Item
10. Directors, Executive Officers and Corporate Governance
The
following table sets forth the names and ages of all of the directors and executive officers of Encompass Energy Services, Inc.
(the “Company”), and the current positions held by each such person. All directors are elected annually at the Company’s
annual meeting of stockholders. No arrangement exists between any of the Company’s officers and directors pursuant to which
any of those persons was elected to such office or position.
Name
|
Age
|
Positions
|
Director
Since
|
Antranik
Armoudian
|
50
|
President, Chief
Executive Officer, Chief Financial Officer, Treasurer, Secretary and Director
|
2011
|
Kristian
B. Kos
|
36
|
Director
|
2010
|
Unless
otherwise disclosed below, none of the corporations or organizations named below is a parent, subsidiary or other affiliate of
Encompass.
Antranik
Armoudian
was appointed as a director in June 2011. Mr. Armoudian was also appointed as our President, Chief Executive Officer,
Chief Financial Officer, Treasurer and Secretary in June 2011 and continues to serve in those roles. Mr. Armoudian has a broad
range of experience in the technology and corporate sectors. Mr. Armoudian currently serves as a manager of Solanic LLC, a company
that focuses on the manufacturing and importation of electronic components. From 1997 through April 2010, Mr. Armoudian worked
in various managerial capacities at Nortel Networks Corporation. During his tenure at Nortel, Mr. Armoudian gained experience
in a wide range of Nortel’s business operations including sales and marketing, business development and the management of
projects in a variety of areas and product lines commensurate with telecommunications and data networking. Most recently he served
as Nortel’s U.S. Director of Sales, and prior to holding that position he held a variety of managerial positions, including
the North America Director of Carrier Services. Mr. Armoudian obtained a Bachelors of Science degree from Southwestern Oklahoma
State University in 1986.
We believe Mr. Armoudian’s managerial, sales and marketing experience provides important
experience and leadership to our Company and our board of directors.
Kristian
B. Kos
was appointed as a director in November 2010. Mr. Kos also previously served as our President and Chief Executive Officer
from November 2010 until his resignation from these positions in June 2011. Mr. Kos has been involved in oil and gas and
energy industries since 2005. Since July 2011, Mr. Kos has served as President, Chief Executive Officer, and a director of New
Source Energy Corporation, an oil and gas exploration and production company. Mr. Kos also has served as a director and as the
President and Chief Executive Officer of New Source Energy Partners L.P. (NYSE: NSLP), an oil and gas partnership, since October
2012. From May 2010 through July 2011, Mr. Kos provided consulting services to New Dominion, LLC, a private oil and gas operating
concern. In August 2006, Mr. Kos founded Deylau, LLC (“Deylau”), a company focused on identifying, managing and
financing oil and gas production companies. Deylau owns approximately 63.7% of the outstanding shares of our Common Stock. From
February 2006 to February 2007, Mr. Kos served as a Vice President at Diamondback Energy Services, where he was actively
involved in identifying and executing growth strategies for that company, including acquisitions. From September 2005 to February
2006, Mr. Kos worked in a business-development role for Gulfport Energy. Prior to working in the oil and gas and energy sectors,
Mr. Kos worked in the financial sector for hedge fund manager Wexford Capital LP. Mr. Kos earned Bachelor of Arts and
Master of Arts degrees in Economics and Philosophy from Trinity College, Dublin, Ireland in 1999. He also earned a Master of Philosophy
degree in Economics from the University of Aix-Marseille, France in 2000. We believe Mr. Kos’s experience in the financial
and oil and gas industries and his leadership positions at other oil and gas companies provide important experience and leadership
to our Company and our board of directors.
2
Specific
Attributes, Experience, Qualifications and Skills of Directors
In
light of the Company’s plans to explore one or more business opportunities in the oilfield service industry, the board of
directors has determined that certain core competencies are desirable for the Company’s directors, including the following:
current or prior experience as a senior officer or director of a public company or other substantial management or risk management
experience; relevant experience in the oil and natural gas industry; and finance and accounting experience.
The
board of directors has reviewed the specific attributes, experience, qualifications and skills of each of the directors, both
of whom are nominees for reelection as a director at the Annual Meeting. The board of directors has concluded that each director
has the appropriate characteristics and skills required for board membership and that each director possesses an in-depth knowledge
of the Company’s business and strategy. The board of directors further believes that it is composed of well-qualified and
well-respected individuals who, as a whole, cover the core competencies that our board has identified as being desirable. The
experience and the key competencies of our directors are as follows:
Management
Experience
: We believe that each of Messrs. Armoudian and Kos have appropriate current or prior management or risk management
experience, as described in more detail in their respective biographical information above.
Oil
and Natural Gas Industry Experience
: We believe that Mr. Kos has appropriate qualifications relating to the oil and natural
gas industry, as described in more detail in his biographical information above.
Finance
and Accounting Experience
: We believe that Mr. Kos has appropriate finance or accounting experience, as described in more
detail in his biographical information above.
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a)
of the Securities Exchange Act of 1934 requires our directors and executive officers and persons who beneficially own more than
10% of our Common Stock to file reports of ownership and changes in ownership of our Common Stock with the Securities and Exchange
Commission. We are required to disclose delinquent filings of reports by such persons.
3
Based
solely on a review of the copies of such reports and amendments thereto received by us, or written representations that no filings
were required, we believe that all Section 16(a) filing requirements applicable to our executive officers, directors and
10% stockholders during 2013 were met.
Code
of Ethics
In
May 2009, our board of directors adopted a Code of Ethics applicable to the Company’s employees, officers and directors.
The Code of Ethics was filed with the Securities and Exchange Commission on May 11, 2009, and is filed as Exhibit 14.1 to this
Annual Report.
Nominating
Committee; Nomination of Directors
In
the event that vacancies on our board of directors arise, our board of directors considers potential candidates for director,
which may come to the attention of the board through current directors, stockholders or other persons. Our board of directors
does not set specific, minimum qualifications that nominees must meet in order to be recommended as directors, but rather believes
that each nominee should be evaluated based on his or her individual merits, taking into account the needs of the Company and
the composition of our board of directors. We do not have any formal policy regarding diversity in identifying nominees for a
directorship, but rather consider it among the various factors relevant to any particular nominee. In the event we decide to fill
a vacancy that exists or we decide to increase the size of the board of directors, we identify, interview and examine appropriate
candidates. We identify potential candidates principally through suggestions from our directors and executive officer.
Audit
Committee; Audit Committee Financial Expert
Our
board of directors has not established an audit committee, compensation committee or nominating committee. Because of the small
size of our board of directors, the lack of any independent directors and the Company’s current limited operations, our
board of directors has concluded that there is no need to establish separate audit, compensation and nominating committees. Similarly,
for these reasons, our board of directors has concluded that there is no need for an audit committee financial expert. Instead,
our entire board fulfills the functions that otherwise would be performed by separate standing committees of this nature.
Board
Meetings
Our
board of directors met or acted by written consent a total of five times during 2013. All directors participated in all such meetings
or consents. The board’s policy regarding director attendance at meetings is that directors generally are expected to attend
all meetings, absent extenuating circumstances. Directors customarily attend annual meetings of stockholders, although such attendance
is not required. Both of the Company’s directors attended the 2013 annual meeting of stockholders.
Director
Compensation
We
did not compensate any of our directors for their services as such during 2013. We have agreements with each of our directors
pursuant to which we have agreed to reimburse them for reasonable and necessary expenses incurred in connection with travel to
and attendance at meetings of the board of directors and other Company business. None of the directors incurred any material expenses
in connection with any Company business during 2013.
4
Communications
with the Board of Directors
Stockholders
may communicate with our board of directors or any of the directors by sending written communications addressed to the board or
any of the directors to: Encompass Energy Services, Inc., P.O. Box 1218, Oklahoma City, Oklahoma 73101, Attention: Corporate Secretary.
All communications are compiled by the corporate secretary and forwarded to the board of directors or the individual director(s)
accordingly.
Board
Leadership Structure
The
current leadership structure of the board of directors does not include a position of chairman. Rather, our principal executive
officer, who is also a director, serves as the unofficial chairman of the board. Our board of directors has determined our leadership
structure based on factors such as the experience of the applicable individuals and the current business and financial environment
faced by our Company, particularly in view of its limited assets and operations and other relevant factors. After considering
these factors, we determined that its current leadership structure is appropriate at this time. The board of directors is responsible
for the strategic direction of the Company. Our executive officer is currently responsible for the day to day operation and performance
of the Company. The board of directors feels that this provides an appropriate balance of strategic direction, operational focus,
flexibility and oversight.
Risk
Oversight
It
is management’s responsibility to manage risk and bring to the attention of our board of directors any material risks to
the Company. The board of directors has oversight responsibility for the Company’s risk policies and processes relating
to the financial statements and financial reporting processes and the guidelines, policies and processes for mitigating those
risks.
Item
11. Executive Compensation
Executive
Officers
Our
current executive officer is named below:
Name
|
Age
|
Positions
|
Antranik
Armoudian
|
50
|
President,
Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary (Since June 30, 2011)
|
For
a description of the business background and other information concerning Mr. Armoudian, see Item 10 above. All executive officers
serve at the discretion of the board of directors.
Compensation
Decisions
Our
board of directors reviews, approves and modifies our executive compensation programs, plans and awards provided to our directors,
executive officers and key employees. The board of directors also is responsible for our compensation and benefit philosophy,
plans and programs and reviews them as necessary. In reviewing our compensation and benefits policies, the board of directors
may consider a number of factors, including the recruitment, development, promotion, retention and compensation of executive talent,
trends in management compensation, and any other factors that it deems appropriate.
5
Compensation
Discussion and Analysis
Originally,
as compensation for his services as president, chief executive officer, chief financial officer, treasurer and secretary of the
Company, Mr. Armoudian was paid an annual salary of $25,000. However, effective as of October 1, 2012, the board of directors
decided to increase such amount to $150,000 annually, due to Mr. Armoudian’s devotion of increased time and effort to the
Company’s business.
Upon
his appointment as an officer of the Company, Mr. Armoudian was granted a stock option to acquire 50,000 shares of Company common
stock, at an exercise price of $0.10 per share and exercisable for a ten year term. Ten thousand shares underlying the option
have previously vested with the remaining 40,000 to vest when and if the Company completes the acquisition of a business opportunity
and files a current report on Form 8-K (or other appropriate form) reporting such acquisition or transaction. Mr. Armoudian does
not have an employment contract or change-in-control agreement. Mr. Armoudian does not devote all of his business time to the
Company.
Our
stockholders, in a non-binding, advisory vote at our 2013 annual meeting of stockholders, approved Mr. Armoudian’s compensation
for 2012.
Summary
Compensation Table
The
following table sets forth the compensation paid by us for services rendered by our named executive officer during the years ended
December 31, 2013 and 2012.
Name and Principal Position
|
|
|
Year
|
|
|
|
Salary (4)
|
|
|
|
Bonus ($)
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Antranik Armoudian (President, Chief Executive Officer, Chief Financial Officer,
Treasurer and Secretary)
|
|
|
2013
|
|
|
$
|
150,000
|
|
|
$
|
—
|
|
|
$
|
150,000
|
|
|
|
|
2012
|
|
|
$
|
56,250
|
|
|
$
|
17,106
|
|
|
$
|
73,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
Outstanding
Equity Awards
The
following table reflects outstanding options and stock awards held by our named executive officer as of December 31, 2013.
|
|
Option Awards
|
|
|
Number of Securities
Underlying Unexercised
Options (#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
Option
Expiration
Date
|
Name
|
|
Exercisable
|
|
|
Unexercisable
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Antranik Armoudian
|
|
10,000
|
|
|
40,000
|
|
|
$
|
0.10
|
|
|
June 30, 2021
|
June 30, 2021
|
______________________
|
(1)
|
10,000
shares underlying the option have previously vested with the remaining 40,000 to vest
when and if the Company completes the acquisition of a business opportunity and files
a current report on Form 8-K (or other appropriate form) reporting such acquisition or
transaction.
|
Item
13. Certain Relationships and Related Transactions, and Director Independence
Related
Party Transactions
The
board of directors attempts to monitor and evaluate transactions or relationships of the Company with related persons that are
considered material to the Company. “Related persons” include the Company’s directors, executive officers and
nominees for election as directors, persons who beneficially own more than 5% of our Common Stock, and the immediate family members
of these persons. Disinterested members of our board of directors consider such related person transactions and approve them,
if at all, only after full disclosure of the related person’s interest in the transaction and a determination that such
transaction is in, or not opposed to, the interests of the Company and its stockholders. The board of directors does not have
a written related person transaction policy, but the Company educates its directors and executive officers regarding the parameters
governing approval of related person transactions.
During
2012, Deylau, LLC, our controlling stockholder, advanced $196,500 to the Company in exchange for a note payable. During 2013,
Deylau, LLC, advanced an additional $50,000 to the Company on this note payable. This is a demand loan and accrues interest at
5% per annum. No payments of principal or interest had been made on the 2012 or 2013 loan advances as of December 31, 2013.
During
2013, Torus, LLC, an entity in which Deylau, LLC owns a 50% interest, advanced $284,000 to the Company in exchange for a note
payable. This is a demand loan and accrues interest at 5% per annum. No payments of principal or interest had been made on these
advances as of December 31, 2013.
From
January 1 through April 25, 2014, Torus, LLC has advanced an additional $15,355 to the Company on its note
payable. No payments of principal or interest have been made on the 2014 loan advances as of April 25, 2014.
Director
Independence
The
Company does not have any independent directors, based on the standards for independence set forth by the New York Stock Exchange,
which the board of directors utilizes to evaluate such matters.