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 ☒ |
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)) |
☒ |
Definitive
Proxy Statement |
☐ |
Definitive
Additional Materials |
☐ |
Soliciting
Material under §240.14a-12 |
|
NUZEE,
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):
☐ |
Fee
paid previously with preliminary materials. |
☐ |
Fee
computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
NUZEE,
INC.
NOTICE
OF THE ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON MARCH 16, 2023
To
the Stockholders of NuZee, Inc.:
You
are cordially invited to virtually attend the 2023 Annual Meeting of Stockholders (the “Annual Meeting”) of NuZee, Inc.,
a Nevada corporation (the “Company”), to be held virtually, via live webcast at www.virtualshareholdermeeting.com/NUZE2023,
on Thursday, March 16, 2023 at 5:00 p.m., Eastern Time, in order to:
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1. |
Elect
six directors for a term of one year or until their respective successors have been duly elected and qualified; |
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2. |
Approve
an amendment to the Company’s Articles of Incorporation (the “Articles”) to reincorporate into the Articles the
“Additional Articles,” which, due to a clerical error were erroneously and inadvertently separated from the record at
an indeterminable date after they were originally filed as part of the Articles filed with the Nevada Secretary of State on July
15, 2011; |
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3. |
Approve
the adoption of the NuZee, Inc. 2023 Equity Incentive Plan (the “2023 Equity Plan”);
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4. |
Hold
a non-binding advisory vote on the compensation paid to our named executive officers; |
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5. |
Ratify
the appointment of MaloneBailey LLP, as the Company’s independent registered public accounting firm for the fiscal year ending
September 30, 2023; and |
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6. |
Transact
such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. |
The
board of directors of the Company (the “Board”) has fixed the close of business on January 20, 2023 as the record date for
determining the stockholders of the Company entitled to notice of, and to vote at, the Annual Meeting or any adjournment or postponements
thereof. Please review in detail the proxy statement for a more complete statement of matters to be considered at the Annual Meeting.
The
Annual Meeting will be held entirely online in a virtual meeting format only, with no physical in-person meeting, to allow greater participation.
Stockholders attending the Annual Meeting virtually will be afforded the same rights and opportunities to participate as they would at
an in-person meeting. We encourage you to attend online and participate in the Annual Meeting, where you will be able to listen to the
meeting live, submit questions and vote. Stockholders may participate in the Annual Meeting by visiting the following website: www.virtualshareholdermeeting.com/NUZE2023.
To participate in the Annual Meeting, you will need the 16-digit control number included on your proxy card or on the instructions that
accompanied your proxy materials. We recommend that you log in a few minutes before the Annual Meeting to ensure you are logged in when
the Annual Meeting starts.
Your
vote is very important to us regardless of the number of shares you own. Whether or not you are able to virtually attend the Annual Meeting,
please read the proxy statement and promptly vote your proxy via the internet, by telephone or, if you received a printed form of proxy
in the mail, by completing, dating, signing and returning the enclosed proxy card in order to assure representation of your shares at
the Annual Meeting. Granting a proxy will not limit your right to vote if you wish to virtually attend the Annual Meeting and vote online
during the Annual Meeting.
|
By
order of the Board of Directors, |
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|
|
/s/
Masateru Higashida |
|
Masateru
Higashida |
|
Chief
Executive Officer, President, Treasurer, Secretary and Chairman of the Board |
Richardson,
Texas
January
30, 2023
You
are cordially invited to virtually attend the Annual Meeting. Whether or not you expect to virtually attend the Annual Meeting, PLEASE
VOTE YOUR SHARES IN ADVANCE. You may vote your shares in advance of the Annual Meeting via the internet, by telephone or, by mailing
the completed proxy card. Voting instructions are printed on your proxy card.
If
you were a stockholder of record as of January 20, 2023, you may vote online during the Annual Meeting. If, on January 20, 2023,
your shares of our common stock were held, not in your name, but rather in an account at a brokerage firm, bank or other similar
organization, you are also invited to attend the Annual Meeting and may vote online during the Annual Meeting. However, even if you
plan to attend the Annual Meeting, the Company recommends that you vote your shares in advance, so that your vote will be counted
if you later decide not to attend the Annual Meeting.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MARCH 16, 2023
Our
proxy statement for the Annual Meeting, proxy card and our Annual Report on Form 10-K for the fiscal year ended September 30, 2022
are also available free of charge at www.proxyvote.com.
|
NuZee,
Inc.
2023
Annual Meeting of Stockholders
PROXY
STATEMENT
This
proxy statement and the accompanying form of proxy are being furnished to the stockholders of NuZee, Inc., a Nevada corporation (the
“Company”, “we”, “us”, or “our”), on or about January 30, 2023, in connection
with the solicitation of proxies by the Company’s Board of Directors (the “Board”) for use at the 2023 Annual Meeting
of Stockholders (the “Annual Meeting”) to be held virtually, via live webcast at www.virtualshareholdermeeting.com/NUZE2023,
on Thursday, March 16, 2023 at 5:00 p.m., Eastern Time, and any adjournment or postponements thereof.
The
Annual Meeting will be held entirely online to allow greater participation. Stockholders may participate in the Annual Meeting by visiting
the following website: www.virtualshareholdermeeting.com/NUZE2023. To participate in the Annual Meeting, you will need the 16-digit
control number included on your proxy card or on the instructions that accompanied your proxy materials.
The
cost of soliciting proxies will be borne by the Company. Following the mailing of this proxy statement, the Company may conduct further
solicitations personally, telephonically or by facsimile through its officers, directors and employees, none of whom will receive additional
compensation for assisting with any such solicitations. The Company does not intend to retain a proxy solicitor in connection with the
Annual Meeting. Brokerage houses, nominees, custodians and fiduciaries will be requested to forward soliciting material to beneficial
owners of stock held of record by them, and the Company, upon request, will reimburse such persons for their reasonable out-of-pocket
expenses in doing so.
Only
holders of record of outstanding shares of the Company’s common stock, par value $0.00001 per share (“Common Stock”),
at the close of business on January 20, 2023 (the “Record Date”), are entitled to notice of, and to vote at, the Annual Meeting
or any adjournment or postponements thereof. Each holder of Common Stock is entitled to one vote for each share of Common Stock held
on the Record Date. There were 691,088 shares of Common Stock outstanding and entitled to vote as of the Record Date. If you plan
to attend the Annual Meeting online, please see the instructions below.
How
do I attend, participate in, and ask questions during the virtual Annual Meeting?
The
Company will be hosting the Annual Meeting via live webcast only. All stockholders as of the Record Date may attend the Annual Meeting
live online at www.virtualshareholdermeeting.com/NUZE2023. The Annual Meeting will start at 5:00 p.m., Eastern Time, on Thursday,
March 16, 2023. Stockholders attending the Annual Meeting virtually will be afforded the same rights and opportunities to participate
as they would at an in-person meeting.
In
order to enter the Annual Meeting, you will need the control number, which is included on your proxy card if you are a stockholder of
record, or included with your voting instruction card and voting instructions received from your broker, bank or other agent if you hold
your shares in “street name.” Instructions on how to attend and participate online are available at www.virtualshareholdermeeting.com/NUZE2023.
We recommend that you log in a few minutes before the scheduled start time to ensure you are logged in when the Annual Meeting starts.
The webcast will open 15 minutes before the start of the Annual Meeting.
To
help ensure that we have a productive and efficient meeting, and in fairness to all stockholders in attendance, you will also find posted
our rules of conduct for the Annual Meeting when you log in prior to its start. These rules of conduct will include the following guidelines:
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● |
You
may submit questions and comments electronically through the meeting portal during the Annual Meeting. If you wish to submit a question
during the Annual Meeting, you may do so by logging in to the virtual meeting platform at www.virtualshareholdermeeting.com/NUZE2023
and typing your question into the “Ask a Question” field, and clicking “Submit”. |
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Only
stockholders as of the Record Date for the Annual Meeting and their proxy holders may submit questions at the Annual Meeting. |
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Please
direct all questions to the Secretary of the Company. |
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Please
include your name and affiliation, if any, when submitting a question or comment. |
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Limit
your remarks to one brief question or comment that is relevant to the Annual Meeting and/or our business. |
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Questions
may be grouped by topic by our management. |
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Questions
may also be ruled as out of order if they are, among other things, irrelevant to our business, related to pending or threatened litigation,
disorderly, repetitious of statements already made, or in furtherance of the speaker’s own personal, political or business
interests. |
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Be
respectful of your fellow stockholders and Annual Meeting participants. |
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No
audio or video recordings of the Annual Meeting are permitted. |
If
you encounter any difficulties accessing the virtual Annual Meeting during login or in the course of the meeting, please contact the
phone number found on the login page at www.virtualshareholdermeeting.com/NUZE2023.
Who
can vote at the Annual Meeting?
Only
stockholders of our Common Stock at the close of business on the Record Date will be entitled to vote at the Annual Meeting. On the Record
Date, there were 691,088 shares of Common Stock outstanding and entitled to vote.
Stockholder
of Record: Shares Registered in Your Name
If,
on the Record Date, your shares of Common Stock were registered directly in your name with our transfer agent, V Stock Transfer, LLC,
then you are a stockholder of record. As a stockholder of record, you may vote (i) through the internet before or at the Annual Meeting,
using the instructions on the proxy card and those posted at www.virtualshareholdermeeting.com/NUZE2023; (ii) by telephone from
the United States, using the number on the proxy card; or (iii) by completing and returning the enclosed printed proxy card. Whether
or not you plan to virtually attend the Annual Meeting, we urge you to vote your shares by proxy in advance of the Annual Meeting electronically
through the internet, by telephone or by completing and returning the enclosed printed proxy card. To help us keep our costs low,
please vote through the internet, if possible.
Beneficial
Owner: Shares Registered in the Name of a Broker or Bank
If,
on the Record Date, your shares of Common Stock were held, not in your name, but rather in an account at a brokerage firm, bank or other
similar organization, then you are the beneficial owner of shares held in “street name”. The organization holding your account
is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right
to direct your broker (or bank or other nominee) regarding how to vote the shares in your account. You may so instruct your broker (or
bank or other nominee) through the internet or by telephone as described in the applicable instructions your broker has provided with
these proxy materials. You may also vote by completing the voting instruction card your broker provides to you. To help us keep our
costs low, please vote through the internet, if possible. As a beneficial owner, you are also invited to virtually attend the Annual
Meeting at www.virtualshareholdermeeting.com/NUZE2023 by entering the 16-digit control number provided by your broker (or bank
or other nominee) and vote your shares of Common Stock online during the Annual Meeting.
Can
I revoke my proxy and change my vote?
Any
stockholder of record who executes and delivers a proxy may revoke it at any time prior to its use by (i) giving written notice of revocation
to the Secretary of the Company, (ii) executing and delivering a proxy bearing a later date, or (iii) virtually attending the Annual
Meeting and voting online during the Annual Meeting. Simply attending the Annual Meeting will not, by itself, revoke your proxy. Even
if you plan to virtually attend the Annual Meeting, we recommend that you also submit your proxy or voting instructions in advance of
the Annual Meeting so that your vote will be counted if you later decide not to virtually attend the Annual Meeting.
If
you are a beneficial owner, you will need to revoke or resubmit your proxy through your broker (or bank or other nominee) and in accordance
with its procedures.
What
are the recommendations of the Board?
Each
of the recommendations of the Board is set forth together with the description of each item in this proxy statement. In summary, the
Board recommends a vote “FOR” the election of the nominees to the Board as more fully described in the section titled “Proposal
One – Election of Directors;” and “FOR” each of Proposal Two, Proposal Three, Proposal Four and Proposal Five.
If you sign and return your proxy card but do not specify how you want your shares voted, the persons named as proxy holders on the proxy
card will vote in accordance with the recommendations of the Board.
The
Board does not know of any other matters that may be brought before the Annual Meeting nor does it foresee or have reason to believe
that the proxy holders will have to vote for a substitute or alternate board nominee for director. In the event that any other matter
should properly come before the Annual Meeting or any nominee for director is not available for election, the proxy holders will vote
as recommended by the Board or, if no recommendation is given, in accordance with their best judgment.
What
constitutes a quorum?
The
presence, by virtual attendance or represented by proxy, of a majority of the outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum at the Annual Meeting. Abstentions and broker “non-votes” will be counted as present in
determining whether the quorum requirement is satisfied. See below for information on broker “non-votes.”
If
I am a beneficial owner of shares held in “street name” and I do not provide my broker, bank or other agent with voting instructions,
what happens?
If
you are a beneficial owner of shares of our Common Stock and do not instruct your broker, bank or other agent how to vote your shares,
the question of whether your broker or nominee will still be able to vote your shares depends on whether the particular proposal is deemed
to be a “routine” matter. Brokers and nominees can use their discretion to vote “uninstructed” shares with respect
to matters that are considered to be “routine,” but not with respect to “non-routine” matters.
We
believe Proposals One, Two, Three and Four are considered non-routine matters under applicable rules. Accordingly, we believe that, without
your specific voting instructions, your broker or nominee will not be permitted to vote your shares on Proposals One, Two, Three
or Four. Such an event would result in a “broker non-vote” and these shares will not be counted as having been voted on Proposals
One, Two, Three and Four. Accordingly, please instruct your bank, broker or other agent to ensure that your vote will be counted.
The
ratification of the appointment of MaloneBailey LLP as our independent registered public accounting firm for the fiscal year ending September
30, 2023 (Proposal Five) is considered a routine matter under applicable rules. Accordingly, if you are a beneficial owner and your shares
of our Common Stock are held in the name of a broker or other nominee, the broker or other nominee is permitted to vote your shares on
Proposal Five even if the broker or other nominee does not receive voting instructions from you. As a result, we do not anticipate any
broker non-votes with respect to Proposal Five. We are aware, however, that certain brokers elect not to exercise their discretionary
authority to vote on routine matters absent voting instructions from their beneficial owners. Accordingly, we strongly urge you to
instruct your broker how to vote with respect to Proposals One, Two, Three, Four and Five.
What
are “broker non-votes”?
As
discussed above, when a beneficial owner of shares held in “street name” does not give instructions to the broker or nominee
holding the shares as to how to vote on matters deemed to be “non-routine,” the broker or nominee cannot vote the shares.
These unvoted shares are counted as “broker non-votes.”
As
a reminder, if you a beneficial owner of shares held in “street name,” in order to ensure your shares are voted in the way
you would prefer, you must provide voting instructions to your broker, bank or other agent by the deadline provided in the materials
you receive from such organization.
How
are votes counted?
Votes
will be counted by the inspector of election appointed for the Annual Meeting, who will separately count: (i) with respect to Proposals
One, Two, Three and Four, votes “FOR,” “AGAINST,” abstentions and broker non-votes and (ii) with
respect to Proposal Five, votes “FOR,” “AGAINST” and abstentions.
How
many votes are needed to approve each proposal?
Proposal
One — Election of directors. Assuming that a quorum is present, the affirmative votes equal to at least a majority of the votes
of the shares of Common Stock present by virtual attendance or represented by proxy at the Annual Meeting and entitled to vote are required
for the election of directors. Stockholders do not have the right to cumulate their votes for directors. Abstentions will have the same
effect as an “AGAINST” vote and broker non-votes will have no effect.
Proposal
Two — Amendment to the Articles to reincorporate into the Articles the “Additional Articles,” which, due to a clerical
error, were erroneously and inadvertently separated from the record at an indeterminable date after they were originally filed as part
of the Articles filed with the Nevada Secretary of State on July 15, 2011 (the “Separated Pages”). The affirmative vote
from the holders of a majority of the outstanding shares of Common Stock as of the Record Date for the Annual Meeting will be required
for approval of the amendment to the Articles. Abstentions and broker non-votes will have the same effect as an “AGAINST”
vote.
Proposal
Three — Adoption of the 2023 Equity Plan. The affirmative votes equal to at least a majority of the total votes cast by holders
of our Common Stock entitled to vote on Proposal Three will be required for approval of the adoption of the 2023 Equity Plan. Abstentions
and broker non-votes will have no effect.
Proposal
Four — Non-binding advisory vote on compensation paid to our named executive officers. The compensation paid to our named executive
officers will be approved if the number of votes cast “FOR” Proposal Four exceeds the number of votes cast “AGAINST”
such proposal. Because this vote is advisory, it will not be binding upon the Board. However, the Board and its compensation committee
(the “Compensation Committee”) will take into account the outcome of the vote when considering future executive compensation
arrangements. Abstentions and broker non-votes will have no effect.
Proposal
Five — Ratification of the appointment of the Independent Registered Public Accounting Firm. The ratification of the appointment
of MaloneBailey LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2023 will be approved
if the number of votes cast “FOR” Proposal Five exceeds the number of votes cast “AGAINST” such
proposal. Abstentions will have no effect on Proposal Five. We do not expect any broker non-votes for Proposal Five.
Other
Matters. For each other matter, the proposal will be approved if the number of votes cast in favor of the proposal exceeds the number
of votes cast in opposition to the proposal.
PROPOSAL
ONE
ELECTION
OF DIRECTORS
Directors
and Nominees
The
Third Amended and Restated Bylaws of the Company (the “Bylaws”) provide that the Board shall consist of at least one and
no more than thirteen directors, comprising only one class of directors, with the exact number being designated from time to time by
resolution of the Board. Our Board is elected annually by our stockholders, and each director is elected for a term of one year or until
his or her successor has been duly elected and qualified. Our nominees for election include our five current independent directors and
the person who serves as our Chairman and Chief Executive Officer. Proxies cannot be voted for a greater number of persons than the number
of nominees named in this proxy statement.
The
number of members of our Board is currently six (6). The Board has nominated Masateru Higashida, Kevin J. Conner, Tracy Ging, J. Chris
Jones, Nobuki Kurita, and David G. Robson, each of whom currently serve on the Board, to stand for re-election as directors at the Annual
Meeting. If Ms. Ging and Messrs. Higashida, Conner, Jones, Kurita and Robson are elected, they will each serve a term expiring at the
annual meeting of stockholders in 2024, or until their successors are elected and qualified. There are no family relationships among
any of our director nominees or executive officers.
The
Board has no reason to believe that any of its nominees will refuse or be unable to accept election. However, if any nominee is unable
to accept election or if any other unforeseen contingencies should arise, the Board may designate a substitute nominee. If the Board
designates a substitute nominee, the persons named as proxies will vote for the substitute nominee designated by the Board.
THE
BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE ELECTION OF EACH OF THE LISTED NOMINEES.
The
following table, together with the accompanying text, sets forth certain information with respect to each of our director nominees:
Nominees
for Director
Name |
|
Age |
|
Position |
|
Director
Since |
Masateru
Higashida |
|
51 |
|
Chief
Executive Officer, President, Treasurer, Secretary and Chairman of the Board |
|
2011 |
Kevin
J. Conner |
|
60 |
|
Director
|
|
2019 |
Tracy
Ging |
|
51 |
|
Director |
|
2021 |
J.
Chris Jones |
|
67 |
|
Director
|
|
2019 |
Nobuki
Kurita |
|
67 |
|
Director
|
|
2021 |
David
G. Robson |
|
56 |
|
Director |
|
2021 |
MASATERU
HIGASHIDA Mr. Higashida has served as our Chief Executive Officer, Secretary, and Treasurer since October 2014, and as Chair of the
Board since April 2013. In July 2020, Mr. Higashida was also re-appointed President of the Company. He previously also held the position
of President from October 2014 until August 2017, and Chief Financial Officer from August 2014 until February 2019. Mr. Higashida previously
founded multiple companies, including a Korea-based investment company and a Singapore-based investment company, and began his career
in the financial industry in Nagoya, Japan.
Mr.
Higashida is an employee director. The Board values Mr. Higashida’s extensive experience operating the Company. As the Company’s
Chief Executive Officer and President, Mr. Higashida is able to apprise the Board of the operational and financial results as they occur
and provide insight into the environment in which the Company operates.
KEVIN
J. CONNER Mr. Conner has served on our Board since October 2019. Mr. Conner is currently Managing Director of Conner & Associates,
a restructuring and turnaround servicing firm he founded in 1991. Mr. Conner has held senior management and board seats of public and
private companies along with being the Chair of the Conner & Associates’ SEC audit practice. Mr. Conner is frequently retained
as a qualified expert witness in matters before both Federal and State courts, including both corporate governance and general business
matters. Mr. Conner holds an MS in Taxation from Philadelphia University and a BS in Accounting from West Chester University of Pennsylvania
along with being licensed to practice as a CPA in the State of New York and the Commonwealth of Pennsylvania.
Mr.
Conner’s qualifications for election to the Board include his expertise in public company accounting and regulatory compliance
matters.
TRACY
GING Ms. Ging has served on our Board since April 2021. Since June 2020, Ms. Ging has served as Chief Marketing Officer of Kum &
Go, a convenience store chain with 400 stores across 11 states. Her responsibilities in this position include providing executive leadership
for merchandising, business intelligence and analytics, and serving on the senior leadership team responsible for the long-term strategic
direction of the business. Prior to joining Kum & Go, Ms. Ging served as Chief Business Officer of S&D Coffee and Tea from 2012
to 2020. Ms. Ging earned a Bachelor of Science from Indiana University and a Master’s Degree in Communication and Organizational
Leadership from Gonzaga University. In addition, in December 2021, Ms. Ging completed the General Management Program from The Wharton
School of the University of Pennsylvania, where she focused her studies on digital strategies and board governance.
Ms.
Ging’s qualifications for election to the Board include her extensive marketing and leadership experience, coupled with her experience
in the coffee industry, which provides our Board with a valuable perspective on the business sector in which our Company operates.
J.
CHRIS JONES Mr. Jones has served on our Board since October 2019. Mr. Jones currently serves as the Managing Director of Haddington
Ventures, LLC, a venture fund manager and advisor Mr. Jones co-founded in 1998, where he focuses on acquisitions, financing and administrative
issues of portfolio companies. While at Haddington, Mr. Jones has served on over 12 boards of directors of portfolio companies, including
multiple companies that were ultimately acquired by publicly traded companies, such as Lodi Gas Storage, which was sold to Buckeye Partners,
and Bear Paw Energy, which was sold to Northern Border Partners. Prior to the formation of Haddington, Mr. Jones served as Vice President
and Chief Financial Officer of Tejas Power Corporation (“TPC”), a publicly traded company, from 1985 until his appointment
as Senior Vice President and Chief Operating Officer in 1995. He also served as a Director of Market Hub Partners, L.P., TPC’s
natural gas storage joint venture with Dayton Power & Light, New Jersey Resources, NIPSCO and Public Service Electric and Gas. Prior
to his association with TPC, Mr. Jones served as Secretary/Treasurer, and later Chief Financial Officer of The Fisk Group, Inc., a U.S.
and international electrical contracting subsidiary of Amec p.l.c., a publicly traded U.K. company. He was employed with The Fisk Group
from 1979 to 1985. Mr. Jones began his professional career with the auditing firm Price Waterhouse in Houston, Texas in 1977. He received
his BBA degree in Accounting from the University of Texas at Austin in 1977.
Mr.
Jones’ qualifications for election to the Board include his experience both in the operation of public company business and serving
on the boards of directors of public companies and his related expertise in corporate governance matters.
NOBUKI
KURITA Mr. Kurita has served on our Board since
March 2021. Mr. Kurita, who is presently retired, served as President of Sony China Co., Ltd from 2012 to 2016 and as SVP at Sony Corporation
(Sony HQ) from 2009 to 2016. While at Sony, Mr. Kurita also served as Chief Executive Officer of Sony Mexico from 1999 to 2003. From
September 2017 to March 2020, Mr. Kurita served as President and Chief Operating Officer of Restar Holdings Corporation (formerly known
as UKC Holdings Corporation) (“Restar”). Restar, which is listed on the Tokyo Stock Exchange, is engaged in trading of semiconductors
and electric devices in Japan and internationally.
Mr.
Kurita’s qualifications for election to the Board include his extensive executive leadership expertise and experience, including
serving as a top executive for a publicly traded company in Japan, and his related expertise in marketing, strategic planning, risk management,
and technical innovation.
DAVID
G. ROBSON Mr. Robson has served on our Board since
March 2021. Mr. Robson has over twenty-five years of operational, finance and accounting experience and has held senior positions with
both public and private companies in a variety of industries. Since March 2021, Mr. Robson has served as Chief Financial Officer of Nuvve
Holding Corp., a publicly traded green energy technology company. Mr. Robson has served on the Board of Directors of Payference, a software
business, since February 2020. Mr. Robson served as the Chief Financial Officer and Chief Compliance Officer of Farmer Brothers Co.,
a publicly traded national distributor of coffee, tea and culinary products from February 2017 to November 2019. His responsibilities
included overseeing mergers and acquisitions, investor relations, information technology and finance. Mr. Robson served as the Chief
Financial Officer of PIRCH, a curator and retailer of kitchen, bath and outdoor home brands, from September 2014 to September 2016. From
January 2012 to September 2014, Mr. Robson was the Chief Financial Officer of U.S. AutoParts, an online provider of auto parts and accessories.
Prior to that, he served as the Executive Vice President and Chief Financial Officer of Mervyns LLC, a former discount department store
chain, from 2007 to 2011. From 2001 to 2007, he served as the Senior Vice President of Finance and Principal Accounting Officer for Guitar
Center, Inc. Mr. Robson began his career with the accounting firm Deloitte & Touche Tohmastu. Mr. Robson graduated with a Bachelor
of Science degree in Accounting from the University of Southern California and is a certified public accountant (inactive) in the State
of California.
Mr.
Robson’s qualifications for election to the Board include his experience as Chief Financial Officer and Chief Compliance Officer
of a national distributor of coffee, tea and culinary products as well as his vast operational, finance and accounting experience with
both public and private companies in a variety of industries.
Board
Diversity Matrix
For
the Annual Meeting, the Board has nominated six individuals who bring valuable diversity to the Board. Their collective experience covers
a wide range of professional, geographic and industry backgrounds. The table below provides certain highlights of the composition of
our directors. Each of the categories listed in the below table has the meaning as it is used in Nasdaq Rule 5605(f).
Board
Diversity Matrix (As of January 20, 2023 and January 19, 2022) |
|
Total
Number of Directors |
|
6 |
|
|
Female |
|
Male |
|
Non-Binary |
|
Did
Not Disclose
Gender |
Part
I: Gender Identity |
Directors |
|
1 |
|
4 |
|
0 |
|
1 |
Part
II: Demographic Background |
African
American or Black |
|
0 |
|
0 |
|
0 |
|
0 |
Alaskan
Native or Native American |
|
0 |
|
0 |
|
0 |
|
0 |
Asian |
|
0 |
|
2 |
|
0 |
|
0 |
Hispanic
or Latinx |
|
0 |
|
0 |
|
0 |
|
0 |
Native
Hawaiian or Pacific Islander |
|
0 |
|
0 |
|
0 |
|
0 |
White |
|
1 |
|
2 |
|
0 |
|
0 |
Two
or More Races or Ethnicities |
|
0 |
|
0 |
|
0 |
|
0 |
LGBTQ+ |
|
|
|
|
|
0 |
|
Did
Not Disclose Demographic Background |
|
|
|
|
|
1 |
|
Board
and Committee Meetings; Attendance
The
Company does not have a policy requiring director attendance at its annual meeting of stockholders, but directors are expected to attend.
All of our directors attended virtually our 2022 annual meeting of stockholders (the “2022 Annual Meeting”), which was also
held exclusively online in a virtual meeting format only, with no physical in-person meeting. During the fiscal year ended September
30, 2022 (“fiscal year 2022”), the Board held eight meetings, including telephonic
meetings. During fiscal year 2022, all directors attended at least 75% of the aggregate of the meetings of the Board and of each
of the Board committees on which he or she served at the time.
Director
Independence
We
require that a majority of our Board be independent in accordance with the rules of the Nasdaq Capital Market. Our Board has undertaken
a review of the independence of our directors and considered whether any director has any direct or indirect material relationship with
us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result
of this review, our Board has affirmatively determined that Ms. Ging and Messrs. Conner, Jones, Kurita and Robson, representing five
of our six current directors, all of whom served on the Board throughout fiscal year 2022, are “independent directors” as
defined under SEC rules and the listing standards of the Nasdaq Capital Market. All of the current members of the Board’s committees
are also independent under such standards. The Board acts independently of management and regularly holds independent director sessions
of the Board without members of management present. Mr. Higashida is not considered independent due to his service as an executive officer
of the Company.
Compensation
Committee Interlocks and Insider Participation
During
fiscal year 2022, our Compensation Committee consisted of Ms. Ging and Messrs. Jones, Kurita and Robson. None of the members of our Compensation
Committee is or has been one of our employees or officers. None of our executive officers currently serves, or during the past fiscal
year has served, as a member of the board of directors or compensation committee of another entity that has one or more executive officers
serving on our Compensation Committee.
Committees
of the Board of Directors
Our
Board has established an audit committee (the “Audit Committee”), the Compensation Committee and a nominating and corporate
governance committee (the “Nominating and Corporate Governance Committee”). The composition and responsibilities of each
of the committees of our Board is described below. Members will serve on these committees until their resignation or until as otherwise
determined by our Board.
The
current members of the Board and the committees of the Board on which they currently serve are identified in the table below.
Name |
|
Audit
Committee |
|
Compensation
Committee |
|
Nominating
and
Corporate Governance
Committee |
Masateru
Higashida |
|
— |
|
— |
|
— |
Kevin
J. Conner |
|
Chairman |
|
— |
|
Member |
Tracy
Ging |
|
— |
|
Member |
|
Member |
J.
Chris Jones |
|
Member |
|
Chairman |
|
— |
Nobuki
Kurita |
|
— |
|
Member |
|
Member |
David
Robson |
|
Member |
|
Member |
|
Chairman |
Audit
Committee
Our
Audit Committee is currently composed of Messrs. Conner, Jones and Robson. Mr. Conner serves as the chairperson of our Audit Committee.
Our Board has determined that each current member of our Audit Committee meets the requirements for independence and financial literacy
under the applicable rules and regulations of the SEC and the listing rules of the Nasdaq Capital Market. Our Board has also determined
that each of Messrs. Conner, Jones and Robson is an “audit committee financial expert” as defined in the rules of the SEC
and has the requisite financial sophistication as defined under the listing standards of the Nasdaq Capital Market. During fiscal year
2022, our Audit Committee met three times.
The
responsibilities of our Audit Committee include, among other things:
|
● |
selecting
and hiring the independent registered public accounting firm to audit our financial statements; |
|
● |
overseeing
the performance of the independent registered public accounting firm and taking those actions as it deems necessary to satisfy itself
that the accountants are independent of management; |
|
● |
reviewing
financial statements and discussing with management and the independent registered public accounting firm our annual audited and
quarterly financial statements, the results of the independent audit and the quarterly reviews, and the reports and certifications
regarding internal control over financial reporting and disclosure controls; |
|
● |
preparing
the audit committee report that the SEC requires to be included in our annual proxy statement; |
|
● |
reviewing
the adequacy and effectiveness of our internal controls and disclosure controls and procedures; |
|
● |
overseeing
our policies on risk assessment and risk management; |
|
● |
reviewing
and approving related party transactions; and |
|
● |
approving
or, as required, pre-approving, all audit and all permissible non-audit services and fees to be performed by the independent registered
public accounting firm. |
Our
Audit Committee operates under a written charter that satisfies the applicable rules and regulations of the SEC and the rules of the
Nasdaq Capital Market. A copy of the charter can be found on the Company’s website at https://mynuzee.com/investor-relations/#corporategovernance.
Compensation
Committee
Our
Compensation Committee is currently composed of Ms. Ging and Messrs. Jones, Kurita and Robson. Mr. Jones serves as the chairperson of
our Compensation Committee. Our Board has determined that each current member of our Compensation Committee meets the requirements for
independence under the applicable rules and regulations of the SEC and the listing rules of the Nasdaq Capital Market. Each current member
of the Compensation Committee is a non-employee director, as defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). During fiscal year 2022, our Compensation Committee met two times.
The
purpose of our Compensation Committee is to oversee our compensation policies, plans and benefit programs and to discharge the responsibilities
of our Board relating to compensation of our executive officers. The responsibilities of our Compensation Committee include, among other
things:
|
● |
reviewing
and approving compensation of our executive officers and reviewing and recommending to the Board for approval compensation of our
directors; |
|
● |
overseeing
our overall compensation philosophy and compensation policies, plans and benefit programs for service providers, including our executive
officers; |
|
● |
reviewing,
approving and making recommendations to our Board regarding incentive compensation and equity plans; and |
|
● |
administering
our equity compensation plans. |
Our
Compensation Committee operates under a written charter that satisfies the applicable rules and regulations of the SEC and the rules
of the Nasdaq Capital Market. A copy of the charter can be found on the Company’s website at https://mynuzee.com/investor-relations/#corporategovernance.
The
Compensation Committee has the authority, in its sole discretion, to select, appoint and retain outside compensation consultants for
advice. The Compensation Committee is directly responsible for the appointment, compensation and oversight of any such consultant, and
the Company is responsible for providing appropriate funding for payment of reasonable compensation to any such consultant, as determined
by the Compensation Committee. The Compensation Committee also has the authority, in its sole discretion, to retain and obtain the advice
and assistance of outside legal counsel and other advisors. In selecting a consultant, outside counsel and other advisors, the Compensation
Committee evaluates its independence by considering applicable rules of the Nasdaq Capital Market and any other factors that the Compensation
Committee deems relevant to the consultant’s independence from management.
In
fiscal year 2022, the Compensation Committee retained Aon/Radford as an independent consultant to advise it on certain director and executive
compensation matters. Aon/Radford was engaged directly by and reported directly to our Compensation Committee and did no other work for
the Company. As requested, a representative of Aon/Radford communicated with Compensation Committee members outside of meetings. The
Compensation Committee considered the applicable rules of the Nasdaq Capital Market and determined that Aon/Radford qualified as an independent
compensation consultant in accordance with applicable SEC and Nasdaq Capital Market rules.
The
Compensation Committee charter does not restrict the Compensation Committee from delegating any of its authority or responsibilities
to individual members of the committee or a subcommittee of the Compensation Committee, although the Compensation Committee did
not delegate any of its responsibilities during fiscal year 2022.
Nominating
and Corporate Governance Committee
The
Nominating and Corporate Governance Committee is currently composed of Ms. Ging and Messrs. Conner, Kurita and Robson. Mr. Robson serves
as chairperson of our Nominating and Corporate Governance Committee. Our Board has determined that all current members of our Nominating
and Corporate Governance Committee meet the requirements for independence under the applicable rules and regulations of the SEC. During
fiscal year 2022, our Nominating and Corporate Governance Committee did not hold any formal meetings but acted by unanimous written consent
one time.
The
responsibilities of our Nominating and Corporate Governance Committee include, among other things:
|
● |
identifying,
evaluating and selecting, or making recommendations to our Board regarding, nominees for election to our Board and its committees;
|
|
● |
evaluating
the performance of our individual directors; |
|
● |
considering
and making recommendations to our Board regarding the composition of our Board and its committees; |
|
● |
considering
director nominees recommended by shareholders; and |
|
● |
developing
and making recommendations to our Board regarding corporate governance guidelines and matters. |
Our
Nominating and Corporate Governance Committee operates under a written charter that satisfies the applicable rules and regulations of
the SEC and the rules of the Nasdaq Capital Market. A copy of the charter can be found on the Company’s website at https://mynuzee.com/investor-relations/#corporategovernance.
The
Company has adopted Corporate Governance Guidelines (the “Corporate Governance Guidelines”), which set forth, among other
things, certain criteria for the Nominating and Corporate Governance Committee to consider in evaluating potential director nominees
who have the education, business experience, and current insight necessary to understand the Company’s business and be able to
evaluate and oversee the direction and performance of the Company. The Nominating and Corporate
Governance Committee is also required to assess whether a director candidate meets all other criteria
as may be established by the Board, including functional skills, corporate leadership, diversity, international experience, or other
attributes that the Board believes will contribute to the development and expansion of the Board’s knowledge and capabilities.
While the Company does not have a formal diversity policy, the Board and the Nominating and Corporate Governance Committee believe that
considerations of diversity are, and will continue to be, an important component relating to the Board’s composition, as multiple
and varied points of view contribute to a more effective decision-making process. For additional information regarding the current composition
of our Board, see “Board Diversity Matrix.”
The
Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders. To recommend a candidate
for election to our Board, a stockholder must notify the Nominating and Corporate Governance Committee by writing to: NuZee, Inc., 1350
East Arapaho Road, Suite #230, Richardson, Texas 75081, Attention: Secretary. Such stockholder’s notice shall set forth the following
information, as further described in the Bylaws:
|
● |
the
name of the director candidate, the number and class of all shares of each class of our stock beneficially owned by such person,
and certain information regarding such director candidate that would be required to be disclosed in a proxy statement pursuant to
Regulation 14A under the Exchange Act in which such individual is a nominee for election to our Board; |
|
● |
the
director candidate’s consent to serve as a director if elected to the Board; and |
|
● |
the
name and address of the stockholder nominating the director candidate and the number and class of all shares of each class of our
stock beneficially owned by such stockholder. |
Please
see the “Stockholder Proposals and Director Nominations” section of this proxy statement for deadlines to submit director
nominations for consideration at our next annual meeting of stockholders. The manner in which director nominee candidates suggested in
accordance with this policy are evaluated does not differ from the manner in which candidates recommended by other sources are evaluated.
Board
Leadership Structure and Role in Risk Oversight
Mr.
Higashida is the chairman of the Board and the Company’s Chief Executive Officer. The Company believes that the Chief Executive
Officer is best situated to serve as chairman of the Board because he is the director most familiar with our business and industry and
the director most capable of identifying strategic priorities and executing our business strategy. In addition, having a single leader
provides clear leadership for the Company. We believe that this leadership structure has served the Company well.
Our
Board has overall responsibility for risk oversight. The Board has delegated responsibility for the oversight of specific risks to Board
committees as follows:
|
● |
The
Audit Committee oversees the Company’s risk policies and processes relating to the financial statements and financial reporting
processes, as well as key credit risks, liquidity risks, market risks and compliance, and the guidelines, policies and processes
for monitoring and mitigating those risks. |
|
● |
The
Compensation Committee oversees the compensation of our chief executive officer and our other executive officers and reviews our
overall compensation policies for employees. |
|
● |
The
Nominating and Corporate Governance Committee oversees risks related to the Company’s governance structure and processes. |
Limitation
of Liability of Directors and Officers
Pursuant
to Nevada Law, our officers and directors will not be personally liable for damages based upon any act or failure to act in his or her
capacity as a director or officer unless the presumption that the officer or director acted in good faith, on an informed basis and with
a view to the interests of the corporation has been rebutted and it is proven that the director’s or officer’s act or failure
to act constituted a breach of his or her fiduciary duties as a director or officer and such breach involved intentional misconduct,
fraud or a knowing violation of the law. This exclusion of liability does not limit any right which a director or officer may have to
be indemnified and does not affect any director’s or officer’s liability under federal or applicable state securities laws.
With respect to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of the Company)
by reason of the fact that such person is or was our director or officer or is or was serving at our request as a director, officer or
employee of another corporation or other enterprise, we have agreed to indemnify our directors and officers, to the fullest extent permitted
by Nevada law, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by a director or officer in connection with any claim against a director or officer if he or she acted in good faith and in
a manner he or she reasonably believed to be in or not opposed to our best interests, and with respect to any criminal action or proceeding,
had no reasonable cause to believe his or her conduct was unlawful. Our Bylaws also provide that directors and officers are entitled
to similar indemnification with respect to any threatened, pending or completed action or suit by or in the right of the Company to procure
a judgment in the Company’s favor, except that no indemnification shall be made in respect of any claim, issue or matter as to
which such person has been adjudged by a court of competent jurisdiction to be liable for
gross negligence or willful misconduct in the performance of such person’s duty to the Company unless and only to the extent that
the court in which the action was brought determines that such person is fairly and reasonably entitled to indemnity for such expenses
the court shall deem proper.
Delinquent
Section 16(a) Reports
Section
16(a) of the Exchange Act requires the Company’s officers and directors and persons who own more than ten percent of a registered
class of the Company’s equity securities to file reports of ownership and changes of ownership with the SEC.
Based
solely on a review of the SEC filings made by the Company’s officers and directors or written representations from certain reporting
persons, the Company believes that during fiscal year 2022 its officers, directors and beneficial owners of more than ten percent of
Common Stock were in compliance with Section 16(a) of the Exchange Act and made all filings timely, except that following fiscal year
2022 one delinquent Form 4 was filed on December 15, 2022 by Mr. Higashida, our Chief Executive Officer, President and Chairman of the
Board who beneficially owns 150,441 shares of Common Stock, to report the acquisition on October 3, 2016 of 383 shares of Common Stock
by NuZee Co., Ltd., an entity organized under the laws of Japan of which Mr. Higashida is the majority owner.
Code
of Ethics
Our
Board has adopted a Code of Business Conduct and Ethics which is applicable to NuZee, Inc. and to all our directors and officers, including
our principal executive officer and principal financial officer.
A
copy of the Company’s Code of Ethics may be obtained free of charge by making the request to the Company in writing or on the Company’s
website at https://mynuzee.com/investor-relations/#corporategovernance.
Derivatives
Trading, Hedging, and Pledging Policies
Our
Insider Trading Policy provides that, unless advance approval is obtained from the designated Compliance Officer thereunder, none of
our executive officers or directors (collectively, “Covered Persons”) may acquire, sell, or trade in any interest or position
relating to the future price of Company securities, such as a put option, a call option, or execute a short sale, or engage in hedging
or monetization transactions or similar arrangements with respect to Company securities. These prohibitions apply whether or not such
Company securities were acquired through the Company’s equity compensation programs. The objective of this policy is to enhance
alignment between the interests of our Covered Persons and those of our stockholders. Company employees who are not executive officers
are not subject to the prohibitions described in this paragraph.
Further,
our Insider Trading Policy provides that no Covered Person or any Company employee may pledge Company securities as collateral to secure
loans. This prohibition means, among other things, that these Covered Persons and Company employees may not hold Company securities in
a “margin” account, which would allow the Covered Person or Company employee to borrow against their holdings to buy securities.
Stockholder
Communications with Directors
Stockholders
may communicate their comments or concerns in writing to members of the Board. Any such communication should be addressed to the attention
of the Company’s Secretary at the Company’s principal executive offices. Any such communication must state, in a conspicuous
manner, that it is intended for distribution to the entire Board. Under the procedures established by the Board, upon the Secretary’s
receipt of such a communication, the Company’s Secretary will send a copy of such communication to each member of the Board, identifying
it as a communication received from a stockholder. Absent unusual circumstances, at the next regularly scheduled meeting of the Board
held more than two days after such communication has been distributed, the Board will consider the substance of any such communication.
Director
Compensation
In
January 2022, the Board adopted and approved a new director compensation policy (the “Director Compensation Policy”) pursuant
to which the Company provides the following compensation to its non-employee Board members: (i) annual cash compensation of $50,000,
effective as of October 1, 2021 and payable quarterly in advance; (ii) payment to each Board member of reasonable out-of-pocket expenses
for travel costs to attend Board meetings; (iii) beginning with the 2022 Annual Meeting, annual grants of restricted shares of common
stock with an aggregate grant date fair value of $50,000 to each Board member upon such Board member’s election or re-election,
as applicable, to the Board at each annual meeting of stockholders, and (iv) annual payments to the Audit Committee Chair, Compensation
Committee Chair and Nominating and Corporate Governance Committee Chair of $10,000, $7,500 and $5,000, respectively. Pursuant to the
Director Compensation Policy, in fiscal year 2022, each of Ms. Ging and Messrs. Conner, Jones, Kurita and Robson was granted 674 restricted
shares of Common Stock upon their re-election to the Board at the 2022 Annual Meeting.
As
set forth in the Corporate Governance Guidelines, directors who are also employees of the Company will not be paid for Board membership
in addition to their regular employee compensation. Accordingly, Mr. Higashida does not receive separate compensation for his service
as a director of the Company. Mr. Higashida’s compensation is discussed and summarized in the Summary Compensation Table included
in this proxy statement.
Director
Compensation Table
The
following table shows for the fiscal year ended September 30, 2022 certain information with respect to the compensation of our non-employee
directors who served in fiscal year 2022:
Name | |
Fees Earned or Paid in Cash ($) | | |
Stock Awards ($)(1) | | |
Total ($) | |
| |
| | |
| | |
| |
Kevin J. Conner(2)(3) | |
| 60,000 | | |
| 50,000 | | |
| 110,000 | |
Tracy Ging(2)(3) | |
| 50,000 | | |
| 50,000 | | |
| 100,000 | |
J. Chris Jones(2)(3) | |
| 57,500 | | |
| 50,000 | | |
| 107,500 | |
Nobuki Kurita(2)(3) | |
| 50,000 | | |
| 50,000 | | |
| 100,000 | |
David G. Robson(2)(3) | |
| 55,000 | | |
| 50,000 | | |
| 105,000 | |
|
(1) |
Amounts
listed in this column represent the aggregate fair value of the awards computed as of the grant date of each award in accordance
with Financial Accounting Standards Board Accounting Standards Codification No. 718, Compensation-Stock Compensation, or FASB ASC
Topic 718, rather than amounts paid to or realized by the named individual. See the notes to our consolidated financial statements
included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 for a discussion of assumptions made in determining
the grant date fair value and compensation expense of our restricted stock awards. These amounts do not necessarily correspond to
the actual value that the individuals may realize upon vesting. |
|
(2) |
Pursuant
to the Director Compensation Policy, on March 17, 2022, each of Ms. Ging and Messrs. Conner, Jones, Kurita and Robson was granted
674 restricted shares of Common Stock, all of which shall vest on the one-year anniversary of the grant date, subject to their continued
service on the Board. |
|
(3) |
Each
of Ms. Ging and Messrs. Conner, Jones, Kurita and Robson also held options to purchase an aggregate of 6,524 shares of Common Stock,
of which options to purchase 4,893 shares were vested, as of September 30, 2022. |
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED
STOCKHOLDER MATTERS
The
following table sets forth, as of January 20, 2023, the beneficial ownership of our Common Stock by:
|
● |
each
person, or group of affiliated persons, known by us to beneficially own more than 5% of our Common Stock; |
|
● |
each
of our named executive officers; |
|
● |
each
of our directors; and |
|
● |
all
executive officers and directors as a group. |
Except
as otherwise indicated, all shares are owned directly, and the percentage shown is based on 691,088 shares of Common Stock issued and
outstanding on January 20, 2023. On December 28, 2022, we completed a l-for-35 reverse stock split, which became effective on
December 28, 2022 upon acceptance of the Company’s filing of an amendment to the Articles with the Secretary of State of Nevada
(the “Reverse Stock Split”). Unless we indicate otherwise, all share and per share information in this proxy statement reflects
the Reverse Stock Split.
Except
as otherwise indicated below, information with respect to beneficial ownership has been furnished by each director, officer or beneficial
owner of more than five percent (5%) of Common Stock. We have determined beneficial ownership in accordance with the rules of the SEC.
These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power
with respect to those securities. In addition, the rules include shares of our Common Stock issuable pursuant to the exercise of stock
options that are either immediately exercisable or exercisable within 60 days of January 20, 2023. These shares are deemed to
be outstanding and beneficially owned by the person holding those options for the purpose of computing the percentage ownership of that
person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise
indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as
beneficially owned by them, subject to applicable community property laws.
Except
as otherwise indicated below, the address of each person listed in the table below is 1350 East Arapaho Road, Suite #230, Richardson,
Texas 75081.
Name of Beneficial Owner | |
Shares of Common Stock Beneficially Owned | | |
Percentage of Shares of Common Stock Beneficially Owned (2) | |
Directors and Named Executive Officers | |
| | | |
| | |
Masateru Higashida(1) | |
| 150,441 | | |
| 21.3 | % |
Patrick Shearer(2) | |
| 2,286 | | |
| * | |
Jose Ramirez(3) | |
| 286 | | |
| * | |
Tomoko Toyota(4) | |
| — | | |
| — | |
Kevin J. Conner(5) | |
| 7,198 | | |
| 1.0 | % |
Tracy Ging(6) | |
| 5,567 | | |
| * | |
J. Chris Jones(5) | |
| 7,198 | | |
| 1.0 | % |
Nobuki Kurita(5) | |
| 7,198 | | |
| 1.0 | % |
David G. Robson(5) | |
| 7,198 | | |
| 1.0 | % |
All Executive Officers and Directors as a group (9 persons)(7) | |
| 203,944 | | |
| 27.5 | % |
All other 5% Stockholders | |
| | | |
| | |
Entities affiliated with Sabby Management, LLC(8) | |
| 72,028 | (8) | |
| 4.99 | %(9) |
Sooncha Kim(10) 8/F., Nihombashi MM Bldg., 3-5-12 Nihombashi, Chou-Ki, 103-0027, Tokyo, Japan | |
| 68,767 | | |
| 9.79 | % |
* |
Represents
less than 1% of our outstanding Common Stock. |
(1) |
Includes
(a) 405 shares of Common Stock owned by NuZee Co., Ltd., an entity of which Mr. Higashida is the majority owner, and (b) options
to purchase 14,477 shares of Common Stock that may be exercised within 60 days of January 20, 2023. |
|
|
(2) |
Mr.
Shearer’s resignation as Chief Financial Officer became effective on January 4, 2023. Includes options to purchase 2,286 shares
of Common Stock that may be exercised within 60 days of January 20, 2023. |
|
|
(3) |
Mr.
Ramirez’s resignation as Chief Sales Officer and Chief Supply Chain Officer became effective on December 2, 2022. Includes
options to purchase 286 shares of Common Stock that may be exercised within 60 days of January 20, 2023. |
|
|
(4) |
Ms.
Toyota ceased serving as our Chief Marketing Officer as of September 27, 2022. |
|
|
(5) |
Includes
options to purchase 6,524 shares of Common Stock that may be exercised within 60 days of January 20, 2023. |
|
|
(6) |
Includes
options to purchase 4,893 shares of Common Stock that may be exercised within 60 days of January 20, 2023. |
|
|
(7) |
Includes
options to purchase 50,133 shares of Common Stock that may be exercised within 60 days of January 20, 2023. |
|
|
(8) |
Includes,
subject to a 4.99% beneficial ownership limitation provision (“Blocker”) described below, 47,735 shares of Common Stock
issuable upon exercise of the Company’s Series A Warrants, and 24,293 shares of Common Stock issuable upon exercise of the
Company’s Series B Warrants. Number of shares based on information reported on Amendment No. 1 to the Schedule 13G/A filed
with the SEC on January 4, 2022, reporting beneficial ownership by (a) Sabby Volatility Warrant Master Fund, Ltd., (b) Sabby Management,
LLC (“Sabby Management”), and (c) Hal Mintz, and certain additional information known to the Company. As more fully described
in the following footnote (9), the Company’s Series A Warrants and Series B Warrants are subject to a 4.99% Blocker. However,
the 72,028 shares of Common Stock reported in this table for Sabby Management includes the number of shares of Common Stock that
would be issuable upon full conversion and exercise of the Company’s Series A Warrants and Series B Warrants and do not give
effect to such Blocker. |
|
|
(9) |
Pursuant
to the terms of the Company’s Series A Warrants and Series B Warrants, Sabby Management
cannot exercise the Series A Warrants and Series B Warrants to the extent Sabby Management
would beneficially own, after any such exercise, more than 4.99% of the outstanding shares of our Common Stock (again, the “Blocker”).
The 4.99% percentage set forth herein for Sabby Management gives effect to the Blocker. |
|
|
(10) |
Number
of shares based on information reported on Schedule 13G filed with the SEC on April 22, 2022, reporting beneficial ownership by Mr.
Sooncha Kim, and certain additional information known to the Company. According to the report, Mr. Sooncha Kim has sole voting and
dispositive power over 34,866 shares. In addition to those shares included on the report, Mr. Sooncha Kim (i) purchased 24,286
shares of Common Stock in the Registered Offering (as defined and further described below, see “Certain Relationships and
Related Transactions”) in August 2022 and (ii) beneficially owns 9,615 additional shares. |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Except
as set forth below, other than the director and executive officer compensation arrangements discussed herein in the sections titled “Director
Compensation” and “Executive Compensation”, there has not been any transaction or series of transactions since October
1, 2020, nor is there any currently proposed transaction, in which:
|
● |
we
have been or are to be a participant; |
|
● |
the
amount involved exceeded or will exceed the lesser of (i) $120,000 or (ii) 1% of the average of the Company’s total assets
at year end for the last two completed fiscal years; and |
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any
of our directors, executive officers or, to our knowledge, beneficial owners of 5% or more of our capital stock, or any immediate
family member of or person sharing the household with any of these individuals or entities, had or will have a direct or indirect
material interest. |
Mr.
Sooncha Kim, who beneficially owns approximately 9.79% of our Common Stock based on the Schedule 13G filed with the SEC on April
22, 2022 and certain additional information known to us, purchased 24,286 shares of Common Stock for an aggregate purchase price of approximately
$697,000 on August 10, 2022 in our underwritten public offering (the “Registered Offering”) of Common Stock, which we completed
pursuant to an Underwriting Agreement dated as of August 7, 2022 and a prospectus supplement to our effective shelf registration statement
on Form S-3 (Registration No. 333-248531). Mr. Sooncha Kim purchased shares of Common Stock in the Registered Offering from the underwriter
on the same terms as all other investors participating in the Registered Offering. The Board pre-approved Mr. Sooncha Kim’s purchase
of shares of Common Stock in the Registered Offering in accordance with our Related Party Transaction Policy.
Control
by Officers and Directors
Our
officers and directors and their affiliates beneficially own, in the aggregate, approximately 27.5% of our outstanding Common Stock as
of January 20, 2023. As a result, in certain circumstances, these stockholders acting together may be able to determine matters
requiring approval of our stockholders, including the election of our directors, or they may delay, defer or prevent a change in control
of us. See “Security Ownership of Certain Beneficial Owners and Management” herein.
Information
about our Executive Officers
The
following sets forth the names, ages and positions of our current executive officers, except for Mr. Higashida, whose biography is set
forth above with our other directors.
SHANA
BOWMAN Ms. Bowman, age 47, has served as our interim Chief Financial Officer since January 2023. Prior to her appointment as interim
Chief Financial Officer, Ms. Bowman served as the Company’s Controller since December 2020. Before joining the Company, Ms. Bowman
served as the Director of Accounting and Finance at Trade Star Energy, Inc. from July 2017 to April 2019. During this time, Ms. Bowman
was responsible for building the company’s accounting and finance teams and improving the company’s finance functions to
comply with the rules governing public companies, such as the Sarbanes-Oxley Act of 2002. Following her role with Trade Star Energy,
Ms. Bowman served as U.S. Financial Controller at National Oilwell Varco from April 2019 to October 2020. In this role, Ms. Bowman was
responsible for overseeing several of the company’s U.S. business units, managing forecasts in relation to market changes during
the COVID-19 pandemic, and overseeing all cost accounting for business units, among other responsibilities. Ms. Bowman earned a Bachelor
of Business Administration degree in accounting from the University of Houston.
TRAVIS
GORNEY Mr. Gorney, age 42, has served as our Chief Innovation Officer and Vice President, Sales since May 2021. He previously served
as our Chief Marketing Officer and Vice President from July 2020 to May 2021, President and Chief Operating Officer from September 2017
to July 2020, Senior VP of Sales and Marketing from January 2017 to August 2017 and VP of Sales and Supply Chain Management from February
2016 to January 2017. Mr. Gorney became a full-time employee of the Company in April 2013, following two years of consulting for Mr.
Higashida on a project concerning bottled spring water from New Zealand as well as a line of certified organic beauty products. From
2008 through 2018, Mr. Gorney acted as President and CEO of Left Coast Threads, Inc., a company that operates retail clothing stores.
Previously, in 2003, Mr. Gorney formed Point Blank Beverage, Inc., where, as President and CEO, he developed a premium energy drink by
the name of Torque. Mr. Gorney began his career in the beverage industry as national sales manager for a start-up independent energy
beverage company named Rollin X, LLC, where he worked from 2002 until 2004.
MARIE
FRANKLIN Ms. Franklin, age 56, has served as our Senior Vice President of Sales and Marketing since December 1, 2022. She previously
served as our Vice President of Sales, North and West Coast from July 2021 to December 2022. Before joining the Company, Ms. Franklin
served as the Director of Quality and Education for Umbria Coffee Roasters, a full-service, wholesale coffee roaster based in Seattle,
Washington, from July 2015 to June 2020. During this time, Ms. Franklin led innovation, education and coffee quality for both retail
and wholesale clients, launched a cold brew beverage program and ready-to-drink products to effectively increase company sales and improved
coffee quality by updating standard and instituting comprehensive beverage quality assurance protocol, among other things. Ms. Franklin
has over 30 years of experience in the coffee industry. Ms. Franklin attended Philadelphia College of Textiles and Science (later acquired
by Thomas Jefferson University) where she studied in the Fashion Merchandising program, earned a Food Industry Executive Leadership Certificate
from Portland State University, and completed an online Specialization in Organizational Leadership through Northwestern University.
PROPOSAL
TWO
AMENDMENT
TO THE COMPANY’S ARTICLES OF INCORPORATION TO REINCORPORATE THE SEPARATED PAGES
On
January 20, 2023 the Board adopted a resolution approving, and recommending that the Company’s stockholders approve,
this proposal to grant the Board the authority to file an amendment (the “Restoration Amendment”) to the Articles, to
reincorporate the Separated Pages, in the form attached hereto as Appendix A.
Reasons
for Stockholder Approval at the Annual Meeting
At
the Company’s special meeting of stockholders held on December 9, 2022 (the “Special Meeting”), the Restoration Amendment
was presented to the Company’s stockholders for approval, but the proposal did not receive sufficient votes for approval at the
Special Meeting, although the Company’s stockholders did approve a proposal to effect the Reverse Stock Split. In the interest
of implementing the Reverse Stock Split as soon as practicable following the Special Meeting, which was necessary to regain compliance
with certain Nasdaq Listing Rules, the Board determined that it was in the best interests of the Company and its stockholders not to
adjourn the Special Meeting to a later date to solicit additional votes in favor of the Restoration Amendment, and instead determined
to present the Restoration Amendment to the Company’s stockholders for approval at the Annual Meeting.
Purpose
and Effect of the Restoration Amendment
The
Articles, including the Separated Pages, were originally filed with the Nevada Secretary of State on July 15, 2011. For reasons not known
to the Company or the Board, the Separated Pages originally included with the Articles were subsequently (at an indeterminable date)
separated from the record maintained by the Nevada Secretary of State. To rectify this clerical error, the Restoration Amendment would
reincorporate the language from the Separated Pages into the Articles. The Separated Pages were included with the Articles filed as Exhibit
3.1 to the Company’s Registration Statement on Form S-1 filed on September 6, 2011 and, therefore, the Separated Pages have been
publicly on file with the Securities and Exchange Commission since that time. The Board has determined that it is in the best interests
of the Company and its stockholders to rectify the clerical error and reincorporate the language from the Separated Pages into the record
maintained by the Nevada Secretary of State.
In
addition, the Board believes that the Restoration Amendment, which will reincorporate the language from the Separated Pages into the
Articles, is necessary and in the best interests of the Company and its stockholders because the Separated Pages provide important detail
regarding certain rights of the Company and its stockholders, including:
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● |
Opt
out of Certain Anti-Takeover Statutes. The State of Nevada, where we are incorporated, has enacted statutes that could prohibit
or delay mergers or other takeover or change in control attempts of our Company and, accordingly, may discourage attempts to acquire
our Company even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing
market price. For example, unless a corporation has opted out, these anti-takeover laws prevent Nevada corporations from engaging
in a business combination with any stockholder, including all affiliates and associates of the stockholder, who is the beneficial
owner of 10% or more of a corporation’s outstanding voting stock, for two years following the date that the stockholder first
became the beneficial owner of 10% or more of the corporation’s voting stock, unless specified conditions are met. The Separated
Pages opted out of these statutes under Nevada law, such that these statutes were not applicable to us. |
|
|
|
|
|
If
approved by the Company’s stockholders at the Annual Meeting, the Restoration Amendment will reincorporate the language from
the Separated Pages into the Articles to again opt the Company out of these statues under Nevada law, such that these statutes would
not be applicable to our Company going forward. If the Restoration Amendment is not approved by our stockholders at the Annual Meeting,
however, the Company will be subject to these statutes, which may have the effect of delaying, deferring or discouraging another
party from acquiring control of our Company, thereby reducing the likelihood that our stockholders could receive a premium for their
Common Stock in any acquisition. |
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● |
Authorization
of Preferred Stock. The Separated Pages authorized the Board to issue up to 100,000,000 shares of preferred stock, par value
$0.00001 per share, in one or more series, and for the Board to fix and determine the designations, rights, qualifications, preferences,
limitations and terms of the shares of any series of preferred stock. This authorization provided the Board with increased financial
and strategic flexibility, as shares of preferred stock were available for, among other things, possible issuances in connection
with such activities as public or private offerings of shares for cash, acquisitions of other companies, pursuit of financing opportunities
and other proper corporate purposes. |
|
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|
|
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If
approved by the Company’s stockholders at the Annual Meeting, the Restoration Amendment will reincorporate the language from
the Separated Pages into the Articles to again permit the Board to issue up to 100,000,000 shares of preferred stock, in one or more
series, with such preferences, privileges and relative, participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, including dividend rights, conversion rights, voting rights, redemption rights, liquidation
preference, sinking fund terms and the number of shares constituting any series or the designation of any series, as shall be designated
from time to time by the Board prior to the issuance of any such shares. The Board would be authorized to issue shares of preferred
stock without any further action by the Company’s stockholders, except as may be required by applicable law or Nasdaq Listing
Rules. If the Restoration Amendment is not approved by our stockholders at the Annual Meeting, the Board will not be authorized to
issue preferred stock at one or more times in the future without further action by the stockholders, which may affect the Company’s
ability to raise additional capital and engage in strategic transactions going forward. |
|
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The
Board does not have any plans, proposals or arrangements concerning the issuance of shares of preferred stock if the Restoration
Amendment is approved by the Company’s stockholders at the Annual Meeting. In addition, the authorization of preferred stock
is not intended to have any anti-takeover effect and is not part of any series of anti-takeover measures contained in the Articles
or Bylaws in effect on the date of this proxy statement. However, the Board’s power to issue preferred stock could have the
effect of delaying, deterring or preventing a transaction or a change in control of the Company that might otherwise be in the best
interest of the Company’s stockholders. |
THE
BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE RESTORATION AMENDMENT TO THE COMPANY’S ARTICLES
OF INCORPORATION.
PROPOSAL
THREE
APPROVAL
OF THE NUZEE, INC. 2023 EQUITY INCENTIVE PLAN
Background
Since
2013, the Company has used the 2013 Plan and the 2019 Plan to grant equity compensation to the Company’s directors, employees and
other eligible service providers. The 2013 Plan and the 2019 Plan were designed to promote the long-term success of the Company and the
creation of stockholder value by encouraging employees and eligible service providers to focus on critical long-range corporate objectives,
encouraging the attraction and retention of employees and other eligible service providers with exceptional qualifications, and linking
the respective interests of the Company’s employees and other eligible service providers to those of the Company’s stockholders.
The Board believes that the 2013 Plan and the 2019 Plan have been effective in providing such incentives. The Board also believes that
for the Company to continue to attract and retain outstanding individuals, it must continue to have incentive plans of this type in place.
Subject
to stockholder approval, the Board adopted the NuZee, Inc. 2023 Equity Incentive Plan (again, the “2023 Equity Plan”) on
January 20, 2023, upon the recommendation of the Compensation Committee. The Company believes that the 2023 Equity Plan is necessary
because the 2013 Plan is set to expire in October 2023 and there are a limited number of shares remaining available for grant under the
2019 Plan. As of January 13, 2023, there were only approximately 26,346 shares remaining available for grant under the 2019 Plan. If
stockholders do not approve the 2023 Equity Plan, it will not be implemented. The Board is therefore recommending that stockholders approve
the 2023 Equity Plan to ensure that the Board and the Compensation Committee will be able to make the types of awards, and covering the
number of shares, as necessary to meet the Company’s compensatory needs going forward. The Board considers the ability to grant
equity-based awards to be an important part of its strategy for recruiting and retaining key employees, consultants and directors and
for aligning their interests with the interests of the Company’s stockholders.
The
2023 Equity Plan is intended to replace both the 2013 Plan and the 2019 Plan. Upon stockholder approval of the 2023 Equity Plan, no further
grants will be made under the 2013 Plan and the 2019 Plan. However, any outstanding awards under the 2013 Plan and the 2019 Plan will
continue in accordance with the terms of the 2013 Plan and the 2019 Plan, as applicable, and any award agreement executed in connection
with such outstanding awards.
Stockholder
approval of the 2023 Equity Plan is also necessary to ensure that the 2023 Equity Plan meets the requirements under section 422 of the
Internal Revenue Code for issuing incentive stock options and the Nasdaq Capital Market approval requirements for equity compensation
plans.
Summary
of the 2023 Equity Plan
The
following is a summary of the material terms of the 2023 Equity Plan. This summary does not purport to be a complete description of all
provisions of the 2023 Equity Plan and is qualified in its entirety by reference to the complete text of the 2023 Equity Plan, a copy
of which is attached as Appendix B to this proxy statement. You may also obtain a copy of the 2023 Equity Plan, free of charge,
by writing to the Company, NuZee, Inc., at 1350 East Arapaho Road, Suite #230, Richardson,
Texas 75081; Attention: Investor Relations.
When
considering the number of additional shares to request under the 2023 Equity Plan, the Board considered a number of factors, including
the potential dilution that would result from the 2023 Equity Plan and our potential future equity compensation needs. The 103,000 shares
to be reserved under the 2023 Equity Plan represent approximately 14.9% of our Common Stock currently outstanding, and if issued would
result in total dilution (when taken together with shares underlying awards outstanding under the 2013 Plan and the 2019 Plan) over the
10-year period in which we expect to use these shares of approximately 23% of our Common Stock then outstanding. The Board believes that
this level of potential dilution is reasonable for a company of our size in our industry, particularly because the 2023 Equity Plan does
not contain an “evergreen provision” providing for the automatic replenishment of shares that may be issued under the plan.
In light of the factors considered, the Board believes that the 2023 Equity Plan represents a critical tool for the Company to incentivize
directors, employees and consultants to increase the value of the Company for all stockholders.
Corporate
Governance Provisions
The
2023 Equity Plan contains several provisions intended to make sure that awards under the 2023 Equity Plan comply with established principles
of good corporate governance. These provisions include:
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No
Discounted Stock Options. Except for certain substitute awards, stock options may not be granted with an exercise price of
less than the fair market value of the Common Stock on the date the stock option is granted. This restriction may not be changed
without stockholder approval. |
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● |
No
Stock Option Repricings. Stock options may not be repriced absent stockholder approval. This provision applies to both direct
repricings—lowering the exercise price of an outstanding stock option—and indirect repricings—canceling an outstanding
stock option and granting a replacement stock option with a lower exercise price. |
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No
Liberal Share Recycling. The 2023 Equity Plan permits share recycling only if an award expires or is terminated, or canceled
without having been fully exercised or is forfeited in whole or in part. The 2023 Equity Plan expressly prohibits recycling shares
in specified circumstances, including: shares tendered to the Company by a participant to pay the exercise price of stock options
and shares forfeited to satisfy tax withholding obligations. |
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Cap
on Non-Employee Director Compensation. The total compensation paid to a single non-employee director in any calendar year,
including the cash compensation and cash value of all equity awards granted to such non-employee director in such year, cannot exceed
$300,000. |
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No
Evergreen Provision. The 2023 Equity Plan does not contain an “evergreen provision”—there is no automatic
provision to replenish the shares of common stock authorized for issuance under the 2023 Equity Plan. |
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No
reload options. The 2023 Equity Plan does not provide for the issuance of stock options which, upon exercise, automatically
entitle a participant to a new stock option. |
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Clawback
Policies. Awards made under the 2023 Equity Plan will be subject to recoupment or clawback to the extent required to comply
with applicable laws or any applicable Company clawback policy. |
Administration
The
2023 Equity Plan shall be administered by a committee consisting exclusively of two or more directors of the Company, who shall be appointed
by the Board, and the composition of such committee shall satisfy such requirements as the SEC may establish for administrators acting
under plans intended to qualify for exemption under Rule 16b-3 (or its successor) under the Exchange Act and any other applicable law.
Generally, it is expected that the Compensation Committee will administer the 2023 Equity Plan. The Compensation Committee is comprised
entirely of independent directors. Subject to the terms of the 2023 Equity Plan, the Board and the Compensation Committee will have the
authority to construe and interpret the 2023 Equity Plan, grant stock options and restricted share awards (each an “Award”,
and collectively, “Awards”) and make all other determinations necessary or advisable for the administration thereof. The
Board may also delegate to a separate committee the administration of the 2023 Equity Plan with respect to employees and consultants
who are not considered officers of NuZee, including the authority to grant and administer Awards to such employees and consultants.
Eligibility
Persons
eligible to receive awards under the 2023 Equity Plan include employees, directors and consultants of the Company and its subsidiary
entities. As of the date of this proxy statement, the Company had approximately 28 employees and 5 non-employee directors who would be
eligible to participate in the 2023 Equity Plan if it were currently in place.
Shares
Reserved for Issuance under the 2023 Equity Plan
The
Company has reserved 103,000 shares of Common Stock for issuance under the 2023 Equity Plan. See “—Summary of the 2023
Equity Plan” for a discussion of various factors that the Board considered when determining the number of shares to be reserved
for issuance under the 2023 Equity Plan.
Effective
Date
The
2023 Equity Plan will become effective upon approval by the Company’s stockholders (the “Effective Date”).
Term,
Termination, and Amendments
Unless
previously terminated, the 2023 Equity Plan will terminate 10 years from the date the 2023 Equity Plan was approved and adopted by the
Board, except that Awards that are granted under the 2023 Equity Plan prior to its termination will continue to be administered under
the terms of the 2023 Equity Plan until the Awards terminate, expire or are exercised.
The
Board may amend, alter, suspend or terminate the 2023 Equity Plan from time to time; provided, however, stockholder approval shall be
required for any amendment to the extent necessary and desirable to comply with Applicable Laws. Additionally, the 2023 Equity Plan may
not be amended, altered, suspended or terminated in any manner that would impair the rights of any participant in the 2023 Equity Plan
without the written agreement of such participant.
Types
of Awards
The
2023 Equity Plan authorizes the issuance of stock options (including non-qualified stock options and incentive stock options) and restricted
share awards.
Additional
Provisions
No
Award or other right or interest of a participant under the 2023 Equity Plan may be assigned or transferred for any reason during the
participant’s lifetime, other than to the Company or any subsidiary or affiliate, and any attempt to do so shall be void and the
relevant Award shall be forfeited. Notwithstanding the foregoing, the Administrator may grant awards, other than Incentive Stock Options,
that are transferable by the participant during his or her lifetime, but only to the extent specifically provided in the award agreement
entered into with such participant. No Incentive Stock Option shall be transferable other than by will or the laws of descent and distribution.
Tax
Withholding
The
Company has the right, to deduct or withhold from any payment owed to a participant an amount that is necessary in order to satisfy any
amount required to be withheld under US federal, state, local, foreign or other tax law as a result of the issuance of, the exercise
of, or lapse of restrictions on, such Common Stock pursuant to an Award, or otherwise require such participant to make provision for
payment of any such withholding amount. Subject to such conditions as may be established by the Administrator, the Administrator may
permit a participant to (i) other than with respect to Incentive Stock Options, have Common Stock otherwise issuable under an Award withheld
to the extent necessary to comply with minimum statutory withholding rate requirements; (ii) deliver to the Company previously acquired
Common Stock; or (iii) have funds withheld from payments of wages, salary or other cash compensation due the participant.
Federal
Income Tax Considerations
The
following is a summary of the principal federal income tax consequences of certain awards which may be granted under the 2023 Equity
Plan. It does not describe all federal tax consequences under the 2023 Equity Plan, nor does it describe state or local tax consequences.
This discussion does not address all aspects of the United States federal income tax consequences of participating in the 2023 Equity
Plan that may be relevant to participants in light of their personal investment or tax circumstances and does not discuss any state,
local or foreign tax consequences of participating in the 2023 Equity Plan. The tax consequences of awards may vary depending upon the
particular circumstances, and it should be noted that the income tax laws, regulations and interpretations thereof change frequently.
Participants should rely upon their own tax advisors for advice concerning the specific tax consequences applicable to them, including
the applicability and effect of state, local, and foreign tax laws.
Incentive
Options. No taxable income is generally realized by the optionee upon the grant or exercise of an incentive option (except that an
alternative minimum tax liability may arise) and the Company is not entitled to a deduction at such time. If shares of Common Stock issued
to an optionee pursuant to the exercise of an incentive option are sold or transferred after both two years from the date of grant and
one year from the date of exercise, then (i) upon sale of such shares, any amount realized in excess of the exercise price (the amount
paid for the shares) will be taxed to the optionee as a long-term capital gain, and any loss sustained will be a long-term capital loss,
and (ii) the Company will generally not be entitled to any deduction for federal income tax purposes, except in the case of a disqualifying
disposition (as discussed below).
If
shares of Common Stock acquired upon the exercise of an incentive option are disposed of prior to the expiration of the two-year and
one-year holding periods described above (a “disqualifying disposition”), generally (i) the optionee will realize ordinary
income in the year of disposition in an amount equal to the excess (if any) of the fair market value of the shares of Common Stock at
exercise (or, if less, the amount realized on a sale of such shares of common stock) over the exercise price thereof, and (ii) the Company
will be entitled to deduct such amount. Any gain realized in excess of this amount will generally be considered as capital gain. Special
rules may apply where all or a portion of the exercise price of the incentive option is paid by tendering shares of previously owned
Common Stock.
If
an incentive option is exercised at a time when it no longer qualifies for the tax treatment described above, the option is treated as
a non-qualified option.
Non-Qualified
Options. No income is realized by the optionee at the time the option is granted. Generally, (i) at exercise, ordinary income is
realized by the optionee in an amount equal to the difference between the exercise price and the fair market value of the shares of Common
Stock on the date of exercise, and the Company receives a tax deduction for the same amount, and (ii) at disposition of the shares of
Common Stock underlying the option, gain or loss after the date of exercise is treated as either short-term or long-term capital gain
or loss depending on how long the shares of Common Stock have been held. Special rules may apply where all or a portion of the exercise
price of the non-qualified option is paid by tendering shares of Common Stock.
Restricted
Shares Awards. No taxable income is recognized by a participant receiving a restricted share award upon the grant of such award,
provided that the award is subject to restrictions on transfer/ a substantial risk of forfeiture and the Company is not allowed a tax
deduction on such date (unless the participant has elected to make a Section 83(b) election as discussed below). A participant’s
receipt of a restricted share award under the 2023 Equity Plan will be subject to taxation on the fair market value of the Common Stock
when the forfeiture provisions on such participant’s award, or any portion thereof, lapse, and the Company will generally be allowed
a corresponding tax deduction at that time. Such taxable income will generally be recognized as ordinary income to the participant. Any
gain upon a later disposition of the stock in excess of this amount will generally be considered capital gain.
A
participant receiving a restricted share award may make an election under Section 83(b) of the Code with respect to such restricted shares.
By making a Section 83(b) election, the participant elects to recognize compensation income with respect to the shares when the shares
are received rather than at the time the forfeiture restrictions lapse. The amount of such compensation income will be equal to the fair
market value of the shares when the participant receives them (valued without taking the restrictions into account) minus any amount
paid for the shares, and the Company will be entitled to a corresponding deduction at that time. If the Section 83(b) election is made,
the participant will not recognize any additional income when the forfeiture provisions lapse. However, any gain recognized later upon
a later disposition of the stock will generally be considered as capital gain. If the shares of Common Stock subject to such Section
83(b) election are later forfeited, the participant will not be entitled to any deduction, refund, or loss (other than any amount paid
for the stock) with respect to the shares to the extent of the income recognized by the participant upon the making of the Section 83(b)
election for tax purposes To make a Section 83(b) election, a participant must file an appropriate form of election with the IRS within
30 days after the restricted shares are transferred. A copy must also be submitted to the Company.
Parachute
Payments. If the vesting or payment of an Award made to a “disqualified individual” (as defined in Section 280G of the
Code) occurs, or is deemed for purposes of Section 280G to occur, in connection with a change in control of the Company, it may cause
a portion of the payments with respect to such awards to be treated as “parachute payments” (as defined in Section 280G the
Code). Any such parachute payments which constitute “excess parachute payments” (as defined in Section 280G of the Code)
may be non-deductible to the Company, in whole or in part, and may subject the participant receiving such award to a non-deductible 20%
federal excise tax on all or a portion of such payment (in addition to other taxes ordinarily payable).
Code
Section 409A. The Plan is intended to be exempt from or administered consistently with the requirements Section 409A of the Code.
If an award is subject to Section 409A (which relates to nonqualified deferred compensation plans), and if the requirements of Section
409A are not met, the taxable events as described above could apply earlier than described, and could result in the imposition of additional
taxes and penalties to a participant.
The
foregoing tax discussion is intended for the general information of stockholders and not as tax guidance to participants in the
2023 Equity Plan. Participants in the 2023 Equity Plan should consult their own tax advisors regarding the federal, state, local, foreign
and other tax consequences to them of participating in the 2023 Equity Plan.
New
Plan Benefits
Future
grants under the 2023 Equity Plan will be made at the discretion of the 2023 Equity Plan administrator and, accordingly, are not yet
determinable. In addition, benefits under the 2023 Equity Plan will depend on a number of factors, including the fair market value of
our Common Stock on future dates and the exercise decisions made by participants. Consequently, at this time, it is not possible to determine
the future benefits that might be received by participants receiving discretionary grants under the 2023 Equity Plan.
THE
BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE 2023 EQUITY PLAN.
PROPOSAL
FOUR
ADVISORY
VOTE APPROVING NAMED EXECUTIVE OFFICER COMPENSATION
In
accordance with Section 14A of the Exchange Act and Rule 14a-21(a) promulgated thereunder, we are asking our stockholders to approve,
in a non-binding advisory vote, the compensation of our named executive officers (our “NEOs”) as disclosed in this proxy
statement pursuant to Item 402 of Regulation S-K. This proposal, commonly known as a “Say on Pay” proposal, gives stockholders
the opportunity to provide input – to endorse or not endorse –the compensation of our NEOs. Unless the Board modifies its
policy of holding an advisory “Say on Pay” vote on an annual basis, the next advisory “Say on Pay” vote
will be held at our 2024 annual meeting of stockholders.
We
strongly encourage you to carefully review the Executive Compensation discussion and compensation tables and narrative discussions and
related material included in this Proposal Four. Thereafter, we request your input on the compensation of our NEOs through your vote
on the advisory resolution that follows the Executive Compensation discussion.
EXECUTIVE
COMPENSATION
Our
NEOs for fiscal year 2022, consisting of our principal executive officer, our next two most highly compensated executive officers serving
as executive officers as of September 30, 2022, and one additional individual who would have been one of our two most highly compensated
executive officers (aside from our principal executive officer) during fiscal year 2022, but for the fact that such individual was not
serving as an executive officer as of September 30, 2022, were:
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Masateru
Higashida, Chief Executive Officer, President, Treasurer, Secretary and Chairman of the Board; |
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Patrick
Shearer, who served as our Chief Financial Officer throughout fiscal year 2022; |
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Jose
Ramirez, who served as our Chief Sales Officer and Chief Supply Chain Officer throughout fiscal year 2022; and |
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Tomoko
Toyota, former Chief Marketing Officer. |
Ms.
Toyota ceased serving as our Chief Marketing Officer on September 27, 2022. Following the end of
fiscal year 2022, Mr. Ramirez resigned as our Chief Sales Officer and Chief Supply Chain Officer effective on December 2, 2022
and Mr. Shearer resigned as our Chief Financial Officer effective on January 4, 2023.
Summary
Compensation Table
The
following table sets forth information regarding the compensation earned by each of our NEOs during the fiscal years ended September
30, 2022 and September 30, 2021.
Name and Principal Position | |
Year | | |
Salary ($) | | |
Bonus ($) | | |
Stock Awards ($) | | |
Option Awards ($)(1) | | |
All Other Compensation ($) | | |
Total ($) | |
Masateru Higashida | |
| 2022 | | |
| 300,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 300,000 | |
Chief Executive Officer, President, Secretary, Treasurer | |
| 2021 | | |
| 230,000 | | |
| 20,500 | | |
| — | | |
| 0 | (5) | |
| — | | |
| 250,500 | (5) |
Patrick Shearer (2) | |
| 2022 | | |
| 250,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 250,000 | |
Former Chief Financial Officer | |
| 2021 | | |
| 57,852 | | |
| 41,000 | | |
| — | | |
| 623,999 | | |
| — | | |
| 722,851 | |
Jose Ramirez (3) | |
| 2022 | | |
| 225,000 | | |
| 31,000 | | |
| — | | |
| — | | |
| — | | |
| 256,000 | |
Former Chief Sales Officer and Chief Supply Chain Officer | |
| 2021 | | |
| 85,240 | | |
| 7,200 | | |
| — | | |
| 527,400 | | |
| — | | |
| 619,840 | |
Tomoko Toyota (4) | |
| 2022 | | |
| 234,173 | (6) | |
| — | | |
| — | | |
| — | | |
| 59,173 | (7) | |
| 293,346 | |
Former Chief Marketing Officer | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
(1) |
Amounts
listed in this column represent the aggregate fair value of the option awards computed as of the grant date of each option award
in accordance with FASB ASC Topic 718, rather than amounts paid to or realized by the named individual. See the notes to our consolidated
financial statements included in our Annual Reports on Form 10-K for the fiscal years ended September 30, 2022 and September 30,
2021 for a discussion of assumptions made in determining the grant date fair value and compensation expense of our stock options.
These amounts do not necessarily correspond to the actual value that the NEOs may realize upon exercise. Certain of the option awards
granted to Messrs. Higashida, Shearer and Ramirez in fiscal year 2021 were subject to performance-based vesting conditions, as further
described below (see “—Executive Employment Arrangements”). The
grant date fair value for any performance-based option awards is based on the probable outcome of the performance conditions as of
the grant date. |
|
(2) |
Following
the end of fiscal year 2022, Mr. Shearer resigned
as our Chief Financial Officer effective on January 4, 2023. |
|
|
|
|
(3) |
Following
the end of fiscal year 2022, Mr. Ramirez resigned
as our Chief Sales Officer and Chief Supply Chain Officer effective on December 2, 2022. |
|
|
|
|
(4) |
Ms.
Toyota served as our Chief Marketing Officer until September 27, 2022. In connection with Ms. Toyota’s departure, we entered
into a Separation and Release of Claims Agreement with Ms. Toyota on September 21, 2022 (the “Separation Agreement”).
For additional information regarding the Separation Agreement, see “—Narrative to Summary Compensation Table”
below. |
|
|
|
|
(5) |
As
previously disclosed, in fiscal year 2021, Mr. Higashida was granted performance-based options to purchase 25,623 shares of Common
Stock, which represents the total number of performance-based options that may be earned, if at all, in the event the performance
conditions are fully achieved. The value of these performance-based options as reported in the Summary Compensation Table for fiscal
year 2021 has been calculated assuming that none of the performance conditions will be met, which the Company believes to be the
most probable outcome given that the performance
conditions are based on the Company achieving exceedingly superior results relative
to the Company’s recent historical results of operations. If the value of these performance-based
options were to be calculated assuming that the performance conditions were fully satisfied, the value for these performance-based
options as reported in the Summary Compensation Table for fiscal year 2021 would be $2,797,832 and Mr. Higashida’s total compensation
as reported in the Summary Compensation Table for fiscal year 2021 would be $3,048,332. For additional information regarding Mr.
Higashida’s performance-based options, see “—Executive Employment Arrangements—Mr. Higashida”
below. |
|
|
|
|
(6) |
Represents
base salary paid to Ms. Toyota pursuant to her employment agreement with the Company, dated as of April 14, 2021 (the “Toyota
Employment Agreement”), prior to her departure on September 27, 2022 and a payment of $9,173 for accrued but unused vacation
time that Ms. Toyota was entitled to pursuant to the Toyota Employment Agreement. |
|
|
|
|
(7) |
Represents
the following amounts received by Ms. Toyota in connection with her departure from the Company: (i) a lump sum payment of $50,000,
less all relevant taxes and other withholdings, pursuant to the Separation Agreement, and (ii) a payment of $9,173, representing
two weeks of salary in lieu of prior written notice of Ms. Toyota’s separation that she was entitled to pursuant to the Toyota
Employment Agreement. For additional information regarding the Separation Agreement, see “—Narrative to Summary Compensation
Table” below. |
Narrative
to Summary Compensation Table
There
are no arrangements or plans in which we provide pension, retirement or similar benefits for our executive officers. Our executive officers
may receive stock options and restricted stock at the discretion of our Board in the future. We do not have any material bonus or profit
sharing plans pursuant to which cash or non-cash compensation is or may be paid to our executive officers, except that stock options
or restricted stock may be granted at the discretion of our Board from time to time. Except as described below under “—Executive
Employment Arrangements” and “—Ms. Toyota”, we have no plans or arrangements in respect of remuneration
received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as
a result of resignation, retirement, change of control) or a change of responsibilities following a change of control.
The
following paragraphs provide further detail regarding the compensation of Ms. Toyota as described in the Summary Compensation Table above.
See “— Executive Employment Arrangements” below for additional information regarding the compensation of Messrs.
Higashida, Shearer and Ramirez.
Ms.
Toyota
Ms.
Toyota served as our Chief Marketing Officer from May 3, 2021 until September 27, 2022. Pursuant to the Toyota Employment Agreement,
Ms. Toyota was entitled to, among other things, an annual base salary of $225,000. Ms. Toyota was also eligible to participate in any
equity compensation plan of the Company, including the NuZee, Inc. 2013 Stock Incentive Plan (the “2013 Plan”) and the NuZee,
Inc. 2019 Stock Incentive Plan (the “2019 Plan”). Ms. Toyota’s departure from the Company became effective on September
27, 2022. In connection with Ms. Toyota’s departure, we entered into the Separation Agreement with Ms. Toyota. Pursuant to the
Separation Agreement, Ms. Toyota received a lump sum payment of $50,000, less all relevant taxes and other withholdings.
Outstanding
Equity Awards at Fiscal Year End
The
following table sets forth information regarding outstanding equity awards held by our named executive officers as of September 30, 2022:
| |
| |
Option Awards | |
Name | |
Grant Date | |
Number of Securities Underlying Unexercised Options Exercisable (#) | | |
Number of Securities Underlying Unexercised Options Unexercisable (#) | | |
Equity Incentive Plan
Awards:
Number
of Securities Underlying Unexercised Unearned Options (#) | | |
Option Exercise Price ($) | | |
Option Expiration Date | |
Masateru Higashida | |
07/20/2017 | |
| 14,477 | | |
| — | | |
| | | |
| 58.80 | | |
| 07/20/2027 | |
| |
07/02/2021 | |
| — | | |
| — | | |
| 25,623 | (1) | |
| 109.20 | | |
| 07/02/2031 | |
Patrick Shearer | |
07/02/2021 | |
| 2,286 | (2) | |
| 3,429 | (3) | |
| — | | |
| 109.20 | | |
| 04/04/2023 | (2) |
Jose Ramirez | |
05/10/2021 | |
| 286 | (4) | |
| 572 | (5) | |
| — | | |
| 101.85 | | |
| 03/02/2023 | (4) |
| |
05/10/2021 | |
| — | | |
| — | | |
| 3,429 | (6) | |
| 101.85 | | |
| 12/02/2022 | (6) |
Tomoko Toyota | |
05/03/2021 | |
| 286 | (7) | |
| | | |
| — | | |
| 109.55 | | |
| 12/27/2022 | (7) |
(1) |
Subject
to Mr. Higashida’s continued employment, the performance-based options vest as follows: (i) 5,125 options were to vest, if
at all, in fiscal year 2022, (ii) 7,687 options shall vest, if at all, in fiscal year 2023, and (iii) 12,811 options shall vest,
if at all, in fiscal year 2024, in each case based upon our achievement of a specified amount of earnings before income taxes in
the respective fiscal year. Following the end of fiscal year 2022, performance-based options to acquire 5,125 shares of Common Stock
were forfeited because the performance conditions were not satisfied in fiscal year 2022. For additional information, see “—Executive
Employment Arrangements—Mr. Higashida” below. |
(2) |
Following
the end of fiscal year 2022, due to Mr. Shearer’s resignation, these options will expire pursuant to their terms on April 4,
2023, three months after Mr. Shearer’s resignation became effective. |
(3) |
Following
the end of fiscal year 2022, these options were forfeited on January 4, 2023 upon the effective date of Mr. Shearer’s resignation.
For additional information, see “—Executive Employment Arrangements—Mr. Shearer” below. |
(4) |
Following
the end of fiscal year 2022, due to Mr. Ramirez’s resignation, these options will expire pursuant to their terms on March 2,
2023, three months after Mr. Ramirez’s resignation became effective. |
(5) |
Following
the end of fiscal year 2022, these options were forfeited on December 2, 2022 upon the effective date of Mr. Ramirez’s resignation.
For additional information, see “—Executive Employment Arrangements—Mr. Ramirez” below. |
(6) |
Subject
to Mr. Ramirez’s continued employment, a maximum of 1,143 performance-based options were to vest, if at all, in each of fiscal
years 2022, 2023 and 2024, in each case based upon the Company’s achievement of a specified amount of adjusted gross sales
in the respective fiscal year. Following the end of fiscal year 2022, performance-based options to acquire: (i) 1,143 shares of Common
Stock were forfeited because the performance conditions were not satisfied in fiscal year 2022, and (ii) 2,286 shares of Common Stock
were forfeited in connection with Mr. Ramirez’s resignation. For additional information, see “—Executive Employment
Arrangements—Mr. Ramirez.” |
(7) |
Following
the end of fiscal year 2022, due to Ms. Toyota’s departure as Chief Marketing Officer, these options expired pursuant to their
terms on December 27, 2022, three months after Ms. Toyota’s departure became effective. |
Executive
Employment Arrangements
Mr.
Higashida
On
August 15, 2017, we entered into an Executive Employment Agreement with Mr. Higashida setting forth the terms of his employment. Pursuant
to the agreement, Mr. Higashida serves as our Chief Executive Officer, President, Treasurer and Secretary and as a member of the Board.
Pursuant
to the agreement, Mr. Higashida is entitled to an annual base salary, currently set at $300,000, and an annual bonus opportunity in an
amount determined each year by the Board. The payment of the annual bonus is determined by our Board based upon our achievement of goals
and objectives for the relevant year. For Mr. Higashida’s salary and bonus information for fiscal year 2022, see “—Summary
Compensation Table.” Mr. Higashida is also eligible to participate in any equity compensation plan of the Company, including
the 2013 Plan and the 2019 Plan, and to receive future equity awards at the Board’s discretion. For awards outstanding as of September
30, 2022, see “—Outstanding Equity Awards at Fiscal Year-End.” Mr. Higashida also participates in all of our
employee benefit programs for which he is eligible and receives reimbursement for his reasonable business expenses, including travel
expenses.
Pursuant
to his employment agreement with us, if Mr. Higashida resigns for “good reason” or his employment is terminated by us without
“cause,” each as defined in the agreement, Mr. Higashida is entitled to receive payment equal to (i) his accrued but unpaid
salary for the period through the date of his resignation or termination, plus (ii) an amount equal to one and one-half times his annual
base salary, plus (iii) an amount equal to one and one-half times the amount of bonus he received during the previous calendar year,
plus (iv) reimbursement for premiums paid to continue Mr. Higashida’s health, dental and vision insurance pursuant to the Consolidated
Omnibus Reconciliation Act of 1985 (“COBRA”) until the of earlier of 18 months or the date on which Mr. Higashida becomes
eligible to participate in a group medical plan sponsored by any other employer. For purposes of Mr. Higashida’s agreement, “good
reason” means (a) the material breach by the Company of any of its obligations under the agreement, (b) the change of Mr. Higashida’s
office, title or responsibilities, or any action by us resulting in the material diminution of Mr. Higashida’s position, duties
or authorities, or (c) the relocation of our principal executive offices or the requirement that Mr. Higashida relocate anywhere outside
of San Diego County, California, in each case without Mr. Higashida’s written consent, and “cause” means Mr. Higashida’s
(x) gross negligence, gross neglect or willful misconduct in the performance of his duties resulting in a material adverse effect on
us, (y) conviction for, deferred adjudication of or plea of no contest to a felony, or (z) material breach of any material provision
of the agreement.
Also
under the agreement, if within 12 months following a change in control of the Company Mr. Higashida resigns for “good reason”
or his employment is terminated by us without “cause,” Mr. Higashida is entitled to receive payment equal to (i) his accrued
but unpaid salary for the period through the date of his resignation or termination, plus (ii) the value of any accrued and unused paid
time off, plus (iii) an amount equal to two times the amount of bonus he received during the previous calendar year, plus (iv) reimbursement
for premiums paid to continue Mr. Higashida’s health, dental and vision insurance pursuant to COBRA until the of earlier of 18
months or the date on which Mr. Higashida becomes eligible to participate in a group medical plan sponsored by any other employer.
If
Mr. Higashida dies during the term of the agreement, Mr. Higashida’s estate is entitled to receive payment equal to (i) Mr. Higashida’s
accrued but unpaid salary for the period through the date of his death, plus (ii) the value of any accrued and unused paid time off,
plus (iii) a salary continuance for 12 months.
If
Mr. Higashida becomes incapable of performing the duties and services required of him under the agreement on a full-time basis due to
accident, physical or mental illness, or other circumstance which renders him mentally or physically incapable, we may terminate Mr.
Higashida’s employment for such disability. In such event, Mr. Higashida is entitled to receive the same payment as he would if
he were terminated without cause as described above.
Performance-Based
Options
In
fiscal year 2021, Mr. Higashida was granted performance-based options to purchase 25,623 shares of Common Stock, which represents the
total number of performance-based options that may be earned, if at all, in the event the performance conditions are fully achieved,
as further described below. Mr. Higashida’s performance-based options vest, if at all, based on the extent to which the Company
achieves certain performance objectives relating to our earnings before income taxes in each of fiscal year 2022, fiscal year 2023 and
fiscal year 2024. Pursuant to the award agreement, (i) 5,125 performance-based options were to vest, if at all, in fiscal year 2022,
(ii) 7,687 performance-based options shall vest, if at all, in fiscal year 2023, and (iii) 12,811 performance-based options shall vest,
if at all, in fiscal year 2024, in each case based upon our achievement of a specified amount of earnings before income taxes in the
respective fiscal year. For this purpose, earnings before income taxes means “operating income, minus interest expense and other
expense, plus other non-operating income and income (loss) from investment in unconsolidated affiliate(s), before income tax (benefit)
expense, all as calculated in accordance with U.S. GAAP.” The performance-based options have an exercise price of $109.20 per share
and will expire ten years from the grant date, unless terminated earlier as provided by the award agreement. Following
the end of fiscal year 2022, performance-based options to acquire 5,125 shares of Common
Stock were forfeited because the performance conditions ($1.0 million in earnings before income taxes) were not satisfied in fiscal year
2022.
Mr.
Shearer
On
July 2, 2021, we entered into the Shearer Employment Agreement with Mr. Shearer in connection with his appointment as our Chief Financial
Officer. Pursuant to the Shearer Employment Agreement, Mr. Shearer was entitled to an annual base salary of $250,000 and an annual cash
bonus opportunity (“Annual Bonus”), with an annual target bonus opportunity equal to 50% of his base salary (the “Target
Bonus”) and an annual maximum bonus opportunity equal to 65% of his base salary, in each case based on the achievement of Company
and/or individual performance goals established by the Compensation Committee; provided that, depending on results, Mr. Shearer’s
actual bonus could be higher or lower than the Target Bonus at the discretion of the Compensation Committee. For Mr. Shearer’s
salary and bonus information for fiscal year 2022, see “—Summary Compensation Table.” Mr. Shearer was also eligible
to participate in any equity compensation plan of the Company, including the 2013 Plan and the 2019 Plan, and to receive future equity
awards at the Board’s discretion.
On
July 2, 2021, pursuant to the Shearer Employment Agreement, Mr. Shearer was granted time-based options to purchase 5,716 shares of Common
Stock, which vested as to 2,286 options on July 2, 2022 and were to vest as to 1,715 options on each of July 2, 2023 and July 2, 2024
subject to Mr. Shearer’s continued employment. The options have an exercise price of $109.20 per share. Due
to Mr. Shearer’s resignation as Chief Financial Officer, Mr. Shearer’s 2,286 vested options will expire pursuant to their
terms on April 4, 2023, three months after Mr. Shearer’s resignation became effective, and the remaining unvested options
were forfeited at the time his resignation became effective.
On
November 2, 2022, Mr. Shearer notified us of his resignation as our Chief Financial Officer, effective on January 4, 2023. Mr. Shearer’s
resignation was without “good reason” (as
defined in the Shearer Employment Agreement). As a result, pursuant to the Shearer Employment Agreement, Mr. Shearer was not entitled
to receive any severance or other compensation in connection with his resignation. Pursuant to the Shearer Employment Agreement, upon
his resignation, Mr. Shearer was entitled to receive a payment equal to (i) his accrued but unpaid base salary and accrued but unused
vacation through January 4, 2023; (ii) reimbursement for any unreimbursed business expenses he properly incurred, which was subject to
and paid in accordance with our expense reimbursement policy; and (iii) such employee benefits (including equity compensation), if any,
to which Mr. Shearer may have been entitled under our employee benefit plans as of January 4, 2023.
Pursuant
to the Shearer Employment Agreement, had Mr. Shearer resigned for “good reason” or his employment had been terminated by
us without “cause,” each as defined in the Shearer Employment Agreement, Mr. Shearer would have been entitled to receive
payment equal to (i) his accrued but unpaid salary, plus (ii) an amount equal to one times his annual base salary, plus (iii) a prorated
amount equal to one times the amount of the Annual Bonus actually paid to Mr. Shearer for the previous fiscal year, plus (iv) certain
COBRA benefits. Also under the Shearer Employment Agreement, had a change in control of the Company, as defined in the Shearer Employment
Agreement, occurred and, within 12 months thereafter, Mr. Shearer resigned for “good reason” or his employment was terminated
by us without “cause,” Mr. Shearer would have been entitled to receive payment equal to (i) his accrued but unpaid salary,
plus (ii) an amount equal to one and one half times his annual base salary, plus (iii) a prorated amount equal to one and one half times
the amount of the Annual Bonus actually paid to Mr. Shearer for the previous fiscal year, plus (iv) certain COBRA benefits.
Mr.
Ramirez
On
May 7, 2021, we entered into the Ramirez Employment Agreement with Mr. Ramirez in connection with his appointment as our Chief Sales
Officer and Chief Supply Chain Officer. Pursuant to the Ramirez Employment Agreement, Mr. Ramirez was entitled to an annual base salary
of $225,000 and an annual cash bonus opportunity computed on the basis of 1% of the Company’s adjusted gross sales during the preceding
fiscal year. For Mr. Ramirez’s salary and bonus information for fiscal year 2022, see “—Summary Compensation Table.”
Mr. Ramirez was also eligible to participate in any equity compensation plan of the Company, including the 2013 Plan and the 2019 Plan,
and to receive future equity awards at the Board’s discretion.
On
May 10, 2021, pursuant to the Ramirez Employment Agreement, Mr. Ramirez was granted time-based options to purchase 858 shares of Common
Stock, which vested as to 286 options on May 10, 2022 and were to vest as to 286 options on each of May 10, 2023 and May 10, 2024 subject
to Mr. Ramirez’s continued employment. The options have an exercise price of $101.85 per
share. Due to Mr. Ramirez’s resignation as Chief Sales Officer and Chief Supply Chain Officer, Mr. Ramirez’s
286 vested options will expire pursuant to their terms on March 2, 2023, three months after Mr. Ramirez’s resignation became
effective, and the remaining unvested options were forfeited at the time his resignation became effective.
In
addition, on May 10, 2021, pursuant to the Ramirez Employment Agreement, Mr. Ramirez was granted performance-based options to purchase
4,287 shares of Common Stock, which represented the total number of performance-based options that
could be earned if the performance conditions were fully achieved, as further described below. Pursuant to the award agreement for the
performance-based options, subject to Mr. Ramirez’s continued employment, (i) 858
performance-based options were to vest, if at all, in the period from May 10, 2021 to September 30, 2021, and (ii) a maximum of 1,143
performance-based options were to vest, if at all, in each of fiscal years 2022, 2023 and 2024, in each case based upon our achievement
of a specified amount of adjusted gross sales (as defined in the Ramirez Employment Agreement) in the respective period or fiscal year,
as the case may be. In fiscal year 2022, performance-based options to acquire 858 shares of Common Stock were forfeited because
the performance conditions ($2.5 million in adjusted gross sales) were not satisfied in the applicable performance period from May 10,
2021 to September 30, 2021. Following the end of fiscal year 2022, (i) performance-based options to acquire 1,143 shares of Common Stock
were forfeited because the performance conditions ($2.5 million in adjusted gross sales) were not satisfied in fiscal year 2022, and
(ii) performance-based options to acquire 2,286 shares of Common Stock were forfeited in connection with Mr. Ramirez’s resignation.
On
October 31, 2022, Mr. Ramirez notified us of his resignation as our Chief Sales Officer and Chief Supply Chain Officer, effective as
of December 2, 2022. Mr. Ramirez was not entitled to receive any severance or other compensation in connection with his resignation.
Pursuant to the Ramirez Employment Agreement, upon his resignation, Mr. Ramirez was entitled to receive (i) his accrued but unpaid base
salary and accrued but unused vacation through December 2, 2022; (ii) reimbursement for any unreimbursed business expenses he properly
incurred, which was subject to and paid in accordance with our expense reimbursement policy; and (iii) such employee benefits (including
equity compensation), if any, to which Mr. Ramirez may have been entitled under our employee benefit plans as of December 2, 2022.
Equity
Compensation Plan Information
Our
Board has adopted the 2013 Plan and the 2019 Plan for the purposes of promoting the long-term success of the Company and the creation
of stockholder value. Our stockholders have approved the adoption of the 2013 Plan and the 2019 Plan. The 2013 Plan provides for the
grant of stock options, restricted share awards, and stock appreciation rights. The 2013 Plan expires in October 2023. The 2019 Plan
provides for the grant of stock options and restricted shares.
The
following table sets forth information concerning the 2013 Plan and the 2019 Plan as of September 30, 2022:
Plan Category | |
Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | | |
Weighted-average exercise price of outstanding options, warrants and rights (b) | | |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |
Equity compensation plans approved by security holders | |
| 116,960 | | |
$ | 165.55 | | |
| 67,711 | |
Equity compensation plans not approved by security holders | |
| — | | |
| — | | |
| — | |
Total | |
| 116,960 | | |
$ | 165.55 | | |
| 67,711 | |
The
Board believes that the compensation of our NEOs is appropriate and recommends a vote “FOR” the following advisory resolution,
which will be submitted for a stockholder vote at the Annual Meeting:
“RESOLVED,
that the stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed pursuant
to the compensation disclosure rules of the SEC, including the compensation tables, narrative discussion and related matters.”
You
may vote “for” or “against” the foregoing resolution, or you may “abstain.” This vote is not intended
to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies, and procedures
described in this proxy statement.
While
the advisory vote is non-binding, the Board and the Compensation Committee will review the results of the vote and take the concerns
of our stockholders into account in future determinations concerning our executive compensation program. The Board therefore recommends
that you indicate your support for the compensation policies and procedures for our NEOs, as outlined in the above resolution.
THE
BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE APPROVAL, ON AN
ADVISORY
BASIS, OF THE COMPENSATION OF THE NEOs.
PROPOSAL
FIVE
RATIFICATION
OF THE APPOINTMENT OF MALONEBAILEY LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING
SEPTEMBER 30, 2023
The
Board has appointed MaloneBailey LLP (“MaloneBailey”) as our independent registered certified public accounting firm for
the fiscal year ending September 30, 2023 and has further directed that the selection of MaloneBailey be submitted to a vote of stockholders
at the Annual Meeting for ratification.
As
described below, the stockholder vote is not binding on the Board. If the appointment of MaloneBailey is not ratified, the Board will
evaluate the basis for the stockholder vote when determining whether to continue the firm’s engagement, but may ultimately determine
to continue the engagement of the firm or another audit firm without re-submitting the matter to stockholders. Even if the appointment
of MaloneBailey is ratified, the Board may in its sole discretion terminate the engagement of the firm and direct the appointment of
another independent auditor at any time during the year if it determines that such an appointment would be in the best interests of our
Company and our stockholders.
Representatives
of MaloneBailey are expected to virtually attend the Annual Meeting, and will be available to respond to appropriate questions and, if
they desire, to make a statement.
Independent
Registered Certified Public Accounting Firm Fees and Services
The
following table sets forth a summary of the fees paid to MaloneBailey for professional services rendered for the fiscal years ended September
30, 2022 and 2021:
Fee Category | |
Fiscal Year 2022 | | |
Fiscal Year 2021 | |
Audit Fees(1) | |
$ | 202,684 | | |
$ | 153,500 | |
Tax Fees(2) | |
| 12,360 | | |
| — | |
Audit-Related Fees(3) | |
$ | 54,000 | | |
$ | 20,000 | |
All Other Fees(4) | |
| — | | |
| — | |
Total Fees | |
$ | 269,044 | | |
$ | 173,500 | |
(1)
Audit fees consist of fees billed for professional services rendered for the audit of our Company’s financial statements and review
of our interim financial statements included in quarterly reports and services that are normally provided by our auditors in connection
with statutory and regulatory filings or engagements.
(2)
Tax fees consist of fees billed for professional services for tax compliance, tax advice and tax planning.
(3)
Audit related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit
or review of our financial statements and are not reported under “Audit Fees”.
(4)
All Other Fees consist of the aggregate fees billed in each of the last two fiscal years for the products and services provided by our
auditors, other than the products and services included in Audit Fees, Tax Fees, and Audit-Related Fees.
Pre-Approval
Policies and Procedures
The
Audit Committee’s policy is to pre-approve all audit and other services rendered by our independent registered public accounting
firm, subject to de minimis exceptions for non-audit services set forth in the applicable rules of the SEC. In fiscal year 2022, our independent registered public accounting firm was not engaged to perform
any non-audit services, except for a minimal amount of tax services.
Report
of the Audit Committee
The
following audit committee report shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended,
or the Exchange Act, and shall not otherwise be deemed filed under these acts, except to the extent we specifically incorporate by reference
into such filings.
Our
Audit Committee is composed of “independent” directors, as determined in accordance with the Nasdaq Capital Market listing
standards and Rule 10A-3 of the Exchange Act. The Audit Committee has certain duties and powers as described in its written charter adopted
by the Board. A copy of the charter can be found on the Company’s website.
The
purpose of the Audit Committee is to assist the oversight of the Board in the integrity of the financial statements of the Company, the
Company’s compliance with legal and regulatory matters, the independent registered public accountant’s qualifications and
independence, and the performance of the Company’s independent registered public accountant. The primary responsibilities of the
Audit Committee include overseeing the Company’s accounting and financial reporting process and audits of the financial statements
of the Company on behalf of the Board.
Management
has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. The
independent registered public accountant is responsible for auditing the financial statements and expressing an opinion on the conformity
of those audited financial statements with generally accepted accounting principles.
In
this context, the Audit Committee reviewed and discussed with management and the independent auditors the audited financial statements
for the fiscal year ended September 30, 2022 (the “Audited Financial Statements”). The Audit Committee has discussed with
MaloneBailey, the Company’s independent auditors, the matters required to be discussed by applicable requirements of the Public
Company Accounting Oversight Board (“PCAOB”) and the SEC. In addition, the Audit Committee has received the written disclosures
and the letter from the independent auditors required by applicable requirements of the PCAOB regarding the independent auditors’
communications with the Audit Committee concerning independence, and has discussed with the independent auditors the independent auditors’
independence.
Based
on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board approved, that the Audited
Financial Statements be included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 for filing with the SEC.
The
report has been furnished by the Audit Committee of the Board.
|
Kevin
J. Conner, Chair |
|
J.
Chris Jones |
|
David
G. Robson |
THE
BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF
MALONEBAILEY
LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2023.
In
the event of a negative stockholder vote on the ratification of MaloneBailey as our independent registered public accounting firm, our
Audit Committee will reconsider its selection.
STOCKHOLDER
PROPOSALS AND DIRECTOR NOMINATIONS
If
any stockholder intends to present a proposal to be considered for inclusion in our proxy materials for the 2024 annual meeting of stockholders,
the proposal must comply with the requirements of Rule 14a-8 of Regulation 14A of the Exchange Act and must be received by the Company
no later than October 2, 2023, unless the date of our 2024 annual meeting is changed by more than 30 days from March 16, 2024, in which
case, the proposal must be received a reasonable time before we begin to print and mail our proxy materials. All proposals must comply
with the applicable requirements or conditions established by the SEC and the Bylaws, which requires among other things, certain information
to be provided in connection with the submission of stockholder proposals. All proposals must be directed to the Secretary of the Company
at 1350 East Arapaho Road, Suite #230, Richardson, Texas 75081.
Pursuant
to our Bylaws, if you wish to submit a proposal (including a director nomination) at the 2024 annual meeting of stockholders otherwise
than for inclusion in next year’s proxy materials, the proposal (including a director nomination) must be received not later than
December 17, 2023, nor earlier than November 17, 2023. However, if the date of our 2024 annual meeting is not held between February 15,
2024 and April 15, 2024, to be timely, notice by the stockholder must be received not later than the tenth (10th) day following the day
on which such notice of the date of the 2024 annual meeting of stockholders was mailed or first publicly announced or disclosed (in a
public filing or otherwise), whichever occurs first. You are also advised to review our Bylaws, which contain additional requirements
about advance notice of stockholder proposals and director nominations.
In
addition to satisfying the requirements under our Bylaws, to comply with the SEC’s universal proxy rules, stockholders who intend
to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information
required by Rule 14a-19 under the Exchange Act no later than January 16, 2024.
OTHER
MATTERS
The
Company knows of no other matters to be submitted at the Annual Meeting. If any other matters properly come before the Annual Meeting,
the enclosed proxy card confers discretionary authority on the persons named in the enclosed proxy card to vote as they deem appropriate
on such matters. It is the intention of the persons named in the enclosed proxy card to vote the
shares in accordance with their best judgment.
HOUSEHOLDING
In
some cases, only one copy of our proxy statement and Annual Report on Form 10-K for
the fiscal year ended September 30, 2022 is being delivered to multiple stockholders sharing an
address unless the Company has received contrary instructions from one or more of the stockholders. Upon written request, the Company
will promptly deliver a separate copy of these documents to a stockholder at a shared address to which a single copy has been delivered.
A stockholder can notify the Company at the address indicated below if the stockholder wishes to receive separate copies in the future.
In addition, stockholders sharing an address who are currently receiving multiple copies may also notify the Company at such address
if they wish to receive only a single copy. Direct your written request to NuZee, Inc., 1350 East Arapaho Road, Suite #230, Richardson,
Texas 75081; Attention: Investor Relations or by telephone at 760-295-2408.
AVAILABLE
INFORMATION
The
Company files Annual Reports on Form 10-K with the SEC. A copy of the Annual Report on Form 10-K for the fiscal year ended September
30, 2022 (except for certain exhibits thereto), including our audited financial statements and any financial statement schedules, may
be obtained, free of charge, upon written request by any stockholder to: NuZee, Inc., 1350 East Arapaho Road, Suite #230, Richardson,
Texas 75081; Attention: Investor Relations. Copies of all exhibits to the Annual Report on Form 10-K are available upon a similar request,
subject to reimbursing the Company for its expenses in supplying any exhibit.
APPENDIX
A
The
Articles of Incorporation of NuZee, Inc. are hereby amended by inserting the following paragraphs:
Section
1. Capital Stock
The
aggregate number of shares that the Corporation will have authority to issue is Two Hundred Million (200,000,000) of which One Hundred
Million (100,000,000) shares will be common stock, with a par value of $0.00001 per share, and One Hundred Million (100,000,000) shares
will be preferred stock, with a par value of $0.00001 per share.
The
Preferred Stock may be divided into and issued in series. The Board of Directors of the Corporation is authorized to divide the authorized
shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the
shares of all other series and classes. The Board of Directors of the Corporation is authorized, within any limitations prescribed by
law and this Article, to fix and determine the designations, rights, qualifications, preferences, limitations and terms of the shares
of any series of Preferred Stock including but not limited to the following:
|
a) |
The
rate of dividend, the time of payment of dividends, whether dividends are cumulative, and the date from which any dividends shall
accrue; |
|
|
|
|
b) |
Whether
shares may be redeemed, and, if so, the redemption price and the terms and conditions of redemption; |
|
|
|
|
c) |
The
amount payable upon shares in the event of voluntary or involuntary liquidation; |
|
|
|
|
d) |
Sinking
fund or other provisions, if any, for the redemption or purchase of shares; |
|
|
|
|
e) |
The
terms and conditions on which shares may be converted, if the shares of any series are issued with the privilege of conversion; |
|
|
|
|
f) |
Voting
powers, if any, provided that if any of the Preferred Stock or series thereof shall have voting rights, such Preferred Stock or series
shall vote only on a share for share basis with the Common Stock on any matter, including but not limited to the election of directors,
for which such Preferred Stock or series has such rights; and, |
|
|
|
|
g) |
Subject
to the foregoing, such other terms, qualifications, privileges, limitations, options, restrictions, and special or relative rights
and preferences, if any, of shares or such series as the Board of Directors of the Corporation may, at the time so acting, lawfully
fix and determine under the laws of the State of Nevada. |
The
Corporation shall not declare, pay or set apart for payment any dividend or other distribution (unless payable solely in shares of Common
Stock or other class of stock junior to the Preferred Stock as to dividends or upon liquidation) in respect of Common Stock, or other
class of stock junior the Preferred Stock, nor shall it redeem, purchase or otherwise acquire for consideration shares of any of the
foregoing, unless dividends, if any, payable to holders of Preferred Stock for the current period (and in the case of cumulative dividends,
if any, payable to holder of Preferred Stock for the current period and in the case of cumulative dividends, if any, for all past periods)
have been paid, are being paid or have been set aside for payments, in accordance with the terms of the Preferred Stock, as fixed by
the Board of Directors.
In
the event of the liquidation of the Corporation, holders of Preferred Stock shall be entitled to received, before any payment or distribution
on the Common Stock or any other class of stock junior to the Preferred Stock upon liquidation, a distribution per share in the amount
of the liquidation preference, if any, fixed or determined in accordance with the terms of such Preferred Stock plus, if so provided
in such terms, an amount per share equal to accumulated and unpaid dividends in respect of such Preferred Stock (whether or not earned
or declared) to the date of such distribution. Neither the sale, lease or exchange of all or substantially all of the property and assets
of the Corporation, nor any consolidation or merger of the Corporation, shall be deemed to be a liquidation for the purposes of this
Article.
Section
2. Acquisition of Controlling Interest.
The
Corporation elects not to be governed by NRS 78.378 to 78.3793, inclusive.
Section
3. Combinations with Interest Stockholders.
The
Corporation elects not to be governed by NRS 78.411 to 78.444, inclusive.
Section
4. Liability.
To
the fullest extent permitted by NRS 78, a director or officer of the Corporation will not be personally liable to the Corporation or
its stockholders for damages for breach of fiduciary duty as a director or officer, provided that this article will not eliminate or
limit the liability of a director or officer for:
|
a) |
Acts
or omissions which involve intentional misconduct, fraud or a knowing violation of law; or |
|
b) |
The
payment of distributions in violation of NRS 78.300, as amended. |
Any
amendment or repeal of this Section 4 will not adversely affect any right or protection of a director of the Corporation existing immediately
prior to such amendment or repeal.
Section
5. Indemnification
|
a) |
Right
to Indemnification. The Corporation will indemnify to the fullest extent permitted by law any person (the “Indemnitee”)
made or threatened to be made a party to any threatened, pending or completed action or proceeding, whether civil, criminal, administrative
or investigative (whether or not by or in the right of the Corporation) by reason of the fact that he or she is or was a director
of the Corporation or is or was serving as a director, officer, employee or agent of another entity at the request of the Corporation
or any predecessor of the Corporation against judgments, fines, penalties, excise taxes, amounts paid in settlement and costs, charges
and expenses (including attorneys’ fees and disbursements) that he or she incurs in connection with such action or proceeding. |
|
|
|
|
b) |
Inurement.
The right to indemnification will inure whether or not the claim asserted is based on matters that predate the adoption of this Section
5, will continue as to an Indemnitee who has ceased to hold the position by virtue of which he or she was entitled to indemnification,
and will inure to the benefit of his or her heirs and personal representatives. |
|
|
|
|
c) |
Non-exclusivity
of Rights. The right to indemnification and to the advancement of expenses conferred by this Section 5 are not exclusive of any other
rights that an Indemnitee may have or acquire under any statue, bylaw, agreement, vote of stockholders or disinterested directors,
the Articles of Incorporation or otherwise. |
|
|
|
|
d) |
Other
Sources. The Corporation’s obligation, if any, to indemnify or to advance expenses to any Indemnitee who was or is serving
at the request as a director, officer employee or agent of another corporation, partnership, joint venture, trust, enterprise or
other entity will be reduced by any amount such Indemnitee may collect as indemnification or advancement or expenses from such other
entity. |
|
|
|
|
e) |
Advancement
of Expenses. The Corporation will, from time to time, reimburse or advance to any Indemnitee the funds necessary for payment of expenses,
including attorneys’ fees and disbursements, incurred in connection with defending any proceeding from which he or she is indemnified
by the Corporation, in advance of the final disposition of such proceeding; provided that the Corporation has received the undertaking
of such director or officer to repay any such amount so advanced if it is ultimately determined by a final and unappealable judicial
decision that the director or officer is not entitled to be indemnified for such expenses. |
APPENDIX
B
NUZEE,
INC.
2023
Equity Incentive Plan
NuZee,
Inc.
2023
Equity Incentive Plan
Adopted
by the Board of Directors on January 20, 2023, Subject to Stockholder Approval
Effective
upon Approval by the Stockholders of the Company on [●], 2023
Table
of Contents
|
Page |
|
|
Article
1. INTRODUCTION |
3 |
|
|
Article
2. ADMINISTRATION. |
3 |
2.1 |
COMMITTEE
COMPOSITION |
3 |
2.2 |
COMMITTEE
RESPONSIBILITIES |
3 |
2.3 |
INDEMNIFICATION |
3 |
|
|
|
Article
3. SHARES AVAILABLE FOR GRANTS. |
4 |
3.1 |
BASIC
LIMITATION |
4 |
3.2 |
ADDITIONAL
SHARES |
4 |
3.3 |
LIMIT
ON COMPENSATION PAID TO OUTSIDE DIRECTORS |
4 |
3.4 |
SUBSTITUTE
AWARDS |
4 |
|
|
|
Article
4. ELIGIBILITY. |
4 |
4.1 |
NONSTATUTORY
STOCK OPTIONS AND RESTRICTED SHARES |
4 |
4.2 |
INCENTIVE
STOCK OPTIONS |
4 |
|
|
|
Article
5. OPTIONS. |
5 |
5.1 |
STOCK
OPTION AGREEMENT |
5 |
5.2 |
NUMBER
OF SHARES |
5 |
5.3 |
EXERCISE
PRICE |
5 |
5.4 |
EXERCISABILITY
AND TERM |
5 |
5.5 |
LIMITATIONS |
5 |
5.6 |
FORM
OF CONSIDERATION |
5 |
5.7 |
EXERCISE
OF OPTION. |
6 |
5.8 |
EARLY
EXERCISE OF OPTIONS |
7 |
|
|
|
Article
6. RESTRICTED SHARES. |
7 |
6.1 |
TIME,
AMOUNT AND FORM OF AWARDS |
7 |
6.2 |
STOCK
AWARD AGREEMENT |
7 |
6.3 |
VOTING
AND DIVIDEND RIGHTS |
7 |
6.4 |
TRANSFERABILITY |
8 |
6.5 |
OTHER
RESTRICTIONS |
8 |
6.6 |
REMOVAL
OF RESTRICTIONS |
8 |
|
|
|
Article
7. ADJUSTMENTS; DISSOLUTION OR LIQUIDATION; MERGER OR CHANGE IN CONTROL |
8 |
7.1 |
ADJUSTMENTS |
8 |
7.2 |
DISSOLUTION
OR LIQUIDATION |
8 |
7.3 |
CERTAIN
TRANSACTIONS/ CHANGE IN CONTROL |
8 |
7.4 |
OUTSIDE
DIRECTOR AWARDS |
9 |
7.5 |
MODIFICATION
OR ASSUMPTION OF OPTIONS |
9 |
Article
8. LEAVE OF ABSENCE/ TRANSFERABILITY |
10 |
8.1 |
LEAVE
OF ABSENCE/TRANSFER BETWEEN LOCATIONS |
10 |
8.2 |
TRANSFERABILITY
OF AWARDS |
10 |
|
|
|
Article
9. LIMITATION ON RIGHTS. |
10 |
9.1 |
RETENTION
RIGHTS |
10 |
9.2 |
REGULATORY
REQUIREMENTS |
10 |
|
|
|
Article
10. TAX. |
10 |
10.1 |
GENERAL |
10 |
10.2 |
COMPLIANCE
WITH SECTION 409A |
11 |
|
|
|
Article
11. AMENDMENT/ TERMINATION/ TERM. |
11 |
11.1 |
TERM
OF THE PLAN |
11 |
11.2 |
AMENDMENT
AND TERMINATION |
11 |
11.3 |
STOCKHOLDER
APPROVAL |
11 |
11.4 |
EFFECT
OF AMENDMENT OR TERMINATION |
11 |
|
|
|
Article
12. CONDITIONS UPON ISSUANCE OF SHARES. |
11 |
12.1 |
LEGAL
COMPLIANCE |
11 |
12.2 |
INVESTMENT
REPRESENTATIONS |
11 |
12.3 |
INABILITY
TO OBTAIN AUTHORITY |
12 |
12.4 |
STOCKHOLDER
APPROVAL |
12 |
12.5 |
ENTIRE
AGREEMENT; GOVERNING LAW |
12 |
12.6 |
SUCCESSORS
AND ASSIGNS |
12 |
12.7 |
CLAWBACK |
12 |
|
|
|
Article
13. DEFINITIONS. |
12 |
NUZEE,
INC.
2023
Equity Incentive Plan
Adopted
by the Board of Directors on January 20, 2023, Subject to Stockholder Approval
Effective
upon Approval by the Stockholders of the Company on [●], 2023
Article
1.
INTRODUCTION
The
purpose of the Plan is to promote the long-term success of the Company and the creation of stockholder value by (a) encouraging Employees,
Directors and Consultants to focus on critical long-range objectives, (b) encouraging the attraction and retention of Employees, Directors
and Consultants with exceptional qualifications and (c) linking Employees, Directors and Consultants directly to stockholder interests
through increased stock ownership. The Plan seeks to achieve this purpose by providing for Awards in the form of Restricted Shares or
Options (which may constitute incentive stock options or nonstatutory stock options).
Article
2.
ADMINISTRATION.
2.1 |
COMMITTEE
COMPOSITION. The Plan shall be administered by the Committee. The Committee shall consist exclusively of two or more Directors
of the Company, who shall be appointed by the Board. In addition, the composition of the Committee shall satisfy such requirements
as the Securities and Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under
Rule 16b-3 (or its successor) under the Exchange Act and any other Applicable Law. In the event that an Award is made to an that
is not exempt from Rule 16b-3, the Award is not void unless otherwise provided in the Award Agreement. |
The
Board may also appoint one or more separate committees of the Board, each composed of one or more Directors of the Company who need not
satisfy the foregoing requirements, who may administer the Plan with respect to Employees and Consultants who are not considered officers
or Directors of the Company under Section 16 of the Exchange Act, may grant Awards under the Plan to such Employees and Consultants and
may determine all terms of such Awards.
2.2 |
COMMITTEE
RESPONSIBILITIES. The Committee shall (a) select the Service Providers who are to receive Awards under the Plan, (b) determine
the type, number, vesting requirements and other features and conditions of such Awards, (c) interpret the Plan and (d) make all
other decisions relating to the operation of the Plan. The Committee may adopt such rules or guidelines as it deems appropriate to
implement the Plan. The Committee may amend or modify any outstanding Awards in any manner to the extent the Committee would have
had the authority under the Plan initially to make such Awards as so amended or modified. The Committee’s determinations under
the Plan shall be final and binding on all persons and will be given the maximum deference permitted under Applicable Law. |
2.3 |
INDEMNIFICATION.
In addition to such other rights of indemnification as they may have as Directors or members of the Committee, and to the extent
allowed by Applicable Laws, the Committee shall be indemnified by the Company against the reasonable expenses, including attorney’s
fees, actually incurred in connection with any action, suit or proceeding or in connection with any appeal therein, to which the
Committee may be party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted
under the Plan, and against all amounts paid by the Committee in settlement thereof (provided, however, that the settlement has been
approved by the Company, which approval shall not be unreasonably withheld) or paid by the Committee in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding
that such Committee did not act in good faith and in a manner which such person reasonably believed to be in the best interests of
the Company, or in the case of a criminal proceeding, had no reason to believe that the conduct complained of was unlawful; provided,
however, that within 60 days after institution of any such action, suit or proceeding, such Committee shall, in writing, offer the
Company the opportunity at its own expense to handle and defend such action, suit or proceeding. |
Article
3.
SHARES AVAILABLE FOR GRANTS.
3.1 |
BASIC
LIMITATION. Shares issued pursuant to the Plan may be authorized but unissued shares or treasury shares, or shares reacquired
by the Company. The number of shares stated in this Section 3.1 as available for the grant of Awards is subject to adjustment in
accordance with Article 7. The aggregate number of Shares available for Awards under the Plan is One Hundred Three Thousand (103,000).
The maximum number of Shares that may be issued upon the exercise of ISOs will equal the aggregate Share number stated above, plus,
to the extent allowable under Code Section 422 and the Treasury Regulations promulgated thereunder, any Shares that become available
for issuance under the Plan pursuant to Section 3.2. |
3.2 |
ADDITIONAL
SHARES. Any shares of Common Stock subject to an Award that is canceled, forfeited or expires prior to exercise or realization,
either in full or in part, shall again become available for issuance under the Plan as ISOs or any type of Award. Notwithstanding
anything to the contrary contained herein: shares subject to an Award under the Plan shall not again be made available for issuance
or delivery under the Plan if such shares are (a) shares tendered in payment of an Option, or (b) shares delivered or withheld by
the Company to satisfy any tax withholding obligation. The Company, during the term of this Plan, will at all times reserve and keep
available such number of Shares as will be sufficient to satisfy the requirements of the Plan. |
3.3 |
LIMIT
ON COMPENSATION PAID TO OUTSIDE DIRECTORS. The total compensation paid to a single Outside Director in any calendar year,
including the cash compensation and the cash value of all equity Awards granted to the Outside Director in such calendar year, shall
not exceed $300,000. Such annual limit shall be measured based on the value of an Award as of the date the Award is granted (not
the date of payment). Accordingly, the annual limit shall not include the value of an Award in the calendar year when it is paid
or vests if such year is different from the year the Award is granted. For purposes of this Section 3.3, Outside Director compensation
in any calendar year shall include amounts or grants that would have been paid or made, as applicable, to the Outside Director in
the calendar year absent the Outside Director’s election to defer such compensation to a subsequent year. |
3.4 |
SUBSTITUTE
AWARDS. Awards may, in the sole discretion of the Committee, be granted under the Plan in assumption of, or in substitution
for, outstanding awards previously granted by an entity acquired by the Company or with which the Company combines (“Substitute
Awards”). Substitute Awards shall not be counted against the aggregate number of Shares available for Awards as set
forth in Section 3.1; provided, that, Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding
options intended to qualify as ISOs shall be counted against the limits on the maximum number of Share that may be issued upon the
exercise of ISOs as set forth in Section 3.1. Subject to applicable stock exchange requirements, available shares under a shareholder-approved
plan of an entity directly or indirectly acquired by the Company or with which the Company combines (as appropriately adjusted to
reflect such acquisition or transaction) may be used for Awards under the Plan and shall not count toward the aggregate number of
Shares available for Awards as set forth in Section 3.1. |
Article
4.
ELIGIBILITY.
4.1 |
NONSTATUTORY
STOCK OPTIONS AND RESTRICTED SHARES. Service Providers shall be eligible for the grant of Restricted Shares. Only Service
Providers of the Company or a Subsidiary shall be eligible for the grant of NQOs. |
4.2 |
INCENTIVE
STOCK OPTIONS. Only Employees who are common-law employees of the Company, a Parent or a Subsidiary shall be eligible for
the grant of ISOs. |
Article
5.
OPTIONS.
5.1 |
STOCK
OPTION AGREEMENT. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee
and the Company. Such Option shall be subject to all applicable terms of the Plan and may be subject to any other terms that are
not inconsistent with the Plan. The Stock Option Agreement shall specify whether the Option is an ISO or an NQO. The provisions of
the various Stock Option Agreements entered into under the Plan need not be identical. |
5.2 |
NUMBER
OF SHARES. Each Stock Option Agreement shall specify the number of Shares subject to the Option and shall provide for the
adjustment of such number in accordance with Article 7. |
5.3 |
EXERCISE
PRICE. Each Stock Option Agreement shall specify the Exercise Price; provided that, other than in connection with Substitute
Awards, the Exercise Price shall in no event be less than 100% of the Fair Market Value of a Share on the date of grant. In the case
of an ISO granted to a Participant who, at the time the ISO is granted, owns stock representing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the Exercise Price shall be at least
110% of the Fair Market Value of a Shares on the ISO’s date of grant. Notwithstanding the foregoing, an ISO may be granted
with an Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code and a Nonqualified Stock Option
may be granted with an Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner satisfying the provisions of Section 409A of the Code. . |
5.4 |
EXERCISABILITY
AND TERM. Each Stock Option Agreement shall specify the date when the Option is to become exercisable. The term of each Option
will be stated in the Stock Option Agreement; provided, however, that the term will be no more than ten (10) years from the date
of grant thereof. In the case of an ISO granted to a Participant who, at the time the ISO is granted, owns stock representing more
than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the ISO will be five (5) years from the date of grant or such shorter term as may be provided in the Stock Option Agreement. |
5.5 |
LIMITATIONS.
Each Option will be designated in the Stock Option Agreement as either an ISO or a NQO. Notwithstanding such designation, however,
to the extent that the aggregate Fair Market Value of the Shares with respect to which ISOs are exercisable for the first time by
the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand
dollars ($100,000), such Options will be treated as NQOs to the extent such treatment is not in violation of Section 409A. For purposes
of this Section 5.5, ISOs will be taken into account in the order in which they were granted, the Fair Market Value of the Shares
will be determined as of the time the Option with respect to such Shares is granted, and calculation will be performed in accordance
with Code Section 422 and Treasury Regulations promulgated thereunder. |
5.6 |
FORM
OF CONSIDERATION. The Committee will determine the acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an ISO, the Committee will determine the acceptable form of consideration at the time of grant.
Such consideration may consist entirely of: (1) cash; (2) check; (3) other Shares, provided that such Shares have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option will be exercised and
provided, further that accepting such Shares will not result in any adverse accounting consequences to the Company, as the Committee
determines in its sole discretion; (4) consideration received by the Company under cashless exercise program (whether through a broker
or otherwise) implemented by the Company in connection with the Plan; (5) by net exercise (only for NQOs); (6) such other consideration
and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or (7) any combination of the foregoing
methods of payment. In making its determination as to the type of consideration to accept, the Committee will consider if acceptance
of such consideration may be reasonably expected to benefit the Company, and will only permit a form which would not. |
|
(a) |
Procedure
for Exercise; Rights as a Stockholder. Any Option granted hereunder will be exercisable according to the terms of the Plan and
at such times and under such conditions as determined by the Committee and set forth in the Stock Option Agreement. An Option may
not be exercised for a fraction of a Share. |
An
Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the Committee may specify from
time to time) from the person entitled to exercise the Option; and (ii) full payment for the Shares with respect to which the Option
is exercised (together with applicable tax withholding). Full payment may consist of any consideration and method of payment authorized
by the Committee and permitted by the Stock Option Agreement and the Plan, but will include the following:
|
(1) |
tendering
a cash payment; |
|
(2) |
with
respect to NQOs only (and not ISOs), authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise
issuable to the Participant as a result of the exercise of the NQO; |
|
(3) |
by
any combination of the above-listed forms of payment. |
Shares
issued upon exercise of an Option will be issued in the name of the Participant or, if requested by the Participant, in the name of the
Participant and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will
exist with respect to the Shares subject to an Option, notwithstanding the exercise of the Option. No adjustment will be made for a dividend
or other right for which the record date is prior to the date the Shares are issued, except as provided in Article 7 of the Plan.
Exercising
an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
|
(b) |
Termination
of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s
termination as the result of the Participant’s death or Disability or as a result of termination for Cause, the Participant
may exercise his or her Option within such period of time as is specified in the Stock Option Agreement (but in no event later than
the expiration of the term of such Option as set forth in the Stock Option Agreement) to the extent that the Option is vested on
the date of termination. In the absence of a specified time in the Stock Option Agreement, the Option shall remain exercisable for
three (3) months following the Participant’s termination (but in no event later than the expiration of the term of such Option
as set forth in the Stock Option Agreement). Unless otherwise provided by the Committee, if on the date of termination the Participant
is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If
after termination the Participant does not exercise his or her Option within the time specified by the Committee, the Option will
terminate, and the Shares covered by such Option will revert to the Plan. |
|
(c) |
Termination
for Cause. Except as explicitly provided otherwise in a Participant’s Stock Option Agreement, if a Participant ceases
to be a Service Provider as a result of termination for Cause, the Option will terminate immediately upon such Participant’s
termination as a Service Provider, and the Participant will be prohibited from exercising his or her Option from and after the date
of such termination as a Service Provider. For the avoidance of doubt, notwithstanding any vesting schedule set forth in the
Participant’s Stock Option Agreement, upon a Participant’s termination for Cause, all Options held by such Participant,
vested and unvested, immediately will revert to the Plan. |
|
(d) |
Disability
of Participant. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant
may exercise his or her Option within such period of time as is specified in the Stock Option Agreement (but in no event later than
the expiration of the term of such Option as set forth in the Stock Option Agreement) to the extent the Option is vested on the date
of termination. In the absence of a specified time in the Stock Option Agreement, the Option shall remain exercisable for twelve
(12) months following the Participant’s termination (but in no event later than the expiration of the term of such Option as
set forth in the Stock Option Agreement). Unless otherwise provided by the Committee, if on the date of termination the Participant
is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If
after termination the Participant does not exercise his or her Option within the time specified herein, the Option will terminate,
and the Shares covered by such Option will revert to the Plan. |
|
(e) |
Death
of Participant. If a Participant dies while a Service Provider, the Option may be exercised within such period of time as is
specified in the Stock Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the
Stock Option Agreement) to the extent that the Option is vested on the date of death, by the Participant’s designated beneficiary,
provided such beneficiary has been designated prior to the Participant’s death in a form acceptable to the Committee. If no
such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the
Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance
with the laws of descent and distribution. In the absence of a specified time in the Stock Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Participant’s death (but in no event later than the expiration of the term
of such Option as set forth in the Stock Option Agreement). Unless otherwise provided by the Committee, if at the time of death Participant
is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option immediately will revert to
the Plan. If the Option is not so exercised within the time specified herein, the Option will terminate, and the Shares covered by
such Option will revert to the Plan. |
5.8 |
EARLY
EXERCISE OF OPTIONS. An Option may, but need not, include a provision whereby the Participant may elect at any time before
the Participant ceases to be a Service Provider, to exercise the Option as to any part or all of the Shares subject to the Option
prior to the full vesting of the Option. Subject to any repurchase limitation, any unvested Shares so purchased may be subject
to a repurchase right in favor of the Company or to any other restriction the Committee determines to be appropriate. |
Article
6.
RESTRICTED SHARES.
6.1 |
TIME,
AMOUNT AND FORM OF AWARDS. Awards under the Plan may be granted in the form of Restricted Shares to Service Providers in
such amounts as the Committee, in its sole discretion, will determine. |
6.2 |
STOCK
AWARD AGREEMENT. Each Award of Restricted Shares will be evidenced by a Stock Award Agreement that will specify the Period
of Restriction, the number of Shares granted, and such other terms and conditions as the Committee, in its sole discretion, will
determine, including, without limitation, any price to be paid by the Participant for such Restricted Shares. Unless the Committee
determines otherwise, the Company as escrow agent, will hold the Restricted Shares until the restrictions on such Shares have lapsed. |
6.3 |
VOTING
AND DIVIDEND RIGHTS. Unless otherwise provided in the Stock Award Agreement, during the Period of Restriction, the holder
of Restricted Shares awarded under the Plan shall have full voting, dividend and other rights provided with respect to the Shares.
Without limitation, a Stock Award Agreement may require that the holders of Restricted Shares invest any cash dividends received
in additional Restricted Shares (in which case such additional Restricted Shares shall be subject to the same conditions and restrictions
as the Award with respect to which the dividends were paid), or may defer payment of any dividends until vesting of the Award. |
6.4 |
TRANSFERABILITY.
Except as provided in this Article 6 or as the Committee determines, Restricted Shares may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated until the end of the applicable Period of Restriction. |
6.5 |
OTHER
RESTRICTIONS. The Committee, in its sole discretion, may impose such other restrictions on Restricted Shares as it may deem
advisable or appropriate; provided however that restrictions and conditions applicable to Restricted Shares must be structured in
a way that would cause such Restricted Shares to be exempt from Section 409A by virtue of such Restricted Shares being transferred
under Section 83 of the Code. |
6.6 |
REMOVAL
OF RESTRICTIONS. Except as otherwise provided in this Article 6, Shares of Common Stock covered by each Restricted Share
grant made under the Plan will be released from escrow as soon as practicable after the last day of the Period of Restriction or
at such other time as the Committee may determine. The Committee, in its discretion, may accelerate the time at which any restrictions
will lapse or be removed. |
Article
7.
ADJUSTMENTS; DISSOLUTION OR LIQUIDATION; MERGER OR CHANGE IN CONTROL
7.1 |
ADJUSTMENTS.
In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting
the Shares occurs, the Committee, in order to prevent diminution or enlargement of the benefits or potential benefits intended to
be made available under the Plan, will adjust the number and class of shares that may be delivered under the Plan and/or the number,
class, and price of shares covered by each outstanding Award and the numerical Share limits in Article 3 of the Plan. It is
intended that, if possible and unless the Committee specifically determines that such adjustment is in the best interests of the
Company or its Subsidiaries or Parent, any adjustments contemplated be made in a manner that satisfies applicable legal, tax (including,
without limitation and as applicable in the circumstances, Code Sections 424 and 409A) and accounting (so as to not trigger any charge
to earnings with respect to such adjustment) requirements. |
7.2 |
DISSOLUTION
OR LIQUIDATION. In the event of the proposed dissolution or liquidation of the Company, the Committee will notify each Participant
as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised,
an Award will terminate immediately prior to the consummation of such proposed action. |
7.3 |
CERTAIN
TRANSACTIONS/ CHANGE IN CONTROL. In the event of a merger, consolidation or similar transaction directly or indirectly involving
the Company, each outstanding Award will be treated as the Committee determines (subject to the provisions of the following paragraph)
whether with or without a Participant’s consent, including, without limitation, that (i) such Award will be assumed, or
a substantially equivalent Award will be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) with appropriate
adjustments as to the number and kind of shares and prices as set forth in Section 7.1; (ii) upon written notice to the applicable
Participant, such Award will terminate upon or immediately prior to the consummation of such transaction; (iii) (1) such Award
will terminate in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon
the exercise of such Award or realization of the applicable Participant’s rights as of the date of the occurrence of such transaction
(and, for the avoidance of doubt, if as of the date of the occurrence of such transaction the Committee determines in good faith
that no amount would have been attained upon the exercise of such Award or realization of the applicable Participant’s rights
thereunder, then such Award may be terminated by the Company without payment), or (2) such Awards will be replaced with other
rights or property selected by the Committee in its sole discretion; or (iv) any combination of the foregoing. In taking any
of the actions permitted under this Section 7.3, the Committee will not be obligated to treat all Awards, all Awards held by
a Participant, all Awards of the same type, or all portions of the same Award, similarly. |
Notwithstanding
the generality of the foregoing, in the event of a merger, consolidation or similar transaction directly or indirectly involving the
Company that results in a Change in Control and in which the acquiring or succeeding corporation does not assume or substitute for the
Award (or portion of the Award), the Participant will fully vest in and have the right to exercise all of his or her outstanding Options
(or portion thereof) that are not assumed or substituted for, including Shares as to which such Awards would not otherwise be vested
or exercisable, all restrictions on Restricted Shares (or portions thereof) not assumed or substituted for will lapse, and, with respect
to Awards with performance-based vesting (or portions thereof) not assumed or substituted for, all performance goals or other vesting
criteria will be deemed achieved at one hundred percent (100%) of target levels and all other terms and conditions met, in each case,
unless specifically provided otherwise under the applicable Award Agreement or other written agreement between the Participant and the
Company or any of its Parent or Subsidiaries, as applicable. In addition, if an Option (or portion thereof) is not assumed or substituted
for, the Committee will notify the Participant in writing or electronically that the Option (or its applicable portion) will be exercisable
for a period of time determined by the Committee in its sole discretion, and the Option (or its applicable portion) will terminate upon
the expiration of such period.
Notwithstanding
anything in this Section 7.3 to the contrary, and unless otherwise provided for in an Award Agreement or other written agreement
between the Participant and the Company or any of its Parent or Subsidiaries, as applicable, an Award that vests, is earned or paid-out upon
the satisfaction of one or more performance goals will not be considered assumed if the Company or its acquirer or successor modifies
any of such performance goals without the Participant’s consent; provided, however, a modification to such performance goals only
to reflect the acquiring or succeeding corporation’s corporate structure following the applicable transaction will not be deemed
to invalidate an otherwise valid Award assumption.
Notwithstanding
anything in this Section 7.3 to the contrary, if a payment under an Award Agreement is subject to Section 409A and if the
change in control definition contained in the Award Agreement or other agreement related to the Award does not comply with the
definition of “change in control” for purposes of a distribution under Section 409A, then any payment of an amount
that is otherwise accelerated under this Section will be delayed until the earliest time that such payment would be permissible
under Section 409A without triggering any penalties applicable under Section 409A.
7.4 |
OUTSIDE
DIRECTOR AWARDS. With respect to Awards granted to an Outside Director, in the event of a Change in Control in which such
Awards are assumed or substituted for, if on the date of or following such assumption or substitution the Participant’s status
as a Director or a director of the successor corporation, as applicable, is terminated other than upon a voluntary resignation by
the Participant (unless such resignation is at the request of the acquirer), then the Participant will fully vest in and have the
right to exercise Options as to all of the Shares underlying such Award, including those Shares which would not otherwise be vested
or exercisable, all restrictions on Restricted Stock will lapse, and, with respect to Awards with performance-based vesting, unless
specifically provided otherwise under the applicable Award Agreement, a Company policy applicable to the Participant, or other written
agreement between the Participant and the Company, all performance goals or other vesting criteria will be deemed achieved at
one hundred percent (100%) of target levels and all other terms and conditions met. |
7.5 |
MODIFICATION
OR ASSUMPTION OF OPTIONS. The Committee may modify, extend or assume outstanding options or may accept the cancellation of
outstanding options (whether granted by the Company or by another issuer) in return for the grant of new options for the same or
a different number of shares and at the same or a different exercise price. The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, alter or impair his or her rights or obligations under such Option (except that
the Committee has the authority to amend any outstanding Option without the Optionee’s consent if the Committee deems it necessary
or advisable to comply with Section 409A). In addition, to the extent the Committee’s modification of the purchase price or
the exercise price of any outstanding Award effects a repricing, shareholder approval shall be required before the repricing is effective. |
Article
8.
LEAVE OF ABSENCE/ TRANSFERABILITY
8.1 |
LEAVE
OF ABSENCE/TRANSFER BETWEEN LOCATIONS. Unless the Committee provides otherwise and except as required by Applicable Laws,
vesting of Awards granted hereunder will be suspended during any unpaid leave of absence. For purposes of ISOs, no such leave may
exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment
upon expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months following the first
(1st) day of such leave any ISO held by the Participant will cease to be treated as an ISO and will be treated for tax
purposes as a NQO. |
8.2 |
TRANSFERABILITY
OF AWARDS. Unless determined otherwise by the Committee, an Award may not be sold, pledged, assigned, hypothecated, transferred,
or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime
of the Participant, only by the Participant. If the Committee makes an Award transferable, such Award will not be transferable other
than for no consideration, and will contain such additional terms and conditions as the Committee deems appropriate. |
Article
9.
LIMITATION ON RIGHTS.
9.1 |
RETENTION
RIGHTS. Neither the Plan nor any Award granted under the Plan shall be deemed to give any individual a right to remain a
Service Provider. The Company and its Parents and Subsidiaries reserve the right to terminate the service of any Service Provider
at any time, with or without Cause, subject to Applicable Laws, the Company’s articles of incorporation and bylaws and a written
employment agreement (if any). |
9.2 |
REGULATORY
REQUIREMENTS. Any other provision of the Plan notwithstanding, the obligation of the Company to issue Shares under the Plan
shall be subject to all Applicable Laws, rules and regulations and such approval by any regulatory body as may be required. The Company
reserves the right to restrict, in whole or in part, the delivery of Shares pursuant to any Award prior to the satisfaction of all
legal requirements relating to the issuance of such Shares, to their registration, qualification or listing or to an exemption from
registration, qualification or listing. |
Article
10.
TAX.
10.1 |
GENERAL.
To the extent provided by the terms of an Award Agreement and subject to the discretion of the Committee, the Participant may satisfy
any federal, state, local, foreign or other taxes (including the Participant’s FICA obligation) tax withholding obligation
relating to the exercise or acquisition of Common Stock under an Award by any of the following means (in addition to the Company’s
right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (a) tendering
a cash payment; (b) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable
to the Participant as a result of the exercise or acquisition of Common Stock under the Award, provided, however, that no shares
of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (c) delivering to
the Company previously owned and unencumbered shares of Common Stock of the Company. The Company shall not be required to issue any
Shares or make any cash payment under the Plan until such obligations are satisfied. The amount of the withholding requirement will
be deemed to include any amount which the Committee agrees may be withheld at the time the election is made, not to exceed the amount
determined by using the maximum federal, state or local marginal income tax rates applicable to the Participant with respect to the
Award on the date that the amount of tax to be withheld is to be determined. The Fair Market Value of the Shares to be withheld or
delivered will be determined as of the date that the taxes are required to be withheld. |
10.2 |
COMPLIANCE
WITH SECTION 409A. All Awards granted hereunder are intended to be exempt from or comply with the requirements of Section
409A. Any ambiguities in this Plan or any Award granted hereunder will be interpreted to so comply with or be exempt from Section
409A, as appropriate. The terms of the Plan and any Award granted under the Plan shall be interpreted, operated and administered
in a manner consistent with the foregoing intention. Notwithstanding any other provision in the Plan or an Award Agreement, the Committee,
to the extent it unilaterally deems necessary or advisable in its sole discretion, reserves the right, but shall not be required,
to amend or modify the Plan and any Award granted under the Plan so that the Award qualifies for exemption from or complies with
Section 409A; provided, however, that the Company makes no representation that the Awards granted under the Plan shall be exempt
from or comply with Section 409A of the Code. Any amounts payable under the Plan shall be excludible from the requirements of Section
409A, either as involuntary separation pay or as short-term deferral amounts, to the maximum possible extent. In no event will the
Company (or any Parent or Subsidiary of the Company, as applicable) have any liability for or reimburse a Participant for any taxes
imposed or other costs incurred under Section 409A. |
Whenever
in the provision of payment or benefit under the Plan is conditioned on the Service Provider’s execution and non-revocation of
a waiver and release of claims, such waiver and release must be executed and not revoked, and all revocation periods must have expired,
on or prior to the stated payment date; otherwise, the payment or benefit is forfeited. In no event may a Service Provider, directly
or indirectly, designate the calendar year of a payment.
Notwithstanding
anything in the Plan to the contrary, with respect to amounts payable pursuant to an Award which is subject to Section 409A, in the event
that a Participant is a “specified employee” as defined in Section 409A, any amount that is payable in connection with the
Participant’s separation from service shall not be paid prior to the date which is six months after the date the Participant separates
from service (or, if earlier, the date the Participant dies). A Participant who is subject to the restriction described in the previous
sentence shall be paid on the first day of the seventh month after the Participant’s separation from service an amount equal to
the benefit that the Participant would have received during such six-month period absent the restriction.
Article
11.
AMENDMENT/ TERMINATION/ TERM.
11.1 |
TERM
OF THE PLAN. The Plan will become effective on the date it is approved by the stockholders of the Company. Unless sooner
terminated under Section 11.2, it will continue in effect for a term of ten (10) years from January 20, 2023, the date the
Plan was approved and adopted by the Board. If the Plan is not approved by the stockholders of the Company, then it will not become
effective. |
11.2 |
AMENDMENT
AND TERMINATION. The Board may at any time amend, alter, suspend or terminate the Plan, provided any such amendment, alteration
or suspension is in compliance with Section 409A, to the extent applicable. |
11.3 |
STOCKHOLDER
APPROVAL. The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws. |
11.4 |
EFFECT
OF AMENDMENT OR TERMINATION. No amendment, alteration, suspension or termination of the Plan will materially impair the rights
of any Participant, unless mutually agreed otherwise between the Participant and the Committee, which agreement must be in writing
and signed by the Participant and the Company. Termination of the Plan will not affect the Committee’s ability to exercise
the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination. |
Article
12.
CONDITIONS UPON ISSUANCE OF SHARES.
12.1 |
LEGAL
COMPLIANCE. Shares will not be issued pursuant to the exercise of an Award unless the grant and exercise of such Award and
the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel
for the Company with respect to such compliance. |
12.2 |
INVESTMENT
REPRESENTATIONS. As a condition to the exercise of an Award, the Company may require the person exercising such Award to
represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required. |
12.3 |
INABILITY
TO OBTAIN AUTHORITY. The inability of the Company to obtain authority from any regulatory body having jurisdiction or
to complete or comply with the requirements of any registration or other qualification of the Shares under any state, federal or
non U.S. law or under the rules and regulations of the Securities and Exchange Commission, the stock exchange on which Shares of
the same class are then listed, or any other governmental or regulatory body, which authority, registration, qualification or rule
compliance is deemed by the Company’s counsel to be necessary or advisable for the issuance and sale of any Shares hereunder,
will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority,
registration, qualification or rule compliance will not have been obtained. |
12.4 |
STOCKHOLDER
APPROVAL. The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the date
the Plan is adopted by the Board. |
12.5 |
ENTIRE
AGREEMENT; GOVERNING LAW. The Plan and each Award Agreement constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with
respect to the subject matter thereof. The Plan and each Award Agreement is governed by the internal substantive laws but not the
choice of law rules of the State of Nevada. |
12.6 |
SUCCESSORS
AND ASSIGNS. The Company may assign any of its rights under this Plan and any Award Agreement to single or multiple assignees,
and this Plan and any Award Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions
on transfer herein set forth, this Plan and any Award Agreement shall be binding upon Participant and his or her heirs, executors,
administrators, successors and assigns. |
12.7 |
CLAWBACK.
Notwithstanding any other provisions in this Plan to the contrary, any Award received by a Subject Participant, and/or any Share
issued upon exercise of any Award received by a Subject Participant hereunder, and/or any amount received with respect to any sale
of any such Award or Share, will be subject to potential cancellation, recoupment, rescission, payback or other action to the extent
required pursuant to Applicable Law, government regulation or national securities exchange listing requirement (or any clawback policy
adopted by the Company pursuant to any such law, government regulation or national securities exchange listing requirement). Each
Subject Participant agrees and consents to the Company’s application, implementation and enforcement of any policy established
by the Company that may apply to the Subject Participant and any provision of applicable law, government regulation or national securities
exchange listing requirement relating to cancellation, rescission, payback or recoupment of compensation, and expressly agrees that
the Company may take such actions as are necessary to effectuate any such policy (as applicable to the Subject Participant) or Applicable
Law, government regulation or national securities exchange listing requirement without further consent or action being required by
the Subject Participant. |
Article
13.
DEFINITIONS.
13.1 |
“Applicable
Laws” means the requirements relating to the administration of equity-based awards under U.S. state corporate laws,
U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted
and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan. |
13.2 |
“Award”
means any award of an Option or a Restricted Share under the Plan. |
13.3 |
“Award
Agreement” means either or both a Stock Option Agreement and a Stock Award Agreement. |
13.4 |
“Board”
means the Company’s Board of Directors, as constituted from time to time. |
13.5 |
“Cause”
means, with respect to a Participant, the occurrence of any of the following events: (i) such Participant’s commission of a
felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (ii)
such Participant’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company, Parent or
Subsidiary; (iii) such Participant’s intentional, material violation of any contract or agreement between the Participant and
the Company, Parent or Subsidiary or of any statutory duty owed to the Company, Parent or Subsidiary; (iv) such Participant’s
unauthorized use or disclosure of the Company’s, Parent’s or Subsidiary’s confidential information or trade secrets;
(v) such Participant’s gross negligence or willful misconduct; or (vi) such Participant’s action which constitutes “Cause”
under his or her applicable employment or consulting agreement. The determination that a termination of the Participant’s continuous
status as a Service Provider is either for Cause or without Cause shall be made by the Company in its sole discretion. Any determination
by the Company that Participant’s continuous status as a Service Provider was terminated by reason of dismissal without Cause
for the purposes of outstanding Awards held by such Participant shall have no effect upon any determination of the rights or obligations
of the Company or such Participant for any other purpose. If, subsequent to a Participant’s termination as a Service Provider,
it is discovered that such Participant could have been terminated for Cause, the Participant shall, at the election of the Company,
in its sole discretion, be deemed to have been terminated for Cause retroactively to the date the events giving rise to Cause occurred.
In such event, any amounts or Shares received under this Plan shall be returned to the Company within thirty (30) days of the Company’s
written demand. |
13.6 |
“Change
in Control” shall mean the occurrence of any of the following events: |
|
(a) |
Change
in Ownership of the Company. A change in the ownership of the Company which occurs on the date that any one person, or more than
one person acting as a group (“Person”), acquires ownership of the stock of the Company that, together with the stock
held by such Person, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company, provided, however,
that for purposes of this subsection (a), the acquisition of additional stock by any one Person, who is considered to own more than
fifty percent (50%) of the total voting power of the stock of the Company will not be considered a Change in Control; or |
|
(b) |
Change
in Effective Control of the Company. A change in the effective control of the Company occurs on the date that a majority of members
of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority
of the members of the Board prior to the date of the appointment or election; or |
|
(c) |
Change
in Ownership of a Substantial Portion of the Company’s Assets. A change in the ownership of a substantial portion of the
Company’s assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending
on the date of the most recent acquisition by such Person or Persons) assets from the Company that have a total gross fair market
value equal to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately
prior to such acquisition or acquisitions. For purposes of this subsection (c), gross fair market value means the value of the assets
of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. |
For
purposes of this Section 13.6, Persons will be considered to be acting as a group if they are owners of a corporation that enters into
a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.
Notwithstanding
the foregoing, a transaction will not be deemed a Change in Control, with respect to an Award subject to Section 409A, unless the transaction
qualifies as a change in control event within the meaning of Section 409A.
Further
and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is to change the jurisdiction
of the Company’s incorporation, or (ii) its sole purpose is to create a holding company that will be owned in substantially the
same proportions by the Persons who held the Company’s securities immediately before such transaction.
13.7 |
“Code”
means the Internal Revenue Code of 1986, as amended. |
13.8 |
“Committee”
means a committee of the Board, as described in Article 2. |
13.9 |
“Common
Stock” means the common stock, par value $0.00001 per share, of the Company. |
13.10 |
“Company”
means NuZee, Inc., a Nevada corporation. |
13.11 |
“Consultant”
means a consultant or adviser who provides bona fide services to the Company, a Parent or a Subsidiary as an independent contractor,
and who may be offered securities registerable pursuant to a registration statement on Form S-8 under the Securities Act. Service
as a Consultant shall be considered employment for all purposes of the Plan, except as provided in Section 4.2. |
13.12 |
“Director”
shall mean a member of the Board. |
13.13 |
“Disability”
means total and permanent disability as defined in Code Section 22(e)(3), provided that in the case of Awards other than ISOs,
the Committee in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory
standards adopted by the Committee from time to time. |
13.14 |
“Employee”
means a common-law employee of the Company, a Parent or a Subsidiary. |
13.15 |
“Exchange
Act” means the Securities Exchange Act of 1934, as amended. |
13.16 |
“Exercise
Price” means the amount for which one Share may be purchased upon exercise of such Option, as specified in the applicable
Stock Option Agreement. |
13.17 |
“Fair
Market Value” means, for so long as the Common Stock is listed on any established stock exchange or a national market
system, including without limitation the New York Stock Exchange, or the Nasdaq Global Select Market, the Nasdaq Global Market or
the Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market Value will be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in The
Wall Street Journal or such other source as the Administrator deems reliable. If the Common Stock is regularly quoted by
a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share will be the mean between the
high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street Journal or
such other source as the Committee deems reliable. In the absence of an established market for the Common Stock, the Fair Market
Value shall be determined in good faith by the Committee and such determination shall be conclusive and binding on all persons. |
13.18 |
“ISO”
means an incentive stock option described in section 422(b) of the Code. |
13.19 |
“NQO”
means a stock option not described in sections 422 or 423 of the Code. |
13.20 |
“Option”
means an ISO or NQO granted under the Plan and entitling the holder to purchase Shares. |
13.21 |
“Optionee”
means an individual or estate who holds an Option. |
13.22 |
“Outside
Director” means a Director who is not an Employee. |
13.23 |
“Parent”
means a “parent corporation” whether now or hereafter existing, as defined in Code Section 424(e). |
13.24 |
“Participant”
means an individual or estate who holds an Award. |
13.25 |
“Period
of Restriction” means the period during which the transfer of Restricted Shares are subject to restrictions and therefore,
the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement
of target levels of performance, or the occurrence of other events as determined by the Committee. |
13.26 |
“Plan”
means this NuZee, Inc. 2023 Equity Incentive Plan, as amended from time to time. |
13.27 |
“Restricted
Share” means a Share awarded under the Plan. |
13.28 |
“Section
409A” means Code Section 409A and the regulations and other guidance issued thereunder. |
13.29 |
“Service
Provider” means an Employee, Director or Consultant. |
13.30 |
“Share”
means a share of Common Stock, as adjusted in accordance with Article 7 of the Plan. |
13.31 |
“Stock
Award Agreement” means the agreement between the Company and the recipient of a Restricted Share that contains the
terms, conditions and restrictions pertaining to such Restricted Share. |
13.32 |
“Stock
Option Agreement” means the agreement between the Company and an Optionee that contains the terms, conditions and restrictions
pertaining to his or her Option. |
13.33 |
“Subsidiary”
means a “subsidiary corporation” whether now or hereafter existing, as defined in Code Section 424(f). |
13.34 |
“Subject
Participant” means a Participant who is designated by the Board as an “executive officer” under the Exchange
Act. |
13.35 |
“Substitute
Award” has the meaning set forth in Section 3.4. |
EXECUTION.
The
Company has caused its duly authorized officer to execute this document in the name of the Company.
|
NUZEE,
INC. |
|
|
|
By: |
|
|
|
Masateru
Higashida, Chief Executive Officer, Secretary, and Treasurer |
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