DEF 14A of Heritage Global Inc., Apr 22, 2025

DEF 14A of Heritage Global Inc.

Filed Apr 22, 2025 · FY20240000950170-25-056713

Open on EDGAR

  1. Proposal No. 1 - Election of Directors

    Proposal No. 1 - Election of Directors For Proposal No. 1, you may: • Vote FOR all of the director nominees; • Vote FOR specific director nominees; • Vote to WITHHOLD from voting with respect to all director nominees; or • Vote to WITHHOLD from voting with respect to specific director nominees.

  2. PROPOSAL NO. 1: ELECTION OF CLASS I DIRECTORS

    PROPOSAL NO. 1: ELECTION OF CLASS I DIRECTORS

  3. General

    General Our Second Amended and Restated Articles of Incorporation (the “Charter”) divide our Board into three classes with the terms of office of each class ending in successive years. Our Charter empowers our Board to fix the exact number of directors and appoint persons to fill any vacancies on the Board. Following a recommendation from the Corporate Governance Committee, our Board has nominated Samuel Shimer, Kelly Sharpe and Ross Dove for election as Class I directors of the Company to serve a three-year term to expire at the annual meeting of shareholders in 2028.

  4. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF

    THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF THESE NOMINEES AS DIRECTORS OF THE COMPANY. Each of the nominees has consented to being named as a director nominee in this Proxy Statement and has agreed to serve for the three-year term to which he or she has been nominated, if elected. It is the intention of the persons named as proxies, subject to any direction to the contrary, to vote in favor of the candidates nominated by the Board. We know of no reason why any nominee would be unable to serve as a director. If any nominee is unable to serve, your proxy may vote for another nominee proposed by the Board, or the Board may reduce the number of directors to be elected. If any director resigns, dies or is otherwise unable to serve out his term, or if the Board increases the number of directors, the Board may fill the vacancy. We have set forth below information with respect to the nominees for election as director proposed by the Company and the other directors whose terms of office as directors will continue after the Annual Meeting. There are no arrangements or understandings between any director and any other person pursuant to which any director was or is selected as a director or nominee.

  5. Nominees for Election at this Annual Meeting (To Term Expiring in 2028)

    Nominees for Election at this Annual Meeting (To Term Expiring in 2028) Samuel Shimer, age 61, 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 Street Capital 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 60, 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 72, 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.

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

    Directors With Terms of Office That Will Continue After This Meeting

  7. Directors With Terms Expiring in 2026

    Directors With Terms Expiring in 2026 Michael Hexner, age 72, 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 68, was appointed by the Board as a Class II director in March 2021. 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 6,000 portfolios with face value of $250 billion. Mr. Ludwig holds a Bachelor of Science Degree in Economics from the University of Illinois. William Burnham, age 54, 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 Abine Inc., both of which are focused on the cybersecurity industry, and Neurotone AI Inc. 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.

  8. 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 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 2024. 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, 2024. While we do not have a formal policy regarding director attendance at shareholder meetings, all then-current directors attended our annual meeting of shareholders in 2024.

  9. 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 2025, Mr. Ross Dove is eligible for a performance-based cash award on the operating income of the Company, not including the amount of such award. 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). For 2024, Mr. Dove was eligible for a performance-based award on the operating income of the Company, not including the amount of such award. 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). For 2024, Mr. Dove earned a performance-based award which was paid 75% in cash, and 25% in restricted stock vesting twelve 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. For 2024, Mr. Dove earned a cash award of $280,772 and restricted stock valued at $93,591, granted on March 6, 2025. 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. For 2024, Mr. Ludwig earned a cash bonus pursuant to this arrangement of $1,045,593. 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. For 2024, Mr. Dove earned a cash bonus pursuant to this arrangement of $319,222. 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.

  10. Equity Incentive Grants and Related Policies and Practices

    Equity Incentive Grants and Related Policies and Practices 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. In years prior to 2022 we used grants of stock options as the predominant form of stock-based compensation. Since 2022, we have used restricted stock awards 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 and restricted stock awards are generally based upon our performance, the level of the executive’s position, and an evaluation of the executive’s past and expected future performance. These equity grants are made to executives and directors annually, typically at a regularly scheduled meeting of the Compensation Committee in March. Meeting dates are set in advance, and the timing of the meetings, and the grant of stock options, including terms and value of the awards, is made without regard to any material nonpublic information. 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, 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 2023 or 2024, except for the restricted stock earned by Mr. Ross Dove discussed above.

  11. Other Compensation

    Other Compensation In addition to the primary compensation elements discussed above, we may provide our named executive officers with limited benefits and perquisites, which, for 2024 and 2023, included the following (which is described in more detail below in footnote [2] to the Summary Compensation Table): the Company provided for the payment of an automobile allowance to Mr. Ross Dove in the amount of $14,029 for 2024 and 2023. We consider this additional benefit to be a part of Mr. Dove’s overall compensation. Any such limited benefits and perquisites, including the foregoing, 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 such benefits and perquisites represents a small percentage of each named executive officer’s total compensation package. We believe that such enhanced benefits and perquisites, including the foregoing, 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 such benefits and perquisites, including the foregoing, help us to be competitive and retain talented executives. There were no pension or change in control benefits in either 2024 or 2023. 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.

  12. 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, 2024 and 2023.

  13. Summary Compensation Table

    | Name and Principal Position | Year | Salary ($) | Non-Equity Incentive Plan Compensation ($) | Stock Awards ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | | Ross Dove | 2024 | 425,000 | 280,772 | 225,173(2) | — | 14,029(1) | 944,974 | | President and Chief Executive Officer | 2023 | 425,000 | 675,520 | 146,142(3) | — | 14,029(1) | 1,260,691 | | David Ludwig | 2024 | 400,000 | 1,045,593 | — | — | — | 1,445,594 | | President, Financial Assets | 2023 | 400,000 | 1,312,553 | — | — | — | 1,712,553 | | Nicholas Dove | 2024 | 250,000 | 319,222 | — | — | — | 569,222 | | President, Industrial Assets | 2023 | 250,000 | 698,017 | — | — | — | 948,017 | | ____________________ | | | | | | | | | (1) | This amount represents payment for an automobile allowance. | | | | | | | | (2) | This amount represents restricted common stock awards granted March 7, 2024 with a one-year vesting term. | | | | | | | | (3) | This amount represents restricted common stock awards granted March 1, 2023 with a one-year vesting term. | | | | | | |

  14. 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, 2024.

  15. Outstanding Equity Awards at Fiscal Year-End

    | | Option Awards | | | | Stock Awards | | | | | 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 | — | — | 44,355(1) | $82,057 | | Ross Dove | — | — | N/A | N/A | 76,850(2) | $142,173 | — | — | | David Ludwig | 21,250(3) | — | $0.70 | June 1, 2029 | — | — | N/A | N/A | | David Ludwig | 45,000(4) | —(4) | $1.41 | June 1, 2030 | — | — | N/A | N/A | | David Ludwig | 30,000(5) | 10,000(5) | $2.81 | June 1, 2031 | — | — | N/A | N/A | | Nicholas Dove | 150,000(6) | 50,000(6) | $1.78 | August 23, 2031 | — | — | N/A | N/A | | ____________________ | | | | | | | | | | (1) | The Company granted 44,355 shares of restricted common stock awards on March 6, 2025, calculated on 2024 achievement. This award has no threshold. The awards vest on March 6, 2026. | | | | | | | | | (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 vested on March 7, 2025. | | | | | | | | | (3) | 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 vested 25% annually beginning on June 1, 2020. | | | | | | | | | (4) | 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. | | | | | | | | | (5) | 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. | | | | | | | | | (6) | 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. | | | | | | | |

  16. Outstanding Equity Awards at Fiscal Year-End

    There were no adjustments or changes in the terms of any of our option awards in 2024.

  17. 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.”

  18. 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.

  19. 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) | | 2024 | 944,974 | 861,976 | 1,007,408 | 955,920 | 98.93 | 5,182,000 | | 2023 | 1,260,691 | 1,275,132 | 1,330,285 | 1,533,851 | 148.66 | 12,475,000 | | 2022 | 877,455 | 877,455 | 1,110,341 | 1,217,941 | 125.67 | 15,493,000 |

  20. Pay Versus Performance Tables

    (1) For the years 2024, 2023 and 2022, 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 2024, 2023 and 2022, 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, 2021 (the last trading day of 2021) 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: [OPEN]

  21. Pay Versus Performance Tables

    | | PEO | | | Non-PEO NEO (Average) | | | | | 2024 | 2023 | 2022 | 2024 | 2023 | 2022 | | Summary Compensation Table Total | $944,974 | $1,260,691 | $877,455 | $1,007,408 | $1,330,285 | $1,110,341 | | Subtract: Grant date fair value of equity awards granted during the covered year | (225,171) | (146,143) | — | — | — | — | | 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 | 142,173 | 160,584 | — | — | — | — | | 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 | — | — | — | (26,044) | (356,884) | 113,897 | | 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 | — | — | — | (25,444) | 560,450 | (6,297) | | 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 | $861,976 | $1,275,132 | $877,455 | $955,920 | $1,533,851 | $1,217,941 |

  22. 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 2024, 2023 and 2022 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 decreased from 2023 to 2024. The Company's net income decreased from 2023 to 2024. 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 2023 to 2024 the Company went from having net income of $12.5 million (which included a one time adjustment to our valuation allowance against our deferred tax assets of approximately $2.2 million that increased net income) to a net income of $5.2 million (which included a one time adjustment to our valuation allowance against our deferred tax assets of approximately $1.3 million that decreased net income). Without the adjustments to deferred tax assets, the Company would have had a net income of $10.3 million in 2023 and $6.5 million in 2024. The change 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 decreased from 2023 to 2024, 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.

  23. Compensation of Directors

    Compensation of Directors Effective July 1, 2024, the Compensation Committee recommended and the Board approved an updated director compensation plan (the “2024 Director Compensation Plan”). Pursuant to the 2024 Director Compensation Plan, each director who is not an employee of the Company receives an annual cash retainer of $50,000, an increase of $25,000, and a grant of 20,000 shares of restricted common stock vesting 25% every three months for one year, which is in increase of 5,000 shares. In addition, the Chairman of the Board receives a cash retainer of $75,000, which remains unchanged, and the Chair of the Audit Committee receives a cash retainer of $75,000, an increase of $15,000. Audit Committee members who are not the Chair receives a cash retainer $7,500, compared to the prior plan which granted each such Audit Committee member a cash retainer of $5,000 plus $1,000 for each meeting attended, Other committee chairpersons receive a cash retainer of $15,000, an increase of $9,000, and other non-chair committee members will receive a cash retainer of $7,500, an increase of $4,500. From January 1, 2024 to June 30, 2024 each director who is not an employee of the Company received a $12,500 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 $37,500, the Chair of the Audit Committee received a cash retainer of $30,000, Audit Committee members who are not the Chair received a cash retainer of $2,500 and $1,000 for each meeting attended. Other committee chairpersons received a cash retainer of $3,000, and other non-chair committee members received a cash retainer of $1,500. Following the approval of the 2024 Director Compensation Plan, from July 1, 2024 to December 31, 2024 each director who is not an employee of the Company received a $25,000 cash retainer (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 $37,500, the Chair of the Audit Committee received a cash retainer of $37,500, Audit Committee members who are not the Chair received a cash retainer of $3,750. Other committee chairpersons received a cash retainer of $7,500, and other non-chair committee members received a cash retainer of $3,750. The following table sets forth the aggregate compensation for services rendered during fiscal 2024 by each person serving as a director:

  24. Compensation of Directors

    | Name | Fees Earned or Paid in Cash ($) | Stock Awards (1) ($) | Total ($) | | Samuel Shimer | 126,000 | 43,950 | 169,950 | | Michael Hexner | 53,250 | 43,950 | 97,200 | | Barbara Sinsley | 53,250 | 43,950 | 97,200 | | Kelly Sharpe | 117,500 | 43,950 | 161,450 | | William Burnham | 51,000 | 43,950 | 94,950 | | David Ludwig (2) | — | — | — | | Ross Dove (2) | — | — | — | | ____________________ | | | | | (1) | The value included in this column represents the grant date fair value of the restricted stock award computed in accordance with FASB ASC Topic 718. The number of restricted shares granted during 2024 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) | Director was not compensated for service on the Board of Directors during 2024 due to compensation received for employment as an executive officer. | | |