
In January 2019, the Board granted Mr. Dykes a stock option to purchase up to 25,795 shares of Common Stock at an exercise price of $3.28 per share which, prior to being forfeited as a result of Mr. Dykes’s termination
of employment, vested and became exercisable in four equal annual installments ending January 29, 2023.
In June 2019, in connection with his termination of employment, the board approved accelerating the vesting on the January 2018, June 2017 and April 2017 options, as mentioned above. The increase in fair value of the
awards resulting from the modification was $56,036.
Equity Compensation Arrangements
2010 Equity Incentive Plan
The Board adopted our 2010 Equity Incentive Plan (2010 Plan) in February 2010. Under the terms of the 2010 Plan, we could grant options to purchase Common Stock and shares of Common Stock to officers, directors,
employees or consultants providing services on such terms as were determined by the Compensation Committee. On December 4, 2013, the Board determined that no additional grants will be made under the 2010 Plan. The Compensation Committee
administered the 2010 Plan, determined vesting schedules on plan awards and could accelerate the vesting schedules for award recipients. The options granted under the 2010 Plan have terms of up to 10 years. As of December 31, 2019, options to
purchase a total of 23,737 shares were outstanding under the 2010 Plan.
2014 Equity Incentive Plan
The Board adopted our 2014 Equity Incentive Plan (2014 Plan) in August 2014, after the plan was approved by shareholders. A total of 1,600,000 shares of Common Stock were initially reserved for issuance under the
plan. In June 2017, shareholders approved to increase the number of shares of Common Stock reserved for issuance under the 2014 Plan by 1,700,000 shares. In June 2018, shareholders approved to increase the number of shares of Common Stock reserved
for issuance under the 2014 Plan by 3,000,000 shares. Under the terms of the plan, we may grant options to purchase Common Stock and shares of Common Stock to officers, directors, employees or consultants providing services on such terms as are
determined by the Board. Our Board administers the plan, determines vesting schedules on plan awards and may accelerate the vesting schedules for award recipients. The options granted under the plan have terms of up to 10 years. As of December 31,
2019, awards for the purchase of 4,236,719 shares had been granted and remain outstanding (stock options, stock and restricted stock and restricted stock units) and 2,063,281 shares were reserved for future grants under the 2014 Plan.
Pension Benefits
None of our named executive officers are covered by a pension plan or other similar benefit plan that provides for payments or other benefits at, following, or in connection with retirement.
Nonqualified Deferred Compensation
None of our named executive officers are covered by a defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified.
Outstanding Equity Awards
The following table provides information as of December 31, 2019, regarding equity awards held by each of our named executive officers.
|
Option Awards
|
Stock Awards
|
|||||||||||||||||||||||||
|
Number of
Securities
Underlying
Unexercised
Options
|
Number of
Securities
Underlying
Unexercised
Options
|
Option
Exercise
Price
|
Option
Expiration
|
Equity
Incentive
Plan:
Number of
Shares, Units
or Other
Rights That
Have Not
Vested
|
Equity
Incentive
Plan: Market
or Payout
Value of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
|
|||||||||||||||||||||
|
(# Exercisable)
|
(# Unexercisable)
|
($/sh)
|
Date
|
(#)
|
($)
|
|||||||||||||||||||||
|
Brent R. Rystrom
|
(1)
|
-
|
-
|
-
|
-
|
500,000
|
735,000
|
|||||||||||||||||||
|
(2)
|
-
|
30,000
|
0.85
|
4/6/2027
|
-
|
-
|
||||||||||||||||||||
|
(3)
|
-
|
33,380
|
1.42
|
1/24/2028
|
-
|
-
|
||||||||||||||||||||
|
(4)
|
37,500
|
112,500
|
2.86
|
10/1/2028
|
-
|
-
|
||||||||||||||||||||
|
(5)
|
-
|
65,372
|
3.28
|
1/29/2029
|
-
|
-
|
||||||||||||||||||||
|
Todd T. Mitchell
|
(6)
|
-
|
-
|
-
|
-
|
125,000
|
183,750
|
|||||||||||||||||||
|
(7)
|
-
|
75,000
|
2.90
|
5/28/2029
|
-
|
-
|
||||||||||||||||||||
| (1) |
Represents shares subject to restricted stock units (RSUs) which vest based upon a vesting price equal to the volume weighted average trading price of our common stock over sixty-five consecutive trading days. The RSU shares vest as to
(i) 50,000 shares if the vesting price equals or exceeds $5.00 per share, (ii) 150,000 shares if the vesting price equals or exceeds $10.00 per share and (iii) 300,000 shares if the vesting price equals or exceeds $15.00 per share. The RSUs
were cancelled in March 2020.
|
| (2) |
Unvested shares vest and become exercisable in two equal annual installments ending April 6, 2021.
|
| (3) |
Unvested shares vest and become exercisable in three equal annual installments ending January 24, 2022.
|
| (4) |
Unvested shares vest and become exercisable in three equal annual installments ending October 1, 2022.
|
| (5) |
Unvested shares vest and become exercisable in four equal annual installments ending January 29, 2023.
|
| (6) |
Represents shares subject to RSUs which vest based upon a vesting price equal to the volume weighted average trading price of our common stock over sixty-five consecutive trading days. The RSU shares vest as to (i) 12,500 shares if the
vesting price equals or exceeds $5.00 per share, (ii) 37,500 shares if the vesting price equals or exceeds $10.00 per share and (iii) 75,000 shares on the later of (a) May 28, 2020 and (b) the date the vesting price equals or exceeds $15.00
per share. The RSUs were cancelled in March 2020.
|
| (7) |
Unvested shares vest and become exercisable as to 25% of the option shares on May 28, 2020, and as to the remainder of the options shares in thirty-six equal monthly installments ending May 28, 2023.
|
Termination and Change in Control Arrangements
We have entered into employment agreements with Mr. Rystrom and Mr. Mitchell that require us to provide compensation to them upon termination of their employment with us or a change in control of the Company.
Regardless of the manner in which their employment terminates, they will be entitled to receive amounts earned during the term of their employment. Such amounts include: the portion of their current annual base salary and bonuses which have accrued
through the date of termination; vested stock options; and payment for accrued but unused vacation.
In addition, immediately before a Change of Control Transaction as defined in the 2010 Plan, all stock options granted pursuant to the 2010 Plan will vest and become fully exercisable. Under the 2010 Plan, a “Change
of Control Transaction” means the occurrence of any of the following events: (i) any person becomes the beneficial owner, directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power
represented by our then-outstanding voting securities; (ii) the consummation of the sale or disposition by the Company of all or substantially all of its assets; or (iii) the consummation of a merger or consolidation of the Company or a subsidiary
with another corporation or any other entity, other than a merger or consolidation which results in our voting securities of the Company outstanding immediately prior thereto continuing to represent at least fifty percent (50%) of the total voting
power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.
In addition, under the 2014 Plan, in the event of a Change of Control Transaction as defined in the 2014 Plan, except as otherwise provided by the Compensation Committee (Committee) in an award agreement or otherwise
in writing, unvested awards will not vest and will be treated in accordance with one of the following methods as determined by the Committee:
|
(a)
|
Awards, whether or not then vested, may be continued, assumed, have new rights substituted therefor or, the Committee may terminate all outstanding and unexercised stock options or any other stock-based award
that provides for a participant-elected exercise, effective as of the date of the Change in Control Transaction, by delivering notice of termination to each participant at least 20 days prior to the date of consummation of the Change in
Control Transaction, in which case during the period from the date on which such notice of termination is delivered to the consummation of the Change in Control Transaction, each such participant shall have the right to exercise in full all
of such exercisable awards that are then outstanding to the extent vested on the date such notice of termination is given (or, at the discretion of the Committee, without regard to any limitations on exercisability otherwise contained in
the award agreements), but any such exercise shall be contingent on the occurrence of the acquisition event, and, provided that, if the acquisition event does not take place within a specified period after giving such notice for any reason
whatsoever, the notice and exercise pursuant thereto shall be null and void. In the event of an Change in Control Transaction, the Committee may terminate any exercisable award for which the exercise price is equal to or exceeds the fair
market value on the date of the Change in Control Transaction without payment of consideration therefor; and restricted stock or other awards may, where appropriate in the discretion of the Committee, receive the same distribution as other
Common Stock on such terms as determined by the Committee; provided that, the Committee may decide to award additional restricted stock or any other award in lieu of any cash distribution.
|
|
(b)
|
Awards may be cancelled in exchange for an amount of cash equal to the change in control price (price per share of Common Stock paid in the Change in Control Transaction) per share of Common Stock covered by
such awards, less, in the case of an appreciation award, the exercise price per share of Common Stock covered by such award.
|
|
(c)
|
Appreciation awards may be cancelled without payment, if the change in control price is less than the exercise price per share of such appreciation awards.
|
Under the 2014 Plan, a “Change of Control Transaction” means the occurrence of any of the following: (a) acquisition (including through purchase, reorganization, merger, consolidation or similar transaction), directly
or indirectly, in one or more transactions by a person of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities representing 45% or more of the combined voting power of the securities of the Company entitled to
vote generally in the election of directors of the Board, calculated on a fully diluted basis after giving effect to such acquisition; (b) election of persons to the Board that causes two-thirds of the Board to consist of persons other than (i)
members of the Board on the effective date and (ii) persons who were nominated for election as members of the Board at a time when two-thirds of the Board consisted of persons who were members of the Board on the effective date; provided that any
person nominated for election by a Board at least two-thirds of which consisted of persons described in clauses (i) or (ii) or by persons who were themselves nominated by such Board shall be deemed to have been nominated by a Board consisting of
persons described in clause (i); (c) sale or other disposition, directly or indirectly, of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to any person.
In addition to the consideration described above, the amount of compensation payable to each of Mr. Rystrom and Mr. Mitchell for termination or a change of control under their respective employment agreements is
discussed below.
| • |
Termination Without Cause, for Good Reason, or Death. In the event employment is terminated (i) by us other than for Cause, (ii) by the employee for Good Reason, or (iii) due to the
employee’s death, Mr. Rystrom and Mr. Mitchell shall be entitled to a cash lump sum payment in an amount equal to one fourth of his then current base annual salary.
|
| • |
Termination in Connection with a Change of Control. In the event that the employee resigns or is terminated within 60 days before and 90 days after a Change of Control, then in addition to
the amounts that the employee would otherwise would be eligible to receive, including amounts that would be payable as a result of a termination other than for Cause, a termination for Good Reason and a termination due to employee’s death,
Mr. Rystrom and Mr. Mitchell shall be entitled to a cash lump sum payment equal to half of current base annual salary.
|
“Cause” is defined as (i) a material breach of the terms of his employment agreement, which breach remains uncured for 30 days following written notice of breach, (ii) the employee has been grossly negligent or has
engaged in material willful or gross misconduct in the performance of his duties, (iii) the employee has committed, as reasonably determined by our Board, or has been convicted by a court of law of fraud, moral turpitude, embezzlement, theft, or
similar criminal conduct, or any felony, (iv) employee habitually misuses alcohol, drugs, or any controlled substance, (v) the employee breaches his proprietary information agreement, or (vi) the employee fails to meet reasonable written standards
established by us for performance of his duties under his employment agreement.
“Good Reason”, is defined as (i) any material breach by us of any provision of the employee’s employment agreement; (ii) a material reduction of the employees duties or responsibilities, or the assignment of duties or
responsibilities that are not consistent or commensurate with his position at the time the employee entered into the agreement (iii) any reduction of the employee’s base salary other than as part of a general reduction of the salaries of all or
substantially all of our employees.
Director Compensation
During 2019, the Compensation Committee engaged Mercer (through outside legal counsel) to review the current compensation of the executive management and directors. Mercer is a leading global independent human
resources and compensation firm. After reviewing Mercer’s report with respect to Mercer’s compensation analysis methodology, compensation analysis results, peer company short and long-term incentive plan prevalence and equity plan design, the
Compensation Committee approved the Mercer report in all material respects. The Compensation Committee consults with Mercer when considering changes to director compensation. Nonemployee directors receive the
following cash consideration for serving as directors and as members of committees of our Board:
|
General
Board Service |
Audit
Committee |
Nominating
and Governance Committee |
Compen-
sation
Committee
|
Executive
Committee |
||||||||||||||||
|
($)
|
($)
|
($)
|
($)
|
($)
|
||||||||||||||||
|
General board service - all directors
|
50,000
|
-
|
-
|
-
|
-
|
|||||||||||||||
|
Service as Chairman of the Board
|
50,000
|
-
|
-
|
-
|
-
|
|||||||||||||||
|
Committee Assignments:
|
||||||||||||||||||||
|
Committee Chair
|
-
|
18,000
|
9,500
|
10,000
|
12,000
|
|||||||||||||||
|
Members
|
-
|
8,000
|
4,500
|
5,000
|
12,000
|
|||||||||||||||
We reimburse all directors for travel and other necessary business expenses incurred in the performance of director services and extend coverage to them under our directors and officers indemnity insurance policies.
In furtherance of implementing the Mercer report recommendations, the Compensation Committee determined that each nonemployee director automatically receives an annual fixed grant in the form of Common Stock under the
2014 Equity Incentive Plan. The number of shares of Common Stock is determined in accordance with the 2014 Equity Incentive Plan using a 5-day volume weighted average price per share. In 2019, the grant value, based on that 5-day volume weighted
average, was $100,000 to the chairman and $50,000 to each other nonemployee director. The annual grant is made on the date of the annual shareholder meeting. If a director becomes a member of the Board after the annual grant, the director will
receive a pro rata portion of the fixed annual grant based upon the months remaining in the year after the director was elected.
Director Compensation Table
The following director compensation table sets forth summary information concerning the compensation paid to our nonemployee directors in 2019 who served on the Board during the year.
|
Fees Earned
or Paid in
Cash
|
Option
Awards
|
Stocks
Awards
|
All Other
Compen-
sation
|
Total
|
||||||||||||||||
|
Name
|
($) (1)
|
($) (2)
|
($) (3)
|
($)
|
($)
|
|||||||||||||||
|
Peter G Bradley (4)
|
23,833
|
-
|
46,176
|
-
|
70,009
|
|||||||||||||||
|
Beth L. Bronner
|
68,000
|
-
|
48,257
|
-
|
116,257
|
|||||||||||||||
|
David Chemerow
|
75,000
|
-
|
48,257
|
-
|
123,257
|
|||||||||||||||
|
Ari Gendason
|
71,500
|
-
|
48,257
|
-
|
119,757
|
|||||||||||||||
|
David Goldman (5)
|
51,875
|
-
|
96,857
|
-
|
148,732
|
|||||||||||||||
|
Baruch Halpern (5)
|
37,500
|
-
|
115,757
|
-
|
153,257
|
|||||||||||||||
|
Henk W. Hoogenkamp (6)
|
29,750
|
-
|
-
|
-
|
29,750
|
|||||||||||||||
|
Brent D. Rosenthal
|
126,500
|
-
|
96,514
|
-
|
223,014
|
|||||||||||||||
| (1) |
Amounts shown in this column reflect the annual aggregate dollar amount of all cash fees earned for 2019 services as a director, including annual retainer fees, committee and/or chairmanship fees, and meeting fees.
|
| (2) |
As of December 31, 2019, the aggregate shares under options outstanding awarded to each director are as follows: 6,563 to David Goldman and 6,996 to Baruch Halpern.
|
| (3) |
Stock awards are reported at grant date fair value, if awarded in the period, and at incremental fair value, if modified in the period. Stock awards for Mr. Goldman and Mr. Halpern include 36,000 and 50,000 shares of Common Stock,
respectively, granted December 19, 2019, under the 2014 Equity Incentive Plan with a grant date fair value of $1.35 per share. The remainder of stock awards consist of grants under our 2014 Equity Incentive Plan in June 2019 (except for Mr.
Bradley which was July 2019) which vest on the earlier of (i) June 19, 2020, or (ii) one day prior to the next annual shareholder meeting. The number of shares of Common Stock were determined using a volume weighted average price per share
at the grant date ($2.86 per share, except the grant for Mr. Bradley which was $3.02 per share) rather than grant date fair value. The grants were 16,873 shares to each of directors Beth L. Bronner, Ari Gendason, David Goldman, Baruch
Halpern and Henk W. Hoogenkamp; 33,746 shares to Brent D. Rosenthal and 15,290 shares to Peter G. Bradley. As of December 31, 2019, the aggregate number of shares which have been awarded to each director for board service are as follows:
15,290 to Peter G. Bradley, 120,267 to Beth L. Bronner, 28,090 to David Chemerow, 120,267 to Ari Gendason, 184,566 to David Goldman, 198,566 to Baruch Halpern, 131,693 to Henk W. Hoogenkamp and 315,927 to Brent D. Rosenthal.
|
| (4) |
Mr. Bradley became a director in July 2019.
|
| (5) |
Mr. Goldman and Mr. Halpern each resigned as our director in December 2019.
|
| (6) |
Mr. Hoogenkamp was not nominated for reelection to the Board in June 2019. On June 19, 2019, we issued Mr. Hoogenkamp 16,873 shares of Common Stock under a one-year consulting agreement. The grant date fair value of those shares,
$48,257, is not included in the table above.
|
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial ownership of our Common Stock as of March 31, 2020, by (i) each person or entity who is known by us to own beneficially more than 5% of the
outstanding shares of that class or series of our stock, (ii) each of our directors and director nominees, (iii) each of the named executive officers, and (iv) all directors and current executive officers as a group. For purposes of this section,
“named executive officers” shall mean: (i) each person who served as our chief executive officer during fiscal 2019; (ii) the two most highly compensated officers other than the chief executive officer who were serving as executive officers at the
end of fiscal 2019; and (iii) up to two additional individuals for whom disclosure would have been provided in the table below, but for the fact that such persons were not serving as executive officers as of the end of fiscal 2019.
The table is based on information provided to us or filed with the SEC by our directors, executive officers and principal shareholders. Beneficial ownership is determined in accordance with the rules of the SEC and
includes voting and investment power with respect to shares. Shares of Common Stock issuable upon exercise or conversion of options and warrants that are currently exercisable or are exercisable within 60 days after March 31, 2020, are deemed
outstanding for purposes of computing the percentage ownership of the person holding such securities but are not deemed outstanding for computing the percentage of any other shareholder. Unless otherwise indicated, the address for each shareholder
listed in the following table is c/o RiceBran Technologies, 1330 Lake Robbins Drive, Suite 250, The Woodlands, TX 77380.
|
Common Stock Beneficially Owned
|
||
|
Name and Address of Beneficial Owner
|
Number
|
Percentage (1)
|
|
Continental Grain Company (2)
|
10,649,068
|
26.56%
|
|
DG Capital Management, LLC, DG Value Partners LP, DG Value Partners II Master Fund LP and Dov Gertzulin (3)
|
2,449,659
|
6.11%
|
|
Brent D. Rosenthal (4)
|
403,890
|
1.01%
|
|
Peter G. Bradley (5)
|
15,290
|
*
|
|
Beth L. Bronner (6)
|
139,767
|
*
|
|
David Chemerow (7)
|
215,232
|
*
|
|
Ari Gendason (8)
|
129,177
|
*
|
|
Brent R. Rystrom (9))
|
358,707
|
*
|
|
Todd T. Mitchell (10)
|
43,750
|
*
|
|
Dennis A. Dykes
|
80,966
|
*
|
|
All directors and executive officers as a group (7 persons) (11)
|
1,305,813
|
3.25%
|
|
* less than 1%
|
||
| (1) |
The applicable percentage of ownership is based on 40,092,017 shares of our Common Stock outstanding as of March 31, 2020, together with shares issuable upon exercise of options and warrants exercisable within 60 days of March 31, 2020.
|
| (2) |
Based on information reported on a Form 4 filed with the SEC on December 20, 2019, and a Schedule 13D filed with the SEC September 25, 2017 (as amended March 28, 2018, August 17, 2018, March 12, 2019, August 21, 2019, and December 20,
2019) by Continental Grain Company (CGC), a Delaware corporation. The address of the principal office of CGC and Mr. Gendason is 767 Fifth Avenue, New York, NY 10153.
|
| (3) |
Based in part on information reported on a Schedule 13G filed with the SEC on February 11, 2020, by DG Capital Management, LLC (DG), a Delaware limited liability company; DG Value Partners II Master Fund, LP (DGVII), a Cayman Islands
limited partnership; and Dov Gertzulin. DG serves as the investment manager of DGVII. Dov Gertzulin serves as managing member of DG and DGVII. DGVII beneficially owns 1,966,934 shares of our Common Stock. Dov Gertzulin beneficially owns
2,449,659 shares of our Common Stock, in part as a result of his control over DG and DGVII. The address of the principal office of DG and Dov Gertzulin is 460 Park Avenue, 22nd Floor, New York, NY 10022.
|
| (4) |
Includes 33,746 shares owned by Mr. Rosenthal which vest the earlier of June 19, 2020, or the day prior to our next annual meeting of shareholders.
|
| (5) |
Includes 15,290 shares owned by Mr. Bradley which vest the earlier of June 19, 2020, or the day prior to our next annual meeting of shareholders.
|
| (6) |
Includes 16,873 shares owned by Ms. Bronner which vest the earlier of June 19, 2020, or the day prior to our next annual meeting of shareholders.
|
| (7) |
Includes 16,873 shares owned by Mr. Chemerow which vest the earlier of June 19, 2020, or the day prior to our next annual meeting of shareholders. Includes 91,217 shares are held by the David I. Chemerow 1992 Trust.
|
| (8) |
Includes 16,873 shares owned by Mr. Gendason which vest the earlier of June 19, 2020, or the day prior to our next annual meeting of shareholders. Mr. Gendason is senior vice president and chief
investment officer of CGC. Mr. Gendason claims no direct or shared voting or dispositive power over the shares owned by CGC.
|
| (9) |
Includes 79,970 shares issuable upon exercise of options.
|
| (10) |
Includes 18,750 shares issuable upon exercise of options.
|
| (11) |
Includes 98,720 shares issuable upon exercise of options, and 99,655 shares which vest the earlier of June 19, 2020, or the day prior to our next annual meeting of shareholders. Excludes the beneficial ownership of Mr. Dykes since he is
no longer an executive officer.
|
Equity Compensation Plan Information
The following table sets forth, as of December 31, 2019, certain information with respect to our 2010 Equity Incentive Plan and 2014 Equity Incentive Plan follows:
|
Number of securities
to be issued
upon exercise of
outstanding options,
warrants and rights
|
Weighted average
exercise price of
outstanding options,
warrants and rights
|
Number of securities
remaining available for
future issuance under
equity compensation
plans
(excluding securities
reflected in column a)
|
|||||||||||
|
Plan Category
|
(1)(a)
|
(1)(b)
|
|
(c)
|
|||||||||
|
Equity compensation plans approved by shareholders
|
972,272
|
$
|
2.71
|
2,063,281
|
(2)
|
|
|||||||
|
Equity compensation plans not approved by shareholders
|
23,737
|
24.46
|
-
|
(3)
|
|||||||||
|
Total
|
996,009
|
$
|
3.23
|
2,063,281
|
|||||||||
| (1) |
Excludes shares issuable upon the vesting of RSUs and the shares underlying such RSUs, which do not have an exercise price. As of December 31, 2019, 1,148,062 shares were
issuable in the future upon the vesting of RSUs.
|
| (2) |
Represents shares reserved for future issuance under our 2014 Equity Incentive Plan.
|
| (3) |
Represents shares reserved for future issuance under our 2010 Equity Incentive Plan. In 2013, the Board determined that no additional grants will be made under the 2010 Plan.
|
Descriptions of our 2010 Equity Incentive Plan and 2014 Equity Incentive Plan are set forth above under “Equity Compensation Arrangements.”
Review, Approval or Ratification of Transactions with Related Parties
As provided in our Audit Committee charter, our Audit Committee reviews and approves, unless otherwise approved by our Compensation Committee, any transaction or series of similar transactions to which we were or are
to be a party in which the amount involved exceeds the lesser of (a) $120,000 or (b) one percent of the average of our total assets at the end of our last two completed fiscal years, and in which any director, director nominee, executive officer or
holder of more than 5% of any class of our capital stock, or members of any such person’s immediate family, had or will have a direct or indirect material interest (each such transaction, a Related Party Transaction). Each Related Party Transaction
that occurred since January 1, 2018, has been approved by our Board, Audit Committee or Compensation Committee.
Related Party Transactions
Other than compensation described above in “Executive Compensation,” “Director Compensation” and “Director Compensation Table”, we believe that there have been no Related Party Transactions since January 1, 2018, other
than those described below.
Transactions with Continental Grain Company
In March 2019, we issued and sold to Continental Grain Company (CGC) 666,667 shares of common stock at a purchase price of $3.00 per share and a pre-funded warrant to purchase up to 1,003,344 shares of common stock for
a purchase price equal to $2.99 for each share underlying the pre-funded warrant. The exercise price of the pre-funded warrant is $0.01 per share. In December 2019, CGC participated in our public offering, and purchased 3,200,000 shares of common
stock at a purchase price of $1.25 per share. Our director, Ari Gendason is an employee and senior vice president and chief investment officer of CGC. As of the date of this filing, CGC owns approximately 26.6% of our outstanding common stock. We
have agreed that in connection with each annual or special meeting of our shareholders at which members of our board of directors are to be elected, or any written consent of our shareholders
pursuant to which members of the board of directors are to be elected, CGC shall have the right to designate one nominee to our board of directors.
Transactions with LF-RB Management, LLC
In July 2016, we entered into a settlement agreement with the LF-RB Group and our directors Beth L. Bronner, Ari Gendason and Brent D. Rosenthal. The settlement agreement required that until December 31, 2018, we
nominate directors Beth L. Bronner, Ari Gendason and Brent D. Rosenthal for election to our board of directors and recommend that our shareholders vote to elect these individuals to our board of directors.
The foregoing description of Related Party Transactions does not include a description of employment compensation that was paid, following approval by our compensation committee, to executive officers that are not
named executive officers.
General
RSM US LLP has been appointed by the Audit Committee to continue as our registered public accountants for the fiscal year ending December 31, 2020. Shareholder ratification of RSM US LLP as our independent registered
public accounting firm is not required by our Bylaws or otherwise. The Board is seeking such ratification as a matter of good corporate practice. If the shareholders fail to ratify the selection of RSM US LLP as our independent public accountants,
the Audit Committee will consider whether to retain that firm for the year ending December 31, 2020. Even if the selection is ratified, we may appoint a different independent public accounting firm during the year if the Audit Committee determines
that such a change would be in the best interests of us and our shareholders. We expect a representative of RSM US LLP to be present at the Annual Meeting or otherwise be available to make a statement or respond to questions.
Fees Billed by Independent Registered Public Accounting Firms
The following table presents fees for professional services rendered by our independent registered public accounting firm, RSM US LLP.
|
2019
|
2018
|
|||||||
|
Audit fees
|
$
|
340,000
|
$
|
345,000
|
||||
|
Audit-related fees
|
68,000
|
333,000
|
||||||
|
Tax fees
|
-
|
-
|
||||||
|
All other fees
|
-
|
-
|
||||||
|
Total
|
$
|
408,000
|
$
|
678,000
|
||||
Audit fees
Audit fees are for services related to the audit of our financial statements, review of financial statements included in our quarterly reports on Form 10-Q, consents and assistance with other filings.
Audit-related fees
Audit-related fees in 2019 relate to consents and comfort letters provided in connection with filings on Form S-3. Audit-related fees in 2018 relate to audits of the financial statements of an entity acquired in 2018,
which financial statements were filed with our current report on Form 8-K/A.
Tax fees
There were no tax fees in 2019 or 2018.
All other fees
There were no other fees in 2019 or 2018.
Pre-Approval Policies
Our Audit Committee pre-approves all audit and non-audit services provided by our independent registered public accounting firm prior to the engagement of the independent registered public accounting firm for such
services. All fees reported under the headings Audit fees, Audit-related fees, Tax fees and All other fees above were approved by the Audit Committee before the respective services were rendered, which concluded that the provision of such services
was compatible with the maintenance of the independence of the firm providing those services in the conduct of its auditing functions.
PART IV
We have filed the following documents as part of this report.
|
Exhibit
|
Exhibit Description
|
|
| 31.1 |
*
|
Certification by CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
*
|
Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
*Filed herewith
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
RICEBRAN TECHNOLOGIES
|
||
|
Date: April 28, 2020
|
By:
|
/s/ Brent Rystrom
|
|
Brent Rystrom
|
||
|
Director and Chief Executive Officer
|
||
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.
|
Signature
|
Title
|
Date
|
||
|
Principal Executive Officer:
|
||||
|
/s/ Brent R. Rystrom
|
Director and Chief Executive Officer
|
April 28, 2020
|
||
|
Brent R. Rystrom
|
||||
|
Principal Financial Officer
and Principal Accounting Officer:
|
||||
|
/s/ Todd T. Mitchell
|
Chief Financial Officer
|
April 28, 2020
|
||
|
Todd T. Mitchell
|
||||
|
Additional Directors:
|
||||
|
*
|
Director
|
April 28, 2020
|
||
|
Peter Bradley
|
||||
|
*
|
Director
|
April 28, 2020
|
||
|
Beth Bronner
|
||||
|
*
|
Director
|
April 28, 2020
|
||
|
David I. Chemerow
|
||||
|
*
|
Director
|
April 28, 2020
|
||
|
Ari Gendason
|
||||
|
*
|
Director and Chairman
|
April 28, 2020
|
||
|
Brent D. Rosenthal
|
|
*
|
By:
|
/s/ Brent R. Rystrom
|
|
|
Brent R. Rystrom
|
|||
|
Attorney-in-fact
|
19