On or
about May , 2019, we will begin mailing the attached Proxy
Statement and our Annual Report on Form 10-K for the year ended
December 31, 2018. Such annual report includes our audited
financial statements.
YOUR VOTE IS IMPORTANT
Even if
you plan to attend the meeting, please vote as promptly as possible
by using the internet or kindly sign, date, and return the enclosed
proxy card in the envelope provided so that your vote will be
counted if you later decide not to attend the 2019 Annual Meeting.
No postage is required if the proxy card is mailed in the United
States.
By
Order of the Board of Directors,
/s/ Stephan
Wallach
Stephan
Wallach
Chairman of the
Board and CEO
Chula
Vista, CA
May ,
2019
2400
Boswell Road
Chula
Vista, California 91914
(619)
934-3980
PROXY
STATEMENT
For
the Annual Meeting of Stockholders to be held on June 24,
2019
GENERAL INFORMATION
We are
providing these proxy materials to holders of shares of common
stock, $0.001 par value per share, of Youngevity International,
Inc., a Delaware corporation (referred to as “YGYI,”
the “Company,” “we,” or “us”),
in connection with the solicitation by the Board of Directors of
YGYI of proxies to be voted at our 2019 Annual Meeting to be held
on June 24, 2019, beginning at 9:00 a.m., (Pacific Daylight Time)
at the Company’s offices located at 2400 Boswell Road, Chula
Vista, California 91914, and at any adjournment or postponement of
our 2019 Annual Meeting.
The
purpose of the 2019 Annual Meeting and the matters to be acted on
are stated in the accompanying notice of Annual Meeting of
Stockholders. The Board of Directors knows of no other business
that will come before the 2019 Annual Meeting.
Our
Board of Directors is soliciting votes (1)
FOR
each of the seven (7) nominees named
herein for election to our Board of Directors; (2)
FOR
the ratification of the appointment
of Mayer Hoffman McCann P.C. as our independent registered public
accounting firm for the year ending December 31, 2019; (3)
FOR
the approval, for
purposes of Nasdaq Listing Rule 5635(d), of the possible issuance
of certain warrants (the “Contingent Warrants”) and up
to an aggregate of 3,000,000 (the “Contingent Warrant
Shares”) shares of common stock to be issued upon exercise of
the Contingent Warrants pursuant to the terms of the Asset and
Equity Purchase Agreement (“AEPA”) dated February 12,
2019 (the “Equity Issuances”); (4)
FOR
the approval, on an advisory basis,
of the compensation of our named executive officers, as disclosed
in this proxy statement; and (5)
FOR
the recommendation, on an advisory
basis, of a three year frequency for holding an advisory vote on
executive compensation.
ANNUAL MEETING ADMISSION
All
stockholders as of the record date are welcome to attend the 2019
Annual Meeting. If you attend, please note that you will be asked
to present government-issued identification (such as a
driver’s license or passport) and evidence of your share
ownership of our common stock on the record date. This can be your
proxy card if you are a stockholder of record. If your shares are
held beneficially in the name of a bank, broker or other holder of
record and you plan to attend the 2019 Annual Meeting, you will be
required to present proof of your ownership of our common stock on
the record date, such as a bank or brokerage account statement or
voting instruction card, to be admitted to the 2019 Annual
Meeting.
No
cameras, recording equipment or electronic devices will be
permitted in the 2019 Annual Meeting.
Information on how
to obtain directions to attend the 2019 Annual Meeting is available
at:
www.ygyi.com
.
HOW TO VOTE
Stockholders of Record
If your
shares are registered directly in your name with YGYI’s
transfer agent, Pacific Stock Transfer Company, you are considered
the “stockholder of record” of those shares and the
proxy statement is being sent directly to you by YGYI. If you are a
stockholder of record, you can vote your shares in one of two ways:
either by proxy or in person at the 2019 Annual Meeting. If you
choose to vote by proxy, you may do so by using the internet
(please visit
www.proxyvote.com
and follow the
instructions) by telephone, or by completing and returning by mail
the proxy card you have received. Whichever method you use, each
valid proxy received in time will be voted at the 2019 Annual
Meeting in accordance with your instructions.
Beneficial Owners of Shares Held in Street Name
If your
shares are held in a stock brokerage account or by a bank or other
nominee, you are considered the “beneficial owner” of
shares held in street name, and the proxy statement is being
forwarded to you by your broker, bank or nominee, who is considered
the stockholder of record of those shares. As a beneficial owner,
you have the right to direct your broker, bank or nominee on how to
vote the shares held in your account. However, since you are not a
stockholder of record, you may not vote these shares in person at
the 2019 Annual Meeting unless you bring with you a legal proxy
from the stockholder of record. A legal proxy may be obtained from
your broker, bank or nominee. If you do not wish to vote in person
or you will not be attending the 2019 Annual Meeting, you may vote
using the Internet, by telephone or by mail. Please visit
www.proxyvote.com,
or call
1-800-454-8683 and follow the instructions, or if you request
printed proxy materials, you will receive voting instructions from
your broker, bank or nominee describing the available processes for
voting your stock.
Vote by Mail
If you
choose to vote by mail, simply mark, date and sign your proxy card
and return it in the postage-paid envelope provided.
Vote by Internet or Telephone
If you
choose to vote by internet, go to
www.proxyvote.com
to complete an
electronic proxy card. Have your proxy card or voting instruction
card in hand when you access the website and follow the
instructions to obtain your records and to create an electronic
voting instruction form. If you vote by telephone call
1-800-454-8683 and follow the instructions. Your internet or
telephonic vote must be received by 11:59 p.m. Eastern Daylight
Time on June 23, 2019 to be counted.
Voting at the Annual Meeting
Voting
by mail or internet will not limit your right to vote at the 2019
Annual Meeting if you decide to attend in person.
ADDITIONAL INFORMATION ABOUT VOTING
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Q:
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What information is contained in the proxy statement?
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A:
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The
information included in this proxy statement relates to the
proposals to be voted on at the 2019 Annual Meeting, the voting
process, the compensation of our directors and executive officers,
and other required information.
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Q:
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How do I get electronic access to the proxy materials?
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A:
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This
proxy statement and our Annual Report on Form 10-K for the year
ended December 31, 2018 are available at
www.ygyi.com
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Q:
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What items of business will be voted on at the 2019 Annual
Meeting?
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A:
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The
five (5) items of business scheduled to be voted on at the 2019
Annual Meeting are: (1) the election of our directors; (2) the
ratification of Mayer Hoffman McCann P.C. as our independent
registered public accounting firm for our fiscal year ending on
December 31, 2019; (3) for purposes of Nasdaq Listing Rule 5635(d),
the approval of the Equity Issuances; (4) the approval, on an
advisory basis, of the compensation of our named executive
officers, as disclosed in this proxy statement; and (5) the
approval, on an advisory basis, of a three year frequency for
holding an advisory vote on executive compensation. We will also
consider any other business that properly comes before the 2019
Annual Meeting.
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Q:
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How does the Board of Directors recommend that I vote?
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A:
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The
Board of Directors recommends that you vote your shares (1)
FOR
each of the nominees
named herein for election to our Board of Directors; (2)
FOR
the ratification of the
appointment of Mayer Hoffman McCann P.C. as our independent
registered public accounting firm for our fiscal year ending on
December 31, 2019; (3)
FOR
the approval of the Equity Issuances for purposes of Nasdaq Listing
Rule 5635(d); (4)
FOR
the
approval, on an advisory basis, of the compensation of our named
executive officers, as disclosed in this proxy statement; and (5)
FOR
the recommendation, on
an advisory basis, of a three year frequency for holding an
advisory vote on executive compensation.
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Q:
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What shares can I vote?
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A:
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You may
vote or cause to be voted all shares owned by you as of the close
of business on May 3, 2019, the record date. These shares include:
(1) shares held directly in your name as a stockholder of record;
and (2) shares held for you, as the beneficial owner, through a
broker or other nominee, such as a bank.
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Q:
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What is the difference between holding shares as a stockholder of
record and as a beneficial owner?
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A:
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Most of
our stockholders hold their shares through a broker or other
nominee rather than directly in their own name. As summarized
below, there are some distinctions between shares held of record
and those owned beneficially.
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Record Holder
. If your shares are registered directly in
your name on the books of YGYI maintained with YGYI’s
transfer agent, Pacific Stock Transfer Company, you are considered
the “record holder” of those shares, and the proxy
statement is sent directly to you by YGYI. As the stockholder of
record, you have the right to grant your voting proxy directly or
to vote in person at the 2019 Annual Meeting.
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Beneficial Owner of Shares Held in Street Name
.
If your shares are held in a stock
brokerage account or by a bank or other nominee, you are considered
the “beneficial owner” of shares held in street name
(also called a “street name” holder), and the proxy
statement is forwarded to you by your broker, bank or other
nominee. As a beneficial owner, you have the right to direct your
broker, bank or other nominee on how to vote the shares held in
your account. However, since you are not a stockholder of record,
you may not vote these shares in person at the 2019 Annual Meeting
unless you bring with you a legal proxy from the stockholder of
record. A legal proxy may be obtained from your broker, bank or
nominee. If you do not wish to vote in person or you will not be
attending the 2019 Annual Meeting, you may vote using the internet,
by telephone or by mail. Please visit
www.proxyvote.com
, or call
1-800-454-8683 and follow the instructions, or if you request
printed proxy materials, you will receive voting instructions from
your broker, bank or nominee describing the available processes for
voting your stock.
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If you
hold your shares through a broker and you do not give instructions
to the record holder on how to vote, the record holder will be
entitled to vote your shares in its discretion on certain matters
considered routine, such as the ratification of the appointment of
independent auditors. The uncontested election of directors, the
approval of the Equity Issuances for purposes of Nasdaq Listing
Rule 5635(d), the approval of the compensation of our named
executive officers and the approval of the frequency for holding an
advisory vote on executive compensation are not considered routine
matters. Therefore, brokers do not have the discretion to vote on
those proposals. If you hold your shares in street name and you do
not instruct your broker how to vote in these matters not
considered routine, no votes will be cast on your behalf. These
“broker non-votes” will be treated as shares that are
present and entitled to vote for purposes of determining the
presence of a quorum, but not as shares entitled to vote on a
particular proposal.
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Q:
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Can I change my vote or revoke my proxy?
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A:
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You may
change your vote or revoke your proxy at any time before the final
vote at the 2019 Annual Meeting. To change your vote or revoke your
proxy if you are the recordholder, you may (1) notify our Corporate
Secretary in writing at Youngevity International, Inc., 2400
Boswell Road, Chula Vista, California 91914; (2) submit a
later-dated proxy (either by mail or internet), subject to the
voting deadlines that are described on the proxy card or voting
instruction form, as applicable; (3) deliver to our Corporate
Secretary another duly executed proxy bearing a later date; or (4)
by appearing at the 2019 Annual Meeting in person and voting your
shares. Attendance at the meeting will not, by itself, revoke a
proxy unless you specifically so request.
For
shares you hold beneficially, you may change your vote by
submitting new voting instructions to your broker or nominee or, if
you have obtained a valid proxy from your broker or nominee giving
you the right to vote your shares, by attending the 2019 Annual
Meeting and voting in person. For shares you hold beneficially, you
may also change your vote by sending a written notice of revocation
to our Corporate Secretary in writing at Youngevity International,
Inc., 2400 Boswell Road, Chula Vista, California
91914.
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Q:
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Who can help answer my questions?
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A:
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If you
have any questions about the 2019 Annual Meeting or how to vote or
revoke your proxy, or you need additional copies of this proxy
statement or voting materials, you should contact the Corporate
Secretary, Youngevity International, Inc., at 2400 Boswell Road,
Chula Vista, California 91914 or by phone at (619)
934-3980.
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Q:
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How are votes counted?
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A:
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In the
election of directors, you may vote FOR all of the seven (7)
nominees named herein or you may direct your vote to be WITHHELD
with respect to any one or more of the seven (7)
nominees.
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With
respect to Proposals 2, 3 and 4, you may vote FOR, AGAINST, or
ABSTAIN. On these proposals, if you ABSTAIN, it has the same effect
as a vote AGAINST. For Proposal 5, you may vote 1 YEAR, 2 YEARS or
3 YEARS or ABSTAIN. Only votes for 1 YEAR, 2 YEARS or 3 YEARS will
affect the outcome. For Proposal 5, abstentions and broker
non-votes will have no effect.
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If you
provide specific instructions, your shares will be voted as you
instruct. If you sign your proxy card or voting instruction card
with no further instructions, your shares will be voted in
accordance with the recommendations of the Board of Directors,
namely (1)
FOR
each of the
seven (7) nominees for election to our Board of Directors; (2)
FOR
the ratification of
Mayer Hoffman McCann P.C. as our independent registered public
accounting firm for the year ending December 31, 2019; (3)
FOR
the approval of the
Equity Issuances for purposes of Nasdaq Listing Rule 5635(d); (4)
FOR
the approval, on an
advisory basis, of the compensation of our named executive
officers, as disclosed in this proxy statement; and (5)
FOR
the recommendation, on
an advisory basis, of a three year frequency for holding an
advisory vote on executive compensation. If any other matters
properly arise at the meeting, your proxy, together with the other
proxies received, will be voted at the discretion of the proxy
holders.
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Q:
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What is a quorum and why is it necessary?
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A:
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C
onduc
ting
business at the meeting requires a quorum. The presence, either in
person or by proxy, of the holders of a majority of our shares of
common stock outstanding and entitled to vote on May 3, 2019 is
necessary to constitute a quorum. Abstentions are treated as
present for purposes of determining whether a quorum exists. Your
shares will be counted towards the quorum only if you submit a
valid proxy (or one is submitted on your behalf by your broker,
bank or other nominee) or if you vote in person at the 2019 Annual
Meeting. Broker non-votes (which result when your shares are held
in “street name”, you do not tell the nominee how to
vote your shares and the nominee does not have discretion to vote
such shares or declines to exercise discretion) are treated as
present for purposes of determining whether a quorum is present at
the meeting. If there is no quorum, the chairperson of the meeting
or the stockholders entitled to vote at the meeting present at the
meeting in person or represented by proxy may adjourn the meeting
to another date.
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Q:
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What is the voting requirement to approve each of the
proposals?
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A:
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To
be approved, Proposal 1 (the election of directors), the seven (7)
persons named herein receiving the highest number of
FOR
votes (from the holders of votes of
shares present in person or represented by proxy at the 2019 Annual
Meeting and entitled to vote on the election of directors) will be
elected. Only votes FOR or WITHHELD will affect the outcome.
Abstentions and broker non-votes will have no effect on the outcome
of the vote as long as each nominee receives at least one FOR vote.
You do not have the right to cumulate your votes.
T
o
be approved, Proposal 2, which relates to the ratification of the
appointment of Mayer Hoffman McCann P.C., as our independent
registered public accounting firm for the year ending December 31,
2019, must receive FOR votes from the holders of a majority of the
votes cast at the 2019 Annual Meeting. Abstentions will have the
same effect of a vote against this proposal. Although none are
expected to exist in connection with Proposal 2, since this is a
routine matter for which brokers have discretion to vote if
beneficial owners do not provide voting instructions, broker
non-votes, if any, will have no effect. This vote is advisory, and
therefore is not binding on us, the Audit Committee or our Board of
Directors. If our stockholders fail to ratify the appointment, the
Audit Committee will reconsider whether or not to retain that firm.
Even if the appointment is ratified, the Audit Committee in its
discretion may direct the appointment of different independent
auditors at any time during the year if they determine that such a
change would be in the best interests of the Company and its
stockholders.
To be
approved, Proposal 3, which relates to the approval of the Equity
Issuances pursuant to the terms of an acquisition of assets that
closed February 15, 2019 for purposes of Nasdaq Listing Rule
5635(d), must receive FOR votes from the holders of a majority of
the votes cast at the 2019 Annual Meeting excluding the 1,794,972
shares of common stock issued upon the closing of the transactions
contemplated in the AEPA. Abstentions will have the same effect of
a vote against this proposal. Broker non-votes will have no effect.
While our stockholders are not
required to approve the Equity Issuances under Delaware law,
because our common stock is listed on the Nasdaq Capital Market,
pursuant to
Nasdaq Listing Rule 5635(d),
our stockholders are required to approve the
Equity Issuances. Proposal 3 seeks stockholder approval for the
issuances of the Contingent Warrants to be issued pursuant to the
terms of the AEPA and the issuance of the Contingent Warrant Shares
pursuant to the terms of the Contingent Warrants, if the revenue
and net income targets are met. If Proposal 3 is approved at the
2019 annual meeting, the Contingent Warrants will be issued as soon
as practicable after this meeting; however, no Contingent Warrant
Shares will be issued until such time, if ever, that the revenue
and net income targets are met in accordance with the terms of the
AEPA and Contingent Warrants.
To be
approved, Proposal 4, which relates to the approval, on an advisory
basis, of the compensation of our named executive officers, must
receive FOR votes from the holders of a majority of votes cast at
the 2019 Annual Meeting. Abstentions will have the same effect of a
vote against this proposal. Broker non-votes will have no effect.
This vote is advisory, and therefore is not binding on us, the
Compensation Committee or our Board of Directors. Our Board of
Directors and Compensation Committee value the opinions of our
stockholders and to the extent there is any significant vote
against the named executive officers’ compensation as
disclosed in this proxy statement, we will consider our
stockholders’ concerns and the Compensation Committee will
evaluate whether any actions are necessary to address those
concerns.
To be
approved, Proposal 5, which relates to the recommendation, on an
advisory basis, of the frequency for holding an advisory vote on
the compensation of our named executive officers, the frequency
receiving the highest number of votes cast at the 2019 Annual
Meeting will be the frequency recommended by our stockholders. Only
votes for 1 YEAR, 2 YEARS or 3 YEARS will affect the outcome.
Abstentions and broker non-votes will have no effect. However,
because this vote is advisory and not binding on us, the Board of
Directors or the Compensation Committee, the Board of Directors and
Compensation Committee may decide that it is in the best interests
of our stockholders and us to hold an advisory vote on executive
compensation more or less frequently than the option approved by
our stockholders.
I
f
your shares are held in “street name” and you do not
indicate how you wish to vote, your broker is permitted to exercise
its discretion to vote your shares on certain “routine”
matters. The only routine matter to be submitted to our
stockholders at the 2019 Annual Meeting is Proposal 2. None of our
other proposals are routine matters. Accordingly, if you do not
direct your broker how to vote for a director in Proposal 1 or how
to vote for Proposal 3, Proposal 4, or Proposal 5, your broker may
not exercise discretion and may not vote your shares on that
proposal. For purposes of Proposal 1, Proposal 3, Proposal 4, and
Proposal 5, broker non-votes are not considered to be “votes
cast” at the meeting and the shares represented by broker
non-votes are not “entitled to vote” at the meeting. As
such, a broker non-vote will not be counted as a vote FOR or
WITHHELD with respect to a director in Proposal 1, a vote FOR or
AGAINST with respect to Proposal 3, or Proposal 4, or a vote for a
frequency of 1 YEAR, 2 YEARS or 3 YEARS with respect to Proposal 5;
and, therefore, will have no effect on the outcome of the vote on
any such proposal. Abstentions will be counted in determining the
total number of “votes cast” and the total number of
shares present in person or represented by proxy and entitled to
vote on each of the proposals but will have the same effect of a
vote against proposals 2, 3 and 4 and will have no effect on the
outcome of proposals 1 and 5.We encourage you to vote
FOR
all five (5)
proposals.
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Q:
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What should I do if I receive more than one proxy
statement?
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A:
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You may
receive more than one proxy statement. For example, if you are a
stockholder of record and your shares are registered in more than
one name, you will receive more than one proxy statement. Please
follow the voting instructions on all of the proxy statements to
ensure that all of your shares are voted.
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Q:
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Where can I find the voting results of the 2019 Annual
Meeting?
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A:
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We
intend to announce preliminary voting results at the 2019 Annual
Meeting and publish final results in a Current Report on Form 8-K,
which we expect will be filed within four (4) business days of the
2019 Annual Meeting. If final voting results are not available to
us in time to file a Current Report on Form 8-K within four (4)
business days after the 2019 Annual Meeting, we intend to file a
Current Report on Form 8-K to publish preliminary results and,
within four (4) business days after the final results are known to
us, file an additional Current Report on Form 8-K to publish the
final results.
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Q:
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What happens if additional matters are presented at the 2019 Annual
Meeting?
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A:
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Other
than the five (5) items of business described in this proxy
statement, we are not aware of any other business to be acted upon
at the 2019 Annual Meeting. If you grant a proxy, the persons named
as proxy holders, Mr. Stephan Wallach, our Chief Executive Officer,
and Mr. David Briskie, our President and Chief Financial Officer,
will have the discretion to vote your shares on any additional
matters properly presented for a vote at the meeting. If for any
unforeseen reason any of our nominees are not available as a
candidate for director, the persons named as proxy holders will
vote your proxy for any one or more other candidates nominated by
the Board of Directors.
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Q:
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How many shares are outstanding and how many votes is each share
entitled?
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A:
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Each
share of our common stock that is issued and outstanding as of the
close of business on May 3, 2019, the record date, is entitled to
be voted on all items being voted on at the 2019 Annual Meeting,
with each share being entitled to one vote on each matter. As of
the record date, May 3, 2019, [___________] shares of common stock
were issued and outstanding.
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Q:
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Who will count the votes?
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A:
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One or
more inspectors of election will tabulate the votes.
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Q:
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Is my vote confidential?
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A:
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Proxy
instructions, ballots, and voting tabulations that identify
individual stockholders are handled in a manner that protects your
voting privacy. Your vote will not be disclosed, either within YGYI
or to anyone else, except: (1) as necessary to meet applicable
legal requirements; (2) to allow for the tabulation of votes and
certification of the vote; or (3) to facilitate a successful proxy
solicitation.
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Q:
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Who will bear the cost of soliciting votes for the 2019 Annual
Meeting?
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A:
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The
Board of Directors is making this solicitation on behalf of YGYI,
which will pay the entire cost of preparing, assembling, printing,
mailing, and distributing these proxy materials. Certain of our
directors, officers, and employees, without any additional
compensation, may also solicit your vote in person, by telephone,
or by electronic communication. We will not retain the services of
an outside firm to aid in the solicitation of proxies for this
year. Brokerage houses, nominees, fiduciaries and other custodians
will be requested to forward solicitation materials to beneficial
owners and will be reimbursed for their reasonable expenses
incurred in so doing. We may request by telephone, facsimile, mail,
electronic mail or other means of communication the return of the
proxy cards.
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Q:
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When are stockholder proposals and director nominations due for
next year’s Annual Meeting?
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A:
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To
be
considered for inclusion in next year’s proxy materials, your
proposal must be submitted in writing by [___________], to the
attention of the Corporate Secretary of Youngevity International,
Inc. at 2400 Boswell Road, Chula Vista, California 91914. If you
wish to submit a proposal (including a director nomination) at the
meeting that is to be included in next year’s proxy
materials, you must do so in accordance with YGYI’s amended
and restated bylaws (the “Bylaws”), which contain
additional requirements about advance notice of stockholder
proposals and director nominations and you must comply with all
applicable requirements of Rule 14a-8 promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”).
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______________
PROPOSAL 1
ELECTION OF DIRECTORS
Directors, Executive Officers and Other Key Employees
The
Board of Directors has nominated for annual election as director
each of the individuals identified below, all of whom are incumbent
directors.
THE NOMINEES
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Name
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Age
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Director Since
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Position
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Stephan
Wallach
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52
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2011*
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Chairman
and Chief Executive Officer
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David
Briskie
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58
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2011
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President,
Chief Financial Officer and Director
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Michelle
Wallach
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48
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2011*
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Chief
Operating Officer and Director
|
|
Richard
Renton
|
|
63
|
|
2012
|
|
Director
|
|
William
Thompson
|
|
58
|
|
2013
|
|
Director
|
|
Paul
Sallwasser
|
|
65
|
|
2017
|
|
Director
|
|
Kevin
Allodi
|
|
62
|
|
2017
|
|
Director
|
* Since
1996, Stephan Wallach and Michelle Wallach served as directors of
AL Global Corporation, the private company that merged with and
into Javalution Coffee Company, our predecessor in
2011.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE YOUR SHARES FOR THE
ELECTION
OF EACH OF THESE NOMINEES
Currently, our
Board of Directors consists of seven (7) members, all of whom are
being nominated to serve as director: Stephan Wallach, David
Briskie, Michelle Wallach, Richard Renton, William Thompson, Kevin
Allodi and Paul Sallwasser. All of the current member nominees have
been recommened for election as directors of YGYI by the
independent members of our Board of Directors meeting separately.
The Board of Directors believes that it is in YGYI’s best
interests to elect the above-described seven (7) nominees, each to
serve as a director until the next annual meeting of Stockholders
and until his successor shall have been duly elected and qualified.
All of the nominees have consented to being named in this proxy
statement and to serve as a director if elected. At the time of the
2019 Annual Meeting, if any of the nominees named above is not
available to serve as director (an event that the Board of
Directors does not currently have any reason to anticipate), all
proxies may be voted for any one or more other persons that the
independent directors of the Board of Directors designate in their
place. It is the intention of the persons named as proxies to vote
all shares of common stock for which they have been granted a proxy
for the election of each of the nominees, each to serve as a
director until the next annual meeting of stockholders and until
his successor shall have been duly elected and
qualified.
The
independent members of our Board believe that each of the nominees
is highly qualified to serve as a member of the Board and each has
contributed to the mix of skills, core competencies and
qualifications of the Board. When evaluating candidates for
election to the Board, the independent members of our Board seek
candidates with certain qualities that it believes are important,
including experience, skills, expertise, personal and professional
integrity, character, business judgment, time availability in light
of other commitments, dedication, conflicts of interest, those
criteria and qualifications described in each director’s
biography below and such other relevant factors that the
independant members of our Board consider appropriate in the
context of the needs of the Board of Directors.
DIRECTOR INDEPENDENCE
Our
common stock is listed on the Nasdaq Capital Market
(“Nasdaq”). Under the Nasdaq listing standards,
independent directors must comprise a majority of a listed
company’s Board of Directors and all members of our Audit
Committee and our Compensation Committee must be independent. Audit
Committee members must also satisfy the independence criteria set
forth in Rule 10A-3 under the Exchange Act and Compensation
Committee members must also satisfy the independence criteria set
forth in Rule 10C-1 under the Exchange Act. Under the Nasdaq
listing standards, a director will only qualify as an
“independent director” if, in the opinion of that
company’s Board of Directors, that person does not have a
relationship that would interfere with the exercise of independent
judgment in carrying out the responsibilities of a
director.
In
order to be considered to be independent for purposes of Rule
10A-3, a member of an Audit Committee of a listed company may not,
other than in his or her capacity as a member of the Audit
Committee, the Board of Directors, or any other board committee:
(1) accept, directly or indirectly, any consulting, advisory or
other compensatory fee from the listed company or any of its
subsidiaries, or (2) be an affiliated person of the listed company
or any of its subsidiaries.
Until February 2019, we qualified as a
“controlled company” and were eligible for certain
exemptions to the Nasdaq Capital Market listing
requirements.
Since ceasing to be a controlled company we
have one year in which to comply with the requirement that a
majority of our directors be “independent” under the
NASDAQ Capital Market independence standards. A majority of our
directors are not currently "independent" under the Nasdaq Capital
Market independence standards.
Our
Board undertook a review of its composition, the composition of its
committees and the independence of each director. Based upon
information requested from and provided by each director concerning
his background, employment and affiliations, including family
relationships, our Board has determined that William Thompson,
Kevin Allodi and Paul Sallwasser, representing three of our seven
directors, do not have a relationship that would interfere with the
exercise of independent judgment in carrying out the
responsibilities of a director and that each of these directors is
“independent” as that term is defined under the listing
standards of Nasdaq.
We
currently have: (1) an Audit Committee comprised of William
Thompson (Chairman), Kevin Allodi and Paul Sallwasser, each of whom
are deemed to be independent in accordance with the Nasdaq
definition of independence, satisfy the independence criteria set
forth in Rule 10A-3 under the Exchange Act as well as qualify as
“audit committee financial experts” as that term is
used in Item 407 of Regulation S-K; and (2) a Compensation
Committee comprised of Paul Sallwasser (Chairman) and Kevin Allodi,
each of whom is deemed to be independent in accordance with the
Nasdaq definition of independence and satisfy the independence
criteria set forth in Rule 10C-1 under the Exchange
Act;.
The
Board annually determines the independence of directors based on a
review by the directors. No director is considered independent
unless the Board of Directors has determined that he or she has no
material relationship with us.
INFORMATION ABOUT THE NOMINEES
Set
forth below are summaries of the background, business experience
and descriptions of the principal occupation for at least the past
five years of each of our current nominees for election as
directors as well as the
skills,
qualities, attributes, and experience of the nominees that led the
Board of Directors to determine that it is appropriate to nominate
these directors for election to our Board.
Stephan Wallach,
Chief Executive Officer and
Chairman of the Board
Mr.
Stephan Wallach was appointed to the position of Chief Executive
Officer on July 11, 2011 pursuant to the terms of the merger
agreement between Youngevity® and Javalution. He previously
served as President and Chief Executive Officer of AL Global
Corporation. He has served as a director of our company since
inception and was appointed Chairman of the Board on January 9,
2012. In 1996, Mr. Wallach and the Wallach family together launched
our Youngevity® division and served as its co-founder and
Chief Executive Officer from inception until the merger with
Javalution.
Mr.
Wallach brings to our Board of Directors executive leadership
experience as well as extensive knowledge about our business
operations, our products and the industries in which we
operate.
David Briskie,
President, Chief Financial
Officer and Director
Mr.
David Briskie was appointed to the position of President on October
30, 2015 and Chief Financial Officer on May 15, 2012. Prior to
that, Mr. Briskie served as President of Commercial Development, a
position he was appointed to on July 11, 2011 pursuant to the terms
of the merger agreement between Youngevity® and Javalution.
From February 2007 until the merger he served as the Chief
Executive Officer and director of Javalution and since September
2007 has served as the Managing Director of CLR Roasters. Prior to
joining Javalution in 2007, Mr. Briskie had an 18-year career with
Drew Pearson Marketing (“DPM”), a consumer product
company marketing headwear and fashion accessories. He began his
career at DPM in 1989 as Executive Vice President of Finance and
held numerous positions in the company, including vice president of
marketing, chief financial officer, chief operating officer and
president. Mr. Briskie graduated magna cum laude from Fordham
University with a major in marketing and finance.
Mr.
Briskie brings to our Board of Directors extensive experience in
financial matters, global business experience, as well as
familiarity and knowledge regarding public companies.
Michelle G. Wallach,
Chief Operating
Officer and Director
Ms.
Michelle Wallach was appointed to the position of Chief Operating
Officer on July 11, 2011 pursuant to the terms of the merger
agreement between Youngevity® and Javalution. She previously
served as Corporate Secretary and Manager of AL Global Corporation.
She has a background in network marketing, including more than 10
years in distributor management. Her career in network marketing
began in 1991 in Portland, Oregon, where she developed a
nutritional health product distributorship. In 1996, Ms. Wallach
and the Wallach family together launched our Youngevity®
division and served as its co-founder and Chief Operations Officer
from inception until the merger with Javalution. Ms. Wallach has an
active role in promotion, convention and event planning, domestic
and international training, and product development.
Ms.
Wallach brings to our Board of Directors vast experience with
network marketing as well as extensive knowledge about our business
operations, our products and the industries in which we
operate.
Richard Renton,
Director
Mr.
Richard Renton was appointed to our Board of Directors on January
9, 2012, and currently serves on the Youngevity Science and
Athletic Advisory Boards. For the past 22 years, Mr. Renton owned
his own business providing nutritional products to companies like
ours. We purchase certain products from Mr. Renton’s company
WVNP, Inc. Mr. Renton attended University of Oregon and Portland
State University, earning degrees in Sports Medicine, Health,
Physical Education, and Chemistry. He has served as an Associate
Professor at PSU in Health and First Aid, and was the Assistant
Athletic Trainer for PSU, the Portland Timbers Soccer Team, and the
Portland Storm Football team.
Mr.
Renton is qualified to serve on our Board of Directors based on the
fact that he is a board-certified Athletic Trainer with the
National Athletic Trainers Association and due to his vast
understanding of nutritional products and the direct selling
industry.
William Thompson,
Director
Mr.
William Thompson was appointed to our Board of Directors on June
10, 2013 and currently serves as the Chief Financial Officer of
Broadcast Company of the Americas, a radio station operator in San
Diego, California. He served as Corporate Controller for the
Company from 2011 to March 2013 and for Breach Security, a
developer of web application firewalls, from 2007 to 2010. Prior to
2007, Mr. Thompson was Divisional Controller for Mediaspan Group
and Chief Financial Officer of Triathlon Broadcasting
Company.
Mr.
Thompson is qualified to serve on our Board of Directors due to his
achievements in financial matters, his accounting expertise and his
overall business understanding.
Paul Sallwasser,
Director
Mr.
Paul Sallwasser was appointed to our Board of Directors on June 5,
2017. Mr. Sallwasser is a certified public accountant, joined the
audit staff of Ernst & Young LLP in 1976 and remained with
Ernst & Young LLP for 38 years. Mr. Sallwasser served a broad
range of clients primarily in the healthcare and biotechnology
industries of which a significant number were Securities and
Exchange Commission (“SEC”) registrants. He became a
partner of Ernst & Young in 1988 and from 2011 until he retired
from Ernst & Young LLP Mr. Sallwasser served in the national
office as a member of the Quality and Regulatory Matters Group
working with regulators and the Public Company Accounting Oversight
Board (PCAOB). Mr. Sallwasser currently serves as the chief
executive officer of a private equity fund that is focused on
investing in healthcare companies in the South Florida
area.
Mr.
Sallwasser is qualified to serve on our Board of Directors due to
his status as an “audit committee financial expert,” as
defined by the rules of the SEC, and his vast audit and accounting
experience serves as the basis for his position on the Board and
its Audit Committee.
Kevin Allodi,
Director
Mr.
Kevin Allodi was appointed to our Board of Directors on June 5,
2017. Mr. Allodi is currently the CEO and Co-Founder of Philo
Broadcasting, a media holding company that includes award-winning
digital content studio Philo Media and a commercial television
production company, Backyard Productions. Philo is headquartered in
Chicago with production offices in Los Angeles. Prior to joining
Philo (described above) Mr. Allodi spent ten years with the
Communications Industry Division of Computer Sciences Corporation
(NYSE:CSC) where he was VP Global Billing & Customer Care
practice. Currently, Mr. Allodi also serves as a Managing Partner
of KBA Holdings, LLC, a private equity investment firm active in
the digital media, hi-tech, alternative energy and bio-tech
industries. Mr. Allodi serves as a partner, limited partner,
director and/or advisory board member to several portfolio
companies including G2T3V LLC, uBid, Ridge Partners LLC, and is on
the Board of Directors of FNBC Bank & Trust.
Mr.
Allodi is qualified to serve on our Board of Directors due to his
executive leadership experience as well as his extensive business
and investment experience
Family Relationships
Other
than Stephan Wallach and Michelle Wallach, who are husband and
wife, none of our officers or directors has a family relationship
with any other officer or director.
Vote Required
Provided that a
quorum is present, the nominees for director receiving a plurality
of the votes cast at the 2019 Annual Meeting in person or by proxy
will be elected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION
OF THESE NOMINEES AS DIRECTORS
Stockholder Communications with Directors
The
Board has established a process to receive communications from
stockholders. Stockholders may contact any member or all members of
the Board, any Board committee, or any chair of any such committee
by mail. To communicate with the Board of Directors, any individual
director or any group or committee of directors, correspondence
should be addressed to the Board of Directors or any such
individual director or group or committee of directors by either
name or title. All such correspondence should be sent “c/o
Corporate Secretary” at Youngevity International, Inc., 2400
Boswell Road, Chula Vista, California 91914.
All
communications received as set forth in the preceding paragraph
will be opened by the office of our Secretary and the Corporate
Secretary’s office will make sufficient copies of the
contents to send to each director who is a member of the group or
committee to which the envelope or e-mail is addressed. The Board
of Directors has instructed the Corporate Secretary to forward
stockholder correspondence only to the intended recipients, and has
also instructed the Corporate Secretary to review all stockholder
correspondence and, in the Corporate Secretary’s discretion,
refrain from forwarding any items deemed to be of a commercial or
frivolous nature or otherwise inappropriate for the Board of
Directors’ consideration. Any such items may be forwarded
elsewhere in YGYI for review and possible response.
INFORMATION REGARDING THE COMMITTEES OF THE BOARD OF
DIRECTORS
Committees of the Board of Directors
The
Board of Directors has a standing Audit Committee and Compensation
Committee The following table shows the directors who are currently
members or Chairman of each of these committees.
|
Board Members
|
|
|
|
Stephan
Wallach
|
-
|
-
|
|
David
Briskie
|
-
|
-
|
|
Michelle
Wallach
|
-
|
-
|
|
Richard
Renton
|
-
|
-
|
|
William
Thompson
|
|
-
|
|
Paul
Sallwasser
|
|
|
|
Kevin
Allodi
|
|
|
Director Independence
Our Board of Directors has determined that William
Thompson, Paul Sallwasser and Kevin Allodi are each an independent
director in accordance with the definition of independence applied
by the Nasdaq Stock Market. As disclosed above, until February
2019, we qualified as a “controlled company” and were
eligible for certain exemptions to the Nasdaq Capital Market
listing requirements.
Since ceasing to be a controlled
company we have one year in which to comply with the requirement
that a majority of our directors be "independent" under the Nasdaq
Capital Market independence standards. A majority of our directors
are not currently "independent" under the Nasdaq Capital Market
independence standards.
Board Committees
Audit
Committee
. The Audit Committee
of the Board of Directors currently consists of William Thompson
(Chairman), Paul Sallwasser and Kevin Allodi. The functions of the
Audit Committee include the retention of our independent registered
public accounting firm, reviewing and approving the planned scope,
proposed fee arrangements and results of the Company’s annual
audit, reviewing the adequacy of the Company’s accounting and
financial controls and reviewing the independence of the
Company’s independent registered public accounting firm. The
Board has determined that William Thompson, Paul Sallwasser and
Kevin Allodi are each an “independent director” under
the listing standards of The Nasdaq Stock Market. The Board of
Directors has also determined that each of Mr. Thompson and Mr.
Sallwasser is an “audit committee financial expert”
within the applicable definition of the SEC. The Audit Committee is
governed by a written charter approved by the Board of Directors, a
copy of which is available on our website at
www.ygyi.com
.
Information contained on our website are not incorporated by
reference into and do not form any part of this registration
statement. We have included the website address as a factual
reference and do not intend it to be an active link to the
website.
Compensation
Committee
. The Compensation
Committee of the Board of Directors currently consists of Paul
Sallwasser (Chairman) and Kevin Allodi. The functions of the
Compensation Committee include setting the compensation offered to
our executive officers and recommending to the full Board of
Directors the compensation to be offered to our directors. Both of
the members of the Compensation Committee are independent under the
listing standards of The Nasdaq Stock Market. In addition, the
members of the Compensation Committee qualify as
“non-employee directors” for purposes of Rule 16b-3
under the Exchange Act and as “outside directors” for
purposes of Section 162(m) of the Internal Revenue Code of 1986, as
amended. The Compensation Committee is governed by a written
charter approved by the Board of Directors, a copy of which is
available on our website at
www.ygyi.com
.
Information contained on our website
are not incorporated by reference into and do not form any part of
this registration statement. We have included the website
address as a factual reference and do not intend it to be an active
link to the website.
Board Leadership Structure
We
currently have the same person, Stephan Wallach, serving as our
Chairman of the Board and Chief Executive Officer and we do not
have a formal policy on whether the same person should (or should
not) serve as both the Chief Executive Officer and Chairman of the
Board. Mr. Briskie currently serves as our President and Chief
Financial Officer. Due to the size of our Company, we believe that
this structure is appropriate. Mr. Wallach has served as the
Chairman of the Board and Chief Executive Officer since AL Global
Corporation, the private company that he owned, merged into our
predecessor in 2011 and he served as the Chairman of the Board and
Chief Executive Officer of AL Global Corporation, since inception.
In serving as Chairman of the Board, Mr. Wallach serves as a
significant resource for other members of management and the Board
of Directors.
We
believe that our company and its stockholders are best served by
having Mr. Wallach, our Chief Executive Officer, serve as
Chairman of the Board of Directors. Mr. Wallach’s
combined role as Chairman and Chief Executive Officer promotes
unified leadership and direction for the Board of Directors and
executive management, and it allows for a single, clear focus for
the chain of command to execute our strategic initiatives and
business plans.
We
do not have a separate lead director. We believe the combination of
Mr. Wallach as our Chairman of the Board and Chief Executive
Officer and Mr. Briskie as our President and Chief Financial
Officer has been an effective structure for our Company. Our
current structure is operating effectively to foster productive,
timely and efficient communication among the independent directors
and management. We do have active participation in our committees
by our independent directors. Each committee performs an active
role in overseeing our management and there are complete and open
lines of communication with the management and independent
directors.
Oversight of Risk Management
The
Board of Directors has an active role, as a whole and also at the
committee level, in overseeing management of our risks. The Board
of Directors regularly reviews information regarding our strategy,
finances and operations, as well as the risks associated with
each.
Overview
Corporate Governance Guidelines
We
are committed to maintaining the highest standards of business
conduct and corporate governance, which we believe are fundamental
to the overall success of our business, serving our stockholders
well and maintaining our integrity in the marketplace. Our
Corporate Governance Guidelines and Code of Business Conduct and
Ethics, together with our Certificate of Incorporation, Bylaws and
the charters of our Board Committees, form the basis for our
corporate governance framework. As discussed above, our Board of
Directors has established two standing committees to assist it in
fulfilling its responsibilities to us and our stockholders: the
Audit Committee and the Compensation Committee. The Board of
Directors performs the functions typically assigned to a Nominating
and Corporate Governance Committee; however, director nominees are
recommended by a majority of the independent members of the Board
of Directors meeting alone or in executive session.
Our
Corporate Governance Guidelines are designed to ensure effective
corporate governance of our Company. Our Corporate Governance
Guidelines cover topics including, but not limited to, director
qualification criteria, director responsibilities, director
compensation, director orientation and continuing education,
communications from stockholders to the Board, succession planning
and the annual evaluations of the Board and its Committees. Our
Corporate Governance Guidelines are reviewed regularly by the Board
and revised when appropriate.
Board Composition; Board Candidates
Our independent members of our Board regularly
assess the appropriate size of our Board, and whether any vacancies
on our Board are expected due to retirement or otherwise. In the
event that vacancies are anticipated, or otherwise arise, the
independent members of our Board will consider various potential
candidates who may come to their attention through current Board
members, professional search firms, stockholders or other persons.
Each candidate brought to the attention of the independent members
of our Board, regardless of who recommended such candidate, is
considered on the basis of the criteria set forth in our corporate
governance guidelines. As stated above, the independent members of
our Board will consider candidates proposed for nomination by our
significant stockholders. Director nominees are recommended for by
a majority of the independent members of the Board of Directors
meeting alone or in executive session. Stockholders may propose
candidates by submitting the names and supporting information to:
Board of Directors in care of the Corporate Secretary, Youngevity
International, Inc., 2400 Boswell, Chula Vista, California 91914.
Supporting information should include (a) the name and address of
the candidate and the proposing stockholder, (b) a comprehensive
biography of the candidate and an explanation of why the candidate
is qualified to serve as a director taking into account the
criteria identified in our corporate governance guidelines, (c)
proof of ownership, the class and number of shares, and the length
of time that the shares of our voting securities have been
beneficially owned by each of the candidate and the proposing
stockholder, and (d) a letter signed by the candidate stating his
or her willingness to serve, if elected.
BOARD AND COMMITTEE MEETINGS
During
our fiscal year ended December 31, 2018, our Board of Directors
held five (5) meetings, our audit committee held four (4) meetings
and our compensation committee held two (2) meetings. Each of our
incumbent directors that were directors during our fiscal year
ended December 31, 2018 attended no less than 75% of the meetings
of the Board of Directors and Board committees on which such
director served during 2018.
DIRECTOR ATTENDANCE AT ANNUAL MEETINGS
Our
directors are encouraged, but not required, to attend the Annual
Meeting of Stockholders.
2018 DIRECTOR COMPENSATION
The
following table sets forth information for the fiscal year ended
December 31, 2018 regarding the compensation of our directors who
at December 31, 2018 were not also named executive
officers.
|
Name
|
Fees Earned or
Paid in Cash ($)
|
|
|
|
|
Richard
Renton
|
—
|
74,239
|
—
|
74,239
|
|
William
Thompson
|
—
|
74,239
|
—
|
74,239
|
|
Paul
Sallwasser
|
—
|
74,239
|
—
|
74,239
|
|
Kevin
Allodi
|
—
|
74,239
|
—
|
74,239
|
|
(1)
|
The amounts in the “Option Awards” column reflect the
dollar amounts recognized as compensation expense for financial
statement reporting purposes for stock options for the fiscal year
ended December 31, 2018 in accordance with FASB ASC Topic 718. The
fair value of the options was determined using the Black-Scholes
model.
|
As
of December 31, 2018, the following table sets forth the number of
aggregate outstanding option awards held by each of our directors
who were not also named executive officers:
|
Name
|
Aggregate
Number of
Option Awards
|
|
Richard
Renton
|
76,655
|
|
William
Thompson
|
79,155
|
|
Paul
Sallwasser
|
66,655
|
|
Kevin
Allodi
|
66,655
|
We
grant to non-employee members of the Board of Directors upon
appointment, stock options to purchase shares of our common stock
at an exercise price equal to the fair market value of the common
stock on the date of grant, and additional stock options each year
thereafter for their service. We also reimburse the non-employee
directors for travel and other out-of-pocket expenses incurred in
attending board of director and committee meetings. During 2018, we
granted each non-employee director a ten-year option to purchase
61,655 shares of our common stock at an exercise price of $4.29,
which vest during 2019. On January 9, 2019, we granted to each
non-executive member of the Board of Directors an option to
purchase 50,000 shares of our common stock, having an exercise
price of $5.56 per share, vesting upon issuance and expiring ten
(10) years from the date of the grant, unless terminated
earlier.
Code of Business Conduct and
Ethics
We have adopted a Code of Business Conduct and
Ethics that applies to all of our employees, officers and
directors. This Code of Business Conduct and Ethics constitutes a
“code of ethics” as defined by the rules of the SEC.
Copies of the code may be obtained free of charge from our
website,
www.ygyi.com
.
Any amendments to, or waivers from, a provision of our code of
ethics that applies to any of our executive officers will be posted
on our website in accordance with the rules of the
SEC.
Delinquent Section 16(a) Reports
Section
16 of the Exchange Act and the related rules of the Securities and
Exchange Commission require our directors and executive officers
and beneficial owners of more than 10% of our common stock to file
reports, within specified time periods, indicating their holdings
of and transactions in our common stock and derivative securities.
Based solely on a review of such reports provided to us and written
representations from such persons regarding the necessity to file
such reports, we are not aware of any failures to file reports or
report transactions in a timely manner during our fiscal year ended
December 31, 2018.
2012 Equity Compensation Plan Information
The
2012 Plan, is our only active equity incentive plan pursuant to
which options to acquire common stock have been granted and are
currently outstanding.
As
of December 31, 2018, the number of stock options and restricted
common stock outstanding under the 2012 Plan, the weighted average
exercise price of outstanding options and restricted common stock
and the number of securities remaining available for issuance were
as follows:
|
Plan category
|
Number of
securities to be issued upon exercise/vesting of outstanding
options and restricted units
under the 2012 Plan (1)
|
Weighted-average
exercise price of
outstanding options
|
Number of securities remaining available for
future issuance under the 2012 Plan
|
|
Equity
compensation plan approved by stockholders under 2012
Plan
|
2,881,879
|
$
4.45
|
1,077,297
|
|
Equity
compensation plan not approved by stockholders
|
-
|
-
|
-
|
|
Total
|
2,881,879
|
$
4.45
|
1,077,297
|
|
|
|
|
|
_________________
(1)
Includes stock
options to purchase 2,394,379 shares of common stock with a per
share price of $4.45. Also includes 487,500 restricted common stock
units with no exercise price.
On February 23, 2017, our Board of
Directors
received the approval
of our stockholders, to amend the 2012 Plan to increase the number
of shares of common stock available for grant and to expand the
types of awards available for grant under the 2012 Plan. The
amendment of the February 2017 amendment to the 2012 Plan increased
the number of shares of our common stock that may be delivered
pursuant to awards granted during the life of the 2012 Plan from
2,000,000 to 4,000,000 shares authorized (as adjusted for the
1-for-20 reverse stock split, which was effective on June 7, 2017).
On February 15, 2019, our Board of Directors received approval of
our stockholder to further amend our 2012 Plan to increase the
number of shares of our common stock that may be delivered pursuant
to awards granted during the life of the 2012 Plan from 4,000,000
to 9,000,000 shares authorized (the “2019 Amendment”).
The 2012 Plan as amended allows for the grant of: (i) incentive
stock options; (ii) nonqualified stock options; (iii) stock
appreciation rights; (iv) restricted stock; and (v) other
stock-based and cash-based awards to eligible individuals. The
terms of the awards will be set forth in an award agreement,
consistent with the terms of the 2012 Plan. No stock option is
exercisable later than ten years after the date it is
granted.
On
January 9, 2019, our Board of Directors granted (i) David Briskie
an option to purchase 541,471 shares of our common stock having an
exercise price of $5.56 per share, vested upon issuance and
expiring ten (10) years from the date of the grant, unless
terminated earlier; and (ii) to each non-executive member of the
Board of Directors an option to purchase 50,000 shares of our
common stock, having an exercise price of $5.56 per share, vesting
upon issuance and expiring ten (10) years from the date of the
grant, unless terminated earlier.
On January 9, 2019, our Board of Directors also
agreed effective as of the 21st day following the mailing of a
definitive information statement to our stockholders regarding the
2019 Amendment (the “Approval Date”), to award
an option to Stephan Wallach to
purchase 500,000 shares of our common stock, an option to Michelle
Wallach to purchase 500,000 shares of our common stock and an
option to David Briskie to purchase 458,529 shares of our common
stock, each having an exercise price equal to the fair market value
of the common stock on the Approval Date, vesting upon grant date
and expiring ten (10) years thereafter.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit Committee of the Board of Directors has selected Mayer
Hoffman McCann P.C., an independent registered public accounting
firm, to audit our books and financial records for the year ending
December 31, 2019. We are asking our stockholders to ratify the
appointment of Mayer Hoffman McCann P.C. as our independent
registered public accounting firm for fiscal 2019.
A
representative of Mayer Hoffman McCann P.C. is expected to be
present either in person or via teleconference at the 2019 Annual
Meeting and available to respond to appropriate questions, and will
have the opportunity to make a statement if he or she desires to do
so.
Vote Required
The
affirmative vote of a majority of the issued and outstanding shares
entitled to vote and represented at the 2019 Annual Meeting in
person or by proxy will be required to approve the ratification of
the appointment of Mayer Hoffman McCann P.C. as our independent
registered public accounting firm for fiscal 2019. Abstentions will
be counted and will have the same effect of a vote against this
proposal. Ratification of the appointment of Mayer Hoffman McCann
P.C. by our stockholders is not required by law, our bylaws or
other governing documents. As a matter of policy, however, the
appointment is being submitted to our stockholders for ratification
at the 2019 Annual Meeting. If our stockholders fail to ratify the
appointment, the Audit Committee will reconsider whether or not to
retain that firm. Even if the appointment is ratified, the Audit
Committee, in its discretion, may direct the appointment of
different independent auditors at any time during the year if they
determine that such a change would be in our best interest and the
best interests of our stockholders.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
RATIFICATION OF THE SELECTION OF MAYER HOFFMAN MCCANN P.C. AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR OUR FISCAL YEAR
ENDING ON DECEMBER 31, 2019.
AUDIT COMMITTEE REPORT
(1)
The
Audit Committee has reviewed and discussed our audited consolidated
financial statements as of and for the year ended December 31, 2018
with our management and Mayer Hoffman McCann P.C., our independent
registered public accounting firm. Further, the Audit Committee has
discussed with Mayer Hoffman McCann P.C. the matters required by
applicable requirements of the Public Company Accounting Oversight
Board (“PCAOB”) and the SEC, and other applicable
regulations, relating to the firm’s judgment about the
quality, not just the acceptability, of our accounting principles,
the reasonableness of significant judgments and estimates, and the
clarity of disclosures in the consolidated financial
statements.
The
Audit Committee also has received the written disclosures and the
letter from Mayer Hoffman McCann P.C. required by PCAOB Ethics and
Independence Rule 3526,
Communication with Audit Committees Concerning
Independence
, which relate to Mayer Hoffman McCann
P.C.’s independence from YGYI, and has discussed with Mayer
Hoffman McCann P.C. regarding its independence from YGYI. The Audit
Committee has also considered whether the independent registered
public accounting firm’s provision of non-audit services to
YGYI is compatible with maintaining the firm’s independence.
The Audit Committee has concluded that the independent registered
public accounting firm is independent from YGYI and its management.
The members of the Audit Committee are not our employees and are
not performing the functions of auditors or accountants.
Accordingly, it is not the duty or responsibility of the Audit
Committee or its members to conduct “field work” or
other types of auditing or accounting reviews or procedures or to
set auditor independence standards. Members of the Audit Committee
necessarily rely on the information provided to them by management
and the independent auditors. Accordingly, the Audit
Committee’s considerations and discussions referred to above
do not constitute assurance that the audit of our consolidated
financial statements has been carried out in accordance with
generally accepted accounting principles or that our auditors are
in fact independent.
Based
on the reviews, reports and discussions referred to above, the
Audit Committee recommended to the Board of Directors, and the
Board approved, that our audited consolidated financial statements
for the year ended December 31, 2018 and management’s
assessment of the effectiveness of our internal control over
financial reporting be included in our Annual Report on Form 10-K
for the year ended December 31, 2018, for filing with the SEC. The
Audit Committee has recommended, and the Board of Directors has
approved the selection of Mayer Hoffman McCann P.C. as our
independent registered public accounting firm for the year ending
December 31, 2019.
Submitted by the
Audit Committee of Our Board of Directors.
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Members
of the Audit Committee:
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William
Thompson
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Kevin
Allodi
Paul
Sallwasser
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———————
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1
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The
material in this report is not “soliciting material,”
is not deemed “filed” with the SEC and is not
incorporated by reference in any filing of YGYI under the
Securities Act of 1933, as amended, or the Exchange Act, whether
made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
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Independent Registered Public Accounting Firm’s Fee
Summary
The
following table provides information regarding the fees billed to
us by Mayer Hoffman McCann P.C. for the years ended December 31,
2018 and 2017. Mayer Hoffman McCann P.C. leases substantially all
of its personnel, who work under the control of Mayer Hoffman
McCann P.C. shareholders, from wholly-owned subsidiaries of CBIZ,
Inc., including CBIZ MHM, LLC, in an alternative practice
structure. All fees described below were approved by the Board or
the Audit Committee:
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Audit Fees and Expenses
(1)
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$
746,000
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$
404,000
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Audit Related Fees
(2)
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14,000
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13,000
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All
Other Fees
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-
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-
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$
760,000
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$
417,000
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(1)
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Audit
fees and expenses were for professional services rendered for the
audit and reviews of the consolidated financial statements of the
Company, professional services rendered for issuance of consents
and assistance with review of documents filed with the
SEC.
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(2)
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The
audit related fees were for professional services rendered for
additional audit services.
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Pre-Approval Policies and Procedures
Consistent
with SEC policies regarding auditor independence, the Audit
Committee has responsibility for appointing, setting compensation
and overseeing the work of the independent registered public
accounting firm. In recognition of this responsibility, the Audit
Committee has established a policy to pre-approve all audit and
permissible non-audit services provided by the independent
registered public accounting firm.
Prior
to the engagement of the independent registered public accounting
firm for the next year’s audit, management will submit a list
of services and related fees expected to be rendered during that
year for audit services, audit-related services, tax services and
other fees to the Audit Committee for approval.
PROPOSAL 3
EQUITY ISSUANCE PROPOSAL REQUIRED BY NASDAQ RULE
5635(
d
)
Approval of Equity Issuance
Our stockholders are not being asked to approve
the
Asset and Equity Purchase Agreement (the
“AEPA”) dated February 12, 2019, by and among us, its
wholly owned subsidiary Khrysos Industries, Inc.
(“KII”), Khrysos Global, Inc. (“KGI”) Leigh
Dundore (“LD”), and Dwayne Dundore (the
“Representing Party”, KGI, LD and the Representing
Party being referred to as the “Sellers”)
or the acquisition of the assets and equity
pursuant to the AEPA (the “Khrysos Acquisition”). The
Khrysos Acquisition closed on February 15, 2019.
Upon the
closing of the Khrysos Acquisition, we issued 1,794,972 shares of
common stock in consideration of the assets and equity being
acquired (the “Purchase Price Shares”) and agreed,
subject to obtaining required stockholder approvals, to issue two
separate warrants (the “Contingent Warrants”) to
purchase an aggregate of up to 3,000,000 shares of common stock
upon attainment of certain revenue and net income milestones at an
exercise price of $10.00 (the “Contingent Warrant
Shares”).
While our stockholders were not required to
approve the acquisition under Delaware law, because our common
stock is listed on the Nasdaq Capital Market, pursuant to
Nasdaq Listing Rule 5635(d),
our
stockholders are required to approve the Equity Issuances. Proposal
3 seeks stockholder approval for the issuances of the Contingent
Warrants pursuant to the terms of the AEPA and the issuance of up
to 3,000,000 shares of common stock pursuant to the terms of
Contingent Warrants, if the revenue and net income targets are met.
If Proposal 3 is approved at the 2019 Annual Meeting, the
Contingent Warrants will be issued as soon as practicable after
this meeting: however, no shares of common stock underlying the
Contingent Warrants will be issued until such time, if ever, that
the revenue and net income targets are met in accordance with the
terms of the AEPA.
Nasdaq
Rule 5635(d) requires stockholder approval prior to the issuance of
securities in connection with a transaction other than a public
offering involving the sale, issuance or potential issuance by a
company of common stock equal to 20% or more of the common stock or
20% or more of the voting power outstanding before the issuance for
less than the “Minimum Price,” which is defined as the
lower of the closing price immediately prior to the time of
execution of a binding agreement with respect to such issuance or
the average closing price of the common stock for the five (5)
trading days immediately preceding the signing of the binding
agreement with respect to such issuance.
The
Purchase Price Shares together with the maximum potential numbers
of shares of common stock issued or issuable pursuant to the terms
of certain private placement transactions that occurred within six
months of the execution of the AEPA (the “Private Placement
Shares”) represented 13% of our issued and outstanding common
stock on the date of execution of the AEPA. If the maximum number
of Contingent Warrant Shares were to be issued, together with the
Purchase Price Shares and Private Placement Shares the total
potential share issuance, would represent 24% of our issued and
outstanding common stock as of February 12, 2019, the date that we
executed the AEPA.
We are
subject to Nasdaq Rule 5635(d) since our common stock is listed and
trades on the Nasdaq Capital Market. Accordingly, Nasdaq Rule
5635(d) requires us to obtain stockholder approval of the issuance
of the Contingent Warrants and the Contingent Warrant
Shares.
Description
of Proposal
We have
sought stockholder approval as required by Nasdaq Rule 5635(d) (as
described below) to enable us to issue the Contingent Warrants and
up to an aggregate of 3,000,000 Contingent Warrant Shares pursuant
to the terms of AEPA.
OVERVIEW OF THE KHRYSOS ACQUISITION
On
February 15, 2019, pursuant the AEPA, KII, our wholly owned
subsidiary, acquired substantially all the assets (the
“Assets”) of KGI and all the outstanding equity of INXL
Laboratories, Inc., a Florida corporation (“INXL”) and
of INX Holdings, Inc., a Florida corporation (“INXH”).
KGI, INXL and INHL are engaged in the CBD hemp extraction
technology equipment business (the “Business”) and
develop and sell equipment and related services to clients which
enable them to extract CBD oils from hemp stock.
Through the acquisition, we are now engaged in
the
field-to-finish hemp-CBD oil, isolate, and distillate
market.
KII is a manufacturer
of hemp-based CBD extraction equipment that enables
clients to extract CBD oils from hemp stock. In
addition, through
INXL, a
wholly owned subsidiary of KII we own a laboratory testing
facility
that provides us with capabilities in regard to
formulation, quality control, and testing standards with its CBD
products.
The
consideration payable for the Assets and the equity of INXL was an
aggregate of Sixteen Million Dollars ($16,000,000), to be paid as
set forth below and allocated between the Sellers in such manner as
they determine in their discretion.
At the
closing, the Sellers received an aggregate of 1,794,972 shares of
common stock, having a deemed value of Fourteen Million Dollars
($14,000,000) and Five Hundred Thousand Dollars ($500,000) in cash.
Thereafter, the Sellers are to receive an aggregate of: Five
Hundred Thousand Dollars ($500,000) in cash thirty (30) days
following the date of closing; Two Hundred Fifty Thousand Dollars
($250,000) in cash ninety (90) days following the date of closing;
Two Hundred Fifty Thousand Dollars ($250,000) in cash one hundred
and eighty (180) days following the date of closing; Two Hundred
Fifty Thousand Dollars ($250,000) in cash two hundred and seventy
(270) days following the date of closing; and Two Hundred Fifty
Thousand Dollars ($250,000) in cash one (1) year following the date
of closing.
In
addition, we agreed to issue to the Representing Party the
following Contingent Warrants, subject to the approval of the
holders (excluding the Purchase Price Shares held by the Sellers)
of at least a majority of the issued and outstanding shares of our
common stock and the approval of The Nasdaq Stock
Market:
(i) a
six-year warrant to purchase an aggregate 500,000 shares of common
stock at an exercise price of $10 per share exercisable upon the
generation by the Business of $25,000,000 in cumulative revenue
during any of the years ended December 31, 2019, 2020, 2021, 2022,
2023 or 2024;
(ii) a
six-year warrant to purchase 500,000 shares of common stock at an
exercise price of $10 per share exercisable upon the generation by
the Business of $75,000,000 in cumulative revenue during any of the
years ended December 31, 2019, 2020, 2021, 2022, 2023 or 2024;
and
(iii) a
six-year warrant to purchase 500,000 shares of common stock at an
exercise price of $10 per share exercisable upon the generation by
the Business of $150,000,000 in cumulative revenue during any of
the years ended December 31, 2019, 2020, 2021, 2022, 2023 or
2024;
(iv) a
six-year warrant to purchase an aggregate 500,000 shares of common
stock at an exercise price of $10 per share exercisable upon the
generation by the Business of $10,000,000 in cumulative net income
before taxes during any of the years ended December 31, 2019, 2020,
2021, 2022, 2023 or 2024;
(v) a
six-year warrant to purchase 500,000 shares of common stock at an
exercise price of $10 per share exercisable upon the generation by
the Business of $30,000,000 in cumulative net income before taxes
during any of the years ended December 31, 2019, 2020, 2021, 2022,
2023 or 2024; and
(vi) a
six-year warrant to purchase 500,000 shares of common stock at an
exercise price of $10 per share exercisable upon the generation by
the Business of $60,000,000 in cumulative net income before taxes
during any of the years ended December 31, 2019, 2020, 2021, 2022,
2023 or 2024.
We also entered
into a six-year consulting agreement with the Representing Party
for the Representing Party to provide consulting services to KII
related to the acquired assets in consideration of the issuance of
the Contingent Warrants. The Contingent Warrants are subject to
termination if KII terminates its consulting agreement with the
Representing Party for breach or the Representing Party terminates
the consulting agreement prior to attaining the milestones set
forth above.
The
AEPA contained customary representations, warranties and covenants
of us, KII, the Sellers. Subject to certain customary limitations,
the Sellers have agreed to indemnify us and KII against certain
losses related to, among other things, breaches of the
Sellers’ representations and warranties, certain specified
liabilities and the failure to perform covenants or obligations
under the AEPA.
Regulatory Landscape
The
regulatory landscape regarding the sale of hemp-derived products is
rapidly changing. The 2018 Farm Bill modified the definition of
“marijuana” in the Controlled Substances Act so that
the definition of “marijuana” no longer includes hemp.
The 2018 Farm Bill defines hemp as the “plant Cannabis sativa
L” and any part of that plant, including the seeds thereof
and all derivatives, extracts, cannabinoids, isomers, acids, salts,
and salts of isomers, whether growing or not, with a delta-9
tetrahydrocannabinol concentration of not more than 0.3% on a dry
weight basis. All of our hemp-derived products contain less than
0.3% delta-9 tetrahydrocannabinol concentration content. As such,
we believe that the manufacture, packaging, labeling, advertising,
distribution and sale of our hemp-derived products are permissible
under the laws of the United States and such activities do not
violate the Controlled Substances Act. Further, we believe that the
sale of our hemp-derived products is in compliance with all
applicable state regulations since our hemp-derived products are
only sold in states in the United States that have not prohibited
the sale of hemp products. We believe that we are in compliance
with the U.S. Food and Drug Administration marketing and labeling
requirements imposed on dietary supplements. New legislation or
regulations may be introduced at either the federal and/or state
level which, if passed, could impose substantial new regulatory
requirements on the manufacture, packaging, labeling, advertising
and distribution and sale of hemp-derived products, such as our
Hemp FX™ CBD oil products. New legislation or regulations may
also require the reformulation, elimination or relabeling of
certain products to meet new standards and revisions to certain
sales and marketing materials, and it is possible that the costs of
complying with these new regulatory requirements could be material.
The rapidly changing regulatory landscape regarding hemp-derived
products presents a substantial risk to the success and ongoing
viability of the hemp industry in general and our ability to offer
and market hemp-derived products. Any violation of United States
federal laws and regulations and/or state laws and regulations
could result in significant fines, penalties, administrative
sanctions, convictions or settlements arising from civil
proceedings. Any such actions could have a material adverse effect
on our business.
Consequences of Not Approving this Proposal
If
we do not obtain stockholder approval, we will not issue the
Contingent Warrants and will seek stockholders approval at a later
date. Stephan Wallach and David Briskie, the owners of shares of
our common stock representing approximately 50.3% of our
outstanding common stock were among the directors that voted in
favor of the AEPA, including the Equity Issuances.
Vote Required
The
affirmative vote of the holders of a majority of the shares of our
common stock present in person or represented by proxy and entitled
to vote on the matter, but not including any of the Purchase Price
Shares, is necessary under Nasdaq Marketplace Rule 5635 to approve
the Nasdaq Issuance Proposals. The Sellers are not permitted to
vote the Purchase Price Shares on this Proposal under the Nasdaq
Listing Rules.
Interests of Certain Persons In The Transactions
None of
the executive officers or directors of our Company have any
interest in the Equity Issuances.
Recommendation of the Board
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
“FOR” THE APPROVAL OF THE 20% ISSUANCE
PROPOSAL.
Copies of the
Contingent Warrants and AEPA were included as
exhibits 4.2, 4.3 and 10.3, respectively, to the Current Report on
Form 8-K we
filed
with the SEC on February 15, 2019.
PROPOSAL 4
ADVISORY VOTE ON THE APPROVAL OF EXECUTIVE
COMPENSATION
As of
December 31, 2018, we are no longer an “emerging growth
company” as defined in the Jumpstart
Our Business Startups Act of 2012
(the “JOBS Act”). As a result, in accordance with the
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
(the “Dodd-Frank Act”) we are required to provide our
stockholders with the opportunity to cast an advisory vote on the
compensation of our named executive officers as disclosed in this
proxy statement in accordance with SEC rules. The advisory
stockholder vote to approve the compensation of our named executive
officers is often referred to as the “say-on-pay
vote.”
This
say-on-pay vote will not be binding on us, the Board of Directors,
or the Compensation Committee.
Our
Compensation Committee continually reviews the compensation
programs for our executive officers to ensure they achieve the
desired goals of aligning our executive compensation structure with
our stockholders’ interests and current market
practices.
The
Board of Directors is asking our stockholders to indicate their
support for our named executive officers’ compensation as
disclosed in this proxy statement. This proposal gives our
stockholders the opportunity to express their views on our
executive compensation. This vote is not intended to address any
specific item of compensation, but rather the overall compensation
of our named executive officers and the philosophy, policies and
practices described in this proxy statement.
Accordingly, the
Board of Directors will ask our stockholders to vote
“FOR” the following resolution at the 2019 Annual
Meeting:
“
RESOLVED
, that the Company’s
stockholders approve, on an advisory basis, the compensation of the
named executive officers as disclosed in the proxy statement for
the 2019 Annual Meeting of Stockholders pursuant to the
compensation disclosure rules of the Securities and Exchange
Commission (which disclosure includes the Summary Compensation
Table for fiscal year 2018, and the other related tables and
disclosures).”
The
say-on-pay vote is advisory, and therefore is not binding on us,
the Compensation Committee or our Board of Directors. Our Board of
Directors and Compensation Committee value the opinions of our
stockholders and to the extent there is any significant vote
against the named executive officers’ compensation as
disclosed in this proxy statement, we will consider our
stockholders’ concerns and the Compensation Committee will
evaluate whether any actions are necessary to address those
concerns.
Required Vote
The
affirmative vote of the holders of a majority of the outstanding
shares of the Company’s common stock entitled to vote that
are present or represented at the meeting and voted is required to
approve, on an advisory basis, the compensation of the
Company’s named executive officers. In accordance with
Delaware law, abstentions will be counted for purposes of
determining the presence or absence of a quorum as are, broker
non-votes. Abstentions will have the same effect of a vote against
this proposal and broker non-votes will not affect the outcome of
the say-on-pay vote.
OUR BOARD OF DIRECTORS AND COMPENSATION COMMITTEE UNANIMOUSLY
RECOMMEND A VOTE FOR THE APPROVAL, ON AN ADVISORY BASIS, OF THE
COMPENSATION OF THE NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS
PROXY STATEMENT.
PROPOSAL 5
ADVISORY VOTE REGARDING THE FREQUENCY OF FUTURE ADVISORY VOTES
ON
EXECUTIVE COMPENSATION
As
previously stated, as of December 31, 2018, we are no longer an
“emerging growth company” as defined in the JOBS Act.
As a result, in accordance with the Dodd-Frank Act, we are seeking
the input of our stockholders on the question of how frequently
YGYI should seek the stockholder vote to approve (on an advisory
basis) the compensation of our named executive officers. The
advisory stockholder vote to approve the compensation of our named
executive officers is often referred to as the “say-on-pay
vote”; Proposal No. 4 is such a “say-on-pay”
proposal. This Proposal No. 5 is often referred to as a
“say-on-frequency” vote.
The
Dodd-Frank Act specifies that stockholders be given the opportunity
to vote on the Company’s executive compensation programs
either annually, every two years, or every three years. Although
this vote is advisory and nonbinding, the Board of Directors will
review voting results and give consideration to the outcome of such
voting. However, because this vote is advisory and not binding on
the Board of Directors or us, the Board of Directors may decide
that it is in the best interests of our stockholders and us to hold
an advisory vote on executive compensation more or less frequently
than the option approved by our stockholders.
The
Board of Directors recognizes the value of receiving input from the
Company’s stockholders on important issues such as the
Company’s compensation programs. However, it believes that a
well-structured compensation program should include plans that
drive creation of stockholder value over the long-term rather than
focus on short term results. The three-year voting cycle allows
stockholders to review compensation over a longer period of time,
providing sufficient time to evaluate the impact of changes made in
one year where outcomes may not be immediately known. In addition,
a three-year voting cycle is more closely aligned with a
longer-term view of compensation and consistent with the vesting
period we typically use for equity awards. The Board of Directors
therefore recommends that our stockholders select “3
YEARS” when voting on the frequency of the advisory vote on
executive compensation.
Required Vote
The
option of one year, two years, or three years that receives the
highest number of votes cast by stockholders will be the frequency
for the advisory vote on executive compensation that has been
selected by stockholders. In accordance with Delaware law,
abstentions will be counted for purposes of determining the
presence or absence of a quorum as will, broker non-votes.
Abstentions and broker non-votes will not affect the outcome of
this proposal.
OUR BOARD OF DIRECTORS AND COMPENSATION COMMITTEE UNANIMOUSLY
RECOMMEND THAT YOU VOTE FOR APPROVAL OF A 3 YEAR FREQUENCY FOR
HOLDING AN ADVISORY VOTE ON.
OTHER MATTERS
The
Board knows of no other business that will be presented to the
Annual Meeting. If any other business is properly brought before
the Annual Meeting, proxies will be voted in accordance with the
judgment of the persons named therein.
EXECUTIVE COMPENSATION
NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE
Overview of Our Compensation Program
A. Philosophy and Objectives
Our
primary objective with respect to executive compensation is to
design compensation programs that will align executives’
compensation with our overall business strategies for the creation
of stockholder value and attract, motivate and retain highly
qualified executives, drive high performance by connecting
compensation to our financial operating, and strategic goals and
results and appropriately reward high performance. To accomplish
this objective, executive compensation is reviewed annually to
ensure that compensation levels are competitive and reasonable
given our level of performance and other comparable companies with
which we compete for talent. Our executive compensation program is
designed to appropriately reward both individual and collective
performance that meets and exceeds our annual, long-term and
strategic goals. To accomplish this objective, a substantial
percentage of total compensation is variable, “at
risk”, both through cash bonus compensation and equity
compensation.
YGYI
seeks to achieve these objectives through four key compensation
elements:
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a base
salary;
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cash
bonuses;
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equity
awards; and
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benefits
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The
Compensation Committee uses a simple and straightforward approach
in compensating our named executive officers in which base salary,
annual incentives and stock options are the principal components.
In addition, executives generally participate in the same benefit
programs as other full-time employees.
In
order to enhance the Compensation Committee’s ability to
carry out its responsibilities effectively, as well as maintain
strong links between executive pay and performance, the
Compensation Committee reviews compensation information for each
named executive officer which includes the following
information:
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the
annual compensation and benefit values that are being offered to
each executive;
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the
value of all outstanding equity awards; and
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the
Compensation Committee also meets with our senior management in
connection with compensation matters, and may retain and meet in
executive session with, compensation and other advisors from time
to time.
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B. Compensation Administration
Roles and Responsibilities of Compensation Committee
The
primary purpose of the Compensation Committee is to conduct reviews
of our general executive compensation policies and strategies and
oversee and evaluate our overall compensation structure and
programs. The Compensation Committee seeks to confirm that total
compensation paid to the Chief Executive Officer, Chief Financial
Officer and Chief Operating Officer is reasonable and competitive.
All of these responsibilities of the Compensation Committee
include, but are not limited to:
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Establishing
on an annual basis performance goals and objectives for purposes of
determining the compensation of our Chief Executive Officer and
other senior executive officers, evaluating the performance of such
officers in light of those goals and objectives, and setting the
compensation level for those officers based on this
evaluation.
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Recommending
to the Board the compensation for Board members (including
retainer, committee and committee chair’s fees, stock options
and other similar items as appropriate).
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Reviewing
the competitive position of, and making recommendations to the
Board with respect to, the cash-based and equity-based compensation
plans and other programs of YGYI relating to compensation and
benefits.
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Reviewing
the financial performance and the operations of our major benefit
plans.
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|
Overseeing
the administration of our stock option and other executive
compensation plans, including recommending to the Board of
Directors the granting of options and awards under the plans, and
the approval or disapproval of the participation of individual
employees in those plans.
|
|
●
|
Reviewing
and approving for our Chief Executive Officer and other senior
executive officers material perquisites or other in-kind
benefits.
|
Additional
information regarding the Compensation Committee’s
responsibilities is set forth in its charter, which is posted on
our website at
www.ygyi.com
.
C. Competitive Considerations and Components of
Compensation
In
making compensation decisions with respect to each element of
compensation, the Compensation Committee considers the competitive
market for executives and compensation levels provided by
comparable companies. The Compensation Committee regularly reviews
the compensation practices at companies with which it competes for
talent, such as businesses engaged in activities similar to those
of YGYI, including other similarly sized companies in the direct
selling business.
We
provide our named executive officer's a base salary commensurate
with their position, responsibilities and experience. In setting
the base salary, the Compensation Committee considers the scope and
accountability associated with each named executive officer’s
position and such factors as performance and experience of each
named executive officer. We design base pay to provide the
essential reward for an employee’s work, and are required to
be competitive in attracting talent. Once base pay levels are
initially determined, increases in base pay may be provided to
recognize an employee’s specific performance achievements.
The base salaries are targeted to be competitive with other similar
companies. In an effort to preserve cash, we did not provide cash
bonuses in 2017; however we did provide cash bonuses of $59,439 to
each of our Chief Executive Officer and President who also serves
as our Chief Financial Officer in 2018. In 2017 and 2018 term
equity incentive awards were an important component of the
compensation of our President who also serves as our Chief
Financial Officer and as such in 2017, we issued our
President/Chief Financial Officer 250,000 restricted stock units
vesting over a six year period and in 2018 we issued him options to
purchase 250,000 shares of common stock vesting over a three year
period. Inasmuch as our Chief Executive Officer and Chief Operating
Officer hold a significant stock ownership position in YGYI, we did
not issue to them any equity incentive awards in 2017 or 2018. On
January 9, 2019, we issued our President who also serves as our
Chief Financial Officer an option to purchase 541,471 shares of our
common stock which vested upon issuance and expires ten (10) years
from the date of the grant, unless terminated earlier. On February
5, 2019, we issued our Chief Executive Officer an option to
purchase 500,000 shares of our common stock which vested upon
issuance and expires ten (10) years from the date of the grant,
unless terminated earlier, our President who also serves as our
Chief Financial Officer an option to purchase 458,529 shares of our
common stock which vested upon issuance and expires ten (10) years
from the date of the grant, unless terminated earlier and our Chief
Operating Officer an option to purchase 500,000 shares of our
common stock which vested upon issuance and expires ten (10) years
from the date of the grant, unless terminated earlier.
We
believe the Chief Executive Officer and Chief Operating
Officer’s ownership position in YGYI, together with the
long-term equity incentive awards to our President/Chief Financial
Officer, motivates their achievement of our financial and strategic
objectives and aligns their interests with those of our
stockholders.
Role of the Chief Executive Officer and Chief Financial
Officer
Our
Chief Executive Officer, Mr. Stephan Wallach, and our
President/Chief Financial Officer, Mr. David Briskie each makes
recommendations to the Compensation Committee regarding the
compensation of our other named executive officer's. Neither
participates in any discussions or processes concerning his own
compensation.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The
following table sets forth a summary of cash and non-cash
compensation awarded, earned or paid for services rendered to us
during the years ended December 31, 2018 and 2017 by our
“named executive officers,” consisting of each
individual serving as (i) principal Chief Executive Officer, (ii)
our principal Chief Financial Officer, and (iii) Chief Operating
Officer.
|
|
Year
|
|
|
|
|
|
|
Stephan Wallach
(1)
|
2018
|
375,000
|
59,439
|
-
|
-
|
434,439
|
|
Chief Executive Officer
|
2017
|
357,212
|
-
|
-
|
-
|
357,212
|
|
|
|
|
|
|
|
|
David Briskie
(1)(2)
|
2018
|
375,000
|
59,439
|
-
|
566,500
|
1,000,939
|
|
President and Chief Financial Officer
|
2017
|
357,212
|
-
|
670,875
|
-
|
1,028,087
|
|
|
|
|
|
|
|
|
Michelle Wallach
(1)
|
2018
|
214,583
|
-
|
-
|
-
|
214,583
|
|
Chief Operating Officer
|
2017
|
192,660
|
-
|
-
|
-
|
192,660
|
|
(1)
|
Mr.
Stephan Wallach, Mr. David Briskie, and Ms. Michelle Wallach have
direct and or indirect (beneficially) distributor positions in our
Corporation that pay income based on the performance of those
distributor positions in addition to their base salaries, and the
people and or companies supporting those positions based upon the
contractual agreements that each and every distributor enter into
upon engaging in the network marketing business. The contractual
terms of these positions are the same as those of all the other
individuals that become distributors in our Company. There are no
special circumstances for these officers/directors. Mr. Stephan
Wallach and Ms. Michelle Wallach received or beneficially received
an aggregate of $330,429 and $362,292 in 2018 and 2017,
respectively related to their distributor positions, which are not
included above. Mr. Briskie beneficially received $17,209 and
$19,196 in 2018 and 2017, respectively, related to his
spouse’s distributor position, which is not included
above.
|
|
(2)
|
Represents value of
restricted stock unit (“RSU”) awards determined in
accordance with FASB ASC Topic 718.
|
|
(3)
|
We
use a Black-Scholes option-pricing model (Black-Scholes model) to
estimate the fair value of the stock option grant in accordance
with FASB ASC Topic 718. Expected volatility is calculated based on
the historical volatility of the Company’s stock. The
risk-free interest rate is based on the U.S. Treasury yield for a
term equal to the expected life of the options at the time of
grant. The amounts do not represent the actual amounts paid to or
released by any of the named executive officers during the
respective periods.
|
Outstanding Equity Awards at Fiscal Year-End
The
table below reflects all outstanding equity awards made to each of
the named executive officers that are outstanding as of December
31, 2018. We currently grant stock-based awards pursuant to our
2012 Stock Option Plan.
|
|
|
|
|
|
No. Of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
No. Of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
Option
Exercise
Price
($)
|
|
No.
Of Shares
or Units
of Stock
That Have Not
Vested (#)
|
Market Value
Of Shares or
Units of
Stock That
Have Not
Vested ($)
|
|
Stephan
Wallach
|
125,000
(1)
|
-
|
$
4.40
|
05/31/2022
|
|
|
|
|
|
|
|
|
|
|
David
Briskie
|
250,000
(2)
|
-
|
$
4.40
|
05/31/2022
|
|
|
|
|
50,000
(3)
|
-
|
$
3.60
|
10/31/2023
|
|
|
|
|
80,000
(4)
|
20,000
|
$
3.80
|
10/30/2024
|
|
|
|
|
100,000
(5)
|
150,000
|
$
5.40
|
12/27/2026
|
|
|
|
|
34,750
(6)
|
215,250
|
$
3.92
|
07/24/2028
|
250,000
(7)
|
$
1,430,000
|
|
|
|
|
|
|
|
|
Michelle
Wallach
|
125,000
(8)
|
-
|
$
4.40
|
05/31/2022
|
|
|
|
(1)
|
125,000
stock options granted on May 31, 2012, vested and
exercisable.
|
|
(2)
|
250,000
stock options granted on May 31, 2012, vested and
exercisable.
|
|
(3)
|
50,000
stock options granted on October 31, 2013, vested and
exercisable.
|
|
(4)
|
100,000
stock options granted on October 30,
2014, 80,000 stock options vested and are exercisable, with the
remaining option shares vesting in equal annual amounts over the
next year as of December 31, 2018
.
|
|
(5)
|
250,000
stock options granted on December 27,
2016, 100,000 stock options vested and are exercisable, with the
remaining option shares vesting in equal annual amounts over the
next three years as of December 31, 2018
.
|
|
(6)
|
250,000
stock options granted on July 24,
2018, 34,750 stock options vested and are exercisable, with the
remaining option shares vesting in equal annual amounts over the
next three years as of December 31, 2018
.
|
|
(7)
|
250,000
restricted stock units were granted on
August 9, 2017, each unit representing contingent right to receive
one share of common stock, vesting as follows: (i) Year 3 - 25,000
shares; (ii) Year 4 – 37,500 shares; (iii) Year 5 - 125,000
shares; and (iv) Year 6 – 62,500 shares; if Mr. Briskie
continues to serve as an executive officer or otherwise is not
terminated for cause prior to such dates. The market value of the
restricted stock units was multiplied by the closing market price
of our common stock at the end of the 2018 fiscal year, which was
$5.72 on December 31, 2018 (the last business day of the 2018
fiscal year
.)
|
|
(8)
|
125,000
stock options granted on May 31, 2012, vested and
exercisable.
|
On
January 9, 2019, our Board of Directors approved an amendment (the
“Amendment”) to the 2012 Stock Option Plan to increase
the number of shares available for issuance thereunder from
4,000,000 shares of common stock to 9,000,000 shares of common
stock. The Amendment was also approved on January 9, 2019 by the
stockholders holding a majority of the Company's outstanding voting
securities but will not be effective until the 20th day following
the mailing of a definitive information statement to Issuer’s
stockholders regarding the Amendment.
On
January 9, 2019, we issued an option to David Briskie to purchase
541,471 shares of our common stock at an exercise price of $5.56
per share which vested upon grant date and expiring ten (10)
thereafter. The option award to David Briskie are not included
in the table above.
On February 5, 2019, we issued an option to
Stephan Wallach to purchase 500,000 shares of our common stock, an
option to Michelle Wallach to purchase 500,000 shares of the
Company’s common stock and an option to David Briskie to
purchase 458,529 shares of our common stock, each having an
exercise price of $7.47 per share, vesting upon grant date and
expiring ten (10) years thereafter.
The options awards to
Stephan Wallach, Michelle Wallach and David Briskie are not
included in the table above.
Employment Agreements
Our
executive officers work as at-will employees. We do not have any
written employment agreements with any of our executive
officers.
Code Section 162(m) Provisions
Section
162(m) of the U.S. Internal Revenue Code, or the Code, generally
disallows a tax deduction to public companies for compensation in
excess of $1 million paid to the Chief Executive Officer or any of
the four most highly compensated officers. Performance-based
compensation arrangements may qualify for an exemption from the
deduction limit if they satisfy various requirements under Section
162(m). Although we consider the impact of this rule when
developing and implementing our executive compensation programs, we
believe it is important to preserve flexibility in designing
compensation programs. Accordingly, we have not adopted a policy
that all compensation must qualify as deductible under Section
162(m) of the Code. While our stock options are intended to qualify
as “performance-based compensation” (as defined by the
Code), amounts paid under our other compensation programs may not
qualify as such.
OTHER INFORMATION REGARDING THE COMPANY
Security Ownership of Certain Beneficial Owners and
Management
The
following table sets forth information regarding beneficial
ownership of our common stock as of May 3, 2019 by:
|
|
(1)
|
each
person or group of affiliated persons known by us to be the
beneficial owner of more than 5% of our common stock;
|
|
|
(2)
|
each of
our named executive officers as of May 3, 2019;
|
|
|
(3)
|
each of
our directors; and
|
|
|
(4)
|
all of
our executive officers and directors as a group.
|
We have
determined beneficial ownership in accordance with the rules of the
SEC and the information is not necessarily indicative of beneficial
ownership for any other purpose. Unless otherwise indicated below,
to our knowledge, the persons and entities named in the table have
sole voting and sole investment power with respect to all shares
that they beneficially own, subject to community property laws
where applicable. To our knowledge, no person or entity, except as
set forth below, is the beneficial owner of more than 5% of the
voting power of our common stock as of the close of business on May
3, 2019.
Under
SEC rules, the calculation of the number of shares of our common
stock beneficially owned by a person and the percentage ownership
of that person includes both outstanding shares of our common stock
then owned as well as any shares of our common stock subject to
options or warrants held by that person that are currently
exercisable or exercisable within 60 days of May 3, 2019. Shares
subject to those options or warrants for a particular person are
not included as outstanding, however, for the purpose of computing
the percentage ownership of any other person. We have based
percentage ownership of our common stock on 28,818,471 shares of
our common stock outstanding as of May 3, 2019.
|
Name of
Beneficial Owner
|
Number of Shares
Beneficially Owned
|
|
|
|
Executive Officers &
Directors
(1)
|
|
|
|
|
Stephan Wallach,
Chairman and Chief Executive
Officer
|
14,627,811
|
(2
)
|
49.7
%
|
|
David Briskie,
President
,
Chief Financial Officer and
Director
|
2,069,957
|
(3
)
|
6.8
%
|
|
Michelle Wallach,
Chief Operating Officer and
Director
|
14,625,000
|
(2
)
|
49.7
%
|
|
Richard Renton,
Director
|
75,166
|
(4
)
|
*
|
|
William Thompson,
Director
|
64,000
|
(5
)
|
*
|
|
Paul Sallwasser,
Director
|
154,042
|
(6
)
|
*
|
|
Kevin Allodi,
Director
|
81,490
|
(7
)
|
*
|
|
All Executive
Officers & Directors, as a group (7 persons)
|
17,697,466
|
|
55.6
%
|
|
|
|
|
|
|
Stockholders
owning 5% or more
|
|
|
|
|
Carl
Grover
|
2,938,133
|
(8
)
|
9.99
%
|
*less
than 1%
|
(1)
|
Unless
otherwise set forth below, the mailing address of Executive
Officers, Directors and 5% or greater holders is c/o Youngevity
International, Inc., 2400 Boswell Road, Chula Vista, California
91914.
|
|
(2)
|
Stephan
Wallach, our Chief Executive Officer, owns 14,000,000 shares of
common stock through joint ownership with his wife, Michelle
Wallach, with whom he shares voting and dispositive control. Mr.
Wallach also owns 2,811 shares and options to purchase 625,000
shares of common stock that are exercisable within sixty (60) days
of May 3, 2019 and are included in the number of shares
beneficially owned by him and Michelle Wallach also owns options to
purchase 625,000 shares of common stock that are exercisable within
sixty (60) days of May 3, 2019 and are included in the number of
shares beneficially owned by her. Stephan Wallach and Michelle
Wallach have pledged 1,500,000 shares of our common stock held by
them to secure the Credit Note under a Security Agreement,
dated December 13, 2018 with Mr. Grover.
|
|
(3)
|
David
Briskie, our President and Chief Financial Officer, owns 170,429
shares of common stock, and beneficially owns 100,028 shares of
common stock owned by Brisk Investments, LP, 250,000 shares of
common stock owned by Brisk Management, LLC. Mr. Briskie also owns
options to purchase 1,549,500 shares of common stocks that are
exercisable within sixty (60) days of May 3, 2019 and are included
in the number of shares beneficially owned by him. Does not include
250,000 restricted stock units issued to Mr. Briskie in August
2017, of which each unit represents a contingent right to receive
one share of common stock, vesting as follows: (i) Year 3 - 25,000
shares; (ii) Year 4 – 37,500 shares; (iii) Year 5 - 125,000
shares; and (iv) Year 6 – 62,500 shares; provided that Mr.
Briskie continues to serve as an executive officer or otherwise is
not terminated for cause prior to such dates.
|
|
(4)
|
Richard
Renton is a director of the Company, owns 13,616 shares of common
stock. Mr. Renton also owns options to purchase an aggregate of
61,550 shares of common stock that are exercisable within sixty
(60) days of May 3, 2019.
|
|
(5)
|
William
Thompson is a director of the Company, owns options to purchase an
aggregate of 64,000 shares of common stock that are exercisable
within sixty (60) days of May 3, 2019.
|
|
(6)
|
Paul
Sallwasser is a director of the Company and owns a 2014 Note in the
principal amount of $75,000 convertible into 10,714 shares of
common stock and a 2014 Warrant exercisable for 14,673 shares of
common stock. Mr. Sallwasser also owns three 2017 Warrants
exercisable for 6,262 shares of common stock. He also owns 67,393
shares of common stock, which includes 9,264 shares from the
conversion of his 2017 Notes to common stock and options to
purchase an aggregate of 55,000 shares of common stock that are
exercisable within sixty (60) days of May 3, 2019.
|
|
(7)
|
Kevin
Allodi is a director of the Company and owns 13,888 shares of
common stock directly and 12,602 shares of common stock through
joint ownership with his wife, Nancy Larkin Allodi. Mr. Allodi also
owns options to purchase an aggregate of 55,000 shares of common
stock that are exercisable within sixty (60) days of May 3,
2019.
|
|
(8)
|
Shares
ownership is based on information contained in a Schedule 13D/A
filed with the SEC on March 11, 2019. Carl Grover is the sole
beneficial owner of 2,938,133 shares of common stock. Mr. Grover
owns a 2014 Warrant exercisable for 782,608 shares of common stock,
a 2015 Warrant exercisable for 200,000 shares of common stock, 2017
Warrants exercisable for 735,030 shares of common stock, and a 2018
Warrant exercisable for 631,579 shares of common stock, a 2018
Warrant exercisable for 250,000 shares of common stock and a second
2018 Warrant exercisable for 250,000 shares of common stock. He
also owns 2,345,862 shares of common stock which includes 1,122,233
shares from the conversion of his 2017 Notes to common stock,
428,571 shares from the conversion of his 2015 Note to common
stock, 747,664 shares issued from the conversion of his 2014 Notes
to common stock and 47,394 shares of common stock held by him. Mr.
Grover has a contractual agreement with us that limits his exercise
of warrants and conversion of notes such that his beneficial
ownership of our equity securities to no more than 9.99% of the
voting power of the Company at any one time and therefore his
beneficial ownership does not include the shares of common stock
issuable upon conversion of notes or exercise of warrants owned by
him if such conversion or exercise would cause his beneficial
ownership to exceed 9.99% of our outstanding shares of common
stock. Mr. Grover’s address is 1010 S. Ocean Blvd., Apt.
1017, Pompano Beach, Florida 33062.
|
NO DISSENTERS’ RIGHTS
The
corporate action described in this proxy statement will not afford
stockholders the opportunity to dissent from the actions described
herein or to receive an agreed or judicially appraised value for
their shares.
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL
PERSONS
The
following is a summary of transactions since January 1, 2017 to
which we have been a party in which the amount involved exceeded
$120,000 and in which any of our executive officers, directors or
beneficial holders of more than 5% of our capital stock have or
will have a direct or indirect interest, other than compensation
arrangements that are described in the sections of this Proxy
Statement entitled “2018 Director Compensation” and
“Executive Compensation.”
FDI Realty, LLC
FDI
Realty, LLC (“FDI Realty”) was the owner and lessor of
the building previously partially occupied by the Company for its
sales and marketing office in Windham, NH until December 2015. A
former officer of the Company is the single member of FDI
Realty.
At
December 31, 2017 we believed we held a variable interest in FDI
Realty, for which we were not deemed to be the primary beneficiary,
and we believed we were a co-guarantor of FDI Realty’s
mortgages on the building. During the year-ended December 31, 2018,
the Company determined that the Company no longer holds a variable
interest in FDI Realty.
2400 Boswell, LLC
2400
Boswell, LLC (“2400 Boswell”) is the owner and lessor
of the building occupied by us for our corporate office and
warehouse in Chula Vista, CA. As of December 31, 2012, an immediate
family member of a greater than 5% shareholder of us was the single
member of 2400 Boswell and the Company was a co-guarantor of the
2400 Boswell mortgage on the leased building. During 2013 we
acquired 2400 Boswell LLC for $248,000 in cash, $334,000 of debt
forgiveness and accrued interest, and a promissory note of
approximately $393,000, payable in equal payments over 5 years and
bears interest at 5.00%. Additionally, we assumed a long-term
mortgage of $3,625,000, payable over 25 years at an interest rate
of 5.75%. As of December 31, 2018, the balance on the long-term
mortgage was $3,217,000 and the balance on the promissory note was
zero.
Richard Renton
Richard
Renton is a member of the Board of Directors and owns and operates
WVNP, Inc., a supplier of certain inventory items sold by the
Company. The Company made purchases of approximately $151,000 and
$182,000 from WVNP, Inc., for the year ended December 31, 2018 and
2017, respectively. In addition, Mr. Renton is a distributor of the
Company was paid distributor commissions for the years ended
December 31, 2018 and 2017 approximately $363,000 and $398,000
respectively.
Carl Grover
Carl
Grover, is the beneficial owner of in excess of five percent (5%)
of our outstanding common shares, is the sole beneficial owner of
2,938,133 shares of common stock. Mr. Grover owns a 2014 Warrant
exercisable for 782,608 shares of common stock, a 2015 Warrant
exercisable for 200,000 shares of common stock and two 2017
Warrant’s exercisable for 735,030 shares of common stock. He
also owns 2,345,862 shares of common stock.
Mr.
Grover acquired two 2017 Notes in the aggregate principal amount of
$5,162,000 convertible into 1,122,233 shares of common stock. On
March 29, 2018, we completed our Series B Convertible Stock
Offering, whereby in accordance with the terms of the 2017 Notes,
the 2017 Notes automatically converted upon the raising a minimum
of $3,000,000 from the Series B Convertible Stock
Offering.
On
December 13, 2018, our wholly-owned subsidiary CLR Roasters
(“CLR”), entered into a Credit Agreement with Mr.
Grover (the “Credit Agreement”) pursuant to which CLR
borrowed $5,000,000 from Mr. Grover and in exchange issued to him a
$5,000,000 credit note (“Credit Note”) secured by its
green coffee inventory under a Security Agreement, dated December
13, 2018. In connection with the Credit Agreement, we issued to Mr.
Grover a four-year warrant to purchase 250,000 shares of our common
stock, exercisable at $6.82 per share, and four-year warrant to
purchase 250,000 shares of our common stock, exercisable at $7.82
per share, pursuant to a Warrant Purchase Agreement, dated December
13, 2018, with Mr. Grover.
On
October 23, 2018, we entered into an Exchange Agreement (the
“Exchange Agreement”) with Mr. Grover to exchange (the
“Exchange”), all amounts owed under an 8% Secured
Convertible Promissory Note (2014 Note) held by him in the
principal amount of $4,000,000 which matures on July 30, 2019 for
747,664 shares of common stock, $.001 par value, at a conversion
price of $5.35 per share and a four-year warrant to purchase
631,579 shares of common stock at an exercise price of $4.75 per
share. The Exchange Agreement was subject to shareholder approval
which was received on December 5, 2018.
On
October 19, 2018, Mr. Grover exercised his right to convert all
amounts owed under the 2015 Note issued to him in the 2015 Private
Placement in the principal amount of $3,000,000 which matured on
October 12, 2018, into 428,571 shares of common stock (at a
conversion rate of $7.00 per share), in accordance with its stated
terms.
Paul Sallwasser
Mr.
Paul Sallwasser is a member of the board directors and owns a 2014
Note in the principal amount of $75,000 convertible into 10,714
shares of common stock and a 2014 Warrant exercisable for 14,673
shares of common stock, each of which were acquired prior to the
date that he joined our Board of Directors. Mr. Sallwasser acquired
in the 2017 Private Placement a 2017 Note in the principal amount
of $38,000 convertible into 8,177 shares of common stock and a 2017
Warrant exercisable for 5,719 shares of common stock, each of which
were acquired prior to the date that he joined our Board of
Directors. Mr. Sallwasser also acquired in the 2017 Private
Placement in exchange for the 2015 Note he owned, a 2017 Note in
the principal amount of $5,000 convertible into 1,087 shares of
common stock and a 2017 Warrant exercisable for 543 shares of
common stock. He also owns 67,393 shares of common stock and
options to purchase an aggregate of 116,655 shares of common stock,
of which options to purchase an aggregate of 55,000 shares of
common stock have vested and are immediately exercisable. On March
29, 2018, we completed our Series B Convertible Stock Offering,
whereby in accordance with the terms of the 2017 Notes, the 2017
Notes would automatically converted upon the raising a minimum of
$3,000,000 from the Series B Convertible Stock
Offering.
Other Relationship Transactions
Hernandez, Hernandez, Export Y Company
CLR, is
associated with Hernandez, Hernandez, Export Y Company
(“H&H”), a Nicaragua company, through sourcing
arrangements to procure Nicaraguan green coffee beans and in
March 2014 as part of the Siles acquisition, CLR engaged the owners
of H&H as employees to manage Siles. We made purchases of
approximately $9,891,000 and $10,394,000 from this supplier for the
years ended December 31, 2018 and 2017, respectively.
In
addition, CLR sold approximately $3,938,000 and $6,349,000 for the
years ended December 31, 2018 and 2017, respectively, of green
coffee beans to H&H Export, a Florida based company which is
affiliated with H&H.
In
March 2017, we entered a settlement agreement and release with
H&H Export pursuant to which it was agreed that $150,000 owed
to H&H Export. for services that had been rendered would be
settled by the issuance of common stock. In May 2017, we issued to
H&H Export 27,500 shares of common stock in accordance with
this agreement.
In May
2017, we entered a settlement agreement with Alain Piedra
Hernandez, one of the owners of H&H and the operating manager
of Siles, who was issued a non-qualified stock option for the
purchase of 75,000 shares of our common stock at a price of $2.00
with an expiration date of three years, in lieu of an obligation
due from us to H&H as relates to a Sourcing and Supply
Agreement with H&H. During the period ended September 30, 2017
we replaced the non-qualified stock option and issued a warrant
agreement with the same terms. There was no financial impact
related to the cancellation of the option and the issuance of the
warrant. As of December 31, 2018, the warrant remains
outstanding.
On
January 15, 2019, CLR entered into the CLR Siles Mill Construction
Agreement (the “Mill Construction Agreement”) with
H&H and H&H Export, Alain Piedra Hernandez
(“Hernandez”) and Marisol Del Carmen Siles Orozco
(“Orozco”), together with H&H, H&H Export,
Hernandez and Orozco, collectively referred to as the Nicaraguan
Partner, pursuant to which the Nicaraguan Partner agreed to
transfer a 45 acre tract of land in Matagalpa, Nicaragua (the
“Property”) to be owned 50% by the Nicaraguan Partner
and 50% by CLR. In consideration for the land acquisition we issued
to H&H Export, 153,846 shares of our common stock. In addition,
the Nicaraguan Partner and CLR agreed to contribute $4,700,000
toward construction of a processing plant, office, and storage
facilities (“Mill”) on the property for processing
coffee in Nicaragua.
Compensation of Our Current Directors and Executive
Officers
For
information with respect to the compensation offered to our current
directors and executive officers, please see the descriptions under
the sections entitled “2018 Director Compensation” and
“Executive and Compensation” of this Proxy
Statement.
Related Party Transaction Policy and Procedures
Pursuant to our
Related Party Transaction and Procedures, our executive officers,
directors, and principal stockholders, including their immediate
family members and affiliates, are prohibited from entering into a
related party transaction with us without the prior consent of our
Audit Committee or our independent directors. Any request for us to
enter into a transaction with an executive officer, director,
principal stockholder, or any of such persons’ immediate
family members or affiliates, must first be presented to our Audit
Committee for review, consideration and approval. In approving or
rejecting the proposed agreement, our Audit Committee will consider
the relevant facts and circumstances available and deemed relevant,
including, but not limited, to the risks, costs and benefits to us,
the terms of the transaction, the availability of other sources for
comparable services or products, and, if applicable, the impact on
a director’s independence. Our Audit Committee approves only
those agreements that, in light of known circumstances, are in, or
are not inconsistent with, our best interests, as our Audit
Committee determines in the good faith exercise of its
discretion.
OTHER MATTERS
As of
the date of this Proxy Statement, the Board of Directors of YGYI
knows of no other matters to be presented for stockholder action at
the 2019 Annual Meeting. However, other matters may properly come
before the 2019 Annual Meeting or any adjournment or postponement
thereof. If any other matter is properly brought before the 2019
Annual Meeting for action by the stockholders, proxies in the
enclosed form returned to YGYI will be voted in accordance with the
recommendation of the Board of Directors.
ANNUAL REPORT/FORM 10-K
Our
2018 Annual Report to our stockholders is being mailed to certain
stockholders concurrently with this proxy statement. Copies of our
Annual Report on Form 10-K as filed with the SEC and any amendments
thereto may be obtained without charge by writing to Youngevity
International, Inc., Attention: Corporate Secretary, 2400 Boswell
Road, Chula Vista, California 91914, or by calling us at (619)
934-3980. A complimentary copy may also be obtained at the internet
website maintained by the SEC at
www.sec.gov
, and by visiting our
internet website at
www.ygyi.com
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NOTICE REGARDING DELIVERY OF STOCKHOLDER DOCUMENTS
(“HOUSEHOLDING” INFORMATION)
The SEC
has adopted rules that permit companies and intermediaries (e.g.,
brokers) to satisfy the delivery requirements for Notices of
Internet Availability of Proxy Materials, proxy statements and
annual reports by delivering a single copy of these materials to an
address shared by two or more YGYI stockholders. This process,
which is commonly referred to as “householding,”
potentially means extra convenience for stockholders and cost
savings for companies and intermediaries. A number of brokers and
other intermediaries with account holders who are our stockholders
may be householding our stockholder materials, including this proxy
statement. In that event, a single proxy statement will be
delivered to multiple stockholders sharing an address unless
contrary instructions have been received from the affected
stockholders. Once you have received notice from your broker or
other intermediary that it will be householding communications to
your address, householding will continue until you are notified
otherwise or until you revoke your consent, which is deemed to be
given unless you inform the broker or other intermediary otherwise
when you receive or received the original notice of householding.
If, at any time, you no longer wish to participate in householding
and would prefer to receive separate Proxy Materials, please notify
your broker or other intermediary to discontinue householding and
direct your written request to receive a separate proxy statement
to us at: Youngevity International, Inc., Attention: Corporate
Secretary, 2400 Boswell Road, Chula Vista, California 91914 or by
calling us at (619) 934-3980. Stockholders who currently receive
multiple copies of the proxy statement at their address and would
like to request householding of their communications should contact
their broker or other intermediary.
STOCKHOLDER PROPOSALS FOR THE 2020 ANNUAL MEETING
Stockholders who
intend to present proposals at the 2020 Annual Meeting under SEC
Rule 14a-8 must ensure that such proposals are received by the
Corporate Secretary of our Company not later than []. Such proposals must
meet the requirements of the SEC to be eligible for inclusion in
our 2020 proxy materials.
All
proposals should be addressed to the Corporate Secretary,
Youngevity International, Inc., 2400 Boswell Road, Chula Vista,
California 91914.
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By
Order of the Board of Directors
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/s/
Stephan
Wallach
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Stephan
Wallach
Chairman
of the Board and CEO
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Chula
Vista, California
May ,
2019
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YOUNGEVITY INTERNATIONAL, INC.
2400 Boswell Road
Chula Vista, California 91914
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VOTE BY INTERNET - www.proxyvote.com
Use the
Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 p.m. Eastern Daylight Time
on June 23, 2019. Have your proxy card in hand when you access the
web site and follow the instructions to obtain your records and to
create an electronic voting instruction form.
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ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you
would like to reduce the costs incurred by our company in mailing
proxy materials, you can consent to receiving all future proxy
statements, proxy cards and annual reports electronically via
e-mail or the Internet. To sign up for electronic delivery, please
follow the instructions above to vote using the Internet and, when
prompted, indicate that you agree to receive or access proxy
materials electronically in future years.
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VOTE BY PHONE - 1-800-690-6903
Use any
touch-tone telephone to transmit your voting instructions. Vote by
11:59 p.m. Eastern Daylight Time on 06/23/2019. Have your proxy
card in hand when you call and then follow the
instructions.
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VOTE BY MAIL
Mark,
sign and date your proxy card and return it in the postage-paid
envelope we have provided or return it to Vote Processing, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
☒
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KEEP
THIS PORTION FOR YOUR RECORDS
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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DETACH
AND RETURN THIS PORTION ONLY
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For
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Withhold
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For All
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To
withhold authority to vote for any individual
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All
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All
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Except
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nominee(s),
mark “For All Except” and write the
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The
Board of Directors recommends you vote FOR the
following:
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number(s)
of the nominee(s) on the line below.
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1.
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Proposal
1—Election of Directors
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☐
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☐
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Nominees:
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05
William
Thompson
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06 Kevin
Allodi
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The
Board of Directors recommends you vote FOR the following Proposal
2:
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For
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Against
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Abstain
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2.
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To
ratify the appointment of Mayer Hoffman McCann P.C. as our
independent registered public accounting firm for our fiscal year
ending on December 31, 2019.
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☐
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☐
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3.
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To
approve, for purposes of Nasdaq Listing Rule 5635(d), the possible
issuance of up to an aggregate of 3,000,000 shares of common stock
pursuant to certain warrants issuable as consideration for assets
acquired pursuant to the terms of an Asset and Equity Purchase
Agreement
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☐
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☐
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☐
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4.
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To
approve, on an advisory basis, the compensation of our named
executive officers, as disclosed in this proxy
statement.
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☐
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☐
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☐
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1 year
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2
years
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3
years
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Abstain
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5.
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To
recommend, on an advisory basis, a three year frequency for holding
an advisory vote on executive compensation.
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☐
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☐
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☐
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☐
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NOTE
: To transact such other business as
may properly come before the meeting or any adjournments or
postponements of the meeting.
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Please
sign exactly as your name(s) appear(s) hereon. When signing
as
attorney, executor,
administrator, or other fiduciary, please give full
title
as such. Joint owners should each sign personally. All holders
must
sign.
If a corporation or partnership, please sign in full corporate
or
partnership name,
by authorized officer.
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Signature
[PLEASE SIGN WITHIN BOX]
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Date
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Signature
(Joint Owners)
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Date
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Important Notice Regarding the Availability of Proxy Materials for
the Annual Meeting:
The proxy materials and proxy statement,
and Form 10-K are available at
www.voteproxy.com
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YOUNGEVITY INTERNATIONAL, INC.
2019 Annual Meeting of Stockholders
June 24, 2019 9:00 a.m. (Pacific Daylight Time)
This proxy is solicited by the Board of Directors
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The
undersigned stockholder hereby appoints Stephan Wallach and David
Briskie, or either of them, as proxies, each with full power of
substitution, hereby authorizes them to represent and to vote, as
designated on the reverse side of this ballot, all of the shares of
common stock of YOUNGEVITY INTERNATIONAL, INC. that the undersigned
is entitled to vote at the 2019 Annual Meeting of Stockholders to
be held at 9:00 a.m. (Pacific Daylight Time), on June 24, 2019, at
the offices of the Company, 2400 Boswell Road, Chula Vista,
California 91914, and any adjournment or postponement
thereof.
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This
proxy, when properly executed, will be voted in the manner directed
herein. If no such direction is made, this proxy will be voted in
accordance with the Board of Directors'
recommendations.
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Continued and to be signed on reverse side
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