UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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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 Pursuant to §240.14a-12 |
SUPERIOR
DRILLING PRODUCTS, 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 all boxes that apply):
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No
fee required. |
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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. |
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
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To
Be Held August 11, 2023 |
SUPERIOR
DRILLING PRODUCTS, INC
1583
South 1700 East
Vernal,
Utah 84078 |
Dear
Stockholders:
We
cordially invite you to attend our 2023 Annual Meeting of Stockholders. The meeting will be held on August 11, 2023 at 9:00 a.m. (Mountain
time), at the Uintah Conference Center 313 E. 200 S. Vernal, Utah 84078. At the meeting,
we will:
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1. |
Elect
two Class III members of the Board of Directors (the “Board”) to serve until our 2026 meeting of stockholders; |
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2. |
Ratify
the appointment of Moss Adams LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023;
and |
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3. |
Transact
any other business as may properly come before the meeting. |
The
Board has fixed June 28, 2023, as of the close of business, as the record date for the determination of stockholders entitled to notice
of, and to vote at, the meeting. A stockholders’ list will be available at our offices at 1583 South 1700 East, Vernal, Utah 84078
for a period of ten days prior to the meeting. We hope that you will be able to attend the meeting in person.
Your
vote is important! Whether or not you expect to attend the meeting, please sign and date the enclosed proxy card and return it to
us promptly. A stamped envelope has been provided for your convenience. Alternatively, you may vote via the telephone or the Internet
by following the instructions set forth on the enclosed proxy card. The prompt return of proxies will ensure a quorum and save us the
expense of further solicitation.
THE
BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE BOARD’S NOMINEES TO BE ELECTED AND “FOR” PROPOSAL
2 USING THE ENCLOSED PROXY CARD.
We
look forward to seeing you at the meeting.
By
order of the Board of Directors, |
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/s/
Annette Meier |
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Annette
D. Meier |
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Secretary |
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June
30, 2023 |
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YOUR
VOTE IS IMPORTANT
Your
vote is important.
We
urge you to review the accompanying Proxy Statement carefully and to submit your proxy as soon as possible so that your shares will be
represented at the meeting.
Table
of Contents
SUPERIOR
DRILLING PRODUCTS, INC.
1583
South 1700 East
Vernal,
Utah 84078
PROXY
STATEMENT
INFORMATION
CONCERNING SOLICITATION AND VOTING
Our
Board of Directors is soliciting proxies for the 2023 annual meeting of stockholders to be held on August 11, 2023 at 9:00 a.m. (Mountain
time), at the Uintah Conference Center 313 E. 200 S. Vernal, Utah 84078, and at any adjournments or postponements of the meeting. This
proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting.
Please read it carefully.
We
will pay the costs of soliciting proxies from stockholders. Our directors, officers and regular employees may solicit proxies on behalf
of us, without additional compensation, personally or by telephone.
QUESTIONS
AND ANSWERS
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Why
am I receiving these materials? |
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The
Board is providing this proxy statement and the enclosed proxy card in connection with its solicitation of proxies to be voted at
the meeting. |
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Who
can vote at the meeting? |
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The
Board of Directors set June 28, 2023 as the record date for the meeting. You can attend and vote at the meeting if you were a common
stockholder at the close of business on the record date, June 28, 2023. On that date, there were 29,252,872 shares of our common
stock outstanding and entitled to vote at the meeting. |
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Q: |
What
proposals will be voted on at the meeting? |
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A: |
Three
proposals are scheduled to be voted upon at the meeting: |
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The
election of two Class III members of the Board of Directors to serve until our 2026 meeting of the stockholders; and |
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The
ratification of the appointment of Moss Adams LLP as our independent registered public accounting firm for the fiscal year ending
December 31, 2023. |
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How
do I cast my vote? |
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A: |
If
your shares are registered directly in your name with our transfer agent, you are considered the registered stockholder for those
shares. As the registered stockholder, you have the right to vote those shares and we will send you the proxy materials and a proxy
card. You can vote by mail, through the internet at www.AALvote.com/SDPI, or by phone at 1-866-804-9616. To vote by mail, you should
sign and return the mailed proxy card in the prepaid and addressed envelope that was enclosed with the proxy materials, and your
shares will be voted at the meeting in the manner you direct.
In
the event that you return a signed proxy card on which no directions are specified, your shares will be voted as recommended by the
Board on all matters, and in the discretion of the proxy holders as to any other matters that may properly come before the meeting
or any postponement or adjournment of the meeting.
If
your shares are registered in the name of a broker, bank or other nominee (typically referred to as being held in “street name”),
you will receive instructions from your broker, bank or other nominee that must be followed in order for your broker, bank or other
nominee to vote your shares per your instructions. Many brokerage firms and banks have a process for their beneficial holders to
provide instructions via the Internet or over the telephone. If Internet or telephone voting is unavailable from your broker, bank
or other nominee, please complete and return the enclosed voting instruction card in the addressed, postage paid envelope provided.
In
the event you do not provide instructions on how to vote, your broker may have authority to vote your shares. Under the rules that
govern brokers who are voting with respect to shares that are held in street name, brokers have the discretion to vote such shares
on routine matters, but not on non-routine matters. Routine matters include the ratification of the appointment of independent auditors.
Non-routine matters on which your broker cannot vote on your behalf include the election of directors.
Your
vote is especially important. If your shares are held by a broker, your broker cannot vote your shares for the election of directors
unless you provide voting instructions. Therefore, please instruct your broker regarding how to vote your shares on this matter promptly.
See “Vote Required” following each proposal for further information.
If
you hold shares through a broker, bank or other nominee and wish to be able to vote in person at the meeting, you must obtain a legal
proxy from your broker, bank or other nominee and present it to the inspector of election with your ballot at the meeting. |
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Q. |
What
should I do if I receive more than one proxy card or set of proxy materials from the Company? |
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A. |
Your
shares may be owned through more than one brokerage or other share ownership account. In order to vote all of the shares that you
own, you must either sign and return all of the proxy cards or follow the instructions for any alternative voting procedure on each
of the proxy cards that you receive. |
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Q: |
What
voting methods are available? |
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A: |
We
send proxy cards to all registered stockholders to enable them to vote their shares. Stockholders who submit a proxy card need not
vote at the meeting. However, we will pass out written ballots to any registered stockholder or holder of a legal proxy who wishes
to vote in person at the meeting. Alternatively, you may vote via the telephone or the Internet by following the instructions set
forth on the enclosed proxy card. |
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Are
the proxy materials available on the Internet? |
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A: |
Pursuant
to the rules of the Securities and Exchange Commission (the “SEC”), we are providing access to our proxy materials both
by sending you this full set of proxy materials, including a proxy card, and by notifying you of the availability of our proxy materials
on the Internet. This proxy statement and a copy of our Annual Report on Form 10-K for the year ended December 31, 2022 are available
on the “Investors” section of our web site at www.sdpi.com. Additionally, and in accordance with SEC rules, we
maintain the proxy materials on our website in a manner that will not infringe on your anonymity if you access them. |
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Q: |
How
does the Board recommend I vote on the proposals? |
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The
Board recommends you vote “FOR” the Class III member nominees to our Board of Directors, and “FOR”
the ratification of the appointment of Moss Adams LLP as our independent registered public accounting firm for the fiscal year ending
December 31, 2023. |
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Who
will count the vote? |
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The
inspector of election will count the vote. We will engage an independent firm to act as the inspector of election. |
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Q: |
What
is a “quorum?” |
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A: |
A
quorum is the number of shares that must be present to hold the meeting. The quorum requirement for the meeting is a majority of
the outstanding shares as of the record date, present in person or represented by proxy. Your shares will be counted for purposes
of determining if there is a quorum if you are present and vote in person at the meeting; or have voted on the Internet, by telephone
or by properly submitting a proxy card or voting instruction card by mail. Abstentions and broker non-votes also count toward the
quorum. An abstention will have the same practical effect as a vote against the ratification of the appointment of our independent
registered public accounting firm. “Broker non-votes” occur when brokers, banks or other nominees that hold shares on
behalf of beneficial owners do not receive voting instructions from the beneficial owners prior to the meeting and do not have discretionary
voting authority to vote those shares. Annette and Troy Meier (the “Meiers”) currently control approximately 38.1% of
the voting power entitled to vote at the meeting. Accordingly, the Meiers have a substantial portion of the voting power to constitute
a quorum at the meeting and to ensure the approval of the proposals described below. |
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What
happens if there is not a quorum at the meeting? |
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Pursuant
to our bylaws, the meeting may be adjourned by the chairman of the meeting to reconvene at the same or some other place. If the adjournment
is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjournment
shall be given to each stockholder of record entitled to vote at the meeting. If the adjournment is for less than 30 days, no additional
notice will be delivered. |
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What
vote is required to approve each item? |
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A: |
The
following table sets forth the voting requirement with respect to each of the proposals: |
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Proposal
1 — Election of Class III Members of the Board of Directors. |
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The
nominees for election at the annual meeting who receives the greatest number of “FOR” votes cast by the stockholders,
a plurality, will be elected as our Class III members of the Board of Directors. |
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Proposal
2 – Ratification of appointment of independent registered public accounting firm. |
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To
be approved by stockholders, this proposal must receive the affirmative “FOR” vote of the holders of a majority of the
shares represented at the meeting, in person or by proxy and entitled to vote. |
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What
does it mean if I get more than one proxy card? |
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Your
shares are probably registered in more than one account. You should vote each proxy card you receive. We encourage you to consolidate
all your accounts by registering them in the same name, social security number and address. This can be accomplished by contacting
your stockbroker. |
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Q: |
How
many votes can I cast? |
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A: |
On
all matters you are entitled to one vote per share. |
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Where
can I find the voting results of the meeting? |
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A: |
The
preliminary voting results will be announced at the meeting. The final results will be published in a Current Report on Form 8-K
to be filed by us with the SEC within four business days of the meeting. |
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Q: |
What
are the solicitation expenses and who pays the cost of this proxy solicitation? |
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A. |
The
Board is asking for your proxy, and we will pay all of the costs of soliciting shareholder proxies. We may also request banks, brokers,
trustees and other intermediaries holding shares of our common stock beneficially owned by others to send this proxy statement to,
and obtain proxies from, the beneficial owners and may reimburse such record holders for their reasonable out-of-pocket expenses
in so doing. Solicitation of proxies by mail may be supplemented by telephone and other electronic means, advertisements and personal
solicitation by our directors, officers or employees. No additional compensation will be paid to our directors, officers or employees
for solicitation. |
Proposal
1
ELECTION
OF DIRECTORS
We
have classified our Board of Directors into three classes. Directors in each Class I, Class II and Class III are elected to serve for
staggered three-year terms, after an initial term of one year, two years and three years, respectively, and until either they are re-elected
or their successors are elected and qualified or until their earlier resignation or removal. Only one class of directors will be elected
at each annual meeting of the stockholders.
At
the meeting, two Class III members of the Board of Directors will be elected. Based on the recommendation of the Nominating and Corporate
Governance Committee, the Board has recommended G. Troy Meier and Robert Iversen for election as Class III directors with their terms
to expire at our 2026 annual meeting of stockholders or until their earlier resignation or removal.
The
nominees have consented to being nominated and have expressed their intentions to serve if elected. We believe that the nominees possess
the professional and personal qualifications necessary for board service and have highlighted particularly noteworthy attributes for
the nominees in their biographies below. We have no reason to believe that the nominees will be unable to serve if elected to office
and, to our knowledge, the nominees intend to serve the entire term for which election is sought. Only the nominees or substitute nominees
designated by the Board will be eligible to stand for election as directors at the meeting.
Nominees
G.
Troy Meier. Mr. Meier has served as our Board Chair, one of our Class III Directors and Chief Executive Officer since 2014. Mr.
Meier has over 37 years of experience in the oil and gas industry. Mr. Meier and co-founder Annette Meier founded our predecessor company
in 1993. Since that time through the present, Mr. Meier has spearheaded the development of our manufacturing business and our research
and development activities. As our chief innovator, Mr. Meier has been responsible for not only inventing, but also designing, engineering
and manufacturing industry specific machinery and processes and has several patent applications pending. Previously, in 1993, Mr. Meier
started our predecessor company, Rocky Mountain Diamond, after thirteen years with Christensen Diamond and its successors. At Christensen
Diamond, Mr. Meier established overseas factories in Ireland, Venezuela and China. In addition, Mr. Meier designed tools to improve efficiency
both in the plants and in the field. Previously, Mr. Meier had been Christensen Diamond’s first drill bit fabricator specialist
and by age 28, was made the Northern Region design engineer responsible for designing drill bits, core systems, centric bits, nozzle
systems and related products. As the co-founder, Mr. Meier for the last six years has focused 100% of his attention on our development
and growth.
Mr.
Meier was selected to serve on our Board of Directors and as the Board Chair because of his extensive industry experience, his role as
our co-founder and chief innovator, and his and Ms. Meier’s majority shareholding. Mr. Meier is married to Annette Meier.
Robert
E. Iversen. Mr. Iversen has served as a Class III Director since 2014, Lead Director from December 2016 through August 2019,
and has been the Chairman of the Compensation Committee since joining the Board. He has also been a member of the Audit Committee and
the Nominating and Governance Committee since 2014. Mr. Iversen has broad executive and operational management experience in the sales,
service, and manufacturing sectors of the global upstream oil and gas industry. Currently, Mr. Iversen is a partner and president of
CTI Energy Services, LLC of Springtown, Texas, a drilling services company he started in 2011. Mr. Iversen has strong experience in the
development and commercialization of new technology products and in company marketing and advertising programs. Previously, Mr. Iversen
collaborated with G. Troy Meier as a partner and senior vice president in Tronco Energy Services from 2008 to 2011. From 2002 to 2008,
he served as President and other C-level positions with Ulterra Drilling Technologies (Fort Worth, Texas), INRG (Houston, Texas) and
NQL Energy Services (Nisku, Alberta). In 1994, Mr. Iversen and partners purchased the U.S. division of DBS Stratabit, a small, underperforming
diamond bit company, where, as President until 2002, he built it into a top tier provider of high technology products. Mr. Iversen previously
held numerous executive positions in marketing, technology and engineering at various divisions of the Baker Hughes companies, and their
predecessors, from 1980 through 1994. Mr. Iversen holds a Bachelor of Science Petroleum Engineering, Montana Tech, as well as numerous
technical and executive post-graduate certifications.
Mr.
Iversen was selected to serve on our Board of Directors because of his strong experience with start-up companies and the development
and commercialization of new technology products. Mr. Iversen further brings his broad executive and operational management expertise
in the oil and gas industry.
Directors
All
of the current members of the Board of Directors are listed in the following table, and certain information concerning those directors,
except Mr. Meier and Mr. Iversen, who are also director nominees, follows the table:
Name |
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Age |
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Position |
G.
Troy Meier |
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62 |
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Board
Chair, Class III Director (term expires at the meeting), Class III Director and Chief Executive Officer |
Annette
Meier |
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60 |
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Class
II Director (term expires at the 2025 Annual Meeting), President and Chief Operating Officer |
James
R. Lines |
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62 |
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Class
II Director (term expires at the 2025 Annual Meeting) |
Robert
Iversen |
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69 |
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Class
III Director (term expires at the meeting) |
Michael
V. Ronca |
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68 |
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Class
I Director (term expires at the 2024 Annual Meeting) |
Annette
Meier. Ms. Meier has served as our Class II Director, President and Chief Operating Officer since 2014. Ms. Meier has over 25
years of experience in the oil and gas industry. Since our inception in 1999 to the present, Ms. Meier has managed all of our day-to-day
operations and business. In 2008, Ms. Meier envisioned and co-created “CHUCK,” our custom shop management and inventory program
software. Ms. Meier was also instrumental to the development of the “nucleus grinding system” that is currently utilized
in our new manufacturing processes. In 2005, Ms. Meier served as the creator and chief architect of the Ropers Business Park, the state-of-the-art
campus that houses our remanufacturing and new manufacturing facilities in Vernal, Utah. Ms. Meier’s understanding of our business
processes resulted in her designing and facilitating the SMART FACILITY layout, process and control systems within the manufacturing
plant. Previously, in 1993, Ms. Meier co-founded and managed our predecessor company, Rocky Mountain Diamond. As the co-founder, Ms.
Meier for the last seven years has focused 100% of her attention on our development and growth. In 2015, Ms. Meier was elected to serve
on the Governor’s Office of Economic Development Board (GOED) for the State of Utah. Ms. Meier has been the recipient of numerous
state, local and industry awards over the years that recognized her for innovation and leadership.
Ms.
Meier was selected to serve on our Board of Directors because of her extensive industry experience, her role as our co-founder and substantial
knowledge of our day-to-day operations, and her and Mr. Meier’s majority shareholding. Ms. Meier is married to G. Troy Meier.
James
R. Lines. Mr. Lines has served as a Class II director since December 2016 and is Chairman of the Audit Committee. He also serves
on the Compensation Committee and the Nominating and Governance Committee of our Board of Directors. Mr. Lines had served as President
and Chief Executive Officer of Graham Corporation since January 2008 and retired on August 31, 2021. Graham designs, manufactures and
sells critical equipment for the energy, defense and chemical/petrochemical industries. Previously, Mr. Lines served as Graham’s
President and Chief Operating Officer since June 2006. Mr. Lines has served Graham in various capacities since 1984, including Vice President
and General Manager, Vice President of Engineering and Vice President of Sales and Marketing. Prior to joining its management team, he
served Graham as an application engineer and sales engineer as well as a product supervisor. Mr. Lines holds a B.S. in Aerospace Engineering
from the State University of New York at Buffalo.
Mr.
Lines was selected to serve on the Board of Directors due to his extensive experience in growing a midsize business, as well as his background
in manufacturing and engineering in the energy industry.
Michael
Ronca. Mr. Ronca has served as a Class I director since 2014, is the Lead Independent Director starting August 2019, and is Chairman
of the Nominating and Governance Committee. He also serves on the Audit Committee and Compensation Committee of our Board of Directors.
Mr. Ronca has over 30 years of experience as an executive building and monetizing businesses. Since 2009, Mr. Ronca has served as President
and Chief Executive Officer of Eagle Ridge Energy, LLC, an oil and gas exploration and development company active in north and central
Texas. Previously, he served as Chairman of BAS Oil & Gas, a private company active in developing reserves in the Barnett Shale trend
in North Texas. Mr. Ronca has a long history of participating in the energy industry starting with his time at Tenneco Inc., where he
served as the Assistant to the Chairman and CEO and later established a new oil and gas division which operated throughout the offshore
and onshore Gulf Coast region. He later executed a leveraged buyout with the backing of private equity and soon after took the company
public on the NYSE under the name of Domain Energy where he also served as President and CEO. In 1998, Domain Energy merged into Range
Resources where Mr. Ronca served as Chief Operating Officer for several years. Mr. Ronca has a BS degree from Villanova University and
an MBA in Finance from Drexel University.
Mr.
Ronca was selected to serve on our Board of Directors because of his strong experience within the oil and gas industry.
Director
Independence
The
majority of the members of the Board of Directors, at any given time, must qualify as “independent” under NYSE American rules.
Our
Board of Directors has undertaken a review of the independence of each of our directors and director nominees and has affirmatively determined
that each of our other non-employee directors, which include Messrs. Lines, Ronca and Iversen, are “independent,” as defined
by the NYSE American rules. Under the NYSE American rules, a director can be independent only if (a) the director does not trigger a
categorical bar to independence and (b) our Board of Directors affirmatively determines that the director does not have a relationship
which, in the opinion of our Board of Directors, would interfere with the exercise of independent judgment by the director in carrying
out the responsibilities of a director. Based on information provided by the directors and the director nominees concerning their background,
employment and affiliations, our Board of Directors has determined that the non-employee directors do not have a relationship that would
interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making this determination,
our Board of Directors considered the current and prior relationships that each of the non-employee directors has with us, and all other
facts and circumstances our Board of Directors deemed relevant in determining independence, including any beneficial ownership of our
capital stock by each of the non-employee directors.
Board
Structure and Leadership
Corporate
Governance Guidelines. Our Board of Directors has adopted our Corporate Governance Guidelines, which is available on our website,
www.sdpi.com, in the “Corporate Governance” subsection of the “Investors” section.
General
Qualifications. In evaluating persons for potential service on the Board of Directors, we seek, above all, the most qualified candidates
and, as more fully discussed below, nominees should have experience in, or an aptitude for, certain competencies that are essential to
our business. Viable candidates must also have ample professional experience and business acumen befitting a director of a public company.
Diversity,
Equity and Inclusion. The Board of Directors believes that diversity, equity and inclusion (“DEI”) is an essential element
of managing, operating and ensuring the sustainability of a modern-day public company, particularly one that works in multiple cultures
and regions. The Board of Directors is comprised of five members of which one is a woman. The Company is committed toward increasing
DEI at all levels of management.
Leadership:
Our Corporate Governance Guidelines provide that one of our independent directors should serve as our Lead Independent Director at
any time when our Chief Executive Officer serves as the Chairman of our Board of Directors, or if the Chairman is not otherwise independent.
Because Mr. Meier is our Chairman, Mr. Ronca serves as our Lead Independent Director. He was appointed to this position in August 2019,
replacing Bob Iversen. The Lead Independent Director presides over periodic meetings of our independent directors, serves as a liaison
between our Chairman and our independent directors and performs such additional duties as our Board of Directors might otherwise determine
and delegate.
Our
Board of Directors believes that our Chief Executive Officer is best situated to serve as Chairman of the Board because he is the director
most familiar with our business and industry, and the director most capable of effectively identifying strategic priorities and leading
the discussion and execution of our strategy. Independent directors and management have different perspectives and roles in strategy
development. Our independent directors bring experience, oversight and expertise from outside the Company and the oil and gas industry,
while the Chief Executive Officer brings Company-specific experience and expertise. Our Board of Directors believes that for a company
of our size, the combined role of Chairman of the Board and Chief Executive Officer promotes strategy development and execution, and
facilitates information flow and communication between senior management and the Board of Directors, which are both essential to effective
governance. One of the key responsibilities of the Board of Directors is to develop a strategic direction for us and to hold management
accountable for the execution of our strategy once it is developed. The Board of Directors believes that the combined role of Chairman
and Chief Executive Officer, together with our having a Lead Independent Director, is in the best interest of the stockholders because
it provides the appropriate balance between strategy development and independent oversight of management.
Board
of Directors and Risk Oversight
In
the normal course of its business, we are exposed to a variety of risks, including market risks relating to changes in commodity prices,
interest rates, political risks and credit and investment risk. The Board oversees our strategic direction, and in doing so considers
the potential rewards and risks of our business opportunities and challenges, and monitors the development and management of risks that
impact our strategic goals. The Audit Committee assists the Board in fulfilling its oversight responsibilities by monitoring the effectiveness
of our systems of financial reporting, auditing, internal controls and legal and regulatory compliance. The Nominating and Governance
Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with Board
organization, membership and structure, succession planning for our directors and executive officers and corporate governance. The Compensation
Committee assists the Board in fulfilling its oversight responsibilities by overseeing our compensation policies and practices.
Environmental,
Social and Governance
We
recognize the importance of Environmental, Social and Governance (“ESG”) factors are essential elements to our success and
we strive to deliver innovative products and solutions while working with high integrity, strong governance culture and respect for human
rights. We believe that consideration of ESG matters is important when we consider how we and our products affect the environments and
societies in which we operate around the world. In addition, we consistently drive to meet our regulatory standards and requirements
around environmental protection, health and safety. We also view ourselves as a responsible corporate citizen throughout the execution
of our operations. It is the goal that all of our products have minimal environmental impact even when compared to other potential solutions.
We strive to provide a working environment that sustains inclusion, diversity and societal support. Lastly, we also have had a growing
commitment to our local communities through volunteering and internship programs.
Communicating
with our Board of Directors
Stockholders
and other interested parties may communicate by writing to: Superior Drilling Products, Inc., P.O. Box 1656, Vernal, Utah 84078. Stockholders
may submit their communications to the Board, any committee of the Board or individual directors on a confidential or anonymous basis
by sending the communication in a sealed envelope marked “Stockholder Communication with Directors” and clearly identify
the intended recipient(s) of the communication.
Our
Secretary will review each communication and other interested parties and will forward the communication, as expeditiously as reasonably
practicable, to the addressees if: (1) the communication complies with the requirements of any applicable policy adopted by the Board
relating to the subject matter of the communication; and (2) the communication falls within the scope of matters generally considered
by the Board. To the extent the subject matter of a communication relates to matters that have been delegated by the Board to a committee
or to an executive officer of the Company, then our Secretary may forward the communication to the executive officer or chairman of the
committee to which the matter has been delegated. The acceptance and forwarding of communications to the members of the Board or an executive
officer does not imply or create any fiduciary duty of the Board members or executive officer to the person submitting the communications.
Information
may be submitted confidentially and anonymously, although the Company may be obligated by law to disclose the information or identity
of the person providing the information in connection with government or private legal actions and in other circumstances. The Company’s
policy is not to take any adverse action, and not to tolerate any retaliation, against any person for asking questions or making good
faith reports of possible violations of law, our policies or our Code of Business Conduct and Ethics.
Annual
Meeting Attendance
Although
we do not have a formal policy regarding attendance by members of the Board at our annual meeting of stockholders, we encourage directors
to attend. Four of our directors attended the 2022 annual meeting of stockholders.
Board
and Committee Activity, Structure and Compensation
Our
Board of Directors is governed by our Certificate of Incorporation, Bylaws, charters of the standing committees of the Board of Directors
and the laws of the State of Utah.
During
2022, our Board of Directors held four meetings. All directors attended at least 75% of the total meetings of the Board and the committees
on which they served. There are currently three standing committees of the Board: the Audit Committee, the Compensation Committee and
the Nominating and Corporate Governance Committee. Members serve on these committees until their resignation or until as otherwise determined
by our Board of Directors. The composition of the Board committees comply with the applicable rules of the NYSE American and applicable
law. Our Board of Directors has adopted written charter for each of the standing committees, which can be found in the “Corporate
Governance” subsection of the “Investors” section of our website at www.sdpi.com. In addition to the above governing
documents, our Code of Business Conduct and Ethics that applies to all of our employees, as well as each member of the Board, can also
be found in the “Corporate Governance” subsection of the “Investors” section of our website at www.sdpi.com
The composition and responsibilities of each of the standing committees of our Board of Directors are as follows:
Audit
Committee. Our Audit Committee is comprised solely of “independent” directors, as defined under and required by Rule
10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the NYSE American rules. Our Audit Committee
is directly responsible for, among other things, the appointment, compensation, retention and oversight of our independent registered
public accounting firm. The oversight of our independent public accounting firm includes reviewing the plans and results of the audit
engagement with the firm, approving any additional professional services provided by the firm and reviewing the independence of the firm.
Commencing with our first report on internal controls over financial reporting, the Committee will be responsible for discussing the
effectiveness of the internal controls over financial reporting with our independent registered public accounting firm and relevant financial
management. The members of this Committee are, and during the year ended December 31, 2022, were, Messrs. Lines, Iversen and Ronca, with
Mr. Lines serving as committee chair. Our Board of Directors has determined that Mr. Lines qualifies as an “audit committee financial
expert,” as defined by the rules under the Exchange Act. The Audit Committee held four meetings in 2022.
Nominating
and Governance Committee. Our Nominating and Governance Committee consists solely of “independent” directors, as defined
under and required by NYSE American rules. The Nominating and Governance Committee is responsible for, among other things, identifying
individuals qualified to become Board members; selecting or recommending to the Board of Directors director-nominees for each election
of directors; developing and recommending to the Board of Directors criteria for selecting qualified director candidates; considering
committee member qualifications, appointments and removals; recommending corporate governance principles, codes of conduct and compliance
mechanisms; providing oversight in the evaluation of the Board of Directors and each committee; and developing an appropriate succession
plan for our chief executive officer. The members of this Committee are, and during the year ended December 31, 2022, were, Messrs. Lines,
Ronca and Iversen, with Mr. Ronca serving as committee chair. The Nominating and Governance Committee held three meetings in 2022.
Compensation
Committee. Our Compensation Committee consists solely of “independent” directors, as defined under and required by the
NYSE American rules, “non-employee directors” under Section 16 of the Exchange Act and “outside directors” for
purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). The Compensation Committee is responsible
for, among other things, supervising and reviewing our affairs as they relate to the compensation and benefits of our executive officers
and non-employee directors. In carrying out these responsibilities, the Compensation Committee reviews all components of executive compensation
for consistency with our compensation philosophy and with the interests of our stockholders. The members of this Committee are, and during
the year ended December 31, 2022, were Messrs. Lines, Ronca and Iversen, with Mr. Iversen serving as committee chair. The Compensation
Committee held two meetings in 2022.
Role
of the Board, Compensation Committee and our Executive Officers
Executive
compensation decisions are typically made on an annual basis by the Compensation Committee with input from our Chief Executive Officer,
our Chief Operating Officer and our Chief Financial Officer. Specifically, after reviewing relevant market data and surveys within our
industry, our CEO, COO and CFO typically provide recommendations to the Compensation Committee regarding the compensation levels for
our existing named executive officers (the “NEOs”), including themselves, and our executive compensation program as a whole.
Our CEO, COO and CFO attend all Compensation Committee meetings. After considering these recommendations, the Compensation Committee
typically meets in executive session and adjusts base salary levels, cash bonus awards and determines the amount of any equity grants
for each of our NEOs. In making executive compensation recommendations, our CEO, COO and CFO consider each NEO’s performance during
the year, the Company’s performance during the year, as well as comparable company compensation levels. While the Compensation
Committee gives considerable weight to our CEO’s, COO’s and CFO’s recommendations on compensation matters, the Compensation
Committee has the final decision-making authority on all executive compensation matters. No other officers have assumed a role in the
evaluation, design or administration of our executive officer compensation program.
Role
of External Advisors
Alliance
Advisors, LLC was engaged to advise the Board during the year ended December 31, 2022. No external advisors were engaged during the year
ended December 31, 2021.
Director
Nominations Process
Our
Bylaws contain provisions that address the process by which a stockholder may nominate an individual to stand for election to our Board
of Directors at our annual meeting of stockholders. Historically, we have not had a formal policy concerning stockholder nominations
of individuals to stand for election to the Board, other than the provisions contained in our Bylaws. Although we have received one recommendation
from a stockholder requesting that the Board or the Nominating and Governance Committee consider a candidate for inclusion among the
slate of nominees in this proxy statement, we believe that no formal policy, in addition to the provisions contained in our Bylaws, concerning
stockholder recommendations is needed.
In
addition to stockholder nominations, the Nominating and Governance Committee may utilize a variety of methods for identifying potential
nominees for directors, including considering potential candidates who come to their attention through current officers, directors, professional
search firms or other persons. Once a potential nominee has been identified, the Nominating and Governance Committee evaluates whether
the nominee has the appropriate skills and characteristics required to become a director in light of the then current make-up of the
Board. This assessment includes an evaluation of the nominee’s judgment and skills, such as experience at a strategy/policy setting
level, financial sophistication, leadership and objectivity, all in the context of the perceived needs of the Board at that point in
time. Our Board of Directors believes that at a minimum all members of the Board should have the highest professional and personal ethics
and values. In addition, each member of the Board must be committed to increasing stockholder value and should have enough time to carry
out his or her responsibilities as a member of the Board.
Our
Bylaws provide that nominations for the election of directors may be made by any stockholder entitled to vote in the election of directors;
provided, however, that a stockholder may nominate a person for election as a director at a meeting only if written notice of such stockholder’s
intent to make such nomination has been given to our Secretary as described in “Deadline for Receipt of Stockholder Proposals”
in this proxy statement. Each notice must set forth: (a) as to each person whom the stockholder proposes to nominate for election or
re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or
employment of the person, (iii) the class or series and number of shares of our capital stock which are owned beneficially or of record
by the person (if any), and (iv) a description of all arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, (b) as to
the stockholder giving the notice, (i) the name and address, as they appear on our books, of such stockholder and (ii) the class and
number of our shares that are beneficially owned by such stockholder and that are owned of record by such stockholder; and (c) a representation
that the stockholder is a holder of record of our stock entitled to vote at such meeting and intends to appear in person or by proxy
at the meeting to introduce the director nominee.
Compensation
of Directors. Our employee directors are not separately compensated for their service as a director. In 2022, each of our non-employee
directors received 88,008 shares of restricted common stock for his service as a director. In addition to receiving shares of stock,
our non-employee directors earned the following fees: Mr. Lines, $93,343; Mr. Iverson, $87,898; and Mr. Ronca, $128,417. The members
of our Board of Directors are entitled to reimbursement of their expenses incurred in connection with the attendance at Board and committee
meetings in accordance with Company policy.
The
following table summarizes the annual compensation for our non-employee directors during 2022.
Name
(a) | |
Fees Earned or Paid in Cash (b) | | |
Stock Awards (c) (1) | | |
Option Awards (d) | | |
Non-Equity Incentive Plan Compensation (e) | | |
Nonqualified Deferred Compensation Earnings (f) | | |
All Other Compensation (g) | | |
Total (h) | |
James R. Lines | |
$ | 93,343 | | |
$ | 75,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 168,343 | |
Robert Iversen | |
$ | 87,898 | | |
$ | 75,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 162,898 | |
Michael V. Ronca | |
$ | 128,417 | | |
$ | 75,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 203,417 | |
(1) |
Reflects
the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of awards granted by the Board of Directors. See
Note 12 - Share-Based Compensation in the consolidated financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 2022. The grant date fair value for restricted stock awards is based on the average price of our common stock
on the grant date (August 12, 2022), which was $1.00 per share, respectively. As of December 31, 2022, Mr. Lines, Mr. Iversen and
Mr. Ronca each have an aggregate of 169,749 outstanding shares of unvested restricted stock. The restricted stock awards have the
following vesting schedule: a) for the shares granted on August 7, 2020: 33.3% of the shares of restricted common stock vested on
the first anniversary of the date of grant, 33.3% of the shares of restricted common stock vested on the second anniversary of the
date of grant and 33.4% of the shares of restricted common stock will vest on the third anniversary of the date of grant in each
case, so long as the director continues to serve on the Board through such date; b) for the shares granted on August 9, 2021: 33.3%
of the shares of restricted common stock vested on the first anniversary of the date of grant, 33.3% of the shares of restricted
common stock will vest on the second anniversary of the date of grant and 33.4% of the shares of restricted common stock will vest
on the third anniversary of the date of grant in each case, so long as the director continues to serve on the Board through such
date and c) for the shares granted on August 12, 2022 33.3% of the shares of restricted common stock will vest on the first anniversary
of the date of grant, 33.3% of the shares of restricted common stock will vest on the second anniversary of the date of grant and
33.4% of the shares of restricted common stock will vest on the third anniversary of the date of grant in each case, so long as the
director continues to serve on the Board through such date |
Vote
Required
The
nominees for election as Class III directors at the meeting who receive the greatest number of votes cast by the stockholders, a plurality,
will be elected as our Class III directors. As a result, broker non-votes and abstentions will not be counted in determining which nominees
receive the largest number of votes cast. You may vote “FOR” the nominees or any specific nominee or “WITHHOLD”
your vote for the nominees or any specific nominee.
Board
Recommendation
Our
Board of Directors recommends a vote “FOR” the Class III director nominees to the Board who are identified on the
enclosed proxy card.
Proposal
2
RATIFICATION
OF APPOINTMENT OF INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM
General
The
Audit Committee has selected Moss Adams LLP (“Moss Adams”), independent registered public accounting firm, to audit our consolidated
financial statements for the fiscal year ending December 31, 2023. Moss Adams served as our independent registered public accounting
firm for each of the fiscal years ended December 31, 2017 through December 31, 2022. Hein & Associates, LLP (“Hein”)
served as our independent registered public accounting firm for the fiscal years ended December 31, 2016, 2015, 2014 and 2013. We are
asking the stockholders to ratify the appointment of Moss Adams as our independent registered public accounting firm for the fiscal year
ending December 31, 2023. Moss Adams was appointed by the Audit Committee in accordance with its charter.
In
the event stockholders fail to ratify the appointment, the Audit Committee may reconsider this appointment. Even if the appointment is
ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent accounting firm at any time during
the year if the Audit Committee determines that such a change would be in our and our stockholders’ best interests.
The
Audit Committee has approved all services provided by Moss Adams. Representatives of Moss Adams plan to attend the annual meeting and
will be available to answer appropriate questions. Its representatives also will have an opportunity to make a statement at the meeting
if they so desire, although it is not expected that any statement will be made.
Audit
Fees
The
following table sets forth the fees incurred for services performed by Moss Adams LLP:
|
|
Years
Ended December 31, |
|
|
|
2022 |
|
|
2021 |
|
Audit
Fees |
|
$ |
190,900 |
|
|
$ |
218,782 |
|
Audit-Related
Fees |
|
|
- |
|
|
|
- |
|
Tax
Fees |
|
|
- |
|
|
|
- |
|
All
Other Fees |
|
|
- |
|
|
|
- |
|
Total |
|
$ |
190,900 |
|
|
$ |
218,782 |
|
Audit
Committee Report
The
Audit Committee assists our Board of Directors in overseeing (i) the integrity of our financial statements, (ii) our compliance with
legal and regulatory requirements, (iii) the independent auditor’s qualifications and independence, and (iv) the performance of
our internal auditors (or other personnel responsible for the internal audit function) and independent auditor. In so doing, it is the
responsibility of the committee to maintain free and open communication between the directors, the independent auditor and our financial
management. The committee is directly responsible for the appointment, compensation, retention and oversight of the work of the independent
auditor for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us. The independent
auditor reports directly to the committee.
Management
is responsible for the preparation, presentation, and integrity of our consolidated financial statements, accounting and financial reporting
principles, internal control over financial reporting, and procedures designed to ensure compliance with accounting standards, applicable
laws, and regulations. Management is also responsible for objectively reviewing and evaluating the adequacy, effectiveness, and quality
of our system of internal control over financial reporting. Our independent auditor, Moss Adams LLP, is responsible for performing an
independent audit of the consolidated financial statements.
The
committee’s responsibility is to monitor and oversee these processes and the engagement, independence and performance of our independent
auditor. The committee relies, without independent verification, on the information provided to it and on the representations made by
management and the independent auditor.
The
committee has met with our independent auditor and discussed the overall scope and plans for their audit. The committee met with the
independent auditor to discuss matters required to be discussed with audit committees under generally accepted auditing standards, including,
among other things, matters related to the conduct of the audit of our consolidated financial statements and the matters required to
be discussed by the by the Public Company Accounting Oversight Board (“PCAOB”) and the SEC.
Our
independent auditor also provided to the committee the written disclosures and the letter required by applicable standards of the PCAOB
regarding the independent auditor’s communications with the committee concerning independence, and the committee discussed with
the independent auditor its independence.
The
committee has reviewed and discussed our audited consolidated financial statements for the fiscal year ended December 31, 2022 with management
and Moss Adams LLP. Based on the committee’s review of the audited consolidated financial statements and the meetings and discussions
with management and the independent auditors, and subject to the limitations on the committee’s role and responsibilities referred
to above and in the Audit Committee Charter, the committee recommended to our Board of Directors that our audited consolidated financial
statements be included in our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC.
AUDIT
COMMITTEE
James
R. Lines
Robert
Iversen
Michael
V. Ronca
Audit
Pre-Approval Policy
The
charter of the Audit Committee and its pre-approval policy require that the Audit Committee review and pre- approve the Company’s
independent registered public accounting firm’s audit fees, audit-related fees, tax fees and fees for other services. The Chairman
of the Audit Committee has the authority to grant pre-approvals, provided such approvals are within the pre-approval policy and are presented
to the Audit Committee at a subsequent meeting. For the year ended December 31, 2022, the Audit Committee approved 100% of the services
described above under the captions “Audit Fees,” “Audit Related Fees,” “Tax Fees” and “All
Other Fees.”
Vote
Required
The
approval of the ratification of the appointment of Moss Adams LLP as our independent registered public accounting firm for the fiscal
year ending December 31, 2023 requires the affirmative vote of the holders of a majority of the shares represented at the meeting, in
person or by proxy, and entitled to vote. As a result, abstentions will have the same practical effect as votes against this proposal.
Broker non-votes will have no effect on the outcome of this proposal. However, because brokers generally have discretionary authority
to vote on the ratification of our independent auditors, broker non-votes are generally not expected to result from the vote on this
proposal. For the approval of the ratification of the appointment of Moss Adams, you may vote “FOR” or “AGAINST”
or abstain from voting.
Board
Recommendation
The
Board recommends that you vote “FOR” the ratification of appointment of Moss Adams LLP as our independent registered
public accounting firm for the fiscal year ending December 31, 2023.
OTHER
INFORMATION
Principal
Stockholders
The
following table presents certain information as of June 28, 2023 as to:
|
● |
each
stockholder known by us to be the beneficial owner of more than five percent of our outstanding shares of common stock, |
|
● |
each
director and director nominee, |
|
● |
each
executive officer named in the Summary Compensation Table, and |
|
● |
all
current directors and NEOs as a group. |
Name
and Address of Beneficial Owner |
|
Numbers
of Shares
of Common Stock
Beneficially Owned |
|
|
%
of Common Stock
Outstanding (1) |
|
G.
Troy Meier (2) |
|
|
11,320,426 |
|
|
|
38.7 |
% |
Annette
Meier (3) |
|
|
10,989,062 |
|
|
|
37.6 |
% |
Christopher
D. Cashion (4), (9) |
|
|
926,026 |
|
|
|
3.2 |
% |
James
R. Lines (5), (6) |
|
|
451,290 |
|
|
|
1.5 |
% |
Robert
Iversen (5), (7) |
|
|
606,675 |
|
|
|
2.0 |
% |
Michael
V. Ronca (5), (8) |
|
|
547,202 |
|
|
|
1.9 |
% |
Jeffrey
E. Eberwein (10) |
|
|
2,250,000 |
|
|
|
7.7 |
% |
Star
Equity Fund, LP (10) |
|
|
1,224,741 |
|
|
|
4.2 |
% |
Executive
Officers and Directors as a group (6 persons) |
|
|
14,932,224 |
|
|
|
51.1 |
% |
|
(1) |
Based
on 29,252,872 shares outstanding as of June 28, 2023. Unless otherwise noted, the address for the holder is 1583 South 1700 East,
Vernal, Utah 84078. |
|
|
|
|
(2) |
Includes
(i) 5,641,510 shares of common stock indirectly owned through his ownership in Meier Family Holding Company, LLC, and (ii) 3,173,350
shares of common stock indirectly owned through his ownership in Meier Management Company, LLC. Also includes 702,801 shares of vested
restricted common stock, 709,168 shares of unvested restricted common stock. The unvested restricted stock will vest on August 12,
2023, August 12, 2024, and August 12, 2025. |
|
|
|
|
(3) |
Includes
(i) 5,641,510 shares of common stock indirectly owned through her ownership in Meier Family Holding Company, LLC, and (ii) 3,173,350
shares of common stock indirectly owned through her ownership in Meier Management Company, LLC. Also includes 536,731 shares of vested
restricted common stock, 543,874 shares of unvested restricted common stock. The unvested restricted stock will vest on August 12,
2023, August 12, 2024, and August 12, 2025. |
|
|
|
|
(4) |
Includes
(a) 46,969 shares of restricted common stock that vests in accordance with the following vesting schedule: 33.3% of the shares of
restricted common stock vested on August 7, 2021, 33.3% of the shares of restricted common stock vested on August 7, 2022, and 33.4%
of the shares of restricted common stock will vest on August 7, 2023; (b) 104,628 shares of restricted common stock that vests in
accordance with the following vesting schedule: 33.3% of the shares of restricted common stock vested on August 9, 2022, 33.3% of
the shares of restricted common stock will vest on August 9, 2023, and 33.4% of the shares of restricted common stock will vest on
August 9, 2024; and (c) 120,000 shares of restricted common stack that vests in accordance with the following vesting schedule: 33.3%
of the shares of restricted common stock will vest on August 12, 2023, 33.3% of shares of restricted common stock will vest on August
12, 2024, and 33.4% of shares of restricted common stock will vest on August 12, 2025. |
|
|
|
|
(5) |
Includes
(a) 29,356 shares of restricted common stock that vests in accordance with the following vesting schedule: 33.3% of the shares of
restricted common stock vested on August 7, 2021, 33.3% of the shares of restricted common stock vested on August 7, 2022, and 33.4%
of the shares of restricted common stock will vest on August 7, 2023; (b) 65,393 shares of restricted common stock that vests in
accordance with the following vesting schedule: 33.3% of the shares of restricted common stock vested on August 9, 2022, 33.3% of
the shares of restricted common stock will vest on August 9, 2023, and 33.4% of the shares of restricted common stock will vest on
August 9, 2024; and (c) 75,000 shares of restricted common stack that vests in accordance with the following vesting schedule: 33.3%
of the shares of restricted common stock will vest on August 12, 2023, 33.3% of shares of restricted common stock will vest on August
12, 2024, and 33.4% of shares of restricted common stock will vest on August 12, 2025. |
|
|
|
|
(6) |
The
address of Mr. Lines is c/o Superior Drilling Products Inc. |
|
|
|
|
(7) |
The
address of Mr. Iversen is c/o Superior Drilling Products Inc. |
|
|
|
|
(8) |
The
address of Mr. Ronca is c/o Superior Drilling Products Inc. |
|
|
|
|
(9) |
The
address of Mr. Cashion is c/o Superior Drilling Products Inc. |
|
|
|
|
(10) |
According
to the Schedule 13D filed with the SEC on May 9, 2023 and the Form 4 filed with the SEC on May 22, 2023 by Star Equity Fund, LP,
Star Equity Holdings, Inc., Star Equity Fund GP, LLC, Star Investment Management, LLC, Jeffrey E. Eberwein, and Star Value, LLC (collectively,
the “Star Equity Group”), Jeffery E. Eberwein directly owns 2,250,000 shares of common stock and the Star Equity Group
together are the beneficial owner of 1,224,741 shares of common stock. |
Executive
Officers and Key Employees
Our
executive officers serve at the direction of our Board of Directors. All of our executive officers and key employees are listed in the
following table, and certain information concerning those officers, except for Mr. Meier and Ms. Meier, who are also members of the Board
of Directors, follows the table:
Name |
|
Age |
|
Position |
G.
Troy Meier |
|
61 |
|
Board
Chair, Class III Director and Chief Executive Officer |
Annette
Meier |
|
60 |
|
Class
II Director, President and Chief Operating Officer |
Christopher
D. Cashion |
|
67 |
|
Chief
Financial Officer |
Christopher
D. Cashion. Mr. Cashion has over 40 years of experience in the fields of accounting, finance and private equity. Mr. Cashion
joined us in March 2014 to serve as our Chief Financial Officer on a full-time basis. Previously, Mr. Cashion worked as an independent
financial and business consultant since 1998. From January 2013 through February 2014, Mr. Cashion was the Chief Financial Officer for
Surefire Industries USA LLC, a Houston-based hydraulic fracturing equipment manufacturing company. Previously, from January 2005 to August
2012, Mr. Cashion provided chief financial officer services to five start-up portfolio companies owned by the Shell Technology Venture
Fund, a private equity fund. Prior to his tenure with the start-up portfolio companies, Mr. Cashion worked for the First Reserve Corporation,
a private equity firm, from 1991 to 1993. Mr. Cashion worked with Baker Hughes, Inc. from 1981 to 1991 and with Ernst & Young from
1977 to 1981. Mr. Cashion holds a B.S. in Accounting from the University of Tennessee and an M.B.A. in Finance and International Business
from the University of Houston. Mr. Cashion has been a Certified Public Accountant since 1979.
Named
Executive Officer Compensation
Summary
Compensation Table. The following table provides information concerning compensation paid or accrued during the fiscal years
ended December 31, 2022 and 2021, to our principal executive officer, our chief operating officer and our principal financial officer,
to whom we sometimes refer together as our NEOs.
Summary
Compensation Table for Fiscal Years Ended December 31, 2022 and 2021
Name and Principal Position | |
Year | | |
Salary | | |
Bonus | | |
Stock Awards | | |
Option Awards | | |
Non-Equity Incentive Plan Compensation | | |
All Other Compensation | | |
Total | |
G. Troy Meier | |
| 2022 | | |
$ | 475,000 | (1) | |
$ | - | (2) | |
$ | 332,500 | (4) | |
$ | - | | |
$ | - | | |
$ | 2,370 | (5) | |
$ | 809,870 | |
Chief Executive Officer | |
| 2021 | | |
$ | 444,666 | (1) | |
$ | 665,000 | (2) | |
$ | 332,500 | (3) | |
$ | - | | |
$ | - | | |
$ | 8,012 | (5) | |
$ | 1,450,178 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Annette Meier | |
| 2022 | | |
$ | 414,113 | (1) | |
$ | - | (2) | |
$ | 255,000 | (4) | |
$ | - | | |
$ | - | | |
$ | 10,656 | (5) | |
$ | 679,770 | |
President and Chief Operating Officer | |
| 2021 | | |
$ | 395,201 | (1) | |
$ | 595,000 | (2) | |
$ | 255,000 | (3) | |
$ | - | | |
$ | - | | |
$ | 12,288 | (5) | |
$ | 1,257,489 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Christopher Cashion | |
| 2022 | | |
$ | 289,029 | (1) | |
$ | - | | |
$ | 120,000 | (4) | |
$ | - | | |
$ | - | | |
$ | 13,340 | (6) | |
$ | 422,370 | |
Chief Financial Officer | |
| 2021 | | |
$ | 276,989 | (1) | |
$ | - | | |
$ | 120,000 | (3) | |
$ | - | | |
$ | - | | |
$ | 11,566 | (6) | |
$ | 408,555 | |
(1) |
Salary
amounts represent base compensation for the individuals indicated. |
|
|
(2) |
A
bonus of $333,900 was accrued but not paid in 2022 for Mr. Meier, and $296,100 was accrued but not paid for Ms. Meier. For 2021,
accrued bonuses of $665,000 for Mr. Meier and $595,000 for Ms. Meier were used to offset the Tronco related party obligation. |
|
|
(3) |
Reflects
the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. See Note 12 Share-Based Compensation to our consolidated
financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022. The grant date fair value for
these restricted stock awards was based on the average price of our common stock on the grant date (August 9, 2021), which was $0.765
per share. The restricted stock awards will vest in accordance with the following vesting schedule: 33.3% of the shares of restricted
common stock vested on August 9, 2022, 33.3% of the shares of restricted common stock will vest on August 9, 2023 and 33.4% of the
shares of restricted common stock will vest on August 9, 2024. |
|
|
(4) |
The
grant date fair value for these restricted stock awards was based on the average price of our common stock on the grant date (August
12, 2022), which was $1.00 per share. The restricted stock awards will vest in accordance with the following vesting schedule: 33.3%
of the shares of restricted common stock will vest on August 12, 2023, 33.3% of the shares of restricted common stock will vest on
August 12, 2024 and 33.4% of the shares of restricted common stock will vest on August 12, 2025. |
|
|
(5) |
Represents
certain company paid health care costs and life insurance costs for G. Troy Meier and Annette Meier. |
|
|
(6) |
Represents
certain company paid health care costs and life insurance costs. |
Narrative
Disclosure to Summary Compensation Table. See the footnotes to the Summary Compensation Table and “Employment Agreements
and Potential Benefits Upon Termination or Change-in-Control” for narrative disclosure with respect to the table, as well as the
below discussion.
Outstanding
Equity Awards for Year Ended December 31, 2022
The
following table shows the number of shares covered by exercisable and unexercisable options awards and stock awards held by our NEOs
on December 31, 2022 that were made under the 2015 Long Term Incentive Plan.
|
|
Option Awards |
|
|
|
|
Stock Awards |
|
Name |
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable |
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable |
|
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#) |
|
|
Option
Exercise
Price
($) |
|
|
Option
Expiration
Date |
|
Number
of Shares
or Units
of Stock
That
Have
Not
Vested
(#) |
|
|
Market
Value of
Shares or
Units of
Stock
That Have
Not
Vested
($) |
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
(#) |
|
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
($) |
|
(a) |
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
(e) |
|
|
(f) |
|
(g) |
|
|
(h) (1) |
|
|
(i) |
|
|
(j) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G. Troy Meier |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86,762 |
|
|
$ |
50,793 |
(3) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
289,906 |
|
|
$ |
221,778 |
(2) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
332,500 |
|
|
$ |
332,500 |
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annette Meier |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,540 |
|
|
$ |
39,092 |
(3) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
222,334 |
|
|
$ |
170,086 |
(2) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
255,000 |
|
|
$ |
255,000 |
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher Cashion (5) |
|
|
11,995 |
|
|
|
- |
|
|
|
- |
|
|
|
1.73 |
|
|
03/04/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,416 |
|
|
|
- |
|
|
|
- |
|
|
|
1.67 |
|
|
03/18/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,057 |
|
|
|
- |
|
|
|
- |
|
|
|
1.37 |
|
|
03/31/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,969 |
|
|
$ |
27,594 |
(3) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,628 |
|
|
$ |
80,040 |
(2) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000 |
|
|
$ |
120,000 |
(4) |
|
|
- |
|
|
|
- |
|
(1) |
See
Note 12 -Share-Based Compensation in the consolidated financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 2022. |
|
|
(2) |
The
grant date fair value for restricted stock awards is based on the average price of our common stock on the grant date (August 9,
2021), which was $0.765 per share. The remaining restricted stock awards vested in accordance with the following vesting schedule:
33.3% of the shares of restricted common stock vested on August 9, 2022, 33.3% of the shares of restricted common stock will vest
on August 9, 2023, and 33.4% of the shares of restricted common stock will vest on August 9, 2024. |
|
|
(3) |
The
grant date fair value for restricted stock awards is based on the average price of our common stock on the grant date (August 7,
2020), which was $0.5875 per share. The restricted stock awards vested in accordance with the following vesting schedule: 33.3% of
the shares of restricted common stock vested on August 7, 2021, 33.3% of the shares of restricted common stock vested on August 7,
2022 and 33.4% of the shares of restricted common stock will vest on August 7, 2023. |
|
|
(4) |
The
grant date fair value for restricted stock awards is based on the average price of our common stock on the grant date (August 12,
2022), which was $1.000 per share. The remaining restricted stock awards will vest in accordance with the following vesting schedule:
33.3% of the shares of restricted common stock will vest on August 12, 2023, 33.3% of the shares of restricted common stock will
vest on August 12, 2024, and 33.4% of the shares of restricted common stock will vest on August 12, 2025. |
|
|
(5) |
During
March 2016, Mr. Cashion agreed to receive awards of stock options in lieu of base salary. The grant date fair value for the stock
option awards was based on the closing price of our common stock on the grant date of a) March 4, 2016, which was $1.73 per share;
b) March 18, 2016, which was $1.67 per share; and c) March 31, 2016, which was $1.37 per share. All options vested 100% on the grant
date and have a ten-year term expiring on March 4, 2026, March 18, 2026 and March 31, 2026, respectively. The fair value of the vested
stock options were calculated using the Black-Scholes model with a volatility and discount rate over the expected term of each employee. |
Employment
Agreements and Potential Benefits Upon Termination or Change-in-Control.
In
connection with our initial public offering, we planned to enter into employment agreements with each of our NEOs, and the forms of those
agreements were filed with the SEC as exhibits to our registration statement on Form S-1. However, management and the Board have continued
to discuss and negotiate the final terms of those agreements and as of the date hereof, the agreements have not been executed. As a result,
none of the NEOs currently has a contractual right to any of the benefits described below. The employment agreements to be entered into
with our NEOs will provide for, among other things, the payment of base salary, reimbursement of certain costs and expenses, and for
each NEO’s participation in our bonus plan and employee benefit plans.
With
the exception of G. Troy Meier’s and Annette Meier’s employment agreements, each agreement will provide for a term of employment
commencing on the date of the agreement and continuing (a) until we or the executive provide 30-days written notice of termination to
the other party, (b) upon termination by us for cause, or (c) upon the executive’s death or disability. Except with respect to
certain items of compensation, as described below, the terms of each agreement will be similar in all material respects.
In
addition to the base salaries shown above,
● |
Mr.
Meier’s form of employment agreement provides for an annual review by our Board of Directors, and a performance bonus of 70%
to 110% of his base salary based on criteria to be established by the Compensation Committee and participate in our incentive plans. |
|
|
● |
Ms.
Meier’s form of employment agreement provides for an annual review by our Board of Directors, and a performance bonus of 70%
to 110% of her base salary based on criteria to be established by the Compensation Committee and participate in our incentive plans. |
|
|
● |
Mr.
Cashion’s form of employment agreement entitles him to receive a performance bonus based on criteria established by the Compensation
Committee, and to participate in our incentive plans. |
Each
of the Meiers’ employment agreements will provide for customary and usual fringe benefits generally available to our executive
officers, and reimbursement for reasonable out-of-pocket business expenses, including the use of a company vehicle.
Change
of Control Provisions. Each NEO’s employment agreement will also provide that in the event of a Change in Control (as defined
below), during the term of executive’s employment, (a) we are obligated to pay such executive a single lump sum payment, within
30 days of the termination of such executive officer’s employment, equal to one year salary, and (b) the executive’s equity
awards, if any, shall immediately vest. “Change in Control” means approval by our stockholders of:
(1)
(a) a reorganization, merger, consolidation or other form of corporate transaction or series of transactions, in each case, with respect
to which persons who were our stockholders immediately prior to such transaction do not, immediately thereafter, own more than 50% of
the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company’s
then outstanding voting securities, in substantially the same proportions as their ownership immediately prior to such transaction, (b)
our liquidation or dissolution, or (c) the sale of all or substantially all of our assets (unless such reorganization, merger, consolidation
or other corporate transaction, liquidation, dissolution or sale is subsequently abandoned); or
(2)
the acquisition in a transaction or series or transactions by any person, entity or “group”, within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act, of more than 50% of either the then outstanding shares of common stock or the combined voting
power of our then outstanding voting securities entitled to vote generally in the election of directors (a “Controlling Interest”),
excluding any acquisitions by (a) us or our subsidiaries, (b) any person, entity or “group” that as of the date of the amendments
to the employment agreements owns beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act of a Controlling Interest,
or (c) any of our employee benefit plans.
G.
Troy Meier’s and Annette Meier’s employment agreements will provide that (a) the non-competition covenant does not apply
following the termination of employment if their employment is terminated without cause or for good reason, (b) the non-solicitation
of employees covenant applies with respect to any current employee or any former employee who was employed by us within the prior six
months, and (c) the non-solicitation of customers covenant applies to all actual or targeted prospective clients of ours to the extent
solicited on behalf of any person or entity in connection with any business competitive with our business.
As
consideration and compensation to our executive officers for, and subject to each executive officer’s adherence to, the above covenants
and limitations, we have agreed to continue to pay the executive officer’s base salary in the same manner as if they continued
to be employed by us during the one-year non-competition period following the executive officer’s termination.
Payments
on Termination. Except as noted above, upon termination of employment under these agreements, (a) we are only required to pay each
executive officer that portion of their respective annual base salary that have accrued and remain unpaid through the effective date
of the executive officer’s termination, and (b) we have no further obligation whatsoever to the executive officer other than reimbursement
of previously incurred expenses which are appropriately reimbursable under our expense reimbursement policy. However, if employment termination
is due to the executive’s death, we will continue to pay the executive’s annual base salary for the period through the end
of the calendar month in which death occurs to the executive’s estate.
Pay
versus Performance
As
required by Item 402(v) of Regulation S-K, we are providing the following information regarding the relationship between executive compensation
and our financial performance for each of the two years in the period ended December 31, 2022 and 2021. The table below summarizes the
compensation values reported in the Summary Compensation Table for our principal executive officer (“PEO”) and average for
our other non-PEO NEOs as compared to the “compensation actually paid” (“CAP”), calculated pursuant to the applicable
rules and our financial performance for the years ended December 31, 2022 and 2021.
Year(1) |
|
|
Summary
Compensation Table Total for PEO |
|
|
Compensation
Actually Paid to PEO(3) |
|
|
Average
Summary Compensation Table Total for Non-PEO NEOs |
|
|
Average
Compensation Actually Paid to Non-PEO NEOs(3) |
|
|
Value
of Initial Fixed $100 Investment Based On Total Shareholder Return |
|
|
Net
Income |
|
(a) |
|
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
(e) |
|
|
(f) |
|
|
(g) |
|
2022 |
|
|
$ |
809,870 |
|
|
$ |
690,538 |
|
|
$ |
551,070 |
|
|
$ |
509,145 |
|
|
$ |
24.32 |
|
|
$ |
1,065,157 |
|
2021 |
|
|
$ |
1,450,178 |
|
|
$ |
1,204,199 |
|
|
$ |
833,022 |
|
|
$ |
720,006 |
|
|
$ |
21.67 |
|
|
$ |
(529,801 |
) |
(1) |
The
PEO and the non-PEO NEOs for each year are as follows: |
|
Year |
PEO |
Non-PEO
NEOs |
|
|
2022 |
G.
Troy Meier |
Annette
Meier, Christopher Cashion |
|
|
2021 |
G.
Troy Meier |
Annette
Meier, Christopher Cashion |
|
(2) |
In
accordance with Item 402(v) of Regulation S-K, the following adjustments were made to the compensation for the PEO for each fiscal
year to determine the CAP: |
Adjustments to Determine Compensation “Actually Paid” for CEO/PEO | |
2022 | | |
2021 | |
Summary Compensation Table Total Compensation | |
$ | 809,870 | | |
$ | 1,450,178 | |
Less (Stock granted) | |
| (332,500 | ) | |
| (332,500 | ) |
Add Stock vested | |
| 213,168 | | |
| 86,521 | |
Total adjustments | |
$ | (119,332 | ) | |
$ | (245,970 | ) |
Compensation actually paid | |
$ | 690,538 | | |
$ | 1,204,199 | |
(3) |
In
accordance with Item 402(v) of Regulation S-K, the following adjustments were made to the compensation for the Non-PEO NEOs for each
fiscal year to determine the CAP: |
Adjustments to Determine Average Compensation “Actually Paid” for Non-PEO NEOs | |
2022 | | |
2021 | |
Summary Compensation Table Total Compensation | |
$ | 551,070 | | |
$ | 833,022 | |
Less (Stock granted) | |
| (187,500 | ) | |
| (187,500 | ) |
Add Stock vested | |
| 145,575 | | |
| 74,484 | |
Total adjustments | |
$ | (41,925 | ) | |
$ | (113,016 | ) |
Compensation actually paid | |
$ | 509,145 | | |
$ | 720,006 | |
The
relationship between CAP to our PEO, the average of CAP to our Non-PEO NEO’s, and the Company’s cumulative Total Shareholder
Return (“TSR”) over the two most recent completed fiscal years is as follows:
|
● |
PEO
paid compensation decreased 42.7% from December 31, 2021 to December 31, 2022 |
|
● |
Average
Non-PEO paid compensation decreased 29.3% from December 31, 2021 to December 31, 2022 |
|
● |
2022
PEO paid compensation was 35.6% higher when compared to the 2022 Average Non-PEO paid compensation |
|
● |
2021
PEO paid compensation was 67.2% higher when compared to the 2021 Average Non-PEO paid compensation |
|
● |
2022
PEO paid compensation was 64.8% of Net Income |
|
● |
2022
Average Non-PEO paid compensation was 47.8% of Net Income |
|
● |
2021
PEO paid compensation was 227.3% of Net Income |
|
● |
2021
Average Non-PEO paid compensation was 135.9% of Net Income |
|
● |
TSR
value increased 17.5% from December 31, 2021 to December 31, 2022 |
Certain
Relationships and Related Party Transactions
Related
Party Note Receivable
The
Company holds 8,267,860 shares as collateral for the Tronco Note (see Note 6 – Related Party Note Receivable in our Annual Report
on Form 10-K for the year ended December 31, 2022).
Policies
and Procedures for Related Party Transactions
Any
request for us to enter into a transaction with an executive officer, director, principal stockholder or any of such persons’ immediate
family members or affiliates, in which the amount involved exceeds $120,000, must first be presented to our audit committee for review,
consideration and approval. All of our directors and executive officers are required to report to the audit committee chair any such
related person transaction. In approving or rejecting the proposed agreement, our audit committee shall consider the facts and circumstances
available and deemed relevant to the audit committee, including, but not limited to, costs and benefits to us, the terms of the transaction,
the availability of other sources for comparable services or products, and, if applicable, the impact on a director’s independence.
Our audit committee shall approve only those agreements that, in light of known circumstances, are in, or are not inconsistent with,
our best interests and the best interests of our shareholders, as our audit committee determines in the good faith exercise of its discretion.
If we should discover related person transactions that have not been approved, the audit committee will be notified and will determine
the appropriate action, including ratification, rescission or amendment of the transaction.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our equity securities to
file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. Officers, directors and greater
than 10% stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) reports they file.
To
our knowledge, based solely on review of the copies of such reports furnished to us and written representations that no other reports
were required, during the fiscal year ended December 31, 2022, our officers, directors and greater than 10% beneficial owners timely
filed all required Section 16(a) reports.
Other
Matters
Our
Annual Report to Stockholders on Form 10-K covering the fiscal year ended December 31, 2022, our Quarterly Reports on Form 10-Q and other
information are available on our website (www.sdpi.com) and may also be obtained by calling (435) 789-0594 or writing to the address
below:
Superior
Drilling Products, Inc.
P.O.
Box 1656
Vernal,
Utah 84078
The
persons designated to vote shares covered by our Board of Directors’ proxies intend to exercise their judgment in voting such shares
on other matters that may properly come before the meeting. Management does not expect that any matters other than those referred to
in this proxy statement will be presented for action at the meeting.
Deadline
for Receipt of Stockholder Proposals
If
you want to present a proposal from the floor at the 2024 annual meeting of stockholders or nominate a person for election to the Board
at such meeting, you must give us written notice no later than the close of business on May 13, 2024and no earlier than the opening of
business on April 13, 2024, and follow the procedures outlined in our Bylaws. If the date of the 2024 annual meeting of stockholders
is more or less than 30 days from August 11, 2024, the one year anniversary of the 2023 annual meeting of stockholders, your notice of
a proposal will be timely if we receive it no earlier than the opening of business on the 120th day before the actual date
of such meeting and no later than the later of (i) the close of business on the 90th day before the actual date of such meeting
and (ii) the close of business on the tenth day following the date on which a written statement setting forth the date of such meeting
was mailed to the stockholders or the date on which it is first disclosed to the public.
If
we do not receive notice of your proposal within this time frame, our management will use its discretionary authority to vote the shares
it represents as the Board may recommend. You may request a copy of the provisions of the Bylaws governing the requirements for notice
at the below address.
If
instead of presenting your proposal or nominee at the meeting you want your proposal to be considered for inclusion in next year’s
proxy statement, you must submit the proposal so that it is received by June 27, 2024 and it must set forth the specific information
required by Rule 14a-8 or Rule 14a-18, as applicable, of Regulation 14A of the Exchange Act. If the date of the annual meeting of stockholders
for the fiscal year ending December 31, 2023 is more than 30 days from August 11, 2024, the one year anniversary date of the 2023 annual
meeting of stockholders, a notice will be timely if we receive it a reasonable time before we begin to print and send our proxy materials
for such meeting.
In
each case, your notice should be sent in writing to our Secretary at our principal executive offices at P.O. Box 1656, Vernal, Utah 84078.
Sincerely,
/s/
Annette Meier |
|
Annette
Meier |
|
Secretary |
|
|
|
June
30, 2023 |
|
Superior Drilling Products (AMEX:SDPI)
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