Unfair (to shareholders) compensation practices:
Richard and Linda Grable are two of three founders of IMDS. Between the two of them, they control the voting shares (though it is unclear to me if that will continue to be true after preferred convertible securities convert). There is no independent compensation committee governing their behavior. The patent discussion above is an extreme example of how this lack of independence may lead to a disregard for shareholder
interest. Below are additional examples.
Richard Grable's salary went from $100,000 in 1995 to $286,000 in 1998. Linda's salary went from $65,000 to $119,000 in the same time period. The average person's salary probably increased 3% per year over that same period. During this period the company had such setbacks as the NASDAQ failure and the drop in share price by 90% or more, hardly justifying the rewards. Further, there were large stock options (some at one-third of market), health
insurance, car allowances, the patent awards mentioned above, and cost of living adjustments of 7% per year! Once operational, they will be paid bonuses, patent royalties and other compensation. All of this compensation has been negotiated by management with THEMSELVES at shareholder expense. These lucrative benefits are being granted by a company with no revenues to a management team that has failed the shareholder's in some very serious ways.
It is difficult to determine how much of the $30mm invested to date has gone to the founders and their family members. I have posed this question to them and have not yet received a response.
We now know that several family members are employeed by the company. It is not clear what procedures are in place to ensure that they were employeed because they were the most qualified candidates (vs because they were family). Clearly, the Miami Herald points out that they aren't doing badly.
We need to determine if nepotism is occuring here. While not illegal, nepotism is not in the best interests of shareholders. When nepotism exists, it is rarely good for common shareholders as it indicates that a company is not getting the best qualified candidates for the lowest salary dollar in a rigorous competitive interview process. This is unacceptable in any company, particularly one that cannot afford to spend precious corporate resources
to enrich family members of the majority owners. The alleged family relationships have been denied for a while until recently. If there are relationships, any denials or half-truthful answers are relevant in that they might be considered attempts to alleviate concerns about nepotism through deliberate deception.
Though it is not illegal to employ family or for family to invest in a corporation, it is not unreasonable to ask whether arms length negotiations are occurring, whether shareholder interests are being watched over (given the lack of independent review), whether proper disclosures of related party activity has occurred (only Linda and Richard are mentioned in related party transactions) and whether shareholders have been deceived by denials made by
the organization in the past.
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