UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
PROXY
STATEMENT PURSUANT TO SECTION 14(a)
OF
THE SECURITIES EXCHANGE ACT OF 1934
(Amendment
No. )
Filed
by the Registrant [X]
Filed
by a Party other than the Registrant [ ]
Check
the appropriate box:
[ ]
Preliminary Proxy Statement
[ ]
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X]
Definitive Proxy Statement
[ ]
Definitive Additional Materials
[ ]
Soliciting Material Pursuant to § 240.14a-12
TARONIS
TECHNOLOGIES, INC.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
[X]
No fee required
[ ]
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
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(1)
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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to Exchange Act Rule: 0-11 (set forth the amount on
which the filing fee is calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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[ ]
Fee paid previously with preliminary materials.
[ ]
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of
its filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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TARONIS
TECHNOLOGIES, INC.
PROXY
STATEMENT
TABLE
OF CONTENTS
300
W. Clarendon Avenue, Suite 230
Phoenix,
AZ 85013
(727)
934-3448
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON AUGUST 20, 2019
To
Our Stockholders:
Notice
is hereby given that the previously adjourned 2018 annual meeting of the stockholders (the “Annual Meeting”) of Taronis
Technologies, Inc., a Delaware corporation (“Company”), will be held on August 20, 2019 at 10 a.m. local time at the
JW Marriott Phoenix Desert Ridge Resort & Spa at 5350 East Marriott Drive, Phoenix, Arizona 85054 for the following purposes,
all as more fully described in the accompanying Proxy Statement:
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1.
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To
elect the nominees named in the Proxy Statement to the Board of Directors (the “Board”);
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2.
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To
approve an amendment to the Company’s Charter to effect a reverse stock split of the outstanding shares of the common
stock, par value $0.001 per share, of the Company (the “Common Stock”), at a ratio in the range from 1-for-2 to
1-for-100, with such ratio to be determined by the sole discretion of the Board. The reverse stock split is expected to occur
on August 22, 2019.
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3.
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To
ratify the appointment of Marcum LLP (“Marcum”) as the Company’s independent registered public accounting
firm; and
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4.
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To
consider and act upon any other matters that may properly come before the Annual Meeting and any adjournment or postponement
thereof
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The
Annual Meeting will not include a presentation by management.
The
close of business on July 18, 2019 has been fixed as the record date for the determination of stockholders of the Company entitled
to notice of, and to vote at, the Annual Meeting. Only stockholders of record at the close of business on July 18, 2019 are entitled
to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof.
All
stockholders are cordially invited to attend the Annual Meeting. However, whether or not you expect to attend in person, please
complete, sign, date and return the enclosed Proxy Card as promptly as possible in the envelope provided for that purpose. Returning
your Proxy Card will ensure your representation and help to ensure the presence of a quorum at the Annual Meeting. Your proxy
is revocable, as set forth in the accompanying Proxy Statement. Therefore, you may attend the Annual Meeting and vote your shares
in person even if you send in your Proxy Card.
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By
Order of the Board of Directors,
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/s/ Scott
Mahoney
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Scott
Mahoney
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Chief
Executive Officer & President
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July
29, 2019
Phoenix,
Arizona
YOUR
VOTE IS IMPORTANT
THIS
PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF PROXIES BY THE COMPANY, ON BEHALF OF THE BOARD OF DIRECTORS,
FOR THE 2018 ANNUAL MEETING OF STOCKHOLDERS. THE PROXY STATEMENT AND THE RELATED PROXY FORM ARE BEING DISTRIBUTED ON OR ABOUT
JULY 29, 2019. YOU CAN VOTE YOUR SHARES USING ONE OF THE FOLLOWING METHODS:
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COMPLETE
AND RETURN A WRITTEN PROXY CARD TO THE NAME AND ADDRESS ON THE PROXY CARD
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ATTEND
THE COMPANY’S 2018 ANNUAL MEETING OF STOCKHOLDERS AND VOTE IN PERSON
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VOTE
VIA THE INTERNET AT
WWW.FCRVOTE/TRNX.COM
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VOTE
BY PHONE BY CALLING THE NUMBER PRINTED ON THE ACCOMPANYING VOTING DOCUMENT
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VOTE
BY FAXING YOUR PROXY CARD TO THE NUMBER PRINTED ON THE ACCOMPANYING VOTING DOCUMENT
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ALL
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED
TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD AS PROMPTLY AS POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE ENCLOSED
FOR THAT PURPOSE OR SUBMIT YOUR VOTE VIA THE INTERNET AT
WWW.FCRVOTE/TRNX.COM
OR VOTE BY PHONE BY CALLING OR BY FAXING
YOUR PROXY CARD TO THE NUMBERS PRINTED ON THE ACCOMPANYING VOTING DOCUMENT. ANY STOCKHOLDER ATTENDING THE MEETING MAY VOTE IN
PERSON EVEN IF HE OR SHE HAS RETURNED A PROXY CARD.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON AUGUST 20, 2019. THE PROXY STATEMENT
AND OUR 2018 ANNUAL REPORT TO SECURITY HOLDERS ON SECURITIES AND EXCHANGE COMMISSION FORM 10-K ARE AVAILABLE AT
WWW.FCRVOTE/TRNX.COM
.
WHETHER
OR NOT YOU INTEND TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED
PRE-ADDRESSED AND POSTAGE-PAID ENVELOPE OR SUBMIT YOUR VOTE VIA THE INTERNET AT WWW.FCRVOTE/TRNX.COM OR BY CALLING OR FAXING THE
PROXY CARD TO THE NUMBERS PRINTED ON THE ACCOMPANYING VOTING DOCUMENT.
PROXY
STATEMENT
INFORMATION
CONCERNING SOLICITATION AND VOTING
This
Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors of Taronis Technologies,
Inc., a Delaware corporation (sometimes referred to in this Proxy Statement as the “Company”, “Taronis”,
“we” or “us”), for exercise in voting at the Company’s previously adjourned 2018 Annual Meeting
of Stockholders to be held on August 20, 2019 (the “Annual Meeting”) for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders. We are first sending this Proxy Statement, accompanying Proxy Card, and Notice of Annual
Meeting of Stockholders to our stockholders on or about July 29, 2019.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON AUGUST 20, 2019.
The
Proxy Statement and our 2018 Annual Report on Form 10-K are available at www.fcrvote/trnx.com
or you may request a printed
or electronic set of the proxy materials at no charge. Instructions on how to access the proxy materials over the Internet and
how to request a printed copy may be found on the Notice. In addition, any stockholder may request to receive proxy materials
in printed form by mail or electronically by email on an ongoing basis. Choosing to receive future proxy materials by email will
save us the cost of printing and mailing documents to stockholders and will reduce the impact on our environment. A stockholder
who chooses to receive future proxy materials by email will receive an email prior to next year’s Annual Meeting with instructions
containing a link to those materials and a link to the proxy voting website. A stockholder’s election to receive proxy materials
by email will remain in effect until such election is terminated by the stockholder.
Our
principal executive offices are located at 300 W. Clarendon Avenue, Suite 230, Phoenix, AZ 85013, and our telephone number is
(727) 934-3448.
INFORMATION
ABOUT THE ANNUAL MEETING
Date,
Time and Place of the Annual Meeting
Our
previously adjourned 2018 Annual Meeting will be held on August 20, 2019 at 10 a.m. local time at the JW Marriott Phoenix Desert
Ridge Resort & Spa at 5350 East Marriott Drive, Phoenix, Arizona 85054
Who
May Attend the Annual Meeting
Only
stockholders who own our Common Stock as of the close of business on July 18, 2019, the record date for the Annual Meeting (the
“Record Date”), will be entitled to attend the Annual Meeting. At the discretion of management, we may permit certain
other individuals to attend the Annual Meeting, including the media, professional service providers and our employees.
Who
May Vote
Each
share of our Common Stock outstanding on the Record Date entitles the holder thereof to one vote on each matter submitted to the
stockholders at the Annual Meeting. Only stockholders who own Common Stock as of the close of business on the Record Date are
entitled to notice of, and to vote at, the Annual Meeting. As of the Record Date, there were approximately 81,664,203 shares
of our Common Stock issued and outstanding.
How
to Vote
If
you were a holder of our Common Stock as of the Record Date, you are entitled to vote at the Annual Meeting, and we encourage
you to attend and vote in person
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HOWEVER,
WHETHER OR NOT YOU INTEND TO ATTEND THE ANNUAL MEETING, THE BOARD OF DIRECTORS REQUESTS THAT YOU COMPLETE, SIGN, DATE AND RETURN
THE ACCOMPANYING PROXY CARD IN ORDER TO ENSURE THE PRESENCE OF A QUORUM.
A
pre-addressed and postage-paid return envelope is enclosed for your convenience. Alternatively, you may cast your vote via the
internet at
www.fcrvote/trnx.com
or by phone by calling or faxing your proxy card to the numbers printed on the
accompanying voting document.
If
your shares are held in the name of a bank, broker, or other holder of record, you will receive instructions from the holder of
record that you must follow in order for your shares to be voted. If your shares are not registered in your own name and you plan
to vote your shares in person at the Annual Meeting, you should contact your broker or agent to obtain a proxy and bring it to
the Annual Meeting in order to vote.
Voting
by Proxy
If
you vote by proxy, the individuals named on the proxy, or their substitutes, will vote your shares in the manner you indicate.
If a beneficial owner who holds shares in street name does not provide specific voting instructions to their brokerage firm, bank,
broker dealer or other nominee, under the rules of certain securities exchanges, including NASDAQ Marketplace Rules, the brokerage
firm, bank, broker dealer or other nominee holding those shares may generally vote as the nominee determines in its discretion
on behalf of the beneficial owner on routine matters but cannot vote on non-routine matters, the latter of which results in “broker
non-votes.” Proposals 1 and 2 involve matters we believe to be routine. Accordingly, if you do not give instructions to
your broker, the broker may vote your shares in its discretion on Proposals 1 and 2 and therefore no broker non-votes are expected
in connection with Proposals 1 and 2. If you date, sign, and return the proxy card without indicating your instructions, your
shares will be voted as follows:
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Proposal
No. 1.
“
FOR
” the nominees named in this Proxy Statement to the Board of Directors (the “Board”);
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Proposal
No. 2. “FOR”
approval of an amendment to the Company’s Charter to effect a reverse stock split of the
outstanding shares of the Company’s Common Stock at a ratio in the range from 1-for-2 to 1-for-100, with such ratio
to be determined by the sole discretion of the Board. The reverse stock split is expected to occur on August 22, 2019.
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Proposal
No. 3. “FOR”
the ratification of the appointment of Marcum LLP (“Marcum”) as the Company’s
independent registered public accounting firm for the fiscal year ending December 31, 2018.
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Other
Business.
In the discretion of your proxy holder (one of the individuals named on your proxy card), on any other matter
properly presented at the Annual Meeting or any adjournment or postponement thereof.
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You
may revoke or change your proxy at any time before it is exercised by delivering to us a signed proxy with a date later than your
previously delivered proxy, by voting in person at the Annual Meeting, or by sending a written revocation of your proxy addressed
to our Corporate Secretary at our principal executive office. Your latest dated proxy card is the one that will be counted.
Quorum
Requirement
A
quorum is necessary to hold a valid meeting. The presence, in person or by proxy, of holders of our Common Stock entitled to cast
a majority of all the votes entitled to be cast at the Annual Meeting constitutes a quorum for the transaction of business. Abstentions
and broker non-votes are counted as present for purposes of establishing a quorum. A “broker non-vote” occurs when
a broker, bank or other holder of record holding shares for a beneficial owner properly executes and returns a proxy without voting
on a particular proposal because such holder of record does not have discretionary voting power for that particular item and has
not received instructions from the beneficial owner.
Voting
Requirements
Proposal
No. 1.
The election of the Directors at the Annual Meeting will be by a plurality of the votes cast. This means that the five
director nominees receiving the greatest number of votes cast, in person or by proxy, by the holders of our Common Stock in the
election of the Directors, will be elected. Stockholders may not cumulate their votes in electing directors. Stockholders entitled
to vote at the Annual Meeting may either vote “FOR” the nominees for election as a director or may “WITHHOLD”
authority for the nominees. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the
election of the nominees named below in Proposal No. 1. If a stockholder withholds authority to vote with respect to the nominees
for director, the shares held by that stockholder will be counted for purposes of establishing a quorum, but will have no effect
on the election of the nominees. Broker non-votes will have no effect on the election of the nominee.
Proposal
No. 2.
Stockholders may vote “FOR” or “AGAINST” or may “ABSTAIN” on Proposal No. 2 regarding
approval of an amendment to the Company’s Charter to effect a reverse stock split of the outstanding shares of the Company’s
Common Stock at a ratio in the range from 1-for-2 to 1-for-100, with such ratio to be determined by the sole discretion of the
Board. The affirmative vote of the holders of a majority of the shares of our Common Stock present in person or represented by
proxy and entitled to vote on the proposal will be required to approve an amendment to the Company’s Charter to effect a
reverse stock split. Abstentions will have the same effect as a vote against Proposal No. 2.
Proposal
No. 3.
Stockholders may vote “FOR” or “AGAINST” or may “ABSTAIN” on Proposal No. 3 regarding
the ratification of the selection of Marcum LLP (“Marcum”) as the Company’s independent registered public accounting
firm for the year ending December 31, 2018. The affirmative vote of the holders of a majority of the shares of our Common Stock
present in person or represented by proxy and entitled to vote on the proposal will be required to ratify the selection of Marcum.
Abstentions will have the same effect as a vote against Proposal No. 3.
Other
Matters
Our
Board of Directors knows of no other matters that may be presented for stockholder action at the Annual Meeting. It is not anticipated
that other matters will be brought before the Annual Meeting. If other matters do properly come before the Annual Meeting, or
any adjournments or postponements thereof, however, persons named as proxies will vote upon them in their discretion.
Information
about the Proxy Statement and the Solicitation of Proxies
The
enclosed proxy is solicited by our Board of Directors and we will bear the costs of preparing, assembling, printing and mailing
this Proxy Statement, accompanying Proxy Card and Notice of Annual Meeting of Stockholders, as well as any additional materials
that we may furnish to stockholders in connection with the Annual Meeting. Copies of our solicitation materials will be furnished
to brokerage houses, fiduciaries and custodians to forward to beneficial owners of stock held in the names of such nominees. We
will, upon request, reimburse those parties for their reasonable expenses in forwarding proxy materials to the beneficial owners.
The solicitation of proxies may be by mail and direct communication with certain stockholders or their representatives by our
officers, directors and employees, who will receive no additional compensation therefor.
Annual
Report
A
copy of our 2018 Annual Report on Form 10-K, as filed with the SEC, is being made available along with this Proxy Statement online
at www.fcrvote/trnx.com and is also available on our website www.taronistech.com. Additional copies may be obtained without charge,
upon written request directed to the Corporate Secretary, Taronis Technologies, Inc., 300 W. Clarendon Avenue, Suite 230, Phoenix,
AZ 85013.
Householding
of Annual Meeting Materials
Some
banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements
and annual reports. This means that only one copy of our Proxy Statement may have been sent to multiple stockholders in your household.
The Company will promptly deliver a separate copy of either document to you if you write or call the Company at the following
address or telephone number:
Taronis
Technologies, Inc.
300
W. Clarendon Avenue, Suite 230
Phoenix,
AZ 85013
Attention:
Corporate Secretary
(727)
934-3448
If
you would like to receive separate copies of the Proxy Statement in the future, or if you are receiving multiple copies and would
like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holder, or you
may contact the Company at the address and telephone number set forth above.
PLEASE
COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED PRE-ADDRESSED AND POSTAGE-PAID ENVELOPE AS PROMPTLY
AS POSSIBLE OR SUBMIT YOUR VOTE VIA THE INTERNET AT WWW.FCRVOTE/TRNX.COM OR BY CALLING OR FAXING THE PROXY CARD TO THE NUMBERS
PRINTED ON THE ACCOMPANYING VOTING DOCUMENT.
BENEFICIAL
OWNERSHIP OF COMMON STOCK
The
following table sets forth certain information regarding our shares of Common Stock beneficially owned as of the Record Date for
(i) each stockholder known to be the beneficial owner of 5% or more of our outstanding shares of Common Stock, (ii) each named
executive officer and director, and (iii) all executive officers and directors as a group. A person is considered to beneficially
own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii)
of which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options
or warrants. Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors
and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.
For
purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of Common
Stock that such person has the right to acquire within 60 days of the Record Date. For purposes of computing the percentage of
outstanding shares of our Common Stock held by each person or group of persons named above, any shares that such person or persons
has the right to acquire within 60 days of the Record Date is deemed to be outstanding, but is not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially
owned does not constitute an admission of beneficial ownership.
Name
of Beneficial Owner and Address
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Amount
and
Nature of
Beneficial
Ownership of
Common Stock
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Percent
of
Common
Stock (1)
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Directors
and
Executive Officers
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Scott
Mahoney, Chief Executive Officer, President, Director
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504,750
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(2)
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*
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William
Staunton, Director
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167,005
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(3)
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*
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Robert
Dingess, Chairman/Director
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169,738
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(4)
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*
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Kevin
Pollack, Director
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167,064
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(5)
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*
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Tyler
Wilson, Executive Vice President, General Counsel, Secretary
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251,250
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(6)
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*
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Clinton
Rafe Dean, Chief Operating Officer
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367,347
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(7)
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*
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Timothy
Hauck, Chief Financial Officer
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250,000
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(8)
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*
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Jack
Armstrong, Executive Vice President of Business Development
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250,000
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(9)
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*
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Richard
Conz, Executive Vice President of Engineering & Technology Development
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250,000
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(10)
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*
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Ermanno
Santilli, Former Chief Technology Officer
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53,876
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(11)
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*
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Luisa
Ingargiola, Former Chief Financial Officer, Former Director
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20,671
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(12)
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*
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All
directors and officers as a group (11 people)
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2,451,780
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(13)
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3.0
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%
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*
Less than 1%.
(1)
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Beneficial ownership is determined under the rules
and regulations of the SEC, and generally includes voting or dispositive power with respect to such shares. Based on approximately
81,664,203 shares of Common Stock outstanding as of the Record Date. Shares of Common Stock that a person has the right
to acquire within 60 days are deemed to be outstanding and beneficially owned by that person for the purpose of computing
the total number of shares beneficially owned by that person and the percentage ownership of that person, but are not deemed
to be outstanding for the purpose of computing the percentage ownership of any other person or group. Accordingly, the amounts
in the table include shares of Common Stock that such person has the right to acquire within 60 days of the Record Date by
the exercise of stock options.
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(2)
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Consists
of 3,750 Common Stock options that are freely exercisable, 1,000 shares of free trading Common Stock and 500,000 shares of
restricted Common Stock.
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(3)
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Consists
of 55,666 shares of free trading Common Stock and 111,339 shares of restricted Common Stock.
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(4)
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Consists
of 58,205 shares of free trading Common Stock and 111,533 shares of restricted trading Common Stock.
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(5)
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Consists
of 55,715 shares of free trading Common Stock and 111,349 shares of restricted Common Stock.
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(6)
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Consists
of 1,250 Common Stock options that are freely exercisable and 250,000 shares of restricted Common Stock.
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(7)
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Consists
of 117,347 shares of free trading Common Stock and 250,000 shares of restricted Common Stock.
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(8)
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Consists
of 250,000 shares of restricted Common Stock.
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(9)
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Consists
of 250,000 shares of restricted Common Stock.
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(10)
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Consists
of 250,000 shares of restricted Common Stock.
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(11)
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Consists
of 3,750 Common Stock options that are freely exercisable and 50,126 shares of restricted Common Stock.
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(12)
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Consists of 20,671 shares of
free trading Common Stock and 79.66 shares of restricted Common Stock.
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(13)
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Consists of 8,750 Common Stock
options that are freely exercisable, 308,604 shares of free trading Common Stock and
2,134,426 shares of restricted Common Stock.
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Pursuant
to Rule 13d-3(d)(1)(i) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the
percentage calculations use different totals of outstanding securities for the purpose of determining ownership. Any securities
not outstanding which are subject to such options, warrants, rights or conversion privileges shall be deemed to be outstanding
for the purpose of computing the percentage of outstanding securities of the class owned by such person but shall not be deemed
to be outstanding for the purpose of computing the percentage of the class by any other person.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires the Company’s executive officers and directors and persons who beneficially own more
than 10% of a registered class of our equity securities to file reports with the SEC regarding ownership and changes in ownership
of such equity securities. Executive officers, directors and greater than 10% stockholders are required by SEC regulations to
furnish to us copies of all reports that they file pursuant to Section 16(a). Based solely on our review of the copies of such
forms furnished to us with respect to our fiscal year ended December 31, 2018, and on our discussions with directors and executive
officers, we believe that, during the fiscal year ended December 31, 2018, all applicable Section 16(a) filing requirements were
timely met.
CODE
OF ETHICS
The
Company has adopted a Code of Ethics and Business Conduct (the “Code of Ethics”) applicable to its directors, officers,
including the Chief Executive Officer, Chief Financial Officer and other officers performing similar functions, and employees.
This Code of Ethics constitutes a code of ethics applicable to senior financial officers within the meaning of the Sarbanes-Oxley
Act of 2002, as amended, and SEC rules. A copy of the Code of Ethics is available on the Company’s website at
http://www.taronistech.com
and any stockholder may obtain a copy by making a written request to the Company’s Corporate Secretary, 300 W. Clarendon
Avenue, Suite 230, Phoenix, AZ 85013. In the event of any amendments to or waivers of the terms of the Code of Ethics, such matters
will be posted promptly to the Company’s website in lieu of disclosure on Form 8-K in accordance with Item 5.05(c) of Form
8-K.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The
Code of Ethics requires all of the Company’s directors, officers and employees to give their complete loyalty to the best
interests of the Company and to avoid any action that may involve, or that even may appear to involve, a conflict of interest
with the Company. The Code of Ethics also requires any of the Company’s directors, officers or employees who become aware
of a conflict or potential conflict to bring it to the attention of supervisor, manager or other appropriate personnel or consult
the compliance procedures provided in the Code of Ethics. The Board of Directors reviews and approves or ratifies all relationships
and transactions between us and (i) any of our directors or executive officers, (ii) any nominee for election as a director, (iii)
any security holder who is known to us to own beneficially or of record more than 5% of our Common Stock or (iv) any member of
the immediate family of any of the foregoing.
PROPOSAL
NO. 1:
ELECTION
OF DIRECTORS
Five
directors are to be elected to serve until the 2019 Annual Meeting of Shareholders and until their successors have been
elected and qualified. The five director candidates receiving the highest number of votes will be elected as directors of the
Company. Votes against the directors and votes withheld will have no legal effect. The Board has nominated the current five directors
of the Company for re-election to the Board at the 2018 Annual Meeting to serve until the 2019 Annual Meeting of
Shareholders for the year ending December 31, 2019, or until their successors are elected and qualified. The persons nominated
by the Board for election as directors, each of whom is currently a director, are listed below. All of the nominees have consented
to being named in this Proxy Statement and to serve following their election.
Below
is information about each director, including biographical data for at least the past five years and an assessment of the skills
and experience of each nominee.
Robert
L. Dingess, 72,
has served as Chairman of our Board of Directors since April 30, 2013. Mr. Dingess has over 35 years of financial
and management experience, including working with several large healthcare organizations, owning and operating his own businesses,
and serving as a Senior Manager and Partner of Ernst & Young. Mr. Dingess currently is owner and Chief Executive Officer of
Ideal Management Services, Inc., d/b/a Ideal Image Central Florida, a med-spa company with four locations in central Florida.
From 1992 to 2002, Mr. Dingess served as the Chief Executive and owner of Dingess & Associates, Inc., a private healthcare
consulting and management company, which served healthcare clients in multiple states. From 1986 to 1992, Mr. Dingess was a Senior
Manager and Partner in Ernst & Young’s Southeast Region Healthcare Operations Business Office Practice, where he advised
over 200 healthcare clients in healthcare financial management. Mr. Dingess holds a Master of Business Administration from Virginia
Commonwealth University and a Bachelor of Business Administration from Marshall University.
Mr.
Dingess’ experience in owning and operating his own businesses, serving as a Partner at Ernst & Young and in advising
companies give him the qualifications and skills to serve as a Director of our Company.
Scott
Mahoney, 44,
has served as our Chief Executive Officer and a member of our Board of Directors since November 2018. He previously
served as our Chief Financial Officer and Secretary since December 2016. Mr. Mahoney has 17 years of financial and distressed
situation management experience. Prior to joining Taronis, Mr. Mahoney was the Chief Financial Officer of Phoenix Group Metals,
LLC, a leading auto core supply and automobile recycling company based in Phoenix, AZ. In addition, Mr. Mahoney has served in
several entrepreneurial roles in the oil industry, raising over $200 million in equity and debt capital for previous projects
in the Permian Basin, Eagle Ford, Williston Basin, Rockies and Mid-continent. Mr. Mahoney has managed 13 oil and gas acquisitions,
and managed or participated in more than 350 oil and gas wells. Prior to co-founding Vast, Mr. Mahoney was the Chief Financial
Officer of American Standard Energy Corp, building that company from a start-up to a $400 million market capitalization in two
years.
Prior
to American Standard, Mr. Mahoney founded Catalyst Corporate Solutions, a financial consulting firm focused on turnaround management
in the heavy industrial, business services and oil and gas industries. Under that firm, Mr. Mahoney served as a strategic advisor
to XOG Operating, LLC, a contract operator in 17 states and Geronimo Holding Corporation, a portfolio of oil and gas assets in
the Permian Basin, Williston Basin, Eagle Ford, South Texas, among other holdings. Mr. Mahoney also advised a number of southwest-based
companies on restructuring, debt and equity financings, acquisitions and the sale of multiple businesses. He has extensive experience
in the technology, heavy manufacturing, recycling and transportation and construction industries through both his banking and
consulting client base. Prior to forming Catalyst, Mr. Mahoney spent 13 years in corporate and investment banking with JP Morgan,
Wells Fargo and Key Bank. Mr. Mahoney is a Chartered Financial Analyst and has an MBA from the Thunderbird School of Global Management
and two Bachelor’s degrees from the University of New Hampshire.
Mr.
Mahoney’s qualifications to serve on our Board include his financial and management experience.
Ermanno
P. Santilli, 49,
has served as a member of our Board of Directors since June 21, 2012 and served as our Chief Executive Officer
from June 2012 until November 2018. Prior to his current role as Chief Technology Officer, Mr. Santilli was our Executive Vice
President of International Relations. Mr. Santilli was employed by Ingersoll Rand Company from March 2008 to April 2009 where
he served as Vice President of Climate Control Business, Global Rail and Aftermarket. In this capacity, he oversaw a department
that generated over $270 million in sales and $80 million in operating income. He managed sales, business development, product
management, and warehousing and dealer development with indirect procurement, manufacturing and engineering. Mr. Santilli also
drove development of new business and rail markets in Australia and India.
From
March 2006 to February 2008, Mr. Santilli served as Vice-President of Climate Control Aftermarket EMEA, where he led a department
that generated total sales of $150 million and operating income of $50 million. He was responsible for business development, product
management, warehousing, procurement, engineering and dealer development with indirect sales. From December 2003 to February 2006,
Mr. Santilli served as Vice-President of Customer Relations for Climate Control EMEA. He had operational responsibility for customer
satisfaction for customers with total sales aggregating over 1 billion dollars. Mr. Santilli had direct responsibility for order
management, credit and collections, warranty, business intelligence and dealer development.
Mr.
Santilli’s qualifications to serve on our Board include his financial and management experience.
Kevin
Pollack, 48,
has served as a Director since June 21, 2012. Mr. Pollack served as Chief Financial Officer of Opiant Pharmaceuticals,
Inc. (NASDAQ: OPNT), a specialty pharmaceutical company, and as a member of its Board of Directors, from 2012 until 2017, and
as an advisor from 2017 until 2018. From 2007 until 2013, Mr. Pollack was a managing director at Paragon Capital LP, a private
investment firm focused primarily on U.S.-listed companies. Since 2003, Mr. Pollack has also served as president of Short Hills
Capital LLC. Prior to that, Mr. Pollack worked as an investment banker at Banc of America Securities LLC, focusing on mergers
and acquisitions and corporate finance. Mr. Pollack started his career at Sidley Austin LLP (formerly Brown & Wood LLP) as
a securities attorney. Since 2012, Mr. Pollack has served as a member of the board of directors of PressureBioSciences, Inc. (OTCQB:
PBIO). Mr. Pollack graduated magna cum laude from the Wharton School of the University of Pennsylvania and received a dual J.D./M.B.A.
from Vanderbilt University, where he graduated with Beta Gamma Sigma honors.
Mr.
Pollack’s qualifications to serve on our Board include his financial, legal, investment and management experience, including
his experience with other public companies.
William
W. Staunton III, 71,
has served as a member of our Board of Directors since April 30, 2013. He is the CEO and Chairman of
Okika Technologies, an electronics design services company specializing in custom integrated circuit (IC), firmware, and software
solutions
.
He has been the President of Accel–RF Corporation, a provider of RF Reliability Test Systems for compound
semiconductor devices from 2011 until 2013. In 2011, Mr. Staunton founded Kokua Executives, LLC, which provides guidance and interim
executive level-leadership to companies. From 2000 to 2011, Mr. Staunton served as the Chief Executive Officer and a Director
of Ramtron International Corporation, which designs, develops and markets specialized semiconductor memory, microcontroller, and
integrated semiconductor solutions. From March 1999 until December 2000, Mr. Staunton served as Chief Operating Officer of Maxwell
Technologies, which designs and manufactures multi-chip modules and board products for commercial satellite applications. Previously,
Mr. Staunton was executive vice president of Valor Electronics Inc. from April 1996 until February 1999. Mr. Staunton holds a
Bachelor of Science degree in electrical engineering from Utah State University.
Mr.
Staunton’s extensive experience in the semi-conductor industry, with specific background in Military and Space Contracting,
give him the qualifications and skills to serve as a director of our Company.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “
FOR”
THE
ELECTION OF ALL NOMINEES NAMED ABOVE.
LEGAL
PROCEEDINGS
None
of the Company’s directors or officers has been a part of any legal proceeding within the last 10 years that is subject
to disclosure under Item 401(f) of Regulation S-K.
BOARD
LEADERSHIP STRUCTURE AND ROLE IN RISK OVERSIGHT
Board
Leadership
The
business and affairs of the Company are managed under the direction of our Board. We conducted one formal Board meeting in the
fiscal year ended December 31, 2018. Each of our directors has attended all meetings either in person or via telephone conference.
The Board also conducted monthly telephone calls in which the majority of the independent Board members were present.
Board
Oversight of Risk
Our
Board is primarily responsible for overseeing our risk management processes. The Board receives and reviews periodic reports from
management, auditors, legal counsel and others, as considered appropriate regarding our assessment of risks. The Board focuses
on the most significant risks facing the Company and our general risk management strategy, and also ensures that risks undertaken
by the Company are consistent with the Board’s tolerance for risk. While the Board oversees our risk management, management
is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach
for addressing the risks facing the Company and that our Board leadership structure supports this approach.
The
Audit Committee assists our Board in its general oversight of, among other things, the Company’s policies, guidelines and
related practices regarding risk assessment and risk management, including the risk of fraud. As part of this endeavor, the Audit
Committee reviews and assesses the Company’s major financial, legal, regulatory, environmental and similar risk exposures
and the steps that management has taken to monitor and control such exposures. The Audit Committee also reviews and assesses the
quality and integrity of the Company’s public reporting, the Company’s compliance with legal and regulatory requirements,
the performance and independence of the Company’s independent auditors, the performance of the Company’s internal
audit department, the effectiveness of the Company’s disclosure controls and procedures and the adequacy and effectiveness
of the Company’s risk management policies and related practices.
Director
Independence
We
make our determination of director independence using the definition of “independence” set forth in Nasdaq Listing
Rule 5605(a)(2), which provides that an “independent director” is a person other than an officer or employee of the
company or any other individual having a relationship which, in the opinion of the Company’s board of directors, would interfere
with the exercise of independent judgment in carrying out the responsibilities of a director. The Nasdaq listing rules provide
that a director cannot be considered independent if:
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The
director is, or at any time during the past three years was, an employee of the company;
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The
director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period
of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including,
among other things, compensation for board or board committee service);
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A
family member of the director is, or at any time during the past three years was, an executive officer of the company;
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The
director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity
to which the company made, or from which the company received, payments in the current or any of the past three fiscal years
that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject
to certain exclusions);
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The
director or a family member of the director is employed as an executive officer of an entity where, at any time during the
past three years, any of the executive officers of the company served on the compensation committee of such other entity;
or
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The
director or a family member of the director is a current partner of the company’s outside auditor, or at any time during
the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s
audit.
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In
accordance with the rules of the SEC and Nasdaq, the Company requires that at least a majority of the directors serving at any
time on the Board of Directors be independent, that at least three directors satisfy the financial literacy requirements for service
on the Audit Committee and that at least one member of the Audit Committee qualify as an “audit committee financial expert”
under those rules. The Board of Directors has determined that Mr. Dingess (chairman of our Audit Committee) is qualified to serve
as the “audit committee financial expert” as defined by Item 407(d)(5) of Regulation S-K and that Mr. Dingess, Mr.
Staunton and Mr. Pollack meet the financial literacy requirements under applicable SEC and Nasdaq rules. The Board of Directors
has also determined that of the five currently serving as directors, three are independent (Robert Dingess, William Staunton III
and Kevin Pollack) under applicable SEC and Nasdaq rules.
COMMITTEES
OF THE BOARD OF DIRECTORS
Our
Board has established four standing committees: audit, compensation, acquisition and corporate governance and nominating. Actions
taken by our committees are reported to the full Board. The Board has determined that all members of each of the audit and compensation
committees are independent under the current listing standards of Nasdaq. Our corporate governance and nominating committee is
comprised of two independent directors.
Audit
Committee
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|
Compensation
Committee
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Acquisition
Committee
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Corporate
Governance and
Nominating Committee
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Robert
Dingess*
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William
Staunton III*
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Kevin
Pollack*
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Robert
Dingess
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Kevin
Pollack
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Kevin
Pollack
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Scott
Mahoney
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Kevin
Pollack*
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William
Staunton III
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William
Staunton III
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*
Indicates committee chair
Audit
Committee
Our
Audit Committee, which currently consists of three directors, provides assistance to our Board in fulfilling its legal and fiduciary
obligations with respect to matters involving the accounting, financial reporting, internal controls and compliance functions
of the Company. Our Audit Committee employs an independent registered public accounting firm to audit the financial statements
of the Company and perform other assigned duties. Further, our Audit Committee provides general oversight with respect to the
accounting principles employed in financial reporting and the adequacy of our internal controls. In discharging its responsibilities,
our Audit Committee may rely on the reports, findings and representations of our auditors, legal counsel and responsible officers.
Our Board has determined that all members of the Audit Committee are financially literate within the meaning of SEC rules and
under the current listing standards of Nasdaq. Our Board has also determined that Mr. Dingess qualifies as an “audit committee
financial expert.” The Audit Committee met four times in 2018.
Compensation
Committee
Our
Compensation Committee, which currently consists of two directors, establishes executive compensation policies consistent with
our objectives and our stockholders’ interests. Our Compensation Committee also reviews the performance of our executive
officers and establishes, adjusts and awards compensation, including incentive-based compensation, as more fully discussed below.
In addition, our Compensation Committee generally is responsible for:
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Establishing
and periodically reviewing our compensation philosophy and the adequacy of compensation plans and programs for our directors,
executive officers and other employees;
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Overseeing
our compensation plans, including the establishment of performance goals under the company’s incentive compensation
arrangements and the review of performance against those goals in determining incentive award payouts;
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Overseeing
our executive employment contracts, special retirement benefits, severance, change in control arrangements and/or similar
plans;
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Acting
as administrator of any company stock option plans; and
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Overseeing
the outside consultant, if any, engaged by the Compensation Committee.
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Our
Compensation Committee periodically reviews the compensation paid to our non-employee Directors and the principles upon which
their compensation is determined. The compensation committee also periodically reports to the Board on how our non-employee Director
compensation practices compare with those of other similarly situated public corporations and, if the Compensation Committee deems
it appropriate, recommends changes to our director compensation practices to our Board for approval.
Outside
consulting firms retained by our Compensation Committee and management also will, if requested, provide assistance to the compensation
committee in making its compensation-related decisions.
Acquisition
Committee
Our
Acquisition Committee reviews mergers and acquisitions deemed to be material to provide additional oversight and guidance to Management
and the Board. The Acquisition Committee is comprised of not less than three (3) directors. Each Acquisition Committee member
is subject to annual reconfirmation and may be removed by the Board at any time. In addition, our Acquisition Committee generally
is responsible for:
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Reviewing
acquisition strategies with the Company’s management and investigating acquisition targets on behalf of the Company.
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Recommending
acquisition strategies and candidates to the Company’s Board, as appropriate.
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Reporting
all of its material actions to the Board and keeping the Board apprised of the Company’s proposed material investments
and acquisitions.
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Corporate
Governance and Nominating Committee
Our
Corporate Governance and Nominating Committee, which currently consists of two directors, monitors our corporate governance system,
assesses Board membership needs, makes recommendations to the Board regarding potential director candidates for election at the
annual meetings of stockholders or in the event of any director vacancy and performs any other functions or duties deemed appropriate
by the Board. The corporate governance and nominating committee met once in 2018.
Director
candidates must have experience in positions with a high degree of responsibility and leadership experience in the companies or
institutions with which they are or have been affiliated. Directors are selected based upon contributions that they can make to
the Company. We do not maintain a separate policy regarding the diversity of our Board members. However, consistent with its charter,
the Corporate Governance and Nominating Committee, and ultimately the Board, seeks directors (including nominees for director)
with diverse personal and professional backgrounds, experience and perspectives that, when combined, provide a diverse portfolio
of experience and knowledge that will well serve our governance and strategic needs.
Director
Qualifications
It
is a policy of the Corporate Governance and Nominating Committee that candidates for director be determined to have unquestionable
integrity and the highest ethical character. Candidates must demonstrate the ability to exercise sound, mature and independent
business judgment in the best interests of the stockholders as a whole and may not have any interests that would, in the view
of the Corporate Governance and Nominating Committee, impair their ability to exercise independent judgment or otherwise discharge
the fiduciary duties owed as a director.
Candidates
are expected to have an appreciation of the major issues facing public companies of a size and operational scope similar to the
Company, including contemporary governance concerns, regulatory obligations of a public issuer, strategic business planning, competition
in a global economy, and basic concepts of corporate finance. Candidates must also have the willingness and capability to devote
the time necessary to participate actively in meetings of the Board of Directors and committee meetings and related activities,
the ability to work professionally and effectively with other members of the Board of Directors and Company management, and the
ability and intention to remain on the Board of Directors long enough to make an effective contribution. Among candidates who
meet the foregoing criteria, the Corporate Governance and Nominating Committee also considers the Company’s current and
anticipated needs, including expertise, diversity and balance of inside, outside and independent directors.
The
Corporate Governance and Nominating Committee endeavors to comprise the Board of Directors of members with a broad mix of professional
and personal backgrounds. Thus, the Corporate Governance and Nominating Committee accords some weight to the individual professional
background and experience of each director. Further, in considering nominations, the Corporate Governance and Nominating Committee
takes into account how a candidate’s professional background would fit into the mix of experiences represented by the then-current
Board of Directors. When evaluating a nominee’s overall qualifications, the Corporate Governance and Nominating Committee
does not assign specific weights to particular criteria, and no particular criterion is necessarily required of all prospective
nominees. In addition to the aforementioned criteria, when evaluating a director for re-nomination to the Board of Directors,
the Corporate Governance and Nominating Committee will also consider the director’s history of attendance at board and committee
meetings, the director’s preparation for and participation in such meetings, and the director’s tenure as a member
of the Board of Directors.
Corporate
Governance and Nominating Committee Process
In
selecting candidates for the Board of Directors, the Corporate Governance and Nominating Committee begins by determining whether
the incumbent directors whose terms expire at the annual meeting of stockholders desire and are qualified to continue their service
on the Board of Directors. However, the Corporate Governance and Nominating Committee recognizes the significant value of the
continuing service of qualified incumbents in promoting stability and continuity, providing the benefit of the familiarity and
insight into the Company’s affairs and enhancing the Board of Directors’ ability to work as a collective body. Therefore,
it is the policy of the Corporate Governance and Nominating Committee, absent special circumstances, to nominate qualified incumbent
directors who the Corporate Governance and Nominating Committee believes will continue to make important contributions to the
Board of Directors and who consent to stand for re-election. If any member of the Board of Directors does not wish to continue
in service or if the Corporate Governance and Nominating Committee or the Board of Directors decides not to re-nominate a member,
there is an existing vacancy on the Board of Directors, or the Board of Directors, upon the recommendation of the Corporate Governance
and Nominating Committee, elects to expand the size of the Board of Directors, the following process would be followed:
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The
Corporate Governance and Nominating Committee develops a profile for candidates’ skills and experience, based on the
criteria described above.
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The
Corporate Governance and Nominating Committee initiates a search, polling members of the Board of Directors and management,
and retaining a search firm if the Corporate Governance and Nominating Committee deems this appropriate.
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The
Corporate Governance and Nominating Committee has a policy with respect to stockholders’ suggestions for nominees for
directorships. Under this policy, stockholder nominees are given identical consideration as nominees identified by the Corporate
Governance and Nominating Committee.
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The
process by which stockholders may submit potential nominees is described below under “Stockholder Recommendation Process.”
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The
Corporate Governance and Nominating Committee then determines the eligibility and suitability of any candidate based on the
criteria described above and the Corporate Governance and Nominating Committee’s search profile.
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The
Chairman of the Board of Directors and at least one member of the Corporate Governance and Nominating Committee interview
prospective candidate(s) who satisfy the qualifications described above.
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The
Corporate Governance and Nominating Committee offers other members of the Board of Directors the opportunity to interview
the candidate(s) and then meets to consider and approve the final candidate(s).
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The
Corporate Governance and Nominating Committee seeks endorsement of the final candidate(s) from the full Board of Directors.
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The
final candidate(s) are nominated by the Board of Directors for submission to a stockholder vote or elected to fill a vacancy.
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Stockholder
Recommendation Process
The
Corporate Governance and Nominating Committee will consider for nomination any qualified director candidates recommended by our
stockholders. Any stockholder who wishes to recommend a director candidate is directed to submit in writing the candidate’s
name, biographical information and relevant qualifications to our Corporate Secretary at our principal executive offices. All
written submissions received from our stockholders will be reviewed by the Corporate Governance and Nominating Committee at the
next appropriate meeting. The Corporate Governance and Nominating Committee will evaluate any suggested director candidates received
from our stockholders in the same manner as recommendations received from management, committee members or members of our board.
The Company or the Corporate Governance and Nominating Committee may require a stockholder who proposes a nominee to furnish such
other information as may reasonably be required by the Company to determine the eligibility or suitability of the proposed nominee
to serve as director of the Company. See the section titled “Stockholder Nominations and Proposals for the 2020 Annual Meeting
of Stockholders” later in this Proxy Statement.
Revisions
to Nomination Process
The
Corporate Governance and Nominating Committee and stockholder recommendation processes have been developed to provide a flexible
framework to permit the director nomination process to move forward effectively. The Corporate Governance and Nominating Committee
intends to review these processes from time to time in light of the Company’s evolving needs and changing circumstances,
as well as changes in legal requirements and stock exchange listing standards. The Corporate Governance and Nominating Committee
may revise these processes or adopt new ones based on such periodic reviews.
STOCKHOLDER
COMMUNICATIONS
The
Board of Directors has adopted a process through which interested stockholders may communicate with the Board of Directors. Stockholders
who wish to send communications to the Board of Directors, or any particular director, should address such communications to the
Corporate Secretary, at the Company’s headquarters at 300 W. Clarendon Avenue, Suite 230, Phoenix, AZ 85013. The envelope
containing any such communication should be prominently marked “To the Attention of the Board of Directors” or to
a particular committee or director, and the communication should include a representation from the stockholder indicating the
stockholder’s address and the number of shares of the Company’s Common Stock beneficially owned by the stockholder.
Our Corporate Secretary is primarily responsible for monitoring communications from stockholders. Depending upon the content of
a particular communication, as he deems appropriate, our Corporate Secretary will: (i) forward the communication to the director,
directors or committee to whom it is addressed; (ii) attempt to handle the inquiry directly, for example where the stockholder
communication consists of a request for information about the Company or is a stock-related matter; or (iii) not forward communications
such as solicitations, junk mail and obviously frivolous or inappropriate communications. At each meeting of the Board of Directors,
the Corporate Secretary will present a summary of all communications, whether or not forwarded, received since the last meeting
and will make those communications available to the directors on request.
DIRECTOR
COMPENSATION
The
following sets forth information with respect to the compensation awarded or paid to our directors during the fiscal year ended
December 31, 2018 for all services rendered in all capacities to us and our subsidiaries in fiscal 2018. The table excludes directors
who are also executive officers, except to the extent such executive officer’s compensation is not fully reflected under
“2018 Summary Compensation Table” below.
Name and Principal Position
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Year
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Fees Earned or Paid in Cash ($)
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Stock Awards ($)
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Option Awards ($)
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Non-Equity Incentive Plan Compensation ($)
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Non-qualified Deferred Compensation Earnings ($)
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All Other Compensation ($)
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Total
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Robert Dingess, Director
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2018
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$
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136,250
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$
|
136,250
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William Staunton, Director
|
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2018
|
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$
|
99,750
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|
$
|
99,750
|
|
|
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|
|
|
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|
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Kevin Pollack, Director
|
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2018
|
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$
|
115,625
|
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|
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|
$
|
115,625
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carla Santilli, Former Director
|
|
|
2018
|
|
|
$
|
38,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
38,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Stone, Former Director
|
|
|
2018
|
|
|
$
|
25,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher Huntington, Former Director
|
|
|
2018
|
|
|
$
|
59,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
59,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Luisa Ingargiola, Former Director
|
|
|
2018
|
|
|
$
|
39,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
39,375
|
|
REPORT
OF THE AUDIT COMMITTEE
The
Audit Committee assists the Board of Directors in fulfilling its responsibility to oversee management’s implementation of
the Company’s financial reporting process. In discharging its oversight role, the Audit Committee reviewed and discussed
the audited financial statements contained in the Company’s 2018 Annual Report on Form 10-K with the Company’s management
and the Company’s independent registered public accounting firm. Management is responsible for the financial statements
and the reporting process, including the system of internal controls. The Company’s independent registered public accounting
firm is responsible for expressing an opinion on the conformity of those financial statements with accounting principles generally
accepted in the United States.
The
Audit Committee met privately with the Company’s independent registered public accounting firm and discussed issues deemed
significant by the independent registered public accounting firm, including those required to be discussed by Auditing Standard
No. 16, “Communications with Audit Committees” issued by the Public Company Accounting Oversight Board. In addition,
the Audit Committee discussed with the independent registered public accounting firm its independence from the Company and its
management, including the matters in the written disclosures and the letter received from the independent registered public accounting
firm as required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s
communications with the audit committee concerning independence, and considered whether the provision of non-audit services by
the independent registered public accounting firm was compatible with maintaining the independent registered public accounting
firm’s independence. The Audit Committee also met with the independent registered public accounting firm, with and without
management present, to discuss the results of the independent registered public accounting firm’s examination, their evaluation
of the Company’s internal controls, and the overall quality of the Company’s financial reporting.
In
reliance on the reviews and discussions outlined above, the Audit Committee recommended to the Board of Directors that the audited
financial statements be included in the Company’s 2018 Annual Report on Form 10-K for filing with the Securities and Exchange
Commission.
Members
of the Audit Committee
Robert
Dingess (Chairman)
Kevin
Pollack
William
Staunton III
EXECUTIVE
COMPENSATION
2018
Summary Compensation Table
The
following sets forth information with respect to the compensation awarded or paid to our named executive officers during the fiscal
years ended December 31, 2018 and 2017 (collectively, the “named executive officers”) for all services rendered in
all capacities to us and our subsidiaries in fiscal 2018 and 2017.
Name
and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards ($)
|
|
|
Non-Equity
Incentive Plan Compensation ($)
|
|
|
Non-Qualified
Deferred Compensation Earnings ($)
|
|
|
All
Other Compensation ($)
|
|
|
Totals
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
Mahoney,
|
|
|
2018
|
|
|
$
|
215,000
|
|
|
|
|
|
|
$
|
16,000
|
(1)
|
|
|
|
|
|
|
|
|
|
$
|
52,452
|
(3)
|
|
$
|
283,452
|
|
Chief
Executive Officer and President
|
|
|
2017
|
|
|
$
|
215,000
|
|
|
|
|
|
|
$
|
10,000
|
(2)
|
|
|
|
|
|
|
|
|
|
$
|
4,000
|
(3)
|
|
$
|
229,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ermanno
Santilli,
|
|
|
2018
|
|
|
$
|
226,697
|
|
|
$
|
25,000
|
|
|
$
|
19,450
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
271,147
|
|
Former
Chief Technology Officer
|
|
|
2017
|
|
|
$
|
235,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
235,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy
Hauck, Chief Financial Officer
|
|
|
2018
|
|
|
$
|
14,167
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack
Armstrong, Executive Vice
|
|
|
2018
|
|
|
$
|
10,417
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,417
|
|
President
of Business Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tyler
B. Wilson, Executive Vice President and Corporate Secretary
|
|
|
2018
|
|
|
$
|
14,583
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Conz,
|
|
|
2018
|
|
|
$
|
15,000
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,000
|
|
Executive
Vice President of Engineering and Technology Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinton
Rafe Dean, Chief Operating Officer
|
|
|
2018
|
|
|
$
|
10,000
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Luisa
Ingargiola, Former CFO
|
|
|
2017
|
|
|
$
|
107,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,900
|
(3)
|
|
$
|
109,400
|
|
Narrative
to Executive Compensation Table
(1)
|
In
April 2018, the Board authorized the issuance of common stock registered under the Corporation’s Amended and Restated
2014 Equity Incentive Compensation Plan. Scott Mahoney received 1,000 shares of common stock, Ermanno Santilli received 1,250
shares of common stock.
|
(2)
|
In
2017, the Board authorized the issuance of common stock to Scott Mahoney as part of his employment compensation.
|
|
|
(3)
|
Represents
the payout of accrued earned paid-time-off pursuant to the terms of the executive’s employment agreement.
|
|
|
(4)
|
Represents
the amount of Executive’s salary paid on a prorated basis during the fiscal year ending December 31, 2018.
|
Outstanding
Equity Awards at 2018 Fiscal Year-end Table
The
following table sets forth information regarding outstanding option awards and stock awards held by each named executive officer
at December 31, 2018.
|
|
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 Unvested Shares
|
|
|
Market Value of Unvested Shares (1)
|
|
|
Vesting Date
|
|
Scott Mahoney, CEO
|
|
|
3,750
|
|
|
|
1,250
|
|
|
|
5,000
|
|
|
$
|
18.74
|
|
|
|
12/31/2027
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Timothy Hauck, CFO
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ermanno Santilli, Former CTO (former CEO)
|
|
|
3,750
|
|
|
|
1,250
|
|
|
|
5,000
|
|
|
$
|
18.74
|
|
|
|
12/31/2027
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Rafe Dean, COO
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Tyler Wilson, EVP, General Counsel, Corporate Secretary
|
|
|
1,250
|
|
|
|
-
|
|
|
|
1,250
|
|
|
$
|
17.20
|
|
|
|
4/2/2028
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Jack Armstrong, EVP of Business Development
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Richard Conz, EVP of Engineering and Technology Development
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Additional
Narrative Disclosure
(1)
|
Based
on the $4.93 closing price of a share of our common stock as quoted on the Nasdaq Stock Market on December 31, 2018.
|
PROPOSAL
2:
APPROVAL
OF AN AMENDMENT TO THE COMPANY’S CHARTER TO EFFECT A REVERSE STOCK SPLIT OF THE OUTSTANDING COMMON STOCK AT A RATIO IN THE
RANGE FROM 1-for-2 to 1-for-100
Overview
The
Board of Directors has determined that it is advisable and in the best interests of the Company and our stockholders that the
Board of Directors be granted the discretionary authority to amend the Company’s Charter to effect a reverse stock split
of the outstanding shares of our Common Stock, at any time on or prior to December 31, 2019, at a ratio in the range from 1-for-2
to 1-for-100, with such ratio to be determined by the sole discretion of the Board (the “
Reverse Split
”). The
Reverse Split was approved by the Board, subject to stockholder approval, on July 15, 2019.
Purposes
of the Reverse Split
Nasdaq
Listing
The
Company’s common stock is currently listed on The Nasdaq Capital Market (“Nasdaq”) under the symbol “TRNX.”
Among other requirements, the listing maintenance standards established by Nasdaq require the common stock to have a minimum closing
bid price of at least $1.00 per share. Pursuant to the Nasdaq Marketplace Rules, if the closing bid price of the common stock
is not equal to or greater than $1.00 for 30 consecutive business days, Nasdaq will send a deficiency notice to the Company. Thereafter,
if the common stock does not close at a minimum bid price of $1.00 or more for 10 consecutive trading days within 180 calendar
days of the deficiency notice, Nasdaq may determine to delist the common stock.
On
May 7, 2018, we received a notice from Nasdaq indicating that the Common Stock was subject to potential delisting from Nasdaq
because for a period of 30 consecutive business days, the bid price of the Common Stock had closed below the minimum $1.00 per
share requirement for continued inclusion under Nasdaq Marketplace Rule 5550(a)(2) (the “Bid Price Rule”). The notification
had no immediate effect on the listing or trading of the Common Stock on Nasdaq. Nasdaq stated in its letter that in accordance
with the Nasdaq listing requirements, the Company has been provided an initial period of 180 calendar days, or until November
5, 2018, to regain compliance. The letter states that the Nasdaq Staff will provide written notification that the Company has
achieved compliance with the minimum bid price listing requirement if at any time before November 5, 2018, the bid price of the
Common Stock closes at $1.00 per share or more for a minimum of ten consecutive business days. On November 6, 2018, the Company
was informed by NASDAQ Listing Qualifications Staff that the Company’s request for an additional 180-day period, or until
May 6, 2019, was granted. On May 7, 2019, the Company received notice that it failed to regain compliance with the Bid Price Rule
and that its Common Stock will be delisted, unless it is successful in appealing Nasdaq’s determination.
The
Company appealed the Staff’s determination to a Hearings Panel (the “Panel”), pursuant to the procedures set
forth in the Nasdaq Listing Rule 5800 Series, which request stayed the suspension of the Company’s securities and the filing
of the Form 25-NSE pending the Panel’s decision for an indeterminable amount of time.
On
July 11, 2019, the Company was formally notified by Nasdaq that Panel granted the Company’s request for continued
listing on Nasdaq, pursuant to an extension through September 19, 2019, to evidence compliance with the $1.00 per share bid price
requirement set forth in Nasdaq Listing Rule 5550(a). In accordance with the terms of the Panel’s decision, the Company’s
continued listing is subject to the timely satisfaction of a number of interim milestones; ultimately, the Company must evidence
a closing bid price of at least $1.00 per share for 20 consecutive trading days on or before September 19, 2019 to evidence compliance
with the terms of the Panel’s decision and to thereafter maintain its Nasdaq listing.
In
the event the common stock is no longer eligible for continued listing on Nasdaq, the Company would be forced to seek to be traded
on the OTC Bulletin Board or in the “pink sheets.” These alternative markets are generally considered to be less efficient
than, and not as broad as, Nasdaq, and therefore less desirable. Accordingly, the Board of Directors believes delisting of the
common stock would likely have a negative impact on the liquidity and market price of the common stock and may increase the spread
between the “bid” and “asked” prices quoted by market makers.
The
Board of Directors has considered the potential harm to the Company of a delisting from Nasdaq and believes that delisting could,
among other things, adversely affect (i) the trading price of the common stock, (ii) the liquidity and marketability of shares
of the common stock and (iii) result in certain defaults under existing agreements. This could reduce the ability of holders of
the common stock to purchase or sell shares of common stock as quickly and as inexpensively as they have done historically.
Delisting
could also adversely affect the Company’s relationships with vendors and customers who may perceive the Company’s
business less favorably, which would have a detrimental effect on the Company’s relationships with these entities.
Furthermore,
if the common stock was no longer listed on Nasdaq, it may reduce the Company’s access to capital and cause the Company
to have less flexibility in responding to the Company’s capital requirements. Certain institutional investors may also be
less interested or prohibited from investing in the common stock, which may cause the market price of the common stock to decline.
In
addition, the Company would no longer be deemed a “covered security” under Section 18 of the Securities Act of 1933,
as amended, and therefore would lose its exemption from state securities regulations. As a result, the Company would need to comply
with various state securities laws with respect to issuances of its securities, including equity award grants to employees. As
a public company, the Company would not have the benefit of certain exemptions applicable to privately-held entities, which would
make granting equity awards to the Company’s employees more difficult.
Potential
Increased Investor Interest
The
Board of Directors believes that the Reverse Split will provide a number of benefits to the Company and its existing stockholders,
which may lead to an increase in investor interest, including:
1.
Reduced Short-Term Risk of Illiquidity.
The Board of Directors understands that a higher stock price may increase investor
confidence by reducing the short-term risk of illiquidity and lack of marketability of the common stock that may result from the
delisting of the common stock from Nasdaq.
2.
Decreasing Transaction Costs.
Investors may also be dissuaded from purchasing stocks below certain prices because the brokerage
commissions, as a percentage of the total transaction value, tend to be higher for such low-priced stocks.
3.
Stock Price Requirements.
The Board of Directors understands that some brokerage houses and institutional investors may
have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual
brokers from recommending low-priced stocks to their customers or by restricting or limiting the ability to purchase such stocks
on margin. In addition, analysts at brokerage firms may not monitor the trading activity or otherwise provide coverage of lower
priced stocks.
Other
Potential Benefits
The
Board of Directors believes that a higher stock price would help the Company attract and retain employees and other service providers.
It is the view of the Board of Directors that some potential employees and service providers are less likely to work for a company
with a low stock price, regardless of the size of the company’s market capitalization. Accordingly, if the Reverse Split
successfully increases the per share price of the common stock, the Board of Directors believes this increase will enhance the
Company’s ability to attract and retain employees and service providers.
Risks
Associated with the Reverse Split
The
Reverse Split could result in a significant devaluation of the Company’s market capitalization and trading price of the
common stock, and we cannot assure you that the proposed reverse stock split will increase our stock price and have the desired
effect of maintaining compliance with Nasdaq Listing Rules.
The
Board of Directors expects that a reverse stock split of the outstanding common stock will increase the market price of the common
stock. However, the Company cannot be certain whether the Reverse Split would lead to a sustained increase in the trading price
or the trading market for the common stock. The history of similar stock split combinations for companies in like circumstances
is varied. There is no assurance that:
|
●
|
the
market price per share of the common stock after the Reverse Split will rise in proportion to the reduction in the number
of pre-split shares of common stock outstanding before the Reverse Split;
|
|
|
|
|
●
|
the
Reverse Split will result in a per share price that will attract brokers and investors, including institutional investors,
who do not trade in lower priced stocks;
|
|
|
|
|
●
|
the
Reverse Split will result in a per share price that will increase the Company’s ability to attract and retain employees
and other service providers;
|
|
|
|
|
●
|
the
market price per post-split share will remain in excess of the $1.00 minimum closing bid price as required by the Nasdaq Marketplace
Rules or that the Company would otherwise meet the requirements of Nasdaq for continued inclusion for trading on Nasdaq;
and
|
|
|
|
|
●
|
the
Reverse Split will increase the trading market for the common stock, particularly if the stock price does not increase as
a result of the reduction in the number of shares of common stock available in the public market.
|
The
market price of the common stock will also be based on the Company’s performance and other factors, some of which are unrelated
to the number of shares outstanding. If the Reverse Split is consummated and the trading price of the common stock declines, the
percentage decline as an absolute number and as a percentage of the Company’s overall market capitalization may be greater
than would occur in the absence of the Reverse Split. Furthermore, the liquidity of the common stock could be adversely affected
by the reduced number of shares that would be outstanding after the Reverse Split and this could have an adverse effect on the
price of the common stock. If the market price of the shares of common stock declines subsequent to the effectiveness of the Reverse
Split, this will detrimentally impact the Company’s market capitalization and the market value of the Company’s public
float.
The
Reverse Split may result in some stockholders owning “odd lots” that may be more difficult to sell or require greater
transaction costs per share to sell.
The
Reverse Split may result in some stockholders owning “odd lots” of less than 100 shares of common stock on a post-split
basis. These odd lots may be more difficult to sell, or require greater transaction costs per share to sell, than shares in “round
lots” of even multiples of 100 shares.
Because
of the Reverse Split ratio, certain stockholders may no longer have any equity interest in the Company.
Assuming
the Board authorizes the maximum Reverse Split ratio of 1-for-100, certain stockholders might be fully cashed out in the Reverse
Split and thus, after the Reverse Split takes effect, such stockholders would no longer have any equity interest in the Company
and therefore would not participate in our future earnings or growth, if any. It will not be possible for cashed out stockholders,
if any, to re-acquire an equity interest in the Company unless they purchase an interest from a remaining stockholder or in a
future equity financing by the Company.
The
Reverse Split may not help generate additional investor interest.
There
can be no assurance that the Reverse Split will result in a per share price that will attract institutional investors or investment
funds or that such share price will satisfy the investing guidelines of institutional investors or investment funds. As a result,
the trading liquidity of our common stock may not necessarily improve.
Effective
Date
Assuming
the Board of Directors exercises its discretion to effect the Reverse Split, the Reverse Split will become effective as of the
date and time (the “Effective Date”) that the certificate of amendment to the Charter to effect the foregoing is filed
with the Secretary of State of the State of Delaware (or such later date and time as is stated in such certificate) in accordance
with the Delaware General Corporation Law (the “DGCL”), without any further action on the part of stockholders and
without regard to the date that any stockholder physically surrenders the stockholder’s certificates representing pre-split
shares of common stock for certificates representing post-Reverse Split shares. The Board of Directors, in its discretion, may
delay or decide against effecting the Reverse Split and the filing of the certificate of amendment to the Charter to effect the
Reverse Split without re-soliciting stockholder approval.
Principal
Effects of the Reverse Stock Split
After
the Effective Date, each stockholder will own a reduced number of shares of the common stock. However, the Company expects that
the market price of the common stock immediately after the Reverse Split will increase substantially above the market price of
the common stock immediately prior to the Reverse Split. The proposed Reverse Split will be effected simultaneously for all of
the outstanding shares of common stock, and the ratio for the Reverse Split will be the same for all of the outstanding shares
of common stock. The Reverse Split will affect all stockholders uniformly and will not affect any stockholder’s percentage
ownership interest in the Company (except to the extent that the Reverse Split would result in any of the stockholders owning
a fractional share as described below). The Reverse Split will not affect holders of outstanding equity awards under the Equity
Incentive Plan (described below) substantially the same. Proportionate voting rights and other rights and preferences of the holders
of common stock will not be affected by the proposed Reverse Split (except to the extent that the Reverse Split would result in
any stockholders owning a fractional share as described below). For example, a holder of 2% of the voting power of the outstanding
shares of common stock immediately prior to the Reverse Split would continue to hold approximately 2% of the voting power of the
outstanding shares of common stock immediately after the Reverse Split. The number of stockholders of record also will not be
affected by the proposed Reverse Split (except to the extent that the Reverse Split would result in any stockholders owning only
a fractional share as described below).
The
par value per share of the common stock would remain unchanged at $0.001 per share after the Reverse Split. In addition, the Reverse
Split will not reduce the number of authorized shares of common stock. The Company will continue to have 10,000,000 shares of
authorized preferred stock, of which 1,000,000 shares are designated as Series A Preferred Stock and are outstanding.
The
proposed Reverse Split will not reduce the number of shares of common stock available for issuance under the Equity Incentive
Plan. All shares of common stock subject to outstanding equity awards (including stock options, performance shares and stock appreciation
rights) under the Equity Incentive Plan and the number of shares of common stock which have been authorized for issuance under
the Equity Incentive Plan but as to which no equity awards have yet been granted or which have been returned to the Equity Incentive
Plan upon cancellation or expiration of such equity awards will not be converted on the Effective Date.
The
effects of the proposed amendment to the Charter are illustrated in the below table as of the Record Date, including (1) the approximate
percentage reduction in the outstanding number of shares of common stock, (2) the approximate number of shares of common stock
that would be (i) authorized, (ii) issued and outstanding, (iii) issued but held by the Company in treasury stock, (iv) reserved
for issuance pursuant to outstanding warrants, (v) authorized but reserved for issuance upon exercise of outstanding equity awards
pursuant to the Equity Incentive Plan, and (vi) authorized but not issued or outstanding, or reserved for issuance under the Equity
Incentive Plan, and (3) the approximate percentage of authorized shares not issued or outstanding, or reserved for issuance under
the Equity Incentive Plan:
Assumes the Board has authorized the
minimum
Reverse Split ratio of 1-for-2:
|
|
Pre-Reverse
Split
|
|
|
Post-Reverse
Split
|
|
|
|
|
|
|
|
|
Percentage
Reduction of Shares Outstanding
|
|
|
-
|
%
|
|
|
50
|
%
|
Authorized
Shares of Common Stock
|
|
|
190,000,000
|
|
|
|
190,000,000
|
|
Shares
Outstanding
|
|
|
81,664,203
|
|
|
|
40,832,102
|
|
Issued
But Not Outstanding (Held by the Company in Treasury Stock)
|
|
|
2,844,696
|
|
|
|
1,422,348
|
|
Reserved
for Issuance Pursuant to Outstanding Warrants
|
|
|
2,336,528
|
|
|
|
1,168,264
|
|
Reserved
for Issuance Upon Exercise/Release of Outstanding Equity Awards Under the Equity Incentive Plan
|
|
|
11,553
|
|
|
|
5,777
|
|
Authorized
but not Issued or Outstanding, or Reserved for Issuance Under the Equity Incentive Plan
|
|
|
386,748
|
|
|
|
386,748
|
|
Percentage
of Authorized Shares not Issued or Outstanding, or
Reserved for Issuance Under Warrants and the Equity Incentive Plan
|
|
|
57
|
%
|
|
|
78.5
|
%
|
If the proposed Reverse Split is implemented
with a ratio of 1-for-2, it may increase the number of stockholders who own “odd lots” of less than 2 shares of common
stock. Brokerage commissions and other costs of transactions in odd lots may be higher than the costs of transactions of more
than 2 shares of common stock.
Assumes the Board has authorized the
maximum
Reverse Split ratio of 1-for-100:
|
|
Pre-Reverse Split
|
|
|
Post-Reverse Split (1)
|
|
|
|
|
|
|
|
|
Percentage Reduction of Shares Outstanding
|
|
|
-
|
%
|
|
|
99
|
%
|
Authorized Shares of Common Stock
|
|
|
190,000,000
|
|
|
|
190,000,000
|
|
Shares Outstanding
|
|
|
81,664,203
|
|
|
|
816,642
|
|
Issued But Not Outstanding (Held by the Company in Treasury Stock)
|
|
|
2,844,696
|
|
|
|
28,447
|
|
Reserved for Issuance Pursuant to Outstanding Warrants
|
|
|
2,336,528
|
|
|
|
23,365
|
|
Reserved for Issuance Upon Exercise/Release of Outstanding Equity Awards Under the Equity Incentive Plan
|
|
|
11,553
|
|
|
|
115
|
|
Authorized but not Issued or Outstanding, or Reserved for Issuance Under the Equity Incentive Plan
|
|
|
386,748
|
|
|
|
386,748
|
|
Percentage of Authorized Shares not Issued or Outstanding, or
Reserved for Issuance Under Warrants and the Equity Incentive Plan
|
|
|
57
|
%
|
|
|
99.99
|
%
|
|
(1)
|
Assumes
the Board has authorized the maximum Reverse Split ratio of 1-for-100.
|
If
the proposed Reverse Split is implemented, it may increase the number of stockholders who own “odd lots” of less than
100 shares of common stock. Brokerage commissions and other costs of transactions in odd lots may be higher than the costs of
transactions of more than 100 shares of common stock.
The
common stock is currently registered under Section 12(b) of the Exchange Act, and the Company is subject to the periodic reporting
and other requirements of the Exchange Act. The proposed Reverse Split will not affect the registration of the common stock under
the Exchange Act. If the proposed Reverse Split is implemented, the common stock will continue to be reported on Nasdaq under
the symbol “TRNX”.
The
proposed amendment to the Charter will not change the terms of the common stock. After the Reverse Split, the shares of the common
stock will have the same voting rights and rights to dividends and distributions and will be identical in all other respects to
the common stock now authorized. Each stockholder’s percentage ownership of the new common stock will not be altered except
for the effect of eliminating fractional shares (which is discussed in more detail below). The common stock issued pursuant to
the Reverse Split will remain fully paid and non-assessable. Following the Reverse Split, the Company will continue to be subject
to the periodic reporting requirements of the Exchange Act.
Treatment
of Fractional Shares
No
scrip or fractional shares would be issued if, as a result of the Reverse Split, a registered stockholder would otherwise become
entitled to a fractional share. Instead, the Company would pay to the registered stockholder, in cash, the value of any fractional
share interest arising from the Reverse Split. The cash payment would equal the closing sales price of the common stock as reported
on Nasdaq as of the Effective Date multiplied by the number of shares of pre-split common stock held by the stockholder that would
otherwise have been exchanged for such fractional share. No transaction costs would be assessed to stockholders for the cash payment.
Stockholders would not be entitled to receive interest for the period of time between the Effective Date and the date payment
is made for their fractional shares. The ownership of a fractional interest will not give the holder thereof any voting, dividend
or other rights except to receive payment as described herein. This cash payment merely represents a mechanical rounding off of
the fractions in the exchange.
As
a result of the Reverse Split, and assuming the Board authorizes the maximum Reverse Split ratio, stockholders who hold less than
100 shares of common stock will no longer be stockholders of the Company on a post-Reverse Split basis. In other words, any holder
of 100 or fewer shares of common stock prior to the effectiveness of the Reverse Split would only be entitled to receive cash
for the fractional share of common stock such stockholder would hold on a post-Reverse Split basis. The actual number of stockholders
that will be eliminated will depend on the actual number of stockholders holding less than 100 shares of common stock on the Effective
Date. Reducing the number of post-Reverse Split stockholders, however, is not the purpose of the Reverse Split.
If
you do not hold sufficient shares of pre-Reverse Split common stock to receive at least one post-Reverse Split share of common
stock and you want to hold common stock after the Reverse Split, you may do so by taking either of the following actions far enough
in advance so that it is completed before the Reverse Split is effected:
|
●
|
purchase
a sufficient number of shares of common stock so that you would hold at least 100 shares of common stock in your account prior
to the implementation of the Reverse Split that would entitle you to receive at least one share of common stock on a post-Reverse
Split basis; or
|
|
|
|
|
●
|
if
applicable, consolidate your accounts so that you hold at least 100 shares of common stock in one account prior to the Reverse
Split that would entitle you to at least one share of common stock on a post-split basis. Common stock held in registered
form (that is, shares held by you in your own name on the Company’s share register maintained by its transfer agent)
and common stock held in “street name” (that is, shares held by you through a bank, broker or other nominee) for
the same investor would be considered held in separate accounts and would not be aggregated when implementing the Reverse
Split. Also, shares of common stock held in registered form but in separate accounts by the same investor would not be aggregated
when implementing the Reverse Split.
|
Stockholders
should be aware that, under the escheat laws of the various jurisdictions where stockholders reside, where the Company is domiciled
and where the funds for fractional shares would be deposited, sums due to stockholders in payment for fractional shares that are
not timely claimed after the effective time may be required to be paid to the designated agent for each such jurisdiction. Thereafter,
stockholders otherwise entitled to receive such funds may have to seek to obtain them directly from the state to which they were
paid.
Effect
of the Reverse Stock Split on Convertible Preferred Shares and Warrants
The
Reverse Split will require that proportionate adjustments be made to the conversion rate, the per share exercise price and the
number of shares issuable upon the exercise or conversion of the following outstanding securities issued by the Company, in accordance
with the reverse stock split ratio (all figures are as of the Record Date):
|
●
|
11,553
shares of common stock issuable upon the exercise of options;
|
|
|
|
|
●
|
9,722
shares of common stock that are issuable upon the exercise of common stock warrants issued in a private placement in June
2017;
|
|
|
|
|
●
|
1,389
shares of common stock that are issuable upon the exercise of placement agent warrants issued in the June 2017 Private Placement;
|
|
|
|
|
●
|
1,235,417
shares of common stock that are issuable upon the exercise of common stock warrants issued in a warrant offering in July 2018;
|
|
|
|
|
●
|
1,090,000
shares of common stock that are issuable upon the exercise of common stock warrants issued in a private placement in October
2018; and
|
|
|
|
|
●
|
1,380,304 shares of common
stock that are issuable upon the conversion of certain Convertible Debentures sold in a private placement in May 2019.
|
|
|
|
|
●
|
2,836,363 shares of common
stock that are issuable pursuant to the terms of a share reservation agreement entered into in June 2019.
|
The
adjustments to the above securities, as required by the Reverse Split and in accordance with the Reverse Split ratio, would result
in approximately the same aggregate price being required to be paid under such securities upon exercise, and approximately the
same value of shares of common stock being delivered upon such exercise or conversion, immediately following the Reverse Split
as was the case immediately preceding the Reverse Split.
Effect
of the Reverse Split on Equity Awards
The
proposed Reverse Split will not reduce the number of shares of common stock available for issuance under the Equity Incentive
Plan. All shares of common stock subject to outstanding equity awards (including stock options, performance shares and stock appreciation
rights) under the Equity Incentive Plan and the number of shares of common stock which have been authorized for issuance under
the Equity Incentive Plan but as to which no equity awards have yet been granted or which have been returned to the Equity Incentive
Plan upon cancellation or expiration of such equity awards will not be converted on the Effective Date.
Board
Discretion to Implement the Reverse Split
Even
if the Reverse Split is approved by stockholders at the previously adjourned 2018 Annual Meeting, the Reverse Split will be effected,
if at all, only upon a subsequent determination by the Board of Directors that the Reverse Split is in the best interests of the
Company and its stockholders at the time. Such determination will be based upon certain factors, including existing and expected
marketability and liquidity of the common stock, prevailing market conditions, the likely effect on the market price of the common
stock and the ability and desirability of the Company to satisfy the continued listing requirements for Nasdaq and such other
considerations as the Board of Directors, in its discretion, determines. If the Board determines to proceed with the Reverse Split,
the Board will determine the ratio of such Reverse Split, in the range from 1-for-2 and 1-for-100, in its sole discretion. Notwithstanding
approval of the Reverse Split by stockholders, the Board of Directors may, in its sole discretion, abandon the proposed amendment
and determine prior to the effectiveness of any filing with the Secretary of State of the State of Delaware not to effect the
Reverse Split, as permitted under Section 242(c) of the DGCL.
Exchange
of Stock Certificates
As
soon as practicable after the Effective Date, stockholders will be notified that the Reverse Split has been effected. The Company’s
transfer agent will act as “exchange agent” for purposes of implementing the exchange of stock certificates. If any
of your shares are held in certificated form (that is, you do not hold all of your shares electronically in book-entry form),
you will receive a letter of transmittal from the Company’s exchange agent as soon as practicable after the Effective Date,
which will contain instructions on how to obtain post-split shares. You must complete, execute and submit to the exchange agent
the letter of transmittal in accordance with its instructions and surrender your stock certificate(s) formerly representing shares
of stock prior to the Reverse Split (or an affidavit of lost stock certificate containing an indemnification of the Company for
claims related to such lost stock certificate). Upon receipt of your properly completed and executed letter of transmittal and
your stock certificate(s), you will be issued the appropriate number of shares of common stock either as stock certificates (including
legends, if appropriate) or electronically in book-entry form, as determined by the Company. This means that, instead of receiving
a new stock certificate, you may receive a direct registration statement that indicates the number of post-split shares you own
in book-entry form. At any time after receipt of your direct registration statement, you may request a stock certificate representing
your post-split ownership interest. If you are entitled to payment in lieu of any fractional share interest, payment will be made
as described above under the heading “Treatment of Fractional Shares.” No direct registration statements, new stock
certificates or payments in lieu of fractional shares will be issued to a stockholder until such stockholder has properly completed
and executed a letter of transmittal and surrendered such stockholder’s outstanding certificate(s) to the exchange agent.
If you hold any or all of your shares electronically in book-entry form, please see the section below under the heading “Effect
on Registered Book-Entry Holders.”
STOCKHOLDERS
SHOULD NOT DESTROY ANY PRE-REVERSE SPLIT STOCK CERTIFICATE AND SHOULD NOT SUBMIT ANY CERTIFICATES UNTIL THEY ARE REQUESTED TO
DO SO.
In
connection with the Reverse Split, the common stock will change its current CUSIP number. This new CUSIP number will appear on
any new stock certificates issued representing shares of the post-split common stock.
Effect
on Beneficial Owners
Stockholders
holding common stock through a bank, broker or other nominee should note that such banks, brokers or other nominees may have different
procedures for processing the Reverse Split than those that would be put in place by the Company for registered stockholders that
hold such shares directly, and their procedures may result, for example, in differences in the precise cash amounts being paid
by such nominees in lieu of a fractional share. If you hold your shares with such a bank, broker or other nominee and if you have
questions in this regard, you are encouraged to contact your bank, broker or nominee.
Effect
on Registered Book-Entry Holders
The
Company’s registered stockholders may hold some or all of their shares electronically in book-entry form under the direct
registration system for securities. These stockholders will not have stock certificates evidencing their ownership of the common
stock. They are, however, provided with a statement reflecting the number of shares registered in their accounts.
|
●
|
If
you hold shares in a book-entry form, you do not need to take any action to receive your post-split shares or your cash payment
in lieu of any fractional share interest, if applicable. If you are entitled to post-split shares, a transaction statement
will automatically be sent to your address of record indicating the number of shares you hold.
|
|
|
|
|
●
|
If
you are entitled to a payment in lieu of any fractional share interest, a check will be mailed to you at your registered address
as soon as practicable after the Company’s transfer agent completes the aggregation and sale described above in “Treatment
of Fractional Shares.” By signing and cashing this check, you will warrant that you owned the shares for which you receive
a cash payment.
|
Accounting
Consequences
The
par value per share of the common stock would remain unchanged at $0.001 per share after the Reverse Split. As a result, on the
Effective Date, the par value per share on the Company’s balance sheet attributable to the common stock will be reduced
proportionally from its present amount, and the additional paid in capital account shall be credited with the amount by which
the par value per share is reduced. The per share common stock net income or loss and net book value will be increased because
there will be fewer shares of common stock outstanding or held by the Company in treasury stock. The Company does not anticipate
that any other accounting consequences would arise as a result of the Reverse Split.
No
Appraisal Rights
Under
the DGCL, our stockholders are not entitled to appraisal rights with respect to the Reverse Split, and we would not independently
provide our stockholders with such rights if the Reverse Split is affected.
Certain
United States Federal Income Tax Consequences of the Reverse Split
The
following is a discussion of certain material U.S. federal income tax consequences of the Reverse Split. This discussion is included
for general information purposes only and does not purport to address all aspects of U.S. federal income tax law that may be relevant
to stockholders in light of their particular circumstances. Further, this discussion does not address any state, local or non-U.S.
tax consequences of the Reverse Split. This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”),
and current Treasury Regulations, administrative rulings and court decisions, all of which are subject to change, possibly on
a retroactive basis, and any such change could affect the continuing validity of this discussion.
All
stockholders are urged to consult with their own tax advisors with respect to the tax consequences of the Reverse Split. This
discussion does not address the tax consequences to stockholders who are subject to special tax rules, such as banks, insurance
companies, regulated investment companies, personal holding companies, partnerships (or entities treated as partnerships for U.S.
federal income tax purposes), stockholders who are not U.S. holders (as defined herein), stockholders who hold their shares as
“qualified small business stock” or “Section 1244” stock, broker-dealers and tax-exempt entities. This
summary also assumes that the pre-Reverse Split shares were, and the post-Reverse Split shares will be, held as a “capital
asset,” as defined in Section 1221 of the Code.
As
used herein, the term “U.S. holder” means a holder that is, for U.S. federal income tax purposes:
|
●
|
an
individual who is a citizen or resident of the United States;
|
|
|
|
|
●
|
a
corporation or other entity taxed as a corporation created or organized in or under the laws of the United States or any political
subdivision thereof;
|
|
|
|
|
●
|
an
estate the income of which is subject to U.S. federal income tax regardless of its source; or
|
|
|
|
|
●
|
a
trust (A) if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more “U.S.
persons” (as defined in the Code) have the authority to control all substantial decisions of the trust or (B) that has
a valid election in effect to be treated as a U.S. person.
|
Other
than the cash payments for fractional shares of common stock discussed above, no gain or loss should be recognized by a stockholder
upon the exchange of pre-Reverse Split shares for post-Reverse Split shares. The aggregate tax basis of the post-Reverse Split
shares will be the same as the aggregate tax basis of the pre-Reverse Split shares exchanged in the Reverse Split, reduced by
any amount allocable to a fractional share for which cash is received. A stockholder’s holding period in the post-Reverse
Split shares will include the period during which the stockholder held the pre-Reverse Split shares exchanged in the Reverse Split.
In
general, the receipt of cash by a U.S. holder instead of a fractional share will result in a taxable gain or loss to such holder
for U.S. federal income tax purposes. The amount of the taxable gain or loss to the U.S. holder will be determined based upon
the difference between the amount of cash received by such holder and the portion of the basis of the pre-Reverse Split shares
allocable to such fractional interest. The gain or loss recognized will constitute capital gain or loss and will constitute long-term
capital gain or loss if the holder’s holding period is greater than one year as of the Effective Date.
A
U.S. holder may be subject to information reporting with respect to any cash received in exchange for a fractional share interest
in a new share in the Reverse Split. U.S. holders who are subject to information reporting and who do not provide a correct taxpayer
identification number and other required information (e.g., by submitting a properly completed IRS Form W-9 or applicable IRS
Form W-8) may also be subject to backup withholding, at their applicable rate. Any amount withheld under such rules is not an
additional tax and may be refunded or credited against the U.S. holder’s U.S. federal income tax liability, provided that
the required information is properly furnished in a timely manner to the Internal Revenue Service.
The
tax treatment of a stockholder may vary depending upon the particular facts and circumstances of such stockholder. Each stockholder
is urged to consult with such stockholder’s own tax advisor with respect to the tax consequences of the Reverse Split.
PROPOSAL
3:
RATIFICATION
OF THE APPOINTMENT OF MARCUM LLP AS THE COMPANY’S INDEPENDENT
REGISTERED
ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2018
The
Board has appointed Marcum LLP (“Marcum”) as our independent registered public accounting firm to audit the consolidated
financial statements of the Company and its subsidiaries for the fiscal year ended December 31, 2018. The Company first engaged
Marcum on May 17, 2016 as the Company’s independent registered public accounting firm.
Stockholder
ratification of the appointment of our independent auditor is not required by our Bylaws or otherwise. However, the Board is submitting
the selection of Marcum to the shareholders for ratification as a matter of good corporate practice. If the shareholders fail
to ratify the selection, the Audit Committee will reconsider whether or not to retain Marcum. Even if the selection is ratified,
the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm
at any time during the year if they determine that such a change would be in the best interests of the Company and its shareholders.
Audit
Fees
The
aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that
are reasonably related to the performance of the audit or review of the registrant’s financial statements and review of
financial statements include in the registrants Form 10-Q or services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements for those fiscal years were $294,653 and $101,000, respectively.
Audit-Related
Fees
The
aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that
are reasonably related to the performance of the audit or review of the registrant’s financial statements and not reported
under Item 9(e)(1) of Schedule 14A, for professional services rendered were $0 and $0, respectively.
Tax
Fees
The
aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for
tax compliance, tax advice, and tax planning for professional services rendered were $0 and $0, respectively.
All
Other Fees
The
aggregate fees billed in each of the last two fiscal years for products and services, provided by the principal accountant, other
than the services report in Items 9(e)(1) through 9(e)(3) of Schedule 14A, for services rendered were $0 and $0, respectively.
Audit
Committee Approval
Before
a principal accountant is engaged by the Company or its subsidiaries to render audit or non-audit services, the engagement is
approved by the Company’s audit committee.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE PROPOSAL TO RATIFY THE SELECTION OF MARCUM LLP AS THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE COMPANY FOR THE YEAR ENDED DECEMBER 31, 2018.
STOCKHOLDER
NOMINATIONS AND PROPOSALS FOR
THE
2019 ANNUAL MEETING OF STOCKHOLDERS
As
of the date of this Proxy Statement, we had not received notice of any shareholder proposals for the previously adjourned 2018
Annual Meeting described herein and proposals received 10 days after the date of this Proxy Statement will be considered untimely.
If a stockholder wants the Company to include a proposal in the Company’s Proxy Statement for presentation at our 2019 Annual
Meeting of Stockholders in accordance with Rule 14a-8 promulgated by the SEC under the Exchange Act, the proposal must be received
by the Company no later than the deadline set forth below. Such proposals should be directed to Taronis Technologies, Inc., 300
W. Clarendon Avenue, Suite 230, Phoenix, AZ 85013, Attention: Corporate Secretary.
Under
Rule 14a-8, to be timely, a stockholder’s notice for a proposal must be received at our principal executive offices not
less than 120 calendar days before the date of our Proxy Statement release to stockholders in connection with the previous year’s
annual meeting. However, if we did not hold an annual meeting in the previous year or if the date of this year’s annual
meeting has been changed by more than 30 days from the date of the previous year’s annual meeting, then the deadline is
a reasonable time before we begin to print and send our proxy materials. Therefore, stockholder proposals intended to be presented
at the 2019 annual meeting must be received by us at our principal executive office no later than a reasonable time before we
begin to print and send our proxy material. During 2019, we will announce the date of our annual meeting and the date we plan
on printing and sending our proxy material and the deadline for the submission of stockholder proposals. Stockholders wishing
to submit proposals to be presented directly at our 2019 annual meeting of stockholders instead of by inclusion in next year’s
Proxy Statement must follow the submission criteria set forth in our By-Laws, and applicable law concerning stockholder proposals.
Upon receipt of any proposal, we will determine whether to include such proposal in accordance with regulations governing the
solicitation of proxies.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
The
Company files annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy
any document that the Company files at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. You
may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC
maintains a website at
http://www.sec.gov
, from which interested persons can electronically access the Company’s
SEC filings.
Any
person, including any beneficial owner, to whom this Proxy Statement is delivered may request copies of reports, proxy statements
or other information concerning the Company (including the documents incorporated by reference herein) without charge, by written
or telephonic request directed to the Corporate Secretary, Taronis Technologies, Inc., 300 W. Clarendon Avenue, Suite 230, Phoenix,
AZ 85013.
July
29, 2019
|
By
Order of the Board of Directors
|
|
|
|
/s/ Scott
Mahoney
|
|
Scott
Mahoney
|
|
Chief
Executive Officer & President
|
“FORM
OF” PROXY CARD
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