DEF 14A of Heritage Global Inc., Apr 23, 2024

DEF 14A of Heritage Global Inc.

Filed Apr 23, 2024 · FY20230000950170-24-046867

Open on EDGAR

  1. Nominee for Election at this Annual Meeting (To Term Expiring in 2027)

    Nominee for Election at this Annual Meeting (To Term Expiring in 2027) Barbara Sinsley, age 61, has served as a Class III director of the Company since she was appointed by the Board in June 2020. Ms. Sinsley specializes in working with technology and fintech platform service providers focused in payments, security, compliance, and data privacy. Ms. Sinsley currently serves as Chief Legal Officer and is on the Board of Directors for meldCX USA Inc., a commercial app building company. Previously, Ms. Sinsley was the General Counsel and Chief Compliance Officer of FactorTrust Inc., a credit reporting agency sold to TransUnion. Ms. Sinsley has worked closely with the CFPB, Federal Trade Commission and state legislatures to craft legislation and solutions for the consumer finance industry and consumers.

  2. Directors With Terms of Office That Will Continue After This Meeting

    Directors With Terms of Office That Will Continue After This Meeting

  3. Directors With Terms Expiring in 2025

    Directors With Terms Expiring in 2025 Samuel L. Shimer, age 60, was appointed as a Class I director in April 2001 and was appointed as Chairman of the Board in March 2020. Mr. Shimer has extensive expertise in mergers and acquisitions, including transactions that occurred while he was an officer of the former parent of the Company, Street Capital, where he was initially employed as a Senior Vice President, Mergers & Acquisitions and Business Development in July 1997. He was appointed Managing Director in February 2000, and he terminated his employment with the Company in February 2004. Mr. Shimer is currently Managing Director of SLC Capital Partners, LLC, a private equity fund management company that he co-founded in 2010. Mr. Shimer additionally serves on the board of two private companies. Mr. Shimer earned a Bachelor of Science in economics from The Wharton School of the University of Pennsylvania, and a Master of Business Administration degree from Harvard Business School. Kelly Sharpe, age 59, has served as a Class I director of the Company since November 2020. Ms. Sharpe brings over 25 years of extensive financial, operational and senior management experience in both public and private venture backed high growth companies. She also has valuable expertise across several industries including many years in the Industrial Asset and Valuation sector at DoveBid Inc., helping to guide the growth of that company’s revenue 10X in the first three years of operation. Ms. Sharpe started her career in public accounting with KPMG International in the San Francisco Bay Area. She currently serves as President of Exec Xcel Inc., an executive consulting and coaching company. Previously Ms. Sharpe held executive positions as CEO of Sharpe Energy Services in the energy sector, Chief Financial Officer for Openwave Mobility and Chief Financial Officer of Openwave Messaging in the mobile telecommunications Industry, and Chief Financial Officer for Carrier IQ, Inc., a provider of mobile service intelligence solutions to the wireless industry. Ms. Sharpe graduated from Clarkson University in New York with a Bachelor of Science degree in Accounting and Law and holds an AAS degree from the State University of New York - Canton. Ross Dove, age 71, the Chief Executive Officer and President of the Company, was appointed by the Board as a Class I director in May 2015. Mr. Dove was appointed our Chief Executive Officer in May 2015 and has served as Co-Managing Partner of Heritage Global Partners, Inc., a Company subsidiary (“HGP”) since its founding in October 2009. Together with his brother, Kirk Dove, Mr. Ross Dove joined our company when HGI acquired HGP in February 2012. Mr. Dove began his career in the auction business over thirty years ago, beginning with a small family-owned auction house and helping to expand it into a global firm, DoveBid, which was sold to a third party in 2008. The Messrs. Dove remained as global presidents of the business until September 2009, and then formed HGP in October 2009. During his career, Mr. Dove has been actively involved with advances in the auction industry such as theatre-style auctions, which was a first step in migrating auction events onto the Internet. Mr. Dove has been a member of the National Auctioneers Association since 1985, and a founding member of the Industrial Auctioneers Association. He served as a director of Critical Path from January 2002 to January 2005 and has served on the boards of several venture funded companies. Ross Dove is the brother of Kirk Dove and uncle of Nicholas Dove.

  4. Directors With Terms Expiring in 2026

    Directors With Terms Expiring in 2026 Michael Hexner, age 71, has served as a Class II director of the Company since August 2016. Mr. Hexner has expertise and extensive experience in executive leadership with growing businesses. Mr. Hexner co-founded Wheel Works in 1976, and grew the business, as its Chief Executive Officer, to become the largest independent tire chain in the United States. Mr. Hexner was the co-founder of Pacific Leadership Group in 2001, served as the Chairman and Chief Executive Officer of both SmartPillars and DealerFusion, was President of the Northern California Golf Association and Co-Founder and President of Youth on Course. Mr. Hexner currently serves as COO of LeadLander, special advisor to the CEOs of Laboratory Equipment Company, and Rondo Energy and is managing partner for The Lane. Mr. Hexner received a Bachelor of Arts in Political Science from Williams College, completed an executive management program at The Haas School of Business of the University of California, is a certified FINRA arbitrator and received a master’s degree in negotiation and dispute resolution from Creighton University. David Ludwig, age 67, was appointed by the Board as a Class II director in March 2021 to fill the vacancy created by the resignation of Allan Silber. Mr. Ludwig currently serves as the President of Heritage Global’s Financial Assets division, which comprises the Company’s National Loan Exchange (“NLEX”) and Heritage Global Capital subsidiaries. He joined Heritage Global in 2014 with the Company’s acquisition of NLEX, which he developed from its start as a post-Resolution Trust Corporation (RTC) sales outlet to the nation’s leading broker of charged-off credit card and consumer debt accounts. With more than 25 years of experience in the financial industry, Mr. Ludwig is considered a leading pioneer in the debt sales industry, and has been a featured speaker at many industry conferences. He has also been quoted in numerous publications including the New York Times, LA Times, Collections and Credit Risk, Collector Magazine, and serves as consultant and expert witness within the industry. Since introducing NLEX to financial institutions in the early 1990s, Mr. Ludwig has supervised the sale of over 5,000 portfolios with face value of $150 billion. Mr. Ludwig holds a Bachelor of Science Degree in Economics from the University of Illinois. William Burnham, age 53, was appointed by the Board as a Class II director in March 2023. Mr. Burnham has extensive investing and capital markets experience as an institutional investor, venture capitalist and public equity analyst. Mr. Burnham is currently the Managing Member of Inductive Capital LP, a technology-focused investment fund which he founded in 2006. Prior to Inductive, Mr. Burnham was a venture capital investor at both SOFTBANK Capital Partners and Mobius Venture Capital, and prior to that a senior equity research analyst at Credit Suisse First Boston, Deutsche Morgan Grenfell, and Piper Jaffray. Over the course of his investment career, Mr. Burnham has served on a numerous public and private company boards in both the United States and Canada. He currently serves as a Director of TrustCloud Inc. and is a Board Advisor to Abine Inc., both of which are focused on the cybersecurity industry. Prior to his investing career, Mr. Burnham was a Senior Associate at the management consulting firm of Booz, Allen & Hamilton. He attended Washington University where he graduated Summa Cum Laude, Phi Beta Kappa.

  5. Diversity Matrix

    Diversity Matrix The following table summarizes certain self-identified characteristics of our directors, in accordance with Nasdaq Listing Rules 5605(f) and 5606. Each term used in the table has the meaning given to it in the rule and related instructions.

  6. Heritage Global Inc. Board Diversity Matrix as of April 23, 2024

    Heritage Global Inc. Board Diversity Matrix as of April 23, 2024

  7. Heritage Global Inc. Board Diversity Matrix as of April 23, 2024

    | Board Size: | | | | | | Total Number of Directors | 7 | | | | | Gender Identity: | Female | Male | Non-Binary | Did Not Disclose | | Directors | 2 | 5 | — | — | | Demographic Background | | | | | | African American or Black | — | — | — | — | | Alaskan Native or Native American | — | — | — | — | | Asian | — | — | — | — | | Hispanic or Latinx | — | — | — | — | | Native Hawaiian or Pacific Islander | — | — | — | — | | White | 2 | 5 | — | — | | Two or More Races or Ethnicities | — | — | — | — | | LGBTQ+ | — | — | — | — | | Did Not Disclose Demographic Background | — | — | — | — |

  8. CORPORATE GOVERNANCE

    CORPORATE GOVERNANCE

  9. Overview

    Overview

  10. In General

    In General Our Board has adopted corporate governance policies, including a Code of Conduct (“Code of Conduct”), corporate governance guidelines and charters for each of our Compensation Committee, Audit Committee, and Corporate Governance Committee. The full text of our Code of Conduct and each committee charter is available in the Investor Relations-Corporate Profile & Governance section of our internet website located at www.hginc.com. A copy of the Code of Conduct is also available in print, free of charge, to any shareholder who requests it by writing to Heritage Global Inc., 12625 High Bluff Drive, Suite 305, San Diego, California, 92130. We intend to post amendments to or waivers, if any, from our Code of Conduct at this location on our website, in each case to the extent such amendment or waiver would otherwise require the filing of a Current Report on Form 8-K pursuant to Item 5.05 thereof. Information contained on our website is not a part of this Proxy Statement and the inclusion of our website address in this Proxy Statement is an inactive textual reference only. In addition, you may request copies of the Code of Conduct and the committee charters by contacting the Company using the following information: Telephone: (203) 972-9200 E-mail: investorrelations@hginc.com

  11. Other Corporate Governance Highlights

    Other Corporate Governance Highlights • Only independent directors serve on our Audit and Corporate Governance Committees, and our Compensation Committee is composed solely of outside directors. • Our Audit Committee appoints, determines the compensation of, and oversees, the work of our independent auditors. It also has the authority to retain outside advisors. • Our Compensation Committee evaluates the performance of the Chief Executive Officer and other senior executives based on corporate goals and objectives, and determines and approves their compensation levels based on this evaluation and in accordance with any applicable employment agreement then in effect. • Our Code of Conduct is applicable to all members of our Board, officers, employees and our subsidiaries. The Code of Conduct addresses, among other things, legal compliance, conflicts of interest, corporate opportunities protection and proper use of Company assets, confidential and proprietary information, integrity of records, compliance with accounting principles and relations with government agencies. • Under our Code of Conduct, directors, employees and officers are required to report service as a director, officer, employee or consultant to any supplier or customer of the Company. The Company may prohibit membership by officers or employees on any board of directors or trustees where such membership might conflict with the best interests of the Company. • Our Code of Conduct includes policies with respect to insider trading, applicable to all directors, officers and employees, their family members and entities controlled by them, which prohibits, among other things, trading in securities of the Company or others while in possession of material non-public information. • We do not have a shareholder rights plan.

  12. Board of Directors

    Board of Directors Our Board oversees our business and monitors the performance of management. The Board is not involved in day-to-day operations. The directors keep themselves informed by discussing matters with the President and Chief Executive Officer, other key executives and our principal external advisors such as legal counsel, outside auditors, investment bankers and other consultants, by reading the reports and other materials that we send them regularly and by participating in Board and committee meetings. The Board meets quarterly to review the Company’s operating results, annually to review and approve the Company’s strategy and budget, and periodically throughout the year as necessary. Material matters such as acquisitions and dispositions, investments and business initiatives are approved by the full Board. The Board met four times during 2023. All directors attended 100% of the aggregate number of meetings of the Board and committees of the Board of which they were a member held during the year ended December 31, 2023.

  13. Performance Based Compensation

    Performance Based Compensation Performance based awards are designed to focus management attention on key operational goals for the current fiscal year. Our executives may earn performance based compensation based upon achievement of their specific operational goals and achievement by us or our business unit of financial targets. Cash awards are distributed based upon the Company and the individual meeting performance criteria objectives. The final determination for all payments is made by our Compensation Committee based on a subjective analysis of the foregoing elements, except where the award is provided for in an employment agreement or other contractual obligation between the Company and the executive. We set performance based compensation based on a subjective analysis of certain performance measures in order to maximize and align the interests of our officers with those of our shareholders. Although performance goals are generally standard for determining awards, we have and will consider additional performance rating goals when evaluating the performance based compensation structure of our executive management. In addition, in instances where the employee has responsibility over a specific area, performance goals may be directly tied to the overall performance of that particular area. For the years 2023 and 2024, Mr. Ross Dove is eligible for a performance based award on the operating income of the Company, not including the amount of such award. Each year, the amount of such award may range from $30,000 (corresponding to operating income of $3,030,000 for such year) to $1,800,000 (corresponding to operating income of $23,750,000 or more for such year). If earned, the award will be paid 75% in cash, and 25% in restricted stock vesting nine months after the date of grant. The foregoing is conditioned upon Mr. Dove’s continued employment in good standing and is expected to constitute Mr. Dove’s entire performance based compensation for this period. In 2023, Mr. Dove earned a cash award of $675,520 and restricted stock valued at $225,173, granted on March 7, 2024. Mr. David Ludwig was eligible to receive a performance incentive under the terms of the Addendum to the Employment Agreements of David and Tom Ludwig (the “Addendum”), effective on June 1, 2018. The Addendum provided that each calendar year NLEX would allocate 30% of its Net Operating Income and 20% of its Principal Net Operating Income for cash incentive awards to the employees of NLEX, including Mr. Ludwig. Such cash incentive awards were allocated among the NLEX employees, including Mr. Ludwig, based on Mr. Ludwig’s recommendation to our Board. In 2023, Mr. Ludwig earned a pro-rated cash incentive award pursuant to this arrangement of $584,726 for the period January 1, 2023 to May 31, 2023. Mr. David Ludwig is eligible to receive a performance incentive under the terms of his Employment Agreement, effective on June 1, 2023. Mr. Ludwig’s employment agreement provides that Mr. Ludwig is entitled to receive a bonus each calendar year in an amount equal to 12% of the net operating income of the Financial Assets Division, subject to adjustment as set forth in Mr. Ludwig’s employment agreement. In 2023, Mr. Ludwig earned a cash bonus pursuant to this arrangement of $727,827 for the period June 1, 2023 to December 31, 2023. Mr. Nicholas Dove is eligible to receive a performance incentive under the terms of his Employment Agreement, effective on January 1, 2023. Mr. Dove’s employment agreement provides that Mr. Dove is entitled to receive a bonus each calendar year in an amount equal to 10% of the net operating income of the Industrial Assets Division of the Company, subject to adjustment as set forth in Mr. Dove’s employment agreement. In 2023, Mr. Dove received a cash bonus pursuant to this arrangement of $698,017. As Mr. Ross Dove’s, Mr. David Ludwig’s and Mr. Nicholas Dove’s performance based awards are closely tied to our profitability, we believe the bonus structure does not encourage inappropriate risk-taking on their part.

  14. Equity Incentive Grants

    Equity Incentive Grants In keeping with our philosophy of providing a total compensation package that favors at-risk components of pay, long-term incentives can comprise a significant component of our executives’ total compensation package. These incentives are designed to motivate and reward executives for maximizing shareholder value and encourage the long-term employment of key employees. Our objective is to provide executives with above-average, long-term incentive award opportunities. We have traditionally used stock options as the predominant form of stock-based compensation. Stock options generally are granted at the prevailing market price on the date of grant and will have value only if our stock price increases. Grants of stock options generally are based upon our performance, the level of the executive’s position, and an evaluation of the executive’s past and expected future performance. We do not time or plan the release of material, non-public information for the purpose of affecting the value of executive compensation. In 2022, at the Company's 2022 Annual Meeting of Shareholders, the Company's shareholders approved the 2022 Heritage Global Inc. Equity Incentive Plan (the “2022 Plan”), which replaced the Heritage Global Inc. 2016 Stock Option Plan (the “2016 Plan”), and authorized the issuance of an aggregate of 3.5 million shares of common stock for awards made after June 8, 2022. No equity incentive grants were made to any of our named executive officers during 2022 or 2023, except for the restricted stock earned by Mr. Ross Dove discussed above.

  15. Other Compensation

    Other Compensation In addition to the primary compensation elements discussed above, we provide our named executive officers with the following limited benefits and perquisites (which are described in more detail below in footnotes 2 and 3 to the 2023 Summary Compensation Table): the Company provided for the payment of an automobile allowance to Mr. Ross Dove in the amount of $14,029 for 2023 and 2022, and the Company provided for the payment of club membership dues for Mr. Ludwig in the amount of $8,695 for 2022. We consider these additional benefits to be a part of a named executive officer’s overall compensation. These benefits generally do not impact the level of other compensation paid to our named executive officers, due to the fact that the incremental cost to us of these benefits and perquisites represents a small percentage of each named executive officer’s total compensation package. We believe that these enhanced benefits and perquisites provide our named executive officers with support services that allow them to focus attention on carrying out their responsibilities to us and are synergistic with positively marketing the Company. In addition, we believe that these benefits and perquisites help us to be competitive and retain talented executives. There were no pension or change in control benefits in either 2023 or 2022. Upon termination of employment by us without cause, Mr. Ross Dove is entitled to twelve months base salary and a pro rata share of the bonus payable in the fiscal year of termination. Any bonus payable is based on the termination date (provided that, as of the termination date, the performance criteria established with respect to the bonus for the fiscal year have been met), subject to certain conditions. Upon termination of employment by us without cause, Mr. Ludwig is entitled to receipt of a pro rata share of the bonus payable in the fiscal year of termination and payment of the greater of (i) an amount equal to Mr. Ludwig’s annual base salary or (ii) an amount equal to 4% of the net amount of any revenues received by NLEX on forward flow contracts entered during Mr. Ludwig’s tenure with the Company for the twelve months succeeding Mr. Ludwig’s termination. Mr. Ludwig does not receive any compensation for his service as a director on our Board because he is employed by the Company. Upon termination of employment by us without cause, Mr. Nicholas Dove is entitled to payment of the greater of (i) an amount equal to Mr. Dove’s annual base salary or (ii) any pro rata share of the bonus payable in the fiscal year of termination to Mr. Dove.

  16. Summary Compensation Table

    Summary Compensation Table The following table provides information regarding the compensation earned by each of our named executive officers for the fiscal years ended December 31, 2023 and 2022.

  17. Summary Compensation Table

    | Name and Principal Position | Year | Salary ($) | Non-Equity Incentive Plan Compensation ($) | Stock Awards ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | | Ross Dove | 2023 | 425,000 | 675,520 | 146,142(3) | — | 14,029(1) | 1,260,691 | | President and Chief Executive Officer | 2022 | 425,000 | 438,426 | — | — | 14,029(1) | 877,455 | | David Ludwig | 2023 | 400,000 | 1,312,553 | — | — | — | 1,712,553 | | President, Financial Assets | 2022 | 400,000 | 703,462 | — | — | 8,695(2) | 1,112,157 | | Nicholas Dove | 2023 | 250,000 | 698,017 | — | — | — | 948,017 | | President, Industrial Assets | 2022 | 200,000 | 908,525 | — | — | — | 1,108,525 | | ____________________ | | | | | | | | | (1) | This amount represents payment for an automobile allowance. | | | | | | | | (2) | This amount represents membership dues paid on behalf of Mr. Ludwig. | | | | | | | | (3) | This amount represents restricted common stock awards granted March 1, 2023 with a one-year vesting term. | | | | | | |

  18. Outstanding Equity Awards at Fiscal Year-End

    Outstanding Equity Awards at Fiscal Year-End The following table sets forth the detail of outstanding equity awards at December 31, 2023.

  19. Outstanding Equity Awards at Fiscal Year-End

    | Name | Number of Securities Underlying Unexercised Options: Exercisable | Number of Securities Underlying Unexercised Options: Unexercisable | Option Exercise Price ($/Share) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested | Equity Incentive Plan Awards: Unearned Units of Stock Not Vested | Equity Incentive Plan Awards: Market Value of Unearned Units of Stock Not Vested | | Ross Dove | — | — | N/A | N/A | — | — | 76,850(1) | $213,643 | | Ross Dove | — | — | N/A | N/A | — | — | 76,850(2) | $213,643 | | Ross Dove | — | — | N/A | N/A | 57,764(3) | $160,584 | — | — | | David Ludwig | 21,250(4) | — | $0.70 | June 1, 2029 | — | — | N/A | N/A | | David Ludwig | 33,750(5) | 11,250(5) | $1.41 | June 1, 2030 | — | — | N/A | N/A | | David Ludwig | 20,000(6) | 20,000(6) | $2.81 | June 1, 2031 | — | — | N/A | N/A | | Nicholas Dove | 100,000(7) | 100,000(7) | $1.78 | August 23, 2031 | — | — | N/A | N/A | | ____________________ | | | | | | | | | | (1) | Mr. Dove is eligible to receive a restricted common stock award for 2024 performance. This award has no threshold. This eligible award has been estimated based on performance in 2023. The awards are expected to be granted in March 2025 and vest over one year. | | | | | | | | | (2) | The Company granted 76,850 shares of restricted common stock awards on March 7, 2024, calculated on 2023 achievement. This award has no threshold. The awards vest on March 7, 2025. | | | | | | | | | (3) | The Company granted 57,764 shares of restricted common stock awards on March 1, 2023, calculated on 2022 achievement. This award has no threshold. The awards vested on March 1, 2024. | | | | | | | | | (4) | The Company granted 42,500 options to purchase common stock in connection with an addendum to the Employment Agreement of David Ludwig (as described previously in “Grants of Plan-Based Awards”). The options vest 25% annually beginning on June 1, 2020. | | | | | | | | | (5) | The Company granted 45,000 options to purchase common stock in connection with an addendum to the Employment Agreement of David Ludwig (as described previously in “Grants of Plan-Based Awards”). The options vest 25% annually beginning on June 1, 2021. | | | | | | | | | (6) | The Company granted 40,000 options to purchase common stock in connection with an addendum to the Employment Agreement of David Ludwig (as described previously in "Grants of Plan-Based Awards").The options vest 25% annually beginning on June 1, 2022. | | | | | | | | | (7) | The Company granted 200,000 options to purchase common stock. The options vest 25% annually beginning on the first anniversary of the August 23, 2021 grant date. | | | | | | | |

  20. Outstanding Equity Awards at Fiscal Year-End

    There were no adjustments or changes in the terms of any of our option awards in 2023.

  21. Pay Versus Performance

    Pay Versus Performance As required by Section 953(a) of the Dodd-Frank Act, we are providing the following information about the relationship between executive compensation actually paid and certain financial performance of the Company. For further information concerning our variable pay-for-performance philosophy and how we align executive compensation with our performance, refer to “Executive Compensation – Compensation Discussion and Analysis.”

  22. Pay Versus Performance Tables

    Pay Versus Performance Tables The following table presents, for each of the three most recent years: • Total compensation, as calculated in the Summary Compensation Table, for our CEO (“Principal Executive Officer” or “PEO”) and an average for our other Named Executive Officers (“Non-PEO NEOs”); • Compensation actually paid to the PEO and Non-PEO NEOs, an SEC prescribed calculation which adjusts total compensation for the items described below and which does not equate to realized compensation; • Our cumulative total shareholder return since the last trading day before the earliest year presented; and • Our net income.

  23. Pay Versus Performance Tables

    | Year | Summary Compensation Table Total for PEO (1) ($) | Compensation Actually Paid to PEO (2) ($) | Average Summary Compensation Table Total for Non-PEO NEOs (3) ($) | Average Compensation Actually Paid to Non-PEO NEOs (2) ($) | Value of Initial Fixed $100 Investment Based on TSR (4) ($) | Net Income ($) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | | 2023 | 1,260,691 | 1,275,132 | 1,330,285 | 1,533,851 | 104.51 | 12,475,000 | | 2022 | 877,455 | 877,455 | 1,110,341 | 1,217,941 | 88.35 | 15,493,000 | | 2021 | 451,529 | 451,529 | 784,994 | 674,813 | 70.30 | 3,053,000 |

  24. Pay Versus Performance Tables

    (1) For the years 2023, 2022 and 2021, this is the total compensation, as disclosed in the Summary Compensation Table above, for PEO Mr. Ross Dove. (2) Compensation Actually Paid is the Summary Compensation Table total for the PEO (column (b) above) and Average Summary Compensation Table total for the Non-PEO NEOs (column (d) above), adjusted for the value of equity pursuant to Item 402(v)(2)(iii)(C) of Regulations S-K, and detailed in the table following. (3) For the years 2023, 2022 and 2021, this is the average total compensation, as disclosed in the Summary Compensation Table above, for our non-PEO NEOs Mr. David Ludwig and Mr. Nicholas Dove. Total Shareholder Return. The value is based on a fixed investment of one hundred dollars in our common stock measured from the market close on December 31, 2020 (the last trading day of 2020) through and including the end of the fiscal year for each year reported in the table. The following table presents compensation actually paid as determined by adjusting the Summary Compensation Table Total for the PEO (column (b) above) and Average Summary Compensation Table Total for the Non-PEO NEOs (column (d) above) for the value of equity pursuant to Item 402(v)(2)(iii)(C) of Regulations S-K:

  25. Pay Versus Performance Tables

    | | PEO | | | Non-PEO NEO (Average) | | | | | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | | Summary Compensation Table Total | $1,260,691 | $877,455 | $451,529 | $1,330,285 | $1,110,341 | $784,994 | | Subtract: Grant date fair value of equity awards granted during the covered year | (146,143) | — | — | — | — | (161,290) | | Add: Fair value as of end of covered year of equity awards granted during covered year that were outstanding and unvested as of end of covered year | 160,584 | — | — | — | — | 9,000 | | Add: Change in fair value from end of prior year to end of current year for equity awards granted in prior years that were outstanding and unvested at end of current year | — | — | — | (356,884) | 113,897 | 37,866 | | Add: Fair value as of vesting date of equity awards that were granted and vested in same year | — | — | — | — | — | — | | Add: Change in fair value from end of prior year to vesting date of equity awards granted in prior years that vested in covered year | — | — | — | 560,450 | (6,297) | 4,244 | | Subtract: Fair value at end of prior year of equity awards granted in prior years that failed to vest (forfeited) in covered year | — | — | — | — | — | — | | Add: Dollar amount of dividends or other earnings paid on equity awards in covered year prior to vesting date that are not included in total compensation for covered year | — | — | — | — | — | — | | Compensation Actually Paid | $1,275,132 | $877,455 | $451,529 | $1,533,851 | $1,217,941 | $674,813 |

  26. Analysis of the Information Presented in the Pay Versus Performance Table

    Analysis of the Information Presented in the Pay Versus Performance Table Our Board and Compensation Committee generally seek to align the interests of stockholders with our named executive officers by incentivizing long-term performance and through the use of short-term cash incentives. Therefore, we do not specifically align our performance measures with “compensation actually paid” (as computed in accordance with Item 402(v) of Regulation S-K) for a particular year and the Compensation Committee did not consider this information in making its executive compensation decisions. Instead our executives were paid in both 2023, 2022 and 2021 based on the achievement of annual corporate goals, which are focused on driving growth in operating income and encouraging activities that support long-term performance of total stockholder return. In accordance with Item 402(v) of Regulation S-K, we are providing the following descriptions of the relationships between information presented in the Pay Versus Performance table. Compensation Actually Paid and Net Income The amount of compensation actually paid to our PEO and the average amount of compensation actually paid to our non-PEO NEOs increased from 2021 to 2022 and from 2022 to 2023. The Company's net income increased substantially from 2021 to 2022, and then decreased from 2022 to 2023. The Company does not look to net income as a performance measure for its executive compensation program and instead looks at operating income to evaluate the Company’s performance. From 2022 to 2023 the Company went from having net income of $15.5 million (which included a one time adjustment to our valuation allowance against our deferred tax assets of approximately $7.1 million) to a net income of $12.5 million. Without the adjustment to deferred tax assets, the Company would have had a net income of $8.4 million in 2022. The increase in compensation actually paid to our named executive officers year over year generally reflects cash bonuses for the achievement of annual corporate and strategic objectives. Compensation Actually Paid and Cumulative Total Stockholder Return The amount of compensation actually paid to our PEO and the average amount of compensation actually paid to our non-PEO NEOs increased from 2021 to 2022 and from 2022 to 2023, as did the Company's total stockholder return. We utilize several performance measures to align executive compensation with the Company’s performance, but historically have not used financial performance measures such as total shareholder return. As described under the Narrative to Summary Compensation Table section of this Proxy Statement, part of the compensation our NEOs are eligible to receive consists of annual performance based cash bonuses and equity awards that are designed to provide appropriate incentives to our executives to achieve defined annual corporate goals. The Board believes that the key performance measurement is operating income growth and we align our payment of incentives to our NEOs based on this metric, which the Company believes is the primary driver that would impact the Company’s enterprise valuation and therefore, ultimately, total stockholder return.

  27. Compensation of Directors

    Compensation of Directors In 2023, each director who is not an employee of the Company received a $25,000 cash retainer and a grant of 15,000 shares of restricted common stock vesting over twelve months (with the exception of Dove and Ludwig, who, as employees of the Company, do not receive compensation for their service as directors). In addition, the Chairman of the Board received a cash retainer of $75,000, the Chair of the Audit Committee received a cash retainer of $60,000, Audit Committee members who are not the Chair received a cash retainer of $5,000 and $1,000 for each meeting attended. Other committee chairpersons received a cash retainer of $6,000, and other non-chair committee members received a cash retainer of $3,000. The following table sets forth the aggregate compensation for services rendered during fiscal 2023 by each person serving as a director:

  28. Compensation of Directors

    | Name | Fees Earned or Paid in Cash ($) | Stock Awards (1) ($) | Total ($) | | Samuel L. Shimer | 112,000 | 43,050 | 155,050 | | Michael Hexner | 34,000 | 43,050 | 77,050 | | Barbara Sinsley | 36,250 | 43,050 | 79,300 | | Kelly Sharpe | 95,000 | 43,050 | 138,050 | | Shirley S. Cho (2) | 21,000 | — | 21,000 | | William Burnham (3) | 27,750 | 43,050 | 70,800 | | David Ludwig (4) | — | — | — | | Ross Dove (4) | — | — | — | | ____________________ | | | | | (1) | The value included in this column represents the grant date fair value of the option award computed in accordance with FASB ASC Topic 718. The number of restricted shares granted during 2023 for each of the directors listed in the table was as follow: Mr. Shimer — 15,000, Mr. Hexner — 15,000, Ms. Sinsley — 15,000, Ms. Sharpe — 15,000, Mr. Burnham — 15,000. | | | | (2) | Shirley Cho resigned as a member of the Board of Directors and as a member of the Compensation Committee, effective August 14, 2023. | | | | (3) | William Burnham was appointed to the Board of Directors on April 1, 2023. | | | | (4) | Director was not compensated for service on the Board of Directors during 2023 due to compensation received for employment as an executive officer. | | |

  29. Compensation of Directors

    PROPOSAL NO. 2: APPROVAL OF THE ADOPTION OF OUR SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION TO MAKE CERTAIN TECHNICAL AND ADMINISTRATIVE CHANGES Our Board of Directors has approved, and is recommending to our shareholders for approval, the adoption of our Second Amended and Restated Articles of Incorporation, as set forth in Appendix A, which would amend and restate our current Amended and Restated Articles of Incorporation to remove certain obsolete references and make other technical and administrative changes.

  30. BOARD OF DIRECTORS

    BOARD OF DIRECTORS 1. Number. The property, business, and affairs of the Corporation shall be managed and controlled by the Board of Directors. The number of directors of the Corporation shall not be less than five nor more than nine, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the whole Board of Directors; provided, however, that the number of directors shall not be reduced so as to shorten the term of a director at that time in office. As used in this Article IV, the term “whole Board” means the total number of directors which the Corporation would have if there were no vacancies. 2. Classes. The Board of Directors shall be divided into three classes, as nearly equal in number as the then total number of directors constituting the whole Board permits, with the term of office of one class expiring each year. No decrease in the number of directors shall shorten the term of any incumbent director. At each annual meeting of shareholders the successors to the class of directors whose term shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting. Removal. Any director may be removed by the vote of a majority of the whole Board of Directors, but only for cause. Except as may otherwise be provided by law, cause for removal shall be construed to exist only if: (a) the director whose removal is proposed has been convicted of a felony by a court of competent jurisdiction: or (b) such director has been adjudicated by a court of competent jurisdiction to be liable for negligence or misconduct in the performance of his duty to the Corporation in a matter of substantial importance to the corporation and such adjudication is no longer subject to direct appeal. In addition, any director or the entire Board of Directors may be removed, with or without cause, by the affirmative vote of the holders of at least 67% of the outstanding shares of the Corporation then entitled to vote generally in the election of directors cast at a meeting of the shareholders called for that purpose. Vacancies. Any vacancies in the Board of Directors resulting from death, resignation, retirement, removal from office, the creation of a new directorship by an increase in the authorized number of directors, or otherwise shall be filled by a majority vote of the directors then in office, though less than a quorum of the entire Board of Directors. Directors so chosen to fill any vacancy shall hold office until the next meeting of shareholders at which directors are elected, with such election to be for a term expiring at the annual meeting of shareholders at which the class of directors of which the director serves (as determined by the Board of Directors in accordance with Florida law at the time of the director’s appointment to the Board) is to be elected and until his or her successor is elected and qualified. Amendment, Alteration, Repeal, Etc. Notwithstanding anything contained in these Second Amended and Restated Articles of Incorporation to the contrary, the affirmative vote of the holders of at least 67% of the outstanding shares of the Corporation then entitled to vote in the election of directors shall be required to amend, alter, or repeal or to adopt any provision inconsistent with, this Article IV.