Inventronics Limited — Remuneration Information 2023

Jun 27, 2023

INVENTRONICS LIMITED (THE "CORPORATION") STATEMENT OF EXECUTIVE COMPENSATION FOR THE YEAR ENDED DECEMBER 31, 2022

Compensation Discussion and Analysis

The Corporation's Named Executive Officers (each an "NEO") (as defined in Form 51-102F6 of National Instrument 51-102 Continuous Disclosure Obligations) included the Chief Executive Officer ("CEO"), the Chief Financial Officer ("CFO"), the Vice President, Operations ("VP Operations") and the Vice President, Sales & Marketing ("VP Sales") (collectively also referred to as the "NEO Group"). The Board of Directors of the Corporation (the "Board") does not presently have a compensation committee and as such all decisions relating to compensation are made by the Board.

The Board reviews the NEO compensation annually to ensure that the compensation levels are commensurate with their experience, qualifications, and responsibilities to the Corporation. It is the Board's opinion that the current compensation structure is appropriate for the Corporation's financial capacity and prevailing economic conditions.

The Corporation's compensation plan for each full-time member of the NEO Group (VP Operations and VP Sales) included an annual base salary for 2022 of $160,000 (2021 - $130,000), a flex-pay component designed to vary depending on the financial performance of the Corporation, and an auto allowance totalling $9,000 (2021 - $9,000). Recognizing that the CEO functions on a part-time basis, the CEO's compensation included an annual base salary equal to approximately one-quarter of the annual base salary of the full-time members of the NEO Group, or $39,332, participation in flex-pay, and an auto allowance totalling $9,000 (2021 - $9,000). A part-time CFO is also a member of the NEO Group on a contract basis with the rate of compensation varying based on the time requirements of the Corporation, participation in flex-pay on a proportionate basis, and no entitlement to any perquisites.

The objective of the compensation plan is to link compensation for the NEO Group to the financial performance of the Corporation. Flex-pay is determined by calculating, at each month end, the Corporation's year-to-date free cash flow and, if the result is positive, a portion of the free cash flow is added to the aggregate compensation to be paid to the NEO Group. The members of the NEO Group do not receive any compensation for serving as members of the Board.

From time-to-time, the Board may grant Options (as defined below) to the NEOs. Options are intended to provide long-term incentive for the NEOs and align the interests of the NEOs with that of the shareholders of the Corporation in improving the trading price and value of the common shares of the Corporation (the "Common Shares") over the long-term. A total of 400,000 Options were granted to the NEOs in February 2022, with each NEO receiving 100,000 Options. There were 33,000 Options exercised by the NEOs during the year ended December 31, 2022.

There are no restrictions on the ability of the NEOs or members of the Board to purchase financial instruments that are designed to hedge or offset a decrease in market value of equity securities granted as compensation or held, directly or indirectly, by NEOs or members of the Board.

No compensation consultant or advisor has been engaged by the Corporation in either of the last two most recently completed financial years.

Summary Compensation Table

The following table sets forth for the years ended December 31, 2022, 2021, and 2020 information concerning the compensation paid to the NEOs.

					Non-equity incentive plancompensation ($)
Name and principalposition	Year	Salary($)	Sharebasedawards($)	Optionbasedawards($)(3)	Annualincentiveplans	Long-termincentiveplans	Pensionvalue ($)	All othercompensation(4)($)	Totalcompensation($)
Dan Stearne(1)	2022	205,582	-	55,000	-	-	-	9,000	269,582
President and CEO	2021	174,332	-	-	-	-	-	9,000	183,332
	2020	121,838	-	-	-	-	-	9,000	130,838
Robert Brookwell(2)	2022	151,250	-	55,000	-	-	-	-	206,250
CFO	2021	81,900	-	-	-	-	-	-	81,900
	2020	81,900	-	-	-	-	-	-	81,900
Tracy Dobson(1)	2022	336,250	-	55,000				20,050	411,300
VP Operations	2021	275,000	-	-	-	-	-	20,050	295,050
	2020	222,506	-	-	-	-	-	20,050	242,556
Daniel O'Greysik(1)	2022	336,250	-	55,000				20,050	411,300
VP Sales	2021	275,000	-	-	-	-	-	20,050	295,050
	2020	222,506	-	-	-	-	-	20,050	242,556

Notes:

(1) Three members of the NEO Group, Messrs. Stearne and O'Greysik and Ms. Dobson, each own 18% of the outstanding Common Shares of the Corporation.

(2) Mr. Brookwell provides fractional CFO services on a contract basis and is compensated on specified terms that do not include any perquisites.

(3) Option-based awards in 2022 represent the grant date fair value of Options granted under the Stock Option Plan (as defined below) as calculated using the Black-Scholes option-pricing model. The assumptions for the model were a risk-free interest rate of 1.75%, option life of 5 years, expected future volatility of 80%, dividend rate of 10%, and no forfeiture rate.

(4) The value of perquisites received by each of the NEOs, including property or other personal benefits provided to them that are not generally available to all employees, were not in the aggregate greater than $50,000 or 10% of the NEO's total salary for the financial year. The amounts under "All other compensation" reflect contributions by the Corporation on behalf of the NEOs (other than the CEO and CFO) to a group Registered Retirement Savings Plan, plus the payment of a monthly auto allowance as described above.

Incentive Plan Awards

Pursuant to TSX Venture Exchange (the "TSXV") Policy 4.4 (the "Option Policy") the Corporation maintains a "rolling" stock option plan (the "Stock Option Plan") reserving a maximum of 10% of the issued and outstanding Common Shares for issuance pursuant to stock options. In accordance with the Option Policy, rolling option plans must receive shareholder approval at the Corporation's annual meeting.

The Stock Option Plan was initially approved by the shareholders of the Corporation on June 20, 2005. At December 31, 2022, the Corporation had 417,000 outstanding options to purchase Common Shares (the "Options") held by the NEOs and independent directors. There were 33,000 Options exercised by the NEOs in 2022 at an exercise price of $1.65 per share.

The Stock Option Plan provides for the granting of Options to purchase Common Shares to directors, officers, employees and consultants of the Corporation. The Stock Option Plan is administered by the Board, or a committee of the Board appointed from time to time for such purpose. Options may be granted at the discretion of the Board or a committee thereof, in such number that may be determined at the time of grant, subject to the limits set out in the Stock Option Plan. The number of Common Shares issuable upon exercise of the Options granted under the Stock Option Plan is not more than 10% of the number of Common Shares that are issued and outstanding. The total number of Options to be granted to any one optionee in a twelve-month period may not exceed 5% of the issued and outstanding Common Shares (on a non-diluted basis) at the date of the grant of the Option. The aggregate issuance of Common Shares to "Insiders" (as such term is defined in the Stock Option Plan) pursuant to the Stock Option Plan within a one-year period may not exceed 10% of the outstanding Common Shares (on a non-diluted basis).

The exercise price of Options granted under the Stock Option Plan is fixed by the Board, provided that such exercise price may not be less than the market price, currently being the closing price of the Common Shares on the TSXV on the trading day preceding the date of grant of the Common Shares, or such other prices as may be determined under the applicable rules and regulations of all regulatory authorities to which the Corporation is subject, including the TSXV. The Options granted under the Stock Option Plan generally will vest over a period of two years and will expire within ten years.

The foregoing summary is subject to the specific provisions of the Stock Option Plan.

Outstanding Share-Based Awards and Option-based Awards

The following table sets forth for each NEO, all option-based awards and share-based awards outstanding at the end of the year ended December 31, 2022.

			Option-based Awards	Share-based Awards
Name	Number ofsecuritiesunderlyingunexercisedoptions(#)	Optionexerciseprice($)	Optionexpirationdate	Value ofunexercisedin-themoneyoptions(1)($)	Numberof sharesor unitsof sharesthat havenotvested(#)	Market orpayoutvalue ofshare-basedawards thathave notvested($)	Market orpayout valueof vestedshare-basedawards notpaid out ordistributed($)
Dan Stearne	100,000	$1.65	Feb. 28, 2027	$185,000	-	-	-
Robert Brookwell	67,000	$1.65	Feb. 28, 2027	$123,950	-	-	-
Tracy Dobson	100,000	$1.65	Feb. 28, 2027	$185,000	-	-	-
Daniel O'Greysik	100,000	$1.65	Feb. 28, 2027	$185,000	-	-	-

Note:

(1) Calculated based on the difference between the market price of the Common Shares of $3.50 on December 31, 2022, and the exercise price of the Options.

Incentive Plan Awards – Value Vested or Earned During the Year

During the year ended December 31, 2022, the following NEO option-based awards vested and no nonequity compensation or share-based awards were awarded, vested or earned.

	Option-based Awards
Name	Number of securitiesunderlying vested options(#)	Optionexercise price($)	Optionvesting date	Value of vestedoptions(1)($)
Dan Stearne	33,333	$1.65	Feb. 28, 2022	Nil
Robert Brookwell	33,333	$1.65	Feb. 28, 2022	Nil
Tracy Dobson	33,333	$1.65	Feb. 28, 2022	Nil
Daniel O'Greysik	33,333	$1.65	Feb. 28, 2022	Nil

Note:

(1) Calculated based on the difference between the market price of the Common Shares of $1.65 on February 28, 2022 and the exercise price of the Options.

Pension Plan Benefits

The Corporation has no pension plan but does make contributions to a group Registered Retirement Savings Plan on behalf of its employees including the Corporation's full-time NEOs.

Termination and Change of Control Benefits

At December 31, 2022, the Corporation had identical employment agreements with each full-time member of the NEO Group which establishes salary, benefits and other general employment provisions. The employment agreements also provide a right to be paid a severance amount, in the event of termination of employment by the Corporation for any reason other than just cause, equal to one and one-half times the aggregate of the base salary plus any flex-pay paid in the previous twelve months prior to the termination date plus the value of the Corporation's contributions to any benefit plans for the twelve months prior to the termination date. If Mr. O'Greysik or Ms. Dobson had been terminated on December 31, 2022, the amount payable to each would have been $550,265 or $541,628, respectively.

In addition, under the terms of the Stock Option Plan, the vesting of all unvested Options shall be accelerated upon the making of a take-over bid as defined in the Securities Act (Alberta) (which is not exempt from the take-over bid requirements of the Securities Act (Alberta)) for the Common Shares.

Director Compensation

Independent directors of the Corporation are paid $750 per meeting attended. The non-independent directors do not receive any compensation for serving as directors. The Corporation reimburses all directors for any expenses incurred with respect to attendance at meetings of the Board or committees thereof.

Independent directors of the Corporation are entitled to participate in, and may receive Options under, the Stock Option Plan. At December 31, 2022, independent directors held a total of 50,000 outstanding Options.

Directors' Summary Compensation Table

The following table sets forth for the year ended December 31, 2022, information concerning the compensation paid to directors of the Corporation other than directors who were also NEOs.

Name	Fees ($)	Option-based awards ($)(2)	Other Compensation ($)	Total ($)
Nicole Maruzzo(1)	3,750	13,750	-	17,500
Michael Martin(1)	3,750	13,750	-	17,500

Notes:

• (1) Ms. Maruzzo and Mr. Martin were re-elected as directors of the Corporation on November 9, 2022.
• (2) Option-based awards in 2022 represent the grant date fair value of Options granted under the Stock Option Plan as calculated using the Black-Scholes option-pricing model. The assumptions for the model were a risk-free interest rate of 1.75%, option life of 5 years, expected future volatility of 80%, dividend rate of 10%, and no forfeiture rate.

Directors' Outstanding Option-Based Awards and Share-Based Awards

	Option-based Awards				Share-based Awards
Name	Number ofsecuritiesunderlyingunexercisedoptions(#)	Optionexerciseprice($)	Optionexpirationdate	Value ofunexercisedin-themoneyoptions(1)($)	Number ofshares orunits ofshares thathave notvested(#)	Market orpayoutvalue ofshare-basedawards thathave notvested($)	Market orpayout valueof vestedshare-basedawards notpaid out ordistributed($)
Nicole Maruzzo	25,000	$1.65	Feb. 28, 2027	$46,250	-	-	-
Michael Martin	25,000	$1.65	Feb. 28, 2027	$46,250	-	-	-

Note:

(1) Calculated based on the difference between the market price of the Common Shares of $3.50 on December 31, 2022, and the exercise price of the Options.

Directors' Incentive Plan Awards – Value Vested or Earned During the Year

During the year ended December 31, 2022, the following director option-based awards vested and no non-equity compensation or share-based awards were awarded, vested or earned.

	Option-based Awards
Name	Number of securitiesunderlying vested options(#)	Optionexercise price($)	Optionvesting date	Value of vestedoptions(1)($)
Nicole Maruzzo	8,333	$1.65	Feb. 28, 2022	Nil
Michael Martin	8,333	$1.65	Feb. 28, 2022	Nil

Note:

(1) Calculated based on the difference between the market price of the Common Shares of $1.65 on February 28, 2022 and the exercise price of the Options.