DEF 14A of One Stop Systems, Inc., Apr 15, 2024

DEF 14A of One Stop Systems, Inc.

Filed Apr 15, 2024 · FY20230000950170-24-044398

Open on EDGAR

  1. Election of Directors

    Election of Directors

  2. Nomination of Directors

    Nomination of Directors The Nominations and Corporate Governance Committee of our board of directors (the “Nominations Committee”) is charged with making recommendations to our board of directors regarding qualified candidates to serve as members of the board of directors. The Nominations Committee’s goal is to assemble a board of directors with the skills and characteristics that, taken as a whole, will assure a strong board of directors with experience and expertise relevant to our business and the industries in which we operate, corporate governance practices, risk management, and the capital markets. The Nominations Committee believes that candidates for director should have certain minimum qualifications, including personal integrity, strength of character, an inquiring and independent mind, practical wisdom, and mature judgment. In evaluating director nominees, the Nominations Committee considers the following factors: 1. The appropriate size of the board of directors; 2. The Company’s needs with respect to the particular talents and experience of its directors; 3. The knowledge, skills, and experience of nominees, including without limitation experience in technology, business, finance, the industries that we target, risk management, conflict resolution, corporate governance, cultural competence, leadership, administration, and/or public service; and 4. Relevant Nasdaq, Securities and Exchange Commission (“SEC”), state, and investor recommendations and requirements. Other than as required by Nasdaq, the SEC or other state rules and regulations, there are no stated minimum criteria for director nominees, and the Nominations Committee may consider such other factors as it deems to be in the Company’s and its stockholders’ best interests. Although the Company does not have a formal policy with regard to the consideration of diversity in identifying director nominees, the Nominations Committee is committed to complying with the diversity requirements recently adopted by Nasdaq. The Nominations Committee does, however, believe it appropriate for at least one member of the board of directors to meet the criteria for an “audit committee financial expert,” as defined by SEC rules, and for a majority of the members of the board of directors to meet the definition of an “independent director” under Nasdaq listing standards. The Nominations Committee identifies nominees by first evaluating the current members of the board of directors willing to continue in service. Current members of the board of directors with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination, but the Nominations Committee at all times seeks to balance the value of continuity of service by existing members of the board of directors with that of obtaining a new perspective. In the event that the Nominations Committee determines that an existing member is no longer the best suited candidate to serve as a director of the Company going forward, or if any member of the board of directors does not wish to continue in service, the Nominations Committee’s policy is to not re-nominate that member for reelection. The Nominations Committee identifies the desired skills and experience of prospective nominees, and then uses its network and external resources to solicit and compile a list of eligible candidates. Our Nominations Committee has, from time to time, received correspondence from shareholders that it considers, researches and actively takes into account in making recommendations to the Board with respect to prospective director nominees and other relevant matters. Stockholders wishing to recommend a candidate for consideration by the Nominations Committee as a prospective nominee for election as a director may do so by contacting the chair of our Nominations Committee and providing information regarding such proposed candidate. Alternatively, stockholders who wish to nominate alternative individuals for election at our annual meetings of stockholders may do so by following the process outlined in Section 2.5 of our amended and restated bylaws, as amended to date, and Rule 14a-19 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and sending a written notice to the Nominations Committee, Attn: Chairman, One Stop Systems, Inc., 2235 Enterprise St. #110, Escondido, CA 92029, naming the proposed candidate and providing detailed biographical, contact and other required information regarding such proposed candidate. To our knowledge, there are currently no legal proceedings, and during the past ten years there have been no legal proceedings, that we believe are required to be disclose pursuant to Item 4.01(f) of Regulation S-K. There are no material proceedings to which any director, officer, affiliate, or owner of record or beneficial owner of more than 5% of any class of voting securities of the Company, or any associates of any such persons, is a party adverse to the Company or any of our subsidiaries, and to our knowledge, none of such persons has a material interest adverse to the Company or any of its subsidiaries. Other than as disclosed below, during the last five years, none of our directors held any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act, or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940. Our board of directors has undergone a significant reprofiling over the past year in order to further align its skillsets with the Company’s revised strategic direction and in response to feedback received by stockholders. In September 2023, two of our former directors stepped down and were replaced by Messrs. Knowles and Dumont. On November 6, 2023, our board or directors temporarily increased the size of the board from seven members to eight members, effective November 10, 2023, and appointed Mr. Manko to fill the resulting vacancy. On November 27, 2023, our board or directors adopted a resolution to further temporarily increase the size of the board form eight members to nine members, effective immediately, and to subsequently decrease the size of the board down to seven members, effective upon closing of the polls for voting on the election of directors at the Annual Meeting. Mr. Herbets was appointed to fill the vacancy resulting from this second temporary increase. As part of the Board’s reprofiling process, it considered adding members who have significant expertise in the defense contracting industry, the technology industry, senior executive experience, corporate governance expertise and capital markets and investment experience. Additionally, it considered the importance of the continuity of service and familiarity of certain board members with the Company and its practices. After extensive independent research as to state of the art industry practices for similar companies and discussion among members of our board of directors, the Nominations Committee recommended the slate set forth below for election by our stockholders at the Annual Meeting. Our board of directors is committed to employing strong corporate governance practices for companies of similar size to One Stop Systems, Inc. The Nominations Committee and the board as a whole review our corporate governance policies and practices on an annual basis to determine whether changes are necessary or appropriate in order to align with best practices and to enhance stockholder value. To that end, the board of directors considers stockholder recommendations with respect to the Company’s corporate governance practices and procedures, as well as those practices of its peers and other public companies similar in size and industry as the Company.

  3. Nomination of Directors

    In accordance with the resolution adopted by the board of directors on November 27, 2023, at the Annual Meeting, only seven directors will be elected to our board of directors. Proxies cannot be voted for a greater number of persons than the number of nominees named, below. The Nominations Committee has recommended, and our board of directors has nominated, Kenneth Potashner, Michael Knowles, Greg Matz, Gioia Messinger, Retired Vice Admiral Mike Dumont, Joseph Manko, Jr., and Mitchell Herbets as nominees for election as members of our board of directors at the Annual Meeting, to hold office until our next annual meeting of stockholders or until such director’s successor is duly elected and qualified, subject to such director’s earlier death, resignation or removal. David Raun and Kimberly Sentovich, each current members of our board of directors, have not been nominated for re-election to the board. However, they will both continue to serve as directors until their term concludes at the Annual Meeting.

  4. Information Regarding Director Nominees

    Information Regarding Director Nominees

  5. Information Regarding Director Nominees

    | Name | Age | Position | | Director Nominees: | | | | Kenneth Potashner | 66 | Chairman | | Mike Knowles | 57 | President, Chief Executive Officer and Director | | Gioia Messinger | 61 | Director | | Greg Matz | 64 | Director | | Mike Dumont | 63 | Director | | Joseph Manko, Jr. | 58 | Director | | Mitchell Herbets | 66 | Director |

  6. Board of Directors

    Board of Directors Kenneth Potashner has served as Chairman of our board of directors since May 2019. Mr. Potashner has extensive board experience in high growth, high technology global organizations. He served as Chairman of Newport Corporation, where he provided 18 years of service culminating in the sale of Newport in 2016 for $980 million. Mr. Potashner served as Chairman of the board of Maxwell Technologies and directed it through a period of rapid expansion. He has also served on the board of California Micro Devices, SonicBlue Inc, and Singapore Technologies, all publicly traded companies. Mr. Potashner is currently serving as the Chairman of Generation Esports and on the board of directors of Collegiate Sports Management Group (CSMG) and Prologue Mobile. He has also served on the board of many private companies as well, including DynaOptics, MyOffice.com, Underground Elephant, Home Bay, Lumedyne, Events.com, Launch Factory, PowerDot and several others. Several of the private companies that Mr. Potashner has had affiliations with have achieved successful exits or significant financings. Mr. Potashner has a BSEE from Lafayette College and an MSEE from SMU, Executive certifications from Columbia and INSEAD in Lausanne, Switzerland. He also has an Advanced Professional Director certification from American Board of Directors. Our board of directors believes Mr. Potashner’s public company executive management, corporate governance, capital markets, mergers and acquisitions and corporate and growth strategy experience, along with his industry relationships and experience serving on public company boards of directors, make him well suited to serve as a member of our board of directors. Mike Knowles has served as our president and chief executive officer since June 2023 and as a director on our board since September 2023. He has more than three decades of leadership experience in global aerospace and defense markets, having led successful business captures resulting in billion-dollar program and product portfolios. Prior to joining the Company, Mr. Knowles served as vice president and general manager of C5ISR Systems at Curtiss Wright Defense Solutions from October 2022 to June 2023. Prior to that, from May 2014 to October 2022, Mr. Knowles worked at Cubic Corporation (“Cubic”), where he served in various roles, culminating in his roles as a senior vice president of Cubic and president of Cubic’s Mission and Performance Solutions business, in which role he led a $700 million global business unit with 2,000 employees. While at Cubic, his C5ISR hardware, software and solutions portfolios included rugged networking/computing at the edge, secure and expeditionary communications, intelligence processing, assessment distribution from enterprise-to-edge, high frequency/low SWAP RF components for electronic warfare, space, and 5G applications; and live, virtual, and constructive (LVC) multi-domain training systems. Before Cubic, Mr. Knowles worked at Rockwell Collins from 2004 to 2014 and at Lockheed Martin from 1998 to 2003, both of which are well recognized defense contractors. Prior to that, Mr. Knowles served in the United States Navy for 20 years as a Naval Flight Officer and Aerospace Engineering Duty Officer, with 10 years active duty and 10 years in the Navy Reserves, where he retired as a Commander. He received a BS in Aerospace Engineering from the United States Naval Academy, an MS in Aerospace Engineering from the Naval Postgraduate School, was a graduate of the US Naval Test Pilot School and received an MBA from George Mason University. Our board of directors believes Mr. Knowles’ senior leadership experience in the defense and technology industries, coupled with the fact that Mr. Knowles serves as the Company’s president and chief executive officer, make him well suited to serve as a member of our board of directors. Gioia Messinger joined our board of directors in July 2020. Since 2012, Ms. Messinger has served as founder and principal of LinkedObjects, Inc., a strategic advisory services business focused on digital transformation brought about by AI and the IoT. From 2004 to 2012, Ms. Messinger served as founder and chief executive officer of Avaak, Inc., now Arlo Technologies (NYSE:ARLO), a leading home security systems company. From 1989 to 2004, Ms. Messinger served as founder and president of SUMMIT Design Technologies, Inc., an engineering services firm with customers in the commercial, defense and healthcare sectors. Ms. Messinger currently serves on the board of directors of Guild Holdings Company (NYSE:GHLD), a nationally recognized residential mortgage lender and Hunter Industries, a global manufacturer of irrigation and outdoor lighting equipment. She previously served on the board of Vicon Industries (NYSE:VCON). Ms. Messinger is a member of the dean’s council of advisors at the University of California San Diego, Jacobs School of Engineering, and is a member of the Latino Corporate Directors Association. Ms. Messinger obtained her Master of Business Administration degree from the Paul Merage School of Business at the University of California, Irvine and bachelor of science in Computer Engineering from the University of California, San Diego. She has a certificate in Cyber Risk Governance for US Public Companies. Our board of directors believes that Ms. Messinger is well qualified to serve as a member of our board of directors because of her business operations, corporate strategy and technical skills, cybersecurity knowledge, thought leadership and industry relationships, as well as her experience serving on public company boards. Greg Matz, CPA, joined our board of directors in July 2020, and is an experienced financial executive, having served in controller, Vice President and CFO roles for over two decades. Now retired, Mr. Matz is currently serving as a member of the board of directors and audit committee chair for Dare Bioscience, Inc. (NASDAQ: DARE), a public clinical-stage biopharmaceutical company. Mr. Matz also chairs the Dean’s Council for the University of San Francisco’s School of Management. From 2011 to 2016, he worked for The Cooper Companies, Inc. (NYSE: COO), holding roles as the Senior Vice President and Chief Financial Officer and Chief Risk Officer. From 2010 to 2011, Mr. Matz was the Chief Financial Officer for CooperVision, a business unit of The Cooper Companies, Inc. Prior to joining The Cooper Companies, Inc., he held key management roles in finance and marketing at Agilent Technologies and Hewlett Packard. He began his career at KPMG and is a CPA with an active certification. Mr. Matz graduated from the University of San Francisco with a B.S. in Business Administration and completed the University of Pennsylvania, The Wharton School’s Advanced Management Program. Mr. Matz is also a National Association of Corporate Directors (“NACD”) Board Leadership Fellow and has earned the NACD Directorship Certification credential. In addition, Mr. Matz has received a certification from NACD / Carnegie Mellon University in Cybersecurity Oversight. Our board of directors believes Mr. Matz’s experience as a chief financial officer and chief risk officer of a public company and his corporate experience in financial functions, risk management, capital markets and corporate strategy make him well suited to serve as a member of our board of directors.

  7. Board of Directors

    Mike Dumont joined our board in September 2023 and brings expertise in government, aerospace and defense, risk management and organizational leadership. He is a retired U.S. Navy three-star vice admiral and retired U.S. Government senior executive. His executive career in both the military and civil service includes having served as a senior Federal prosecutor specializing in white collar crimes and corporate matters, the principal director for counterterrorism and special operations in the U.S. Department of Defense, the Principal Deputy Assistant Secretary of Defense for Special Operations, the deputy commander of U.S. Northern Command, and vice commander of North American Aerospace Defense Command. He oversaw military responses to border security, natural disasters, and the COVID-19 pandemic in the United States, where AI solutions were deployed to meet operational demands. He also led teams in providing aerospace warning, aerospace control, missile defense and maritime warning, and generating globally integrated effects using information enabled by AI. Adm. Dumont is the interim president of the California State University Maritime Academy and serves on the board of directors of the Marines’ Memorial Association, the board of advisors of Dataminr, Inc., and the national security advisory council of the U.S. Global Leadership Coalition. He holds a B.A. degree from the University of Southern Maine, a M.S. degree from the National War College, and a J.D. degree from Suffolk University Law School. Our board of directors believes Mr. Dumont’s experience as a U.S. Government senior executive, coupled with his organizational leadership, risk management skills and defense market expertise, make him well suited to serve as a member of our board of directors. Joseph Manko, Jr. joined our board of directors, in November 2023, to fill a vacancy created by the temporary board expansion discussed above. Mr. Manko has been the Senior Principal in Horton Capital Management LLC, the investment manager for the Horton Capital Partners Fund, LP (“Horton Fund”) since 2013. The Horton Fund is a significant shareholder in the Company. Mr. Manko has over 20 years of investment experience in the asset management, investment banking, private equity and corporate securities markets. From 2005 to 2010, Mr. Manko was a Partner and Chief Executive Officer of Switzerland-based BZ Fund Management Limited, where he was responsible for corporate finance, private equity investments, three public equity funds and the firm’s Special Situations and Event-Driven strategies. Prior to that Mr. Manko was a Managing Director with Deutsche Bank in London. He began his investment banking career at Merrill Lynch as a Vice President in Hong Kong and prior to that, Mr. Manko was a corporate finance attorney at Skadden, Arps, Slate, Meagher & Flom LLP. Mr. Manko has served on the board of several public companies and has advised numerous companies in the industrial and technology industries and currently serves as a director of Koru Medical, Inc. and Chairman of Safeguard Scientifics, Inc., and previously served as a director of Wireless Telecom Group, Inc., and Creative Realities, Inc. Mr. Manko earned both his B.A. and J.D. from the University of Pennsylvania. Our board of directors believes Mr. Manko’s experience in the investment industry, capital markets, public company board service and best corporate governance practices make him well suited to serve as a member of our board of directors. Mitchell H. Herbets joined our board of directors in November 2023, to fill a vacancy created by the temporary board expansion discussed above. Mr. Herbets currently serves as non-executive chairman of Thales Defense and Security, a global technology company that provides advanced technology equipment to the U.S. defense and federal technology markets. His other current chairman positions include: Safran Federal Systems (formerly Orolia Defense & Security), a provider of resilient positioning, navigation and timing (PNT) solutions and custom engineering services to federal agencies, defense organizations and contractors, Photonis Defense, provider of advanced products in the fields of broad bandwidth, high power microwave amplifiers and cutting-edge night and digital vision technologies to U.S. and allied governments, and iDirect Government, a provider of tactical satellite communications systems to U.S. Primes for the U.S. Department of Defense. Herbets previously served on the board of Wireless Telecom Group (WTT), a NYSE American-listed provider of infrastructure for cellular systems, LTE and 5G waveforms, and telecommunications test equipment company before it was acquired by Maury Microwave earlier this year. He earlier served as president and CEO of Thales Communications (now Thales Defense and Security), a global leader in tactical radio technology. Prior to being appointed a president and CEO of Thales, he served in a number of senior executive positions at the company, including leadership roles in program management, engineering, and business development. Before Thales, he served four years in U.S. Army with the final rank of captain. He holds a bachelor’s degree in electrical engineering from Lehigh University, where he currently serves as a member of the advisory councils of Lehigh University’s Engineering College and its Electrical & Computer Engineering Department. He earned his MBA from George Washington University. Our board of directors believes Mr. Herbets’ experience as a senior executive in the defense industry, corporate governance experience, organizational leadership skills and experience serving on the boards of public companies make him well suited to serve as a member of our board of directors. The election of directors will be decided by a plurality of the votes cast. If a quorum is present and voting at the Annual Meeting, the seven nominees receiving the highest number of “for” votes will be elected to our board of directors. Abstentions, votes “against” and broker non-votes will be counted only for purposes of determining whether a quorum is present, but will have no effect on the outcome of this proposal.

  8. Board Composition and Election of Directors

    Board Composition and Election of Directors

  9. Director Compensation

    Director Compensation The following table sets forth information for the year ended December 31, 2023, regarding the compensation awarded to, earned by, or paid to our non-employee directors who served on our board of directors during 2023.

  10. Director Compensation

    | Name | Fees earned or paid in cash ($) | Stock awards ($) | RSU awards ($) | Non-equity incentive plan compensation ($) | Nonqualified deferred compensation earnings ($) | All other compensation ($) | Total ($) | | Ken Potashner | $47,840 | $70,145 | $- | $- | $- | $30,062 | $148,047 | | David Raun (1) | $20,404 | $- | $- | $- | $- | $- | $20,404 | | Kimberly Sentovich | $41,860 | $- | $- | $- | $- | $- | $41,860 | | Gioia Messinger | $37,375 | $- | $- | $- | $- | $10,258 | $47,633 | | Greg Matz | $41,860 | $- | $- | $- | $- | $- | $41,860 | | Mike Dumont (2) | $8,970 | $- | $- | $- | $- | $- | $8,970 | | Joseph Manko, Jr. (3) | $- | $- | $- | $- | $- | $- | $- | | Mitch Herbets (4) | $3,413 | $- | $- | $- | $- | $- | $3,413 | | Jack Harrison (5) | $31,395 | $- | $- | $- | $- | $10,258 | $41,653 | | Sita Lowman (6) | $26,910 | $- | $- | $- | $- | $- | $26,910 |

  11. Director Compensation

    (1) Mr. Raun served as the Company’s president and chief executive officer until June 5, 2023. Mr. Raun’s entitlement to compensation for his services as a director of the Company commenced as of the effective date of his resignation as on officer of the Company. See the “Summary Compensation Table” and related narrative disclosures included elsewhere in this Proxy Statement for information regarding compensation paid to Mr. Raun for his services as an executive officer of the Company. (2) Mr. Dumont was appointed as a director of the Company effective September 30, 2023. (3) Mr. Manko was appointed as a director of the Company effective November 6, 2023. Mr. Manko has voluntarily elected to waive the right to receive compensation for his services as a director until the size of the board is decreased back down to seven in connection with the Annual Meeting, and as a result did not receive any compensation for such services in 2023. (4) Mr. Herbets was appointed as a director of the Company effective November 27, 2023. Mr. Harrison and Ms. Lowman resigned from the board of directors and the respective committees on which they served, effective September 30, 2023. During the year ended December 31, 2023, our non-executive directors were entitled to receive the following cash payments as compensation for serving on our board: All non-executive board members are entitled to quarterly payments of $8,970. • The chairman of our board is entitled to an additional quarterly cash payment of $2,990. • The chair of each committee of our board is entitled to an additional quarterly cash payment of $1,495. In previous years, in addition to cash compensation, our non-executive directors were also entitled to receive RSUs as further consideration for their board services. However, except as set forth below, we did not grant any equity awards to our non-executive directors in the year ended December 31, 2023, due to the extremely limited number of shares available for issuance under our 2017 Plan. The board may elect to reinstate our prior practices to grant equity to our non-executive directors at such time that our 2017 Plan is amended to increase the number of shares authorized for issuance thereunder, which amendment will require shareholder approval. In addition to the foregoing, in connection with the transition to a new chief executive officer and president, our board of directors constituted a new committee of the board, the strategic transition committee, to assist in the identification, transition and retention of a successor chief executive officer, including to work with the engaged search firm to accomplish the foregoing, and to perform other duties as may be necessary or desirable from time to time in connection with the reorganization of the Company. Members of the strategic transaction committee consisted of Jack Harrison (chair of the committee), Gioia Messinger and Kenneth Potashner. The strategic transition committee was dissolved in June 2023. As additional compensation for the services rendered as members of the strategic transition committee (i) from January 1, 2023 through June 5, 2023, Mr. Harrison and Ms. Messinger received $2,000 per month in cash (for a total of $10,257.53 each), which cash payment was paid to each of the relevant members in one lump sum in June 2023, and (ii) Mr. Potashner was entitled to receive (A) 3,333 shares of Company common stock per month, commencing November 1, 2022 and continuing through June 5, 2023, which shares amounted to 23,778 shares in the aggregate and were issued to Mr. Potashner in a single grant in June 2023, and (B) a one-time cash payment equal to 30% of the total value of the shares issued to Mr. Potashner to cover taxes payable in connection with the issuance of such shares (amounting to $30,062.19).

  12. Summary Compensation Table

    Summary Compensation Table The following table provides information regarding the total compensation for services rendered in all capacities that was earned by each individual who served (i) as our principal executive officer at any time during 2023, and (ii) our two most highly compensated executive officers other than our principal executive officer who were serving as executive officers as of December 31, 2023.

  13. Summary Compensation Table

    | Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) (1) | Option Awards (2) | All Other Compensation ($) (3) | Total ($) | | Mike Knowles (4) | 2023 | $256,539 | $- | $1,180,000 | $796,000 | $13,034 | $2,245,573 | | President and Chief Executive Officer | 2022 | $- | $- | $- | $- | $- | $- | | David Raun (4) | 2023 | $353,477 | $142,418 | $- | $- | $15,960 | $511,855 | | Former President and Chief Executive Officer | 2022 | $355,231 | $293,360 | $783,900 | $- | $27,166 | $1,459,657 | | Jim Ison | 2023 | $290,004 | $25,900 | $201,400 | $- | $38,108 | $555,412 | | Chief Product Officer | 2022 | $283,039 | $115,299 | $220,080 | $- | $31,765 | $650,182 | | John W. Morrison Jr. | 2023 | $308,212 | $38,600 | $249,100 | $- | $38,596 | $634,508 | | Chief Financial Officer | 2022 | $298,477 | $172,108 | $251,520 | $- | $31,648 | $753,753 |

  14. Summary Compensation Table

    (1) Amounts reflect the full grant-date fair value of stock awards, consisting of restricted stock units, granted during the relevant fiscal year computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual. We provide information regarding the assumptions used to calculate the value of all stock awards made to our officers in Note 10 to the audited consolidated financial statements for the year ended December 31, 2023. (2) Represents the fair market value of options on date of issuance using Black Scholes option pricing model. (3) Represents payment of health insurance premiums and 401(k) contributions. (4) Mr. Raun stepped down as the Company's chief executive officer and president and Mr. Knowles was appointed to serve in such roles, in each case effective June 5, 2023.

  15. Outstanding Equity Awards at Fiscal Year End

    Outstanding Equity Awards at Fiscal Year End The following table summarizes the number of shares of common stock underlying outstanding equity incentive plan awards for each named executive officer as of December 31, 2023.

  16. Outstanding Equity Awards at Fiscal Year End

    | | | Option Awards | | | | | Stock Awards | | | | | Name | Grant Date | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Equity Incentive plan awards: Number of securities underlying unexercised unearned options (#) | Option Exercise Price ($) | Option expiration date | Number of shares or units of stock that have not vested (#) | Market value of shares of units of stock that have not vested ($) | Equity Incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) | Equity Incentive plan awards: Market or payout value of unearned share, units or other right that have not vested ($) | | Mike Knowles | 6/5/2023 | - | 400,000 | - | $2.95 | 6/5/2033 | - | - | - | - | | | 6/5/2023 | - | - | - | $0.00 | 6/5/2026 | 400,000 | 840,000 | - | - | | David Raun (1) | 4/18/2017 | 10,000 | - | - | $1.95 | 4/17/2027 | - | - | - | - | | | 6/23/2020 | 412,125 | - | - | $2.14 | 6/5/2024 | - | - | - | - | | Jim Ison | 4/18/2017 | 20,000 | - | - | $1.95 | 4/18/2027 | - | - | - | - | | | 4/2/2016 | 23,991 | - | - | $1.08 | 4/2/2026 | - | - | - | - | | | 3/16/2023 | - | - | - | - | - | 76,000 | 159,600 | - | - | | | 2/3/2022 | - | - | - | - | - | 28,000 | 58,800 | - | - | | | 5/19/2021 | - | - | - | - | - | 2,500 | 5,250 | - | - | | John W. Morrison Jr. | 3/16/2023 | - | - | - | - | - | 94,000 | 197,400 | - | - | | | 2/3/2022 | - | - | - | - | - | 32,000 | 67,200 | - | - | | | 5/19/2021 | - | - | - | - | - | 3,334 | 7,001 | - | - |

  17. Outstanding Equity Awards at Fiscal Year End

    (1) Mr. Raun stepped down from his roles as president and chief executive officer of the Company on June 5, 2023, and Mr. Knowles was appointed to such roles effective as of the same day.

  18. PAY VERSUS PERFORMANCE

    PAY VERSUS PERFORMANCE As required by Section 953(a) of the Dodd-Frank Act, and Item 402(v) of Regulation S-K, the following table provides information regarding the total compensation earned by each individual who served (i) as our principal executive officer at any time during 2023, and (ii) our two most highly compensated executive officers other than our principal executive officer who were serving as executive officers as of December 31, 2023, during each of the fiscal years ended December 31, 2023 and December 31, 2022. For information on our executive compensation program, see the above Narrative Disclosure to Summary Compensation Table and Outstanding Equity Awards at Fiscal Year End Table.

  19. PAY VERSUS PERFORMANCE

    | Year | Summary compensation table tool for PEO (1)(2) | Summary compensation table tool for PEO (1)(3) | Compensation actually paid to PEO (2)(4) | Compensation actually paid to PEO (2)(4) | Average summary compensation table total for non-PEO named executive officers (5) | Average compensation actually paid to non-PEO named executive officers (6) | Net income | | 2023 | $2,245,573 | $511,855 | $260,077 | $497,276 | $594,960 | $340,551 | $(6,716,176) | | 2022 | $- | $1,459,657 | $- | $655,445 | $701,968 | $445,855 | $(2,229,055) |

  20. PAY VERSUS PERFORMANCE

    (1) The dollar amounts reported in these columns are the amounts of total compensation reported for our respective PEOs for each corresponding year in the “Total” column of the Summary Compensation Table. Refer to “Executive Compensation — Summary Compensation Table.” (2) Michael Knowles was appointed as the Company’s president and chief financial officer, effective June 5, 2023, and served as the Company’s PEO from such date through December 31, 2024. Mr. Knowles was not employed by the Company prior to such date, and therefore did not receive any compensation during the year ended December 31, 2022. (3) David Raun served as the Company’s president and chief financial officer for the entirety of the year ended December 31, 2022 and through June 5, 2023, and served as the Company’s PEO for such period. (4) The dollar amounts reported these columns represent the amount of “compensation actually paid” to our respective PEOs, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to our respective PEOs during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to the PEO’s total compensation for each year to determine the compensation actually paid:

  21. PAY VERSUS PERFORMANCE

    | | 2023 | | 2022 | | | Adjustments: | PEO ($) | PEO ($) | PEO ($) | PEO ($) | | Summary Compensation Table Total for PEOs | $2,245,573 | $511,855 | $- | $1,459,657 | | Stock Awards | (1,180,000) | - | - | (783,900) | | Option Awards | (796,000) | - | - | | | Medical Benefits | (13,034) | (15,960) | - | (27,166) | | Contribution to 401K Plan | 3,538 | 1,381 | - | 6,854 | | Compensation actually paid | $260,077 | $497,276 | $- | $655,445 |

  22. PAY VERSUS PERFORMANCE

    (5) The dollar amounts reported in this column represent the average of the amounts reported for the Company’s Non-PEO NEOs as a group in the “Total” column of the Summary Compensation Table in each applicable year. The Company’s non-PEO NEOs for each of fiscal 2023 and 2022 were John W. Morrison, Jr. and Jim Ison. The dollar amounts reported in this column represent the average amount of “compensation actually paid” to our Non-PEO NEOs as a group, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average amount of compensation earned by or paid to the Non-PEO NEOs as a group during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation for the Non-PEO NEOs as a group for each year to determine the compensation actually paid, using the same methodology described above in Note 4:

  23. PAY VERSUS PERFORMANCE

    | | Average for Non- PEO NEOs | | | | 2023 | 2022 | | Adjustments: | PEO ($) | PEO ($) | | Summary Compensation Table Total for Non-PEO NEOs | $594,960 | $701,968 | | Stock Awards | (225,250) | (235,800) | | Option Awards | - | - | | Medical Benefits | (38,352) | (31,706) | | Contribution to 401K Plan | 9,193 | 11,394 | | Compensation actually paid | $340,551 | $445,855 |

  24. PAY VERSUS PERFORMANCE

    The dollar amounts reported represent the amount of net income (loss) reflected in the Company’s audited financial statements for the applicable year.