DEF 14A of Cleanspark, Inc.
Filed Jan 26, 2024 · FY20230001140361-24-004070
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS Nomination of Directors The Nominations and Corporate Governance Committee of the Board (the “Nominating Committee”) is charged with making recommendations to the Board regarding qualified candidates to serve as members of the Board. The Nominating 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 in all aspects of corporate governance. Accordingly, the Nominating 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 Nominating Committee considers the following factors:
ELECTION OF DIRECTORS
| (1) The appropriate size of the Board; |
ELECTION OF DIRECTORS
| (2) The Company’s needs with respect to the particular talents and experience of its directors; and |
ELECTION OF DIRECTORS
| (3) The knowledge, skills, and experience of nominees, including experience in technology, business, finance, Bitcoin, digital assets, administration, and/or public service. |
ELECTION OF DIRECTORS
Other than the foregoing, there are no stated minimum criteria for director nominees, although the Nominating Committee may also consider such other factors as it deems to be in the Company’s and its stockholders’ best interests, including the independence requirements for board and committee membership under The Nasdaq Capital Market (“Nasdaq”) listing standards, diversity (though the Company does not have a formal policy with regard to the consideration of diversity in identifying director nominees), and the requirements for at least one member of the Board to meet the criteria for an “audit committee financial expert,” as defined by SEC rules. The Nominating Committee also believes it is appropriate for our Chief Executive Officer to serve on the Board. The Nominating Committee identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board 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 Nominating Committee at all times seeks to balance the value of continuity of service by existing members of the Board with that of obtaining a new perspective. If any member of the Board does not wish to continue in service, the Nominating Committee’s policy is to not re-nominate that member for reelection. The Nominating Committee identifies the desired skills and experience of a new nominee and then uses its network and external resources to solicit and compile a list of eligible candidates. We do not have a formal policy concerning stockholder recommendations of nominees for director to the Nominating Committee as, to date, we have not received any recommendations from stockholders requesting the Nominating Committee to consider a candidate for inclusion among the Nominating Committee’s slate of nominees in our proxy statement. The absence of such a policy does not mean, however, that such recommendations will not be considered. Stockholders wishing to recommend a candidate may do so by sending a written notice to the Nominating Committee, Attn: Chairman, CleanSpark, Inc., 10624 S. Eastern Ave., Suite A - 638, Henderson, Nevada 89052, naming the proposed candidate and providing detailed biographical and contact information for such proposed candidate. See “Stockholders’ Proposals” for further information on submitting written notices. There are no arrangements or understandings between any of our directors, nominees for directors, or officers and any other person pursuant to which any director, nominee for director, or officer was or is to be selected as a director, nominee, or officer, as applicable. There currently are no legal proceedings, and during the past ten years there have been no legal proceedings, that are material to the evaluation of the ability or integrity of any of our directors or director nominees. There are no material proceedings to which any director, officer, affiliate, or owner of record or beneficially 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 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 Securities Exchange Act of 1934, as amended (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. The Nominating Committee has recommended, and the Board has nominated, Zachary Bradford, S. Matthew Schultz, Larry McNeill, Dr. Thomas L. Wood, Roger P. Beynon, and Amanda Cavaleri as nominees for election as members of our Board at the 2024 Annual Meeting for a period of one year or until each such director’s respective successor is elected and qualified or until such director’s earlier death, resignation, or removal. Each of the nominees is currently a director of the Company. At the 2024 Annual Meeting, six directors will be elected to the Board. Information Regarding Directors
ELECTION OF DIRECTORS
| Name | Age | Position | | Zachary K. Bradford | 37 | Chief Executive Officer, President, and Director | | S. Matthew Schultz | 55 | Executive Chairman and Chairman of the Board | | Larry McNeill | 82 | Director | | Dr. Thomas L. Wood | 58 | Director | | Roger P. Beynon | 77 | Director | | Amanda Cavaleri | 35 | Director |
ELECTION OF DIRECTORS
| Zachary K. Bradford | Zachary K. Bradford has served as the Company’s Chief Executive Officer and President since October 2019 and a Director since 2014. Previously, he served as Chief Financial Officer from 2014 through October 2019. In June 2013, he founded a public accounting and consulting firm in Henderson, Nevada, where he served as an active partner until 2019 and has since retained ownership and transitioned to being a non-active partner. He has also held various financial leadership roles in both private and public companies, including a public accounting firm and a regional retail chain. Mr. Bradford holds a bachelor’s degree in accounting and a master’s of accountancy from Southern Utah University. He is a licensed Certified Public Accountant in Nevada and a member of the American Institute of Certified Public Accountants. Mr. Bradford is a member of the board of directors of the Digital Energy Council, a non-profit trade association focused solely on digital energy. | | | We believe that Mr. Bradford is qualified to serve on our Board of Directors because of his service as our Chief Executive Officer, as well as his experience and knowledge in public company reporting and accounting, Bitcoin infrastructure economics, including the ASIC bitcoin miner and energy markets, and mergers and acquisitions. |
ELECTION OF DIRECTORS
| S. Matthew Schultz | S. Matthew Schultz has served as Chairman of the Board since October 2019 and served as a Director since March 2014. He served as the Company’s Chief Executive Officer from 2014 through October 2019 and has served as Executive Chairman since October 2020. Mr. Schultz has helped numerous startups secure financing and expedite growth since 1999, including during his role as president of Wexford Capital Ventures, Inc. While serving as the chairman of Pali Financial Group, Inc., he led market development for dozens of public corporations. He was a founding member and vice president of the Utah Consumer Lending Association. | | | We believe that Mr. Schultz is qualified to serve on our Board of Directors because of his experience and knowledge in public company reporting and finance, the energy sector, and market development. |
ELECTION OF DIRECTORS
| Larry McNeill | Larry McNeill has served as a Director of the Company since January 2015. In September 2017, Mr. McNeill accepted the position of Chairman of the Board, which he held until October 2019. Since then, Mr. McNeill has continued as an independent Director and Chairman of the Compensation and Nominations and Corporate Governance Committees. Mr. McNeill’s diverse business background includes roles in real estate, finance, research, legal, management, and business strategies. He was Director of the Consumer, Sales, and Store Location research departments of Safeway Grocery Stores, Inc., where he was responsible for the expansion of Safeway in Europe, Australia, and Canada from 1970 to 1975. Prior to that, Mr. McNeill served as Director of Market Research for A&P, where he was responsible for the company’s expansion into Saudi Arabia. He was an executive officer of Smith’s Food and Drug Stores for 17 years, most recently as Senior Vice President of Corporate Development. Mr. McNeill retired from Smith’s Food and Drug Stores in 1996 after its merger with Fred Meyer was completed. Mr. McNeill has a bachelor’s degree in business administration, economics, and Russian language from Minnesota State University, a master’s degree in business administration from Armstrong University, and has completed course work towards his PhD in business management. | | | We believe that Mr. McNeill is qualified to serve on our Board of Directors because of his extensive experience and knowledge in business management and finance, including market research, real estate, strategic advisory services, and business law. |
ELECTION OF DIRECTORS
| Dr. Thomas L. Wood | Dr. Thomas L. Wood has been a Director of the Company since October 2019. He has over 37 years of experience in planning and operations, policy development and implementation, construction management, defense acquisition, budgeting and programming, and large project management. Dr. Wood previously served in the U.S. Navy from 1985 to 2006, rising to the role of Deputy Operations for the Navy’s Pacific Engineering Command, where he oversaw the execution of nearly $1 billion annually in construction and services contracts through nine field offices. After leaving the Navy, Dr. Wood served as a Subject Matter Expert (SME) supporting the U.S. Pacific Command (USPACOM) Joint Interagency Coordination Group (JIACG) as a Senior Military Analyst and continued as a civil servant in senior roles thereafter, including Director, Commander’s Action Group, Joint Interagency Task Force West, and Deputy Director for Strategic Forces and Policy, Commander Submarine Force, U.S. Pacific Fleet. Dr. Wood holds a Bachelor’s Degree in Civil Engineering from Union College, a Master’s Degree in Civil Engineering from the University of Maryland, College Park, and a Doctor of Business Administration degree from Argosy University, Honolulu. He is a licensed Professional Engineer. Dr. Wood is a member of the board of advisors of 28 Research. | | | We believe that Dr. Wood is qualified to serve on our Board of Directors because of his experience and knowledge in engineering, strategic planning, operations, and logistics, derived in part from his military background. |
ELECTION OF DIRECTORS
| Roger P. Beynon | Roger P. Beynon has been a Director of the Company since October 2019. He is a Certified Public Accountant (CPA) and owner of Beynon & Associates, a public accounting firm that has been in operation for over 37 years. Mr. Beynon has provided accounting and tax services to businesses since 1984. Mr. Beynon is a CPA and Certified Fraud Examiner (CFE) and is a past president of the Utah Association of CPAs. He is also chairman of the board of directors of Transwest Credit Union. Mr. Beynon holds a bachelor’s degree in accounting with a minor in banking and finance from Weber State University. | | | We believe that Mr. Beynon is qualified to serve on our Board of Directors because of his experience and knowledge in leading a public company reporting and accounting firm, board management, and finance. |
ELECTION OF DIRECTORS
| Amanda Cavaleri | Amanda Cavaleri has been a Director of the Company since December 2022. Since 2021, she has been the Chief Executive Officer of a Wyoming-based company that is developing a bitcoin mining site leveraging stranded energy. She has also been a partner at an alternative investment firm since 2021 and managing director of a bitcoin advisory firm since 2020. Ms. Cavaleri was Chief Marketing Officer and Vice President of Business Development of a privacy platform from 2018 to 2019. She was the managing director of an emerging tech advisory firm from 2013 to 2018. Ms. Cavaleri has consulted within the Bitcoin ecosystem for clients ranging from hedge and venture funds to financial services and mining. She is a former Innovation Fellow with AARP (2016-2017) and was a Thought Leader with Carnegie Mellon University & UPMC’s Quality of Life Technology Center in 2014. She received her master’s degree in technology commercialization from the University of Texas at Austin McCombs School of Business and a bachelor’s degree in business administration from Regis University. Ms. Cavaleri is a member of the board of advisors of the Bitcoin Today Coalition, a nonprofit (c)(4) increasing Bitcoin literacy among America’s legislators, regulators, and other policymakers, and a member of the board of directors of the Jackson Hole International Film Festival. She co-authored Bitcoin and the American Dream: The New Monetary Technology Transcending our Political Divide (2021). | | | We believe that Ms. Cavaleri is qualified to serve on our Board of Directors because of her experience and knowledge in alternative investments and emerging technologies, the Bitcoin mining industry, and policy and regulatory arenas. |
ELECTION OF DIRECTORS
Vote Required and Recommendation of the Board Directors are elected by a plurality of the votes cast at the Meeting. This means that the nominees receiving the highest number of affirmative (“FOR”) votes (among votes properly cast virtually or by proxy) will be elected as directors. In other words, because there are no other nominees for election as directors other than the persons named in the enclosed proxy card, and assuming each of those persons receives at least one vote, all such directors will be re-elected to our Board, provided that a quorum is present at the Meeting. Shares represented by executed proxies will be voted for which no contrary instruction is given, if authority to do so is not withheld, “FOR” the election of each of the nominees named above. Only votes “FOR” will affect the outcome. Broker non-votes and withheld votes will have no effect on this proposal.
ELECTION OF DIRECTORS
| THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES UNDER PROPOSAL 1 |
ELECTION OF DIRECTORS
PROPOSAL 2
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Non-Qualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | | Larry McNeill | $120,000 | $200,000 | $— | $— | $— | $— | $320,000 | | Roger P. Beynon | $113,333 | $200,000 | $— | $— | $— | $— | $313,333 | | Dr. Thomas L. Wood | $120,000 | $200,000 | $— | $— | $— | $— | $320,000 | | Amanda Cavaleri | $100,000 | $200,000 | $— | $— | $— | $— | $300,000 |
DIRECTOR COMPENSATION
| (1) Includes $120,000 annual cash retainers for each Board member paid $10,000 monthly. Mr. Beynon received approximately $6,667 for each of the months of October 2022 and November 2022. Ms. Cavaleri became a Board member effective November 30, 2022. |
DIRECTOR COMPENSATION
| (2) Represents the fair value of Restricted Stock Units (“RSUs”) issued in accordance with the CleanSpark, Inc. 2017 Incentive Plan (as amended from time to time, the “2017 Incentive Plan”), and is computed in accordance with Accounting Standards Codification 718, Compensation—Stock Compensation, or ASC 718. The RSUs represented here vested 25% per each quarter period during fiscal year 2023. None of these were unvested and outstanding as of September 30, 2023. |
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Long-term incentives are provided to executives as equity compensation in the form of RSUs granted under the 2017 Incentive Plan. They are awarded and vest in two different ways–time and performance. Time-based vesting is designed to retain high-performing executives who remain in anticipation of future rewards and incentivize the executive award recipient to increase the Company’s stock price through continued, consistent performance. Time-based awards granted by the Company generally vest evenly over a three-year period following the grant date. Stock awards such as RSUs also fall subject to our Insider Trading Policy, which prohibits hedging and restricts any unauthorized trading on the margin or pledging of Company stock by the Company’s executives. Performance-based vesting is also designed to focus executive attention on targets that the Company believes are likely to drive stockholder value. The Company has deployed two types of performance-based awards. They include achieving 1) operational targets, which are tied to the achievement of specific growth goals related to the Company’s hashrate, and 2) market targets, which are tied to creating sustainable stock-price appreciation. On September 29, 2023, the Company issued performance-based RSUs that are intended to incentivize executives for delivering stockholder returns in the form of stock price improvement. These long-term incentive performance-based RSU grants carry contingent vesting rights that only vest upon the Company’s stock price appreciating to certain specified levels from the closing price on the date of the RSUs being adopted, September 29, 2023, which was $3.81: For the vesting to occur, these thresholds must be met or exceeded for a period of 10 business days (which may or may not be consecutive) within a 20 consecutive business day close, or in connection with a change in control transaction. Pay Versus Performance The following tables summarize the relationship between executive compensation for our principal executive officer (“PEO”) (also known as our “CEO”)), other named executive officers, and financial performance measures for the Company’s two (2) most recently completed fiscal years, calculated in accordance with Item 402(v) of Regulation S-K. The disclosure included in this section is prescribed by SEC rules and Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and it does not necessarily align with how the Company or the Compensation Committee views the link between the Company’s performance and compensation paid to its named executive officers. For discussion of how the Company views its executive compensation, including alignment with the Company’s performance, see “Executive Compensation and Other Information” beginning on page 22 of this Proxy Statement. Please review the tables and associated narrative and graphical disclosure together for a more complete presentation of such relationship over the periods presented.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
| Fiscal Year(1) | Summary Compensation Table Total for PEO Zachary K. Bradford ($)(2) | Compensation Actually Paid to PEO Zachary K. Bradford ($)(3) | Average Summary Compensation Table Total for Non-PEO Named Executive Officers ($)(2) | Average Compensation Actually Paid to Non-PEO Named Executive Officers ($)(3) | Value of Initial Fixed $100 Investment Based on Total Shareholder Return ($)(4) | Net INCOME ($) | | 2023 | $6,975,812 | $8,820,110 | $4,704,986 | $5,633,412 | $26.64 | $(136,588,871) | | 2022 | $27,038,892 | $8,983,877 | $12,632,546 | $4,605,598 | $32.77 | $(57,325,554) |
EXECUTIVE COMPENSATION AND OTHER INFORMATION
| (3) To calculate the compensation actually paid to our PEO and our non-PEO named executive officers, adjustments were made to the amounts reported in the Summary Compensation Table for the applicable fiscal year in accordance with the SEC rules as follows: |
EXECUTIVE COMPENSATION AND OTHER INFORMATION
| Fiscal Years | 2023 | | 2022 | | | Adjustments | PEO Zachary K. Bradford ($) | Non-PEO Named Executive Officers* ($) | PEO Zachary K. Bradford ($) | Non PEO-Named Executive Officers* ($) | | Summary Compensation Table Total Amount | 6,975,812 | 4,704,986 | 27,038,892 | 12,632,546 | | Less: Equity Compensation from Summary Compensation Table | (3,423,000) | (2,681,350) | (25,984,299) | (12,003,123) | | Impact of awards granted during the current year: | | | | | | Unvested awards: Fair value of awards at the end of the fiscal year | 3,429,000 | 2,684,050 | 9,925,710 | 4,844,784 | | Granted and vested awards: Fair value of awards at vesting date | — | — | 2,812,137 | 1,124,340 | | Impact of awards granted in prior years | | | | | | Unvested and outstanding awards: Change in fair value as of the end of the fiscal year compared to fair value at the end of prior year | 483,339 | 241,550 | (4,808,563) | (1,992,950) | | Vested Awards: Change in fair value as of vesting date compared to fair value at the end of prior year | 1,354,958 | 684,176 | — | — | | Compensation Actually Paid | 8,820,110 | 5,633,412 | 8,983,877 | 4,605,598 |
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
| Name and principal position | Year | Salary ($) | Bonus(1) ($) | Stock Awards(2) ($) | Option Awards(3) ($) | All Other Compensation(4) ($) | Total ($) | | Zachary K. Bradford CEO, President, and Director | 2023 | 600,000 | 2,600,000 | 3,423,000 | — | 352,812 | 6,975,812 | | | 2022 | 500,000 | 350,000 | 25,378,854 | 605,445 | 204,593 | 27,038,892 | | S. Matthew Schultz Executive Chairman | 2023 | 540,000 | 2,340,000 | 3,080,700 | — | 318,038 | 6,278,738 | | | 2022 | 350,000 | 329,000 | 21,814,888 | 484,356 | 170,721 | 23,148,965 | | Gary A. Vecchiarelli CFO | 2023 | 400,000 | 400,000 | 2,282,000 | — | 49,233 | 3,131,233 | | | 2022 | 263,826 | 145,300 | 1,707,000 | — | — | 2,116,126 |
SUMMARY COMPENSATION TABLE
| (1) Amounts shown represent two tiers of bonuses: i) discretionary bonuses as generally described under the executives’ respective employment agreements and earned based on goals approved by the Compensation Committee, and ii) incentive-based non-equity incentive payments awarded to Zachary Bradford of $2,000,000 and to S. Matthew Schultz of $1,800,000 for meeting certain growth and performance targets under the performance measures, while meeting or exceeding efficiency targets. |
SUMMARY COMPENSATION TABLE
| (2) Amounts shown represent the aggregate grant date fair value of RSUs, as computed in accordance with ASC Topic 718. For a discussion of the assumptions made in the valuation reflected in these columns, see Note 14 to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. |
SUMMARY COMPENSATION TABLE
| a. | The deemed value of the 2023 Stock Awards for Mr. Bradford include the following: |
SUMMARY COMPENSATION TABLE
| i. | $3.4 million related to 900,000 market-based RSU awards granted on September 29, 2023. The stock award is market-based dependent on the Company’s common stock closing price and vests only upon the stock price appreciating to certain specified levels above the closing price on the grant date of $3.81. One-third vests when the stock price appreciates to $7.62 (100% increase from grant date price), one-third vests when the stock price appreciates to $11.43 (200% increase from grant date price), and the remaining one-third vests when the stock price appreciates to $15.24 (300% increase from grant date price). The stock price must reach the respective closing price threshold for a period of 10 business days (which may or may not be consecutive) within a 20 consecutive business day close. The 900,000 RSUs were deemed under ASC 718 to have a fair value of $3.803 per award on the date of grant based on the probable outcome of the performance conditions. |
SUMMARY COMPENSATION TABLE
| b. | The deemed value of the 2023 Stock Awards for Mr. Schultz include the following: |
SUMMARY COMPENSATION TABLE
| i. | $3.1 million related to 810,000 market-based RSU awards granted on September 29, 2023. The stock award is market-based dependent on the Company’s common stock closing price and vests only upon the stock price appreciating to certain specified levels above the closing price on the grant date of $3.81. One-third vests when the stock price appreciates to $7.62 (100% increase from grant date price), one-third vests when the stock price appreciates to $11.43 (200% increase from grant date price), and the remaining one-third vests when the stock price appreciates to $15.24 (300% increase from grant date price). The stock price must reach the respective closing price threshold for a period of 10 business days (which may or may not be consecutive) within a 20 consecutive business day close. The 810,000 RSUs were deemed under ASC 718 to have a fair value of $3.803 per award on the date of grant based on the probable outcome of the performance conditions. |
SUMMARY COMPENSATION TABLE
| c. | The deemed value of the 2023 Stock Awards for Mr. Vecchiarelli include the following: |
SUMMARY COMPENSATION TABLE
| i. | $2.3 million related to 600,000 market-based RSU awards granted on September 29, 2023. The stock award is market-based dependent on the Company’s common stock closing price and vests only upon the stock price appreciating to certain specified levels above the closing price on the grant date of $3.81. One-third vests when the stock price appreciates to $7.62 (100% increase from grant date price), one-third vests when the stock price appreciates to $11.43 (200% increase from grant date price), and the remaining one-third vests when the stock price appreciates to $15.24 (300% increase from grant date price). The stock price must reach the respective closing price threshold for a period of 10 business days (which may or may not be consecutive) within a 20 consecutive business day close. The 600,000 RSUs units were deemed under ASC 718 to have a fair value of $3.803 per award on the date of grant based on the probable outcome of the performance conditions. |
SUMMARY COMPENSATION TABLE
| d. | The deemed value of the 2022 Stock Awards for Mr. Bradford include the following: |
SUMMARY COMPENSATION TABLE
| i. | $8.2 million related to 450,000 market-based RSU awards granted on November 5, 2021. When initially granted, those awards were deemed to have a fair value of $6.0 million ($13.32 per share). On September 12, 2022, the Board modified the vesting terms of the award. As a result of the modification, the 450,000 RSUs vested and the original award was effectively cancelled and replaced with a new award. On the date of the modification and vesting, the 450,000 RSU awards were deemed to have a fair value of $2.2 million and the original award was effectively cancelled. Under the accounting rules in ASC 718, the Company is required to report the value of both awards, effectively resulting in the double counting of the awards, although the first award ($6.0 million) was effectively cancelled and the actual value deemed delivered to the holder under ASC 718 was only $2.2 million in RSUs ($4.89 per share). |
SUMMARY COMPENSATION TABLE
| ii. | $1.4 million related to 69,000 performance-based RSU awards granted on November 5, 2021, all of which were earned and recognized in fiscal year 2022. The 69,000 RSUs units were deemed under ASC 718 to have a fair value of $20.48 per RSU on the date of grant based on the probable outcome of the performance conditions. |
SUMMARY COMPENSATION TABLE
| iii. | $0.6 million related to 30,000 time-based RSU awards granted on November 5, 2021, which vested evenly over the fiscal year ended September 30, 2022. The 30,000 RSUs units were deemed under ASC 718 to have a fair value of $20.48 per RSU on the date of grant. |
SUMMARY COMPENSATION TABLE
| iv. | $6.6 million related to the full grant date value as determined under ASC 718 of 1,350,000 RSU awards granted on September 12, 2022. Such award will vest one-third on the following dates: September 30, 2023, 2024, 2025. |
SUMMARY COMPENSATION TABLE
| v. | $6.6 million is related to the full grant date value as determined under ASC 718 of 1,350,000 performance-based RSU awards granted on September 12, 2022. The vesting of these awards is dependent upon the Company achieving certain Bitcoin mining processing power (defined in EH/s). |
SUMMARY COMPENSATION TABLE
| vi. | $2.0 million related to 400,000 RSU awards granted on September 12, 2022. |
SUMMARY COMPENSATION TABLE
| e. | The deemed value of the 2022 Stock Awards for Mr. Schultz include the following: |
SUMMARY COMPENSATION TABLE
| i. | $6.6 million related to 360,000 market-based RSU awards granted on November 5, 2021. When initially granted, those awards were deemed to have a fair value of $4.8 million ($13.32 per share). On September 12, 2022, the Board modified the vesting terms of the award. As a result of the modification, the 360,000 RSUs vested and the original award was effectively cancelled and replaced with a new award. On the date of the modification and vesting the 360,000 RSU awards were deemed to have a fair value of $1.8 million and the original award was effectively cancelled. Under the accounting rules in ASC 718, the Company is required to report the value of both awards, effectively resulting in the double counting of the award, although the first award ($4.8 million) was effectively cancelled and the actual value deemed delivered to the holder under ASC 718 was only $1.8 million in RSUs ($4.89 per share). |
SUMMARY COMPENSATION TABLE
| ii. | $1.1 million is related to 55,000 performance-based RSU awards granted on November 5, 2021, all of which were earned and recognized in fiscal year 2022. The 55,000 RSUs units were deemed under ASC 718 to have a fair value of $20.48 per RSU on the date of grant based on the probable outcome of the performance conditions. |
SUMMARY COMPENSATION TABLE
| iii. | $0.5 million related to 24,000 time-based RSU awards granted on November 5, 2021, which vested evenly over the fiscal year ended September 30, 2022. The 24,000 RSUs units were deemed under ASC 718 to have a fair value of $20.48 per RSU on the date of grant. |
SUMMARY COMPENSATION TABLE
| iv. | $5.9 million related to the full grant date value as determined under ASC 718 of 1,215,000 RSU awards granted on September 12, 2022. Such award will vest one-third on the following dates: September 30, 2023, 2024, 2025. |
SUMMARY COMPENSATION TABLE
| v. | $5.9 million related to the full grant date value as determined under ASC 718 for 1,215,000 performance-based RSU awards granted on September 12, 2022. The vesting of these awards is dependent upon the Company achieving certain Bitcoin mining processing power (defined in EH/s). |
SUMMARY COMPENSATION TABLE
| vi. | $1.8 million related to 360,000 RSU awards granted on September 12, 2022. |
SUMMARY COMPENSATION TABLE
| f. | The deemed value of the 2022 Stock Awards for Mr. Vecchiarelli include the following: |
SUMMARY COMPENSATION TABLE
| i. | $0.8 million related to 60,000 market-based RSU awards issued on December 15, 2021, which did not have an expiration date and were valued assuming a 5-year term. These market-based awards were deemed to have a fair value of $0.3 million on the date of the modification (see 2.f.iii). |
SUMMARY COMPENSATION TABLE
| ii. | $0.1 million related to 10,000 RSU awards granted on December 15, 2021, which vest over a 1-year period and had a value of $0.05 million on the date of the modification (see 2.f.iii). |
SUMMARY COMPENSATION TABLE
| iii. | $0.4 million related to 120,000 RSU awards granted on September 12, 2022 with a 3-year vesting period. This award and the award described in 2.f.iv replace the awards described in 2.f.i and 2.f.ii and represent the incremental fair value. |
SUMMARY COMPENSATION TABLE
| iv. | $0.4 million related to the full grant date value as determined under ASC 718 for 120,000 performance-based RSU awards granted on September 12, 2022. The vesting of these awards is dependent upon the Company achieving certain Bitcoin mining processing power (defined in EH/s). |
SUMMARY COMPENSATION TABLE
| (3) Amounts shown represent the aggregate grant date fair value of stock options, as computed in accordance with ASC Topic 718, which were granted pursuant to the executives’ respective employment agreements. These awards vested upon achievement of pre-established performance metrics set by the Compensation Committee over a 12-month period and include a one-time discretionary award of options for exceeding performance expectations as approved by the Compensation Committee. Amounts included assume the maximum level of performance. For a discussion of the assumptions made in the valuations reflected in these columns, see Note 14 to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. |
SUMMARY COMPENSATION TABLE
| a. | The 2022 stock option awards for Mr. Bradford include the grant of performance-based stock options exercisable for 30,000 shares of Common Stock granted on November 5, 2021, all of which were earned and recognized in fiscal year 2022. The stock options exercisable for 30,000 shares of Common Stock were deemed to have a fair value of $20.48 per option on the date of grant under ASC 718. |
SUMMARY COMPENSATION TABLE
| b. | The 2022 stock option awards for Mr. Schultz include the grant of performance-based stock options exercisable for 24,000 shares of Common Stock granted on November 5, 2021, all of which were earned and recognized in fiscal year 2022. The stock options exercisable for 24,000 shares of Common Stock were deemed to have a fair value of $20.48 per option on the date of grant under ASC 718. |
SUMMARY COMPENSATION TABLE
| (4) Amounts shown include compensation paid in Bitcoin in accordance with the executives’ respective employment agreements and certain taxes paid by the Company on behalf of the executives in accordance with the executives’ employment agreements. The value included in the table represents the Bitcoin price on the date of the issuance of the Bitcoin. |
SUMMARY COMPENSATION TABLE
Narrative Disclosure to the Summary Compensation Table Zachary K. Bradford – Chief Executive Officer, President, and Director On October 26, 2020, the Company entered into an employment agreement whereby Mr. Bradford accepted the position of Chief Executive Officer. Under this agreement, as amended on April 16, 2021, Mr. Bradford was compensated for fiscal year 2022 by (i) a base salary of $500,000, (ii) a discretionary cash bonus (the percentage of which is determined by the Compensation Committee but will be no less than 50% of base salary) which was $350,000 in fiscal year 2022, (iii) 0.6 Bitcoin per month of employment (i.e., 7.2 Bitcoin per year), and (iv) a combination of RSUs and stock options that is at least 50% in value to his annual base compensation (for fiscal year 2022 this consisted of performance-based awards of 69,000 RSUs and options exercisable for 30,000 shares of common stock, respectively). Incentives were earned upon the achievement of performance metrics. Mr. Bradford achieved all of the performance metrics set by the Compensation Committee in fiscal year 2022. In the event that the Company ceases to mine Bitcoin for any reason, the Bitcoin payment will automatically terminate, and the Company will have no obligation to pay Mr. Bradford any additional Bitcoin. Fiscal year - October 1, 2022 to September 30, 2023 On September 13, 2022, Mr. Bradford’s employment agreement was further amended to provide the following compensation to Mr. Bradford effective October 1, 2022: (i) $600,000 annual base salary, (ii) a performance bonus opportunity equal to 100% of base salary, (iii) a grant of 1,350,000 performance-based RSUs, (which fully vested on October 26, 2023 upon the Company’s achievement of 10.0 EH) and 1,350,000 RSUs, which vest over time, one-third on each anniversary of the grant date, and (iv) the payment in Bitcoin was increased to 1.2 Bitcoin per month (i.e., 14.4 Bitcoin per year). In the event that the Company ceases to mine Bitcoin for any reason, the Bitcoin payment will automatically terminate, and the Company will have no obligation to pay Mr. Bradford any additional Bitcoin. See the Summary Compensation Table for the actual cash paid and the fair value of equity awards granted to Mr. Bradford in the fiscal year ended September 30, 2023. S. Matthew Schultz – Executive Chairman and Chairman of the Board Fiscal year - October 1, 2021 to September 30, 2022 On October 26, 2020, the Company entered into an employment agreement whereby Mr. Schultz accepted the position of Executive Chairman. Under this agreement, as amended on April 16, 2021, Mr. Schultz was compensated for the fiscal year by (i) a base salary of $350,000, (ii) a discretionary cash bonus (the percentage of which is determined by the Compensation Committee but will be no less than 50% of base salary) which was $329,000 in fiscal year 2022, (iii) 0.5 Bitcoin per month of employment (i.e., 6.0 Bitcoin per year), and (iv) a combination of RSUs and stock options that is at least 50% in value to his annual base compensation (for fiscal year 2022 this consisted of performance-based awards of 55,000 RSUs and options exercisable for 24,000 shares of common stock, respectively). Incentives were earned upon the achievement of performance metrics. Mr. Schultz achieved all of the performance metrics set by the Compensation Committee in fiscal year 2022. In the event that the Company ceases to mine Bitcoin for any reason, the Bitcoin payment will automatically terminate, and the Company will have no obligation to pay Mr. Schultz any additional Bitcoin. Fiscal year - October 1, 2022 to September 30, 2023 On September 13, 2022, Mr. Schultz’s employment agreement was further amended to provide the following compensation to Mr. Schultz effective October 1, 2022: (i) $540,000 annual base salary, (ii) a performance bonus opportunity equal to 100% of base salary, (iii) a grant of 1,215,000 performance-based RSUs (which fully vested on October 26, 2023 upon the Company’s achievement of 10.0 EH) and 1,215,000 RSUs, which vest over time, one-third on each anniversary of the grant date, and (iv) the payment in Bitcoin was increased to 1.08 Bitcoin per month (i.e., 12.96 Bitcoin per year). In the event that the Company ceases to mine Bitcoin for any reason, the Bitcoin payment will automatically terminate, and the Company will have no obligation to pay Mr. Schultz any additional Bitcoin. See the Summary Compensation Table for the actual cash paid and the fair value of equity awards granted to Mr. Schultz in the fiscal year ended September 30, 2023. Gary A. Vecchiarelli – Chief Financial Officer Effective December 15, 2021, the Company entered into an employment agreement with Mr. Vecchiarelli whereby Mr. Vecchiarelli accepted the position of Chief Financial Officer. Under this agreement, Mr. Vecchiarelli was compensated by (i) a base salary of $350,000, (ii) a cash signing bonus of $40,000, which signing bonus is subject to repayment in full in the event that Mr. Vecchiarelli resigns within two years of employment, (iii) an annual discretionary cash bonus based on annual gross margin of the Company and other benchmarks that may be identified at the discretion of the Company’s Chief Executive Officer and ratified by the Compensation Committee, which is equivalent to no less than 30% of base salary, (iv) at least 10,000 RSUs to be issued annually, which shall vest in full on the first anniversary of such issuance, and (v) additional RSUs as incentive compensation. Mr. Vecchiarelli achieved all of the performance metrics set by the Compensation Committee in fiscal year 2022. Fiscal year - October 1, 2022 to September 30, 2023 On September 13, 2022, Mr. Vecchiarelli’s employment agreement was further amended to provide the following compensation to Mr. Vecchiarelli effective October 1, 2022: (i) $400,000 annual base salary, (ii) a grant of 120,000 performance-based RSUs (which fully vested on October 26, 2023 upon the Company’s achievement of 10.0 EH) and 120,000 RSUs, which vest over time, one-third on each anniversary of the grant date, and (iii) the payment in Bitcoin of 0.167 Bitcoin per month (i.e., 2.0 Bitcoin per year). In the event that the Company ceases to mine Bitcoin for any reason, the Bitcoin payment will automatically terminate, and the Company will have no obligation to pay Mr. Vecchiarelli any additional Bitcoin. See the Summary Compensation Table for the actual cash paid and the fair value of equity awards granted to Mr. Vecchiarelli in the fiscal year ended September 30, 2023. Potential Payments Upon Termination Named Executive Officer Severance Terms The severance terms for Messrs. Bradford, Schultz, and Vecchiarelli are reflected in their respective employment contracts.
SUMMARY COMPENSATION TABLE
As of the end of fiscal year 2023, in the event the Company terminated the employment of Messrs. Bradford or Schultz prior to the expiration of such officer’s employment contract term without “cause,” (i) the Company will pay the accrued and unpaid portion of such officer’s base salary and any bonuses earned for services provided through such officer’s termination date (the “Compensation Payment”); (ii) the Company will pay any reimbursement for business travel and other expenses to which such officer is entitled (the “Reimbursement”); (iii) any unvested portion of any options, stock, or other securities of the Company or any of its affiliates granted to such officer which are subject to vesting (“Unvested Securities”) will immediately be issued (in the case of the stock grants) and become exercisable (in the case of the stock options, warrants, or other convertible securities), regardless of the vesting or termination provisions of such Unvested Securities; (iv) subject to the signing by such officer of a general release of all claims against the Company in a form and manner satisfactory to the Company, and after the expiration of any revocation rights under that general release, and subject to such officer’s compliance with post-termination obligations and any restrictive covenants upon termination by the Company without cause, the Company will provide such officer with severance equal to six (6) months of such officer’s base salary and other employment benefits if terminated in the first twelve (12) months of employment and twelve (12) months of such officer’s base salary and other employment benefits thereafter; and (v) subject to the same terms as the severance, the Company will pay such officer an amount equal to 100% of the bonus paid to such officer during the prior six (6) months. If due and payable, the severance and bonus described in the foregoing formula will be payable in equal payments over twelve (12) months following the effective date of termination, subject to all applicable withholdings and taxes. As of January 19, 2024, Messrs. Bradford and Schultz would be entitled to twelve (12) months of severance. If Mr. Vecchiarelli is terminated without “cause,” (i) the Company will pay the Compensation Payment; (ii) the Company will pay the Reimbursement; (iii) any Unvested Securities will immediately be issued and become exercisable or convertible; (iv) subject to the signing by Mr. Vecchiarelli of a general release of all claims against the Company in a form and manner satisfactory to the Company, and after the expiration of any revocation rights under that general release, and subject to the Mr. Vecchiarelli’s compliance with post-termination obligations and any restrictive covenants upon termination by the Company without cause, the Company will provide Mr. Vecchiarelli with severance equal to six (6) months of Mr. Vecchiarelli’s base salary and other employment benefits plus two (2) months of base salary for every full year of employment with the Company; and (v) subject to the same terms as the severance, the Company will pay Mr. Vecchiarelli an amount equal to 100% of the cash bonus paid to Mr. Vecchiarelli during the prior twelve (12) months. If due and payable, at the election of the Company, the severance and bonus described in the foregoing formula will be payable in equal payments over twelve (12) months following the effective date of termination, subject to all applicable withholdings and taxes. As of January 19, 2024, Mr. Vecchiarelli would be entitled to ten (10) months of severance. If Messrs. Bradford, Schultz, or Vecchiarelli’s employment terminates for “cause,” as applicable, they will receive such officer’s applicable (i) Compensation Payment and (ii) Reimbursement. Additionally, for Messrs. Bradford and Schultz only, subject to the signing by such officer of a general release of all claims against the Company in a form and manner satisfactory to the Company, and after the expiration of any revocation rights under that general release, and subject to such officer’s compliance with post-termination obligations and any restrictive covenants, upon termination for cause, the Company will provide such officer with severance equal to three (3) months of such officer’s base salary and other employment benefits if terminated in the first twelve (12) months of employment and six (6) months of such officer’s base salary and other employment benefits thereafter. As of January 19, 2024, Messrs. Bradford and Schultz would be entitled to six (6) months of severance. In the event of termination upon disability, the applicable officer will receive (i) the Compensation Payment, (ii) the Reimbursement, and (iii) the Unvested Securities. In the event of termination upon death, the applicable officer’s estate will receive (i) the Compensation Payment, (ii) the Reimbursement, and (iii) the Unvested Securities. “Cause” means (i) the officer’s material breach of his employment agreement and such breach is not cured by the officer within thirty (30) days after written notice from the Company; (ii) the officer’s failure to perform his material duties and obligations under his employment agreement (other than during any period of disability) and such failure is not cured by the officer within thirty (30) days after written notice from the Company; (iii) the officer’s material malfeasance or material misconduct in connection with the performance of his duties under the employment agreement; (iv) the officer’s conviction of, or pleading guilty or nolo contendere to, a felony or the equivalent thereof, any other crime having as its predicate element fraud, dishonesty, misappropriation, moral turpitude, violence or theft; or (v) committing an act of moral turpitude, whether criminal or not, which would tend to undermine the reputation of the Company. Potential Payments Upon a Change in Control Award agreements under our 2017 Incentive Plan provide that any Unvested Securities held by Messrs. Bradford, Schultz, or Vecchiarelli shall immediately be issued and become exercisable or convertible in the event of such officer’s termination upon (i) a sale of substantially all of the capital stock or assets of the Company, (ii) the sale of more than 50% of the Company’s stock in one transaction, or (iii) a change of at least 60% of the Board within a 30-day period. Outstanding Equity Awards at Fiscal Year-End On June 19, 2017, our Board of Directors adopted the 2017 Incentive Plan. The purpose of the 2017 Incentive Plan is to attract and retain the best available personnel for positions of substantial responsibility with us, to provide additional incentive to employees, directors, and consultants, and to promote our success. The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer as of September 30, 2023.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
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 | 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 or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Zachary K. Bradford | 6,752 | — | — | $9.00 | 10/25/2023 | — | — | — | — | | | 30,000 | — | — | $9.00 | 10/26/2023 | — | — | — | — | | | 402,777 | 97,223(1) | — | $23.00 | 4/15/2026 | — | — | — | — | | | 30,000 | — | — | $20.48 | 11/7/2024 | — | — | — | — | | | | | | | | 900,000(3) | 3,429,000 | | | | | | | | | | 96,432(4) | 367,406 | | | | | | | | | | 900,000(5) | 3,429,000 | | | | S. Matthew Schultz | 322,221 | 77,779(2) | — | $23.00 | 4/15/2026 | — | — | — | — | | | 15,000 | — | — | $9.00 | 10/25/2023 | — | — | — | — | | | 24,000 | — | — | $9.00 | 10/25/2023 | — | — | — | — | | | 24,000 | — | — | $20.48 | 11/7/2024 | — | — | — | — | | | | | | | | 810,000(3) | 3,086,100 | — | — | | | | | | | | 86,787(4) | 330,658 | — | — | | | | | | | | 810,000(5) | 3,086,100 | | | | Gary A. Vecchiarelli | | | | | | 80,000(3) | 304,800 | — | — | | | | | | | | 8,571(4) | 32,656 | — | — | | | | | | | | 600,000(5) | 2,286,000 | | |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| (1) Options exercisable for 500,000 shares of Common Stock granted on April 16, 2021, which vest in 36 equal monthly installments. |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| (2) Options exercisable for 400,000 shares of Common Stock granted on April 16, 2021, which vest in 36 equal monthly installments. |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| (3) RSU awards that are subject to a 3-year vesting period beginning with the grant date of September 12, 2022. |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| (4) RSU awards that are subject to a performance-based vesting beginning with the grant date of September 12, 2022. |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| (5) RSU awards that are market-based dependent on the Company’s common stock closing price on the grant date of $3.81. One-third vests when the stock price appreciates to $7.62 (100% increase from grant date price), one-third vests when the stock price appreciates to $11.43 (200% increase from grant date price), and the remaining one-third vests when the stock price appreciates to $15.24 (300% increase from grant date price). The stock price must reach the respective closing price threshold for a period of 10 business days (which may or may not be consecutive) within a 20 consecutive business day close. |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
2017 Incentive Plan On June 19, 2017, our Board of Directors established the 2017 Incentive Plan. On March 8, 2023, our stockholders approved an amendment to the 2017 Incentive Plan to (i) increase the number of shares authorized for issuance under the 2017 Incentive Plan from 3,500,000 shares of common stock to 11,512,000 shares of common stock and (ii) add an evergreen provision to, on April 1st and October 1st of each year, automatically increase the maximum number of shares of common stock available under the 2017 Incentive Plan to fifteen percent (15%) of our outstanding shares of common stock, in each case as of the last day of the immediately preceding month. A total of 14,542,583 shares are authorized for issuance under the 2017 Incentive Plan. As of September 30, 2023, there were 715,896 shares available for issuance under the 2017 Incentive Plan. The 2017 Incentive Plan allows the Company to grant incentive stock options, non-qualified stock options, restricted stock, stock units, stock awards, stock appreciation rights, performance shares, and performance units. The incentive stock options are exercisable for up to ten years, at an option price per share not less than the fair market value on the date the option is granted. The incentive stock options are limited to persons who are regular full-time employees of the Company at the date of the grant of the option. Non-qualified options may be granted to any person, including, but not limited to, employees, independent agents, consultants, and attorneys who the Company’s Board believes have contributed, or will contribute, to the success of the Company. Non-qualified options may be issued at option prices of less than fair market value on the date of grant, subject to compliance with Internal Revenue Code Section 409A, and may be exercisable for up to ten years from date of grant. The option vesting schedule for options granted is determined by the Board of Directors at the time of the grant. The 2017 Incentive Plan provides for accelerated vesting of unvested options if there is a change in control, as defined in the 2017 Incentive Plan. As of September 30, 2023, the number of securities issued under the 2017 Incentive Plan was:
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| Plan Category | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights | Weighted-average Price of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans | | | (a) | (b) | (c) | | Equity compensation plans approved by security holders | 1,970,458 | $14.86 | 715,896 | | Equity compensation plans not approved by security holders | — | $— | — | | Total | 1,970,458 | $14.86 | 715,896 |