NATURAL HEALTH TRENDS CORP. | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 10, 2018
To the Stockholders of Natural Health Trends Corp.:
The 20182022 annual meeting of stockholders of Natural Health Trends Corp. (the “Company”) will be held on May 10, 2018,2022, beginning at 9:00 a.m. local time, at Hong Kong Gold Coast Hotel, 1 Castle Peak Road, Gold Coast, Hong Kong.the Company's office located at 19745 Colima Rd., Suite 8, Rowland Heights, CA 91748. At the meeting, the holders of the Company’s outstanding common stock will act on the following matters:
Election of five (5) directors to the Board of Directors of the Company to serve until the next annual meeting of the Company’s stockholders;stockholders
Ratification of the appointment of Marcum LLP as the Company’s independent registered public accounting firm for fiscalthe Company for the year ending December 31, 2018.2022
All holders of record of shares of the Company’s common stock at the close of business on March 12, 201814, 2022 are entitled to vote at the meeting and any postponements or adjournments of the meeting.
We are using Securities and Exchange Commission rules that allow the Company to furnish proxy materials on the Internet to stockholders of the Company. Consequently, stockholders will not automatically receive paper copies of our proxy materials. We are instead sending to stockholders a Notice of Internet Availability of Proxy Materials with instructions for accessing the proxy materials, including our proxy statement and Annual Report on Form 10-K, and for voting via the Internet. The electronic delivery of our proxy materials will reduce our printing and mailing costs and any environmental impact.
The Notice of Internet Availability of Proxy Materials identifies the date, time and location of the annual meeting; the matters to be acted upon at the meeting and the Board of Directors’ recommendation with regard to each matter; a toll-free telephone number, an e-mail address, and a website where shareholders can request a paper or e-mail copy of our proxy materials, including our Annual Report on Form 10-K, proxy statement and a proxy card, free of charge.
We currently intend to hold our annual meeting in person. However, we are monitoring the coronavirus (COVID-19) situation and it may become necessary or advisable to change the date, time, location and/or means of holding the annual meeting (including by means of remote communication). Any such change will be announced via press release and website posting, as well as the filing of additional proxy materials with the Securities and Exchange Commission.
By Order Of The Board Of Directors, | |
/s/ Timothy S. Davidson | |
March 28, | Timothy S. Davidson Chief Financial Officer, Senior Vice President and Corporate Secretary |
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE EXERCISE YOUR VOTING RIGHTS. THISTHE PROXY STATEMENT IS FIRST BEING MADE AVAILABLESENT OR GIVEN TO THE COMPANY’S STOCKHOLDERS ON OR ABOUT MARCH 28, 2018.2022.
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ABOUT THE MEETING | |
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Can I change my vote or revoke my proxy? | |
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What are the Board of Directors’ recommendations? | 3 |
| reports during 2021? | |
| 2021? | |
| 7 | |
What is the Board of Directors’ role in risk oversight? | |
8 | |
8 | |
Does the Company have a Code of Ethics? | |
INFORMATION ABOUT EXECUTIVE OFFICERS | 9 |
11 | |
12 | |
| 2021 | 12 |
| Post-Termination Payment Arrangements | 13 |
Director Compensation | 14 |
15 | |
15 | |
| 2022 | 17 |
17 | |
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NATURAL HEALTH TRENDS CORP.
PROXY STATEMENT
This proxy statement contains information related to the annual meeting of stockholdersstockholders of Natural Health Trends Corp. (“the Company”, “we”, “our” or “us”) to be held on May 10, 20182022 beginning at 9:00 a.m. local time, at Hong Kong Gold Coast Hotel, 1 Castle Peak Road, Gold Coast, Hong Kong, the Company's office located at 19745 Colima Rd., Suite 8, Rowland Heights, CA 91748, and at any postponements or adjournments thereof. This proxy statement is first being made available to stockholders on or about March 28, 2018.
ABOUT THE MEETING
What is the purpose of the meeting?
At the annual meeting, stockholders will act upon the matters outlined in the Notice of Annual Meeting of Stockholders included with this proxy statement.
Who is entitled to vote at the meeting?
Only stockholders of record at the close of business on March 12, 2018,14, 2022, the record date for the meeting, are entitled to receive notice of and to participate in the annual meeting. If you were a stockholder of record on that date, you will be entitled to vote all of the shares that you held on that date at the meeting, or any postponements or adjournments of the meeting.
What are the voting rights of the holders of the Company’s common stock?
Each outstanding share of the Company’s common stock will be entitled to one vote on each matter considered at the meeting. Cumulative voting in the election of directors is prohibited by the Company’s certificate of incorporation.
Who can attend the meeting and where is it being held?
All stockholders as of the record date, or their duly appointed proxies, may attend the meeting. The meeting is being held at the location identified above. To obtain directions to attend the meeting in person, please contact the Company at 310-541-0888.
We currently intend to hold our annual meeting in personperson. However, we are monitoring the coronavirus (COVID-19) situation and it may become necessary or advisable to change the date, time, location and/or means of holding the annual meeting (including by proxy,means of the holders of a majority of the aggregate voting power of the stock outstanding on the record date will constitute a quorum, permitting the stockholders to act upon the matters outlined in the Notice of Annual Meeting of Stockholders. As of the record date, 11,376,092 shares of common stock, representing the same number of votes, were outstanding. Thus, the presence of the holders of common stock representing at least 5,688,047 shares of common stockremote communication). Any such change will be required to establish a quorum.
Why did I initially receive a Notice of Internet Availability regarding proxy materials this yearof Proxy Materials instead of a full set of proxy materials?
Pursuant to rules adopted by the Securities and Exchange Commission, we have elected to provide access to our proxy materials over the Internet to our stockholders. Accordingly, a Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”) was or will be sent to many of our stockholders providing notice of the annual meeting and enabling stockholders to access our proxy materials on the website referred to in the Notice of Internet Availability of Proxy Materials (“Notice of Availability of Proxy Materials”) or request to receive free of charge a printed set of the proxy materials, including the Notice of Annual Meeting, our 20172021 Annual Report on Form 10-K, this proxy statement and a proxy card. Instructions on how to access the proxy materials over the Internet or to request a printed copy are set out in the Notice of Internet Availability.Availability of Proxy Materials. Those stockholders that previously requested to receive our proxy materials in printed or electronic form will receive such proxy materials in lieu of the Notice of Internet Availability.
How can I elect the manner in which I will receive proxy materials in the future?
All stockholders may request to receive proxy materials in printed form by mail or electronically by e-mail on an ongoing basis by following the instructions in the Notice of Internet Availability or proxy materials.of Proxy Materials. The Company encourages stockholders to take advantage of the availability of the proxy materials on the Internet in order to help reduce printing and mailing costs and any environmental impact.
By Mail: | If you |
| address, it will be voted as you direct. | ||
In Person: | If you are a registered stockholder and attend the meeting, you may vote in person at the meeting. If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, you must obtain a valid legal proxy from your broker, bank or other agent to vote in person at the meeting. | |
| Via Internet: | Log on to http://www.proxyvote.com and follow the on-screen instructions. |
Note: Please also refer to the specific instructions set forth in the Notice of Availability of Proxy Materials or, if you requested to receive our proxy materials in printed or electronic form, in the proxy materials.
How may my broker, bank or other agent vote my shares if I fail to provide timely directions?
Brokers, banks or other agents holding shares of common stock in street name for customers are generally required to vote such shares in the manner directed by their customers. In the absence of timely directions, your broker, bank or other agent will have discretion to vote your shares on the “routine” matters to be voted upon at the meeting — the proposal to ratify the appointment of Marcum LLP (Item Two). Your broker does not have discretion to vote on the election of directors (Item One) absent direction from you.
Can I change my vote or revoke my proxy?
Yes. You can change your vote or revoke your proxy. If you are a registered stockholder, you may revoke your proxy in any one of four ways.
You may send a written notice that you are revoking your proxy to the Company’sCompany's Corporate Secretary at Natural Health Trends Corp., 609 Deep Valley Drive, Suite 395, Rolling Hills Estates, 90274,the Company’s principal executive offices located at Units 1205-07, 12F, Mira Place Tower A, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong, Attention: Timothy S. Davidson.
You may timely grant another proxy via the Internet.
You may submit another properly completed proxy card with a later date.
You may attend the annual meeting and vote in person. Simply attending the annual meeting will not, by itself, revoke your proxy.
Your most current proxy, whether submitted by proxy card, via the Internet or in person, is the one that is counted.
If your shares are held by your broker, bank or other agent, you should follow the instructions provided by your broker, bank or other agent.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a majority of the aggregate voting power of the stock outstanding on the record date will constitute a quorum, permitting the stockholders to act upon the matters outlined in the Notice of Annual Meeting of Stockholders. As of the record date, 11,422,539 shares of common stock, representing the same number of votes, were outstanding. Thus, the presence of the holders of common stock representing at least 5,711,270 shares of common stock will be required to establish a quorum.
A proxy submitted by a stockholder may indicate that all or a portion of the shares represented by the proxy are not being voted (“stockholder withholding”) with respect to a particular matter. Similarly, a broker may not be permitted to vote stock (“broker non-vote”) held in street name on a particular matter in the absence of instructions from the beneficial owner of the stock. See above under the caption “How may my broker, bank or other agent vote my shares if I fail to provide timely directions?” The shares subject to a proxy that are not being voted on a particular matter because of either stockholder withholding or broker non-vote will count for purposes of determining the presence of a quorum. Abstentions are also counted in the determination of a quorum.
Unless you give other instructions on your returned proxy, the persons named as proxy holders on the proxy will vote in accordance with the recommendations of the Board of Directors. The Board of Directors’ recommendations are set forth together with the description of each item in this proxy statement. In summary, the Board of Directors recommends a vote:
• | for election of the nominated slate of Directors (see Item One); |
• | for ratification of the appointment of Marcum LLP as independent registered public accounting firm for the Company for the year ending December 31, 2022 (see Item Two). |
With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, in their own discretion.
What vote is required to approve each item?
Election of Directors.
The affirmative vote of a plurality of the votesRatification of Independent Registered Public Accounting Firm.
For the ratification of the appointment of Marcum LLP asWhat types of expenses will the Company incur?
The expense of preparing, printing and mailing proxy materials and the Notice of Internet Availability of Proxy Materials, as well as all expenses of soliciting proxies, will be borne by the Company. In addition to the use of the mails, proxies may be solicited by officers and directors and regular employees of the Company, without additional remuneration, by personal interviews,interaction, telephone, telegraph or facsimile transmission. The Company may elect to engage a proxy solicitation firm to solicit stockholders to vote or grant a proxy with respect to the proposals contained in this proxy statement. The Company will request brokers, banks, nominees, custodians, fiduciaries and other agents to forward proxy materials to the beneficial owners of shares of common stock held of record and will provide reimbursements for the cost of forwarding the material in accordance with customary charges.
STOCK OWNERSHIP
Who are the owners of the Company’s stock?
The following table shows the amount of the Company’s common stock beneficially owned (unless otherwise indicated) as of March 12, 201814, 2022 by (i) each stockholder known to us to be the beneficial owner of more than 5% of the Company’s common stock, (ii) each director or director nominee, (iii) each of the Company’s named executive officers and (iv) all executive officers and directors as a group. Beneficial ownership is determined in accordance with the rules and regulations of the Securities and Exchange Commission and generally includes those persons who have voting or investment power with respect to the securities. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of the Company’s common stock beneficially owned by them.
Name and Address of Beneficial Owner (1) | Amount and Nature of Beneficial Ownership (2) | Percent of Class (2) | ||||
| Executive Officers and Directors: | ||||||
| Chris T. Sharng | 478,574 | (3) | 4.2 | % | ||
| Timothy S. Davidson | 232,642 | (4) | 2.0 | % | ||
| George K. Broady | 866,423 | (5) | 7.6 | % | ||
| Yiu T. Chan | — | — | ||||
| Kin Y. Chung | 3,058 | * | ||||
| Randall A. Mason | 252,733 | (6) | 2.2 | % | ||
| All executive officers and directors as a group (6 persons) | 1,833,430 | (7) | 16.1 | % | ||
| Stockholders Beneficially Owning 5% or More | ||||||
| The Jane Eleanor Broady Irrevocable Trust | 2,245,128 | (8) | 19.7 | % | ||
| Renaissance Technologies LLC | 903,600 | (9) | 8.0 | % | ||
Name and Address of Beneficial Owner (1) |
| Amount and Nature of Beneficial Ownership (2) |
| Percent of Class (2) | ||
Executive Officers and Directors: |
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|
|
| ||
Chris T. Sharng |
| 886,645 | (3) | 7.8 | % | |
Timothy S. Davidson |
| 391,100 | (4) | 3.4 | % | |
| Brunde E. Broady | — | (5) | — | |||
Yiu T. Chan |
| — |
| — | ||
Randall A. Mason |
| 252,733 | (6) | 2.2 | % | |
Ching C. Wong |
| — |
| — |
| |
All executive officers and directors as a group (6 persons) |
| 1,530,478 | (7) | 13.4 | % | |
Non-Executive Stockholders Beneficially Owning 5% or More: |
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Eleanor Jane Broady 2012 Irrevocable Trust |
| 2,245,128 | (8) | 19.7 | % | |
Renaissance Technologies LLC |
| 847,787 | (9) | 7.4 | % | |
| George K. Broady 2012 Irrevocable Trust | 690,099 | (10) | 6.0 | % | ||
_______________________
(1) | |||
Unless otherwise indicated, the address of each beneficial owner is c/o Natural Health Trends Corp., |
(2) | Any securities not outstanding that are subject to conversion privileges exercisable within 60 days of March |
(3) | Includes |
(4) | Includes |
| (5) |
(6) | Includes 23,899 shares owned by Marden Rehabilitation Associates, Inc., an entity controlled by Mr. Mason. |
(7) | Includes |
(8) | Eleanor Jane |
(9) | The information regarding the beneficial ownership of Renaissance Technologies LLC (“RTC”) is based on the Schedule 13G filed jointly with Renaissance Technologies Holdings Corporation (“RTHC”) with the | |
| (10) | George K. Broady, a former director of the Company, is the current trustee and a beneficiary of the George K. Broady 2012 Irrevocable Trust. The George K. Broady 2012 Irrevocable Trust pledged 570,390 shares to secure a line of credit. As described in Note 5 above, the Company understands that Brunde E. Broady is one of five individuals named as successor co-trustee to the George K. Broady 2012 Irrevocable Trust; provided, that it is further understood that Mr. Broady could elect at any time to change the designation of successor co-trustees to the Trust. |
Were there any delinquent Section 16(a) beneficial ownership reporting compliance?
Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than ten percent (10%) of a registered class of the Company’s equity securities, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required by Securities and Exchange Commission regulation to furnish the Company with copies of all Section 16(a) forms they file. To the Company’s knowledge, based solely on its review of electronic filings with the copies of such reports furnished toSecurities and Exchange Commission and any written representations received by the Company during the fiscal year ended December 31, 2017 and thereafter,from persons required to make filings under Section 16(a), all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were satisfied.
GOVERNANCE OF THE COMPANY
Who are the current members of the Board of Directors and on which committees do they serve?
The members of the Board of Directors on the date of this proxy statement and the committees of the Board of Directors on which they serve are identified below.
Director | Age | Audit Committee | Compensation Committee | |||||
Nominating and Corporate Governance Committee | ||||||||
Brunde E. Broady | 57 | — | — | — | ||||
Yiu T. Chan | 55 | M | C | M | ||||
| Randall A. Mason | C | — | ||||||
Ching C. Wong | 63 | M | M | C | ||||
Chris T. Sharng | 58 | — | — | — |
M = Member
C = Chairman
Who is the Chairman of the Board of Directors?
Mr. Mason has served as Chairman of the Board of Directors since March 2006. The Chairman of the Board of Directors organizes the work of the Board of Directors and ensures that the Board of Directors has access to sufficient information to enable the Board of Directors to carry out its functions, including monitoring the Company’s performance and the performance of management. In carrying out this role, the Chairman, among other things, presides over all meetings of the Board of Directors, establishes the annual agenda of the Board of Directors, established the agendas of each meeting in consultation with the President, and oversees the distribution of information to directors.
Which directors are considered independent?
The Board of Directors has adopted the requirements in Nasdaq Marketplace Rule 5605(a)(2) as its standard in determining the “independence” of members of its Board of Directors. The Board of Directors has determined that each of the following individuals who are nominated for election as a director qualifies as an “independent director” under this standard:
Yiu T. Chan
Randall A. Mason
Ching C. Wong
Subject to being elected as a director Mr. Chan served as a consultant toapplicable exemptions, the Company but received no compensationapplies the foregoing Nasdaq standard for his brief service. In addition, with respect to Mr. Chung,determining the “independence” of each member of its Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee. The Board consideredof Directors has determined that prior to being electedall of the members of each such Committee qualifies as a director Mr. Chung was a consultant to“independent.” Further, the Company and, in such capacity, received far less compensation from the Company than that which would disqualify Mr. Chung from being considered “independent” under the Nasdaq Marketplace Rule referenced above. The Board of Directors has separately determined that each member of Messrs. Chan, Chung, and Masonthe Audit Committee meets the criteria for independence set forth in Rule 10A-3(b)(1) promulgated under the Exchange Act, as required for service on the Audit Committee.
The Board of Directors met or acted by unanimous written consent a total of nine11 times during the fiscal year ended December 31, 2017,2021, and each director attended at least seventy-five percent (75%) of these meetings. In addition,As described below, the Company’s Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee each met or acted by unanimous written consent a number of times during the fiscal year ended December 31, 2021, and the members of the Boardeach such committee attended at least seventy-five percent (75%) of Directors conducted regular meetings or conference calls with management, closely monitoring the progress of the Company’s business.
What is the role of the Board of Directors’ Audit, Compensation, and Nominating and Corporate Governance Committees?
Audit Committee.
Mr. Mason serves as Chairman of the Audit Committee, and Messrs. Chan andThe functions of the Audit Committee are set forth in the Audit Committee Charter as approved by the Board of Directors and as posted on our website at
www.naturalhealthtrendscorp.com. In general, these responsibilities include meeting with the internal financial staff of the Company and the independent registered public accounting firm engaged by the Company to review (i) the scope and findings of the annual audit, (ii) quarterly financial statements, (iii) accounting policies and procedures and (iv) the internal controls employed by the Company. The Audit Committee is also directly and solely responsible for the appointment, retention, compensation, oversight and termination of the Company’s independent registered public accounting firm. The Audit Committee’s findings and recommendations are reported to management and the Board of Directors for appropriate action.Compensation Committee.
The Compensation Committee operates pursuant to a charter approved by the Board of Directors, a copy of which is posted on our website at www.naturalhealthtrendscorp.com. The members of our Compensation Committee are Messrs. Chan andNominating and Corporate Governance Committee.
The Nominating and Corporate Governance Committee (the “Nominating Committee”) operates pursuant to a charter approved by our Board of Directors, a copy of which is posted on our website at www.naturalhealthtrendscorp.com. The members of the Nominating Committee are Messrs. Mason,A stockholder wishing to nominate an individual for election to the Board of Directors or to otherwise submit a candidate for consideration by the Nominating Committee must comply with the advance notice provisions set forth in our Bylaws, which are generally described in this proxy statement under the caption “Additional Information - Information—Stockholder Proposals for the 20192023 Annual Meeting of Stockholders.” These provisions require the timely submission of information concerning the nominee or candidate, as well as information as to the stockholder’s ownership of our common stock.
In considering Board of Director candidates, the Nominating Committee takes into consideration the Company’s “New Director Candidates” factors (as set forth in the charter of the Nominating Committee), the Company’s policy regarding stockholder-recommended director candidates as set forth above, selection criteria recommended by stockholders, and all other factors that they deem appropriate, including, but not limited to, the individual’s judgment, skill, diversity, integrity, and experience. In evaluating a candidate’sexperience with businesses and other organizations of comparable size, industry knowledge, the interplay of the candidates experience with the experience of the existing members of the Board of Directors, the number of other public and private company boards on which the candidate serves and diversity, the Nominating Committee considers the candidate’sof age, gender, ethnicity, and such other factors as it deems appropriate given the current needs of the Board of Directors and the Company to maintain a balance of knowledge, experience, background, and capability. At this time, the Nominating Committee does not have a specific process for assessing the effectiveness of its consideration of diversity in director candidates, but believes that the diversity reflected in the composition of its Board of Directors is appropriate given the nature of the Company’s business. For each new or vacant position on the Board of Directors, the charter of the Nominating Committee provides that the Nominating Committee shall ensure that a diverse slate of candidates is identified and evaluated. In evaluating whether an incumbent director should be nominated for re-election to the Board of Directors, the Nominating Committee takes into consideration the same factors established for other director candidates and also takes into account the incumbent director’s performance as a member of the Board of Directors.
The Nominating Committee hasdid not receivedreceive, on or prior to the applicable annual deadline, a candidate recommendation from any stockholder (or group of stockholders) that beneficially owns more than five percent of the Company’s common stock.
What is the composition of the Board of Directors?
As described above, the Nominating Committee takes diversity considerations into account when evaluating Board of Director candidates. Recently adopted Nasdaq Rule 5605(f) requires each listed company that has five or fewer board members to have, or explain why it does not have, at least one diverse director on the board. Inasmuch as our current Board of Directors includes a number of diverse directors within the meaning of the Nasdaq Rule, the composition of our Board of Directors is in compliance with the Nasdaq diversity requirement. The table below highlights certain features of the composition of our Board of Directors. Each of the categories listed in the below table has the meaning used in Nasdaq Rule 5605(f).
BOARD DIVERSITY MATRIX
(As of January 28, 2022)
| Total number of directors | 5 | |||||||
| Female |
| Male |
| Non-Binary |
| Did Not Disclose Gender | |
Part I: Gender Identity |
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Directors |
| 1 |
| 3 |
| — |
| 1 |
Part II: Demographic Background |
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African American or Black |
| — |
| — |
| — |
| — |
| Alaskan Native or Native American | — | — | — | — | ||||
| Asian | — | 2 | — | — | ||||
| Hispanic or Latinx | — | — | — | — | ||||
Native Hawaiian or Pacific Islander |
| — |
| — |
| — |
| — |
| White | 1 | 1 | — | — | ||||
| Two or more races or ethnicities | — | — | — | — | ||||
| LGBTQ+ | — | |||||||
| Did not disclose demographic background | 1 | |||||||
What is the Board of Directors’ role in risk oversight?
Our Board of Directors has responsibility for the oversight of risks that could affect the Company. This oversight is conducted primarily through the Board of Directors with respect to significant matters, including the strategic direction of the Company, and by the various committees of the Board of Directors in accordance with their charters. The Board of Directors continually works, with the input of its committees and of the Company’s management to assess and analyze the most likely areas of future risk for the Company. Directors also have complete and open access to all of our employees and are free to, and do, communicate directly with our management. In addition to our formal compliance efforts, the Board of Directors encourages management to promote a corporate culture that incorporates risk management into the Company’s corporate strategy and day-to-day business operations.
Our employee director did not receive compensation for his service as director. Information with respect to the compensation of the non-employee members of our Board of Directors is set forth below under the caption “Compensation of Named Executive Officers and Directors—Director Compensation.”
How do stockholders communicate with the Board of Directors?
Stockholders or other interested parties wishing to communicate with the Board of Directors, the independent directors as a group, or any individual director may do so in writing by sending an e-mail to compliance@nhtglobal.com, or by mail to Natural Health Trends Corp. at the address of its headquarters (609 Deep Valley Drive, Suite 395, Rolling Hills Estates, California 90274,(Units 1205-07, 12F, Mira Place Tower A, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong, Attention: Timothy S. Davidson). Complaints or concerns that appear to involve Mr. Davidson may be directed to the Chairman of the Audit Committee at audit.chair@nhtglobal.com; alternatively, any such complaints or concerns may be submitted anonymously at www.lighthouse-services.com/nhtglobal.audit.chair@nhtglobal.com. Complaints or concerns relating to the Company’s accounting, internal accounting controls or auditing matters, and concerns regarding questionable accounting or auditing matters are referred to the Chairman of the Audit Committee. Alternatively, any such complaints or concerns may be submitted anonymously at www.lighthouse-services.com/nhtglobal. Other Board communications are referred to the Chairman of the Board of Directors, provided that advertisements, solicitations for periodical or other subscriptions, and similar communications generally are not forwarded. The Company held an annual stockholders meeting on May 4, 2017,11, 2021. None of the members of the Board of Directors were personally in attendance at the meeting, and the Company does not, at this time, have a policy regarding director attendance at annual stockholder meetings.
Are Company employees or directors permitted to engage in hedging transactions?
No. The Company’s Insider Trading Policy prohibits employees and directors from entering into hedging transactions or similar arrangements with respect to the Company’s stock.
Does the Company have a Code of Ethics?
The Company has a Worldwide Code of Business Conduct (the “Code”) that applies to itsour employees, officers (including our principal executive officer and principal financial officer) and directors, which is posted on the Company’s website at www.naturalhealthtrendscorp.com.directors. The Code is intended to establish standards necessary to deter wrongdoing and to promote compliance with applicable governmental laws, rules and regulations, and honest and ethical conduct. The Code covers many areas of professional conduct, including conflicts of interest, financial reporting and disclosure, protection of Company assets and confidentiality. Employees have an obligation to promptly report any known or suspected violation of the Code without fear of retaliation. The Company has made the Code available on its website at https://ir.naturalhealthtrendscorp.com/governance-docs. Waiver of any provision of the Code for executive officers and directors may only be granted by the Board of Directors and any such waiver or any modification of the Code relating to such individuals will be disclosed by the Company on its website at www.naturalhealthtrendscorp.com.https://ir.naturalhealthtrendscorp.com.
INFORMATION ABOUT EXECUTIVE OFFICERS
Certain information concerning executive officers of the Company is set forth below:
Name | Age | |||
Position(s) with the Company | ||||
Chris T. Sharng | 58 | President | ||
Timothy S. Davidson | 51 | Chief Financial Officer, Senior Vice President and Corporate Secretary |
Chris T. Sharng.
Mr. Sharng has served as President of the Company since February 2007, and as a director since March 2012. He served as Executive Vice President and Chief Financial Officer of the Company from August 2004 to February 2007. Mr. Sharng also performed the functions of the principal executive officer of the Company from April 2006 to August 2006. From March 2006 to August 2006, Mr. Sharng served as a member of the Company’s Executive Management Committee, which was charged with managing the Company’s day-to-day operations while a search was conducted for a new chief executive officer for the Company. From March 2004 through July 2004, Mr. Sharng was the Chief Financial Officer of NorthPole Limited, a privately held Hong Kong-based manufacturer and distributor of outdoor recreational equipment. From October 2000 through February 2004, Mr. Sharng was the Senior Vice President and Chief Financial Officer of Ultrak Inc., which changed its name to American Building Control Inc. in 2002, a Texas-based, publicly traded company listed on The NASDAQ Stock Market that designed and manufactured security systems and products. From March 1989 through July 2000, Mr. Sharng worked at Mattel, Inc., most recently as the Vice President of International Finance. Mr. Sharng has an MBA from Columbia University and received his bachelor degree from National Taiwan University.Timothy S. Davidson.
Mr. Davidson has served as the Company’s Chief Financial Officer and Senior Vice President since February 2007, and as the Company’s Corporate Secretary since January 2014. He previously served as the Company’s Chief Accounting Officer from September 2004 to February 2007. From March 2001 to September 2004, Mr. Davidson was Corporate Controller for a telecommunications company, Celion Networks, Inc., located in Richardson, Texas. From February 2000 to February 2001, Mr. Davidson was Manager of Financial Reporting for another Dallas-based telecommunications company, IP Communications, Inc. From December 1994 through January 2000, Mr. Davidson was employed by Arthur Andersen, LLP, most recently as an Audit Manager. Mr. Davidson has a master degree in professional accounting from the University of Texas at Austin and received his bachelor degree from Texas A&M University at Commerce.The following Report of the Audit Committee does not constitute soliciting material and shall not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent the Company specifically incorporates this Report of the Audit Committee by reference therein.
We have reviewed and discussed the consolidated financial statements of the Company set forth at Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 20172021 with management of the Company and Marcum LLP (“Marcum”).
We have discussed with Marcum the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 61, “Communications with Audit Committees.”
We have received the written disclosures and the letter from Marcum required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the audit committee concerning independence, and have also discussed with Marcum that firm’s independence. The Audit Committee has concluded that Marcum’s services provided to the Company are compatible with Marcum’s independence.
Based on our review and discussions with management of the Company and Marcum referred to above, we recommended to the Board of Directors that the consolidated financial statements of the Company be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
It is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s consolidated financial statements are complete and accurate and in accordance with accounting principles generally accepted in the United States of America; that is the responsibility of management and the Company’s independent registered public accounting firm. In giving its recommendation to the Board of Directors, the Audit Committee has relied on (i) management’s representation that such financial statements have been prepared with integrity and objectivity and in conformity with accounting principles generally accepted in the United States of America and (ii) the reports of the Company’s independent registered public accounting firm with respect to such financial statements.
Members of the Audit Committee of the Board of Directors
Randall A. Mason (Chairman)
Yiu T. Chan
Ching C. Wong
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information regarding all compensation plans under which the Company’sCompany's equity securities were authorized for issuance as of December 31, 2017:
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | ||||||||||
Equity compensation plans approved by security holders | — | $ | — | 1,219,583 | |||||||||
Equity compensation plans not approved by security holders | — | $ | — | — | |||||||||
Total | — | $ | |||||||||||
— | 1,219,583 | ||||||||||||
The foregoing securities remaining available for issuance were reserved under the Company’sCompany's 2016 Equity Incentive Plan.
COMPENSATION OF NAMED EXECUTIVE OFFICERS AND DIRECTORS
Summary Named Executive Officer Compensation Discussion and Analysis
The following discussiontable provides information concerning the compensation for the years ended December 31, 2021 and analysis describes2020 of our principal executive officer and one other executive officer (collectively, the Company’s compensation objectives and policies and each element of compensation awarded to the Company’s executive officers (its “named executive officers”) during 2017, who are::
SUMMARY COMPENSATION TABLE
Name and Principal Position |
| Year |
| Salary ($) |
| Bonus ($) | Stock Awards ($)(1) |
| All Other Compensation ($)(2) |
| Total ($) | |||||
Chris T. Sharng, President |
| 2021 |
| 1,000,000 |
| — | 432,442 |
| 13,050 |
| 1,445,492 | |||||
|
| 2020 |
| 1,000,000 |
| — | — |
| 12,825 |
| 1,012,825 | |||||
Timothy S. Davidson, Chief Financial Officer, Senior Vice President and Corporate Secretary |
| 2021 |
| 350,000 |
| 32,000 | 144,757 |
| 13,050 |
| 539,807 | |||||
|
| 2020 |
| 350,000 |
| 32,000 | — |
| 12,825 |
| 394,825 | |||||
_______________________
| (1) | The amounts in this column represent the aggregate grant date fair value of phantom shares granted in 2021 to the named executive officers under the Company’s Phantom Equity Plan, as computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation – Stock Compensation, excluding estimated forfeitures. Assumptions used in the calculation of phantom share awards granted in 2021 are included in Note 9 of the Notes to Consolidated Financial Statements under “Item 8. Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2021. |
(2) | The amounts in this column represent employer matching contributions under the Company’s defined contribution plan. |
Named Executive Officer Compensation Arrangements
Chris T. Sharng. The Company is a party to an employment agreement with Mr. Sharng - President
Timothy S. Davidson. The Company is a party to an employment agreement with Mr. Davidson that provides for a base annual salary and also provides that Mr. Davidson is eligible or entitled to participate in our incentive plans (including our equity incentive plans) and other standard U.S. employee benefit programs. Mr. Davidson was paid a base annual salary of $350,000 in each of 2021 and 2020. The Compensation Committee awarded a discretionary cash bonus of $32,000 to Mr. Davidson in each of 2021 and 2020 based on his strong annual performance and aligns business objectives withduring those years. On March 15, 2021, the interestsCompensation Committee granted 41,788 phantom shares to Mr. Davidson under the Phantom Equity Plan. The phantom shares entitle Mr. Davidson to receive a cash payment equal to the fair market value of an equal number of shares of the Company’s stockholders. During 2017common stock upon the close of a vesting period, subject to a maximum payment value of $12.00 per phantom share. The phantom shares vest in eight equal three-month vesting increments, subject to the satisfaction of both a time-based vesting condition and a performance vesting condition. These vesting conditions were deemed satisfied on the grant date for the initial vesting increment, and were also satisfied for each of the following three vesting periods in 2021, resulting in aggregate cash payments to Mr. Davidson under the Phantom Equity Plan of $144,757 for 2021. Neither Mr. Davidson nor any other Company employee was designated by the Compensation Committee made no significant changes to the Company’s executive compensation policies or to the structure of its executive compensation program, having taken into account, among other things, the fact that the holders of over 99% of the votes cast at the Company’s 2015 annual meeting of stockholders approved, on an advisory basis, the compensation of the Company’s named executive officers as disclosed in the proxy statement for that annual meeting.
Outstanding Equity Awards at December 31, 2021
The following the conclusion of 2017 the Compensation Committee determined in its discretiontable provides information concerning outstanding stock awards to reduce the aggregate amounts otherwise payable under those Compensation Plans, and awarded $2.0 million under the Annual Plan and $2.2 million under the Long-Term Plan for 2017. As a result, the aggregate incentive compensation awarded under all three Compensation Plans was well below the Adjusted EBITDA Cap, representing 8.7% of the Company’s Adjusted EBITDA for 2017.
| Net Sales Performance Goal | Adjusted EBITDA Performance Goal | |||||||||||||
| Name | Base Salary Points Percentage | Performance Goal Weighting | Ratio of Actual to Target | Performance Goal Weighting | Ratio of Actual to Target | Participant Cash Award | ||||||||
| Chris T. Sharng | 32% | 75% | 60% | 25% | 60% | $ | — | |||||||
| Timothy S. Davidson | 6% | 60% | 60% | 40% | 60% | 150,000 | ||||||||
| Name | Base Salary Points Percentage | Ratio of Actual to Target Performance Goal | Participant Cash Award | Participant Stock Award(1) | ||||||||
| Chris T. Sharng | 63% | 60% | $ | 187,500 | $ | 62,500 | ||||||
| Timothy S. Davidson | 12% | 60% | 187,500 | 62,500 | ||||||||
Name |
| 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 ($) | |||
Chris T. Sharng |
| 68,011 | (1) |
| 459,754 | (3) | |
| 62,426 | (2) | 422,000 | (4) | ||||
Timothy S. Davidson |
| 26,093 | (1) |
| 176,389 | (3) | |
| 20,892 | (2) | 141,230 | (4) | ||||
_______________________
(1) | Shares of restricted stock granted to the named executive officers vest on a quarterly basis over the three-year period following the date of grant and are subject to forfeiture in the event of the executive’s termination of service to the Company under specified circumstances. | |
| (2) | Phantom shares granted to the named executive officers vest in eight equal three-month vesting increments, subject to the satisfaction of both a time-based vesting condition and a performance vesting condition. In order for the time-based vesting condition to be satisfied for each vesting period the named executive officer | |
(3) | Dollar amount is determined by multiplying the number of unvested shares of restricted stock by the closing price per share of the Company’s common stock on December 31, 2021, as reported on the NASDAQ Capital | |
| (4) | Dollar amount is determined by multiplying the number of Phantom Shares by the closing price per share of the Company’s common stock on December 31, 2021, as reported on the |
Severance and stock incentive compensation awarded to each of the named executive officers that is indicated in the table above is less than the amounts that would have been awarded based on the Company’s actual results relative to the Long-Term Plan performance goal for 2017 and the application of the metrics indicated in the table. After applying such metrics and before finalizing the actual incentive compensation to be awarded under the Long-Term Plan for 2017, and with our President’s recommendation, the Compensation Committee determined that it was appropriate to reduce the amounts otherwise payable to the named executive officers because the Long-Term Plan performance goal was not fully achieved. The Compensation Committee reallocated a portion of these reductions for the benefit of some other participants in the Long-Term Plan.
A primary feature of the Company’s employment agreements with its named executive officers provides compensation to the named executive officer in the event of the termination of the executive’s employment under certain circumstances. The employment agreements provide that if the executive’s employment with the Company is terminated voluntarily by him for “good reason,” or is terminated by the Company without “cause,” other than in connection with a “change of control,” then the executive will be entitled to the continuation of the payment of his salary, plus health and medical insurance coverage, for a period of up to one year following the termination date, or until the earlier date upon which he becomes engaged in any “competitive activity” (as defined in a separate non-competition agreement) or otherwise breaches the terms and conditions of such agreement. These severance provisions are intended to compensate the executive until he is able to secure another source of income. In the event the executive’s employment with the Company is terminated by the Company, or its successor in a change of control transaction, without “cause” during the period commencing on the date that is 30 days prior to a change of control through and including a date that is 18 months following the change of control, he is entitled to a payment equal to two years of his salary (plus health and medical insurance coverage costs). This payment is due in a lump sum 30 days after the termination date. These change of control features in the employment agreements are referred to as “double trigger” severance arrangements. This means that no severance compensation will become payable to a named executive officer only because of the occurrence of a change of control of the Company. Instead change of control severance compensation will only be payable if, within 30 days prior to a change of control through and including a date that is 18 months following the change of control, there is also a termination of the executive’s employment without “cause.” These change of control severance provisions are intended to (i) preserve morale and productivity and encourage retention of the executive in the face of the disruptive impact that a change of control of the Company is likely to have, and (ii) encourage the executive to remain focused on the business and interests of the Company’s stockholders when considering strategic alternatives that may be beneficial to those stockholders.
The named executive officers also participate in the Annual Plan and Long-Term Plan in some years (collectively, the “Incentive“Cash Incentive Plans”). Under the terms of the Cash Incentive Plans, if a participant separates from service for any reason other than on account of a “Qualifying Termination Event,” any award granted to the participant that remains undistributed shall be immediately and irrevocably forfeited in full. A “Qualifying Termination Event” is defined under the Cash Incentive Plans to include a participant’s separation from service from the Company on account of death, due to disability, involuntarily for a reason other than for cause, voluntarily for good reason, due to retirement, or upon a change in control termination. If a participant experiences a separation from service with the Company due to a Qualifying Termination Event and the performance goals relating to an award for a prior performance period have been satisfied but the proceeds of such award remained undistributed, then the Company must pay such undistributed proceeds to the participant in a single lump sum, net of applicable withholding and other taxes, within two and one-half months following the participant’s separation from service and as soon as administratively practicable. These provisions in the Cash Incentive Plans are designed to provide the named executive officers and other participants in such plans with a greater degree of certainty that if the performance goals under ana Cash Incentive Plan are achieved, then the participants will ultimately receive the entire amount of incentive compensation earned under the Cash Incentive Plan notwithstanding the occurrence of largely unforeseeable events over which the participants may have little or no control. Similarly,Finally, the restricted stock agreements to which the named executive officers are parties provide for the acceleration of vesting of the restricted stock in the event of the executive’s death or disability, or in the event the Company experiences a change in control. In such event, as previously described, the Company may elect to pay the named executive officer income tax gross-up payments designed to cover all income and employment taxes associated with the accelerated vesting of the restricted stock. Finally, theCash Incentive Plans also provide that if, in connection with a change in control, an excise tax under Section 4999 of the Internal Revenue Code would be imposed upon a participant in connection with an award under an Incentive Plan, then the Company shall pay to the participant an additional amount (the “Excise Gross-Up Payment”) such that the net amount retained by the participant, after deduction of any excise tax and any federal, state or local income tax and any excise tax upon the Excise Gross-Up Payment, shall be equal to the amount that would have been distributable under the Cash Incentive Plan as described above but for the application of Section 4999 of the Internal Revenue Code.
The accounting and tax treatment of particular forms of compensation do not materially affect the Company’s compensation decisions. However, the Company evaluates the effect of such accounting and tax treatment on an ongoing basis and makes appropriate adjustments to compensation policies where appropriate. The Company’s decision to make tax gross-up payments in connection with the awardnamed executive officers currently hold shares of restricted stock to named executive officers is an example of such an adjustment.
| Name and Principal Position | Year | Salary ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | |||||||||||||
| Chris T. Sharng, President | 2017 | $ | 1,000,000 | $ | 250,000 | (1) | $ | 460,772 | (7) | $ | 1,710,772 | |||||||
| 2016 | 993,846 | 2,400,000 | (2) | 278,283 | (8) | 3,672,129 | ||||||||||||
| 2015 | 571,923 | 5,641,053 | (3) | 763,689 | (9) | 6,976,665 | ||||||||||||
| Timothy S. Davidson, Chief Financial Officer, Senior Vice President and Corporate Secretary | 2017 | 350,000 | 400,000 | (4) | 160,054 | (10) | 910,054 | |||||||||||
| 2016 | 349,600 | 1,050,000 | (5) | 89,153 | (11) | 1,488,753 | ||||||||||||
| 2015 | 308,423 | 1,666,041 | (6) | 265,380 | (12) | 2,239,844 | ||||||||||||
| Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | ||||||||||||
| Name | Grant Date | Plan | Threshold ($) | Target ($) | Maximum ($) | |||||||
| Chris T. Sharng | 1/24/2017 | Annual Plan | — | $ | 2,096,078 | (1) | — | |||||
| 1/24/2017 | Long-Term Plan | — | 5,322,305 | (2) | — | |||||||
| Timothy S. Davidson | 1/24/2017 | Annual Plan | — | 412,665 | (1) | — | ||||||
| 1/24/2017 | Long-Term Plan | — | 1,047,829 | (2) | — | |||||||
| Name | Number of Shares Acquired on Vesting (1) | Value Realized on Vesting (2) | |||||
| Chris T. Sharng | 24,628 | $ | 583,039 | ||||
| Timothy S. Davidson | 7,873 | 186,444 | |||||
| Name | Number of Shares of Stock That Have Not Vested (1) | Market Value of Shares of Stock That Have Not Vested (2) | |||||
| Chris T. Sharng | 23,118 | $ | 351,162 | ||||
| Timothy S. Davidson | 7,921 | 120,320 | |||||
| Name | Death | Disability | Involuntary Termination | Retirement | Change of Control | |||||||||||||||
| Chris T. Sharng | ||||||||||||||||||||
| Employment Agreement | $ | — | $ | — | $ | 1,031,038 | $ | — | $ | 2,062,077 | ||||||||||
Annual Plan (1) | — | — | — | — | — | |||||||||||||||
Long-Term Plan (2) | 3,636,651 | 3,636,651 | 3,636,651 | 3,636,651 | 3,636,651 | |||||||||||||||
Restricted Stock (3) | 351,162 | 351,162 | — | — | 351,162 | |||||||||||||||
Income Tax Gross-Up (4) | 433,558 | 433,558 | — | — | 433,558 | |||||||||||||||
Excise Tax Gross-Up (5) | — | — | — | — | 669,403 | |||||||||||||||
| Timothy S. Davidson | ||||||||||||||||||||
| Employment Agreement | — | — | 371,107 | — | 742,214 | |||||||||||||||
Annual Plan (1) | — | — | — | — | — | |||||||||||||||
Long-Term Plan (2) | 1,178,630 | 1,178,630 | 1,178,630 | 1,178,630 | 1,178,630 | |||||||||||||||
Restricted Stock (3) | 120,320 | 120,320 | — | — | 120,320 | |||||||||||||||
Income Tax Gross-Up (4) | 148,552 | 148,552 | — | — | 148,552 | |||||||||||||||
Excise Tax Gross-Up (5) | — | — | — | — | 198,928 | |||||||||||||||
The named executive officers each participatecurrently hold phantom shares issued pursuant to, and may in the future receive additional phantom shares granted under, the Company’s Annual Plan and Long-Term Plan (collectively, the “Incentive Plans”). Under the terms of the Incentive Plans, if a participant separates from service for any reason other than on account of a “Qualifying Termination Event,” any award granted to the participant that remains undistributed shall be immediately and irrevocably forfeited in full. If a participant experiences a separation from service with the Company due to a Qualifying Termination Event, however, and the performance goals relating to an award for a prior performance period were satisfied but the proceeds of such award remain undistributed, then the Company must pay such undistributed proceeds to the participant in a single lump sum, net of applicable withholding and other taxes, within two and one-half months following the participant’s separation from service and as soon as administratively practicable after the Compensation Committee has certified in writing the extentPhantom Equity Plan. The related phantom share agreements to which the applicable performance goals for earning the award were satisfied.
Director Compensation
The following table provides information about the ratio of the median of the annual total compensation of our employees and the annual total compensation of Chris T. Sharng, our President and principal executive officer (“CEO”). For 2017, the annual total compensation of our median employee (excluding Mr. Sharng), was $33,629 and the annual total compensation of our CEO was $1,710,772. Based on this information, for 2017 our CEO’s annual total compensation was 51 times that of the median of the annual total compensation of all our employees.
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | All Other Compensation ($) | Total ($) | ||||||||
| George K. Broady | $ | 200,000 | — | — | $ | 200,000 | ||||||
| Yiu T. Chan | 200,000 | — | — | 200,000 | ||||||||
| Kin Y. Chung | 200,000 | — | — | 200,000 | ||||||||
| Randall A. Mason | 248,000 | — | — | 248,000 | ||||||||
DIRECTOR COMPENSATION TABLE
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | All Other Compensation ($) | Total ($) | ||||||||||||
| Brunde E. Broady (2) | 63,710 | 27,203 | — | 90,913 | ||||||||||||
George K. Broady (2) | 36,290 | 8,709 | — | 44,999 | ||||||||||||
Yiu T. Chan | 100,000 | 35,912 | — | 135,912 | ||||||||||||
Randall A. Mason | 148,000 | 46,193 | — | 194,193 | ||||||||||||
| Ching C. Wong | 100,000 | 35,912 | — | 135,912 | ||||||||||||
_______________________
| (1) | The amounts in this column represent the aggregate grant date fair value of phantom shares granted in 2021 to each non-employee director under the Company’s Phantom Equity Plan, as computed in accordance with FASB ASC Topic 718, Compensation – Stock Compensation, excluding estimated forfeitures. Assumptions used in the calculation of phantom share awards granted in 2021 are included in Note 9 of the Notes to Consolidated Financial Statements under “Item 8. Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2021. |
(2) | Mr. Broady declined to stand for re-election to the Company's Board of Directors at its 2021 annual meeting of stockholders held on May 11, 2021, at which meeting Ms. Broady was first elected to the Board of Directors. |
During 20172021, each non-employee member of our Board of Directors earned a cash retainer of $8,333 per month, plus the reimbursement of their respective out-of-pocket expenses incurred in connection with the performance of their duties as directors. Mr. Mason earned an additional retainer of $4,000 per month as Chairman of the Board of Directors in 2017. Finally,2021.
On March 15, 2021, the Compensation Committee granted 10,370 phantom shares under the Company’s Phantom Equity Plan to each of Messrs. Mason, Broady, Chan and Chung received an additionalWong as non-employee directors, and 13,333 phantom shares to Mr. Mason as non-employee director and Chairman of the Board of Directors. The phantom shares entitle each such non-employee director to receive a cash payment equal to the fair market value of $100,000 in February 2018 for their services during 2017.
ELECTION OF DIRECTORS
Under the Company’s Bylaws, the number of directors shall not be less than three nor more than eleven, with the exact number fixed from time to time by action of the stockholders or of the Board of Directors.
The Company’s Board of Directors presently consists of five directors whose terms expire at the annual meeting of stockholders. The Nominating Committee recommended, and the Board of Directors has nominated, the five directors identified below.
Biographical summaries of the five persons who have been nominated to stand for election at the annual meeting are provided below for your information. The Board of Directors recommends that these persons be elected at the annual meeting to serve until the next annual meeting of stockholders. Proxies will be voted for the election of the five nominees listed below as directors of the Company unless otherwise specified on the proxy. A plurality of the votes cast by holders of common stock present in person or represented by proxy at the annual meeting will be necessary to elect the directors listed below. If, for any reason, any of the nominees shall be unable or unwilling to serve, the proxies will be voted for a substitute nominee who will be designated by the Board of Directors at the annual meeting. Stockholders may withhold authority from voting for one or more nominees by marking the appropriate boxes on the enclosed proxy card. Withheld votes shall be counted separately and shall be used for purposes of calculating whether a quorum is present at the meeting.
Biographical Summaries of Nominees for the Board of Directors
Brunde E. Broady. Ms. Broady, age 79,57, has served asbeen a director of the Company since October 2008. HeMay 2021. She has been involved in business for more than 40 years, and he is currently active in the direct selling industry and is the principal owner of several privately held companies in the fields of telecommunications and enterprise software. He currently serves as Chairman of the Board of SoloProtect US, LLC, a provider of lone worker safety solutions, and previouslysince 2010 served as President and Chief Executive Officer of that companyBroady Health Sciences, LLC, a health science product development company. In addition, Ms. Broady has since September 2019 served as a consultant to Management Controls, Inc. (“MCI”), which provides software technology for contractor management, and from 2013May 2017 through May 2020 served as a consultant to 2014. HeSoloProtect US, LLC (“SoloProtect”), which provides technologies to monitor worker safety. Ms. Broady’s consulting responsibilities for MCI and SoloProtect involve reviewing the business performance and making investment decisions with respect to such companies. Ms. Broady has since October 2019 also served as Chairmana director of Neurodon Corporation, a privately-held company that develops disease-modifying drugs for neurodegeneration, diabetes, and other life-threatening diseases. Ms. Broady has over a number of years participated in a family-controlled venture firm that has invested in both start-up and mature companies in a variety of industries, including nutraceuticals, software, technology and biopharma. Ms. Broady has a bachelor degree in finance from Southern Methodist University and an MBA from Yale University. The Company is a party to a Royalty Agreement and License with Broady Health Sciences, LLC to which the BoardCompany pays royalties.
Ms. Broady, a daughter of Kings III of America, an emergency communications company, from 2014 until the sale of that company in 2017, and served as Chief Executive Officer of that company prior to 2014. He founded Network Security Corporation, Interactive Technologies Inc. and Ultrak Inc., and brought each of them public on The NASDAQ Stock Market. He was chairman of all three organizations and CEO of both Network Security and Ultrak. All three companies were involved in electronic security, including CCTV and access control. Earlier in his career, Mr.former Company director George K. Broady, was an investment analysthas over many years gained a deep familiarity with both a private investment firm, Campbell Henderson & Co., and with the First National Bank in Dallas. Mr. Broady served twice in the U.S. Army and holds a Bachelor of Science degree from Iowa State University.
Yiu T. Chan.
Mr. Chan, ageMr. Chan has extensive experience in advising companies operating in China, helping to navigate complicated tax and business compliance matters. Mr. Chan holds a bachelor degree in accounting from City University of Hong Kong and is a member of both the Hong Kong Institute of Certified Public Accountants and Association of Chartered Certified Accountants.
Ching C. Wong. Dr. Wong, age 63, has been a director of the Company since June 2020 and served as a consultant to the Company from 2016 until immediately prior to his election as a director of the Company. He was also an employee of the Company from 2004 to 2007 and 2009 to 2010. Dr. Wong served as Corporate Controller from 2000 to 2004 for North Pole Limited, a Hong Kong-based manufacturing and trading company of outdoor consumer goods and also held several senior Asia regional positions for two US publicly-held companies. Dr. Wong obtained a PhD in Marketing Management from Shanghai University of Finance and Economics (SUFE) in 2011 and a law degree from Tsinghua University, Beijing in 2006. Dr. Wong is a current fellow member of the Association of Chartered Certified Accountants, UK.
Dr. Wong has been a life-long entrepreneur and businessperson, active in Greater China, which is our most important market. He has extensive experience in business practices, culture and protocol, particularly those of Hong Kong and China.
Chris T. Sharng. The biographical information for Mr. Sharng, the Company’s President, is set forth above under the caption “Executive“Information About Executive Officers.”
The Board of Directors recommends that stockholders vote “FOR” each of the persons nominated by the Board of Directors. Unless otherwise instructed or unless authority to vote is withheld, the enclosed proxy will be voted FOR the election of the above listed nominees and AGAINST any other nominees.
RATIFICATION OF THE APPOINTMENT OF MARCUM LLP AS THE COMPANY
The Audit Committee has appointed Marcum LLP (“Marcum”) as the Company’s independent registered public accounting firm to perform an integrated audit of its consolidated financial statements for fiscal year ending December 31, 2018 and its internal control over financial reporting as of December 31, 2018.
The Audit Committee is directly responsible for the appointment and retention of the Company’s independent registered public accounting firm. Although ratificationRatification by stockholders of the appointment of Marcum is an advisory matter that is not binding on the Company because it is not required by the Company’s organizational documents or applicable law,law. Nevertheless, the Audit Committee has determined that requesting ratification by stockholders of its appointment of Marcum as the Company’s independent registered public accounting firm is a matter of good corporate practice. If the Company’s stockholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain Marcum, but may still determine to retain them. Even if the selection is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interest of the Company and its stockholders.
Audit Firms
During the fiscal years ended December 31, 20152021 and 2016 and through March 13, 2017, (i) there were no disagreements with Lane Gorman on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Lane Gorman, would have caused Lane Gorman to make reference thereto in its reports on the financial statements for such years, and (ii) there were no reportable events as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K.
Audit Fees.
FeesAudit-Related Fees
Tax Fees
. No taxAll Other Fees
.Pre-Approval Policies and Procedures for Audit and Non-Audit Services
The policy of the Company’s Audit Committee is to pre-approve all audit and permissible non-audit services to be performed by the Company’s independent registered public accounting firm during the fiscal year. Before engaging an independent registered public accountant firm to render audit or non-audit services, the engagement is approved by the Company’s Audit Committee or the engagement to render services is entered into pursuant to pre-approval policies and procedures established by the Audit Committee.
Representatives of Marcum are not expected to be present at the annual meeting and therefore will not have the opportunity to make a statement or be available to respond to questions.
The Board of Directors recommends that stockholders vote “FOR” the ratification of the appointment of Marcum LLP as the Company’s
independent registered public accounting firm for fiscal year ending December 31,At the date of this proxy statement, the Company has no knowledge of any business other than that described above that will be presented at the annual meeting. If any other matter is properly brought before the meeting for action by stockholders, proxies in the enclosed form returned to the Company will be voted in accordance with the recommendation of the Board of Directors or, in the absence of such a recommendation, in accordance with the judgment of the proxy holder.
ADDITIONAL INFORMATION
Stockholder Proposals for the 20192023 Annual Meeting of Stockholders
Under Securities and Exchange Commission rules, if a stockholder wants us to include a proposal in our proxy statement and form of proxy for our 20192023 annual meeting of stockholders, our Corporate Secretary must receive the proposal at our principal executive offices by November 27, 2018.28, 2022. Stockholders interested in submitting such a proposal are advised to contact knowledgeable counsel with regard to the detailed requirements of applicable securities laws. The submission of a stockholder proposal does not guarantee that it will be included in our proxy statement.
Under our Bylaws, stockholders must follow certain procedures and meet various requirements to nominate a person for election as a director or to introduce an item of business at our annual meeting. Under these procedures and requirements, stockholders must submit the proposed nominee or item of business by delivering a notice addressed to our Corporate Secretary at our principal executive offices. We must receive notice as follows:
Normally we must receive notice of a stockholder's intention to introduce a nomination or proposed item of business for an annual meeting not less than 90 days nor more than 120 days before the first anniversary of the previous year's annual meeting of stockholders. Accordingly, a stockholder who intends to submit a nomination or proposal for our 20192023 annual meeting must do so no later than February 8, 2019.9, 2023.
• | However, if we hold our 2023 annual meeting on a date that is more than 30 days before, or more than 70 days after, the anniversary date of our 2022 annual meeting of stockholders, we must receive the notice no later than the close of business on the tenth day following the day on which public announcement of the date of such annual meeting is first made. |
• | A stockholder's submission must include certain specified information concerning the nominee or proposal, as the case may be, as well as information as to the stockholder's ownership of our common stock. Nominations or proposals not meeting these requirements will not be considered at our 2023 annual meeting. |
• | If a stockholder does not comply with the requirements of this advance notice provision, the proxies may exercise discretionary voting authority under proxies it solicits to vote in accordance with their best judgment on any such nomination or proposal submitted by a stockholder, if presented at the meeting. |
To make any submission or to obtain additional information as to the proper form and content of submissions, stockholders should contact our Corporate Secretary, Timothy S. Davidson, in writing at 609 Deep Valley Drive, Suite 395, Rolling Hills Estates, California 90274.
HOUSEHOLDING INFORMATION
Unless the Company has received contrary instructions, the Company may send a single copy of its proxy materials (including the Notice of Annual Meeting, Annual Report on Form 10-K, this proxy statement and the proxy card) or Notice of Internet Availability of Proxy Materials to any household at which two or more stockholders reside if the Company believes the stockholders are members of the same family. This process, known as “householding,” reduces the volume of duplicate information received at any one household and helps to reduce the Company’s expenses. However, if stockholders prefer to receive multiple sets of proxy materials and/or Notices of Internet Availability at the same address this year or in future years, the stockholders should follow the instructions described below. Similarly, if an address is shared with another stockholder and together both of the stockholders would like to receive only a single set of the Company’s proxy materials or Notice of Internet Availability of Proxy Materials, the stockholders should follow these instructions:
If the shares are registered in the name of the stockholder, the stockholder should contact the Company at its offices at 609 Deep Valley Drive, Suite 395, Rolling Hills Estates, California 90274,Units 1205-07, 12F, Mira Place Tower A, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong, Attention: Timothy S. Davidson, or by telephone at 310-541-0888,+852-3107-0800, to inform the Company of its request. If a broker, bank or other agent holds the shares, the stockholder should contact the broker, bank or other agent directly.
