Proposal
1
PROPOSAL
TO AUTHORIZE BOARD TO AMEND OUR CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE SHARE SPLIT OF OUR COMMON STOCK
General
We
are asking you to approve a proposal to authorize the Board, in its sole and absolute discretion, without further action of the
stockholders, to file an amendment to our Certificate of Incorporation (the “Certificate”), to effect a reverse stock
split of our common stock at a specific ratio to be determined by the Board, ranging from 1-to-2 and 1-to-20, inclusive (the “Reverse
Split”). This proposal is being submitted for your approval pursuant to the Delaware General Corporation Law and SEC rules.
If
this Proposal 1 is approved by stockholders, the Board will have the authority, but not the obligation, in its sole and absolute
discretion, and without further action on the part of the stockholders, to affect the approved Reverse Split by filing the amendment
with the Secretary of State of the State of Delaware at any time after the stockholders’ approval of the Reverse Split.
If the amendment has not been filed with the Secretary of State of the State of Delaware within one year from the date of the
Special Meeting, the Board will abandon the Reverse Split.
The
text of the proposed amendment is included as Annex A to this Proxy Statement. Such text is however subject to revision for such
changes as may be required by the Secretary of State of the State of Delaware, and other changes consistent with this Proposal
1 that we may deem necessary or appropriate.
Reasons
for Reverse Split
Our
common stock is listed on the NASDAQ. In order for our common stock to continue to be listed on the NASDAQ, we must comply with
various listing standards, including that we maintain a minimum average closing price of at least $1.00 per share of common stock
during a consecutive 30 trading-day period. On August 9, 2018, we received a deficiency letter from the NASDAQ notifying us that,
for the last 30 consecutive business days, the bid price for our common stock had closed below the minimum $1.00 per share requirement
for continued inclusion on the NASDAQ Global Market pursuant to the NASDAQ Listing Rules (the “Rules”). In accordance
with the Rules, the Company was provided a period of 180 calendar days, or until February 5, 2019, to regain compliance with the
listing requirements. If we do not regain compliance before February 5, 2019, the NASDAQ stated that it will provide us with written
notice that its securities are subject to delisting. At that time, we may appeal the NASDAQ’s determination to a NASDAQ
Listing Qualifications Panel, which would stay any further delisting action by the NASDAQ pending a final decision by the panel.
Alternatively, we may be eligible for an additional 180 calendar day grace period if we meet the continued listing standards,
with the exception of bid price, for the NASDAQ Capital Market, and we effect the Reverse Split. The Board has approved the proposed
Reverse Split amendment and recommends that stockholders approve such amendment for the purpose of increasing the price of our
common stock in order to regain compliance with the NASDAQ’s listing requirements.
In
addition to our desire to continue to be listed on an exchange, the Board believes that the low market price of our common stock
impairs our marketability and acceptance by institutional investors and other members of the investing public and creates a negative
impression of our company. Theoretically, decreasing the number of shares of common stock outstanding should not, by itself, affect
the marketability of the shares, the type of investor who would be interested in acquiring them, or our reputation in the financial
community. In practice, however, many investors and market makers consider low-priced stocks as unduly speculative in nature and,
as a matter of policy, avoid investment and trading in such stocks. The presence of these negative perceptions may adversely affect
not only the pricing of our common stock but also the trading liquidity. In addition, these perceptions may affect our commercial
business and our ability to raise additional capital through equity and debt financings.
We
expect that the decrease in the number of outstanding shares of our common stock resulting from the Reverse Split, and the anticipated
increase in the per share trading price will encourage greater interest in our common stock among members of the financial community
and the investing public, and possibly create a more liquid market for our stockholders. However, the possibility exists that
stockholder liquidity may be adversely affected by the reduced number of shares outstanding if the Reverse Split is affected,
particularly if the trading price per share of our common stock begins a declining trend after the Reverse Split takes effect.
Effects
of Reverse Split on our Common Stock
General
If
the Reverse Split is approved and implemented, the principal effect will be to proportionately decrease the number of outstanding
shares of common stock based on the ratio selected by the Board. Our common stock currently registered under Section 12(b) of
the Exchange Act, and we are subject to the periodic reporting and other requirements of the Exchange Act. The Reverse Split will
not affect the registration of our common stock under the Exchange Act or the listing of our common stock on the NASDAQ. Following
the Reverse Split, our common stock will continue to be listed on the NASDAQ under the symbol “OPTT,” although it
will be considered a new listing with a new CUSIP number.
Proportionate
voting rights and other rights of the holders of our common stock will not be affected by the Reverse Split, other than as a result
of the treatment of fractional shares as described below. For example, a holder of 2% of the voting power of the outstanding shares
of our common stock immediately prior to the effectiveness of the Reverse Split will generally continue to hold 2% of the voting
power of the outstanding shares of our common stock after the Reverse Split. The number of stockholders of record will not be
affected by the Reverse Split (except to the extent any are cashed out as a result of holding fractional shares). If approved
and implemented, the Reverse Split may result in some stockholders owning “odd lots” of less than 100 shares of common
stock. Odd lot shares may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots are
generally somewhat higher than the costs of transactions in “round lots” of even multiples of 100 shares. The Board
believes, however, that these potential effects are outweighed by the benefits of the Reverse Split.
If
the Reverse Split is approved, the increased proportion of our authorized but unissued shares of common stock to be issued and
outstanding shares could, under certain circumstances, have an anti-takeover effect. For example, such a change could permit future
issuances of our common stock that would dilute the share ownership of a person seeking to effect a change in composition of the
Board or contemplating a tender offer or other transaction for a combination with us and another entity. The Reverse Split, however,
is not being proposed in response to any effort of which we are aware to accumulate shares of our common stock or to obtain control
of us.
No
Going Private Transaction
Notwithstanding
the decrease in the number of outstanding shares following the proposed Reverse Split, the Board does not intend for this transaction
to be the first step in a “going private transaction” within the meaning of Rule 13e-3 of the Exchange Act.
No
Appraisal Rights
Stockholders
have no right under Delaware law or the Certificate, to dissent from the Reverse Split or to dissent from the payment of cash
in lieu of issuing fractional shares.
Effects
on Reverse Split on Outstanding Convertible Securities
The
number of shares of common stock subject to outstanding convertible securities issued by us will be reduced by the same ratio
as the reduction in the outstanding shares of common stock resulting from the Reverse Split and the exercise price will be increased
by the same ratio.
Effectiveness
of the Reverse Split
The
Reverse Split would become effective on the date of filing of the amendment with the office of the Secretary of State of the State
of Delaware. On the effective date, shares of common stock issued and outstanding immediately prior thereto will be combined and
converted, automatically and without any action on the part of the stockholders, into new shares of common stock in accordance
with the Reverse Split ratio determined by the Board within the limits set forth in this Proposal 1.
Effect
on Legal Ability to Pay Dividends
The
Board has not declared, nor does it have any plans to declare in the foreseeable future, any distributions of cash, dividends
or other property, and we are not in arrears on any dividends. Therefore, we do not believe that the Reverse Split will have any
effect with respect to future distributions, if any, to our stockholders.
Treatment
of Fractional Shares
No
fractional shares would be issued if, as a result the Reverse Split, a registered stockholder would otherwise become entitled
to a fractional share. Instead, stockholders who otherwise would be entitled to receive fractional shares because they hold a
number of shares not evenly divisible by the ratio of the Reverse Split will automatically be entitled to receive an additional
share of our common stock. In other words, any fractional share will be rounded up to the nearest whole number.
Accounting
Consequences of Reverse Split – Reduction in Stated Capital
The
par value of our common stock would remain unchanged at $0.001 per share after the Reverse Split. However, the stated capital
on our balance sheet attributable to our common stock would be adjusted downward in proportion to the Reverse Split. Correspondingly,
our additional paid-in capital account, which consists of the difference between our stated capital and the aggregate amount paid
to us upon issuance of all currently outstanding common stock, shall be credited with the amount by which stated capital is reduced.
Our total stockholders’ equity, in the aggregate, will remain unchanged. Additionally, net income (loss) per share would
increase proportionately as a result of the Reverse Split since there will be a lower number of shares outstanding.
Book-Entry
Shares
If
the Reverse Split is effected, stockholders who hold uncertificated shares (i.e. shares held in book-entry form and not represented
by a physical share certificate), either as direct or beneficial owners, will have their holdings electronically adjusted by our
transfer agent (and, for beneficial owners, by their brokers or banks that hold in “street name” for their benefit,
as the case may be) to give effect to the Reverse Split.
Stockholders
who hold uncertificated shares as direct owners will be sent a transmittal letter by our transfer agent and will need to return
a properly completed and duly executed transmittal letter in order to receive any cash payment in lieu of fractional shares or
any other distributions, if any, that may be declared and payable to holders of record following the Reverse Split.
Effect
on the Incentive Plans
As
of January 4, 2019, we had approximately 1,564,389 shares of common stock subject to options and shares of unvested restricted
stock outstanding under the 2006 Stock Incentive Plan (the “2006 Plan”), the 2015 Omnibus Incentive Plan (the “2015
Plan”) and the Employment Inducement Incentive Award Plan (the “Inducement Plan”) and together with the 2006
Plan and the 2015 Plan, the “Incentive Plans”). The Incentive Plans provide for adjustment to the shares outstanding
and available for issuance and awards granted under the Incentive Plans in the event of a stock split. Should the Reverse Split
be effected, the Board has approved proportionate adjustments to the number of shares outstanding and available for issuance under
Incentive Plans and proportionate adjustments to the number of shares, exercise price, grant price or purchase price relating
to any award under the Incentive Plans in accordance with the terms of the Incentive Plans. There will be no fractional shares
issued in connection with the adjustment and any fractions resulting from the adjustment shall be eliminated in each case by rounding
downward to the nearest whole share.
Accordingly,
if the Reverse Split is approved by our stockholders, the number of all outstanding equity awards, the number of shares available
for issuance and the exercise price, grant price or purchase price relating to any award under the Incentive Plans will immediately
be proportionately adjusted. The Board has also authorized us to effect any other changes necessary, desirable or appropriate
to give effect to the Reverse Split, including any applicable technical, conforming changes to the Incentive Plans.
Exchange
of Share Certificates
If
a Reverse Split is implemented, stockholders holding certificated shares (i.e., shares represented by one or more physical share
certificates) will receive a transmittal letter from our transfer agent promptly after the effectiveness of the Reverse Split.
The transmittal letter will be accompanied by instructions specifying how stockholders holding certificated shares can exchange
certificates representing the pre-split shares for a statement of holding.
Beginning
after the effectiveness of the Reverse Split, each certificate representing pre-split shares will be deemed for all corporate
purposes to evidence ownership of post-split common stock.
STOCKHOLDERS
SHOULD NOT DESTROY ANY PRE-REVERSE SPLIT STOCK CERTIFICATE AND SHOULD NOT SUBMIT ANY CERTIFICATES UNTIL THEY ARE REQUESTED TO
DO SO.
Certain
Risk Factors Associated with the Reverse Split
Reduced
Market Capitalization
. As noted above, the principal purpose of the Reverse Split will be to increase the trading price of
our common stock to continue to be listed on the NASDAQ. We cannot assure you, however, that the Reverse Split, if implemented,
will accomplish this objective. While we expect that the reduction in our outstanding shares of common stock will increase the
trading price of our common stock, we cannot assure you that the Reverse Split will increase the trading price of our common stock
by a multiple equal to the number of pre-Reverse Split shares, or result in any permanent increase in the trading price, which
can be dependent upon many factors, including our business and financial performance and prospects. Should the trading price decline
after implementation of the Reverse Split, the percentage decline may be greater, due to the smaller number of shares outstanding,
than it would have been prior to the Reverse Split. In some cases the share price of companies that have implemented reverse stock
splits has subsequently declined back to pre-reverse split levels. Accordingly, we cannot assure you that the trading price of
our common stock immediately after the Reverse Split takes effect will be maintained for any period of time or that the ratio
of post and pre-split shares will remain the same after the Reverse Split is effected, or that the Reverse Split will not have
an adverse effect on our stock price due to the reduced number of shares outstanding after the Reverse Split. A reverse stock
split is often viewed negatively by the market and, consequently, can lead to a decrease in our overall market capitalization.
If the per share price does not increase proportionately as a result of the Reverse Split, then our overall market capitalization
will be reduced.
Increased
Transaction Costs
. The number of shares held by each individual stockholder will be reduced if the Reverse Split is implemented.
This will increase the number of stockholders who hold less than a “round lot,” or 100 shares. Typically, as previously
noted, the transaction costs to stockholders selling “odd lots” are higher on a per share basis. Consequently, the
Reverse Split could increase the transaction costs to existing stockholders in the event they wish to sell all or a portion of
their position.
Liquidity
.
Although the Board believes that the decrease in the number of shares of our common stock outstanding as a consequence of the
Reverse Split and the anticipated increase in the price of our common stock could encourage interest in our common stock and possibly
promote greater liquidity for our stockholders, such liquidity could also be adversely effected by the reduced number of shares
outstanding after the Reverse Split.
Certain
Federal Income Tax Consequences
The
following discussion summarizes certain material U.S. federal income tax consequences relating to the participation in the Reverse
Split by a U.S. stockholder that holds the shares as a capital asset. This discussion is based on the provisions of the Internal
Revenue Code of 1986, as amended (the “Code”), final, temporary and proposed U.S. Treasury regulations promulgated
thereunder and current administrative rulings and judicial decisions, all as in effect as of the date hereof. All of these authorities
may be subject to differing interpretations or repealed, revoked or modified, possibly with retroactive effect, which could materially
alter the tax consequences set forth herein.
For
purposes of this summary, a “U.S. stockholder” refers to a beneficial owner of common stock who is any of the following
for U.S. federal income tax purposes: (i) a citizen or resident of the United States, (ii) a corporation created or organized
in or under the laws of the United States, any state thereof, or the District of Columbia, (iii) an estate the income of which
is subject to U.S. federal income taxation regardless of its source, or (iv) a trust if (x) its administration is subject to the
primary supervision of a court within the United States and one or more U.S. persons have the authority to control all of its
substantial decisions, or (y) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a
U.S. person. A foreign stockholder is a stockholder who is not a U.S. stockholder.
This
summary does not represent a detailed description of the U.S. federal income tax consequences to a stockholder in light of his,
her or its particular circumstances. In addition, it does not purport to be complete and does not address all aspects of federal
income taxation that may be relevant to stockholders in light of their particular circumstances or to stockholder that may be
subject to special tax rules, including, without limitation: (i) stockholders subject to the alternative minimum tax; (ii) banks,
insurance companies, or other financial institutions; (iii) tax-exempt organizations; (iv) dealers in securities or commodities;
(v) regulated investment companies or real estate investment trusts; (vi) traders in securities that elect to use a mark-to-market
method of accounting for their securities holdings; (vii) foreign stockholders or U.S. stockholders whose “functional currency”
is not the U.S. dollar; (viii) persons holding common stock as a position in a hedging transaction, “straddle,” “conversion
transaction” or other risk reduction transaction; (ix) persons who acquire shares of common stock in connection with employment
or other performance of services; (x) dealers and other stockholders that do not own their shares of common stock as capital assets;
or (xi) U.S. expatriates. Moreover, this description does not address the U.S. federal estate and gift tax, alternative minimum
tax, or the Medicare tax on net investment income or the effects of any state, local or foreign tax laws.
If
a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our
common stock, the U.S. federal income treatment of a partner in a partnership will generally depend on the status of the partner
and the activities of the partnership. Partnerships that hold our common stock, and partners in such partnerships, should consult
their own tax advisors regarding U.S. federal income tax consequences of the Reverse Split.
There
can be no assurance that the IRS will not take a contrary position to the tax consequences described herein or that such position
would not be sustained by a court. In addition, U.S. tax laws are subject to change, possibly with retroactive effect, which may
result in U.S. federal income tax considerations different from those summarized below. No opinion of counsel or ruling from the
IRS has been obtained with respect to the U.S. federal income tax consequences of the Reverse Split.
This
discussion is for general information only and is not tax advice. All stockholders should consult their own tax advisors with
respect to the U.S. federal, state, local and foreign tax consequences of the Reverse Split.
Based
on the assumption that the Reverse Split will constitute a tax-free reorganization within the meaning of Section 368(a)(1)(E)
of the Code, and subject to the limitations and qualifications set forth in this discussion, the following U.S. federal income
tax consequences should result from the Reverse Split:
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a
U.S. stockholder should not recognize gain or loss in the Reverse Split;
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the
aggregate tax basis of the post-Reverse Split shares should be equal to the aggregate tax basis of the pre-Reverse Split shares;
and
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the
holding period of the post-Reverse Split shares should include the holding period of the pre-Reverse Split shares.
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THE
PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT AND DOES NOT
PURPORT TO BE A COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT THERETO. YOU SHOULD CONSULT YOUR OWN TAX
ADVISORS AS TO THE PARTICULAR FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE REVERSE SPLIT IN LIGHT OF YOUR
SPECIFIC CIRCUMSTANCES.
Vote
Required
The
approval of this proposal requires the affirmative vote of the holders of a majority of the outstanding shares entitled to vote
at the Special Meeting, in person or by proxy. For the approval of this amendment to the Certificate, you may vote “FOR”
or “AGAINST” or abstain from voting. If you hold your shares in your own name and abstain from voting on this matter,
your abstention will have the effect of a vote “AGAINST” this amendment. Because this is a routine matter, if you
hold your shares through a broker, bank, trustee or other nominee and you do not instruct them how to vote on this proposal, your
broker may have authority to vote your shares. As a result, a failure to instruct your broker, bank or other nominee on how to
vote your shares will not necessarily count as a vote against this proposal, and your broker may have discretion to vote for or
against the proposal without your instruction.
Board
Recommendation
The
Board recommends a vote “FOR” authorizing the Board to amend the Certificate to provide for the Reverse Split.
Stockholder Proposal Information
In
accordance with our by-laws, a stockholder who wishes to present a proposal for consideration at the 2019 annual meeting must
deliver a notice of the matter the stockholder wishes to present to our principal executive offices in Monroe Township, NJ, at
the address identified in the preceding paragraph, not less than 90 nor more than 120 days prior to the first anniversary of the
date of the 2018 annual meeting. Accordingly, any notice given by or on behalf of a stockholder pursuant to these provisions of
our by-laws (and not pursuant to Rule 14a-8 under the Exchange Act) must be received no earlier than August 9, 2019 and no later
than September 9, 2019 (except that in the event that the date of the 2019 annual meeting of stockholders is advanced by more
than 20 days, or delayed by more than 60 days, from the first anniversary of the 2018 annual meeting of stockholders, a stockholder’s
notice must be so received no earlier than the 120th day prior to the 2019 annual meeting and not later than the close of business
on the later of (A) the 90th day prior to the 2019 annual meeting and (B) the tenth day following the day on which notice of the
date of the 2019 annual meeting was mailed or public disclosure of the date of the 2018 annual meeting was made, whichever first
occurs). The notice should include (i) a brief description of the business desired to be brought before the 2019 annual meeting
and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the stockholder, (iii)
the class or series and number of shares of capital stock of the Company beneficially owned or owned of record by the stockholder,
(iv) a description of all arrangements or understandings between the stockholder and any other person or persons (including their
names) in connection with the proposal and any material interest of the stockholder in such business, (v) a representation that
the stockholder intends to appear in person or by proxy at the 2019 annual meeting to bring such business before the meeting and
(vi) a representation as to whether such stockholder intends, or is part of a group that intends, to deliver a proxy statement
and/or solicit proxies. Any proposal should be addressed to the Corporate Secretary, Ocean Power Technologies, Inc., 28 Engelhard
Drive, Suite B, Monroe Township, NJ 08831. The proposal must comply with SEC regulations regarding the inclusion of stockholder
proposals in company-sponsored proxy materials.
Other
Matters
We
file annual, quarterly, current and special reports, proxy statements, and other information with the SEC. Our SEC filings are
available to the public over the internet at the SEC’s website at
www.sec.gov
and on our website at
www.oceanpowertechnologies.com
.
You may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street, N.E., Washington,
D.C. 20549.
You
may also request copies of any of our filings by writing or telephoning us at our principal executive offices: Corporate Secretary,
Ocean Power Technologies, Inc., 28 Engelhard Drive, Suite B, Monroe Township, NJ 08831.
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By
Order of the Board of Directors,
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/s/
John W. Lawrence
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John
W. Lawrence
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General
Counsel and Secretary
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ANNEX
A
Text
of Proposed Amendment to Affect the Reverse Split
STATE
OF DELAWARE
CERTIFICATE
OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Ocean
Power Technologies, Inc., organized and existing under and by virtue of the General Corporation Law of the State of Delaware,
does hereby certify:
FIRST
:
That the Board of Directors of Ocean Power Technologies, Inc. adopted a proposed amendment of the Certificate of Incorporation
of said corporation to effectuate a reverse stock split, declaring said amendment to be advisable.
The
proposed amendment reads as follows:
Article
Fourth is hereby amended by adding the following to the end of the first paragraph of Article Fourth:
Upon
the filing and effectiveness (the “Effective Time”) of this Certificate of Amendment to the Certificate of Incorporation
of the Corporation, each __ ( __ ) shares of Common Stock issued and outstanding immediately prior to the Effective Time shall,
automatically and without any action on the part of the respective holders thereof, be combined and converted into one (1) share
of Common Stock (the “Consolidation”). No fractional shares shall be issued in connection with the Consolidation.
Shares shall be rounded up to the nearest whole share. Each certificate that immediately prior to the Effective Time represented
shares of Common Stock (“Old Certificates”) shall thereafter represent that number of shares of Common Stock into
which the shares of Common Stock represented by the Old Certificate shall have been combined, subject to the rounding up of any
fractional share interests as described above.
SECOND:
That, pursuant to a resolution of its Board of Directors, a meeting of the stockholders of Ocean Power Technologies, Inc.
was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at
which meeting the necessary number of shares of Common Stock as required by statute were voted in favor of granting the Board
of Directors the authority to amend the Certificate of Incorporation to provide for a reverse stock split.
THIRD:
That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN
WITNESS WHEREOF,
said corporation has caused this certificate to be signed this __ day of ________________, 2019.