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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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FORM 10-K/A

(Amendment No. 1)

 

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(Mark One)

☒

Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the fiscal year ended: January 28, 2017

 

OR

 

	☐	Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the transition period from to

 

Commission File Number 001-32207

 

SIGMA DESIGNS, INC.

(Exact name of Registrant as specified in its charter)

 

California	94-2848099
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
47467 Fremont Blvd., Fremont, California	94538
(Address of principal executive offices)	(Zip code)

 

Registrant’s telephone number, including area code: (408) 262-9003

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Name of each exchange on which registered
Common Stock, no par value		The NASDAQ Stock Market LLC

 

Securities registered pursuant to Section 12(g) of the Act: None

 

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

 

Yes ☐ No ☒

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” "accelerated filer," "smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

 

The aggregate market value of the registrant’s common stock, no par value, held by non-affiliates of the registrant on July 30, 2016, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $244,010,322 based on the closing sale price of $6.70 per share on that date. Shares of common stock held by each executive officer, director and shareholder known by the registrant to own 10% or more of the registrant’s outstanding common stock based on Schedule 13G or 13D filings and other information known to the registrant, have been excluded because such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

 

There were 38,153,106 shares of the registrant’s common stock outstanding on March 15, 2017.

 

 

EXPLANATORY NOTE

 

We are filing this Amendment No. 1 to Annual Report on Form 10-K/A, or the Amendment, to amend our Annual Report on Form 10-K for the fiscal year ended January 28, 2017, as filed with the U.S. Securities and Exchange Commission, or the SEC, on March 30, 2017, or the 10-K. The principal purpose of this Amendment is to include in Part III the information that was to be incorporated by reference to the Proxy Statement for our 2017 Annual Meeting of Shareholders. This Amendment hereby amends Part III, Items 10 through 14, and Part IV, Item 15 of the 10-K.

 

No attempt has been made in this Amendment to modify or update the other disclosures presented in the 10-K. This Amendment does not reflect events occurring after the filing of the 10-K (i.e., occurring after March 30, 2017) or modify or update those disclosures that may be affected by subsequent events. Such subsequent matters will be addressed in subsequent reports filed with the SEC. Accordingly, this Amendment should be read in conjunction with the 10-K and our other filings with the SEC.

 

 

PART III

 

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE GOVERNANCE

 

Board of Directors

 

Our directors and their ages as of May 1, 2017 are as set forth below:

 

Name	Age	Position
J. Michael Dodson (1)(2)(3)	56	Director
Martin Manniche (1)(2)(3)	49	Director
Pete Thompson (1)(2)(3)	48	Director
Thinh Q. Tran	63	Director, President and Chief Executive Officer

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	(1)	Member of the Audit Committee.
	(2)	Member of the Compensation Committee.
	(3)	Member of the Corporate Governance and Nominating Committee.

 

J. Michael Dodson has served as a member of our Board of Directors since July 2013 and as our Lead Independent Director since January 2014. Mr. Dodson has served as Chief Operating Officer and Chief Financial Officer of Mattson Technology, Inc., a semiconductor wafer processing equipment manufacturing company, since October 2012 having joined Mattson in October 2011 as Executive Vice President and Chief Financial Officer in October 2011. In May 2016, Mattson was acquired by Beijing E-Town Dragon Semiconductor Industry Investment Center (Limited Partnership) (“E-Town Dragon”), and Mr. Dodson has continued to serve as Chief Financial Officer of Mattson Technology, a wholly owned subsidiary of E-Town Dragon. Prior to joining Mattson, Mr. Dodson served as Senior Vice President and Chief Financial Officer at DDi Corp., a provider of printed circuit board engineering and manufacturing services, from January 2010 until October 2011. Before joining DDi Corp., Mr. Dodson served as the CFO for three global public technology companies and Chief Accounting Officer for an S&P 500 company. Mr. Dodson started his career with Ernst & Young. Mr. Dodson received a bachelor’s degree in Accounting and Information Systems from the University of Wisconsin-Madison.

 

Mr. Dodson’s public company financial and operational experience enables him to provide our Company with valuable financial, accounting and executive insights. In addition, Mr. Dodson’s experience within the semiconductor industry provides additional industry experience that can assist the Board in managing the strategic direction of our Company. Finally, Mr. Dodson’s recent experience in the sale of Mattson Technology to E-Town Dragon, a company based in China, enables him to bring a current perspective on cross-border business transactions and other related matters, as a significant portion of our business takes place in Asia.

 

Martin Manniche has served as a member of our Board of Directors since February 2014. Mr. Manniche is currently the Chairman and Chief Executive Officer of GreenWave Systems Inc., a technology development and services company, which he co-founded in September 2009. He previously served as Chief Technology Officer at Cisco Consumer Business Group from September 2005 to September 2009. Mr. Manniche also serves on the board of Telechips; a Kosdaq listed company, and has also previously held board positions at Analogix Semiconductor, Inc., Avega Systems Inc. and KiSS Technology A/S. Mr. Manniche received a degree in Business from Lyngby Uddannelsescenter in Denmark.

 

Mr. Manniche’s industry experience enables him to provide valuable insight that will assist the Board in managing the strategic direction of our Company. In addition, Mr. Manniche’s experience at both established and start-up companies, in addition to service on other company boards, will be valuable as we shape our plans for future growth and profitability.

 

Pete Thompson has served as a member of our Board of Directors since December 2013. Mr. Thompson has served as Executive Vice President and Chief Operating Officer of TiVo Corporation, a consumer entertainment company, since September 2016. Prior to TiVo, Mr. Thompson served as Vice President of Strategic Partnering of Sonos, Inc., a consumer electronics company, from September 2015 to September 2016. From September 2013 to September 2015, Mr. Thompson served as the Senior Vice President of the TV & Media Division at Ericsson Corporation. Prior to Ericsson, Mr. Thompson held a variety of executive positions with Microsoft Corporation from January 2006 to September 2013, including Corporate Vice President of Mediaroom Business Unit, General Manager of Xbox Live, and General Manager of Surface. Prior to Microsoft, Mr. Thompson held management positions at T-Mobile USA and Hewlett-Packard. Mr. Thompson previously served on the Board of Directors of Seawell Networks, a Canadian-based company, until it was acquired by Arris Group, Inc. in April 2014. Mr. Thompson currently serves on the board of directors of E.W. Scripps Company, a broadcasting company. Thompson received a bachelor’s degree in International Economics from the University of California Los Angeles and an MBA from the Kellogg Graduate School of Management.

 

 

Mr. Thompson’s market awareness, knowledge and experience enable him to provide valuable insight to our Company. In addition, his diverse industry background and leadership experience, including operating large business units, will help drive our growth strategy in parallel with our efforts to operate profitably.

 

Thinh Q. Tran has served as a member of our Board of Directors since the founding of the company in 1982. One of our founders, Mr. Tran has served as our President and Chief Executive Officer and as Chairman of our Board of Directors since February 1982. Prior to founding us, Mr. Tran was employed by Amdahl Corporation and Trilogy Systems Corporation, both of which were involved in the IBM-compatible mainframe computer market. Mr. Tran received a bachelor’s degree in Electrical Engineering from the University of Wisconsin and a master’s degree in Electrical Engineering from Stanford University.

 

As our President and Chief Executive Officer, a position he has held for over 30 years, Mr. Tran has extensive knowledge of our business, products and operations. During his period of service as our President and Chief Executive Officer, Mr. Tran has established strong relationships with our key customers, suppliers and other industry participants. In addition, Mr. Tran brings significant senior leadership, industry and technology expertise to our Board. 

 

There are no family relationships among any of our directors and executive officers.

 

 

Executive Officers

 

The names of our executive officers, their ages as of May 1, 2017, and their positions are shown below

 

Name		Age		Position
Thinh Q. Tran		63		President and Chief Executive Officer
Elias N. Nader		52		Chief Financial Officer and Secretary
Sal Cobar		64		Chief Operating Officer

 

 

Our Board appoints executive officers, who then serve at the Board’s discretion.

 

For information regarding Mr. Tran, please refer to “Board of Directors” above.

 

Elias N. Nader, has served as our Chief Financial Officer since April 2014. Mr. Nader served as our interim chief financial officer from March 2013 to April 2014 and as our corporate controller from October 2012 to March 2013. Prior to joining us, Mr. Nader served as a chief financial officer consultant with various companies in Europe and the Middle East from October 2011 to September 2012. From June 2010 to September 2011, Mr. Nader served as group chief financial officer with Imperial Jet, a VIP business aircraft company based in Europe and the Middle East. From June 2005 to June 2010, Mr. Nader served as corporate controller at Dionex Corporation, a chromatography company based in Sunnyvale, California. Mr. Nader serves on the board of directors of YuMe, Inc., a global audience technology company. Mr. Nader received a bachelor’s degree in Business Administration from San Jose State University and an MBA from San Jose State University.

 

Sal Cobar has served as our Chief Operating Officer since September 2016. Previously, Mr. Cobar served as our Senior Vice President, Chief Marketing and Sales Officer from July 2015 to September 2016 and as Vice President, Worldwide Sales and Business Development from April 2010 to July 2015. From April 2007 to April 2010, Mr. Cobar served as Vice President of Worldwide Sales of Silicon Image, Inc., a developer of secure cores for high definition display and distribution for the television, set-top box and consumer markets. From April 2001 to April 2007, Mr. Cobar served as Silicon Image’s Senior Director, Strategic Accounts and Americas Sales, where he was instrumental in developing and spearheading Silicon Image’s overall strategic account sales initiatives as well as leading the Americas sales team of Silicon Image. Prior to joining Silicon Image, Mr. Cobar held several strategic sales and marketing positions during his 12-year tenure at Sun Microsystems. In those positions, Mr. Cobar had management and executive responsibilities for engineering, operations and the creation and execution of new markets for network-based thin client technology. In June 1980, Mr. Cobar joined Xerox Corporation for nine years driving multiple engineering and operations initiatives. Mr. Cobar received a bachelor’s degree in Systems Engineering from San Jose State University and an MBA from Golden Gate University.

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership on Forms 3, 4 and 5 with the SEC. Officers, directors and greater than 10% shareholders are required to furnish us with copies of all Forms 3, 4 and 5 they file.

 

Based solely on our review of the copies of such forms we have received and written representations from certain reporting persons that they filed all required reports, we believe that all of our officers, directors and greater than 10% shareholders complied with all Section 16(a) filing requirements applicable to them with respect to transactions during fiscal 2017.

 

Code of Ethics

 

The Company has adopted a Code of Business Conduct and Ethics, or the Code, which is applicable to our directors, officers and employees. The Code of Business Ethics and Conduct is available on the Company’s website at http://www.sigmadesigns.com-“Corporate”-“Governance.” The Company will disclose any amendment to the Code or waiver of a provision of the Code applicable to an officer or director in accordance with applicable law, including the name of the officer to whom the waiver was granted, on the Company’s website at http://www.sigmadesigns.com-“Corporate”-“Governance.”

 

Policy Prohibiting Margin Accounts, Pledges and Hedging

 

We believe that certain types of transactions by our insiders can lead to unintended negative consequences. For example, securities held in a margin account may be sold by a broker without the employee’s consent if the employee fails to meet a margin call. Similarly, securities pledged as collateral for a loan may be sold in foreclosure without the employee’s consent if the employee defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when the shareholder is aware of material nonpublic information or otherwise is not permitted to trade in our securities, we require our officers to obtain pre-approval in writing from our compliance officer prior to entering into any pledge or margin arrangement. To date, our compliance officer has not granted approval for any such arrangement.

 

We have a policy in place that prohibits all employees, including officers, from directly or indirectly selling any equity security of our company if the person selling the security or his principal does not own the security sold, or if owning the security, does not deliver it against such sale within twenty days thereafter, or does not within five days after such sale deposit it in the mail or other usual channels for such a transaction. Generally, a short sale, as defined in our policy, means any transaction whereby one may benefit from a decline in our stock price. While employees who are not executive officers or directors are not prohibited by law from engaging in short sales of our securities, we believe it is inappropriate for any employees to engage in such transactions, and accordingly such transactions are prohibited by our policy. We also prohibit any employee from purchasing or selling, or making any offer to purchase or offer to sell, derivative securities relating to our securities, whether or not issued by us, such as exchange traded options to purchase or sell our securities (so called “puts” and “calls”). This policy does not prohibit the Company from granting derivative securities to our employees, such as options or restricted stock units, nor does it prohibit employees from exercising those derivative securities that are granted to them by the Company.

 

Board Meetings

 

The Board of Directors held 22 meetings during fiscal 2017. Each director attended at least 75% of the meetings held by the Board of Directors and of the committees on which such director served during fiscal 2017.

 

Board Leadership Structure

 

Our Chairman is responsible for presiding over each Board meeting. The Chairman also serves as liaison between the Chief Executive Officer and the other directors, approves meeting agendas and schedules and notifies other members of the Board of Directors regarding any significant concerns of shareholders or interested parties of which he becomes aware. The Chairman provides advice and counsel to our Chief Executive Officer.

 

In January 2014, we appointed J. Michael Dodson as our Lead Independent Director. Mr. Dodson, as our Lead Independent Director, performs the functions of the Chairman of the Board, which position is currently vacant.

 

 

Committees of the Board

 

The Board of Directors has appointed an Audit Committee, a Compensation Committee and a Corporate Governance and Nominating Committee. The Board of Directors has determined that each director who serves on these committees is “independent,” as that term is defined by applicable listing standards of the NASDAQ Stock Market and Securities and Exchange Commission rules. The Board of Directors has approved a charter for each of these committees that can be found on our website at http://www.sigmadesigns.com under the “Corporate - Governance” heading.

 

Compensation Committee

 

The current members of the Compensation Committee are Messrs. Dodson, Manniche and Thompson, each of whom is a non-management member of our Board of Directors. Mr. Thompson is currently the chairperson of the Compensation Committee. We believe that the composition of our Compensation Committee meets the criteria for independence under, and the functioning of our Compensation Committee complies with the applicable requirements of the Sarbanes-Oxley Act of 2002, the current rules of the NASDAQ Stock Market and Securities and Exchange Commission rules and regulations. The Compensation Committee’s primary functions, among others, are to review and make recommendations to the Board of Directors concerning our executive compensation policy, including establishing salaries, incentives and other forms of compensation for the Company’s executive officers, and to oversee a risk assessment of the Company’s compensation policies and practices. The Compensation Committee held two (2) meetings and acted by written consent one (1) time during fiscal 2017. Additional information concerning the Compensation Committee’s processes and procedures for the consideration and determination of executive compensation is set forth under the heading “Compensation Discussion and Analysis.” All of our directors serving on the Compensation Committee attended at least 75% of the meetings held in fiscal 2017.

 

Audit Committee

 

The Audit Committee currently consists of Messrs. Thompson, Manniche, and Dodson, each of whom is a non-management member of our Board of Directors. Mr. Dodson is our audit committee financial expert as currently defined under Securities and Exchange Commission rules. Mr. Dodson is also currently the chairperson of the Audit Committee. The Audit Committee’s primary functions, among others, are to approve the selection, compensation, evaluation and replacement of, and oversee the work of, our independent registered public accounting firm, pre-approve all fees and terms of audit and non-audit engagements of such auditors, including the audit engagement letter, review Sigma’s accounting policies and its systems of internal accounting controls, and oversee company-wide risk management. We believe that the composition of our Audit Committee meets the criteria for independence under, and the functioning of our Audit Committee complies with the applicable requirements of, the Sarbanes-Oxley Act of 2002, the current rules of the NASDAQ Stock Market and Securities and Exchange Commission rules and regulations. The Audit Committee held six (6) meetings and acted by written consent one (1) time during fiscal 2017. All of our directors serving on the Audit Committee attended at least 75% of the meetings held in fiscal 2017.

 

Corporate Governance and Nominating Committee

 

The current members of the Corporate Governance and Nominating Committee are Messrs. Dodson, Manniche and Thompson. During fiscal 2017, Mr. Thompson served as the chairperson of the Corporate Governance and Nominating Committee. We believe that the composition of our Corporate Governance and Nominating Committee meets the criteria for independence under, and the functioning of our Corporate Governance and Nominating Committee complies with the applicable requirements of, the Sarbanes-Oxley Act of 2002, the NASDAQ Stock Market and Securities and Exchange Commission rules and regulations. The Corporate Governance and Nominating Committee is responsible for overseeing matters of corporate governance and for the development of general criteria regarding the qualifications and selection of members of the Board of Directors and recommending candidates for election to the Board of Directors. The Corporate Governance and Nominating Committee will consider recommendations of candidates for the Board of Directors submitted by shareholders of the Company. The Corporate Governance and Nominating Committee is also responsible for periodically evaluating the Company’s risk management process and system in light of the nature of the material risks the Company faces and the adequacy of the Company’s policies and procedures designed to address risk, and recommending to the Board of Directors any changes deemed appropriate by the Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee did not hold any meetings and acted by written consent one (1) time in fiscal 2017. All of our directors serving on the Corporate Governance and Nominating Committee attended at least 75% of the meetings held in fiscal 2017.

 

  

Compensation Committee Interlocks and Insider Participation

 

No member of our Compensation Committee was at any time during fiscal 2017 one of our officers or employees. None of our executive officers serves as a member of the Board of Directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee.

 

Compensation Programs and Risk

 

The Company has conducted a risk assessment of the Company’s compensation policies and practices and concluded that the Company’s compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. This risk assessment was led by our Chief Executive Officer and Chief Financial Officer with oversight of the assessment conducted by our Compensation Committee. Our Compensation Committee reported the findings of this assessment to our Board of Directors. In this regard, we note that:

 

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the Company’s compensation programs, including its standard four-year vesting schedule for option awards, are weighted towards offering long-term incentives that reward sustainable performance;

•

the amount of compensation that the Company actually pays is at a reasonable and sustainable level, as determined by a review of the Company’s economic position and prospects, as well as the compensation offered by comparable companies; and

•

most of the compensation we pay our executive officers is fixed, such as base salary, which is not impacted by corporate performance or individual decisions that may foster riskier actions or decisions (though a portion of executive compensation is tied to our cash incentive program to encourage a pay-for-performance culture).

 

Based on this assessment, the Company concluded that it has a balanced compensation program that does not promote imprudent or excessive risk taking.

 

 

ITEM 11.

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

This section contains a discussion and analysis of how, and the reasons why, we compensate our Chief Executive Officer, Chief Financial Officer and our highest paid other executive officer, our Chief Operating Officer, who we refer to collectively as our named executive officers. In this section, we discuss our executive officer compensation philosophy and objectives, the process under which our executive officer compensation is determined and the elements of our executive compensation program, including a discussion of our compensation decisions for fiscal 2017 and to date in fiscal 2018.

 

The Compensation Committee of our Board of Directors, which we refer to as the Committee in this section, administers the compensation program for our named executive officers. The Compensation Committee may not delegate its authority in these matters to other persons.

 

Our Executive Compensation Philosophy and Objectives

 

We are engaged in a dynamic and competitive industry. Our success depends upon our talented employees, and the leadership provided by our named executive officers is a key factor in our success. The Committee has designed our executive compensation program to achieve the following objectives:

 

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Manage resources efficiently. Employee compensation is a significant expense for us. We strive to manage our compensation programs to balance our need to reward and retain executives with preserving shareholder value.

 

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Align the interests of our executives with shareholders. We believe our programs should reward our executive officers for contributions to increase our shareholder value.

 

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Attract and retain highly qualified talent. We compete for talented executives with leading technology companies worldwide along with both technology start-ups and established businesses. Our compensation programs allow us to attract and retain dynamic, experienced people who are motivated by the challenges and opportunities of growing our business.

 

Our compensation program is designed to reward the contributions of our executive officers to our overall corporate performance. In fiscal 2017, the Committee continued to remain focused on our corporate-wide objectives of operating profitably and increasing revenue growth. The Committee reviewed our executive officer compensation policies and programs with these corporate objectives driving its decisions on the level of pay as well as the structure of our incentive compensation programs. This review consisted, among other things, of a review of our executive officer compensation philosophy, pay practices, the implementation of an executive incentive compensation plan, and a review of market comparable data.  As part of its review process, the Committee also reviewed the individual performance of each executive and the leadership demonstrated by the executive during the prior period. Although there were no qualitative or quantitative measures established prior to an evaluation of an individual’s performance, the Committee reviewed the contributions made by an officer to our overall business performance and the performance of the business department for which the officer is primarily responsible. The type of contributions can vary depending on the officer and the business department.

 

Components of Compensation

 

In an effort to meet these objectives, our executive compensation program consists of the following components:

 

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Base salary. The Committee believes that base salary should provide executives with a predictable income sufficient to attract and retain strong talent in a competitive marketplace. We generally set executive base salaries at levels that we believe enable us to hire and retain individuals in a competitive environment, while taking into account our corporate objective of reducing operating expenses and operating profitably.

 

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Equity Awards. The Committee believes that long-term equity incentives that vest over a period of time and focus executives on increasing long-term shareholder value are key retention devices for executives through use of multi-year vesting periods.

 

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Executive Officer Bonus Plan. Historically, the Committee has awarded cash bonuses on a case-by-case basis in recognition of strong company performance or to reward significant individual contributions. In fiscal 2017, the Committee adopted a cash incentive bonus plan for executive officers and awards under such plan are earned based on the achievement of certain company performance criteria.

 

 

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Discretionary Cash Bonus Awards. The Committee has retained the discretion to determine individual cash bonus awards after the completion of a fiscal year.

 

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General Benefits. We provide generally competitive benefits packages, such as medical, life and disability insurance, to our executives on the same terms as our other employees.

 

The Committee views these components of executive compensation as related, but does not believe that compensation should be derived entirely from one component. The Committee has not adopted a formal or informal policy for allocating compensation between long-term and current compensation or between cash and non-cash compensation.

 

Our Process of Establishing Executive Compensation

 

Our executive compensation program is administered by the Committee. In fiscal 2017, the Committee retained an independent compensation consultant, Radford, to update total direct compensation recommendations based on our then-current stock price and multi-year strategy to bring our executive officer compensation in line with market comparable companies. The Committee referred to the executive compensation study and the data provided by Radford during the Committee’s review of executive compensation in fiscal 2017. Finally, the Committee also took into account the results of the shareholder advisory vote on our executive compensation from the 2016 annual meeting of shareholders, where the shareholders voted in favor of our executive compensation.

 

In making its compensation decisions in fiscal 2017, the Committee utilized the market assessment conducted by Radford. This market assessment consisted of a review of compensation information from a select group of peer companies (identified below) and utilized information from a database selected by Radford. The Committee developed the list of peer companies based on companies meeting one or more of the following criteria: (i) industry group, a company that competes within the semiconductor and related devices industry; (ii) annual revenue; and (iii) market cap size. The Committee took into account feedback provided by the management team in assessing which companies compete with us in the semiconductor and related devices industry. Based on the Committee’s approved criteria, the following companies were selected to form our peer group:

 

Alpha and Omega Semiconductor	Applied Micro Circuits	DSP Group
Inphi	Integrated Silicon Solution	Intermolecular
IXYS	Lattice Semiconductor	MaxLinear
NeoPhotonics	Peregrine Semiconductor	Pericom Semiconductor
Power Integrations	Silicon Image	Vitesse Semiconductor
ViXS Systems

 

The peer group of companies is the same group of companies used for fiscal 2016, except for the removal of companies that had been acquired in the last fiscal year.

 

Our Compensation Program Decisions

 

Base Salary

  

In July 2016, after completing a comprehensive review of executive officer compensation policies and programs as discussed above, the Committee approved the following changes to our executive officers’ annual base salaries:

 

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For our President and Chief Executive Officer, annual base salary was changed from $375,400 to $394,200, a five percent (5%) increase;

 

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For our Chief Financial Officer, annual base salary was changed from $283,300 to $300,000, a six percent (6%) increase; and

 

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For our Chief Operating Officer, annual base salary was changed from $279,200 to $287,600, a 3% increase.

 

 

Executive Officer Bonus Plan

 

In July 2016, the Committee approved a Fiscal 2017 Cash Incentive Bonus Plan (the “2017 Bonus Plan”), in which each of our executive officers was eligible to participate. The material terms of the 2017 Bonus Plan were as follows:

 

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Annual bonuses were earned and paid based on achievement against annual goals. The specific annual goals were based on achieving or exceeding certain operation income targets, as well as individual performance metrics specific to the executive’s role within the Company. These targets were designed to implement a pay-for-performance culture at the Company.

  

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Executive officers were eligible to earn cash bonuses upon the attainment of both financial and operational performance objectives. For each of our Chief Executive Officer and Chief Financial Officer, one-third of the total eligible bonus was based on a revenue target for fiscal 2017 of $240 million, one-third of the total eligible bonus was based on a quarterly profitability target for each quarter in fiscal 2017 of $4 million, and the remaining one-third of the total eligible bonus was based on a quarterly operating expense target of $28 million for each quarter of fiscal 2017. For our Chief Operating Officer, 60% of his bonus was based on a commission plan applying an annual revenue target of $240 million for fiscal 2017 and 40% of his bonus was based on a quarterly profitability target for each quarter in fiscal 2017 of $4 million. At the time of adoption, the Committee believed the targets were challenging but achievable based on its review of the Company’s operating plan and its assessment of the general economic environment.

 

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Payouts under the 2017 Bonus Plan were based on the level of attainment of the specified objectives.

 

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For our Chief Executive Officer, the total target cash bonus amount was 85% of base salary, or $335,070.

 

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For our Chief Financial Officer, the total target bonus amount was 50% of base salary, or $150,000.

 

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For our Chief Operating Officer, the total target bonus amount was 45% of base salary, or $129,400.

 

The Committee determined that the Company should target the 50th percentile of the Company’s peer group in establishing total direct compensation (total cash and equity compensation) for its executive officers. As a result of the changes described above, the Committee determined that executive compensation would be set at approximately its targeted objective. 

 

In fiscal 2017, the Company met in excess of 90% of the revenue target and achieved the operating expense target every quarter. The profitability target was met in the second and third quarters of fiscal 2017, resulting in a bonus award of 50% of the target. The resulting payouts under the 2017 Bonus Plan to our executive officers were as follows: (i) $279,225 to our Chief Executive Officer; (ii) $125,000 to our Chief Financial Officer; and (iii) $95,360 to our Chief Operating Officer.

 

Discretionary Bonus Awards

 

The Committee, from time to time, may award discretionary bonuses to our executive officers. The Committee did not award any discretionary bonuses to our executive officers in fiscal 2017, because it determined the cash incentive program addressed compensation for performance during fiscal 2017 and saw no reason to diverge from the parameters of the 2017 Bonus Plan.

  

Sales Commission Plan 

 

In fiscal 2016, the Committee shifted a significant amount of variable compensation previously based on sales commissions into base salary for our Chief Operating Officer. Therefore, in addition to his base salary, our Chief Operating Officer was compensated for performance under a reduced sales commission plan and was also eligible to receive a bonus under our 2016 Bonus Plan. In 2017, our Chief Operating Officer continued to participate in a reduced sales commission plan, as well as remained eligible to receive a bonus under our 2017 Bonus Plan based on our corporate profitability objectives. The commission plan provided for an accelerator on the commission rate if we had sales in excess of 100% of our target objective for the fiscal year, up to 200% of our targeted amount. The Committee believed it was in the best interest of our shareholders to incent our Chief Operating Officer with sales performance goals under the commission plan as well as further align his interest with those of the Company, our shareholders and the other executive officers using our profitability objectives.

 

 

Equity Incentive Awards

 

Our equity-based incentive program for the entire company, including executive officers, primarily consists of stock options and restricted stock units, as well as our employee stock purchase program. In July 2016, the Compensation Committee approved equity incentive awards to our named executive officers that are intended to align their interests with those of our shareholders and as an incentive to help the Company retain the services of its named executive officers. In an effort to achieve a balance of these two objectives, the Committee approved a mix of restricted stock unit awards and options to purchase shares of our common stock. The Committee believed this approach provided a guarantee of a return through a full value award, such as a restricted stock unit, balanced against an option that has a strike price equal to the fair value on the date of grant, which would require the stock to appreciate in the future for the executive officer to recognize income. The Committee felt this approach balanced certainty of compensation with incentivizing executives to contribute to share price appreciation through contributions to corporate performance. The Committee awarded a restricted stock unit award of 58,000 shares to the Company’s Chief Executive Officer, 25,000 shares to the Company’s Chief Financial Officer and 20,000 to the Company’s Chief Operating Officer. The Committee also awarded an option to purchase 120,000 shares to our Chief Executive Officer, an option to purchase 50,000 shares to our Chief Financial Officer and an option to purchase 40,000 shares to our Chief Operating Officer. All the restricted stock unit awards vest over a four-year period, with one-fourth of the total number of shares vesting on the one-year anniversary from the vesting start date, and the remaining shares vesting in equal quarterly installments thereafter. All of the options vest over a four-year period, with one-fourth of the total number of shares vesting on the one-year anniversary from the vesting start date, and the remaining shares vesting in equal monthly installments thereafter. Pursuant to the 2015 Stock Incentive Plan, each officer entered into a restricted stock unit agreement and stock option agreement, as applicable, for each of these awards.

 

The Committee granted these equity awards in recognition of our corporate performance in fiscal 2016, the individual contributions made by each of our executive officers and to bring the equity incentives of our executive officers more in line with our peer group practices. The Committee applied a four-year vesting schedule to these awards in order to incent our executive officers to increase shareholder value over a longer period of time and as a retention device.

 

Change in Control Benefits

 

An additional component of our executive compensation program is change in control and severance benefits. The Committee believes these benefits are critical for remaining competitive with our peers in the area of executive compensation. These protections also allow our executives to focus on our corporate objectives and align their interest with our shareholders if a strategic opportunity arises in the future. The Committee believes this is of particular importance in the semiconductor industry, which has been characterized by consolidation in the recent past. Our executive officers have the following change in control and severance benefits:

 

●

For our Chief Executive Officer, the Company will pay 12 months of base salary and benefits, the payout of the eligible bonus amount in the fiscal year in which he is terminated and 12 months of accelerated vesting on all outstanding equity awards, if terminated under specific circumstances prior to a change in control. If our Chief Executive Officer is terminated under specified circumstance within 18 months following a change in control, then the Chief Executive Officer will be paid severance equal to 24 months of his base salary and benefits, the payout of two times the full eligible bonus amount in the fiscal year in which he is terminated and accelerated vesting in full of all outstanding equity awards.

 

●

For our Chief Financial Officer, the Company will pay six months of base salary and benefits, the payout of fifty percent (50%) of the eligible bonus amount in the fiscal year in which he is terminated and six months of accelerated vesting on all outstanding equity awards, if terminated under specific circumstances prior to a change in control. For our Chief Operating Officer, the Company will pay 12 months of base salary and benefits, the payout of the eligible bonus amount in the fiscal year in which he is terminated and 12 months of accelerated vesting on all outstanding equity awards, if terminated under specific circumstances prior to a change in control. If either the Chief Financial Officer or Chief Operating Officer is terminated under specified circumstance within 18 months following a change in control, then such officer will be paid severance equal to 12 months of his base salary and benefits, the payout of the full eligible bonus amount in the fiscal year in which he is terminated and accelerated vesting in full of all outstanding equity awards.

 

General Benefits

 

In addition to the compensation opportunities we describe above, we also provide our executive officers other employee benefits such as medical insurance, life and disability insurance and our 401(k) Savings/Retirement Plan, in each case on the same basis as other employees.

 

 

Section 162(m) Treatment Regarding Performance-Based Equity Awards

 

Section 162(m) of the Internal Revenue Code provides that public companies cannot deduct non-performance based compensation paid to certain named executive officers in excess of $1 million per year. These officers include any employee who, as of the close of the taxable year, is the principal executive officer, and any employee whose total compensation for the taxable year is required to be reported to shareholders under the Securities Exchange Act of 1934 by reason of such employee being among the three highest compensated officers for that taxable year, other than the principal executive officer or the principal financial officer. The Committee intends to preserve the deductibility of compensation payable to our executives, although deductibility will be only one of the many factors considered in determining appropriate levels or modes of compensation.

 

Fiscal 2017 Summary Compensation Table

 

Name and Principal Position		Fiscal Year		Salary ($)				Bonus ($)				Stock Awards ($) (1)				Non-Equity Incentive Plan Compensation ($)				All Other Compensation ($)				Total ($)
Thinh Q. Tran		2017			394,200				279,225				730,260			__					10,944	(2)			1,414,629
President and		2016			375,200				281,550				1,102,300			__					6,141	(3)			1,765,191
Chief Executive Officer		2015			363,847				50,000			__				__					2,262	(4)			416,109
Elias N. Nader		2017			300,000				125,000				309,675								8,284	(5)			742,959
Chief Financial Officer		2016			283,129				157,485				485,680			__					2,801	(6)			929,095
		2015			270,798				25,000			__				__					966	(7)			296,764
Sal Cobar		2017			287,600				25,000				247,740				70,361	(8)			9,412	(9)			640,113
Chief Operating Officer		2016			277,431				50,000				485,680				71,999	(8)			2,740	(10)			887,850
		2015			186,840			__				__					208,485	(8)			885	(10)			396,210

---

(1)	Amounts represent the grant date fair value of shares underlying stock awards, calculated in accordance with ASC Topic 718, rather than amounts paid to or realized by the named individual. For the underlying assumptions used to calculate fair value, please refer to the footnotes to our consolidated financial statements in our Annual Report on Form 10-K for the corresponding fiscal year.
(2)	Represents $6,072 paid for 401K match, $2,100 paid for employer match on health savings account and $2,772 paid for group term life insurance
(3)	Represents $1,444 paid for 401K match, $1,925 paid for employer match on health savings account and $2,772 paid for group term life insurance.
(4)	Represents $2,262 paid for group term life insurance.
(5)	Represents $6,478 paid for 401K match and $1,806 paid for group term life insurance
(6)	Represents $1,770 paid for 401K match and $1,031 paid for group term life insurance.
(7)	Represents $966 paid for group term life insurance.
(8)	Represents amounts paid for sales commissions.
(9)	Represents $6,640 paid for 401K match and $2,772 paid for group term life insurance
(10)	Represents amounts paid for group term life insurance.

 

 

Fiscal 2017 Grants of Plan-Based Awards Table 

 

The following table shows information regarding all plan-based awards we granted to the named executive officers during the year ended January 28, 2017:

 

				Estimated Future Payouts under Non-Equity Incentive Plan Awards												All Other Stock Awards: Number of Shares of Stock or Units				All Other Option Awards: Number of Securities Underlying Options				Exercise or Base Price of Option Awards				Grant Date Fair Value of Stock Awards
Name		Grant Date		Threshold ($)				Target ($)				Maximum ($)				(#) (1)				(#) (2)				($/sh)					($)  (3)
Thinh Q. Tran President and Chief Executive Officer		07/07/16 07/07/16 07/07/16			27,643				335,000				335,000				58,000				120,000				6.48				375,840 354,420
Elias N. Nader Chief Financial Officer		07/07/16 07/07/16 07/07/16			12,375				150,000				150,000				25,000				50,000				6.48				162,000 147,675
Sal Cobar Chief Operating Officer		07/07/16 07/07/16 07/07/16			0				129,400				207,040				20,000				40,000				6.48				129,600 118,140

 

(1)	All stock awards listed consist of restricted stock units, which result in the issuance of common stock upon vesting. The vesting for all restricted stock units shown in the table is as follows: 25% of the award will vest on the one year anniversary and 1/16th of the award will vest quarterly thereafter. All stock awards listed were granted under our 2015 Stock Incentive Plan.
(2)	All stock awards listed consist of options to purchase shares of our common stock. The vesting for all stock options shown in the table is as follows: 25% of the award will vest on the one year anniversary and 1/36th of the award will vest monthly thereafter. All stock options listed were granted under our 2015 Stock Incentive Plan.
(3)	Amounts represent the grant date fair value of shares underlying stock awards, calculated in accordance with ASC Topic 718, rather than amounts paid to or realized by the named individual. For the underlying assumptions used to calculate fair value, please refer to the footnotes to our consolidated financial statements in our Annual Report on Form 10-K for fiscal 2017.

  

 

Outstanding Equity Awards at Fiscal Year-End 2017

 

The following table sets forth information regarding the outstanding equity awards held by our named executive officers as of January 28, 2017:

 

		Option Awards													Stock Awards (2)
Name		Number of Securities Underlying Unexercised Options (#) Exercisable				Number of Securities Underlying Unexercised Options (#) Unexercisable				Option Exercise Price ($)			Option Expiration Date (1)		Number of Shares or Units of Stock That Have Not Vested (#)				Market Value of Shares or Units of Stock That Have Not Vested ($)(3)
Thinh Q. Tran			100,000				—				41.58		2/11/18			—				—
President and Chief Executive Officer			87,500				—				10.87		11/3/18			—				—
			87,500				—				11.09		2/6/19			—				—
			150,000				—				10.59		1/26/20			—				—
			—				120,000				6.48		7/7/26			—				—
			—				—				—					3,125	(4)			20,000
			—				—				—					45,000	(5)			288,000
																58,000	(7)			371,200
Elias N. Nader			—				50,000				6.48		7/7/26			—				—
Chief Financial Officer																6,250	(6)			40,000
																2,750	(4)			17,600
																15,188	(5)			97,203
																25,000	(7)			160,000
Sal Cobar			80,000				—				11.74		4/19/20			—				—
Chief Operating Officer			—				40,000				6.48		7/7/26			—				—
																2,750	(4)			17,600
																15,188	(5)			97,203
																20,000	(7)			128,000

 

---

(1)	Except as otherwise noted, the options have a term of 10 years, subject to earlier termination in certain events relating to termination of employment.

  

(2)	Stock awards listed consist only of time-based shares (also called "restricted stock award") which will be converted into our common stock upon vesting.

 

(3)	The market value of stock awards was determined by multiplying the number of unvested shares by the closing price of our common stock of $6.40 on January 27, 2017, the last trading day of fiscal 2017, as reported on the NASDAQ Global Market.

 

(4)	This restricted stock award was granted on April 8, 2015 and vests over two years. 50% of the award vests on 4/8/2016 and 1/8th of the award vests quarterly thereafter.

 

(5)	This restricted stock award was granted on July 10, 2015 and vests over four years. 25% of the award vested on 3/16/2016 and 1/16th of the award vests quarterly thereafter.

 

(6)	This restricted stock award was granted on December 30, 2013 and vests over four years in equal annual installments.

 

(7)	This restricted stock award was granted on July 7, 2016 and vests over four years. 25% of the award vested on 7/7/17 and 1/16th of the award vests quarterly thereafter.

  

 

Fiscal 2017 Option Exercises and Stock Vested

 

		Stock Awards
Name		Number of Shares Acquired on Vesting (#)				Value Realized on Vested ($)(1)
Thinh Q. Tran			56,875				402,725
President and Chief Executive Officer
Elias N. Nader			39,187				269,962
Chief Financial Officer and Secretary
Sal Cobar			31,062				214,648
Chief Operating Officer

---

(1)	The aggregate dollar value realized upon the vesting of an award represents the market price of the underlying shares on the date of vest as measured by the closing price on the NASDAQ Global Market multiplied by the number of shares vested.

 

 

Fiscal 2017 Director Compensation

 

The compensation we pay our non-employee directors is reviewed by our compensation committee and ultimately approved, taking into account information from our Compensation Committee, by our full Board of Directors, which includes one employee director.

 

We have established a cash compensation program for our non-employee directors. In fiscal 2017, each non-employee director was entitled to the following cash compensation (each retainer is paid quarterly):

 

Annual retainer for service as Board member		$	50,000
Annual retainer for service as a chairperson of any committee of the Board		$	10,000
Annual retainer for service as chairperson of the Board		$	10,000

 

We do not have a policy of automatic equity incentive awards to our non-employee directors either for initial grants when first joining the Board of Directors or in connection with the re-election to the Board of Directors at an annual meeting of shareholders. However, our Board of Directors believes equity compensation is important to attract and retain non-employee directors and to better align their interest with those of our shareholders.

 

Each non-employee director who was re-elected to the Board at our 2016 annual meeting of shareholders received RSUs with the following terms: (i) a number of restricted stock units equal to $100,000 divided by the price per share of our Common Stock on the date of grant; (ii) the RSU will vest on the earlier of the one year anniversary from the date of grant or the date of the 2017 annual meeting; and (iii) such vesting shall fully accelerate upon a change in control of the Company. We anticipate granting equity awards to our non-employee directors following our annual meeting each year in such amounts to be determined by the Board at that time.

 

 

The following chart shows the compensation paid to each non-employee director for their service in fiscal 2017:

 

Director		Fees Earned or Paid in Cash ($)(1)				Stock Awards ($)(2)(3)				Total ($)
J. Michael Dodson			70,000				100,000				170,000
Martin Manniche			60,000				100,000				160,000
Pete Thompson			60,000				100,000				160,000
Tor R. Braham			32,903				—				32,903

 

(1)

The amounts listed under "Fees Earned or Paid in Cash" are based on actual payments made to our non-employee directors.

 

(2)

Amounts listed in this column represent the aggregate grant date fair value of awards granted for the corresponding fiscal year and calculated in accordance with FASB ASC 718, rather than amounts paid to or realized by the named individual. For the underlying assumptions for this expense, please refer to the footnotes to our consolidated financial statements in our Annual Report on Form 10-K for the corresponding fiscal year. There can be no assurance that awards will vest (in which case no value will be realized by the individual) or that the value on vesting will approximate the compensation expense recognized by us.

 

(3)

Our non-employee directors who served during fiscal 2017 held restricted stock units as of January 28, 2017 as follows:

 

Director		Restricted Stock Units
J. Michael Dodson			14,534
Martin Manniche			14,534
Pete Thompson			14,534

 

 

Compensation Committee Report

 

The following report has been submitted by the Compensation Committee of our Board of Directors:

 

The Compensation Committee of our Board of Directors has reviewed and discussed the Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Amendment No. 1 to our Annual Report on Form 10-K for the fiscal year ended January 28, 2017.

 

The foregoing report was submitted by the Compensation Committee of the Board of Directors and shall not be deemed to be “soliciting material” or to be “filed” with the Commission or subject to Regulation 14A promulgated by the Commission or Section 18 of the Securities Exchange Act of 1934.

 

	Respectfully submitted,
	Martin Manniche J. Michael Dodson Pete Thompson, Chair

 

 

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

 

Security Ownership of Certain Beneficial Owners and Management

 

The following table sets forth certain information concerning the beneficial ownership of our Common Stock as of May 15, 2017 by each person known by us to be the beneficial owner of five percent or more of the outstanding shares of our Common Stock. Applicable percentage ownership is based on 38,180,384 shares of our Common Stock outstanding on May 15, 2017.

 

Name and Address of Beneficial Owner		Shares Beneficially Owned(1)				Percentage Beneficially Owned
5% Shareholder								%
Entities affiliated with Soros Fund Management LLC(2)			4,068,819				10.7
Entities affiliated with Dimensional Fund Advisors LP (3)			3,116,796				8.2
Entities affiliated with Raging Capital Management, LLC (4)			2,548,127				6.7
Entities affiliated with The Vanguard Group (5)			2,470,782				6.5
Entities affiliated with Blackrock, Inc. (6)			2,238,040				5.9
Entities affiliated with Renaissance Technologies LLC (7)			1,773,100				4.6
Named Executive Officers, Directors and Nominees for Director
Thinh Q. Tran (8)			1,286,730				3.3
Elias N. Nader (9)			75,341				*
Sal Cobar (10)			140,153				*
J. Michael Dodson			68,050				*
Martin Manniche			53,829				*
Pete Thompson			72,661				*
All directors and executive officers as a group (6 persons) (11)			1,696,764				4.4

---

*Represents less than 1% of our Common Stock.

 

 

(1)	The persons named in the table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this table.
(2)	Based solely on a report on Schedule 13G/A filed on April 14, 2017. Soros Fund Management LLC (“SFM”) is deemed to beneficially own the shares of common stock held in the account of Quantum Partners LP, a Cayman Islands exempted limited partnership (“Quantum Partners”), for which SFM serves as principal investment manager and holds the sole power to direct investments and to vote the securities. George Soros, Chairman of SFM, and Robert Soros, President and Deputy Chairman of SFM, are also deemed to beneficially own the shares of common stock of the Issuer and hold shared power to direct investments and to vote the securities. The principal business address of SFM, George Soros and Robert Soros is 250 West 55th Street, 38th Floor, New York, New York 10019.
(3)	Based solely on a report on Schedule 13G/A filed on February 9, 2017. Dimensional Fund Advisors LP, an investment adviser registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager to certain other commingled group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to certain Funds. In its role as investment advisor, sub-adviser and/or manager, Dimensional Fund Advisors LP or its subsidiaries (collectively, “Dimensional”) possess voting and/or investment power over the securities of the Issuer that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the Issuer held by the Funds. All of the securities reported here are owned by the Funds. Dimensional disclaims beneficial ownership of such securities. The principal business address of this shareholder is Palisades West, Building One, 6300 Bee Cave Road, Austin, Texas, 78746.

  

 

(4)	Based solely on a report on Schedule 13G filed on February Raging Capital Management, LLC on February 14, 2017. Raging Capital Management, LLC (“Raging Capital”) is deemed to beneficially own the shares of common stock held in the account Raging Capital Master Fund, Ltd., a Cayman Islands exempted company (“Raging Master”), for which Raging Capital serves as the investment manager and has shared power to direct investments or to vote the securities. William C. Martin is the Chairman, Chief Investment Officer and Managing Member of Raging Capital and deemed to be a beneficial owner with shared power to direct investments or to vote the securities. The principal business address of Raging Capital and William C. Martin is Ten Princeton Avenue, P.O. Box 228, Rocky Hill, New Jersey 08553.
(5)	Based solely on a report on Schedule 13G/A filed on February 13, 2017. Shares beneficially owned by The Vanguard Group (“Vanguard”), Vanguard Fiduciary Trust Company (“VFTC”), or Vanguard Investments Australia, Ltd. (“VIA”). The Vanguard Group is a beneficial owner as a result of having sole power to dispose of or to direct the disposition of 2,429,272 shares. VFTC, a wholly-owned subsidiary of Vanguard, is a beneficial owner as a result of its serving as investment manager of collective trust accounts with shared power to dispose or direct the disposition of 41,510 shares. VIA, a wholly-owned subsidiary of Vanguard, is a beneficial owner as a result of its serving as investment manager of Australian investment offerings with sole power to vote or direct the vote of 0 shares. The principal business address of Vanguard, VFTC and VIA is 100 Vanguard Blvd., Malvern, PA 19355.
(6)	Based solely on a report on Schedule 13G/A filed on January 27, 2017. BlackRock, Inc. is deemed to beneficially own the shares of common stock held in the accounts for which it serves as a parent holding company and holds the sole power to direct investments or to vote the securities. The principal business address of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10022.
(7)	Based solely on a report on Schedule 13G/A filed on February 14, 2017. Renaissance Technologies LLC (“RTC”), an investment advisor, and Renaissance Technologies Holdings Corporation (“RTHC”) are deemed to beneficially own the shares of common stock held in the accounts for which it serves as a parent holding company and holds the sole power to direct investments or to vote the securities. The principal business address of RTC and RTHC is 800 Third Avenue, New York, New York 10022.
(8)	Includes 455,000 shares issuable upon exercise of outstanding options which are exercisable within 60 days of May 15, 2017, the right to acquire 19,500 shares upon the settlement of restricted stock units within 60 days of May 15, 2017, and 812,230 shares of Common Stock held by Thinh Q Tran’s family trust.
(9)	Includes 12,500 shares which are issuable upon the exercise of options exercisable within 60 days of May 15, 2017 and the right to acquire 9,500 shares upon the settlement of restricted stock units within 60 days of May 15, 2017.
(10)	Includes 90,000 shares issuable upon the exercise of outstanding options which are exercisable within 60 days of May 15, 2017 and the right to acquire 6,687 shares upon the settlement of restricted stock units within 60 days of May 15, 2017.
(11)	Includes 557,500 shares which are issuable upon the exercise of options exercisable within 60 days of May 15, 2016 and the right to acquire 35,687 shares upon the settlement of restricted stock units within 60 days of May 15, 2017.

 

 

Equity Compensation Plan Information

 

The following table sets forth required information for the Company’s equity compensation plans as of January 28, 2017:

 

		Number of securities to be issued upon exercise of outstanding options, warrants, and rights				Weighted-average exercise price of outstanding options, warrants, and rights				Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a)
Plan Category		(a)				(b)				(c)
Equity Compensation Plans approved by security holders (1)			2,665,571	(2)		$	11.25				4,836,384
Equity Compensation Plans not approved by security holders			42,684			$	3.89				---
Totals			2,708,255			$	11.13				4,836,384

 

 

---

(1)	Consists of securities remaining available for future issuance under our 2015 Stock Incentive Plan and 2015 Employee Stock Purchase Plan.

 

(2)	Excludes 1,638,618 restricted stock units outstanding under our 2015 Stock Incentive Plan.

 

 

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

 

Certain Relationships and Related Transactions

 

It is the Company’s policy that all employees, officers and directors must avoid any activity that is or has the appearance of conflicting with the interests of the Company. This policy is included in the Company’s Code of Business Conduct and Ethics. The Company conducts a review of all related party transactions for potential conflict of interest situations on an ongoing basis. The Company’s Audit Committee must approve any waiver of the Code of Business Conduct and Ethics for Senior Executives, including related party transactions. All waivers to the Code of Business Conduct and Ethics must be approved by the Company’s Board of Directors or a committee of the Board of Directors responsible for corporate governance.

 

 

Director Independence

 

The Board of Directors has determined that each of Messrs. Dodson, Manniche and Thompson is an “independent director” within the meaning of Rule 5605(a)(2) of the NASDAQ Stock Market.

 

 

 

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

 

Fees Paid to Independent Registered Public Accounting Firm

 

The following table sets forth the fees billed for services rendered by Armanino LLP for each of our last two fiscal years.

 

		2017				2016
Audit fees (1)		$	996,843			$	1,001,948
Tax-related fees (2)			211,175				276,475
Total		$	1,208,018			$	1,278,423

---

 

(1)

Audit fees represent fees for professional services provided in connection with their audit of the Company’s consolidated financial statements, their audit of the effectiveness of internal control over financial reporting, reviews of the consolidated financial statements included in the Company’s quarterly reports on Form 10-Q and related statutory and regulatory filings.

 

(2)	Tax fees represent fees for professional services related to tax returns, tax compliance, tax advice and tax planning.

 

Pre-Approval Policies and Procedures

 

The Company’s Audit Committee is responsible for appointing, setting compensation for and overseeing the work of the Company’s independent registered public accounting firm. In connection with these responsibilities, the Company’s Audit Committee adopted a policy for pre-approving the services and associated fees of the Company’s independent registered public accounting firm. Under this policy, the Audit Committee must pre-approve all audit and audit related services. All of the services in fiscal 2016 and 2017 were pre-approved by the Audit Committee. The policy also mandates that no engagements of the Company’s independent registered public accounting firm for non-audit services may be entered into without the express approval of the Audit Committee.

 

 

PART IV

 

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

(b) Exhibits

 

The exhibits listed on the accompanying index to exhibits immediately following the financial statement schedules are incorporated by reference into this Annual Report on Form 10-K.

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Milpitas, State of California, on the 30th day of May 2017.

 

	SIGMA DESIGNS, INC.
	By:	/s/ Thinh Q. Tran
		Thinh Q. Tran
		President and Chief Executive Officer

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 

Signature		Title		Date
/s/ Thinh Q. Tran		President and Chief Executive Officer		May 30, 2017
Thinh Q. Tran		(Principal Executive Officer)
/s/ Elias N. Nader		Chief Financial Officer and Secretary		May 30, 2017
Elias N. Nader		(Principal Financial and Accounting Officer)
*		Lead Independent Director
J. Michael Dodson
*		Director
Martin Manniche

 

*		Director
Pete Thompson

 

*/s/Thinh Q. Tran				May 30, 2017
Thinh Q. Tran, as Attorney-in-Fact

 

 

EXHIBIT INDEX

 

Exhibit Number		Description		Filed Herewith or Incorporated Herein by Reference to
3.1		Second Restated Articles of Incorporation.		Incorporated by reference to exhibit filed with the Registration Statement on Form S-1 (No. 33-17789) filed October 8, 1987, Amendment No. 1 thereto filed June 9, 1988 and Amendment No. 2 thereto filed June 14, 1988, which Registration Statement became effective June 14, 1988.
3.2		Certificate of Amendment to the Second Restated Articles of Incorporation dated June 22, 2001.		Incorporated by reference to exhibit 3.1 filed with the Registration Statement on Form S-8 (No. 333-64234) filed on June 29, 2001.
3.3		Amended and Restated Bylaws of Sigma.		Incorporated by reference to exhibit 3.1 filed with the Current Report on Form 8-K on August 3, 2012.
3.4		Certificate of Determination of Preferences of Series A Preferred Stock dated June 13, 1997.		Incorporated by reference to exhibit 3.3 filed with the Registrant’s Form S-1 filed on September 14, 2007.
3.5		Certificate of Determination of Preferences of Series B Preferred Stock dated January 30, 1998.		Incorporated by reference to exhibit 3.4 filed with the Registrant’s Form S-1 filed on September 14, 2007.
3.6		Certificate of Determination of Preferences of Series C Preferred Stock dated January 20, 1999.		Incorporated by reference to exhibit 3.5 filed with the Registrant’s Form S-1 filed on September 14, 2007.
3.7		Certificate of Amendment to the Second Restated Articles of Incorporation dated January 28, 2008.		Incorporated by reference to exhibit 3.7 filed with the Annual Report on Form 10-K filed on April 2, 2008.
3.8		Amendment to By-Laws dated August 20, 2015.		Incorporated by reference to exhibit 3.1 filed with the Current Report on Form 8-K on July 16, 2015.
10.3*		2001 Employee Stock Option Plan.		Incorporated by reference to exhibit 4.1 filed with the Registration Statement on Form S-8 (333-64234) filed on June 29, 2001.
10.4		Lease Agreement dated December 27, 2014 by and between Sigma Designs, Inc. and PLDSPE LLC.		Incorporated by reference to exhibit 10.1 filed with the Current Report on Form 8-K filed on December 31, 2014.
10.5		Industrial Lease by and between AMB Property, L.P. and Sigma dated February 22, 2007.		Incorporated by reference to exhibit 10.15 filed with the Annual Report on Form 10-K for the fiscal year ended February 3, 2007.
10.6		First Amendment to Lease Agreement entered into as of October 8, 2012 by and between Prologis, L.P. and Sigma Designs, Inc.		Incorporated by reference to exhibit 10.1 filed with the Current Report on Form 8-K filed on October 12, 2012.
10.7*		Sigma Designs 2010 Employee Stock Purchase Plan.		Incorporated by reference to exhibit 10.1 filed with the Current Report on Form 8-K filed on July 13, 2011.
10.8*		Amended and Restated 2009 Stock Incentive Plan and forms of agreements thereto.		Incorporated by reference to exhibit 10.1 filed with the Current Report on Form 8-K filed on July 14, 2011.
10.9*		CopperGate Communications Ltd. 2003 Share Option Plan.		Incorporated by reference to exhibit 99.1 filed with the Registration Statement on Form S-8 filed on November 16, 2009.

 

 

10.11		Form of Director and Officer Indemnification Agreement.		Incorporated by reference to exhibit 10.2 filed with the Current Report on Form 8-K filed on August 3, 2012.
10.12*		Sigma Designs 2015 Employee Stock Purchase Plan.		Incorporated by reference to exhibit 10.1 filed with the Current Report on Form 8-K on August 24, 2015.
10.13*		Sigma Designs 2015 Stock Incentive Plan.		Incorporated by reference to exhibit 10.2 filed with the Current Report on Form 8-K on August 24, 2015.
10.14*		Form of Executive Severance Agreement.		Incorporated by reference to exhibit 10.1 filed with the Current Report on Form 8-K on July 16, 2015.
21.1		Subsidiaries of the Registrant.		Previously filed.
23.1		Consent of Independent Registered Public Accounting Firm (Armanino LLP).		Previously filed.
24.1		Power of Attorney (contained in the signature page to this Annual Report on Form 10-K).		Previously filed.
31.1		Certification of the President and Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a).		Previously filed.
31.2		Certification of the Chief Financial Officer and Secretary pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a).		Previously filed.
31.3		Certification of the President and Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a).		Filed herewith.
31.4		Certification of the Chief Financial Officer and Secretary pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a).		Filed herewith.
32.1**		Certificate of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.		Previously filed.
32.2**		Certificate of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.		Previously filed.
101.INS		XBRL Instance.		Previously filed.
101.SCH		XBRL Taxonomy Extension Schema.		Previously filed.
101.CAL		XBRLTaxonomy Extension Calculation.		Previously filed.
101.DEF		XBRL Taxonomy Extension Definition.		Previously filed.
101.LAB		XBRL Taxonomy Extension Labels.		Previously filed.
101.PRE		XBRL Taxonomy Extension Presentation.		Previously filed.

 

 

*	Indicates management contract or compensatory plan or arrangement.
**	In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Exchange Act.

 

 

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