UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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Filed by the Registrant ☒
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Filed by a Party other than the Registrant ☐
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under §240.14a-12
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TSS, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee paid previously with preliminary materials
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Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 |
110 E. Old Settlers Blvd, Round Rock, TX 78664
(512) 310-3100
April 28, 2023
Dear Stockholder,
We cordially invite you to attend our 2023 Annual Meeting of Stockholders to be held at 10:00 a.m., Central Daylight Time, on Thursday, June 8, 2023, at our offices located at 110 E. Old Settlers Blvd, Round Rock, Texas 78664. The attached notice of annual meeting and this proxy statement describe the business we will conduct at the annual meeting and provide information about us that you should consider when you vote your shares.
At the annual meeting, one person will be elected as a Class III director. In addition, we will ask stockholders to ratify the appointment of Weaver and Tidwell, L.L.P. as our independent registered public accounting firm for our fiscal year ending December 31, 2023. The enclosed proxy statement contains the recommendation of our Board of Directors on each of these proposals.
We hope you will be able to attend the annual meeting. Whether you plan to attend the annual meeting or not, it is important that your shares are represented. Therefore, when you have finished reading the proxy statement, you are urged to complete, sign, date and return the enclosed proxy card promptly in accordance with the instructions set forth on the card. We encourage you to vote by proxy so that your shares will be represented and voted at the meeting, whether or not you can attend.
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Sincerely,
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/s/ Darryll E. Dewan
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Darryll E. Dewan
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President and Chief Executive Officer
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TSS, INC.
110 E. Old Settlers Blvd, Round Rock, TX 78664
(512) 310-3100
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 8, 2023
To the Stockholders
of TSS, Inc.:
NOTICE IS HEREBY GIVEN that the 2023 annual meeting of stockholders of TSS, Inc. will be held at 10:00 a.m., Central Daylight Time, on June 8, 2023 (the “Annual Meeting”) at our offices located at 110 E. Old Settlers Blvd, Round Rock, Texas 78664 for the following purposes:
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To elect Mr. Peter H. Woodward as a Class III director to serve a three-year term;
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To ratify the appointment of Weaver and Tidwell, L.L.P. as our independent registered public accounting firm for the fiscal year ending December 31, 2023; and
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To transact such other business as may properly be presented before the Annual Meeting and any adjournments or postponements thereof.
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Only those holders of our common stock of record as of the close of business on April 28, 2023, are entitled to notice of, and to vote at, the Annual Meeting and at any adjournments or postponements thereof. A list of stockholders of record will be available at the meeting and, during the 10 days prior to the meeting, at our offices at 110 E. Old Settlers Blvd, Round Rock, Texas 78664.
A total of 21,541,591 shares of our common stock were issued and outstanding as of that record date. Each share of our common stock entitles its holder to one vote. Cumulative voting of shares of common stock is not permitted.
All stockholders are cordially invited to attend the Annual Meeting. At least a majority of all issued and outstanding shares of common stock on the record date is required to constitute a quorum. Accordingly, whether you plan to attend the Annual Meeting or not, we ask that you complete, sign, date and return the enclosed proxy card as soon as possible in accordance with the instructions on the proxy card. A pre-addressed, postage prepaid return envelope is enclosed for your convenience.
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BY ORDER OF THE BOARD OF DIRECTORS
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/s/ Darryll E. Dewan
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Darryll E. Dewan
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President and Chief Executive Officer
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TABLE OF CONTENTS
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Page
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GENERAL INFORMATION ABOUT THE ANNUAL MEETING
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1
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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4
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MANAGEMENT AND CORPORATE GOVERNANCE
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5
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EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
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9
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REPORT OF AUDIT COMMITTEE
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14
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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15
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PROPOSALS TO BE VOTED UPON BY STOCKHOLDERS
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CODE OF CONDUCT AND ETHICS
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OTHER MATTERS
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STOCKHOLDER PROPOSALS
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TSS, INC.
110 E. Old Settlers Blvd, Round Rock, TX 78664
(512) 310-3100
PROXY STATEMENT
2023 ANNUAL MEETING OF STOCKHOLDERS
GENERAL INFORMATION ABOUT THE ANNUAL MEETING
Why Did You Send Me this Proxy Statement?
We sent you this proxy statement and the enclosed proxy card because our Board of Directors is soliciting your proxy to vote at the 2023 Annual Meeting of Stockholders, and any adjournments or postponements of the meeting, to be held at 10:00 a.m., Central Daylight Time, on Thursday, June 8, 2023, at 110 E. Old Settlers Blvd, Round Rock, Texas 78664. This proxy statement along with the accompanying notice of annual meeting of stockholders summarizes the purposes of the meeting and the information you need to know to vote at the annual meeting.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on June 8, 2023. The proxy statement and annual report to security holders are available at http://www.cstproxy.com/tss/2023.
On or around April 28, 2023, we began sending this proxy statement, the attached notice of annual meeting of stockholders and the enclosed proxy card to all stockholders entitled to vote at the meeting. Although not part of this proxy statement, our Annual Report on Form 10-K for the year ended December 31, 2022, which includes our financial statements for the fiscal year ended December 31, 2022, accompanies this proxy statement. You can also find a copy of this proxy statement and our Annual Report on Form 10-K for the year ended December 31, 2022 at http://www.cstproxy.com/tss/2023.
Who Can Vote?
Only stockholders who owned our common stock at the close of business on April 28, 2023 are entitled to vote at the annual meeting. On this record date, there were 21,541,591 shares of our common stock outstanding and entitled to vote. Our common stock is our only class of voting stock.
You do not need to attend the annual meeting to vote your shares. Shares represented by valid proxies, received in time for the meeting and not revoked prior to the meeting will be voted at the meeting. A stockholder may revoke a proxy before the proxy is voted by providing a signed statement of revocation or a duly executed proxy card bearing a later date to us at 110 E. Old Settlers Blvd, Round Rock, Texas 78664, Attention: John Penver, Chief Financial Officer. Any stockholder who has executed a proxy card but attends the meeting in person may revoke the proxy and vote at the meeting.
How Many Votes Do I Have?
Each share of our common stock that you own entitles you to one vote.
How Do I Vote?
Whether you plan to attend the annual meeting or not, we urge you to vote by proxy. Voting by proxy will not affect your right to attend the annual meeting. If your shares are registered directly in your name through our stock transfer agent, Continental Stock Transfer & Trust Company, 17 Battery Place, New York, NY 10004, or you have stock certificates, you may vote:
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By mail. Complete and mail the enclosed proxy card in the enclosed postage prepaid envelope. Your proxy will be voted in accordance with your instructions. If you sign the proxy card but do not specify how you want your shares voted, they will be voted as recommended by our Board of Directors.
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In person at the meeting. If you attend the annual meeting, you may deliver your completed proxy card in person or you may vote by completing a ballot, which will be available at the meeting.
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If your shares are held in “street name” (held in the name of a bank, broker or other nominee), you must provide the bank, broker or other nominee with instructions on how to vote your shares and can do so as follows:
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By mail. You will receive instructions from your bank, broker or other nominee explaining how to vote your shares.
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In person at the meeting. Contact the bank, broker or other nominee who holds your shares to obtain a broker’s proxy card and bring it with you to the meeting. You will not be able to vote at the meeting unless you have a proxy card from your broker.
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How Does the Board of Directors Recommend That I Vote on the Proposals?
The Board of Directors recommends that you vote as follows:
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“FOR” the election of Mr. Peter H. Woodward as a Class III director; and
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“FOR” the ratification of the appointment of Weaver and Tidwell, L.L.P. as our independent registered public accounting firm for our fiscal year ending December 31, 2023.
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If any other matter is presented, the proxy card provides that your shares will be voted by the proxy holder listed on the proxy card in accordance with his best judgment. At the time this proxy statement was printed, we knew of no matters that needed to be acted on at the annual meeting, other than those discussed in this proxy statement.
May I Revoke My Proxy?
If you give us your proxy, you may revoke it at any time before the meeting. You may revoke your proxy in any one of the following ways:
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Signing a new proxy card and submitting it, as instructed above;
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Notifying us at 110 E. Old Settlers Blvd, Round Rock, Texas 78664, Attention: John Penver, Chief Financial Officer, in writing before the annual meeting that you have revoked your proxy; or
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Attending the meeting in person and voting in person. Attending the meeting in person will not in and of itself revoke a previously submitted proxy, unless you specifically request it.
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What if I Receive More Than One Proxy Card?
You may receive more than one proxy card or voting instruction form if you hold shares of our common stock in more than one account, which may be in registered form or held in street name. Please vote in the manner described under “How Do I Vote?” for each account to ensure that all of your shares are voted.
Will My Shares be Voted if I Do Not Return My Proxy Card?
If your shares are registered in your name or if you have stock certificates, your shares will not be voted if you do not return your proxy card by mail or vote at the meeting as described above under “How Do I Vote?”
If your shares are held in street name and you do not provide voting instructions to the bank, broker or other nominee that holds your shares as described above under “How Do I Vote?,” the bank, broker or other nominee has the authority to vote your unvoted shares on Proposal 2, even if it does not receive instructions from you. We encourage you to provide voting instructions. This ensures your shares will be voted at the meeting in the manner you desire. If your bank, broker or other nominee cannot vote your shares on a particular matter because it has not received instructions from you and does not have discretionary voting authority on that matter, this is referred to as a “broker non-vote.”
What Vote is Required to Approve Each Proposal and How are Votes Counted?
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Proposal 1: Elect One Director
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The affirmative vote of a plurality of the shares of common stock cast by stockholders present in person or represented by proxy at the annual meeting is required to elect Mr. Peter H. Woodward as a Class III director. You may vote either FOR the nominee or WITHHOLD your vote from the nominee. Votes that are withheld will not be included in the vote for the election of directors. Banks, brokers, and other nominees DO NOT have the authority to vote your uninstructed shares in the election of directors. If you hold your shares in street name and you do not instruct your bank, broker, or other nominee how to vote your shares in the election of directors, no votes will be cast on your behalf. Broker non-votes will have no effect on the outcome of the election.
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Proposal 2: Ratify the Appointment of Independent Registered Public Accounting Firm
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The affirmative vote of a majority of the votes present in person or represented by proxy and entitled to vote at the annual meeting is required to ratify the appointment of our independent registered public accounting firm. Abstentions will be treated as shares represented at the meeting and will have the same effect as votes against this proposal. Banks, brokers, and other nominees have discretionary authority to vote customers’ uninstructed shares held by the firms in street name on this proposal. We are not required to obtain the approval of our stockholders to appoint our independent registered public accounting firm. If our stockholders do not ratify the appointment of Weaver and Tidwell, L.L.P. as our independent registered public accounting firm for the year ending December 31, 2023, the Audit Committee of our Board of Directors will reconsider its appointment.
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Is Voting Confidential?
We will keep all the proxies, ballots and voting tabulations private. We only let our Inspector of Election and Continental Stock Transfer & Trust Company examine these documents. Management will not know how you voted on a specific proposal unless it is necessary to meet legal requirements. We will, however, receive any written comments you make on the proxy card or elsewhere.
Could the Annual Meeting be Postponed?
If a quorum is not present or represented at the annual meeting, the chair of the meeting or the stockholders entitled to vote at the meeting have the power to postpone the meeting.
What Are the Costs of Soliciting these Proxies?
We will pay all of the costs of soliciting these proxies. Our directors and employees may solicit proxies in person or by telephone, fax or email. We will pay these employees and directors no additional compensation for these services. We will ask banks, brokers and other institutions, nominees and fiduciaries to forward these proxy materials to their principals and to obtain authority to execute proxies. We will then reimburse them for their expenses.
What Constitutes a Quorum for the Meeting?
The presence, in person or by proxy, of the holders of a majority of the outstanding shares of our common stock as of the record date is necessary to constitute a quorum at the meeting. Votes of stockholders of record who are present at the meeting in person or by proxy, abstentions, and broker non-votes are counted for purposes of determining whether a quorum exists.
Attending the Annual Meeting
The annual meeting will be held at 10:00 a.m., Central Daylight Time, on Thursday, June 86, 2023, at our offices at 110 E. Old Settlers Blvd, Round Rock, Texas 78664. When you arrive at our offices, signs will direct you to the appropriate meeting rooms. You need not attend the annual meeting in order to vote.
Householding of Annual Disclosure Documents
The Securities and Exchange Commission has adopted a rule concerning the delivery of annual disclosure documents. The rule allows us, or your broker, to send a single set of our annual report and proxy statement to any household at which two or more of our stockholders reside, if we or your broker believe that the stockholders are members of the same family. This practice, referred to as “householding,” benefits both you and us. It reduces the volume of duplicate information received at your household and helps to reduce our expenses. The rule applies to our annual reports, proxy statements and information statements. Once you receive notice from your broker or from us that communications to your address will be “householded,” the practice will continue until you are otherwise notified or until you revoke your consent to the practice. Each stockholder will continue to receive a separate proxy card or voting instruction card.
If you do not wish to participate in “householding” and would like to receive your own set of our annual disclosure documents in future years, follow the instructions described below. Conversely, if you share an address with another stockholder and together both of you would like to receive only a single set of our annual disclosure documents, follow these instructions:
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If your shares are registered in your own name, please contact our transfer agent, Continental Stock Transfer & Trust Company, and inform them of your request by calling them at 212.509.4000 ext. 206, or by e-mail at cstmail@continentalstock.com , or writing them at 17 Battery Place, New York, NY 10004.
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If a broker or other nominee holds your shares, please contact the broker or other nominee directly and inform them of your request. Be sure to include your name, the name of your brokerage firm and your account number.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of April 28, 2023 for (a) each of our executive officers named in the Summary Compensation Table on page 10 of this proxy statement, (b) each of our directors and director nominees, (c) all of our current directors and executive officers as a group and (d) each stockholder known by us to own beneficially more than 5% of our common stock. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Except as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them based on information provided to us by these stockholders. Percentage of ownership is based on 21,541,591 shares of common stock outstanding on April 28, 2023. Unless otherwise indicated, the address for each director and current executive officer is c/o TSS, Inc., 110 E. Old Settlers Blvd, Round Rock, Texas 78664.
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Beneficially Owned
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Ownership
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Directors and Executive Officers
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Peter H. Woodward (1)
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3,928,350 |
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18.07 |
%
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Darryl E. Dewan
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%
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Anthony Angelini
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983,787 |
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4.57 |
%
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Richard M. Metzler (2)
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100,000 |
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0.46 |
%
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John K. Penver (3)
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1,167,274 |
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5.37 |
%
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Kieran P. Brennan (4)
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742,425 |
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3.41 |
%
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All directors and officers combined as a group (5 persons) (5)
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5,938,049 |
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26.64 |
%
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5% Stockholders
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MHW Capital Management, LLC (1)
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3,928,350 |
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18.07 |
%
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Norman H. Pessin (6)
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2,021,189 |
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9.38 |
%
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Glen Ikeda(7)
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1,606,856 |
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7.46 |
%
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(1)
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Derived from a Schedule 13D/A (Amendment No. 5) filed jointly by MHW Capital Management, LLC, Peter H. Woodward, MHW Partners, L.P., and MHW SPV II, LLC on May 21, 2019. According to the Schedule 13D/A, MHW Capital Management LLC has shared voting and dispositive power with respect to 3,728,350 shares, MHW Partners, L.P., has shared voting and dispositive power with respect to 1,852,524 shares and MHW SPV II, LLC has sole voting and dispositive power with respect to 1,115,826 shares. Mr. Woodward has shared voting and dispositive power with respect to 3,728,350 shares, and he has sole voting and dispositive power with respect to 200,000 shares that may be acquired within 60 days of the record date by exercising stock options. Mr. Woodward is a principal of MHW Capital Management, LLC, which is the investment manager of MHW Partners, L.P. and MHW SPV II, LLC, and may be considered to have beneficial ownership of the shares held by MHW Partners, L.P. and other entities for which MHW Capital Management, LLC acts as investment manager. Mr. Woodward disclaims beneficial ownership of these shares except to the extent of his pecuniary interest in the shares. The business address of MHW Capital Management is 150 East 52
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(2)
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Includes 100,000 shares that may be acquired by Mr. Metzler within 60 days of the record date by exercising stock options.
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(3)
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Includes 193,333 shares of restricted stock that are subject to forfeiture and 200,000 shares that may be acquired by Mr. Penver within 60 days of the record date by exercising stock options.
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(4)
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Includes 100,000 shares of restricted stock that are subject to forfeiture and 250,000 shares that may be acquired by Mr. Brennan within 60 days of the record date by exercising stock options.
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(5)
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Includes 293,333 shares of restricted stock that are subject to forfeiture and 750,000 shares that may be acquired within 60 days of the record date by exercising stock options.
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(6)
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Derived from a Schedule 13D/A (Amendment No. 3) filed jointly by Norman H. Pessin and Brian Pessin on August 1, 2016. According to the Schedule 13D/A, Mr. Norman Pessin has sole voting and dispositive power with respect to 1,468,789 shares, and Mr. Brian Pessin has sole voting and dispositive power with respect to 552,400 shares. The business address of Mr. Norman Pessin and Mr. Brian Pessin is 366 Madison Avenue, 14
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(7)
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Derived from a Schedule 13G/A (Amendment No. 1) filed by Glen Ikeda on January 8, 2019. According to the Schedule 13G, Mr. Ikeda has sole voting and dispositive power with respect to 1,606,856 shares. The business address of Mr. Ikeda is PO Box 3306, Auburn, California 95604.
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MANAGEMENT AND CORPORATE GOVERNANCE
The Board of Directors
Our Certificate of Incorporation and Amended and Restated Bylaws provide that our business is to be managed by or under the direction of our Board of Directors. We do not have a policy as to whether the role of Chief Executive Officer and Chairman of the Board of Directors should be separate or combined or whether the Chairman of the Board of Directors should be a management or non-management director. Our Board of Directors believes that having an independent director serve as the non-executive Chairman of our Board of Directors is in the best interests of our stockholders. This structure allows the Chairman of our Board of Directors to focus on the effectiveness of our Board of Directors while the Chief Executive Officer focuses on executing our strategic plan and managing our operations and performance.
In accordance with our Certificate of Incorporation, our Board of Directors is divided into three classes for purposes of election. One class is elected at each annual meeting of stockholders to serve for a three-year term. Our Board of Directors currently consists of three members, classified into three classes as follows:
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Mr. Peter H. Woodward constitutes a class with a term ending at the 2023 Annual Meeting of Stockholders;
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Mr. Richard M. Metzler constitutes a class with a term ending at the 2024 Annual Meeting of Stockholders; and
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Mr. Darryll E. Dewan constitutes a class with a term ending at the 2025 Annual Meeting of Stockholders.
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Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.
Our Board of Directors has voted to nominate Mr. Woodward for election at the 2023 Annual Meeting of Stockholders for a term of three years to serve until the 2026 Annual Meeting of Stockholders and until his successor has been elected and qualified, or until his earlier death, resignation or removal.
Set forth below are the names of the persons nominated for director and our current directors whose terms do not expire this year, their ages, their offices in the company, if any, their principal occupations or employment for the past five years, the length of their tenure as directors, the names of other public companies in which such persons have held directorships during the past five years, and the experience, qualifications, attributes and skills that support the conclusion that these persons should serve as members of our Board of Directors. Mr. Woodward and Mr. Metzler are non-employee directors and the members of the Audit Committee and the Compensation Committee.
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Name
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Age
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Position with the Company
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Peter H. Woodward
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50
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Chairman
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Richard M. Metzler
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70
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Director
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Darryll E. Dewan
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71
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Chief Executive Officer and Director
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Peter H. Woodward, age 50, has been a Director since January 3, 2012, and Chairman of our Board of Directors since March 2012. Mr. Woodward is the Founder and President of MHW Capital Management, a private investment firm that takes concentrated positions in micro-cap turnaround companies, with a focus on the technology sector. Prior to founding MHW Capital Management in 2005, Mr. Woodward was a Managing Director at Regan Fund Management Ltd., a hedge fund group specializing in active equity investments in public companies and revitalizing their business plans. In addition to serving as the Chairman of our Board of Directors, Mr. Woodward serves as the Chairman of the Board of Directors of Precision Optics Corporation and as the Chief Executive Officer of Innovative Power, LLC. Previously, he served as Chief Executive Officer and director of Cartesian, Inc., Chairman of the Board of Hampshire Group, Limited, and as a Director at News Edge Corp., Zomax, Inc. and Innodata-Isogen, Inc. Mr. Woodward holds a Bachelor of Arts degree in Economics from Colgate University and a Master’s degree in International Economics from Columbia University. He is a Chartered Financial Analyst. Mr. Woodward is very familiar with our industry and his capital markets experience is valuable to our Board of Directors.
Richard M Metzler age 70, has been a Director since April 2021. From 2018 until January 2022, Mr. Metzler served as the Chief Executive Officer of Lone Star Overnight, LLC, a third-party delivery services provider, and, since January 2021, has also served as the Chief Executive Officer of Ocelot Acquisition Corporation I, a special-purpose acquisition company. Mr. Metzler has over 25 years of senior leadership experience within the logistics industry, specifically within parcel, freight, third-party logistics, and e-commerce. Prior to his role at Lone Star Overnight, LLC, Mr. Metzler served as the Chief Marketing Officer at Austin-based uShip, Inc., an online marketplace for shipping services, from 2013 to 2018. Previously, Mr. Metzler has held leadership roles including Vice President of FedEx Logistics, CEO of APL Logistics, Executive Vice President at DHL, and Chief Commercial Officer at Greatwide Logistics. Since 2017, Mr. Metzler has served as the Chairman of the board of directors and as a member of the compensation committee for iGPS Logistics, a private company. Mr. Metzler has also worked extensively with private equity, debt financing, venture capital, and as a senior leader in portfolio companies advising on investments and divestitures. Mr. Metzler also brings with him extensive global M&A experience. Mr. Metzler provides our Board of Directors with substantial financing and M&A expertise and significant operational and executive experiences gained in his capacity as a chief executive officer and board member of rapidly growing businesses in the logistics industry.
Darryll E. Dewan, age 71, has served as a Director and as our President and Chief Executive Officer since November 2022. Prior to joining TSS, Mr. Dewan was a Vice President at Dell Technologies, Inc. from 2012 until November 2022 where he served as the global sales leader for all direct and indirect sales, field operations and marketing of the Dell Endpoint Data Security Business. Prior to his role at Dell, Mr. Dewan held various executive level positions in sales, marketing and business development with companies including Credant Technologies, Inc., VA Software Solutions, i2 Technologies, Amdahl Corp and IBM. Mr. Dewan holds a Bachelor of Arts degree in economics from the University of Notre Dame. Mr. Dewan provides our Board of Directors with over 30 years of experience as a senior executive and is very familiar with our industry.
Director Independence
The Board of Directors has adopted the director independence standards of The NASDAQ Stock Market, LLC. Our Board of Directors has reviewed the materiality of any relationship that each of our directors has with the company, either directly or indirectly. Based upon this review, our Board of Directors has determined that each of Mr. Woodward and Mr. Metzler is an “independent director” as defined by The NASDAQ Stock Market, LLC and has no material relationship with us, except as a director and/or stockholder. When determining the independence of Mr. Woodward, the Board of Directors considered the amount of stock owned by Mr. Woodward and his affiliates and the outstanding amount of notes payable to affiliates of Mr. Woodward.
Role in Risk Oversight
As part of its general responsibility to manage our business, the Board of Directors has oversight responsibility with respect to risk management. The Board of Directors has delegated primary responsibility for risk oversight and the monitoring of our significant areas of risk to the Audit Committee. In accordance with its charter, the Audit Committee inquires of management and our independent registered accounting firm about significant risks or exposures to risks and discusses guidelines and policies to govern the steps management has taken to minimize these risks. The Audit Committee regularly reports the results of these inquiries and discussions to our Board of Directors.
Committees of the Board of Directors and Meetings
Meeting Attendance
Although we do not have any formal policy regarding director attendance at our annual meetings, we attempt to schedule our annual meetings so that all of our directors can attend. All of our directors attended the 2022 Annual Meeting of Stockholders either in person or telephonically. During 2022, the Board of Directors met two times. During the fiscal year ended December 31, 2022, all of our directors attended at least 75% of the meetings of the Board of Directors and committees of the Board of Directors on which they served.
Audit Committee
Our Audit Committee currently has two members, Peter H. Woodward and Richard Metzler. Our Audit Committee’s role and responsibilities are set forth in a written charter and include the authority to retain and terminate the services of our independent registered public accounting firm, review annual financial statements, review quarterly financial statements, consider matters relating to accounting policy and internal controls and review the scope of annual audits. The Audit Committee met four times in 2022.
Each of Mr. Woodward and Mr. Metzler satisfies the current independence standards promulgated by the Securities and Exchange Commission and The NASDAQ Stock Market, LLC, as such standards apply specifically to members of audit committees. The Board has determined that each of Mr. Woodward and Mr. Metzler is an “audit committee financial expert,” as the Securities and Exchange Commission has defined that term in Item 407 of Regulation S-K. Please also see the report of the Audit Committee set forth elsewhere in this proxy statement.
A copy of the Audit Committee’s written charter is publicly available on our website at www.tssiusa.com.
Compensation Committee
Our Compensation Committee currently has two members, Peter H. Woodward and Richard Metzler. Our Compensation Committee reviews, approves and makes recommendations regarding our compensation policies, practices and procedures to ensure that legal and fiduciary responsibilities of the Board of Directors are carried out and that such policies, practices and procedures contribute to our success. The Compensation Committee is responsible for the determination of the compensation of our Chief Executive Officer, Chief Financial Officer and Senior Vice President, Sales & Marketing and conducts its decision-making process with respect to their compensation without the Chief Executive Officer, Chief Financial Officer, and Senior Vice President, Sales & Marketing present. Each of Mr. Woodward and Mr. Metzler qualifies as an independent director under the definition promulgated by The NASDAQ Stock Market, LLC. The Compensation Committee met one time during 2022.
The Compensation Committee has the responsibility to:
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review, modify and approve our overall compensation strategy;
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recommend to the Board of Directors the compensation and terms of employment of our executive officers, including Darryll E. Dewan, our Chief Executive Officer, John K. Penver, our Chief Financial Officer, and Kieran Brennan, our Senior Vice President, Sales & Marketing, and to evaluate their respective performance in light of relevant goals and objectives;
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review and recommend to our Board of Directors the type and amount of compensation to be paid or awarded to the members of our Board of Directors;
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recommend to our Board of Directors the adoption, amendment and termination of any bonus, equity and other deferred compensation plans;
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administer all equity-based plans, including the 2015 Omnibus Incentive Compensation Plan;
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determine appropriate insurance coverage for our executive officers and directors; and
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review, discuss and assess its own performance at least annually.
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Our Compensation Committee approves and makes recommendations to our Board of Directors with respect to the compensation for our executive officers (other than Mr. Dewan) with the advice of Mr. Dewan and/or one or more other executive officers designated by Mr. Dewan. Although the Compensation Committee receives information and recommendations regarding the design and level of compensation for the executive officers from management, the Compensation Committee makes the final recommendations to the Board of Directors as to the design and compensation levels for the executive officers. To the extent we enter into employment agreements with our executive officers, those agreements would be subject to negotiation between us and the applicable executive officer. The Compensation Committee did not engage a compensation consultant in 2022.
A copy of the Compensation Committee’s written charter is publicly available on our website at www.tssiusa.com.
Nominations for Directors
We do not currently have a standing Nominating Committee. Our Board of Directors has determined that Mr. Woodward and Mr. Metzler, the independent members of the Board of Directors, adequately fulfill the obligations of a nominating committee without the need of incurring additional costs of committee meetings.
The Board of Directors considers recommendations of potential candidates from current directors, management and stockholders. Stockholders’ nominations for directors must be made in writing and must include the following information:
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the name, age, business address, and residence address of the nominee;
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the principal occupation or employment of the nominee;
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the number of shares of our common stock that are beneficially owned by the nominee;
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any other information relating to the nominee that is required to be disclosed in the solicitations for proxies for the election of directors under the rules and regulations of the Securities and Exchange Commission;
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the name and record address of the stockholder making the nomination; and
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the number of shares of common stock that are beneficially owned by the stockholder making the nomination.
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Nominations by stockholders must be delivered to or mailed and received at our headquarters address listed below, and generally must be received no later than 60 days nor earlier than 90 days prior to the meeting. However, in the event that less than 75 days’ notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholders to be timely must be received no later than the close of business on the fifteenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs.
Secretary of TSS, Inc.
110 E. Old Settlers Blvd.
Round Rock, Texas 78664
If a vacancy were to occur on the Board of Directors or if the Board were to increase the number of directors, the Board of Directors would identify potential candidates to fill the vacancy. Although there are no specific qualifications and standards that must be met by a candidate or any specific qualities or skills that a candidate must possess, the Board of Directors would evaluate a candidate on a wide variety of factors. These factors include the candidate’s background and qualifications, diversity and business experience, and commitment to serving on the Board of Directors and its committees. It is preferable that candidates have a reputation for sound business judgment and integrity and inspire trust and confidence in the other directors. The Board of Directors does not have a formal policy regarding diversity in identifying candidates but rather considers diversity among the various factors relevant to any particular candidate.
Stockholder Communications to the Board
Stockholders who wish to address questions regarding our business directly with the Board of Directors, or any individual director, should direct his or her questions in writing to the Chairman of the Board of Directors at 110 E. Old Settlers Blvd, Round Rock, Texas 78664. Communications will be distributed to the Board of Directors, or to any individual director or directors as appropriate, depending on the facts and circumstances outlined in the communications. Items that are unrelated to the duties and responsibilities of the Board of Directors may be excluded, such as:
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junk mail and mass mailings,
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resumes and other forms of job inquiries,
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solicitations or advertisements.
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In addition, any material that is unduly hostile, threatening, or illegal in nature may be excluded, provided that any communication that is filtered out will be made available to any outside director upon request.
EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
Summary Compensation Table
The following table shows the total compensation earned during the last two fiscal years ended December 31, 2022 and 2021 to (1) our President and Chief Executive Officer, (2) our Chief Financial Officer, and (3) our Senior Vice President, Sales & Marketing (collectively, the “named executive officers”).
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Name and Principal Position(s)
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Year
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Salary
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Bonus
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Stock Awards (1)
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All Other Compensation (2) |
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Total
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Darryll E. Dewan
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2022
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$ |
44,423 |
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$ |
- |
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$ |
512,500 |
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$ |
10,000 |
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$ |
566,923 |
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| President and Chief Executive Officer(3) |
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Anthony Angelini
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2022
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385,000 |
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69,300 |
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- |
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- |
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454,300 |
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| President and Chief Executive Officer(4) |
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2021
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370,417 |
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35,000 |
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- |
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- |
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405,417 |
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John K. Penver
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2022
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275,000 |
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42,969 |
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- |
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- |
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317,969 |
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| Chief Financial Officer |
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2021
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|
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264,583 |
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25,000 |
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- |
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- |
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289,583 |
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Kieran P. Brennan
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2022
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250,000 |
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77,000 |
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- |
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- |
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327,000 |
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| Senior Vice President, Sales & Marketing |
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2021
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250,000 |
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- |
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- |
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- |
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250,000 |
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(1)
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Amounts shown are the grant date fair value of stock option awards. The grant date fair value of the award is based on the Black-Scholes-Merton valuation model.
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(2)
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Includes housing and relocation allowances in connection with Mr. Dewan’s relocation to Texas.
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(3)
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Mr. Dewan was appointed the President and Chief Executive Officer effective November 14, 2022.
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(4)
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Mr. Angelini ceased being the President and Chief Executive Officer upon Mr. Dewan’s appointment effective November 14, 2022.
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Outstanding Equity Awards at Fiscal Year End
The following table provides information about all equity compensation awards held by the named executive officers at December 31, 2022.
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Option Awards
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Stock Awards
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Name
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Number of
securities
underlying
unexercised
options
(#)
Exercisable
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Equity incentive
plan awards:
Number of
securities
underlying
unexercised
unearned
options
(#)
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Option
exercise
price
($)
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Option
Expiration Date
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Number of
shares or units
of stock that
have not vested
(#)
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Market value
of share or
units of stock
that have not
vested (1)
($)
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Darryll E. Dewan
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- |
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1,250,000 |
(2) |
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$ |
0.62 |
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11/14/2032
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Anthony Angelini
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- |
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- |
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- |
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- |
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- |
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John K. Penver
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200,000 |
(3) |
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- |
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0.10 |
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8/29/2024
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93,333 |
(4) |
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$ |
52,266 |
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Kieran P. Brennan
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250,000 |
(5) |
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- |
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0.49 |
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1/22/2028
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- |
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- |
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(1)
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Computed based on a closing market price of $0.56 per share for the Company’s common stock at December 31, 2022.
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(2)
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Represents an award of stock options to purchase 1,2500,000 shares of our common stock granted to Mr. Dewan on November 14, 2022 that will vest in three equal annual installments of 416,667 shares on each of the first, second and third anniversaries of the grant date. These options become immediately exercisable in the event of a Change in Control (as defined in the executive’s employment agreement.
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(3)
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These stock options became exercisable (a) with respect to 150,000 shares on April 10, 2018, and (b) with respect to 150,000 shares on April 10, 2019.
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(4)
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Represents the unvested portion of an award of 280,000 restricted shares of our common stock granted to Mr. Penver on August 6, 2020 under the 2015 Plan that vest in three equal annual installments of 93,333 shares on each of the first, second and third anniversaries of the grant date.
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(5)
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Represent an award of stock options to acquire 250,000 shares of our common stock granted to Mr. Brennan on January 22, 2018. The options become exercisable in three equal annual installments of 83,333 shares on each of the first, second and third anniversaries of the grant date. These options become immediately exercisable in the event of a Change in Control (as defined in the executive’s employment agreement.
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Retirement Plans
We have a tax qualified 401(k) plan designed to assist our eligible officers and employees in providing for their retirement. We currently do not match employee contributions to the plan.
Executive Officer and Employment Agreements
President and Chief Executive Officer
On November 14, 2022, we entered into an employment agreement with Mr. Dewan. Under that employment agreement, Mr. Dewan’s annual base salary is $385,000 and he is eligible to receive a bonus in an amount and on terms established by our Board of Directors. Mr. Dewan is entitled to receive vacation, health insurance, and other benefits generally made available to our other executives and reimbursement for reasonable, out-of-pocket expenses actually incurred by him relating to travel to our various corporate offices. During the first twelve (12) months of Mr. Dewan’s employment, the Company shall pay Mr. Dewan a housing allowance of $5,000 per month. If we terminate Mr. Dewan’s employment other than for “Cause” (as defined in the employment agreement), Mr. Dewan terminates his employment for a “Good Reason” (as defined in the employment agreement), we will (1) continue paying Mr. Dewan his base salary commencing on the date of termination and ending (a) three months from the date of termination if his employment is terminated on or before November 14, 2023, or (b) twelve months from the date of termination if the termination of employment is terminated following November 14, 2023, and (2) a pro-rated amount of the annual bonus that Mr. Dewan would have been paid if he remained employed with the Company.
Chief Financial Officer
Mr. Penver has been our Chief Financial Officer since August 29, 2014, and, from July 2, 2014, until August 29, 2014, was our Interim Chief Financial Officer. Mr. Penver was the Chief Financial Officer of Fallbrook Technologies, Inc., a privately held manufacturer of mechanical transmission systems and technologies, from November 2012 until February 2014. From February 2005 until October 2012, Mr. Penver was the Vice President of Finance, Chief Financial Officer and Company Secretary of Active Power, Inc., a manufacturer of uninterruptible power systems and modular infrastructure solutions for data centers. Mr. Penver has also held a number of senior financial leadership positions including with Silicon Gaming, Inc., Factory Logic, Inc. and Deloitte & Touche LLP in the United States and Australia. Mr. Penver has an MBA from Santa Clara University and a Bachelor of Business degree from Monash University (Australia), and is a Certified Public Accountant as well as a Chartered Accountant.
On August 29, 2014, we entered into an employment agreement with Mr. Penver. Under that employment agreement, Mr. Penver’s annual base salary is $250,000, and he is eligible to receive a bonus in an amount and on terms established by our Board of Directors. On June 1, 2021, that employment agreement was amended to increase Mr. Penver’s base salary to $275,000. Mr. Penver is entitled to receive vacation, health insurance, and other benefits generally made available to our other executives. If we terminate Mr. Penver’s employment other than for “Cause” (as defined in the employment agreement) or Mr. Penver terminates his employment for a “Good Reason” (as defined in the employment agreement), we will continue paying Mr. Penver his base salary commencing on the date of termination and ending (a) six months from the date of termination, or (b) twelve months from the date of termination if the termination of employment is terminated within twelve months following a Change in Control (as defined in the employment agreement).
Senior Vice President of Sales & Marketing
Mr. Brennan was hired as our Senior Vice President of Sales & Marketing on January 22, 2018. Prior to joining us, from 2013 until January 2018, Mr. Brennan was the Director of Sales – Technology for Neovia Logistics Services, LLC, a privately held global third-party logistics and distribution company. From 2010 until 2013, Mr. Brennan was the Director of North America Business Development for Syncreon, Inc., a global contract logistics company. Mr. Brennan has also held a number of senior sales and business development leadership positions including with Stream Global Services, Solectron, Modus Media, Cap Gemini, and Ernst & Young. Mr. Brennan has a Bachelor of Science (Finance) degree from California State University (Long Beach).
On January 22, 2018, we entered into an employment agreement with Mr. Brennan. Under that employment agreement, Mr. Brennan’s annual base salary is $250,000, and he is eligible to receive a bonus in an amount and on terms established by our Board of Directors. Mr. Brennan is entitled to receive vacation, health insurance, and other benefits generally made available to our other executives. If we terminate Mr. Brennan’s employment other than for “Cause” (as defined in the employment agreement) or Mr. Brennan terminates his employment for a “Good Reason” (as defined in the employment agreement), we will continue paying Mr. Brennan his base salary commencing on the date of termination and ending (a) six months from the date of termination, or (b) twelve months from the date of termination if the termination of employment is terminated within twelve months following a Change in Control (as defined in the employment agreement).
Director Compensation
In 2022, we compensated each of our non-employee directors an annual retainer of $22,500. The Chairman of our Board of Directors earned an additional annual retainer of $12,500, the Chairman of the Audit Committee earned an additional annual retainer of $5,000, and the Chairman of the Compensation Committee earned an additional annual retainer of $2,500.
In April 2017, we granted Mr. Woodward an option to purchase 200,000 shares of our common stock which vested on the first anniversary of the date of grant. These options were also outstanding at December 31, 2022. In May 2021, upon his joining the Board of Directors, we granted Mr. Metzler an option to purchase 150,000 shares of our common stock which vest over a three-year period. These options were outstanding at December 31, 2022.
We also reimburse our directors for travel, lodging and other reasonable out-of-pocket expenses in connection with the attendance at Board, committee, and stockholder meetings, as well as for other reasonable expenses related to service on the Board. We do not maintain any pension, nonqualified defined contribution or other deferred compensation plans for our non-employee directors. The following table summarizes compensation earned by our non-employee directors during fiscal year 2022.
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Name
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Fees earned or
paid in cash
($)
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Stock Awards
($)
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Option Awards
($)
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All other
compensation
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Total
($)
|
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Peter H. Woodward
|
|
$ |
43,333 |
|
|
|
- |
|
|
$ |
- |
|
|
|
$ |
43,333 |
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Richard M. Metzler
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|
|
26,667 |
|
|
|
- |
|
|
|
- |
|
|
|
|
26,667 |
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Pay versus Performance
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation and certain financial performance of the Company for each of the last two completed calendar years. In determining the “compensation actually paid” to our named executive officers (“NEOs”), we are required to make various adjustments to amounts that have previously been reported in the Summary Compensation Table in previous years, as the SEC’s calculation method for this section differs from those required in the Summary Compensation Table. The disclosure included in this section is prescribed by SEC rules and does not necessarily align with how the Company or the Compensation Committee view the link between the Company’s performance and the compensation paid to the NEOs.
The table below presents information of our principal executive office (“PEO”) and our NEOs in comparison to certain financial performance metrics for 2022 and 2021. The metrics are not those that the Compensation Committee uses when setting executive compensation. The use of the term “compensation actually paid” (“CAP”) is required by the SEC rules. Neither CAP nor the total amount reported in the Summary Compensation Table (“SCT”) reflect the amount of compensation actually paid, earned or received during the applicable year. Per SEC rules, CAP was calculated by adjusting the SCT total values for the applicable year as described in the footnotes to the table.
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Summary Compensation Table
Total for PEOs (1)(2)
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|
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Compensation Actually
Paid to PEOs (3)
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|
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Average
Summary
Compensation
Table Total for
Non-PEO
|
|
|
Average
Compensation
Actually Paid
to Non-PEO
|
|
|
Value of
Initial Fixed
$100
Investment
Based on
Total
Shareholder
|
|
|
Net income
(loss)
|
|
| Years |
|
PEO 1
|
|
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PEO 2
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PEO 1
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PEO 2
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NEOs (4) |
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NEOs (5) |
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Return (6) |
|
|
((000’s) |
|
|
2022
|
|
|
454,300 |
|
|
|
566,923 |
|
|
|
492,633 |
|
|
|
466,923 |
|
|
|
322,485 |
|
|
|
332,751 |
|
|
$ |
97 |
|
|
$ |
(73 |
) |
|
2021
|
|
|
405,417 |
|
|
|
N/A |
|
|
|
340,417 |
|
|
|
N/A |
|
|
|
269,792 |
|
|
|
251,592 |
|
|
$ |
78 |
|
|
$ |
(1,297 |
) |
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(1)
|
Anthony Angelini (“PEO 1”) served as our PEO for the full year 2021 and through November 14, 2022, at which time Darryll E. Dewan (“PEO 2”) became the PEO and served for the remainder of the year 2022.
|
|
(2)
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Amounts in this column represent the “Total” column set forth in the SCT on page 9. See the footnotes to the SCT for further detail regarding the amounts in these columns.
|
|
(3)
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The dollar amounts reported in these columns represent the amounts of “compensation actually paid”. The amounts are computed in accordance with Item 402(v) of Regulation S-K by deducting and adding the following amounts from the “Total” column of the SCT (pursuant to SEC rules, fair value at each measurement date is computed in a manner consistent with the fair value methodology used to account for share-based payments in our consolidated financial statements under GAAP).
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The following table reflects the adjustments made to SCT total compensation to compute CAP for the position of PEO and average CAP for our other NEOs
| |
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PEO 1
|
|
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PEO 2
|
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Non-PEO NEOs |
|
| |
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
|
|
Summary Compensation Table Total
|
|
$ |
454,300 |
|
|
$ |
405,417 |
|
|
$ |
566,923 |
|
|
|
N/A |
|
|
$ |
322,485 |
|
|
$ |
269,792 |
|
|
Equity Deductions From SCT Total (a)
|
|
|
- |
|
|
|
- |
|
|
|
(512,500 |
) |
|
|
N/A |
|
|
|
5,133 |
|
|
|
(6,067 |
) |
|
CAP of Equity Vesting During FY (b)
|
|
|
38,333 |
|
|
|
(21,667 |
) |
|
|
- |
|
|
|
N/A |
|
|
|
- |
|
|
|
(12,133 |
) |
|
CAP of Unvested Equity at FYE (c)
|
|
|
- |
|
|
|
(43,333 |
) |
|
|
412,500 |
|
|
|
N/A |
|
|
|
5,133 |
|
|
|
- |
|
|
Compensation Actually Paid
|
|
$ |
492,633 |
|
|
$ |
340,417 |
|
|
$ |
466,923 |
|
|
|
N/A |
|
|
$ |
332,751 |
|
|
$ |
251,592 |
|
|
(a)
|
The amount in this row represents the grant date fair value of equity-based awards granted during each year. (For this purpose, the fair value of equity awards is computed in a manner consistent with the fair value methodology used to report Outstanding Equity Awards at Fiscal Year-End.)
|
|
(b)
|
The equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following: (i) for awards that are granted and vest in the same applicable year, the fair value as of the vesting date; (ii) for awards granted in prior years that vest in the applicable year, the amount equal to the change in fair value as of the vesting date (from the end of the prior fiscal year).
|
|
(c)
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The equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following: (i) the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year; (ii) the amount of change in fair value as of the end of the applicable year (from the end of the prior fiscal year) of any awards granted in prior years that are outstanding and unvested as of the end of the applicable year.
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(4)
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Our non-PEO named executive officers for both 2021 and 2022 were John K. Penver and Kieran P. Brennan. The dollar amounts reported in this column represent the average of the amounts reported for the Company’s NEOs as a group in the “Total” column of the Summary Compensation Table in each applicable year. See note (3) above.
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(5)
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The dollar amounts reported in this column represent the average amount of CAP to the NEOs as a group, as computed in accordance with the Pay Versus Performance Rules. They do not reflect the actual average amount of compensation earned or paid to the NEOs as a group during the applicable year.
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(6)
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Cumulative total shareholder return (“TSR”) is calculated by dividing the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s share price at the beginning of the measurement period. There were no dividends for the common stock. The beginning of the measurement period for the years 2022 and 2021 was the Company’s share price at December 31, 2020.
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The following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to our Non-PEO NEOs and our net income during the two most recently completed fiscal years.
REPORT OF AUDIT COMMITTEE
The Audit Committee of the Board of Directors, which consists entirely of directors who meet the independence and experience requirements of The NASDAQ Stock Market, LLC, has furnished the following report:
The Audit Committee assists the Board of Directors in overseeing and monitoring the integrity of our financial reporting process, compliance with legal and regulatory requirements and the quality of internal and external audit processes. This committee’s role and responsibilities are set forth in a charter adopted by the Board of Directors, which is available on our website at www.tssiusa.com. This committee reviews and reassesses our charter annually and recommends any changes to the Board of Directors for approval. The Audit Committee is responsible for overseeing our overall financial reporting process, and for the appointment, compensation, retention, and oversight of the work of our independent registered public accounting firm. In fulfilling its responsibilities for the financial statements for the fiscal year ended December 31, 2022, the Audit Committee took the following actions:
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•
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Reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2022 with management and Weaver and Tidwell, L.L.P., our independent registered public accounting firm;
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•
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Discussed with Weaver and Tidwell, L.L.P. matters required to be discussed by the Public Accounting Oversight Board and the Securities and Exchange Commission; and
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•
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Received written disclosures and the letter from Weaver and Tidwell, L.L.P. regarding its independence as required by applicable requirements of the Public Company Accounting Oversight Board regarding Weaver and Tidwell, L.L.P. communications with the Audit Committee and the Audit Committee further discussed with Weaver and Tidwell, L.L.P. their independence.
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Based on the Audit Committee’s review of the audited financial statements and discussions with management and Weaver and Tidwell, L.L.P., the Audit Committee recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for filing with the SEC.
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Members of the Audit Committee:
Peter H. Woodward (Chairman)
Richard Metzler
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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Our Audit Committee in accordance with its written charter reviews and approves in advance all related party transactions greater than $25,000 and follows a pre-approved process for contracts with a related party for less than $25,000.
In February 2015, we borrowed $945,000 from MHW SPV II, LLC, an entity affiliated with the Chairman of our Board of Directors. In 2017 we amended and restated the terms of the promissory note that evidenced this loan, extending its maturity until July 20222, The loan bore interest at a fixed rate of 12% per annum of which 6% was paid in cash monthly in arrears, and 6% was payable in kind. The loan was secured by substantially all of our assets pursuant to the terms of a security agreement. We paid interest of approximately $71,000 and $143,000 during the years ended December 31, 2022 and 2021, respectively. There was approximately $267,000 in accrued interest in-kind outstanding on this loan at its maturity date.
In July 2017 we borrowed an additional $650,000 from MHW Partners, L.P., an entity affiliated with the Chairman of our Board of Directors. This loan ranked pari-passu with the earlier notes and was subject to the same loan agreement with the same interest rate. We paid interest of approximately $49,000 and $98,000 during the years ended December 31, 20202 and 2021, respectively. There was approximately $182,000 in accrued interest in-kind outstanding on this loan at its maturity date.
On July 1, 2022, we repaid in full the amounts outstanding under these loans from MHW SPV II, LLC and MHW Partners, L.P., including the accrued interest in-kind outstanding on the loans.
On July 19, 2022, MHW and MHW Partners exercised their outstanding warrants and purchased 1,883,326 shares of common stock of the Company. The warrants were granted in connection with the loans described above. The Company received approximately $367,000 from the aggregate exercise price of the warrants.
Peter H. Woodward, the Chairman of our Board of Directors, is a principal of MHW Capital Management, LLC, which is the investment manager of MHW SPV II, LLC and MHW Partners, L.P. MWH Capital Management, LLC was entitled to a performance-related fee tied to any appreciation in the valuation of the common stock in excess of the applicable strike price under the warrants issued to MHW SPV II, LLC and to MHW Partners, L.P.
PROPOSALS TO BE VOTED UPON BY STOCKHOLDERS
ELECTION OF DIRECTORS
(Notice Item 1)
Our Board of Directors has nominated Mr. Peter H. Woodward for election at the 2023 Annual Meeting of Stockholders for a term of three years to serve until the 2026 Annual Meeting of Stockholders, and until his successor has been elected and qualified, or until his earlier death, resignation or removal.
The Board of Directors currently consists of three members, classified into three classes as follows:
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Mr. Peter H. Woodward constitutes a class with a term ending at the 2023 Annual Meeting of Stockholders;
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Mr. Richard M. Metzler constitutes a class with a term ending at the 2024 Annual Meeting of Stockholders; and;
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Mr. Darryll E. Dewan constitutes a class with a term ending at the 2025 Annual Meeting of Stockholders.
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At each Annual Meeting of Stockholders, directors are elected for a full term of three years to succeed those directors whose terms are expiring. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.
The Board of Directors has nominated Mr. Woodward for election at the 2023 Annual Meeting of Stockholders for a term of three years to serve until the 2026 Annual Meeting of Stockholders, and until his successor is elected and qualified, or until his earlier death, resignation or removal. The Class I director, Mr. Metzler, serves until the 2024 Annual Meeting of Stockholders, and the Class II director, Mr. Dewan, serves until the 2025 Annual Meeting of Stockholders, and until his successor has been elected and qualified, or until his earlier death, resignation or removal.
Unless authority to vote for these nominees is withheld, the shares represented by the enclosed proxy will be voted FOR the election of Mr. Woodward. If Mr. Woodward becomes unable or unwilling to serve, the shares represented by the enclosed proxy will be voted for the election of such other person as the Board of Directors may recommend in his place. We have no reason to believe that Mr. Woodward will be unable or unwilling to serve as a director.
A plurality of the shares voted affirmatively at the annual meeting is required to elect the nominee as a director.
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF MR. PETER H. WOODWARD AS DIRECTOR, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Notice Item 2)
The Audit Committee has appointed Weaver and Tidwell, L.L.P. (“Weaver”) as our independent registered public accounting firm to audit our financial statements for the fiscal year ending December 31, 2023. The Board proposes that the stockholders ratify the appointment. Weaver audited our financial statements for the years ended December 31, 2022 and 2021. We expect that representatives of Weaver will be present at the meeting, will be able to make a statement if they so desire, and will be available to respond to appropriate questions.
Audit and Non-Audit Fees
The following table presents fees for professional audit services rendered by Weaver during the years ended December 31, 2022 and 2021.
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2022
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2021
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Audit fees
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$ |
220,214 |
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$ |
216,482 |
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Audit-related fees
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5,562 |
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- |
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Tax Fees
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|
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- |
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- |
|
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All Other Fees
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- |
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- |
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Total
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$ |
225,776 |
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$ |
216,482 |
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Audit Fees
Audit fees consisted of professional services rendered by Weaver in 2022 and 2021 for the audit of the annual consolidated financial statements included in our Annual Report on Form 10-K, for the reviews of the consolidated quarterly financial statements included in our Forms 10-Q and assistance and review of such documents filed with the SEC. Audit-related fees are for professional services rendered by Weaver in 2022 in connection with the filing of a Form S-8 registration statement to register shares in the Company’s stock option plan.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-audit Services of Independent Registered Public Accounting Firm
Consistent with policies of the Securities and Exchange Commission regarding auditor independence, the Audit Committee has responsibility, pursuant to its written charter, for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. In recognition of this responsibility, the Audit Committee pre-approves all audit and permissible non-audit services provided by the independent registered public accounting firm. The Audit Committee’s policy is to approve all audit and non-audit services provided by our independent registered public accounting firm prior to the commencement of the services using a combination of pre-approvals for certain engagements up to predetermined dollar thresholds in accordance with the pre-approval policy and specific approvals for certain engagements on a case-by-case basis. The Audit Committee has delegated authority to the committee’s chairman to pre-approve between committee meetings those services that have not already been pre-approved by the committee. The chairman of the Audit Committee is required to report any such pre-approval decisions to the full committee at its next scheduled meeting.
Prior to engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted and the Audit Committee requires the independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging the independent registered public accounting firm. The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.
The affirmative vote of a majority of the shares present or represented and entitled to vote at the annual meeting is required to ratify the appointment of the independent registered public accounting firm. If the stockholders do not ratify the appointment of Weaver as our independent registered public accounting firm, the Audit Committee will reconsider its appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO RATIFY THE SELECTION OF WEAVER AND TIDWELL L.L.P. AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR OF SUCH RATIFICATION UNLESS A STOCKHOLDER INDICATES OTHERWISE ON THE PROXY.
CODE OF CONDUCT AND ETHICS
We have adopted a code of ethics that applies to all of our employees, including our chief executive officer and chief financial officer. The text of the code of conduct and ethics is posted on our website at www.tssiusa.com. The code of ethics is also available to stockholders, without charge, upon request in writing to our Secretary at 110 E. Old Settlers Blvd, Round Rock, TX 78664. Disclosure regarding any amendments to, or waivers from, provisions of the code of ethics that apply to our directors, principal executive and financial officers will be included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented to the 2023 Annual Meeting of Stockholders. If any other business is properly brought before the 2023 Annual Meeting of Stockholders, proxies in the enclosed form will be voted in accordance with the judgment of the persons voting the proxies.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the proxy statement relating to our 2024 Annual Meeting of Stockholders to be furnished to all stockholders entitled to vote at our next annual meeting must be received at our principal executive offices no later than December 30, 2023 provided, however, that in the event that we hold our 2024 Annual Meeting of Stockholders more than 30 days before or after the one-year anniversary date of the 2023 Annual Meeting of Stockholders, we will disclose the new deadline by which stockholder proposals must be received in our Quarterly Report on Form 10-Q. In addition, stockholder proposals must otherwise comply with the requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended. In accordance with our Amended and Restated Bylaws, to be considered at our 2024 Annual Meeting of Stockholders, stockholder proposals must be delivered to or mailed and received at our principal executive offices not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 75 days’ notice or prior public disclosure of the date of the meeting is given or made to the stockholders, notice by the stockholder to be timely must be so received no later than the close of business on the fifteenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. Proposals received after that date will not be voted on at the annual meeting. If a proposal is received before that date, the proxies that management solicits for the meeting may still exercise discretionary voting authority on the proposal under circumstances consistent with the proxy rules of the SEC. In addition to satisfying the foregoing requirements under our Amended and Restated Bylaws, stockholders who intend to solicit proxies in support of director nominees other than the Company's nominees under the universal proxy rules must provide notice that sets forth the information required by Rule 14a-19(b) under the Exchange Act. All stockholder proposals should be marked for the attention of Chief Executive Officer, TSS, Inc., 110 E. Old Settlers Blvd, Round Rock, Texas 78664.
ROUND ROCK, TEXAS
April 28, 2023
Our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (other than exhibits thereto) filed with the SEC, which provides additional information about us, is available on the Internet at www.tssiusa.com and is available in printed copy to beneficial owners of our common stock without charge upon written request to Mr. John K. Penver, Chief Financial Officer, TSS, Inc., 110 E. Old Settlers Blvd, Round Rock, Texas 78664. Exhibits will be provided upon written request and payment of an appropriate processing fee.
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